immr-def14a_20190614.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Schedule 14A Information (Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

 

 

Filed by the Registrant 

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))

Definitive Proxy Statement 

Definitive Additional Materials

Soliciting Material Pursuant to Rule § 240.14a-12

IMMERSION CORPORATION

(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):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:

 


 

 

April 30, 2019

TO THE STOCKHOLDERS OF IMMERSION CORPORATION

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Immersion Corporation, which will be held at our corporate offices, 50 Rio Robles, San Jose, California 95134, on June 14, 2019, at 9:30 a.m. Pacific Time.

At the Annual Meeting, stockholders will be asked to vote on each of the four proposals set forth in the Notice of Annual Meeting of Stockholders and the Proxy Statement, which describe the formal business to be conducted at the Annual Meeting and follow this letter.

It is important that your shares be represented and voted at the Annual Meeting regardless of the size of your holdings. please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope.  Voting electronically, by telephone, or by returning your proxy card in advance of the Annual Meeting does not deprive you of your right to attend the Annual Meeting.

On behalf of the Board of Directors, I would like to express our appreciation for your continued support for and interest in the affairs of our company. We look forward to seeing you at the Annual Meeting.

Sincerely,

 

RAMZI HAIDAMUS

Director

 

 


 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held June 14, 2019

 

The Annual Meeting of Stockholders (the “Annual Meeting”) of Immersion Corporation will be held at our corporate headquarters, 50 Rio Robles, San Jose, California 95134, on June 14, 2019, at 9:30 a.m. Pacific Time for the following purposes:

 

1.

To elect five (5) directors to hold office for the applicable term and until their successor is elected and qualified;

 

2.

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;

 

3.

To hold an advisory vote to approve the compensation of our named executive officers;

 

4.

To approve an amendment to the 2011 Equity Incentive Plan; and

 

5.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

Only stockholders of record at the close of business on April 10, 2019 are entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof.

The vote of each eligible stockholder is important.  Please vote as soon as possible to ensure that your vote is recorded promptly even if you plan to attend the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

 

RAMZI HAIDAMUS

Director

San Jose, California

April 30, 2019

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 14, 2019: THIS PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE AT

https://ir.immersion.com/annual-proxy.cfm

 

 


 

IMMERSION CORPORATION

2019 ANNUAL MEETING OF STOCKHOLDERS

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

TABLE OF CONTENTS

 

Contents

 

 

 

PROXY STATEMENT

1

 

 

QUESTIONS AND ANSWERS

1

 

 

ELECTION OF DIRECTORS (PROPOSAL 1)

8

 

 

DIRECTOR COMPENSATION

14

 

 

CORPORATE GOVERNANCE

17

 

 

RELATED PERSON TRANSACTIONS

24

 

 

OWNERSHIP OF OUR EQUITY SECURITIES

24

 

 

Directors and Executive Officers

24

 

 

Principal Stockholders

25

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

25

 

 

COMPENSATION DISCUSSION AND ANALYSIS

26

 

 

Executive Summary

26

 

 

Compensation Philosophy

29

 

 

Compensation Determination Process

29

 

 

Elements of Compensation

31

 

 

Additional Compensation Policies and Practices

37

 

 

COMPENSATION COMMITTEE REPORT

39

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

40

 

 

EQUITY COMPENSATION PLAN INFORMATION

40

 

 

EXECUTIVE COMPENSATION

41

 

 

2018 Summary Compensation Table

41

 

 

2018 Grants of Plan-Based Awards

42

 

 

Outstanding Equity Awards at December 31, 2018

43

 

 

Stock Vested In Fiscal 2018

44

 

 

Stock Options Exercised In Fiscal 2018

44

 

 

Potential Payments upon Termination or Change in Control

44

 

 

AUDIT COMMITTEE REPORT

48

 

 

 

 

 


 

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 2)

49

 

 

Audit Fees and All Other Fees

49

 

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

50

 

 

Other Information

50

 

 

ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (PROPOSAL 3)

51

 

 

AMENDMENTS TO AND RE-APPROVAL OF PERFORMANCE CRITERIA OF THE IMMERSION CORPORATION 2011 EQUITY INCENTIVE PLAN (PROPOSAL 4)

52

 

 

Equity Plan Share Reserve

52

 

 

Minimum Vesting Periods

54

 

 

Dividends on Unvested Shares

54

 

 

Limit on Non-Employee Director Compensation

54

 

 

Certain Other Equity Plan Amendments

54

 

 

Vote Required and Board Recommendation

54

 

 

Summary of Equity Plan

55

 

 

Purpose of Equity Plan

55

 

 

Key Terms

55

 

 

New Plan Benefits

57

 

 

Terms applicable to Stock Options and Stock Appreciation Rights

58

 

 

Terms applicable to Restricted Stock Awards, Restricted Stock Unit Awards, Performance Shares, Performance Units and Stock Bonus Awards

58

 

 

Performance Metrics

58

 

 

Transferability

59

 

 

Administration

59

 

 

Amendments

60

 

 

Adjustments

60

 

 

Forfeiture Events

60

 

 

U.S. Tax Consequences

60

 

 

ERISA Information

62

 

 

 

 


 

PROXY STATEMENT

We are providing you with these proxy materials in connection with the solicitation by the Board of Directors of Immersion Corporation, of proxies to be used at our 2019 Annual Meeting of Stockholders (“Annual Meeting”).  The Annual Meeting will be held at our corporate headquarters, 50 Rio Robles, San Jose, California 95134 on June 14, 2019 at 9:30 a.m. Pacific Time.  This proxy statement contains important information regarding our Annual Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote, and information about voting procedures.

This proxy statement, any accompanying proxy card or voting instruction form, and our 2018 Annual Report to Stockholders (the “2018 Annual Report”) will be mailed to or otherwise made available to our stockholders on or about April 30, 2019.

QUESTIONS AND ANSWERS

What is included in the proxy materials?

 

The proxy materials for our Annual Meeting include this proxy statement and our 2018 Annual Report. If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction form.

Who is soliciting my vote?

 

The Board of Directors of Immersion Corporation is soliciting your vote at our Annual Meeting.

Who is entitled to vote?

 

You may vote if you were the record owner of Immersion Corporation common stock as of the close of business on April 10, 2019. Each share of common stock is entitled to one vote. As of April 10, 2019, we had 31,552,886 shares of common stock outstanding and entitled to vote. There is no cumulative voting.

Who can attend the Annual Meeting?

 

Stockholders of record at the close of business on April 10, 2019 may attend the Annual Meeting.  You must bring with you a form of government-issued photo identification, such as a driver’s license, state-issued ID card, or passport to gain entry to the Annual Meeting.  If you are a beneficial owner of our common stock, you must also bring with you to the Annual Meeting a legal proxy from the organization that holds your shares or a brokerage statement showing your ownership of shares as of the close of business on the record date.  If you are a representative of an institutional stockholder, you must also bring a legal proxy or other proof that you are a representative of a firm that held shares as of the close of business on the record date and that you are authorized to vote on behalf of the institution.

1


 

How many votes must be present to hold the Annual Meeting?

 

Your shares are counted as present at the Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. For us to hold our Annual Meeting, holders of a majority of our outstanding shares of common stock as of April 10, 2019, must be present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the meeting.

What is the difference between holding shares as a stockholder of record and as a beneficial stockholder?

 

If your shares are registered directly in your name with our registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered a stockholder of record with respect to those shares. If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” or “street name” holder of those shares.

What is a broker non-vote?

 

Applicable rules permit brokers to vote shares held in street name on routine matters when the brokers have not received voting instructions from the beneficial owner on how to vote those shares. Brokers may not vote shares held in street name on non-routine matters unless they have received voting instructions from the beneficial owners on how to vote those shares. Shares that are not voted on non-routine matters are called broker non-votes. Broker non-votes will have no effect on the vote for any matter properly introduced at the meeting.

What routine and non-routine matters will be voted on at the Annual Meeting?

 

The ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2019 is the only routine matter to be presented at the Annual Meeting on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions.  The non-routine matters that will be voted on at the Annual Meeting include the election of five (5) directors, the advisory vote to approve compensation of our named executive officers, and the amendment to our 2011 Equity Incentive Plan.

How are abstentions and broker non-votes counted?

 

Abstentions and broker non-votes are included in determining whether a quorum is present, but are not considered votes cast. Accordingly, broker non-votes and abstentions will have no effect on the vote for any matter properly introduced at the Annual Meeting.  

2


 

What are my voting choices for each of the proposals to be voted on at the Annual Meeting and how does the Board recommend that I vote my shares?

 

 

 

More

Information

Voting Choices and Board Recommendation

PROPOSAL 1

Election of five Directors

Page 8

   vote FOR the nominees; or

   withhold your vote for the nominees.

The Board recommends a vote FOR the nominees.

PROPOSAL 2

Ratification of Independent Registered Public Accounting Firm

Page 49

   vote FOR the ratification;

   vote against the ratification; or

   abstain from voting on the ratification.

The Board recommends a vote FOR the ratification.

PROPOSAL 3

Advisory vote on the compensation of our named executive officers

Page 51

   vote FOR, the advisory proposal;

   vote against the advisory proposal; or

   abstain from voting on the advisory proposal.

The Board recommends an advisory vote FOR the compensation of our named executive officers.

PROPOSAL 4

Approval of the amendments to the 2011 Equity Incentive Plan

Page 52

   vote FOR, the amendments to the 2011 Equity Incentive Plan;

   vote against the amendments to the 2011 Equity Incentive Plan; or

   abstain from voting on the amendments to the 2011 Equity Incentive Plan.

The Board recommends a vote FOR the approval of the amendments to the 2011 Equity Incentive Plan.

 

3


 

How many votes are needed to approve each proposal?

 

The director nominees shall be elected by a plurality of the votes cast (meaning that the five director nominees who receive the highest number of votes cast “FOR” their election will be elected as directors).  There is no cumulative voting with respect to the election of directors.  All other proposals submitted require the affirmative “FOR” vote of a majority of the votes cast. As an advisory vote, the proposal to approve the compensation of our named executive officers is not binding upon us. However, the Compensation Committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.

How do I vote?

 

Stockholders of Record: You can vote either in person at the Annual Meeting or by proxy. Persons who vote by proxy need not, but are entitled to, attend the Annual Meeting. Even if you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy.

This proxy statement, the accompanying proxy card and the 2018 Annual Report are being made available to our stockholders on the Internet at www.envisionreports.com/IMMR.

You may vote your shares as follows – in all cases, have your proxy card in hand:

 

Vote over the Internet 24/7 at www.envisionreports.com/IMMR

Dial toll-free 24/7 (800) 652-VOTE within the USA, US territories & Canada

Vote using your tablet or smartphone

If you elected to receive a hard copy of your proxy materials, fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage-paid envelope.

 

Beneficial Stockholders: If you hold your shares of Immersion Corporation common stock in a brokerage account (that is, in “street name”), your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please follow the directions on your proxy card or voting instruction card carefully. Please note that brokers may not vote your shares on Proposal 1 (Election of Directors), Proposal 3 (Advisory vote on executive compensation) or Proposal 4 (Amendment to the 2011 Equity Incentive Plan). Please provide your voting instructions so your vote can be counted on these matters.

If you plan to vote in person at the Annual Meeting and you hold your shares of Immersion Corporation common stock in street name, you must obtain a proxy from your broker and bring that proxy to the Annual Meeting.

How can I revoke my proxy?

 

You can revoke your proxy by sending written notice of revocation of your proxy to our Corporate Secretary at Immersion Corporation, 50 Rio Robles, San Jose, California 95134 so that it is received prior to the close of business on June 13, 2019.

4


 

Can I change my vote?

 

Yes. You can change your vote at any time before the polls close at the Annual Meeting. You can do this by:

 

voting again by telephone or over the Internet prior to 11:59 p.m. Eastern Time on June 13, 2019;

 

signing another proxy card with a later date and returning it to us prior to the Annual Meeting; or

 

voting again at the Annual Meeting.

Who counts the votes?

 

We have hired Computershare to count the votes represented by proxies and cast by ballot, and our General Counsel and Corporate Secretary, or other individual as appointed by the Board of Directors, will act as Inspector of Election.

When will we announce the voting results?

 

We will announce the preliminary voting results at the Annual Meeting. Within four business days of the Annual Meeting, we will report the final results on our website and in a Current Report on Form 8-K filed with the SEC.

Will my shares be voted if I don’t provide my proxy and don’t attend the Annual Meeting?

 

If you do not provide a proxy or vote your shares held in your name, your shares will not be voted. If you hold your shares in street name, your broker has the authority to vote your shares for “routine” matters even if you do not provide the broker with voting instructions

Without instructions from you, the broker may not vote on any proposals other than the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2019, which is a routine matter.

What if I am a stockholder of record and return my proxy but don’t vote for some of the matters listed on my proxy card?

 

If you return a signed proxy card without indicating your vote, your shares will be voted “FOR” the director nominees listed on the card, (Proposal 1), “FOR” the ratification of Deloitte & Touche LLP as our independent registered public accounting firm (Proposal 2), “FOR” the advisory vote to approve the compensation of our named executive officers, (Proposal 3), and “FOR” the amendment to the 2011 Equity Incentive Plan (Proposal 4).

What if I am a beneficial owner and do not give voting instructions to my broker?

 

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank or broker by the deadline provided in the materials you receive from your bank or broker. If you do not provide voting instructions to your bank or broker, whether your shares can be voted by such person depends on the type of item being considered for vote. Brokers may not vote shares held in street name on non-routine matters unless they have received voting instructions from the beneficial owners on how to vote those shares.  The ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2019 is the only routine matter to be presented at the Annual Meeting on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions.  All other matters are considered “non-routine”.

5


 

Could other matters be decided at the Annual Meeting?

 

We are not aware of any other matters to be presented at the Annual Meeting. If any matters are properly brought before the Annual Meeting, the persons named in your proxies will vote in accordance with their best judgment. Discretionary authority to vote on other matters is included in the proxy.

Do we have a policy about directors’ attendance at the Annual Meeting?

 

Pursuant to the Corporate Governance Principles, directors are strongly encouraged to attend the Annual Meeting.  Five of our directors attended the 2018 Annual Meeting of Stockholders.

How can I access Immersion Corporation’s proxy materials and annual report electronically?

 

This proxy statement, the accompanying proxy card and the 2018 Annual Report are being made available to our stockholders on the Internet at www.envisionreports.com/IMMR. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.

If you own Immersion Corporation common stock in your name, you can choose this option and reduce the cost of producing and mailing these documents and help the environment by checking the box for electronic delivery on your proxy card, or by following the instructions provided when you vote by telephone or over the Internet. If you hold your Immersion Corporation common stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet.

If you choose to view future proxy statements and annual reports over the Internet, you will receive a Notice of Internet Availability next year in the mail containing the Internet address to use to access our proxy statement and annual report. Your choice will remain in effect unless you change your election following the receipt of a Notice of Internet Availability. You do not have to elect Internet access each year. If you later change your mind and would like to receive paper copies of our proxy statements and annual reports, you can request both by following the directions set forth on the Notice of Internet Availability.

Who bears the cost of this proxy solicitation?

 

Our Board of Directors has sent you this proxy statement. Our directors, officers and employees may solicit proxies by mail, by email, by telephone or in person. Those persons will receive no additional compensation for any solicitation activities. We will request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation materials to the beneficial owners of Immersion Corporation common stock held of record by those entities, and we will, upon the request of those record holders, reimburse reasonable forwarding expenses. We will pay the costs of preparing, printing, assembling and mailing the proxy materials used in the solicitation of proxies.

How do I submit a proposal for action at the 2020 Annual Meeting of Stockholders?

 

A proposal for action to be presented by any stockholder at the 2020 Annual Meeting of Stockholders will be acted upon only:

 

if the proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), the proposal is received by our Corporate Secretary on or before January 2, 2020; 

6


 

 

if the proposal or a director nomination is not to be included in the proxy statement, pursuant to our Bylaws, the proposal is submitted in writing to our Corporate Secretary on or before January 2, 2020 and such proposal is, under Delaware General Corporation Law (“Delaware Law”), an appropriate subject for stockholder action and is submitted in accordance with our Bylaws; or

 

also in the case of nominating directors, if we increase the number of directors to be elected at our 2020 Annual Meeting of Stockholders and there is no public announcement by us naming all of the nominees for director or specifying the size of the increased Board by December 23, 2019, we must receive nominations (but only from a stockholder who had previously submitted in proper form a timely director nomination notice by January 2, 2020) for any new positions created by such increase no later than the close of business on the 10th day following the day on which such public announcement is made.

In addition, the stockholder proponent, or a representative who is qualified under state law, must appear in person at the 2020 Annual Meeting of Stockholders to present such proposal. Our Bylaws, which are publicly available as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2018, provide detailed information on how to properly submit stockholder proposals and director nominations, and should be read carefully.

 

Proposals should be sent to our Corporate Secretary, Immersion Corporation, 50 Rio Robles, San Jose, California 95134.

How can I view or request copies of our corporate documents and SEC filings?

 

Our website contains our Certificate of Incorporation, Bylaws, Corporate Governance Principles, Stock Ownership Policy, Board Committee Charters, the Code of Business Conduct and Ethics, Immersion Environmental and Social Policy and our SEC filings. To view these documents, go to www.immersion.com, click on “Investor Relations” and click on “Governance.” To view our SEC filings and Forms 3, 4 and 5 filed by our directors and executive officers, go to www.immersion.com, click on “Investor Relations” and click on “Financial Info.”

We will promptly deliver free of charge a copy of our 2018 Annual Report to any stockholder requesting a copy. Requests should be directed to our Corporate Secretary, Immersion Corporation, 50 Rio Robles, San Jose, California 95134.

What is householding?

 

As permitted by the Exchange Act, only one copy of this proxy statement is being delivered to stockholders residing at the same address, unless the stockholders have notified us of their desire to receive multiple copies of the proxy statement. This is known as householding.

We will promptly deliver, upon oral or written request, a separate copy of the proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year or future years should be directed to our Corporate Secretary, Immersion Corporation, 50 Rio Robles, San Jose, California 95134.

Stockholders of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Computershare, to request that only a single copy of the proxy statement be mailed in the future.

Contact Computershare by phone at (888) 265-3747 or by mail at 250 Royall Street, Canton, Massachusetts 02021.

Beneficial owners should contact their broker or bank.

7


 

ELECTION OF DIRECTORS (PROPOSAL 1)

The Board of Directors of Immersion Corporation (the “Board of Directors” or the “Board”) is elected by the stockholders to oversee their interest in the long-term health and the overall success of our business and its financial strength. The Board serves as our ultimate decision-making body, except for those matters reserved to or shared with the stockholders. The Board selects and oversees the members of senior management, who are charged by the Board with conducting our business.

Election Process

 

Pursuant to our previous Amended and Restated Certificate of Incorporation, our Board membership was divided into three classes — Class I, II, and III directors. Beginning in 2018, each director nominated for election is elected for a one-year term of office. The Board will become declassified as of the date of the 2020 Annual Meeting. Each director holds office until his or her successor is elected and qualified or until his or her earlier death, resignation, or removal. In accordance with our Amended and Restated Certificate of Incorporation, the Class I and the Class II directors will be elected at this 2019 Annual Meeting, the Class I, Class II and Class III directors will be elected at the annual meeting of stockholders in 2020.  If a quorum is present and voting, the nominees for Class I and Class II directors receiving the greatest number of votes will be elected as director.  Any votes withheld and broker non-votes have no effect on the vote.

Nomination of Directors

 

The entire Board of Directors is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of stockholders, upon the recommendation of the Nominating and Corporate Governance Committee or the independent members of the Board.  The Nominating and Corporate Governance Committee is responsible for identifying, screening, and recommending candidates to the entire Board for Board membership. The Nominating and Corporate Governance Committee works with the Board to determine the appropriate characteristics, skills, and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board takes into account many factors, which are described in further detail below. The Board evaluates each individual in the context of the Board as a whole with the objective of retaining a group of directors with diverse and relevant experience that can best perpetuate our success and represent stockholder interests through sound judgment.

The Nominating and Corporate Governance Committee may seek the input of other members of the Board or management in identifying candidates who meet the criteria outlined above. In addition, the Nominating and Corporate Governance Committee may use the services of consultants or a search firm. The Nominating and Corporate Governance Committee will consider recommendations by our stockholders of qualified director candidates for possible nomination by the Board. Stockholders may recommend qualified director candidates by writing to our Corporate Secretary at Immersion Corporation, 50 Rio Robles, San Jose, California 95134. Submissions should include information regarding a candidate’s background, qualifications, experience, and willingness to serve as a director. Based on a preliminary assessment of a candidate’s qualifications, the Nominating and Corporate Governance Committee may conduct interviews with the candidate or request additional information from the candidate. The Nominating and Corporate Governance Committee uses the same process for evaluating all candidates for nomination by the Board, including those recommended by stockholders. Our Bylaws permit persons to be nominated as directors directly by stockholders if certain timing, information and other requirements are met.

In order for a stockholder to nominate a director or directors, the stockholder must submit the proposal to nominate in writing to our Corporate Secretary on or before January 2, 2020.  If we increase the number of directors to be elected at our 2020 Annual Meeting of Stockholders and there is no public announcement by us naming all of the nominees for director or specifying the size of the increased Board by December 23, 2019, we must receive nominations (but only from a stockholder who had previously submitted in proper form a timely director nomination notice by January 2, 2020 for any new positions created by such increase no later than the close of business on the 10th day following the day on which such public announcement is made.  Nominations must be submitted in accordance with our Bylaws and should be sent to our Corporate Secretary, Immersion Corporation, 50 Rio Robles, San Jose, California 95134.

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Qualifications of Directors and Nominees

 

When evaluating potential director nominees, the Nominating and Corporate Governance Committee considers each individual’s professional expertise and educational background in addition to the individual’s general qualifications. The Nominating and Corporate Governance Committee works with the Board to determine the appropriate mix of backgrounds and experiences in order to establish and maintain a Board that is strong in its collective knowledge and that can fulfill its responsibilities and oversee our business consistent with its fiduciary duty to stockholders.

The Nominating and Corporate Governance Committee communicates with the Board to identify backgrounds, qualifications, professional experiences, and areas of expertise that impact our business that are particularly desirable for our directors to possess in order to help meet specific Board needs, including:

 

Public company board and corporate governance experience, which provides directors a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board;

 

Shareholder alignment, which helps to ensure the Board protects the best interests of our shareholders;

 

Operating experience as current or former executives, which gives directors specific insight, and expertise that will foster active participation in the development of our business strategy and provide the appropriate tools for overseeing the implementation of our operating plan;

 

Industry knowledge, especially in our key markets of mobile devices, gaming, VR/AR and automotive, which is vital in understanding and reviewing our strategy;

 

Executive leadership experience, which gives directors who have served in significant leadership positions strong abilities to motivate and manage others and to identify and develop leadership qualities in others;

 

Accounting and financial expertise, which enables directors to analyze our financial statements and oversee our accounting and financial reporting processes; and

 

Technology licensing and IP monetization experience, which is an important component of our business plans.

The following table highlights each director’s or director nominee’s specific skills, knowledge and experience.  A particular director may possess other skills, knowledge or experience even though they are not indicated below.

 

Director

  

Industry

 

 

Operating

 

Leadership

 

Accounting

and

Financial

  

  

Public

Company

Board/

Corporate

Governance

  

Technology Licensing

and IP

Monetization

Sumit Agarwal

 

 

 

 

 

 

 

 

 

Sid Ganis

 

 

 

 

 

 

 

 

 

 

Ramzi Haidamus

 

 

 

 

 

 

 

 

 

 

Sharon Holt

 

 

 

 

 

 

 

 

 

David Sugishita

 

 

 

 

 

 

 

 

 

Jonathan Visbal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experience in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.

9


 

2019 Nominees for Director

 

Our Board’s nominees for election at the Annual Meeting are Sumit Agarwal, Sid Ganis, Ramzi Haidamus, David Sugishita, and Jonathan Visbal.  If elected, these nominees will hold office until the 2020 Annual Meeting of Stockholders and until his successor is elected and qualified.  Mr. Lacey and Mr. Traub who have served as directors since 2018, and Mr. Veschi, who has served as a director since 2014, will not stand for re-election.

We have no reason to believe that the nominees listed above will be unable or unwilling to serve if elected. However, if any of these nominees should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.  Given the recent departure of our Chief Financial Officer, and given Mr. Sugishita’s long experience and familiarity with our finance operations, Mr. Sugishita has informed the Board of his willingness to stand for re-election and is willing to serve his full term or to resign if he is elected and the Board has appointed another independent director with requisite financial expertise before the end of his full term.  The Board believes that the nominees’ qualifications, skills and experiences would contribute to an effective and well-functioning Board.

Included in each nominee’s biography below is an assessment of his specific qualifications, attributes, skills, and experience based on the qualifications described above.

There are no family relationships between the nominees, or any directors, or any of our executive officers.

Nominees for Directors – To Be Elected for a Term Expiring in 2020

 

 

Sumit Agarwal

Age: 43

Education: BS in Chemical Engineering from Massachusetts Institute of Technology; Masters from Air Force Academy (Air University)

Professional Experience:  Mr. Agarwal has served since 2011 as Co-Founder and Chief Operating Officer of Shape Security, a security company defending consumer brands in the Fortune 500 from internet fraud and cyber-attacks.  From 2010 to 2011 Mr. Agarwal was with the US Department of Defense where he served as Deputy Assistant to the Secretary of Defense as well as Senior Advisor for Cyber Innovation.  From 2003 to 2009 Mr. Agarwal was at Google LLC where he held several product management roles including Head of Mobile Product Management, North America.

Director Qualifications: Mr. Agarwal brings to the Board many years of experience in product management which will be invaluable as we begin to focus more of our efforts on delivering technological solutions to our customers.

Sid Ganis

Age: 79

Education: Brooklyn College

Professional Experience:  Mr. Ganis is the owner of the independent production company Out of the Blue Entertainment, which he founded in 1996.  Mr. Ganis is also the Co-Founder and Chairman of Jiaflix Enterprises, a U.S. company that works with entertainment owns to monetize their assets in Asia.  He served on the board of directors of Marvel Entertainment, an entertainment company, until its sale to The Walt Disney Company in 2009.  In addition, Mr. Ganis has previously held various global corporate and strategic positions at Sony Pictures Entertainment, including as President of Worldwide Marketing for Columbia TriStar, Vice Chairman of Columbia Pictures, and President of Marketing and Distribution for Columbia Pictures, as well as key posts at Lucasfilm, Warner Bros., Paramount, and Twentieth Century Fox. Currently Mr. Ganis is Vice President of the Academy of Motion Picture Arts and Sciences where he previously served as President and is the Honorary Chairman at Wuxi Studios near Shanghai.

10


 

Director Qualifications: Mr. Ganis brings to the Board decades of valuable marketing and branding experience which will be critical to our strategy going forward as we look to rebrand as a technology deliverer.

Ramzi Haidamus

Director and Chief Executive Officer since 2019

Age:  55

Board Committee: None

Education: B.S. and M.S. in Electrical Engineering from the University of the Pacific

Professional Experience: Mr. Haidamus has substantial leadership, strategic planning and business development experience in technology and IP monetization. Previously, he was president of Nokia Technologies group from September 2014 to October 2016, where he led the growth of the existing patent licensing division and the formation of its digital media, digital health and brand licensing divisions. From 1996 to March 2014, Mr. Haidamus held numerous positions at Dolby Laboratories, Inc. (NYSE:  DLB), an audio, visual and voice technologies company, including serving as Executive Vice President, Marketing and Business Development and Executive Vice President, Sales and Marketing. From 2002 to 2006, he was also the founder, CEO, and President of Via Licensing Corp., a patent pool licensor. From October 2017 to January 2019, he served as Chairman of the Advisory Board of UKL Tech Hub Accelerator, and since August 2018, he served as a member of the Advisory Board of Keyssa, a secure high-speed data transfer developer.

Director Qualifications:  Mr. Haidamus is our Chief Executive Officer and brings more than 20 years of experience in the technology and IP monetization space, including and executive positions at Nokia Technologies and Via Licensing Corp.

David Sugishita

Director since 2010

Age: 71

Board Committees: Audit (Chair), Compensation

Education: B.S. in Finance from San Jose State University and an M.B.A from Santa Clara University

Professional Experience: Mr. Sugishita served as the non-executive Chairman of the Board of Atmel Corporation from August 2006 to April 2016, and served as a director of Atmel from February 2004 to April 2016. In addition, Mr. Sugishita was Chairman of the Audit Committee of Atmel. Previously he served on the board of directors of Micro Component Technology, Inc. from 1994 to 2009, Magma Design Automation from 2010 to 2011, and Ditech Networks, Inc. from 2003 to 2012. Mr. Sugishita is retired and previously held various senior financial management positions with SONICblue Inc. (EVP/CFO), RightWorks (EVP/CFO), Synopsys (SVP/CFO), Actel (SVP/CFO), Micro Component Technology (SVP/CFO), Applied Materials (VP/ Corporate Controller) National Semiconductor (VP/Finance), Fairchild Camera & Instrument (Controller) and Intersil (Controller) during the past 40 years.

Director Qualifications: Mr. Sugishita brings to the Board over two decades of experience as a financial executive officer and member of the boards of directors of public high technology companies, specifically in the semiconductor industry, which is an important vertical market for our company. Additionally, Mr. Sugishita brings many years of service on public company boards, including as chairman, and service on audit and nomination and corporate governance committees.  Mr. Sugishita’s experience is invaluable in helping us to continue to provide strong financial oversight at the Board level.

11


 

Jonathan Visbal

Age: 61

Education: MBA, Stanford Graduate School of Business; BA, University of Colorado

Professional Experience:  Since January, 2018, Mr. Visbal has served as Chairman of the Board of Trustees for World Affairs Council in San Francisco, California. From 1999 to September 2018 he served as a leadership advisor and executive recruiter at Spencer Stuart where he specialized in senior-level assignments in the technology and communications arena, with a concentration on the globalization of businesses via new technologies. His assignments spanned the functions of board director, CEO, and senior executive management. He has served as a member of Spencer Stuart’s board of directors and as the leader of the firm’s global Technology, Communications, & Media Practice as well as the Silicon Valley, San Francisco, and Seattle offices

Prior to joining Spencer Stuart, he held the role of vice president of international business development at Lucent Technologies. Jonathan also worked at Octel Communications for 10 years in a variety of sales and marketing positions, including as vice president of marketing, director of European telecom sales, and group product manager. He was one of the founders of the company’s Europe, Middle East and Africa operations in London. He began his career in telecommunications with AT&T and Pacific Telesis International.

Director Qualifications: Mr. Visbal brings to the Board years of experience in recruiting which will be critical to our success going forward as well as broad industry, leadership and operational skills.

The Board of Directors recommends a vote FOR the election of Messrs. Agarwal, Ganis, Haidamus, Sugishita, and Visbal, as directors.

 

Director Serving for a Term Expiring at the 2020 Annual Meeting of Stockholders (Class III Director)

 

Sharon Holt

Director since 2016 and Chairman of the Board since 2018

Age: 54

Board Committee: Compensation (Chair), Audit

Education: BSEE from Virginia Polytechnic Institute and State University

Professional Experience: Since 2016, Ms. Holt has served as a Principal at Fraser Stuart Ventures, LLC, a private investment and advisory firm.  Since 2012 she has served as an advisor to several technology companies, including Analogix Semiconductor, a semiconductor designer and manufacturer, Lumileds, a developer and manufacturer of LED solutions, Kandou Bus., S.A., a technology development and licensing company, and Mgestyk Technologies, a developer and licensor of gesture control technology.  Ms. Holt was a senior executive at Rambus Inc., a leading technology development and licensing company, from 2004 to 2012 where she served as Senior Vice President of Sales, Licensing and Marketing, and Senior Vice President and General Manager of the Semiconductor Business Group.  From 1999 to 2004, Ms. Holt was an executive at Agilent Technologies (“Agilent”) in the Semiconductor Products Group (now Broadcom), where her last position was Vice President & General Manager of Americas Field Operations, overseeing sales and technical support operations for the semiconductor business, including ASICs, ASSPs, optical and wireless ICs. Prior to that, she ran sales operations focused on Agilent’s largest global customers. From 1986 to 1999, Ms. Holt worked at HP in Applications Engineering, Sales, and Distribution Channel Management for the Semiconductor Products Group.

12


 

Director Qualifications:  Ms. Holt brings more than 30 years of experience in the semiconductor industry and has a proven track record of developing business and partnerships with market-leading technology companies. Her experience advising technology companies looking to optimize their intellectual property and licensing business strategy, customer engagements, and strategic partnerships makes her an ideal advisor to Immersion in putting its business and licensing strategies into practice.

 

13


 

DIRECTOR COMPENSATION

The Compensation Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services.  Under the Compensation Committee charter, the Compensation Committee is authorized to engage consultants or advisors in connection with its review and analysis of director compensation.  In 2018 the Compensation Committee engaged Compensia in its review and analysis. Directors who also serve as our employees do not receive payment for services as directors.    

2018 Annual Compensation

 

Cash Compensation

In 2018, non-employee directors each received an annual retainer fee of $25,000, typically paid in quarterly installments on the date of each quarterly Board meeting. In addition, the Chairman of our Board received an additional retainer fee of $20,000. The Chairman of our Audit Committee received a $10,000 annual committee fee, the Chairman of our Compensation Committee received an $8,000 annual committee fee, and the Chairman of our Nominating and Corporate Governance Committee received a $3,000 annual committee fee. The other members of our Audit and Compensation Committees each received a $3,000 annual committee fee and the other members of our Nominating and Corporate Governance Committee each received a $2,000 annual committee fee. These annual committee fees are typically paid in quarterly installments on the date of the quarterly Board meetings. Fees for partial year service are pro-rated. Directors are entitled to reimbursement of reasonable travel expenses they incur in connection with attending Board and committee meetings.

In 2019, the Board revised the annual committee fee for the Chairman of our Audit Committee from $10,000 to $14,000.

Equity Compensation

At the beginning of 2018 our policy was to grant non-employee directors an option to purchase 40,000 shares of our common stock upon joining the Board.  This initial option was granted with an effective date of the 10th business day of the month following the month the director joins the Board; the exercise price per share for such option equaled the closing price per share of our common stock on The Nasdaq Global Market on such effective date.  Subject to continued service, such option vested as to 1/4th of the shares subject to the grant on the first anniversary of the date of commencement of service and 1/48th monthly thereafter.

In addition, on an annual basis, non-employee directors received a grant of restricted stock awards (“RSAs”) or a stock option having a value equal to $125,000 on the date of the annual shareholder meeting, 100% of which vested on the first anniversary of the grant date.  

In August 2018, the Board of Directors changed the director equity program such that the initial equity grant made to non-employee directors is the same as the RSA annual grant made to non-employee directors.

In 2019, the Board revised the stock compensation for non-employee directors to eliminate the choice between a stock option and an RSA for annual grants such that all annual director grants are now RSAs that vest at our next annual stockholder meeting.  If a director commences service on the date of the annual stockholder meeting, the director will receive only the initial equity grant and will not be eligible for annual equity grant until the following stockholder meeting.  If a director commences service between the annual stockholder meetings, the director shall receive a prorated initial equity grant based on the number of days before the next annual stockholder meeting.

14


 

2018 Director Compensation Table

 

The following table sets forth information concerning the compensation earned during 2018 by each person who served as a director during the year ended December 31, 2018, except for Mr. Schlachte who did not receive any compensation for serving as director during 2018:

 

 

 

Fees Earned

or Paid in

Cash(2)

 

 

Stock

Awards(3)(4)

 

 

Option

Awards(3)(5)

 

 

Total

 

Director(1)

 

($)

 

 

($)

 

 

($)

 

 

($)

 

Sharon Holt(6)

 

 

45,000

 

 

 

121,806

 

 

 

 

 

 

166,806

 

Tom Lacey(7)

 

 

 

 

 

536,470

 

 

 

 

 

 

536,470

 

Daniel McCurdy(8)

 

 

27,223

 

 

 

 

 

 

 

 

 

27,223

 

Jack Saltich(9)

 

 

25,500

 

 

 

 

 

 

 

 

 

25,500

 

David Sugishita

 

 

38,000

 

 

 

121,806

 

 

 

 

 

 

159,806

 

Kenneth Traub(10)

 

 

14,000

 

 

 

 

 

 

290,520

 

 

 

304,520

 

John Veschi

 

 

31,000

 

 

 

121,806

 

 

 

 

 

 

152,806

 

 

(1)

In 2018, Mr. Lacey and Mr. Schlachte both served as interim CEO while they were serving as directors.  

(2)

Consists of meeting fees for service as a member of our Board.  Fees earned by directors vary depending on the number of committees on which the director served and whether the director was Chairman of our Board or served as chair of certain committees.  See “2018 Annual Compensation” above for more information.

(3)

Represents the grant date fair value of each stock option, restricted stock unit or restricted stock award, as applicable, granted in 2018 in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (FASB ASC Topic 718), disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. For a discussion of assumptions used to calculate the FASB ASC Topic 718 grant date fair value, refer to Note 6 (Stock-based Compensation) to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. See “2018 Annual Compensation” above for more information.

(4)

For each director, other than Mr. Lacey, the aggregate number of shares subject to RSAs outstanding on December 31, 2018 that were granted in 2018.  For Mr. Lacey the aggregate number of RSUs outstanding on December 31, 2018 that were granted in 2018.

(5)

Amount represents the aggregate number of stock options outstanding on December 31, 2018.

(6)

Ms. Holt was appointed as Chairman of the Board on August 20, 2018.

(7)

Mr. Lacey was appointed as Interim Chief Executive Officer and as director in August 2018.  Upon appointment, Mr. Lacey received an RSU award for 31,000 shares which represented 11,478 shares for service as a member of the Board and 19,522 shares for service as Interim Chief Executive Officer. In October 2018, Mr. Lacey received an additional RSU award for 20,000 shares, 10,000 shares of which would vest a year from grant should Mr. Lacey still be serving as Interim Chief Executive Officer and 10,000 shares of which would vest a year from date of grant should Mr. Lacey still be serving as a member of the Board. Mr. Lacey also received compensation for service as the Interim Chief Executive Officer as described in the Summary Compensation Table below.

(8)

Mr. McCurdy served as a director until September 2018.

(9)

Mr. Saltich served as a director until our 2018 annual stockholder meeting.  

(10)

At Mr. Traub’s request, his annual cash retainer was paid directly to Raging Capital Management, LLC.  Mr. Traub received an option to purchase 40,000 shares upon joining the company with an exercise price of $15.25 and the option award value is calculated as described in Footnote 3 above.

 

 

15


 

For each director, below is the aggregate number of shares subject to Restricted Stock Awards, Restricted Stock Units, and Stock Options outstanding on December 31, 2018:

 

 

 

 

Restricted Stock

Awards

Outstanding at

December 31,

2018

 

 

Restricted Stock

Units

Outstanding at

December 31,

2018

 

 

Option Awards

Outstanding at

December 31,

2018

 

 

Director

 

(#)

 

 

(#)

 

 

(#)

 

 

Sharon Holt

 

 

7,889

 

 

 

 

 

 

40,000

 

 

Tom Lacey

 

 

 

 

 

51,000

 

 

 

 

 

Daniel McCurdy

 

 

 

 

 

 

 

 

 

 

Jack Saltich

 

 

 

 

 

 

 

 

 

 

Carl Schlachte

 

 

 

 

 

 

 

 

 

 

David Sugishita

 

 

7,889

 

 

 

 

 

 

1,895

 

 

Kenneth Traub

 

 

 

 

 

 

 

 

40,000

 

 

John Veschi

 

 

7,889

 

 

 

 

 

 

92,574

 

 

 

16


 

CORPORATE GOVERNANCE

We are committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens Board and management accountability and helps build public trust. The Board of Directors has established Corporate Governance Principles which provide a framework for our effective governance. The principles address matters such as the director responsibilities, director qualifications, determination of director independence, Board committee structure, Chief Executive Officer performance evaluation and management succession. The Board regularly reviews developments in corporate governance and updates the Corporate Governance Principles and other governance materials as it deems necessary and appropriate.

The corporate governance section of our website makes available our corporate governance materials, including the Corporate Governance Principles, our Stock Ownership Policy, the charters for each Board committee and our Code of Business Conduct and Ethics. To access these documents on our website, www.immersion.com, click on “Investor Relations” and then “Governance.”

Board Leadership Structure

 

Our Board has determined that having an independent director serve as Chairman of our Board is in our best interests and those of our stockholders.  This Board structure enhances the independence of our Board from our management by ensuring a greater role for the independent directors in our oversight and active participation of the independent directors in setting agendas and establishing priorities and procedures for our Board. In addition, separating these roles allows our Chief Executive Officer to focus his efforts on running our business and managing our day-to-day operations, while allowing our Board to benefit from our Chairman’s experience in leadership roles at public companies and advising technology companies looking to optimize their intellectual property and licensing business strategy, customer engagements, and strategic partnerships. Every regular meeting of our Board includes a meeting of our independent non-executive directors without management present.

 

 

Board Leadership Structure

 

    Chairman of the Board: Sharon Holt

 

    Chief Executive Officer:  Ramzi Haidamus

 

    All of our non-employee directors are independent

 

Independence of Directors

 

In accordance with the standards for independence set forth in the rules of The Nasdaq Stock Market, our Board has determined that, except for Mr. Haidamus, our Chief Executive Officer, each of the members of our Board has no relationship that would interfere with the exercise of independent judgment in carrying out his responsibilities as a director and is otherwise “independent” in accordance with the applicable rules of The Nasdaq Stock Market as currently in effect.

17


 

Risk Management

 

Our Board recognizes the importance of effective risk oversight in running a successful business and in fulfilling its fiduciary responsibilities for us and our stockholders.  Consistent with our Board leadership structure, our Chief Executive Officer and other members of our executive team are responsible for the day-to-day management of risk, while our Board is responsible for ensuring that we have an appropriate culture of risk management, set the right “tone at the top,” oversee our aggregate risk profile and assist management in addressing specific risks.

Our Board exercises its oversight responsibility for risk both directly and through its standing committees.  Strategic, operational and competitive risks also are presented and discussed at our Board’s quarterly meetings, and more often as needed.  On at least an annual basis, our Board conducts a review of our long-term strategic plans and members of our executive team report on our top risks and the steps management has taken or will take to mitigate these risks.  On a regular basis between Board meetings, our Chief Executive Officer provides updates to the Board on the critical issues we face and recent developments in our principal markets.

 

 

Risk Management

 

    Our Board oversees risk management.

 

    Our Board and standing committees spend a portion of their time reviewing and discussing specific risk topics.

 

    Company management is charged with managing risk through internal processes and controls.

 

Our Audit Committee is responsible for reviewing our risk management framework and programs, as well as the framework by which management discusses our risk profile and risk exposures with our full Board and its committees. Our Audit Committee meets regularly with our Chief Financial Officer, our independent auditor, our General Counsel, and other members of senior management to discuss our major financial risk exposures, financial reporting, internal controls, credit and liquidity risk, compliance risk, key operational risks, and our risk management framework and programs. Other responsibilities include at least annually reviewing the implementation and effectiveness of our compliance and ethics program and our business continuity plan and test results. Our Audit Committee meets regularly in separate executive sessions with the independent auditor, as well as with Audit Committee members only, to facilitate a full and candid discussion of risk and other issues.

Our Compensation Committee is responsible for overseeing human capital and compensation risks, including evaluating and assessing risks arising from our compensation policies and practices for all employees and ensuring executive compensation is aligned with performance. Our Compensation Committee also is charged with monitoring our incentive and equity-based compensation plans, including employee benefit plans. For additional information regarding the Compensation Committee’s review of compensation-related risk, please see the section of this proxy statement entitled “Compensation Discussion and Analysis—Risk Assessment of Compensation Programs.”

Our Nominating and Corporate Governance Committee oversees risks related to our overall corporate governance, including Board and committee composition, Board size and structure, director independence, and our corporate governance profile and ratings. Our Nominating and Corporate Governance Committee also is actively engaged in overseeing risks associated with succession planning for our Board and management.

18


 

Our Board believes that one of its primary responsibilities is to oversee the development and retention of executive talent and to ensure that an appropriate succession plan is in place for our Chief Executive Officer and other members of management. Each year, the Nominating and Corporate Governance Committee meets with our Vice President, Human Resources and other executives to discuss management succession planning and to address potential vacancies in senior leadership. The Nominating and Corporate Governance Committee also annually reviews with the Board succession planning for our Chief Executive Officer.  In addition to executive and management succession, the Nominating and Corporate Governance Committee regularly oversees and plans for director succession and refreshment of the Board to ensure a mix of skills, experience, tenure, and diversity that promote and support our long-term strategy. In doing so, the Nominating and Corporate Governance Committee takes into consideration the overall needs, composition and size of the Board, as well as the criteria adopted by the Board regarding director candidate qualifications. Individuals identified by the Nominating and Corporate Governance Committee as qualified to become directors are then recommended to the Board for nomination or election.

Board and Committee Self-Evaluations

 

Each year, the Nominating and Corporate Governance Committee oversees the self-evaluation process of the Board, committees and Chairman.  The process is conducted using a detailed questionnaire which (a) provides for quantitative ratings in key area and (b) seeks subjective comment in each of these areas.  

Company Policies

 

Our Board has adopted several policies governing directors, employees, and/or officers: i) Code of Business Conduct and Ethics that outlines the principles of legal and ethical business conduct; ii) Stock Ownership Policy, which requires our executives and non-employee directors to have a direct ownership in Immersion’s common stock; iii) Insider Trading Policy, which outlines the procedures and guidelines governing securities trades by our employees; and iv) Immersion Environmental and Social Policy.  

The Code of Business Conduct and Ethics is applicable to all of our directors, employees, and officers and is available on our website at https://ir.immersion.com/corporate-governance.  Any substantive amendment or waiver of this policy may be made only by our Board upon a recommendation of the Audit Committee and, as required by applicable SEC rules, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by disclosing such information on our website.

The Stock Ownership Policy is applicable to our executives and non-employee directors and is available on our website at https://ir.immersion.com/corporate-governance.  This policy requires that these individuals hold stock equal in value to, in the case of our CEO and non-employee directors, three times, and our other executives, one times, the amount of their annual cash retainer/base salary.  This is calculated once a year and there is a five-year period in which to comply.  If it is determined that a particular person does not comply with the policy, the individual will be notified and will be required to retain 50% of the net shares received as a result of any exercise, vesting or payment of any equity awards until he or she becomes compliant. 

The Insider Trading Policy applies to all of our current and former employees, directors, independent contractors, agents and consultants.  The Insider Trading Policy prohibits short sales, hedging or pledging of stock by employees, officers or directors.

In addition, the Board recently adopted the Immersion Environmental and Social Policy which can be found on our website at https://ir.immersion.com/corporate-governance/environmental-and-social-policy.

19


 

Communications by Stockholders with Directors

 

Stockholders may communicate with any and all directors by transmitting correspondence by mail, facsimile, or e-mail, addressed as follows: Board or individual director, c/o Corporate Secretary, Immersion Corporation, 50 Rio Robles, San Jose, California 95134; Fax: (408) 350-7994; E-mail Address: corporate.secretary@immersion.com. Our Corporate Secretary will maintain a log of such communications and transmit as soon as practicable such communications to the identified director addressee(s).  The acceptance and forwarding of a communication to any director does not imply that the director owes or assumes any fiduciary duty to the person submitting the communication, all such duties being only as prescribed by applicable law.

Board Meetings and Committees of the Board

 

Attendance at Board, Committee and Annual Stockholder Meetings

Our Board and its committees meet throughout the year on a set schedule, hold special meetings as needed, and act by written consent from time to time.  The Board met twenty-seven times during 2018.  Each director attended at least 75% of the meetings of the Board and of any committees of the Board on which he serves.  The total number of meetings held by each committee is set forth below under “Committees of the Board.”

We make every effort to schedule our annual meeting of stockholders at a time and date to accommodate attendance by directors, taking into account the directors’ schedules. All directors are encouraged to attend the annual meeting of stockholders.  Five of our directors attended our 2018 annual meeting of stockholders.

Executive Sessions of the Board

The non-executive members of our Board and all committees of our Board meet in executive session without management present at each regularly scheduled in-person Board and committee meeting.  

Committees of the Board

The Board has a separately-designated standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.  

The Board has also adopted a written charter for each of the Board committees.  Each charter is available on our website at https://ir.immersion.com/corporate-governance.

In each case, our Board has delegated the responsibilities set forth below to the respective committee; however, our Board may from time to time, perform the duties itself.

The table below provides current membership (M) and chairmanship (C) information for each standing committee.

 

Name

 

Audit

 

Compensation

 

Nominating and

Corporate Governance

Sharon Holt

 

M

 

C

 

 

Ramzi Haidamus

 

 

 

 

 

 

Tom Lacey

 

 

 

 

 

M

David Sugishita

 

C

 

M

 

 

John Veschi

 

M

 

 

 

M

Kenneth Traub

 

 

 

M

 

C

20


 

Audit Committee and Audit Committee Financial Expert

 

Members:

 

David Sugishita (Chairman)

Sharon Holt

John Veschi

 

Number of Meetings in Fiscal Year 2018:

 

8

Independence:

 

Our Board has determined that each member of the Audit Committee meets the independence criteria set forth in the applicable rules of The Nasdaq Stock Market and the SEC for Audit Committee membership.

Financial Expert:

 

Our Board has determined that all members of the Audit Committee possess the level of financial literacy required by applicable Nasdaq Stock Market and SEC rules and that in accordance with section 407 of the Sarbanes-Oxley Act of 2002, at least one member of the Audit Committee, Mr. Sugishita, is an “audit committee financial expert,” as defined in the rules of the SEC.  

Responsibilities:

 

Our Audit Committee provides assistance to our Board in various matters, including fulfilling its responsibilities with respect to the following:

    retaining our independent registered public accounting firm;

    reviewing the scope of audit and pre-approving permissible non-audit services by our independent registered public accounting firm;

    reviewing the accounting principles and auditing practices and procedures to be used for our financial statements;

    reviewing the results of the audits of our financial statements;

    reviewing risk management framework and programs; and

    reviewing related party transactions.

 

 

21


 

Compensation Committee

 

Members:

 

Sharon Holt (Chairman)

David Sugishita

Kenneth Traub

Number of Meetings in Fiscal Year 2018:

 

6

Independence:

 

Our Board has determined that each member of the Compensation Committee meets the independence criteria set forth in the applicable Nasdaq Stock Market rules, is a “non-employee director,” as defined in Rule 16b-3 under Section 16 of the Exchange Act.  

Responsibilities:

 

Our Compensation Committee provides assistance to our Board in various matters, including with respect to the following:

    overseeing our general compensation structure, policies and programs, and assessing whether our compensation structure establishes appropriate incentives for management and employees and properly aligning executive compensation with stockholder interests and business performance;

    making recommendations to the Board with respect to and administration of our equity-based compensation plans, including our equity incentive plans and employee stock purchase plan;

    reviewing and approving compensation packages for our executive officers;

    reviewing and approving employment and retention agreements and severance arrangements for executive officers, including change-in-control provisions, plans or agreements; and

    reviewing the compensation of directors for service on the Board and its committees and recommending changes in compensation to the Board.

Other than the delegation to the Chief Executive Officer of the authority to grant awards under certain equity plans pursuant to guidelines set by the Board, our Compensation Committee has not delegated any of its duties under its charter. The Compensation Committee may, however, from time to time, delegate duties or responsibilities to subcommittees or to one member of the Compensation Committee.  

22


 

Nominating and Corporate Governance Committee

 

Members:

 

Kenneth Traub (Chairman)

Tom Lacey

John Veschi

Number of Meetings in Fiscal Year 2018:

 

8

Independence:

 

Our Board has determined that each member of the Nominating and Corporate Governance Committee meets the criteria for independent Board members set forth in the applicable Nasdaq Stock Market rules.  

Responsibilities:

 

Our Nominating and Corporate Governance Committee provides assistance to our Board in various matters, including fulfilling its responsibilities with respect to the following:

    identifying, evaluating and recommending candidates for Board positions to our Board and recommending to our Board policies on Board and committee composition and criteria for Board membership;

    recommending to our Board, and reviewing on a periodic basis, our succession plan, including policies and principles for selection and succession of the Chief Executive Officer in the event of an emergency or the resignation or retirement of our Chief Executive Officer;

    periodically reviewing policies and the compliance of senior executives with respect to these policies;

    reviewing our compliance with corporate governance listing requirements of The Nasdaq Stock Market; and

    assisting our Board in developing criteria for the annual evaluation of our Chief Executive Officer, director and committee performance.

 

 

23


 

RELATED PERSON TRANSACTIONS

In accordance with our Audit Committee charter, our Audit Committee is responsible for reviewing and approving the terms and conditions of any related party transactions.  Review of any related party transaction would include reviewing each such transaction for potential conflicts of interests and other improprieties. Except as described in “Director Compensation” above and “Executive Compensation” below, since January 1, 2018, there has not been, nor is there currently proposed, any transaction or series of similar transactions, to which we are or were a party, in which the amount involved exceeds $120,000 and in which any of our directors, executive officers, or holders of more than 5% of our capital stock, or any of the immediate family members of such persons, had or will have a direct or indirect material interest.

In addition to indemnification provisions in our Bylaws, we have entered into agreements to indemnify our directors and executive officers. These agreements provide for indemnification of our directors and executive officers for some types of expenses, including attorney’s fees, judgments, fines, and settlement amounts incurred by persons in any action or proceeding, including any action by us or in our right, arising out of their services as our director or executive officer. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

OWNERSHIP OF OUR EQUITY SECURITIES

Directors and Executive Officers

 

The following table sets forth information regarding beneficial ownership of Immersion Corporation common stock by each director, each director nominee, each individual named in the 2018 Summary Compensation Table on page 41, and our directors, director nominees and executive officers as a group, all as of April 10, 2019. Unless otherwise noted, voting power and investment power in Immersion Corporation common stock are held solely by the named person.  The address of each of the individuals named below is c/o Immersion Corporation, 50 Rio Robles, San Jose, California 95134.  

 

Name

 

Aggregate

Number of

Shares

Beneficially

Owned

 

Percent of

Outstanding

Shares

(1)

 

Additional Information

Sharon Holt

 

47,194

 

*

 

 

Includes 28,333 shares that may be acquired

upon exercise of options on or before June 9, 2019.

Nancy Erba

 

67,093

 

*

 

 

Ramzi Haidamus

 

 

*

 

 

Includes 0 shares that may be acquired upon

exercise of options on or before June 9, 2019.

Anne Marie Peters

 

296,033

 

*

 

 

Includes 188,978 shares that may be acquired

upon exercise of options on or before June 9, 2019.

Carl Schlachte

 

27,886

 

*

 

 

Tom Lacey

 

37,000

 

*

 

 

David Sugishita

 

36,147

 

*

 

 

Includes 1,895 shares that may be acquired upon

exercise of options on or before June 9, 2019.

Kenneth Traub

 

17,889

 

*

 

 

John Veschi

 

119,848

 

*

 

 

Includes 92,574 shares that may be acquired

upon exercise of options on or before June 9, 2019.

All directors, director

nominees and executive

officers as a group

(9 persons)

 

649,090

 

1.75%

 

 

Includes 311,780 shares that may be acquired

upon exercise of options on or before June 9, 2019.

 

*

Less than 1% of issued and outstanding shares of Immersion Corporation common stock.

(1)

Calculated on the basis of 31,552,886 shares of common stock outstanding as of April 10, 2019, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after April 10, 2019 are deemed to be outstanding for the purpose of calculating that stockholder’s percentage of beneficial ownership.

 

24


 

Principal Stockholders

 

Set forth in the table below is information about the number of shares held by persons we know to be the beneficial owners of more than 5% of the issued and outstanding Immersion Corporation common stock. Unless otherwise noted, to our knowledge, voting power and investment power in Immersion Corporation common stock are held solely by the named entity.

 

Name and Address

 

Aggregate

Number of

Shares

Beneficially

Owned

 

Percent of

Outstanding

Shares

(1)

 

Additional Information

Raging Capital

Management, LLC

Ten Princeton Ave.,

P.O. Box 228

Rocky Hill, NJ 08553

 

4,779,346

 

15.15%

 

 

Based solely on a Schedule 13D filed with the SEC

on February 28, 2019, Raging Capital Management

LLC and William C. Martin have shared voting power

with respect to 4,779,346 shares.

Viex Capital Advisors, LLC

825 Third Ave., 33rd Floor

NY, NY 10022

 

1,878,234

 

5.95%

 

 

Based solely on a Schedule 13G filed with the SEC

on March 29, 2019, Eric Singer, Viex Capital

Advisors, LLC, Viex Opportunities Fund, LP – Series

One and Viex GP, LLC have shared voting and

dispositive power with respect to 899,602 shares.

Eric Singer, Viex Capital Advisors, LLC, Viex Special

Opportunities Fund II, LP and Viex Special

Opportunities GP II, LLC have shared voting

and dispositive power with respect to 978,632 shares

BlackRock, Inc.

55 East 52nd St.

NY, NY 10055

 

1,868,241

 

5.29%

 

 

Based solely on a Schedule 13G/A filed with the SEC

on February 4, 2019, Blackrock Inc. has the sole

voting power with respect to 1,825,290 shares and

the sole dispositive power as to 1,868,241 shares.

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

 

1,780,321

 

5.64%

 

 

Based solely on a Schedule 13G filed with the SEC

on February 11, 2019, The Vanguard Group has the

sole dispositive power with respect to 1,728,924

shares and the shared dispositive power as to 51,397

shares with Vanguard Fiduciary Trust Company.

 

(1)

Calculated on the basis of 31,552,886 shares of common stock outstanding as of April 10, 2019.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our officers, directors, and persons who beneficially own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC.  These persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such persons.

Based solely on our review of the forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors, and persons who beneficially own more than 10% of our common stock were complied with during the fiscal year ended December 31, 2018.  

25


 

COMPENSATION DISCUSSION AND ANALYSIS

In this Compensation Discussion and Analysis, we summarize our objectives regarding the compensation of our named executive officers, including how we determine the elements and amounts of their compensation. Included below are discussions regarding how our executive compensation program ties to our strategic goals and objectives and supports stockholder value creation.  Specifically, we will discuss our compensation philosophy, our compensation approach, our compensation determinations and our policies and practices related to executive compensation. Our executive compensation program reflects a commitment to:

 

align compensation with our annual and long-term business objectives and performance;

 

enable us to attract, retain and reward executive officers and other key employees who contribute to our long-term success;

 

motivate our executive officers to enhance long-term stockholder value; and

 

position us competitively among the companies against which we recruit and compete for talent.

Our named executive officers for fiscal 2018 were as follows:

 

Name

 

Title

Tom Lacey(1)

 

Former Interim Chief Executive Officer

Carl Schlachte(2)

 

Former Interim Chief Executive Officer

Nancy Erba(3)

 

Former Chief Financial Officer

Anne Marie Peters

 

General Counsel and Senior Vice President, IP Licensing

and Legal Affairs and Interim Chief Financial Officer

 

 

 

 

(1)

Mr. Lacey held the position of Interim Chief Executive Officer between August 21, 2018 to January 21, 2019.

(2)

Mr. Schlachte held the position of Interim Chief Executive Officer between November 29, 2017 to August 16, 2018.

(3)

Ms. Erba resigned as Chief Financial Officer effective March 14, 2019 at which time Ms. Peters was appointed Interim Chief Financial Officer.

Executive Summary

 

The past year was a transitional, pivotal time for Immersion. We have had change at top of the organization as we searched for a new Chief Executive Officer, who began employment with us in early 2019. With this stabilization in leadership, we believe we are well positioned for the future. We have opportunity for our talented team to capitalize on our intellectual property assets and lead the widespread adoption of touch feedback and related technologies in a broad array of products and markets.

As will be shown throughout this CD&A, the Board and Compensation Committee made difficult compensation-related decisions in this transitional year.  We believe that the decisions made were not only appropriate for our circumstances but also have enabled Immersion to stabilize and retain a talented management team to lead our growth going forward.

2018 Company and Chief Executive Officer Transition

Much of the past year involved managerial transitions and a search for stable leadership. This began in November 2017, when we announced the departure of our long-time Chief Executive Officer, Victor Viegas, and subsequently appointed our Chairman of the Board, Carl Schlachte, as Interim Chief Executive Officer. We immediately commenced a search to recruit a Chief Executive Officer.

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In December 2017, we also implemented a reduction in force of approximately 41% of our employee base. In February 2018, the Board determined, in light of the CEO transition and search process, resulting management uncertainty, and the significant reduction in force and the increased responsibilities of the remaining executive officers, to implement a retention program for its named executive officers, including Mr. Schlachte, in the form of restricted stock units that would cliff-vest after one year.

In August 2018, the Board informed Mr. Schlachte that he would not be hired as our Chief Executive Officer and on August 16, 2018, Mr. Schlachte resigned as Interim Chief Executive Officer and as Chairman of the Board.

On August 21, 2018, the Board appointed Tom Lacey as Interim Chief Executive Officer and as a director. When the Board appointed Mr. Lacey as Interim Chief Executive Officer, both the Board and Mr. Lacey intended for this appointment to be short term as we continued our search for a Chief Executive Officer.

In December 2018, the Board concluded its search process for a Chief Executive Officer and entered into an employment agreement with Mr. Ramzi Haidamus pursuant to which Mr. Haidamus would serve as our Chief Executive Officer commencing in January 2019.

Overview of our Executive Compensation Program.  

In determining the compensation of our named executive officers, the Compensation Committee evaluates various factors, including the following:

 

our overall business and financial performance;

 

how our compensation program can drive our strategic goals and support stockholder value creation;

 

the individual’s performance, experience and skills;

 

compensation previously paid or awarded to the individual; and

 

competitive market data for similar positions based on an analysis consisting of a blend of data from our compensation peer group and the technology survey data from Radford Associates, a unit of Aon Consulting.

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The Compensation Committee has established an executive compensation program that consists of three principal elements: base salary, short term cash incentive awards under our executive incentive plan (“EIP”) and long-term equity-based incentive awards (“LTI”). The Compensation Committee believes that by allocating compensation among these elements our overall executive compensation program appropriately balances compensation-related risk and the desire to focus our named executive officers on specific short-term and long-term goals important to our overall success.

 

Base Salary

Base salaries are fixed pay set with consideration of responsibilities, market data and individual contribution, in order to attract and retain talented executives.

Annual Cash Incentives

Annual cash incentives are intended to motivate and reward our executives for the achievement of corporate and individual objectives. For 2018, corporate goals were based on Revenue and non-GAAP Net Income.

Long-Term Equity Incentives

Long-term equity awards incentivize executives to deliver long-term shareholder value, while also providing a retention vehicle for our top executive talent. In 2018, equity awards were delivered as stock options and RSUs.

 

Executive Compensation Governance Policies and Practices

In designing our executive compensation program, we have implemented policies and practices to create alignment with our stockholders and that support our commitment to good corporate governance as follows:

 

Clawback Policy. We have the authority to require repayment of certain annual cash incentives in instances of fraudulent activity and/or misstated financials or otherwise inaccurate financial reporting.

 

No Tax Gross-Ups. Tax gross-ups are not provided to our executive officers for personal expenses or if excise taxes are incurred following a qualifying termination of employment in connection with a change in control of the Company.

 

Independent Compensation Consultant.  The Compensation Committee has engaged Compensia, Inc. (“Compensia”) to act as its independent compensation consultant. Compensia provides services only to the Compensation Committee and provided no other services to us during fiscal 2018.

 

Stock Ownership Guidelines. We have established stock ownership guidelines to further align our executive officers’ interests with those of our stockholders. The guidelines require our executive officers to acquire and hold shares of our common stock having a value equal to three, in the case of our CEO, and one, in the case of our other executive officers, times their base salary divided by the average closing price for the 12-month period ending on September 30.

 

Capped Award Payouts. We set maximum award levels on our executive cash incentive plans.

 

No Repricing of Underwater Options. Repricing of stock options is expressly prohibited by our equity incentive plan without the approval of our stockholders.

 

No Executive Pension Benefits. Named executive officers participate in the same defined contribution retirement plans as our other employees.

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The Compensation Committee believes that the policies and practices described above clearly demonstrate our commitment to, and consistent execution of, an effective performance-oriented executive compensation program.

2018 Say on Pay Vote

At the annual meeting of our stockholders held in June 2018, approximately 69% of the total stockholders’ votes cast were voted in favor of the fiscal 2017 compensation of our named executive officers. We routinely have discussions with our largest shareholders regarding many topics, which include discussions related to our compensation strategies.  As a result of such conversations, upon the hiring of our Chief Executive Officer in early 2019, we undertook to ensure that his compensation package was heavily weighted to performance-based compensation. Half of his total potential cash compensation is delivered in the form of a target bonus under our performance-based Executive Incentive Plan and a significant portion of his total direct compensation was delivered in the form of equity incentives.

Compensation Philosophy

 

The primary objective of our executive compensation program is to align compensation with our overall business goals and stockholder interests. Our compensation objective is to attract and retain top tier executive talent capable of managing in a dynamic business environment and motivate them to achieve above-market performance with a long-term view in creating stockholder value. To this end, our executive compensation philosophy reflects:

 

a pay-for-performance model that delivers a significant portion of an executive’s total cash compensation based on overall Company and individual performance;

 

an emphasis on long-term equity-based incentive awards that link a meaningful portion of executive compensation to the appreciation in value of our common stock; and

 

evaluation of our pay levels and compensation practices against a peer group that is reasonable and appropriate for our Company.

Although the Compensation Committee has not established a fixed policy for the allocation between cash and equity compensation or short-term and long-term compensation, the Compensation Committee, as part of its evaluation of the compensation of our executive officers, reviews not only the individual elements of compensation, but also total compensation.

Compensation Determination Process

 

Role of Compensation Committee

The Compensation Committee reviews and recommends to the Board for approval all compensation programs (including equity compensation) applicable to our named executive officers and directors, our overall strategy for employee compensation, and the specific compensation of our Chief Executive Officer.

The Compensation Committee approves the compensation of all other executive officers. The Compensation Committee has the sole authority to select, retain, and terminate special counsel and other experts (including compensation consultants), as it deems appropriate.

Role of Chief Executive Officer in Compensation Decisions

While the Compensation Committee determines our overall compensation philosophy, our Board sets the compensation for our Chief Executive Officer. Our Chief Executive Officer also provides our Board and the Compensation Committee with his perspective on the performance of our named executive officers as part of the determination of the individual portion payable under the executive incentive plans (as described below) and the annual personnel review as well as a self-assessment of his own performance.  Our Chief Executive Officer is not present during discussions by the Compensation Committee or our

29


 

Board relating to his own compensation. Our Chief Executive Officer recommends to the Compensation Committee specific compensation amounts for named executive officers other than himself, and the Compensation Committee considers those recommendations and the information provided by its compensation consultant concerning peer group comparisons and industry trends when making its compensation decisions.  Our Chief Executive Officer, Vice President of Human Resources, and General Counsel regularly attend portions of the Compensation Committee’s meetings to provide perspectives on the competitive landscape and the needs of the business, information regarding our performance, and technical advice.  Members of the Compensation Committee also participate in our Board’s annual review of the Chief Executive Officer’s performance and its setting of annual performance goals, in each case led by our independent Chairman of the Board or previously our Lead Independent Director.

Role of the Compensation Consultant

The Compensation Committee uses a compensation consultant primarily to provide input on compensation trends and developments and to assist with the analysis of competitive executive compensation levels and trends. The compensation consultant also provides a valuable outside perspective on executive compensation practices.

In establishing executive compensation for fiscal 2018, the Compensation Committee engaged Compensia to serve as its compensation consultant. During fiscal 2018, Compensia advised the Compensation Committee on executive compensation matters, including performing an executive compensation assessment, a peer group review and development, the structure of our compensation program, risk mitigation, advice on CEO and Interim CEO compensation and disclosure about executive compensation.   Compensia was engaged directly by the Compensation Committee and does not provide any other unrelated products or services to us. Based on its review of the factors set forth in the Nasdaq listing standards, the Compensation Committee has determined that the work performed by Compensia during fiscal year 2018 did not raise a conflict of interest.

Peer Group and Competitive Positioning

In performing the executive compensation assessment for our first Interim Chief Executive Officer and Chief Financial Officer, Compensia used market data that reflected a 50/50 blend of (1) compensation data from the peer group below and (2) national Radford technology survey data for companies with $50 to $200 million in revenues.  In performing the executive compensation assessment for all other executive officers, Compensia used the national Radford technology survey data for companies with $50 to $200 million in revenues. Compensia also reviewed for all executive officers the same blend using Bay Area Radford technology survey data.

 

The companies comprising the peer group used by Compensia to aid in evaluating the compensation of our executive officers for 2018 were:

 

 

Acacia Research (new)

CyberOptics (new)

Datawatch (new)

Digimarc

Finjan Holdings (new)

Intermolecular

Kopin

LightPath Technologies (new)

Mesa Laboratories

NVE

PDF Solutions

Pendrell (new)

Pixelworks (new)

SeaChange International

 

 

In determining the peer group for 2018, the Compensation Committee reviewed the peer group used in fiscal 2017 against the objective criteria used for selecting peers in 2017 including companies in the IP licensing, semiconductor, electrical equipment and application software industries with revenues that were approximately one-half to three times our estimated revenues for 2018 and market capitalizations equal to approximately one-half to three times our market capitalization The following companies were deleted from the peer group in 2018: CEVA, Inc., DSP Group, and Wi-LAN.

While the Compensation Committee believes that comparisons to competitive market data are a useful tool, it does not believe that it is appropriate to establish executive compensation levels based solely on a

30


 

comparison to market data. Due to the variations between companies’ reporting and the roles for which compensation for these companies is ultimately disclosed, directly comparable information is not available from each peer group company with respect to each of our named executive officers. In considering market compensation data, the Compensation Committee recognizes that executives at different companies can play significantly different roles, with different responsibilities and scopes of work, even though they may hold similar titles or nominal positions. The Compensation Committee therefore uses the competitive market data as a starting point while also considering subjective factors such as experience, skills, competencies and performance.

Elements of Compensation

 

Our named executive officers’ total compensation includes base salary, short term cash incentive awards under our executive incentive plan (other than for our Interim Chief Executive Officers), and long-term equity incentive compensation.

 

Element

Objectives

Key Features

Base Salary

•     To provide a fixed level of cash compensation to attract and retain executive officers, and reward demonstrated experience, skills and competencies relative to the market value of the job.

•     Adjustments are considered annually based on individual performance, level of pay relative to market and internal pay equity.

Short-Term Cash Incentive Awards

•     Rewards annual corporate and individual performance.

•     Aligns compensation with performance against the board-approved annual operating plan.

•     Short-term cash incentive payments are based on financial and individual performance

•     For 2018, financial measures were:

O  Revenue

O  Non-GAAP Net Income

•     Earned annual incentive awards can vary from 0% to 216% of the target amount for our CEO and 0% to 204% for all named executive officers.

Long-Term Incentive Awards (Equity Awards)

•     Aligns named executive officers’ interests with long-term stockholder interests by linking part of executive compensation to stock price performance.

•     Provides opportunities for wealth creation and ownership which promotes retention and enables us to attract and motivate our named executive officers.

•     Provides a retention vehicle through multi-year vesting of equity granted and multi-year performance periods.

•     Uses different equity types, including stock options and restricted stock unit (“RSU”) awards to balance stockholder interests and retention.

•     Long-term equity awards generally vest in increments over three years for RSUs or four years for stock options.

 

Base Salary

In determining base salaries for our named executive officers, the Compensation Committee considered the market data for executives serving in similar positions, as well as individual performance, experience and skills.

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The named executive officers’ base salaries for 2018, as compared to 2017, were as follows:

 

Name

 

2017 Base Salary

($)(1)

 

2018 Base Salary

 ($)(1)

 

% Increase

Tom Lacey

 

 

600,000

 

Carl Schlachte

 

250,000

 

250,000

 

Nancy Erba

 

310,500

 

322,921

 

4.0

Anne Marie Peters

 

347,760

 

361,671

 

4.0

 

(1)

Differs from actual paid as reported in the Summary Compensation Table due to payroll period allocation.

When the Board appointed Mr. Lacey as Interim Chief Executive Officer, both the board and Mr. Lacey intended for this appointment to be short term, and as such Mr. Lacey did not receive any base salary.  In October 2018, after it became apparent that Mr. Lacey would be serving as Interim Chief Executive Officer longer than originally anticipated as we continued our search for a Chief Executive Officer, the Board approved a base salary for Mr. Lacey of $50,000 per month.

Mr. Schlachte’s base salary was determined in 2017 when Mr. Schlachte became interim Chief Executive Officer.  Due to the interim nature of Mr. Schlachte’s position, the Compensation Committee elected not to increase Mr. Schlachte’s base salary in 2018.

Ms. Erba’s 2018 base salary was $323,000, representing a 4% increase over 2017, to maintain her salary at approximately the 50th percentile of the executives holding comparable positions at the companies in the peer group.

Ms. Peters’ 2018 base salary was $362,000, also representing a 4% increase over 2017, although her base salary was higher than the base salaries of executives holding comparable chief legal officer positions at the peer companies, the Compensation Committee believed this base salary was appropriate because of Ms. Peters’ dual role in the Company as both general counsel and senior vice president of IP licensing, a key revenue-generating element of our business.

Annual Cash Incentives

The Executive Incentive Plan is a cash incentive program designed to align executive compensation with annual performance and to enable us to attract, retain, and reward individuals who contribute to our success and to motivate such individuals to enhance our value. The Compensation Committee believes that aggregate incentive payouts should be closely linked to our overall financial performance, with individual compensation differentiated based on individual performance. Thus, funding and payouts under such plan is dependent and based on both corporate and individual performance.

 

The Compensation Committee established a target award value as a percentage of base cash compensation for Ms. Erba and Ms. Peters for fiscal 2018 based on its review of competitive market data for similar positions and various other factors, including individual performance in the prior year and the terms of employment arrangements with the individual. Neither Mr. Schlachte nor Mr. Lacey participated in the 2018 Executive Incentive Plan.

 

The Compensation Committee increased the target opportunity for Ms. Erba due to the aforementioned considerations. For 2018, her new target award opportunity increased to 60% of base salary, compared to 50% in the prior year. Ms. Peters’ target award percentage remained the same as 2017 at 60% of her base salary.

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Executive 2018 Executive Incentive Plan Payments

The following table sets forth the determinations of the Compensation Committee in February 2018 with respect to the Executive Incentive Plan targets for fiscal 2018, as well as the actual amount of the cash incentive awards received by our named executive officers upon payout of the fiscal 2018 Executive Incentive Plan.  

 

Fiscal 2018 Executive Incentive Plan Target

 

 

 

 

 

 

 

Name

 

Target Incentive Opportunity (as a % of base salary)

 

Target Award Value ($)

 

2018 Earned

Awards ($)

Tom Lacey (1)

 

 

 

Carl Schlachte (1)

 

 

 

Nancy Erba

 

60%

 

193,752

 

293,167

Anne Marie Peters

 

60%

 

217,002

 

322,487

 

(1)

Neither Mr. Lacey nor Mr. Schlachte participated in the 2018 EIP.

The Compensation Committee, with input from our Chief Executive Officer, establishes (1) the performance measures based on business criteria and target levels of performance and (2) a formula for calculating each participant’s award based on our actual performance compared to the pre-established performance goals.  

 

Our 2018 Executive Incentive Plan was based on two independent components. 70% of the bonus was based on our achievement of certain corporate financial objectives for 2018 as set forth below, and the remaining 30% of the bonus was based on the achievement of individual management objectives.  For payment to have been made under the corporate component of the plans, we must have met the minimum GAAP revenue and Non-GAAP Net Income target levels set forth in the matrix below.  If minimum GAAP revenue and Non-GAAP Net Income were not achieved, then the plan would not be funded. The maximum level of payout for the corporate component of the bonus was 200%. In addition, the Compensation Committee determined the performance weighting factor to be applied to the calculation of each named executive officer’s bonus, which weighting factor was based on each named executive officer’s overall individual annual performance as determined by the Compensation Committee.  The standard weighting factor was 1.0 but could be increased or decreased by 0.2 at the Compensation Committee’s discretion. If such weighting factor was increased or decreased from the standard weighting factor of 1.0, then such modified weighting factor was applied to both the corporate component and the individual component to determine the total incentive payment.  As a result, our named executive officers were eligible to receive a maximum cash award of 0%-204% (70% corporate bonus x 200% maximum payout = 140% x 1.2 maximum weighting factor = 168% plus 30% maximum individual component x 1.2 maximum weighting factor = 36% = 204% aggregate maximum bonus) of their respective target award based on the achievement of corporate financial and individual performance goals.

The GAAP revenue and Non-GAAP Net Income matrix for the corporate objectives of the 2018 Executive Incentive Plans was set by the Compensation Committee and was based on our annual operating plan.  The matrix was as follows:

 

GAAP Revenues ($) / Non-GAAP Net

Income Targets ($)

 

80,318,441

 

90,358,246

 

100,398,051

 

110,437,856

 

120,477,661

63,789,256

 

125.0%

 

137.5%

 

150.0%

 

175.0%

 

200.0%

58,473,484

 

100.0

 

112.5

 

125.0

 

150.0

 

175.0

53,157,713

 

75.0

 

87.5

 

100.0

 

125.0

 

150.0

47,841,942

 

62.5

 

75.0

 

87.5

 

112.5

 

137.5

42,526,170

 

50.0

 

62.5

 

75.0

 

100.0

 

125.0

For purposes of the fiscal 2018 Executive Incentive Plan, “GAAP revenues” means revenue recognized by us for the applicable period in accordance with GAAP and as reported in our audited financial statements, and “Non-GAAP Net Income” is GAAP Net Income adjusted to reflect an expected long-term effective tax rate of 19% less stock-based compensation expense. “Non-GAAP Net Income” also excludes certain non-recurring charges including discontinued operations and other charges, as

33


 

determined by the Compensation Committee.  By excluding certain one-time items from the calculations, the Compensation Committee sought to utilize an operating performance metric that more closely reflects our expected long-term effective tax rate and exclude certain non-cash expenses and other special charges, such as deferred tax assets valuation allowance and restructuring costs, that many investors feel may obscure our true operating performance.

Our performance for fiscal 2018 resulted in GAAP revenues of $110.979 million and Non-GAAP Net Income of $63.2 million.   Interpolating this result between the revenue levels of $110.4 million and $120.5 million and between the $58.5 million and $63.8 million Non-GAAP Net Income levels on the table above resulted in a payout percentage of 173.3% of target for this measure.

For the individual performance of each named executive officer, the Compensation Committee had set management by objectives (MBOs) for fiscal 2018 in February 2018 and scored the individual based on the completion of such MBOs as of the end of fiscal 2018.  The Compensation Committee determined that for 2018, plan participants’ standard weighting factor should neither be increased nor decreased from the standard weighting factor of 1.0. Ms. Erba’s MBOs included elements related to exceeding financial targets, investor relations, business partnering and financial and IT excellence. Ms. Peters’ MBOs included initiatives related to innovation, revenue and budgeting.  

The following table set forth the amounts earned under each component of the 2018 executive incentive plans by the named executive officers:

 

 

 

CORPORATE COMPONENT

ACHIEVEMENT AT 173.3%

 

 

 

 

 

 

INDIVIDUAL COMPONENT

ACHIEVEMENT

 

 

 

 

 

Name (1)

 

Percentage of

Target

 

 

Multiplier

 

 

Actual

Corporate

Component

 

 

Percentage of

Target

 

 

Percentage

Achievement

 

 

Individual

Component

Multiplier

 

 

Actual

Individual

Component

 

 

Total 2018

Award

 

Nancy

Erba

 

70%

 

 

 

1.0

 

 

$

235,041

 

 

30%

 

 

100%

 

 

 

1.0

 

 

$

58,126

 

 

$

293,167

 

Anne Marie Peters

 

70%

 

 

 

1.0

 

 

$

263,246

 

 

30%

 

 

91%

 

 

 

1.0

 

 

$

59,242

 

 

$

322,487

 

Discretionary Cash Bonus

Following the settlement of the litigation with Apple Inc., Ms. Erba and Ms. Peters each received a one-time discretionary cash bonus of $10,000 and $50,000, respectively, for their efforts in securing this settlement, a key milestone for us.

Long-Term Equity Incentive Awards

Stock Options

Stock options are intended to align our named executive officers’ interests with the interests of stockholders in increasing sustainable, long-term stockholder value. We view stock options as an element of performance-based compensation because they only deliver value to a recipient if the price of our common stock increases above the price of our common stock at the time of grant and the vesting requirements have been met. Our stock options are granted with an exercise price equal to the closing market price for our common stock on the date of grant. Our stock options typically vest over a period of four years with 25% of the shares of our common stock subject to the grant vesting after the first year and 1/48th of the shares subject to the grant vesting monthly thereafter.

RSUs

RSUs are intended primarily to aid in management retention, and ensure that, coupled with our stock ownership guidelines, executives maintain an ownership stake in our company that is tied to stock price performance. The Compensation Committee believes that by providing an ownership stake, RSUs incentivize executives to drive our stock price performance, aid in retention and provide value to our executive officers directly aligned with stockholder value. Our RSUs typically vest over a period of three or four years.

The Compensation Committee approved annual equity awards to our named executive officers in fiscal 2018 after considering individual and corporate performance generally, the total compensation levels of

34


 

our executive officers and our retention objectives. The Compensation Committee also considered the compensation practices and levels of the companies in our peer group when determining the size of equity awards.

2018 Retention Awards.  

As previously noted, in February 2018, Mr. Schlachte, Ms. Erba and Ms. Peters received retention grants, which cliff vest in one year.  The retention grants were one-time grants in light of the CEO transition and search process, the resulting management uncertainty and the significant reduction in force and increased responsibilities of the remaining executives.

Mr. Schlachte’s February 2018 retention RSU grant was in respect of 88,152 RSUs valued at $1,043,719, using the grant date fair value in accordance with FASB ASC Topic 718, which number of shares was determined using 2x Mr. Schlachte’s base salary based on $7.09 per share, the 30 day average of the closing price of a share of Common Stock from December 12, 2017 to January 10, 2018. The retention RSUs were scheduled to vest in full on the one-year anniversary of the date of grant, subject to Mr. Schlachte’s continued service as Interim Chief Executive Officer on such date. All of these retention RSUs were forfeited upon Mr. Schlachte’s resignation.

In August 2018, upon becoming Interim Chief Executive Officer Mr. Lacey was granted an RSU award for 31,000 shares. The RSUs were valued at $346,270.  The 31,000 shares (which represented 11,478 shares for services as a member of the Board and 19,522 shares for services as Interim CEO) were scheduled to vest in full on the day immediately preceding the date of 2019 Annual Meeting.  In October 2018, as it became clear that Mr. Lacey would be serving as Interim CEO for a longer than anticipated period, Mr. Lacey was granted an additional RSU award for 20,000 shares (valued at $190,200), 10,000 shares of which were scheduled to vest one year from grant if Mr. Lacey was serving as Interim CEO on such date (which shares have been forfeited) and 10,000 shares of which were scheduled to vest one year from date of grant if Mr. Lacey was serving as a member of the Board on such date.  Vesting was structured in this way in order to retain Mr. Lacey’s service as Interim Chief Executive Officer and to facilitate the Board’s ability to select another person as Chief Executive Officer should the Board so choose.  

The Compensation Committee granted Ms. Erba an option to purchase 80,000 shares of common stock valued at $438,192 which vests annually over a four-year period, and which fell between the 25th and 50th percentile of the equity awards granted to executives holding comparable positions at the companies in the peer group, placing her target total direct compensation between the 25th and 50th percentile of the peer group.

After considering Ms. Peters’ dual role as described above, the Compensation Committee granted Ms. Peters an option to purchase 25,000 shares of common stock valued at $136,935, which vests over a four-year period and an annual RSU award in respect of 25,000 shares of common stock valued at $296,000 which vests over a three-year period, which equity incentive grants fell between the 25th and 50th percentile of equity awards granted to executives holding comparable positions at the companies in the peer group.

35


 

Also, in February 2018, as noted above under the heading “2018 Company and Chief Executive Officer Transition,” Ms. Erba and Ms. Peters received retention RSU grants of 56,946 shares and 63,822 shares (valued at $674,241 and $755,652 respectively using the grant date fair value in accordance with FASB ASC Topic 718), which amounts were intended to approximate 1.25X such executives’ base salary based on $7.09 per share, the 30-day average of the closing price of a share of Common Stock from December 12, 2017 to January 10, 2018.

 

Name

 

Position

 

Shares Subject to Stock

Options

 

Shares Subject to Restricted

Stock Units

Tom Lacey

 

Former Interim Chief Executive

 

 

51,000(1)

Carl Schlachte

 

Former Interim Chief Executive Officer

 

 

88,152(2)

Nancy Erba

 

Former CFO

 

80,000(4)

 

56,946 (3)

Anne Marie Peters

 

General Counsel and SVP IP Licensing & Legal Affairs & Interim CFO

 

25,000(4)

 

25,000(5)

63,822(6)

 

(1)

31,000 shares vest on the day immediately preceding the date of 2019 Annual Meeting; 10,000 shares vest a year from grant should Mr. Lacey still be serving as Interim CEO and 10,000 shares vest one year from date of grant should Mr. Lacey still be serving as a member of the Board.

(2)

Vests on the one-year anniversary of the grant date.  The RSU was forfeited in full.

(3)

Vests on the one-year anniversary of the grant date.

(4)

Vests over four years with one-fourth vesting on the one-year anniversary of the date of grant and 1/48th monthly thereafter.

(5)

Vests over three years with one-third vesting on the one-year anniversary of the date of grant and 1/36th monthly thereafter.

(6)

Vests on the one-year anniversary of the grant date.

2019 Chief Executive Officer

As discussed above, following an exhaustive year-long process, the Board selected as our Chief Executive Officer Ramzi Haidamus, who began his employment with us in January 2019. In determining Mr. Haidamus’ compensation, the Compensation Committee reviewed data from Compensia which included the executive compensation assessment data described in the section entitled “Peer Group and Competitive Positioning” as well as actual new hire market data from recently hired CEOs at similarly sized technology companies.  Mr. Haidamus receives a base salary of $525,000 per year.

 

Mr. Haidamus is eligible to participate in our corporate bonus plan, with a target annual bonus equal to 100% of his then-current base salary.

Mr. Haidamus received an option to purchase a number of shares of our common stock valued at $1,250,000 which option will vest over four years. Mr. Haidamus also received a restricted stock unit award covering a number of shares of our common stock valued at $2,750,000, which RSUs will vest over four years. The grants fell within the 60th percentile of our peer group. The Compensation Committee determined that it would not be practical to implement performance-based metrics in Mr. Haidamus’ initial hire-on equity incentive grants in light of the competitive hiring environment for chief executive officers for Bay Area-based technology companies and the need for the Board and Mr. Haidamus to together conduct a careful assessment of our business to determine our go-forward business strategy before orienting chief executive officer compensation around particular performance objectives.  The Compensation Committee did determine that it expects to use performance metrics in future long-term equity grants for our CEO.

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Additional Compensation Policies and Practices

 

Severance and Change in Control Payments

We have entered into retention and change in control agreements with our named executive officers with the goal of retaining such executive officers during the pendency of a proposed change of control transaction, and in order to align the interests of the executive officers with the interests of our stockholders in the event of a potential change in control of the Company. These arrangements are intended to attract and retain qualified executives who could have other job alternatives that may appear to them to be less risky absent these arrangements, particularly given the significant level of acquisition activity in our industry. Our severance arrangements outside of a change of control of the Company provide for cash severance equal to six months’ base salary and reimbursement of health insurance premiums for up to six months.  All of our change of control arrangements are “double trigger,” meaning that severance payments and acceleration of vesting of equity awards are not awarded upon a change of control unless, following the change of control, the executive’s employment is terminated without cause or as a result of good reason, each as defined in the applicable agreement, in either case, within the period commencing three months prior to and ending 12 months following the transaction.

We believe the structure of our “double trigger” change of control arrangements protects stockholder value by allowing us the opportunity to deliver an intact and motivated management team to any potential acquirer. If we did not offer any such change of control arrangements, our executives could be less motivated to pursue a potential acquisition even if such a transaction would benefit our stockholders, because of the possibility that they would lose the potential value of their unvested equity compensation or future cash compensation upon an acquisition. If we offered “single trigger” change of control arrangements, meaning that our executives would receive benefits upon an acquisition even if their employment was not terminated, we could become less attractive to potential acquirers, who may place significant value on retaining members of our executive team and who may perceive this goal to be undermined if executives receive acceleration payments in connection with such a transaction and would no longer be required to continue employment to earn the remainder of their equity awards. We believe the “double trigger” structure strikes an appropriate balance between these alternatives because it motivates our executives to both pursue transactional opportunities that would provide the greatest benefit to stockholders, and to continue providing services to the surviving Company following such a transaction, increasing our value to potential acquirers and, as a result, to our stockholders. The Compensation Committee believes that these payments and benefits serve to enhance stockholder value and align our executive officers’ interests with those of our stockholders in change in control transactions.  All such agreements with the named executive officers are described in “Potential Payments upon Termination or Change in Control” elsewhere in this proxy statement.

Perquisites and Other Benefits

We provide certain named executive officers with perquisites and other personal benefits that the Compensation Committee believes are reasonable and consistent with our overall compensation programs and philosophy and which benefits are generally available to all our employees.  These benefits are provided to enable us to attract and retain these executive officers.  The Compensation Committee periodically reviews the levels of these benefits provided to our executive officers. These benefits include participation in our health and benefits plans, retirement savings plans, housing assistance, reimbursement of certain living and education-related expenses, car services, immigration assistance, relocation assistance, and our employee stock purchase plan.  

Our executive officers and non-employee directors are subject to a stock ownership policy that is available on our website at https://ir.immersion.com/governance.cfm.  This policy requires that our CEO and non-employee directors hold stock equal in value to three times the amount of their annual cash retainer/base salary and all other officers hold stock equal in value to one time the amount of their annual base salary.  This is calculated once a year and there is a five-year period in which to comply.  If it is determined that a particular person does not comply with the policy, the individual will be notified and will be required to retain 50% of the net shares received as a result of any exercise, vesting or payment of any equity awards until he or she becomes compliant.

37


 

Impact of Accounting and Tax Requirements on Compensation

Section 162(m) of the Internal Revenue Code limits the deductibility of certain items of compensation paid to the CEO and certain other highly compensated executive officers (together, the “covered officers”) to $1,000,000 annually, but in years prior to 2018 there was an exception to such limit for compensation that qualified as “performance-based compensation”. Effective for 2018, the Tax Cuts and Jobs Act amended Section 162(m) to, among other things, extend the deduction limitation to the Chief Financial Officer and eliminate the exception for performance-based compensation, except for certain qualifying arrangements in place as of November 2, 2017.

Favorable accounting and tax treatment of the various elements of our total compensation program was an important, but not the sole, consideration in its design.  The Committee reserves the right to provide for compensation to executive officers that may not be deductible pursuant to Section 162(m).

Risk Assessment of Compensation Programs

The Compensation Committee considers potential risks when reviewing and approving our compensation programs. We have designed our compensation programs, including our incentive compensation plans, with specific features to address potential risks while rewarding our employees for achieving financial and strategic objectives through prudent business judgment and appropriate risk taking. The following elements have been incorporated in our compensation programs for our named executive officers:

 

A Balanced Mix of Compensation Components – The target compensation mix for our named executive officers is composed of base salary, short-term cash incentive awards and long-term equity incentives, representing a mix that is not overly weighted toward short-term cash incentives.

 

Multiple Performance Factors – Our incentive compensation plans use both Company-wide metrics and individual performance, which encourage focus on the achievement of objectives for our overall benefit:

 

The executive incentive plan is designed to use multiple performance metrics including GAAP revenue and Non-GAAP Net Income, as well as individual performance goals related to specific strategic or operational objectives and the corporate metric portion of the incentive plan does not pay out unless the target levels of the pre-established financial metrics are met.

 

The long-term incentives are equity-based, generally with three- or four-year vesting to complement our short-term cash incentive awards.

 

Capped Incentive Awards – Awards under the executive incentive plans are generally capped at the sum of: (1) 200% of the target bonus attributable to Company-wide metrics (with a maximum multiplier of 1.2), plus (2) 100% of the target bonus attributable to individual performance (with a maximum multiplier of 1.2).

 

Clawback Provision – Our clawback provision provides our Board with the authority to recoup past incentive compensation in the event of a material restatement of our financial results due to fraud, intentional misconduct or gross negligence of the named executive officer.

Additionally, the Compensation Committee considered an assessment of the compensation-related risks arising from our compensation programs for all our employees. Based on this assessment and the factors noted above, the Compensation Committee concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on us. In making this evaluation, the Compensation Committee reviewed the key design elements of our compensation programs in relation to industry “best practices” as presented by Compensia, as well as how any potential risks may be mitigated, such as through our internal controls and oversight by management and our Board.

38


 

COMPENSATION COMMITTEE REPORT

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that we specifically incorporate it by reference into such filing.

 

We, the Compensation Committee of the Board of Directors of Immersion Corporation, have reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management.  Based on such review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

 

 

COMPENSATION COMMITTEE

 

Sharon Holt, Chairman

David Sugishita

Kenneth Traub

 

39


 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Sharon Holt, David Sugishita, and Kenneth Traub were members of our Compensation Committee during the 2018 fiscal year. None of the individuals serving on our Compensation Committee were at any time during 2018, or at any other time, an officer or employee of us, nor did they have any relationships requiring disclosure by us under the SEC’s rules requiring disclosure of certain relationships and related party transactions.  None of our executive officers serve as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or our Compensation Committee.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2018 concerning our equity compensation plans:

 

 

 

Number of

Securities to be

Issued Upon

Exercise of

Outstanding

Options Warrants and Rights

 

 

Weighted-

Average

Exercise

Price of

Outstanding

Options Warrants and Rights

 

 

 

Number of

Securities

Remaining

Available for

Future

Issuance

Under Equity

Compensation

Plans

(Excluding

Securities

Reflected in

Column (a))

 

 

Plan Category

 

(a)

 

 

(b)

 

 

 

(c)

 

 

Equity Compensation Plans

Approved by Security Holders(1)

 

 

3,279,923

 

(2)

$9.31

 

 

 

 

2,066,266

 

(3)

Equity Compensation Plans Not

Approved by Security Holders(4)

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

3,279,923

 

 

 

 

 

 

 

 

2,066,266

 

 

 

 

(1)

Consists of two plans: the Immersion Corporation 2007 Equity Incentive Plan and the 2011 Equity Incentive Plan. Excludes purchase rights under the Employee Stock Purchase Plan.

(2)

These RSUs and awards have no exercise price.

(3)

Includes 275,178 shares available for future issuance under the Employee Stock Purchase Plan

(4)

As of December 31, 2018, there were no equity compensation plans not approved by security holders.  

 

40


 

EXECUTIVE COMPENSATION

2018 Summary Compensation Table

 

The following table sets forth information concerning the compensation earned during the years ended December 31, 2018, 2017, and 2016 by our former Interim Chief Executive Officers, our former Chief Financial Officer, and our General Counsel and SVP IP Licensing and Legal Affairs and Interim Chief Financial Officer. No other officer met the definition of named executive officer for 2018.

 

Name & Principal

Position

 

Fiscal

Year

 

Salary(1)

($)

 

 

Bonus

($)

 

 

Stock

Awards(2)

($)

 

 

Option

Awards(2)

($)

 

 

Non-Equity

Incentive Plan

Compensation(3)

($)

 

 

All Other

Compensation

($)

 

 

 

Total

($)

 

Tom Lacey (4)

 

2018

 

 

85,385

 

 

 

 

 

536,470

 

 

 

 

 

 

 

 

 

 

621,855

 

Former Interim

Chief Executive

Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carl Schlachte (5)

 

2018

 

 

175,428

 

 

 

 

 

1,043,719

 

 

 

 

 

 

 

 

 

 

1,219,147

 

Former Chairman of

the Board and

Interim Chief

Executive Officer

 

2017

 

 

16,346

 

 

 

 

 

 

 

 

 

299,595

 

 

 

 

 

45,833

 

(6)

 

 

361,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nancy Erba (7)

 

2018

 

 

321,487

 

 

 

10,000

 

(8)

 

674,241

 

 

 

438,192

 

 

 

293,167

 

 

 

 

 

 

1,737,087

 

Former Chief

Financial Officer

 

2017

 

 

309,289

 

 

 

 

 

 

 

346,000

 

 

 

 

 

 

 

 

 

 

655,289

 

 

 

2016

 

 

95,769

 

 

 

 

 

 

 

 

 

537,120

 

 

 

46,553

 

 

 

 

 

 

679,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anne Marie Peters (7)

 

2018

 

 

360,065

 

 

 

50,000

 

(8)

 

1,051,652

 

 

 

136,935

 

 

 

322,487

 

 

 

 

 

 

1,921,139

 

General Counsel

and SVP IP

 

2017

 

 

346,403

 

 

 

 

 

 

 

432,500

 

 

 

 

 

 

 

 

 

 

778,903

 

Licensing & Legal

Affairs

 

2016

 

 

306,712

 

 

 

 

 

 

 

67,500

 

 

 

360,000

 

 

 

 

 

 

 

 

734,212

 

 

(1)

Differs from salary reported in the “Compensation Discussion & Analysis” above due to pay period allocation.

(2)

The amounts in this column represent the aggregate grant date fair value of the awards, computed in accordance with FASB ASC Topic 718.  See Note 6 of the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our assumptions in determining the FASB ASC Topic 718 values.

(3)

Consists of bonus awards under our executive incentive plans. See “Compensation Discussion and Analysis” above for a description of our executive incentive plans.

(4)

Tom Lacey served as our Interim Chief Executive Officer from August 21, 2018 to January 21, 2019. Upon appointment, Mr. Lacey received an RSU award for 31,000 shares which represented 11,478 shares for service as a member of the Board and 19,522 shares for service as Interim CEO. In October 2018, Mr. Lacey received an additional RSU award for 20,000 shares, 10,000 shares of which would vest a year from grant should Mr. Lacey still be serving as Interim CEO and 10,000 shares of which would vest a year from date of grant should Mr. Lacey still be serving as a member of the Board. Mr. Lacey also received compensation for service as the Interim CEO as described in the Summary Compensation Table.

(5)

Carl Schlachte served as our Interim Chief Executive Officer from November 29, 2017 to August 16, 2018

(6)

Consists of $22,916.67 as an annual retainer for serving on the Board, $18,333.33 as an annual retainer for serving as Chairman of the Board, $2,750.00 for serving on the Audit Committee and $1,833.33 for serving on the Nominating and Corporate Governance Committee.

(7)

Nancy Erba served as our Chief Financial Officer from September 7, 2016 to March 14, 2019.  Anne Marie Peters became our Interim Chief Financial Officer on March 14, 2019.

(8)

Amounts reflected hereunder reflect one-time cash bonuses in conjunction with the signing of a significant contract.

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2018 Grants of Plan-Based Awards

 

The following table sets forth information concerning each grant of an award made to a named executive officer during the year ended December 31, 2018:

 

 

 

 

 

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards(1)

 

All Other

Stock

Awards:

Number of

 

 

All Other

Option

Awards:

Number of

 

Exercise or

 

Grant Date

 

Name

 

Grant Date

 

Threshold

($)

 

Target

($)

 

Maximum

($)

 

Shares of

Stock or

Units

(#)

 

 

Securities

Underlying

Options(2)

(#)

 

Base Price

of Option

Awards

($/sh)

 

Fair Value of

Stock and

Option Awards(3)

($)

 

Tom Lacey

 

08/22/2018