Definitive Proxy Statement


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A INFORMATION

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 § 240.14a-12

MITEL NETWORKS 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:

   

 


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LOGO

 

 

MITEL NETWORKS CORPORATION

 

 

 

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

AND

MANAGEMENT PROXY CIRCULAR

Dated April 21, 2017

For the Annual General Meeting of Shareholders to be held on May 15, 2017


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LOGO

M ITEL N ETWORKS C ORPORATION

350 Legget Drive

Ottawa, Ontario, Canada K2K 2W7

N OTICE O F T HE A NNUAL M EETING O F S HAREHOLDERS

NOTICE IS HEREBY GIVEN that an Annual Meeting (the “ Meeting ”) of the shareholders of Mitel Networks Corporation (“ Mitel ”) will be held on Monday, May 15, 2017 at The Brookstreet Hotel, 525 Legget Drive, Ottawa (Kanata), Ontario, Canada K2K 2W2, commencing at 4:00 p.m., Ottawa time , for the following purposes:

 

1.

To place before the Meeting the consolidated financial statements for the year ended December 31, 2016 together with the auditor’s report.

 

2.

To elect directors for the ensuing year (“ Annual Resolution No.  1 ”).

 

3.

To reappoint Deloitte LLP as our independent auditor (and, for purposes of U.S. securities laws, our independent registered public accounting firm) and to authorize the directors to fix the auditor’s remuneration (“ Annual Resolution No.  2 ”).

 

4.

To provide an advisory vote to approve executive compensation (“ Annual Resolution No.  3 ”).

 

5.

To provide an advisory vote to approve Mitel’s frequency of “say-on-pay” votes (“ Resolution No.  4 ”).

 

6.

To consider and, if thought advisable, to pass, with or without variation, an ordinary resolution (“ Ordinary Resolution No.  1 ”) to approve Mitel’s 2017 Omnibus Incentive Plan.

 

7.

To consider, and if thought advisable, to pass, an ordinary resolution confirming an amendment to By-Law No. 1A of Mitel to increase the quorum requirement at any meeting of Mitel’s shareholders from 25% to 33 1/3 % (the “ By-Law Ratification Resolution ”).

 

8.

To transact such further and other business as may properly come before the Meeting or any adjournment thereof.

A copy of the full text of each of the proposed Annual Resolution No. 1, Annual Resolution No. 2, Annual Resolution No. 3, Resolution No. 4, Ordinary Resolution No. 1 and the By-Law Ratification Resolution is attached as Schedule A, Schedule B, Schedule C, Schedule D, Schedule E and Schedule F respectively, to the proxy circular that accompanies this notice. Any action on the items of business described above may be considered at the Meeting or at any adjournment or postponement of the Meeting. Please note that our proxy materials are also available through the Internet at http://investor.mitel.com . In the interest of convenience to you and of minimizing the environmental impact associated with printing and mailing our proxy material and annual reports in the future, you may indicate your preference for receiving all future materials electronically, by indicating as such in the manner provided for on the enclosed form of proxy or, for beneficial holders, on the voting instruction form.

The Board of Directors of Mitel has fixed a record date of March 21, 2017 for the Meeting. Accordingly, shareholders registered on the books of Mitel at the close of business on March 21, 2017 are entitled to receive notice of the Meeting and are entitled to vote thereat. This notice of the Meeting, the proxy circular and the accompanying form of proxy are first being sent to shareholders on or about April 21, 2017.

Shareholders of record attending the Meeting should be prepared to present government-issued picture identification for admission. Shareholders owning common shares through a broker, bank, or other record holder should be prepared to present government-issued picture identification and evidence of share ownership as of the record date, such as an account statement, voting instruction form issued by the broker, bank or other record holder, or other acceptable document, for admission to the Meeting. Check-in at the Meeting will begin at 3:30 p.m., Ottawa time, and you should plan to allow ample time for check-in procedures.

As owners of Mitel, your vote is very important, regardless of the number of shares you own. Whether or not you are able to attend the Meeting in person, it is important that your shares be represented. We request that you vote as soon as possible on-line at www.investorvote.com or in writing by following the instructions noted on the form of proxy or, for beneficial shareholders, the voting instruction form, included with this notice. Your form of proxy or voting instruction form, as applicable, must be received by 4:00 p.m., Ottawa time, two business days before the Meeting, Thursday, May 11, 2017 . For specific information regarding voting of your common shares, please refer to the section entitled “ Voting of Proxies ” in the accompanying proxy circular.


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Thank you for your continued interest in Mitel.

DATED at Ottawa, Ontario this 21st day of April, 2017.

BY ORDER OF THE BOARD OF DIRECTORS

 

LOGO

Richard D. McBee, President and Chief Executive Officer


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EXPLANATORY NOTE REGARDING THE CONTENT AND FORMAT OF THIS DOCUMENT

A copy of our annual report on Form 10-K for the year ended December 31, 2016, which is referred to as the Form 10-K, is included in the materials mailed with this proxy circular and is also available at http://investor.mitel.com . You may also review and print the Form 10-K and all exhibits from the website of the U.S. Securities and Exchange Commission, which is referred to as the SEC, at www.sec.gov or from SEDAR at www.sedar.com . In addition, we will send a complete copy of the annual report on Form 10-K (including all exhibits, if specifically requested), to any shareholder (without charge) upon written request addressed to: Investor Relations, Mitel Networks Corporation, 350 Legget Drive, Ottawa, Ontario, Canada K2K 2W7. All of our public documents are filed with SEDAR and may be found on the following website: www.sedar.com . Information on or accessible through our website is not incorporated into this proxy circular and you should not consider any information on, or that can be accessed through, our website as part of this proxy circular.

Additional financial information is contained in our audited consolidated financial statements for the year ended December 31, 2016 and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2016. Copies of our financial statements and management’s discussion and analysis of financial condition and results of operations are included in our Form 10-K and available upon request to Investor Relations, Mitel Networks Corporation, 350 Legget Drive, Ottawa, Ontario, Canada K2K 2W7.

In this proxy circular, we refer to Mitel Networks Corporation, the Canada Business Corporations Act corporation whose shares you own (together with its subsidiaries, where applicable), as “Mitel.” Additionally, we sometimes refer to Mitel as “we,” “us,” “our,” “our corporation,” or “the Corporation.” References to “GAAP” mean generally accepted accounting principles in the United States. References to fiscal 2016, fiscal 2015 or fiscal 2014, mean the financial year ended December  31, 2016, December  31, 2015, and December  31, 2014, respectively.

Unless indicated otherwise, all dollar amounts included in this proxy circular are expressed in U.S. dollars.


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TABLE OF CONTENTS    Page  
A.   INFORMATION ON VOTING AND PROXIES      1  
  1.   Who May Vote      1  
  2.   Solicitation of Proxies      1  
  3.   Appointment of Proxies      1  
  4.   Revocation of Proxies      4  
  5.   Voting of Proxies      4  
  6.   Authorized Capital and Voting Shares      4  
  7.   Security Ownership of Certain Beneficial Owners and Management      5  
B.   CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES      7  
  8.   Composition of the Mitel Board      7  
  9.   Independence and Other Considerations for Director Service      8  
  10.   Mandate of the Mitel Board and Corporate Governance Guidelines      9  
  11.   Code of Business Conduct      12  
  12.   The Role of the Mitel Board of Directors in Risk Oversight      13  
  13.   Board Committees      13  
  14.   Director Compensation      16  
        Director Compensation Table      17  
  15.   Communication with the Mitel Board      18  
C.   COMPENSATION DISCUSSION AND ANALYSIS      18  
  16.   Executive Officer Compensation      18  
        Summary Compensation Table      32  
        Equity Compensation Plan Information Table      37  
        Grant of Plan-Based Awards Table      38  
        Outstanding Equity Awards at Fiscal Year-End Table      38  
        Option Exercises and Stock Vested Table      42  
        Pension Benefits Table      43  
  17.   Employment Agreements, Termination and Change of Control      45  
D.   ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION      47  
    Compensation Committee Report      47  
E.   ADVISORY VOTE ON FREQUENCY OF SAY ON PAY VOTES      48  
F.   INTEREST OF MANAGEMENT, NOMINEES AND OTHERS IN MATERIAL TRANSACTIONS      49  
  18.   Review, Approval or Ratification of Transactions Involving Related Parties      49  
  19.   Section 16(a) Beneficial Ownership Reporting Compliance      50  
G.   BUSINESS TO BE TRANSACTED AT THE MEETING      51  
  20.   Financial Statements      51  
        Audit Committee Report      51  
  21.   Annual Resolution No. 1 – Election of Directors      51  
  22.   Annual Resolution No. 2 – Appointment and Remuneration of Auditors      57  
  23.   Annual Resolution No. 3 – Say on Pay      58  
  24.   Resolution No. 4 – Frequency of Say on Pay Votes      59  
  25.   Ordinary Resolution No. 1 – The 2017 Omnibus Incentive Plan      60  
  26.   By-Law Ratification Resolution      67  
H.   OTHER MATTERS      68  
I.   APPROVAL BY THE BOARD OF DIRECTORS      68  

 

APPENDIX A – MANDATE OF THE BOARD OF DIRECTORS

 

    

 

69

 

 

 

SCHEDULE A – ANNUAL RESOLUTION NO. 1 – ELECTION OF DIRECTORS

 

  

SCHEDULE B – ANNUAL RESOLUTION NO. 2 – APPOINTMENT AND REMUNERATION OF AUDITORS

 

  

SCHEDULE C – ANNUAL RESOLUTION NO. 3 – SAY ON PAY

 

  

SCHEDULE D – RESOLUTION NO. 4 – FREQUENCY OF SAY ON PAY

 

  

SCHEDULE E – ORDINARY RESOLUTION NO. 1 – 2017 OMNIBUS INCENTIVE PLAN

 

  

APPENDIX E-1 – 2017 OMNIBUS INCENTIVE PLAN

 

  

SCHEDULE F – BY-LAW RATIFICATION RESOLUTION

  


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LOGO

MITEL NETWORKS CORPORATION

350 Legget Drive

Ottawa, Ontario

K2K 2W7

M ANAGEMENT P ROXY C IRCULAR

April 21, 2017

 

A.

INFORMATION ON VOTING AND PROXIES

 

1.

Who May Vote

You are entitled to vote at the annual meeting if you were a holder of Mitel common shares at the close of business on March 21, 2017, which is referred to as the record date. Each Mitel common share is entitled to one vote. On the record date, there were 122,788,211 Mitel common shares outstanding.

 

2.

Solicitation of Proxies

This proxy circular is furnished in connection with the solicitation of proxies by or on behalf of the management of Mitel, a corporation governed by the Canada Business Corporations Act , which is referred to as the CBCA , for use at the meeting to be held on May 15, 2017 at The Brookstreet Hotel, 525 Legget Drive, Ottawa (Kanata), Ontario, K2K 2W2, commencing at 4:00 p.m., Ottawa time, or any adjournment or adjournments thereof, for the purposes set out in the notice of the meeting, which is referred to as the notice of meeting, accompanying this proxy circular.

The enclosed proxy is being solicited by or on behalf of the management of Mitel and the cost of such solicitation will be borne by us . Mitel has retained Alliance Advisors, LLC to assist in the solicitation of proxies for a fee of U.S.$40,705 plus reasonable out-of-pocket expenses. It is expected that the solicitation of proxies will be primarily by mail communication by our directors, officers or employees. Except as otherwise stated, the information contained in this proxy circular is given as of March 31, 2017.

 

3.

Appointment of Proxies

The persons named in the enclosed form of proxy or voting instruction form are directors or officers of Mitel. If you wish to appoint some other person or company (who need not be a shareholder) to represent you at the meeting, you may do so by striking out the name of the persons named in the enclosed form of proxy or voting instruction form and inserting the name of your appointee in the blank space provided or complete another form of proxy and, in either case, deliver the completed and signed form in the envelope provided by 4:00 p.m., Ottawa time, on May 11, 2017, being two business days preceding the date of the meeting (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). It is the responsibility of the shareholder appointing some other person to represent the shareholder to inform such person that he or she has been so appointed. The proxy or voting instruction form must be signed by the shareholder or the shareholder’s attorney authorized in writing or, if the shareholder is a corporation, by an officer or attorney of that corporation, duly authorized.

Registered Shareholders

A registered shareholder is the person in whose name a share certificate is registered. If you are a registered shareholder, you are entitled to vote your shares in one of two ways:


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  (a)

Attend the meeting – You may attend the meeting and vote in person. When you arrive at the meeting, please register with Computershare Investor Services, Inc. and provide government-issued picture identification for admission. Whether or not you intend to attend the meeting, you are encouraged to vote by proxy (see (b) below).

 

  (b)

By Proxy – If you do not plan to attend the meeting in person, you may vote by proxy in one of two ways:

 

   i.

By authorizing the management representatives of Mitel named in the proxy form to vote your Mitel common shares. You may convey your voting instructions by:

 

   

Internet – Go to www.investorvote.com and follow the instructions. You will need the 15 digit control number which is located on your proxy form; or

 

   

Mail – Complete the proxy form in full, sign and return it in the envelope provided by 4:00 p.m., Ottawa time, on May 11, 2017, being two business days preceding the date of the meeting (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). The shares represented by your proxy will be voted in accordance with your instructions as indicated on your form and on any ballot that may be called at the meeting.

 

  ii.

You have the right to appoint some other person to attend the meeting and vote your Mitel common shares on your behalf. You may do this either by:

 

   

Internet – Go to www.investorvote.com and follow the instructions. You will need the 15 digit control number which is located on your proxy form; or

 

   

Mail – Print your appointee’s name in the blank space on the proxy form and indicate how you would like to vote your Mitel common shares. Complete the proxy form in full, sign and return it in the envelope provided. Your proxyholder will decide how to vote on amendments or variations to the matters to be voted on at the meeting. Please ensure your proxyholder attends the meeting as your shares will not be voted unless your proxyholder is in attendance.

Non-Registered Shareholders

Instead of being registered in your name, your shares may be registered in the name of an intermediary (which is usually a bank, trust company, securities dealer or broker, or trustee or administrator of self-administered RRSPs, RRIFs, RESPs and similar plans). If your shares are registered in the name of an intermediary, you are a non-registered shareholder.

Mitel has distributed copies of the notice of meeting, this proxy circular and the form of proxy, which are referred to as the meeting materials, to intermediaries for distribution to non-registered shareholders. Unless you have waived your right to receive the meeting materials, intermediaries are required to deliver them to you as a non-registered shareholder of Mitel and to seek your instructions regarding how to vote your shares. Typically, a non-registered shareholder will be given a voting instruction form which must be completed and signed by the non-registered shareholder in accordance with the instructions on the form. The purpose of these procedures is to allow non-registered shareholders to direct the voting of those shares that they own but which are not registered in their own name.


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As a non-registered shareholder, you may vote in person at the meeting or by proxy in one of two ways.

 

  (a)

Attend the meeting - On the voting instruction form you received from your intermediary, insert your name in the blank space provided for the proxyholder appointment, and return it as instructed on the form to your intermediary. Do not complete the voting section of the form since you will vote in person at the meeting. Your form must be returned to your intermediary well in advance of the meeting to enable your intermediary to provide your instructions to Computershare Investor Services, Inc. by 4:00 p.m., Ottawa time, two days before the meeting, being May 11, 2017 (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened), in order for you to attend the meeting to vote the shares covered by the form. When you arrive at the meeting, you should advise the staff that you are a proxy appointee. If there is no space for appointing a proxyholder on the voting instruction form, you may have to indicate on the voting instruction form that you wish to receive a proxy form, and then return the voting instruction form as instructed by your intermediary. The intermediary will mail a proxy form that you will need to complete, sign and return to Computershare Investor Services, Inc. by 4:00 p.m., Ottawa time, two days before the meeting, being May 11, 2017 (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). When you arrive at the meeting, please register with Computershare Investor Services, Inc. and provide government-issued picture identification and evidence of share ownership as of the record date, such as an account statement, voting instruction form issued by the broker, bank or other record holder, or other acceptable document. Whether or not you intend to attend the meeting, you are encouraged to vote by proxy (see (b) below).

 

  (b)

By Proxy - If you do not plan to attend the meeting in person, you may vote by proxy in one of two ways:

 

   i.

By authorizing the management representatives of Mitel named in the voting instruction form accompanying this proxy circular to vote your Mitel common shares. You may convey your voting instructions by:

 

   

Internet – Go to www.proxyvote.com and follow the instructions. You will need the 12 digit control number which is located on your voting instruction form.

 

   

Mail – Complete the voting instruction form in full, sign and return it as instructed on the form to your intermediary well in advance of the meeting to enable your intermediary to provide your instructions to Computershare Investor Services, Inc. by 4:00 p.m., Ottawa time, on May 11, 2017, being two business days preceding the date of the meeting (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). Your shares will be voted in accordance with your instructions as received by Computershare Investor Services, Inc. on any ballot that may be called at the meeting.

 

  ii.

You have the right to appoint some other person to attend the meeting and vote your Mitel common shares on your behalf. You may do this either by:

 

   

Internet – Go to www.proxyvote.com and follow the instructions. You will need the 12 digit control number which is located on your voting instruction form.

 

   

Mail – Print your appointee’s name in the blank space provided for the proxyholder appointment on the voting instruction form and indicate how you would like to vote your Mitel common shares. Complete the proxy form in full, sign and return it as instructed on the form to your intermediary well in advance of the meeting to enable your intermediary to provide your instructions to Computershare Investor Services, Inc. by 4:00 p.m., Ottawa time, on May 11, 2017, being two business days preceding the date of the meeting (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). If there is no space for appointing a proxyholder on the voting instruction form, you may have to indicate on the voting instruction form that you wish to receive a proxy form, and then return the voting instruction form as instructed by your intermediary. The intermediary will mail a proxy form that you will need to complete, sign and return to Computershare Investor Services, Inc. by 4:00 p.m., Ottawa time, two days before the meeting, being May 11, 2017 (or 48 hours, exclusive of Saturdays, Sundays and statutory holidays, prior to the date any adjourned or postponed meeting is reconvened). Your proxyholder will decide how to vote on amendments or variations to the matters to be voted on at the meeting. Please ensure your proxyholder attends the meeting as your shares will not be voted unless your proxyholder is in attendance.


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Proxies returned by intermediaries as “non-votes” because the intermediary has not received instructions from the non-registered shareholder with respect to the voting of certain shares will be treated as not entitled to vote on any matter before the meeting and will not be counted as having been voted in respect of any such matter. Shares represented by intermediary “non-votes” will, however, be counted in determining whether there is a quorum present at the meeting.

 

  4.

Revocation of Proxies

A registered shareholder may change or revoke a proxy (i) by voting again on a later date, (ii) by depositing an instrument in writing executed by the shareholder or by the shareholder’s attorney authorized in writing (or, if the shareholder is a corporation, by an authorized officer or attorney of such corporation authorized in writing) at the registered office of Mitel at any time up to and including the last business day preceding the day of the meeting, or an adjournment thereof, at which such proxy is to be used, or with the Chairman of the meeting on the day of, but prior to commencement of, the meeting, (iii) by attending and voting in person at the meeting, or (iv) in any other manner permitted by law. If an instrument of revocation is deposited with the Chairman of the meeting on the day of the meeting, the instrument will not be effective with respect to any matter on which a vote has already been cast pursuant to such proxy. If the registered shareholder attends and votes in person at the meeting, the change or revocation will apply only to those matters on which the registered shareholder casts a ballot at the meeting.

A non-registered shareholder may change or revoke a voting instruction form that has been given to an intermediary at any time by providing new voting instructions to, or a written notice to, the intermediary or to the service company that the intermediary uses, in sufficient time for the intermediary to act on it.

 

  5.

Voting of Proxies

The form of proxy or voting instruction form accompanying this proxy circular affords a shareholder an opportunity to specify that the shares registered in the shareholder’s name shall be voted FOR or AGAINST or WITHHELD in accordance with your instructions as indicated on your form of proxy. In the absence of instructions, your shares will be voted FOR each of the matters to be considered at the meeting. Votes WITHHELD and abstentions are counted as present or represented for purposes of determining the presence or absence of a quorum at the meeting but are not included in the number of shares present or represented and voting on each matter.

The form of proxy or voting instruction form accompanying this proxy circular confers discretionary authority upon the nominees named in the enclosed form of proxy with respect to amendments or variations of matters identified in the notice of meeting or other matters which may properly come before the meeting. As of the date of this proxy circular, management of Mitel knows of no amendment or variation of the matters referred to in the notice of meeting or other business that will be presented at the meeting. If any such matters should properly come before the meeting, management representatives of Mitel named in the enclosed form will vote on those matters in accordance with his or her best judgment.

 

  6.

Authorized Capital and Voting Shares

The authorized capital of the Corporation consists of an unlimited number of Mitel common shares and an unlimited number of preferred shares, issuable in series, which are referred to as the preferred shares. As of the record date, Mitel had 122,788,211 Mitel common shares issued and outstanding and no preferred shares issued and outstanding. Each Mitel common share carries one vote in respect of each matter to be voted upon at the meeting. Only holders of outstanding Mitel common shares of record at the close of business on the record date will be entitled to vote at the meeting.


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  7.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of Mitel common shares as of March 31, 2017 and shows the number of shares and percentage of outstanding Mitel common shares owned by:

 

   

each person or entity who is known by us to own beneficially 5% or more of our Mitel common shares;

 

   

each member of the Mitel Board;

 

   

each of our named executive officers, each referred to as an NEO; and

 

   

all members of our Board and our executive officers as a group.

Beneficial ownership is determined in accordance with SEC rules, which generally attribute beneficial ownership of securities to each person or entity who possesses, either solely or shared with others, the power to vote or dispose of those securities. These rules also treat as outstanding all shares that a person would receive upon exercise of stock options or warrants, or upon conversion of convertible securities held by that person that are exercisable or convertible within 60 days of the determination date, which in the case of the following table is May 30, 2017. Shares issuable pursuant to exercisable or convertible securities are deemed to be outstanding for computing the percentage ownership of the person holding such securities but are not deemed outstanding for computing the percentage ownership of any other person. The percentage of beneficial ownership for the following table is based on 122,675,810 Mitel common shares outstanding as of March 31, 2017. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Mitel common shares shown as beneficially owned by them.

 

 

       Amount and Nature of  
Beneficial Ownership
        

Name and Address of Beneficial Owner  (1)

   Number      Percentage
of Class
        

Five Percent Shareholders:

        

Matthews Group  (2)

        

Dr. Terence H. Matthews

     220,359          0.2%     

Wesley Clover International Corporation

     6,738,590         5.5%     
  

 

 

    

 

 

    

Total

     6,958,949         5.7%     
  

 

 

    

 

 

    

Francisco Partners Group  (3)

        

Francisco Partners Management, LLC

     409,925         0.3%     

Francisco Partners II (Cayman) LP

     62,470         0.1%     

Francisco Partners Parallel Fund II, LP

     858         0.0%     

Arsenal Holdco I S.a.r.l.

     6,281,568         5.1%     

Arsenal Holdco II S.a.r.l.

     2,424,602         2.0%     

Benjamin H. Ball

     8,974         0.0%     
  

 

 

    

 

 

    

Total

     9,188,397         7.5%     
  

 

 

    

 

 

    

NWQ Investment Management  (4)

     15,095,919         12.3%     

Elliott Management Corporation  (5)

     12,248,059         10.0%     

Turtle Creek Asset Management Inc.  (6)

     8,385,047         6.8%     

Guardian Capital L.P.  (7)

     6,891,479         5.6%     


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       Amount and Nature of  
Beneficial Ownership
        

Name and Address of Beneficial Owner  (1)

   Number      Percentage
of Class
        

Executive Officers and Directors:

        

Benjamin H. Ball  (3)

     9,188,397         7.5%     

Martha H. Bejar  (8)

            -     

Peter D. Charbonneau  (9)

     233,406         0.2%     

Dr. Terence H. Matthews  (2)

     6,958,949         5.7%     

Richard D. McBee

     2,170,584         1.8%     

John P. McHugh

     212,974         0.2%     

Sudhakar Ramakrishna

     64,153         0.0%     

David M. Williams  (10)

     249,460         0.2%     

Steven E. Spooner  (11)

     491,304         0.4%     

Graham Bevington

     228,937         0.2%     

Jon D. Brinton

     182,713         0.1%     

Thomas G. Lokar

     127,310         0.1%     

All directors and executive officers as a group (14 persons)  (12)

     20,216,480        16.5%     

 

 

 

(1)

Except as otherwise indicated, the address for each beneficial owner is c/o Mitel Networks Corporation, 350 Legget Drive, Ottawa, Ontario, Canada K2K 2W7.

(2)

The “Matthews Group” means Dr. Matthews and certain entities, including Wesley Clover International Corporation (formerly Kanata Research Park Corporation which merged with Wesley Clover International Corporation on January 1, 2017), controlled by Dr. Matthews. Includes stock options to acquire 182,423 Mitel common shares that are currently exercisable and 6,738,590 Mitel common shares owned by Wesley Clover International Corporation. Dr. Matthews has voting and investment power over the Mitel common shares owned by Wesley Clover International Corporation and therefore beneficially owns the Mitel common shares held by Wesley Clover International Corporation. The address for the Matthews Group and Dr. Matthews is 390 March Road, Kanata, Ontario, Canada K2K 0G7.

(3)

The “Francisco Partners Group” means Francisco Partners Management, LLC and certain of its affiliates. Includes 8,860,877 Mitel common shares and stock options to acquire 327,520 Mitel common shares that are exercisable. Benjamin Ball, a partner of Francisco Partners Management, LLC, has voting and investment power over the Mitel common shares owned by each of Francisco Partners, Francisco Partners II (Cayman) LP , Francisco Partners Parallel Fund II, LP, Arsenal Holdco I S.a.r.l. and Arsenal Holdco II S.a.r.l. and therefore beneficially owns the Mitel common shares held by each of these entities. Mr. Ball holds 8,974 Mitel common shares directly. The address for each of the Francisco Partners Group and Benjamin Ball is c/o Francisco Partners Management, LLC, One Letterman Drive, Building C-Suite 410, San Francisco, California, 94129.

(4)

The number of shares is based on the shareholder’s Schedule 13G/A filed with the SEC on February 3, 2017. The address for NWQ Investment Management is 2049 Century Park East, 16 th Floor, Los Angeles, CA, 90067.

(5)

The number of shares is based on the shareholder’s Schedule 13D/A filed on August 19, 2016. The address for Elliott Management Corporation is 40 West 57 th St., New York, New York, 10019.

(6)

The number of shares is based on the shareholder’s Schedule 13G/A filed with the SEC on February 14, 2017. The address for Turtle Creek Asset Management Inc. is 4 King Street West, Suite 1300, Toronto, Ontario, M5H 1B6.

(7)

The number of shares is based on the shareholder’s Schedule 13G filed with the SEC on February 14, 2017. The address for Guardian Capital LP is Commerce Court West, Suite 3100, PO Box 201, Toronto, Ontario, M4L 1E8.

(8)

Martha Bejar was appointed to the Board on March 10, 2017.

(9)

Of this total, 2,019 Mitel common shares are registered to Peter Charbonneau Trust #2, a trust of which Mr. Charbonneau is the sole trustee, and 13,927 Mitel common shares are registered to Mr. Charbonneau’s wife, Joan Charbonneau, for which he disclaims beneficial ownership. Includes options to acquire 185,185 Mitel common shares at exercise prices ranging from $2.61 to $10.83.

(10)

Of this total, 2,300 Mitel common shares are registered to Mr. Williams’ wife, June Williams, for which he disclaims beneficial ownership. Includes options to acquire 39,460 Mitel common shares at exercise prices ranging from $7.17 to $10.83.

(11)

Of this total, 5,100 Mitel common shares are registered to the Spooner Children Trust, a trust of which Mr. Spooner is one of three trustees, 309,500 Mitel common shares issuable upon the exercise of options at exercise prices ranging from $3.80 to $10.11.

(12)

In calculating this total, the Mitel common shares held by Mr. Ball have been counted only once, as all such shares are held by and through the Francisco Partners Group.

For the purpose of this table, which contains information that is also included in our Form 10-K filing for the year ended December 31, 2016, the term “executive officer” has the meaning ascribed to it under Rule 405 promulgated under the U.S. Securities Act of 1933, as amended, which is referred to as the 1933 Act, and the term “named executive officer”, or NEO, has the meaning ascribed to it under Item 403(a)(3) of Regulation S-K promulgated under the 1933 Act. The information with respect to beneficial ownership of our directors, NEOs and executive officers is based upon information furnished by each director, NEO or executive officer or information contained in insider reports made with the Canadian Securities Administrators.


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B.

CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES

Mitel is a Canadian reporting issuer and qualifies as a domestic issuer for purposes of the Exchange Act. Mitel common shares are listed on the NASDAQ and on the TSX. As a result, we are subject to, and comply with, a number of legislative and regulatory corporate governance requirements, policies and guidelines, including those of the NASDAQ, TSX, the Canadian Securities Administrators and the SEC.

In addition to compliance with governance requirements, Mitel and its management place significant emphasis on the structure of the Mitel Board and the committees of the Mitel Board in order to promote effective corporate governance of the Corporation. We have adopted corporate governance guidelines, mandates for each of the Mitel Board, Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, as well as position descriptions for a chairman of the Mitel Board, a lead director and a Chief Executive Officer. Seven of our eight directors are independent. Our independent directors meet regularly without the presence of management. Mitel has share ownership guidelines for its directors and executive officers.

We have established a Global Business Ethics and Compliance Office headed by a Compliance Officer with assistance from the Legal Department and Internal Audit Department, who report directly to the Audit Committee. The responsibilities of the Compliance Officer include (but are not limited to):

 

   

ensuring annual distribution and certification of our Code of Business Conduct to all of our employees, directors, officers and representatives which requires each individual to certify their compliance with the Code of Business Conduct;

 

   

monitoring our ethics and business practices company-wide by coordinating audits, performance assessments and providing training programs;

 

   

monitoring and promoting anonymous hotlines to report suspected violations; and

 

   

reporting to the Mitel Board and/or a Committee of the Mitel Board.

We have adopted an Insider Trading Policy for directors, officers and employees who may from time to time be in possession of material, non-public information.

Certain employees who are involved in the preparation and review of financial statements and regulatory filings execute, on an annual basis, certifications in support of the certification obligations of the Chief Executive Officer and the Chief Financial Officer pursuant to the Sarbanes Oxley Act of 2002 . The certification process complements the due diligence process administered by us to support reporting obligations under the Sarbanes Oxley Act of 2002 .

Our significant governance principles and practices, all of which are described below, are set forth in governance documentation available on our website at http://investor.mitel.com . These include the Mandate for the Mitel Board of Directors, Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Corporate Governance Guidelines and Code of Business Conduct. We will provide a copy of any of these governance documents to any person, without charge, who requests a copy in writing to Investor Relations, Mitel Networks Corporation, 350 Legget Drive, Ottawa, Ontario, Canada K2K 2W7.

 

  8.

Composition of the Mitel Board

The Mitel Board currently consists of eight members. The directors have approved a fixed number of eight directors to be elected at the meeting. Our articles of incorporation provide that the Mitel Board is to consist of a minimum of three and a maximum of fifteen directors as determined from time to time by the directors, and permit the directors to appoint additional directors in accordance with the CBCA within any fixed number from time to time. Under the CBCA , one quarter of our directors must be resident Canadians as defined in the CBCA . Under the terms of a Shareholders’ Agreement among Mitel and certain of its shareholders, certain shareholders are entitled to nominate collectively up to two directors and such shareholders have agreed to nominate our Chief Executive Officer to serve on the Board (see “Interest of Management, Nominees and Others in Material Transactions: Transactions Involving Related Parties: Shareholders’ Agreement”). The Board regularly assesses the need for additional directors in order to ensure that the Mitel Board is composed of individuals with diverse backgrounds, experience, competencies and independence as evaluated against criteria established from time to time by the Mitel Board.


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  9.

Independence and Other Considerations for Director Service

A majority (seven of eight) of our nominated directors are considered “independent”, as defined under the NASDAQ rules and for purposes of Canadian securities laws. Our independent directors are Peter Charbonneau, Benjamin Ball, Martha Bejar, Terence Matthews, John McHugh, Sudhakar Ramakrishna and David Williams. For purposes of the NASDAQ rules, an independent director means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. A director is considered to be independent for the purposes of Canadian securities laws if the director has no direct or indirect material relationship to the company. A material relationship is a relationship that could, in the view of the Mitel Board, be reasonably expected to interfere with the exercise of a director’s independent judgment. Certain individuals, such as employees and executive officers of Mitel, are deemed by Canadian securities laws to have material relationships with the Corporation.

The Audit Committee reviews related-party transactions on a quarterly basis and has determined that relationships with companies affiliated with Dr. Matthews are not material and have been at arm’s-length and therefore the Mitel Board is satisfied that Dr. Matthews is independent.

Our non-independent nominated director is Richard McBee. Our Board determined that Richard McBee is non-independent as he is the Chief Executive Officer and President of the Corporation.

We have an independent chairman, separate from our Chief Executive Officer. The Corporation believes that this leadership structure, which separates the Chairman and Chief Executive Officer roles, is appropriate at this time in light of the Corporation’s business and operating environment. As chairman, Dr. Matthews’ role is to promote the Mitel Board’s effectiveness in providing oversight to the Corporation. In particular, the chairman has the responsibility to:

 

   

preside over Board meetings in an efficient and effective manner that is compliant with governance policies and procedures;

 

   

in conjunction with the Chief Executive Officer, communicate and maintain relationships with the Corporation, its shareholders and other stakeholders;

 

   

set Board meeting agendas based on input from directors and senior management;

 

   

work cooperatively with the lead director in fulfilling the lead director’s mandate and, in the event of a conflict in their duties, yield to the lead director; and

 

   

carry out other duties, as requested by the Mitel Board or the Chief Executive Officer.

The Board has also appointed a lead independent director, Peter Charbonneau, who is referred to as the Lead Director. The responsibility of our Lead Director is to provide additional independent leadership to the Mitel Board and to ensure that it functions in an independent and open manner. Together with the chairman of the Mitel Board, the Lead Director ensures that the Mitel Board understands its responsibilities and communicates effectively with its subcommittees and with management. Our Lead Director is also chairman of our Nominating and Corporate Governance Committee, of which all of the members are independent. At the regularly scheduled Nominating and Corporate Governance Committee meetings, the Lead Director ensures that the independent directors have in-camera discussions. There were four such in-camera meetings held during the year ended December 31, 2016.


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The attendance record of each director of the Mitel Board for all board and board committee meetings for the year ended December 31, 2016 is as follows:

 

   
Director  

Board and Committee Attendance for FY2016

 

 

Board
  Meetings (15  
meetings)

 

 

 

Audit
  Committee  
Meetings

(7

meetings)

 

 

  Compensation  
Committee
Meetings (6
meetings)

 

 

 

  Nominating and  
Governance
Committee
Meetings (4
meetings)

 

Terence H. Matthews

  100%   -   -   100%

Richard D. McBee

  100%   -   -   -

Benjamin H. Ball

  100%   -   100%   75%

Martha H. Bejar (1)

  -   -   -   -

Peter D. Charbonneau

  100%   100%   -   100%

John P. McHugh (2)

  94%   100%   100% (2)   100%

Sudhakar Ramakrishna

  94%   100%   -   100%

David M. Williams

  100%   -   100%   100%

 

(1) Martha Bejar was appointed to the Board on March 10, 2017.

(2) John McHugh was appointed to the Compensation Committee on June 23, 2016. Mr. McHugh attended 2 of 2 (100%) Compensation Committee Meetings held from the date of his appointment.

At least quarterly, the independent directors hold meetings at which non-independent directors and management are not in attendance.

The Mitel Board permits, but does not require, its directors to attend the Corporation’s annual meeting of shareholders. Mr. McBee and Dr. Matthews attended the 2016 annual meeting of shareholders.

 

  10.

Mandate of the Mitel Board and Corporate Governance Guidelines

The mandate of the Mitel Board is to oversee corporate performance and to provide quality, depth and continuity of management so that we can meet our strategic objectives. We have attached our board mandate as Appendix A to the proxy circular. In particular, the Mitel Board focuses its attention on the following key areas of responsibility:

 

   

appointing and supervising the Chief Executive Officer and other senior officers;

 

   

supervising strategy implementation and performance;

 

   

monitoring our financial performance and reporting;

 

   

identifying and supervising the management of the Corporation’s principal business risks;

 

   

monitoring the legal and ethical conduct of the Corporation;

 

   

maintaining shareholder relations; and

 

   

developing and supervising our governance strategy.


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The Mitel Board discharges many of its responsibilities through its standing committees: the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. Other committees may be formed periodically by the Mitel Board to address specific issues that are not on-going in nature. The duties and responsibilities delegated to each of the standing committees are prescribed in the respective charter of each standing committee.

Position Descriptions & Charters

The Mitel Board has developed and implemented a written position description for each of the Chairman, the Lead Director and the Chief Executive Officer. Committees of the Mitel Board each have a committee charter that sets out the mandate of the committee, which includes the responsibilities of the chair of each committee.

Process for Recommending Candidates for Election to the Mitel Board of Directors

The Nominating and Corporate Governance Committee is responsible for, among other things, determining the criteria for membership to the Mitel Board and recommending candidates for election to the Mitel Board. The criteria and process for evaluating and identifying the candidates that it recommends to the full Mitel Board for selection as director nominees are as follows:

 

   

The Nominating and Corporate Governance Committee regularly reviews the current composition and size of the Mitel Board.

 

   

The Nominating and Corporate Governance Committee oversees an annual evaluation of the performance of the Mitel Board as a whole and each Committee and evaluates the performance of individual members of the Mitel Board eligible for re-election at the annual meeting of the shareholders.

 

   

In its evaluation of the director candidates, including the members of the Mitel Board eligible for re-election, the committee seeks to achieve a balance of knowledge, experience and capability on the Mitel Board and considers:

 

     

the current size and composition of the Mitel Board and the needs of the Mitel Board and the respective committees of the Mitel Board;

 

     

factors such as issues of character, judgement, diversity including gender diversity, age, expertise, business experience, length of service, independence, other commitments and the like; and

 

     

such other factors as the Nominating and Corporate Governance Committee may consider appropriate.

 

   

In evaluating and identifying candidates, the Nominating and Corporate Governance Committee has the authority to retain and terminate any third party search firm that is used to identify director candidates and has the authority to approve the fees and retention terms of any search firm.

 

   

After completing its review and evaluation of the director candidates, the Nominating and Corporate Governance Committee recommends the director nominees to the full Mitel Board for selection.

 

   

The Nominating and Corporate Governance Committee may also consider recommendations for nomination from other sources and interested parties, including Mitel’s officers, directors and shareholders. In considering these recommendations, the Nominating and Corporate Governance Committee utilizes the same standards described above, and considers the current size and composition of the Board, and the needs of the Board and its committees. Shareholders who wish to submit any shareholder proposal which includes nominees for director, as permitted under the CBCA , may address their shareholder proposal, including any notice on Schedule 14N, in writing to Mitel Networks Corporation, 350 Legget Drive, Kanata, ON, K2K 2W7, Attention: Corporate Secretary. In order for a shareholder’s director nominee to be included in Mitel’s proxy materials for an annual general meeting of shareholders, such shareholder proposal must comply with applicable Canadian law and the rules and regulations of the SEC. We will consider such shareholder proposal (and any proposal made pursuant to Rule 14a-8 of the Exchange Act) for inclusion in the proxy materials for the 2017 annual meeting only if our Corporate Secretary receives such proposal on or before the close of business on Monday, March 27, 2017 (which is the deadline for submitting shareholder proposals under the CBCA ).


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Orientation and Continuing Education

Director orientation and continuing education is conducted by the Nominating and Corporate Governance Committee. All newly elected directors are provided with a comprehensive orientation on our business and operations. This includes familiarization with our reporting structure, strategic plans, significant financial, accounting and risk issues, compliance programs, policies and management and the external auditor. Existing directors are periodically updated in respect of these matters.

For the purposes of orientation, new directors are given the opportunity to meet with members of the executive management team to discuss the Corporation’s business and activities. The orientation program is designed to assist the directors in fully understanding the nature and operation of our business, the role of the Mitel Board and its committees, and the contributions that individual directors are expected to make.

Director Term Limits and Mechanisms of Board Renewal

The Mitel Board has determined that fixed term limits for directors should not be established. The Mitel Board is of the view that such a policy would have the effect of forcing directors off the Mitel Board who have developed, over a period of service, increased insight into the Corporation and who, therefore, can be expected to provide an increasing contribution to the Mitel Board.

At the same time, the Mitel Board recognizes the value of some turnover in board membership to provide on-going input of fresh ideas and views. The Corporation’s director retirement policy provides that a director may not be appointed or elected as a director once that person has reached 75 years of age, unless the Mitel Board makes an exception to this policy. David Williams turned 75 on January 16, 2017. In light of his experience, qualifications and continuing commitment, the Mitel Board has approved an exception to our director retirement policy. Accordingly, the Mitel Board has exercised its discretion to allow Mr. Williams to stand for re-election at the Meeting.

The Mitel Board has had some turnover during the last five years. Of the seven members who served as directors during the year ending December 31, 2016, two directors joined the Mitel Board within the last five years.

 

   

Sudhakar Ramakrishna joined the Mitel Board on May 14, 2015, and

 

   

David Williams joined the Mitel Board on January 31, 2014.

In addition, Martha Bejar joined the Mitel Board on March 10, 2017.

Gender Diversity

Mitel and the Board believe that diversity is important to ensure that Board members provide the necessary range of perspectives, experience and expertise required to achieve effective stewardship of the Corporation. The Board recognizes that gender diversity amongst its board members and executive officers is a significant aspect of diversity and acknowledges the important role of women in contributing to diversity of perspective in the Boardroom and to the Corporation as a whole. On March 10, 2017, Mitel appointed Martha Bejar to the Board. While education, executive and public company board experience, personal qualities, sector specific knowledge, and skill set (relative to other members of the Board), were the primary factors that the Nominating and Corporate Governance Committee and the Board considered, gender was also a significant factor in the decision to appoint Ms. Bejar to the Board. The Mitel Board is committed to seeking further qualified female candidates as vacancies arise amongst the current Directors and executive officers.


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Currently, Mitel does not have a policy relating to the identification and nomination of women directors. The Nominating and Corporate Governance Committee is mandated to review annually the competencies, skills and personal qualities applicable to candidates to be considered for nomination to the board. The objective of this review is to maintain the composition of the Mitel Board in a way that provides, in the judgment of the Mitel Board, the best mix of skills and experience to provide for the overall stewardship of the Corporation. This review also takes into account the desirability of maintaining a reasonable diversity of personal characteristics including gender, origin, age, and geographic residence, and ensures that appropriate efforts are made to include women in the list of candidates being considered for nomination for a Board position. The Mitel Board will continue to evaluate the appropriateness of adopting a formal board diversity policy in the future.

In identifying nominees for election by shareholders and candidates for executive officer positions, the Corporation does not target a specific representation of women. Although Mitel does not currently have any female executive officers, gender diversity is one of several important factors that the Corporation takes into consideration in identifying qualified candidates to serve as executive officers of Mitel. Mitel, by and through its management, makes all employment decisions based on merit and without discrimination on any prohibited ground including, but not limited to, gender, age, race, religion, place of origin, sexual orientation, marital status, family status, or physical or mental handicap. Mitel will, however, continue to evaluate the appropriateness of adopting targets in the future.

 

  11.

Code of Business Conduct

The Mitel Board has established the Code of Business Conduct, or Code which governs the conduct of the Mitel Board and Mitel’s executives, employees, contractors and agents, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. As disclosed in our Current Report on Form 8-K filed with the SEC on December 22, 2016, the Mitel Board approved and adopted an amendment to the Code on December 16, 2016. The Code was amended in order to comply with NASDAQ corporate governance requirements that apply to Mitel commencing on January 1, 2017, as the Corporation was no longer eligible to rely upon NASDAQ foreign private issuer corporate governance exemptions after that date. The amendment to the Code did not result in any explicit or implicit waiver of any provision of the Code in effect prior to the amendment. A copy of the Code, as amended, may be obtained, without charge, either on-line at http://investor.mitel.com/governance.com or, upon request, by contacting the “Global Business Ethics and Compliance Office” of the Corporation at 350 Legget Drive, Ottawa, Ontario, Canada, K2K 2W7, phone number: 613-592-2122.

Responsibility for ensuring compliance with the Code of Business Conduct rests with our Global Business Ethics and Compliance Office, which is referred to as the Compliance Office, under the guidance of its director, who is also the general counsel of the Corporation. The Compliance Office ensures that the Code of Business Conduct is distributed throughout the Corporation, monitors the ethics of our business practices, investigates potential breaches of the Code and engages in education on compliance with the Code of Business Conduct. The Audit Committee periodically reviews the ethics monitoring conducted by the Compliance Office and updates the Code of Business Conduct as required. The chair of the Audit Committee reports the results of his or her reviews to the Mitel Board following Audit Committee meetings and keeps the Mitel Board apprised of matters considered by the committee.

Directors are prohibited by the Code of Business Conduct from engaging in transactions on our behalf in which that director has, or a family member of that director has, a substantial beneficial interest. Among other things, this means that a director may not hold a financial interest in a customer, supplier or competitor of ours or our subsidiaries; notwithstanding this prohibition, a director may own $25,000 worth of stock or two percent of a publicly owned corporation, whichever is greater. Permission to deviate from these rules must be obtained from the Mitel Board. Moreover, prior to commencing service on the Mitel Board, directors are required to disclose all potential conflicts of interest to the corporate secretary. If potential conflicts arise during a director’s tenure on the Mitel Board, such conflicts must be immediately disclosed to the corporate secretary. Where a conflict of interest exists, a director is required by statute to abstain from voting on the matter and, by corporate policy, is also required to recuse him or herself from any discussion on any matter in respect of which a conflict of interest precludes the director from voting.


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  12.

The Role of the Mitel Board of Directors in Risk Oversight

Mitel believes that risk is inherent in innovation and the pursuit of long-term growth opportunities. Mitel’s management is responsible for day-to-day risk management activities. The Mitel Board, acting directly and through its committees, is responsible for the oversight of Mitel’s risk management. With the oversight of the Mitel Board, Mitel has implemented practices and programs designed to help manage the risks to which we are exposed in our business and to align risk-taking appropriately with our efforts to increase shareholder value.

Mitel’s management has implemented an enterprise risk management, or ERM, program designed to work across the business to identify, assess, govern and manage risks and Mitel’s response to those risks.

The Audit Committee, which oversees our financial and risk management policies, receives regular reports on ERM from internal audit. The Audit Committee meets regularly with our chief financial officer, our independent auditor, the head of internal audit, and other members of senior management to discuss our major financial risk exposures, financial reporting, internal controls, compliance risk, and key operational risks.

As part of the overall risk oversight framework, other committees of the Mitel Board also oversee certain categories of risk associated with their respective areas of responsibility.

Each committee reports regularly to the full Mitel Board on its activities. In addition, the Mitel Board participates in regular discussions among the Mitel Board and with Mitel’s senior management of many core subjects, including strategy, operations, finance, and legal and public policy matters, in which risk oversight is an inherent element.

 

  13.

Board Committees

The Mitel Board has established three standing committees to assist it in carrying out its responsibilities: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.

The Audit Committee

The Audit Committee is composed of three directors namely, Peter Charbonneau (Chairman), John McHugh and Sudhakar Ramakrishna. Peter Charbonneau was appointed to the Audit Committee in February 2002, John McHugh was appointed in February 2014 and Sudhakar Ramakrishna was appointed in August 2015. The Mitel Board has determined that each of these directors meets the independence requirements of the rules and regulations of the NASDAQ and the SEC and the independence requirements of Canadian securities rules. The Mitel Board has determined that each of these directors is financially literate. Peter Charbonneau (Chairman) has been identified as an “audit committee financial expert” as such term is defined by applicable U.S. securities laws.

The Audit Committee assists the Mitel Board in fulfilling its financial oversight obligations including responsibility for overseeing the integrity of our financial statements and accounting and financial process and the audits of our financial statements, legal and regulatory compliance, auditor independence and qualification, the work and performance of our financial management, internal auditor and external auditor and for overseeing the systems of disclosure controls and procedures and the system of internal controls regarding finance, accounting, legal compliance, risk management and ethics that management and the Mitel Board have established.

The Audit Committee has access to all books, records, facilities and personnel and may request any information about the Corporation as it may deem appropriate. It also has the authority to retain and compensate special legal, accounting, financial and other consultants or advisors to advise the committee. The Audit Committee also reviews and approves related party transactions and prepares reports for the Mitel Board on such related party transactions.


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All members of the Audit Committee have experience reviewing financial statements and dealing with related accounting and auditing issues. The members of the Audit Committee have the following relevant education and experience:

 

   

Peter Charbonneau served as a general partner in Skypoint Capital Corporation, an early-stage technology venture capital firm from 2001 to 2015. He previously served as the Chief Financial Officer and Chief Operating Officer of Newbridge Networks Corporation. Mr. Charbonneau currently sits on the audit committee for Teradici Corporation. Mr. Charbonneau has also served as a director and audit committee member at other companies, including CBC/Radio Canada, Telus Corporation, BreconRidge Corporation, Cambrian Systems, Inc., CounterPath Corporation, March Networks Corporation, ProntoForms Corporation and Jennerex, Inc. From 1977 to 1986, Mr. Charbonneau worked as an accountant at Deloitte LLP (as it is now known). Mr. Charbonneau holds a Bachelor of Science from the University of Ottawa, an MBA from the University of Western Ontario and is a Fellow of the Chartered Professional Accountants of Ontario. Mr. Charbonneau also holds the ICD.D certification, having completed the Directors Education Program of the Institute of Corporate Directors of Canada.

 

   

John McHugh is the General Manager and Senior Vice President, Commercial Business Unit of NETGEAR, Inc. Prior to his current role, Mr. McHugh was the Chief Marketing Officer for Brocade Communications Systems, Inc. Prior to that, Mr. McHugh held Vice President and General Manager roles at Nortel Networks and Hewlett-Packard. In his capacity as an executive of each of these companies, Mr. McHugh has held leadership roles in research and development, marketing and manufacturing and has owned profit and loss responsibility for global business units driving business results through reseller channel and service provider markets around the world. Mr. McHugh has over 18 years of experience in general management, including management of cash and capital usage, evaluating business opportunities and acquisitions with significant capital structure and cash flow analysis. Mr. McHugh holds a Bachelor of Science degree in Electrical Engineering and in Computer Science from Rose-Hulman Institute of Technology.

 

   

Sudhakar Ramakrishna is the CEO and a director of Pulse Secure, LLC, where he has overseen all aspects of business strategy and execution since July 2015. Prior to his current role, Mr. Ramakrishna was the Senior Vice President and General Manager for the Enterprise and Service Provider Division of Citrix. He previously served as President of Products and Services for Polycom and held senior leadership roles at Motorola, 3COM and U.S. Robotics. Mr. Ramakrishna holds a Master’s degree in Computer Science from Kansas State and an MBA from Northwestern University’s Kellogg School of Management.

The Compensation Committee

The Mitel Board has established a compensation committee, the purpose of which is to assist the Mitel Board in establishing fair and competitive compensation and performance incentive plans. The Compensation Committee is currently composed of three directors namely, Benjamin Ball (Chairman), John McHugh and David Williams. Benjamin Ball was appointed to the Compensation Committee in October 2007, John McHugh was appointed in June 2016 and David Williams was appointed in March 2014. All members of the Compensation Committee qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code as amended (the “Tax Code”), qualify as “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and are independent, as determined by the Mitel Board in accordance with NASDAQ independence rules and Canadian securities rules including the Chairman who is responsible for the leadership of the committee and the fulfilment by the committee of its mandate. The Compensation Committee is responsible for annually reviewing the compensation of our directors, our chief executive officer and certain other senior executives. To ensure an objective process for determining compensation, the Compensation Committee considers a variety of pre-determined, objective criteria and consults with independent third party advisors. In each case, the Compensation Committee reviews the compensation received in the most recent period and assesses its appropriateness in the context of the responsibilities and performance of the individuals and industry trends. On this basis, the Compensation Committee makes its annual compensation recommendations to the Mitel Board.


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In addition to making compensation recommendations to the Mitel Board, the Compensation Committee administers our 2006 Equity Incentive Plan and 2014 Equity Incentive Plan as well as the Mavenir Systems, Inc. 2005 Stock Plan, which is referred to as the 2005 Stock Plan, and the Mavenir Systems, Inc. 2013 Equity Incentive Plan, which is referred to as the 2013 Equity Incentive Plan, inherited through acquisition, and may periodically recommend the adoption of other incentive compensation plans. The Compensation Committee also conducts annual reviews of our succession plan, reviews our policies regarding loans to directors and senior officers and monitors and maintains our insider trading policy. To fulfill its mandate, the Compensation Committee is empowered to retain legal, accounting, financial and other professionals. It is also entitled to full access to our books and records and may require our directors, officers and employees to provide information deemed necessary by the committee to fulfill its mandate.

The current members of the Compensation Committee have experience reviewing executive compensation. The members of the Compensation Committee have the following relevant education and/or experience:

 

   

Benjamin Ball is a partner of Francisco Partners Management, LLC, which is a leading private equity firm focused exclusively on investing in the information technology market. Mr. Ball currently sits on the Compensation Committees for such private companies as Webtrends Inc. and Watchguard Technologies, Inc. Mr. Ball also served as a director and compensation committee member at other companies including Foundation 9 Entertainment, Inc. and EF Johnson Technologies, Inc. Mr. Ball has been a director of these and other private companies where he has been responsible for hiring and retaining corporate level executives for each company. Mr. Ball holds a Bachelor of Arts degree from Harvard College and an MBA from Stanford Graduate School of Business.

 

   

John McHugh is the General Manager and Senior Vice President, Commercial Business Unit of NETGEAR, Inc. Prior to his current role, Mr. McHugh was the Chief Marketing Officer for Brocade Communications Systems, Inc. Prior to that, Mr. McHugh held Vice President and General Manager roles at Nortel Networks and Hewlett-Packard. In his capacity as an executive of each of these companies over the last 18 years, Mr. McHugh has reviewed, designed and implemented numerous compensation plans for a wide range of businesses.

 

   

David Williams serves on the board of directors of several Canadian companies. Mr. Williams has over 25 years of experience being directly or indirectly (CEO and CFO roles) responsible for the human resource function within large public and non-public corporations (Loblaw Companies Ltd., Shoppers Drug Mart Corp. and Workplace Safety & Insurance Board). Mr. Williams also has extensive experience in the role and requirements of compensation committee members, having served on five public company and three non-public company boards. He was chair of the board of four of these and served various terms on the compensation committee for all of them. He has extensive experience in areas such as salary administration, compensation reward programs, pension plan design and administration, labour relations, health and safety, succession planning, organizational design and transformation, and merger integrations. Mr. Williams is a graduate of the ICD Corporate Governance College and is a member of the Chartered Professional Accountants of Ontario.

Compensation Committee Interlocks and Insider Participation

There were no reportable interlocks or insider participation affecting the Corporation’s compensation committee during the year ended December 31, 2016. None of our executive officers serves 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 of directors or compensation committee. None of the members of Mitel’s compensation committee is a current or former officer of Mitel. See “Interest of Management, Nominees and Others in Material Transactions — Transactions involving Related Parties” below for a description of related-person transactions.


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The Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is currently composed of five directors namely, Peter Charbonneau (Chairman), Benjamin Ball, John McHugh, Sudhakar Ramakrishna and David Williams. The committee was formed in March 2010, at which time Peter Charbonneau, Benjamin Ball and John McHugh became members. David Williams was appointed in February 2014 and Sudhakar Ramakrishna was appointed in August 2015. All of the members of the Nominating and Corporate Governance Committee, including the Chairman, are independent directors, as determined by the Mitel Board in accordance with NASDAQ independence rules and Canadian securities rules, ensuring the committee receives diverse input into the Corporation’s board nomination process and functions independently.

The Nominating and Corporate Governance Committee assists the Mitel Board in identifying and/or recommending director candidates for election at the next annual meeting of shareholders. The committee also oversees and assesses the functioning of the Mitel Board and the committees of the Mitel Board, and the implementation and assessment of effective corporate governance principles. The committee conducts annual surveys of directors regarding effectiveness of the Mitel Board, the Chairman and each director, each committee and its chairman, and the individual directors. The committee also annually assesses the effectiveness of the Mitel Board and each committee as a whole and makes recommendations to the Mitel Board.

 

  14.

Director Compensation

Except as noted below, all non-employee directors receive role-based fees paid quarterly as set forth below:

 

Annual service on the Mitel Board (other than Chair)

   $ 50,000  

Annual service as Chair of the Mitel Board

   $   125,000  

Annual service as member of the Audit Committee (other than Chair)

   $ 15,000  

Annual service as Chair of the Audit Committee

   $ 25,000  

Annual service as a member of the Compensation Committee (other than Chair)

   $ 10,000  

Annual service as Chair of the Compensation Committee

   $ 15,000  

Annual service as a member of the Nominating and Corporate Governance Committee (other than Chair)

   $ 8,000  

Annual service as Chair of the Nominating and Corporate Governance Committee

   $ 12,000  

 

Annual service on the Mitel Board

    

10,000 stock options, and

10,000 restricted stock units

 

 

Initial grant for new directors

     45,000 stock options  

A director is reimbursed for any out-of-pocket expenses incurred in connection with attending Mitel Board or committee meetings, as well as Canadian tax return preparation fees for non-Canadian directors.

Richard McBee, who is the Chief Executive Officer of Mitel, does not receive annual service retainers or fees for serving as a director.

For the year ended December 31, 2016, each non-employee director could elect to receive the above retainers in cash, in the form of equity awards or a mix of both. Stock options and restricted stock units (“RSUs”) were granted pursuant to the 2014 Equity Incentive Plan.

The annual grants of stock options and RSUs cliff vest at the end of the calendar year. Upon vesting, the RSUs are settled for Mitel common shares. Should a director leave before the end of the calendar year (other than for cause), vesting of the annual grants is pro-rated and the remaining unvested equity awards terminate. The initial grant of 45,000 stock options vests in thirds each year on the anniversary of the date of grant. Fees paid in the form of equity incentives are split evenly in value between stock options, valued using the Black-Scholes valuation methodology, and RSUs, valued using the closing price per Mitel common share on the NASDAQ on the date of grant. The strike price of each stock option is the closing price per Mitel common share on the NASDAQ on the date of grant.


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There were nil stock options exercised by directors during the year ended December 31, 2016. There were 85,105 RSUs vested for directors during the year ended December 31, 2016.

The Compensation Committee has reviewed directors’ compensation for the year ended December 31, 2016 and preceding years. In fiscal 2014, 2015 and 2016, the Compensation Committee retained Radford, a part of Aon Hewitt, a business unit of Aon plc (“Radford”), for assistance to ensure that our director compensation packages remain competitive within our industry. For the 2017 equity-based incentive awards, Radford has recommended that we discontinue the granting of stock options for non-employee directors based on institutional investor preference for the use of other compensation vehicles such as RSUs only. This recommendation will be presented to the Compensation Committee for consideration at our next fiscal (Q1) quarterly meeting to be held in May 2017. See Section 16 “Executive Officer Compensation”.

There are no loans or other indebtedness outstanding from the Corporation or any subsidiary to any of its directors, nor has any director received any financial assistance from the Corporation or from any subsidiary.

In accordance with our Insider Trading Policy, directors are prohibited from hedging or otherwise undermining their alignment with shareholder interests resulting from their holdings of Mitel common shares and equity compensation awards.

The following table sets forth a summary of compensation paid for the year ended December 31, 2016 to the non-executive directors:

 

                Name

 

 

Fees
earned
($)

 

   

Share-

based
  awards ($)   
(1)

 

   

  Option-
based
awards
($) (1)

 

    Non-equity
incentive
plan
compensation
($)
 

Pension
value
($)

 

 

All other
compensation
($)

 

  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
 

Total
($)

 

 

Benjamin H. Ball (2)

    73,000       71,700       31,500     -   -   -   -     176,200  

Peter D. Charbonneau

    87,000       71,700       31,500     -   -   -   -     190,200  

Terence H. Matthews

    -       138,199       98,001     -   -   -   -     236,200  

John P. McHugh

    -       110,702       70,498     -   -   -   -     181,200  

Sudhakar Ramakrishna

    73,000       71,700       31,500     -   -   -   -     176,200  

David Williams

    68,000       71,700       31,500     -   -   -   -     171,200  

 

 

 

  (1)

The compensation value of share-based awards is based on the fair value of the award on the grant date which is equal to the closing Mitel stock price on the same day. The grant-date fair value of awarded RSUs is expensed on a straight-line basis over the vesting period of the award. The compensation value of option-based awards is based on the fair value of the award on the grant date using the Black-Scholes option-pricing model for each award. The grant-date fair value of awarded options is expensed on a straight-line basis over the employee service period, which is the vesting period of the award. Assumptions used in the Black-Scholes option-pricing model are summarized as follows:

 

   

 

  Year Ended December 31,  
2016
      
 

Risk-free interest rate

    1.3%        
 

Dividends

    0.0       
 

Expected volatility

    52.6       
 

Annual forfeiture rate

    0.0       
 

Expected life of the options

    5 years       
 

Weighted average fair value per option

    $3.11       

 

  (2)

Stock options granted in connection with Mr. Ball acting as a director of the Corporation were granted to Francisco Partners Management, LLC of which Mr. Ball is a partner.

  (3)

Martha Bejar joined the Board on March 10, 2017.


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For information regarding stock options and RSUs outstanding for directors, see the section entitled “Equity Incentive and Other Compensation Plans” below.

Non-Employee Director Share Ownership

Mitel’s corporate governance policies include share ownership guidelines for non-employee directors and executives (see Executive Officer Compensation section below). These guidelines call for each non-employee director to own Mitel common shares having a value equal to at least three times the regular annual cash retainer, with a five-year period to attain that ownership level. Executives and directors who do not hold the requisite number of Mitel common shares at the end of the applicable period will be required to hold 100% of any shares received as a result of any equity awards granted to them (net of shares sold or withheld to pay the exercise price of stock options or sold to pay the withholding tax.) To facilitate share ownership, part of the non-employee directors’ compensation is an annual grant of RSUs and stock options. The equity awards issued are granted under the 2014 Equity Incentive Plan. As previously noted, for the 2017 equity-based incentive awards, Radford has recommended that we discontinue the granting of stock options for our non-employee directors, which recommendation will be presented to the Compensation Committee for consideration in May 2017.

 

  15.

Communication with the Mitel Board

Shareholders or others may contact the Mitel Board by mail to:

The Board of Directors

c/o the Corporate Secretary’s Office

Mitel Networks Corporation

350 Legget Drive

Ottawa, Ontario, Canada

K2K 2W7

 

C.

COMPENSATION DISCUSSION AND ANALYSIS

 

  16.

Executive Officer Compensation

The following Compensation Discussion & Analysis, referred to as the CD&A, describes the philosophy, objectives and structure of our 2016 executive compensation program. This CD&A is intended to be read in conjunction with the tables beginning on page 26, which provide further historical compensation information for our following NEOs:

 

 

Name

 

    

 

Title

 

   

 

  Richard D. McBee

 

    

 

President & Chief Executive Officer

 

 
  Steven E. Spooner          Chief Financial Officer  

 

  Graham Bevington

 

    

 

Executive Vice President and Chief Sales Officer

 

 

 

  Thomas G. Lokar

 

    

 

Executive Vice President and Chief Human Resources Officer

 

 

 

  Jon D. Brinton

 

    

 

Executive Vice President and General Manager, Mitel Cloud Services

 

 


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Quick CD&A Reference Guide

 

 

 

Executive Summary

 

 

 

Section I

 

  
 

 

Compensation Decision-Making Process

 

 

 

Section II

 

  
 

 

Elements of Compensation

 

 

 

Section III

 

  
 

 

Key Executive Compensation Program Changes Commencing in 2017

 

 

 

Section IV

 

  
 

 

Additional Compensation Policies and Practices

 

 

 

Section V

 

  

 

I.

Executive Summary

Mitel’s compensation program for executive officers is designed to attract, retain, motivate and engage highly skilled and experienced individuals who excel in their field. The objective of the program is to focus our executives on the key business factors that affect shareholder value. Our executives are provided incentives to pursue and achieve our key strategic business goals. For executives, the compensation program is designed to link pay to performance and is structured to reward both annual and long-term Corporation performance while not encouraging excessive risk taking.

As described below in this CD&A, a substantial portion of our NEOs’ compensation is performance-based or is linked to the value of our share price. Annual incentives are awarded based on the achievement of pre-established performance targets for the fiscal year. Our equity incentive awards are primarily in the form of RSUs, which align payouts with our share price. Executives also received stock option awards in 2016 which only have value if our share price increases after the grant date. The Compensation Committee believes that the compensation awarded to our executive officers for fiscal 2016 described below was appropriate in light of Mitel’s performance during the fiscal year.

This CD&A describes Mitel’s compensation philosophy and programs generally, and explains the compensation paid to the CEO, CFO and the three most highly compensated executives (the NEOs). Our 2016 executive compensation program was substantially similar to our program in 2015. This CD&A also describes key compensation program changes we have made for 2017.

The Compensation Committee is currently composed of three directors namely, Benjamin Ball (Chairman), John McHugh and David Williams. Benjamin Ball was appointed to the Compensation Committee in October 2007, John McHugh was appointed in June 2016 and David Williams was appointed in March 2014.

We believe that spreading compensation across the three primary components of base pay, short-term incentive plans and long-term incentive plans achieves our compensation objectives:

 

  Aligns the interests of management and shareholders

 

  Promotes Pay-for-Performance

 

  Provides competitive executive pay levels

 

  Balances fixed and at-risk compensation appropriately

 

  Balances short-term and long-term focus appropriately


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Best Practices We Employ

 

       

Practices We Avoid

 

     

  

Pay for performance – pay aligned with both corporate and individual performance

 

 

 X     No uncapped incentive award payments

 

 X     Hedging and short sales are not permitted

 

 X      Incentive program designs are not highly leveraged and do
  not encourage excessive risk taking

 

 X      No option re-pricing permitted

 

 X     No guaranteed bonuses

 

 X     No discounted stock options

 

 X     No excessive perquisites

  

Utilize multiple performance metrics over multiple time periods for balance and to avoid undue focus on any particular measure, and to discourage short-term risk-taking at the expense of long term results

 

 

  

Performance metrics are directly tied to value creation for shareholders

 

 

  

Pay at risk – 55.1% of the 2016 total direct compensation for the CEO (at target) is at-risk pay – variable, contingent and not guaranteed

 

 

  

Executive and director stock ownership guidelines

 

 

  

Compensation Committee is comprised entirely of independent directors

 

 

  

Compensation Committee engages an independent consultant

 

 

   Compensation Committee regularly meets in executive session without management present  
     

  

Annual risk assessment of the compensation program

 

        

Executive Officers

The following table sets forth information with respect to our executive officers as of March 31, 2017. Unless otherwise indicated below, the business address for each of our executive officers is 350 Legget Drive, Ottawa, Ontario, Canada K2K 2W7.

 

Name and Place

of Residence

  Age   Position  

Executive

Officer Since

  Principal Occupation

Richard D. McBee Dallas, Texas, United States

  53  

President and Chief

Executive Officer and

Director

  January 19, 2011  

President and Chief

Executive Officer, Mitel

Steven E. Spooner Ottawa, Ontario, Canada

  58   Chief Financial Officer   June 20, 2003  

Chief Financial Officer,

Mitel

Robert D. Agnes North Plains, Oregon, United States

  58   Executive Vice President and President, Enterprise Division   August 4, 2014   Executive Vice President and President, Enterprise Division

Graham G. Bevington Frisco, Texas, United States

  57  

Executive Vice President

and Chief Sales Officer

  June 28, 2006  

Executive Vice President

and Chief Sales Officer, Mitel


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Name and Place

of Residence

  Age   Position  

Executive

Officer Since

  Principal Occupation

Jon D. Brinton Peoria, Arizona, United States

  52  

Executive Vice President

and General Manager,

Mitel Cloud Services

  May 1, 2011  

Executive Vice President and General Manager, Mitel

Cloud Services, Mitel

Wesley D. Durow Lucas, Texas, United States

  51   Chief Marketing Officer   April 6, 2015   Chief Marketing Officer, Mitel

Thomas G. Lokar Frisco, Texas, United States

  50   Executive Vice President and Chief Human Resources Officer   January 13, 2014   Executive Vice President and Chief Human Resource Officer, Mitel

Richard D. McBee, who brings more than 25 years of experience in telecommunications to the Corporation, was appointed President and Chief Executive Officer in January 2011. Prior to joining the Corporation, Mr. McBee served as President of the Communications & Enterprise Group of Danaher Corporation. In this role, he was responsible for annual sales derived from carrier, enterprise, and SMB markets via both direct sales and channel partners. Mr. McBee joined Danaher in 2007 as President, Tektronix Communications, following the acquisition by Danaher of Tektronix. During his 15 years with Tektronix, he held a variety of positions including Senior Vice President and General Manager, Communications Business Unit; Senior Vice President of Worldwide Sales, Service and Marketing; and Vice President of Marketing & Strategic Initiatives. Mr. McBee holds a Master’s Degree in Business Administration from the Chapman School of Business and Economics and graduated from the United States Air Force Academy with a Bachelor of Science in 1986. Mr. McBee serves on the board of the Metroplex Technology Business Council in Texas.

Steven E. Spooner joined us in June 2003 as Chief Financial Officer. Mr. Spooner has more than 33 years of experience in corporate finance, mergers and acquisitions, corporate governance, strategic business planning and operational leadership with companies in the high technology and telecommunications sectors. Between April 2002 and June 2003, he was an independent management consultant for various technology companies. From February 2000 to March 2002, Mr. Spooner was President and Chief Executive Officer of Stream Intelligent Networks Corp., a competitive access provider and supplier of point-to-point high speed managed bandwidth. From February 1995 to February 2000, Mr. Spooner served as Vice President and Chief Financial Officer of CrossKeys Systems Corporation, a publicly traded company between 1997 and 2001. Prior to that, Mr. Spooner was Vice President Finance and Corporate Controller of SHL Systemhouse Inc., also a publicly traded company. He held progressively senior financial management responsibilities at Digital Equipment of Canada Ltd. from 1984 to 1990 and at Wang Canada Ltd. from 1990 to 1992. Mr. Spooner previously served as the Chair of the Finance and Audit Committee and was a member of the Executive Committee and Nominating Committee of The Ottawa Hospital Foundation from February 2006 to June 2016. He also previously served on the Board for Magor Communications Corporation from March 2013 to November 2015. Mr. Spooner is an honours Commerce graduate of Carleton University. He is a member of the Chartered Professional Accountants of Ontario (successor of the Institute of Chartered Accountants of Ontario) and in 2011 was elected by the Institute as a Fellow of the Institute in recognition of outstanding career achievements and leadership contributions to the community and to the profession and received his FCPA credentials in 2013. Mr. Spooner also holds the ICD.D certification, having completed the Directors’ Education Program of the Institute of Corporate Directors of Canada.


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Robert D. Agnes is our Executive Vice President and President, Enterprise Division, responsible for strengthening and growing this important foundational business. Prior to this role, Mr. Agnes was Executive Vice President and General Manager of Mitel’s Asia-Pacific Operations, focused on implementing the company’s strategy in this key geography. With more than 30 years in global telecommunications organizations, Mr. Agnes is a results-driven leader with deep experience successfully growing businesses. Mr. Agnes began his career as a software engineer with Hamilton Standard, a subsidiary of United Technologies. He moved to a sales engineer position with Tektronix, Inc., in 1985. For the next 21 years, he held various roles with Tektronix, including leading several key businesses. Among his leadership roles at Tektronix, Mr. Agnes was Vice President and General Manager of the company’s video business, Vice President and General Manager of Tektronix Berlin, head of Sales and Operations in the Pacific region, and Vice President of Strategic Initiatives. Prior to his career at Tektronix, Mr. Agnes was President of Asia-Pacific for Lectra S.A.; Senior Vice President of Worldwide Sales and Marketing for X-Rite America, Inc.; Senior Vice President, Worldwide Marketing; and President of Asia-Pacific for PartMiner Worldwide, Inc. Mr. Agnes earned his Associate of Science in Electrical Engineering (ASEE) from Hartford State Technical College (Hartford, Connecticut), and a Bachelor of Science degree in Computer Science from the University of Connecticut School of Engineering. He also holds a Master of Business Administration (MBA) from George Fox University (Newburg, Oregon).

Graham G. Bevington is our Executive Vice President and Chief Sales Officer responsible for worldwide sales operations. Mr. Bevington has more than 25 years’ experience in the high-technology industry in sales and management positions. He has held several executive sales positions with the company and has been responsible for Mitel’s growth and success in EMEA, Asia-Pacific and Central and Latin America. Mr. Bevington joined us in 2000 as Managing Director for EMEA. From 1997 until December 1999, he was Managing Director at DeTeWe Limited and prior to that, Mr. Bevington was Sales Director at Shipton DeTeWe Limited from 1986 to 1997.

Jon D. Brinton is the Executive Vice President and General Manager Mitel Cloud Services, responsible for leading Mitel’s global cloud initiatives and Mitel’s U.S.-based communications services provider, Mitel NetSolutions. Mr. Brinton joined the Corporation in 1999 through the acquisition of his own corporation, Network Services Agency, Inc. by Inter-Tel Technologies, Inc. (now known as Mitel Technologies, Inc.). Through the years, Mr. Brinton has held various positions within the Corporation including: General Manager, Mitel Networks Solutions, Vice President of Networks Services, and President of Mitel NetSolutions, Inc. Mr. Brinton holds a Bachelor of Science degree from Grand Canyon University.

Wesley D. Durow joined us in April 2015 as Chief Marketing Officer as a 20-year technology industry veteran with deep domain knowledge in cloud-based, real-time communications for both enterprises and service providers. Prior to joining Mitel, Mr. Durow was Vice President of Global Marketing for Sonus Networks, Inc. Prior to that Mr. Durow was Chief Marketing Officer at Fonality, Inc. and served as Vice President and General Manager of Global Marketing for Avaya, Inc. Mr. Durow spent more than a decade with Nortel in a number of leadership roles, including end-to-end marketing, go-to-market, and strategic planning for their enterprise business. Mr. Durow began his career in advertising, helping to build brands for leading companies including American Airlines, Pace Picante Sauce, NationsBank (now Bank of America), The Dial Corporation and GTE (now Verizon). Mr. Durow earned his Master’s degree in Advertising from Northwestern University and his Bachelor’s degree in Marketing from the University of Northern Iowa.

Thomas G. Lokar joined us in January 2014 as Executive Vice President and Chief Human Resources Officer. Mr. Lokar has more than 18 years of experience in the technology sector and brings to the company deep expertise in organization effectiveness, talent management, and employee development from his previous time at several Fortune 500 companies. Prior to joining the company, Mr. Lokar worked for Hewlett-Packard as Vice President of Human Resources for Enterprise Services, Global Outsourcing, and Application Services. Prior to that, he spent six years at AOL as Senior Vice President of HR Products, Platforms, and Technology Development, before leaving to become president and co-founder of an online career management and talent management start-up. Mr. Lokar has also worked at Bristol Myers Squibb in leadership development, as well as seven years in management consulting. He holds a PhD in Industrial and Organizational Psychology from Kansas State University. He earned his BA from the University of Detroit.

 

II.

Compensation Decision-Making Process

We set cash and equity compensation in part by considering compensation paid to executives at comparable companies. The Compensation Committee reviews our executive officers’ overall compensation packages on an annual basis, and retains its exclusive power to determine all matters of executive compensation and benefits, although from time to time it seeks inputs and recommendations from the CEO and Human Resources department. Our CEO does not make recommendations with respect to his own compensation or participate in the deliberations regarding the setting of his own compensation. The Compensation Committee reports to the Mitel Board on the major items covered at each Compensation Committee meeting.


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In determining executive compensation, the Compensation Committee also considers, among other factors, the possible tax consequences to Mitel and to its executives. To maintain maximum flexibility in designing compensation programs, the Compensation Committee, while considering company tax deductibility as one of its factors in determining compensation, will not limit compensation to those levels or types of compensation that are intended to be deductible.  Further, the Compensation Committee considers the accounting consequences to Mitel of different compensation decisions; however, this factor by itself does not drive compensation decisions.

Compensation Risk Oversight

The Compensation Committee has reviewed and discussed the concept of risk as it relates to Mitel’s compensation policies and it does not believe that Mitel’s compensation policies encourage excessive or inappropriate risk taking. The Mitel Board and the Compensation Committee assess the risks associated with the structuring of our NEOs’ respective compensation arrangements to ensure that none of the arrangements encourages a particular NEO or group of NEOs to take undue risk on behalf of the Corporation in order to maximize their respective compensation. The various elements of our NEO compensation packages are given appropriate weighting to ensure that there is commonality across the NEO’s compensation arrangements while structuring incentive arrangements for particular NEOs within their respective spheres of influence, whether based on the performance of the Corporation as a whole or the performance of the region for which the NEO has responsibility.

The Compensation Committee has concluded that the Corporation’s compensation policies and practices do not create risks that would have a material adverse effect on the Corporation.

Role of Consultants

Management also retains independent compensation consultants from time to time to assist in determining executive compensation packages. The nature and scope of the services rendered by the consultants include:

 

   

assisting in identifying members of our peer group for comparison purposes;

 

   

helping to determine compensation levels at the peer group companies;

 

   

providing advice regarding executive compensation best practices and market trends;

 

   

assisting with the redesign of any compensation program, as needed;

 

   

preparing for and attending selected management or committee meetings; and

 

   

providing advice throughout the year.

The Compensation Committee retained Radford in 2015 to provide survey data and other benchmark information related to trends and competitive practices for the director and executive compensation packages. In keeping with compensation industry practices, the 2015 data was aged 3% to adjust for market movement for 2016. As noted above under “Director Compensation”, Radford also assisted the Corporation in reviewing our director compensation package. Radford was originally retained by the Corporation in April 2006. Executive and director compensation related fees billed by Radford to the Corporation during the year ended December 31, 2016 were $163,324 (this included fees incurred for executive compensation work done relating to the proposed Polycom acquisition). None of the compensation committee members and none of our executive officers or directors have any personal relationship with Radford. The Compensation Committee has determined that no conflicts of interest exist between the Corporation and Radford and has considered the independence of Radford in accordance with SEC and NASDAQ rules.


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Peer Group

The reference market used to benchmark executive compensation is based on companies who operate in a similar industry segment, and survey data. Mitel’s philosophy when setting base salaries, short term and long term incentives for its CEO and NEOs is to be mindful of that reference market and of the 50th percentile of that market. The Committee considers such reference market information, but does not base its decisions on such information. The Committee also takes into account the CEO’s and other NEOs’ individual performance and scope of responsibilities, as well as Corporation and business unit performance. Our market positioning philosophy is aligned with our compensation philosophy ensuring that our compensation programs are competitive to market/peer companies and that compensation is closely tied to incentives.

For 2014 and 2015, the peer group consisted of the 17 companies listed below, of which three are Canadian and 14 are U.S. companies, operating in the communications and computer networking industries:

 

     

ADTRAN, Inc.

 

 

Finisar Corporation

 

 

Plantronics, Inc.

 

     

Aruba Networks, Inc.

 

 

Infinera Corporation

 

 

Polycom, Inc.

 

     

CAE Inc.

 

 

JDS Uniphase Corporation (now Viavi)

 

 

Riverbed Technology, Inc.

 

     

Ciena Corporation

 

 

MacDonald, Dettwiler and Associates Ltd.

 

 

Super Micro Computer, Inc.

 

     

Constellation Software Inc.

 

 

Netgear, Inc.

 

 

ViaSat, Inc.

 

     

Comtech Telecommunications Inc.

 

 

NeuStar, Inc.

 

   

For 2016, the peer group consisted of the 20 companies listed below, of which two are Canadian and 18 are U.S. companies, operating in the communications and computer networking industries. The change to our Peer Group from 2015 to 2016 primarily reflects changes within the existing peer group (through acquisitions for instance) and the addition of companies that our Cloud Division competes against.

 

       

ADTRAN, Inc.

 

 

DH Corporation

 

 

Netgear, Inc.

 

 

ShoreTel

 

       

Broadsoft

 

 

Finisar Corporation

 

 

NeuStart, Inc.

 

 

Super Micro Computer, Inc.

 

       

Ciena Corporation

 

 

Infinera Corporation

 

 

Plantronics, Inc.

 

 

Verint Systems

 

       

Constellation Software Inc.

 

 

Interactive Intelligence Group

 

 

Polycom, Inc.

 

 

ViaSat, Inc.

 

       

Cornerstone OnDemand

 

 

I2 Global

 

 

RingCentral

 

 

Viavi Solutions (JDS Uniphase)

 

In selecting this group of peers, the Corporation considered scoping criteria that are reflective of the size, scale and complexity of Mitel’s businesses, including revenue, market capitalization, and headcount.


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III.

Elements of Compensation

Compensation for executive officers is comprised primarily of three main components:

 

   

base salary;

 

   

short-term incentive plans; and

 

   

long-term incentive plans.

We believe that our compensation program encourages our employees to remain focused on both our short-term and long-term goals. For example, our Annual Incentive Plan measures performance on an annual basis, while our equity awards vest in installments over 3-4 years, which encourages our executives to focus on the long-term performance of the Corporation.

 

Pay Element          

 

What it Does      

 

          Performance Measures      
Base Salary    

 

    

 

Provides competitive fixed pay to help us attract and retain key talent

 

 

 

    

 

Job scope, experience and market pay

      

Balances risk-taking concerns with pay for performance

 

        
      

Considers experience, expertise, individual performance and expected contributions to the Corporation

 

          
Annual Management   Incentive Plan Awards    

 

    

 

Provides an annual cash incentive opportunity, earned based on the achievement of pre-established performance metrics

 

 

 

 

    

 

The Corporate measures established for 2016 awards include Adjusted EBITDA 1 for the Corporation

 

For certain NEOs, performance metrics included metrics related to divisional and regional performance

 

      

Drives short-term performance

 

      

  Performance Share Units     and Restricted Stock

Units

 

 

    

 

PSUs and RSUs align the payout with Corporation performance as indicated by Mitel’s stock price

 

 

 

 

    

 

Long-term stock price appreciation

 

Some awards vest based on achievement of targeted compound annual growth in stock price

      

Retains key talent

 

      
      

Fosters an environment focused on long-term growth

 

      
      

Directly ties the interests of our executives with those of long-term shareholders

 

      
Stock Option Awards    

 

    

 

Mitel is phasing out stock option awards as a key component of compensation to management

 

 

 

    

 

Long-term stock price appreciation

 

1 Adjusted EBITDA is a non-GAAP financial measure, as defined on page 28 of this proxy circular and on page 25 of Mitel’s Form 10-K.


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Base Salaries

Individual salaries are determined by each officer’s experience, expertise, individual performance and expected contributions to the Corporation. The Compensation Committee uses industry studies and comparables for reference purposes to assist in setting a range of base salaries for positions; however, these studies and comparables are only one factor that is reviewed in determining base salary for each executive officer position. The Compensation Committee annually reviews each officer’s base salary and determines such salary based on the following factors:

 

   

Position and responsibility (takes into account promotions and any changes in role);

 

   

Job performance and expected future contributions;

 

   

Market factors (as described above); and

 

   

Retention risk.

Upon concluding its 2016 review, the Compensation Committee determined to adjust base salaries as follows:

 

Name   

2014

($)

 

  

2015

($)

 

  

2016

($)

 

   Adjustment for 2016      

 

Richard D. McBee        

 

   700,000     775,000     813,750     5.0%    

 

Steven E. Spooner

 

   CAD 455,500     CAD 546,600     CAD 568,464     4.0%    

 

Graham Bevington

 

   GBP 198,275     375,600     390,000     3.8%    

 

Thomas G. Lokar

 

   300,000     321,000     335,000     4.4%    

 

Jon D. Brinton

 

   260,000     300,000     315,000     5.0%    

In reviewing NEO compensation levels versus the market, it was determined that Mr. Spooner’s benchmark required taking into account two factors. First, in addition to his responsibilities as CFO for Mitel, Mr. Spooner has responsibility for other areas outside of the normal duties of a CFO. Secondly, while Mr. Spooner is based in Canada, it is essential that when benchmarking Mr. Spooner against the market that we consider the US competitive market as well based on the nature of Mitel’s operations.

Annual Management Incentive Plan

Mitel utilizes annual cash incentive plan bonuses to reward the achievement of corporate objectives and to recognize individual performance. The amount of annual performance incentive or “at risk” component of an executive officer’s compensation increases with the level of responsibility and impact that the executive officer has had and can have on overall performance. The Chief Executive Officer provides the Compensation Committee with an assessment of each executive’s performance annually and provides input on the annual incentive plan achievement for each executive. Each named executive officer’s annual cash incentive award target was established as a percentage of base salary. Such target cash bonus percentage was either negotiated and set forth in the NEO’s employment agreement or otherwise established by the Compensation Committee. As displayed below, the annual performance incentive targets for the year ended December 31, 2016 for the NEOs ranged between 65% and 125% of base salary, with NEOs eligible to receive up to 2 times their target award based on performance against pre-established financial metrics. The table below details the potential payouts under the Annual Management Incentive Plan for our executives.


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Name   

 

Threshold Award  

(% of Base Salary)  

 

  

Target Award (%  

of Base Salary)  

  

Maximum Award  

(% of Base Salary)  

   2016 Payout ($)  

Rich McBee

   50%    125%    200%   

 

$696,773

 

Steven E. Spooner

   50%    80%    200%   

 

CAD$311,518

 

Graham Bevington

   50%    75%    200%   

 

$221,568

 

Thomas G. Lokar

   50%    65%    150%   

 

$183,454.

 

Jon D. Brinton

   50%    65%    200%   

 

$280,508

 

The targets for the financial objectives were established by our Compensation Committee and approved by the Mitel Board. For 2016, our Compensation Committee determined that financial objectives for Messrs. McBee and Spooner would consist of Adjusted EBITDA 2 for the Corporation. For Mr. Bevington, the financial objectives consisted of Enterprise Division Contribution Margin (70%) and Enterprise Division Revenue (30%). For Mr. Lokar, the financial objectives consisted of Adjusted EBITDA 2 for the Corporation (50%) and Management By Objectives (50%). Management By Objectives consists of an assessment of individual performance based on performance against objectives approved by the employee’s manager. Assessment of an individual’s performance is not a formulaic process and judgement is exercised in determining the level of performance achieved. For Mr. Brinton, the financial objectives consisted of Cloud Division Revenue (70%) and Cloud Division Contribution Margin (30%).

For 2016, the targets were established as follows:

 

 

Metric

 

  

 

  Threshold    

 

  

 

  Target    

 

  

 

  Maximum    

 

  

 

  Actual    

 

 

Adjusted EBITDA 2 ($M USD)

 

     $        148.0          $        185.0          $        203.5          $        161.6    

 

Enterprise Division Revenue ($M USD)

 

     $        684.9          $        856.1          $        941.7          $        838.1    

 

Enterprise Division

Contribution Margin ($M USD)

 

     $        204.9          $        256.1          $        281.7          $        221.9    

 

Cloud Division Revenue ($M USD)

 

     $        118.4          $        148.0          $        162.8          $        149.5    

 

Cloud Division Contribution Margin ($M USD)

 

     $            3.8          $            4.7          $            5.2          $            6.8     

 

2 Adjusted EBITDA is a non-GAAP financial measure, as defined on page 28 of this proxy circular and on page 25 of Mitel’s Form 10-K.

Based on 2016 performance, each NEO earned between 68.5% and 137% of their target bonus.


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Long-Term Incentive Plans

The Compensation Committee considers equity-based long-term incentive compensation to be a fundamental component of Mitel’s executives’ compensation program. Our LTIP, effective 2017, now consists of two equity components – time-based RSUs and, beginning in 2017, for NEOs and other executives reporting directly to the CEO, PSUs. The performance based stock units have replaced stock options as an equity vehicle for our executives. We believe that grants of PSUs and RSUs under our equity incentive plans assist us in retaining employees and attracting critical key talent by providing them with an opportunity to share in any increase in shareholder value. Additionally, we believe that the award of stock-based compensation and incentives is an effective way of aligning our executives’ interests with the goal of enhancing shareholder value. As a result of the direct relationship between the value of an equity award and Mitel’s stock price, we believe that our equity awards motivate executives to manage Mitel’s business in a manner that is consistent with shareholder interests, as well as align executives’ interests with the long-term interests of our shareholders. To that end, the time-based RSUs generally vest over 4 years, while PSUs vest only at the end of a three-year performance period if threshold compound annual stock price growth is achieved. RSUs constitute 50% of the value of an award of stock-based compensation at the time of the award, and PSUs constitute the remaining 50%. Primary factors considered in granting equity stock awards and determining the size of grants to executives are prior performance and their level of responsibility. Additionally, we may grant equity awards in order to attract new executive officers and to recognize job promotions.

The Chief Executive Officer recommends levels of equity awards including stock options and RSUs, and commencing in 2017, PSUs, for the NEOs to the Compensation Committee based on skills, responsibilities and performance. Previous grants of equity awards are also taken into consideration. During the year ended December 31, 2016, the committee determined to grant 651,750 options to the NEOs at a strike price and grant date fair value of $7.17 and $3.15 per share respectively and 533,250 RSUs at a grant date fair value of $7.17. The time-based RSUs granted in 2016 vest over 4 years (25% each year), while the option awards granted for 2016 vest over 4 years also (1/16 every quarter). For our NEOs, the total equity grant in 2016 was split 33% in options and 67% in RSUs. The 2016 awards are reflected in the 2016 Executive Equity Awards table on page 38.

 

IV.

Key Executive Compensation Program Changes Commencing in 2017

To align executive compensation more closely with the Corporation’s operating and stock price performance, the Compensation Committee has made several key changes to the design of the Corporation’s executive compensation program commencing in 2017. The Compensation Committee has retained Radford to assist in the review of and to make recommendations to the Compensation Committee in respect of the component elements of the Corporation’s executive compensation program for 2017 and beyond. In reviewing and implementing a 2017 executive compensation program, the Compensation has taken into account governance best practices and the policies and preferences of its shareholders. The Compensation Committee believes that the changes that have been made for 2017, together with certain risk mitigators previously adopted, have significantly strengthened pay for performance alignment for the Corporation’s CEO and other NEOs.

Majority Performance-Based Long Term Incentives .  In previous years, the Compensation Committee has granted equity-based long term incentives comprised of 67% RSUs and 33% stock options. To further enhance the performance-based portion of the executive compensation program, in 2017 the Corporation introduced a stock-based performance element as a key component of its overall executive compensation program and shifted the program’s structure to 50% PSUs and 50% RSUs. In addition, and as discussed further below, the Compensation Committee continues to be mindful of the median of the competitive market in terms of long term equity-based incentives, and as a result PSU awards granted in 2017 will be made with this in mind. After careful consideration of various performance-based options and alternatives, the performance measure for the PSUs under the 2017 program will be based on the compound annual growth rate, or CAGR, of the Corporation’s stock price at the end of a three-year performance period. The three year target CAGR is 15%, and to receive a payout, the CEO and NEOs must be employed at the time of measurement, vesting and payout. The Compensation Committee believes that by expressly conditioning payout under a PSU grant on the achievement of specified levels of stock price performance, this element of the executive compensation program now directly aligns the interests of the CEO and the other NEOs with the shareholders in respect of stock price growth.

Annual Performance-Based Short Term Cash Incentives .    To further tighten alignment between short term incentive compensation and operating performance, the Compensation Committee has structured the CEO’s short term incentive opportunity based on two key Corporation-wide metrics, namely, Adjusted EBITDA 3 (80%) and, new for 2017, revenue component (20%). The Compensation Committee also increased the minimum performance level necessary for the short term incentive to be earned, establishing the threshold level at 95% of the targets. No changes have been made to the target percentages of base salary representing the short term incentive opportunity, and the committee has capped the maximum performance factor multiplier at 200%. Similarly, for the NEOs, the Compensation Committee also tightened the alignment for the other NEOs by increasing the threshold level necessary for a payout from 80% to 85% of target for any measure based on Adjusted EBITDA 4 , revenue or margin. These changes to the short term incentive component serve to further tie payouts to the achievement of higher levels of certain key performance measures.

 

 

3 Adjusted EBITDA is a non-GAAP financial measure. Mitel defines Adjusted EBITDA as net income (loss), adjusted for interest expense, income tax recovery, amortization and depreciation, special charges and restructuring costs, stock-based compensation, purchase accounting adjustments and goodwill as set out more fully on page 26 of Mitel’s Form 10-K. Management assesses performance on a reported basis and on an adjusted basis and considers both to be useful in its assessment.

4 Adjusted EBITDA is a non-GAAP financial measure, as discussed on page 28 of this proxy circular and on page 25 of Mitel’s Form 10-K.


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Base Salaries .  The Compensation Committee has determined that there will be no increases to the base salaries of the CEO or the other NEOs in 2017. As discussed above, the committee also did not increase target bonus opportunities. As a result, the target total cash compensation will remain unchanged from the prior year. The Compensation Committee also took into account that base salaries among the CEO and NEOs generally approximate the 50 th percentile of the market, with some variance by position and individual responsibilities, and has determined to keep base salaries within that range.

Compensation-Setting Considerations.   The Compensation Committee was mindful of the composite of the competitive benchmark compensation (see discussion below), and of the cash compensation paid to the executives of the competitive market group with similar roles. However, while the committee continued its past practice of obtaining competitive, positional market data, this was not the driving factor in the determination of the total direct compensation for 2017. As a result, the Compensation Committee has made pay decisions for the NEOs based on a variety of individual factors including prior year company, business unit and individual performance, and scope of responsibility.

Reference Sources for Competitive Compensation .  For 2017, the Compensation Committee reviewed the peer group of companies and updated the list from the prior year in order to include cloud-based competitors and to replace peer companies that have merged or that have been acquired, for a total peer group composed of 20 (2 Canadian companies and 18 U.S.) companies. The Corporation is positioned at the 56 th percentile of the peer group in terms of revenues, and at the 30 th percentile in terms of operating income. In addition to the peer group of companies, the Compensation Committee also incorporated information from the Radford Global Technology Survey, and blended this information together to arrive at a composite of competitive market compensation.

Risk Mitigating Factors .  To further enhance the alignment of the Corporation’s executive compensation program with the interests of shareholders, the Corporation continues to enforce the following policies:

 

   

Stock ownership guidelines for executive officers and directors. The CEO is required to hold 3.0x his base salary, and the other NEOs are required to hold 1.5x their respective base salaries, to be achieved within a five year period. If the guidelines are not met within the prescribed time period, the CEO and the other NEOs must hold 100% of any shares received through equity-based incentive awards (net of shares sold or withheld to pay the exercise price of stock options or sold to pay withholding tax) until the prescribed ownership levels are achieved. These guidelines reinforce the common interest of shareholders and the CEO and executive officers with stock price performance.

 

   

Prohibition on hedging and short sales of Corporation securities. This prevents Corporation insiders from reducing their risk of stock ownership.

 

   

Caps on payouts under both the long term and short term incentive programs. This is intended to limit the possibility of excessive risk taking to the maximum set level.

The Compensation Committee believes that the changes made to the Corporation’s 2017 executive compensation program, together with risk mitigators that the Corporation previously put in place, have substantially increased the pay for performance alignment of the program.


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V.

Additional Compensation Policies & Practices

Insider Trading Policy (including anti-hedging)

In accordance with our Insider Trading Policy, an NEO is not permitted to purchase financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the NEO.

Executive Share Ownership Guidelines

Mitel’s corporate governance policies include share ownership guidelines for non-employee directors (as described in the Director Compensation section above) and executive officers. These guidelines are as follows:

 

Role   

 

Ownership Requirement (as a
multiple of base salary)

 

 

CEO

 

  

 

3x

 

 

All other executive officers      

 

  

 

1.5x

 

All executives have a five-year period to attain these ownership levels. Executives and directors who do not hold the requisite number of Mitel shares at the end or the applicable period will be required to hold 100% of any shares received as a result of any equity awards granted to them (net of shares sold or withheld to pay the exercise price of stock options or sold to pay the withholding tax). RSUs and options granted under Mitel’s equity compensation plans are not included when determining whether an executive satisfies the applicable minimum ownership guideline.

As of March 31, 2017, all executives were in compliance with their share ownership guideline in that they had either already attained or they still have time left to achieve the required level of share ownership.

Performance Graph

The following graph compares the total cumulative return of a shareholder who invested $100 in Mitel’s common shares over the five-year period ended December 31, 2016 compared to the total cumulative return of the NASDAQ Composite Indices and the NASDAQ Telecommunications Index.


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LOGO

The NEO total compensation (as a group and as reported in the Summary Compensation Table) has not been historically based on performance of the Corporation’s share price, however, the trend in the total compensation of the NEOs has generally corresponded to the trend shown in the performance graph, excluding the impact of individual performance factors and increases in compensation due to promotion. Mitel has historically determined compensation and related adjustments annually based on a number of factors including market competitive rates, reviewing the compensation peer group annually to ensure the comparators used to assess competitiveness are aligned in terms of business size, scope, and revenue. As the Corporation has completed acquisitions, the comparators have increased in size and complexity over time, resulting in increased pay. Mitel has made adjustments to the CEO and executive team compensation taking into consideration the peer median each year, base salary, target incentives, and annual equity values. As such, reported values may not correspond with share price movement as the size of equity grants reported in the Summary Compensation Table do not consider shareholder returns, but more importantly, the likely final value realized by an NEO is directly related to performance of the Corporation’s share price; where the share price drops between the time of grant and when the equity vests, the value vesting reflects the lower share price, and can be significantly lower than the value granted and reported in the Summary Compensation Table. Annual performance incentive targets for our NEOs has been primarily based on the financial performance of the Corporation in order to provide added incentive to our NEOs to focus on their respective roles within the Corporation and their ability to continue to strengthen the Corporation’s performance (see Annual or Short-term Incentive Plans above ). For key changes to our executive compensation program commencing in 2017, please see Section IV.


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Summary Compensation Table

The following table sets forth a summary of compensation paid during the year ended December 31, 2016, referred to in the table below as 2016, the year ended December 31, 2015, referred to in the table below as 2015, and during the year ended December 31, 2014 referred to in the table below as 2014:

 

Name and

Principal

Position

   Year       

 

Salary

 

($)  (1)

    

 

Bonus

 

($)

    

 

Share-

 

based

 

Awards

 

($) (2)

    

 

Option-

 

based

 

Awards

 

($) (3)

    

 

Non-equity

annual

incentive

plan

compensation

 

($)

    

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)  (4)

   

 

All Other

Compensation

 

($) (5)

    

 

Total

 

($)

 

 

Richard D. McBee

President & Chief Executive Officer

       2016            806,894        542,636          1,645,515        883,575        696,773            180,556            4,755,949  
       2015          762,019             2,262,525          1,122,500        654,900            25,950        4,827,894  
       2014          696,154             1,166,694        1,172,500          1,513,008            20,856        4,569,212  

Steven E. Spooner

Chief Financial Officer

       2016          414,905          319,989        967,950        519,750        235,196            28,354        2,486,144  
       2015          419,016             905,010        444,510        218,782            26,412        2,013,730  
       2014          412,805             349,806        351,750        481,593            32,641        1,628,595  

Graham Bevington

Executive Vice President and Chief Sales Officer

       2016          387,508        72,013        483,975        259,875        253,295          237,628     26,981        1,721,275  
       2015          356,994             679,970        333,607        115,520        (6)     98,592        1,584,683  
       2014          291,696             116,265        186,700        221,530        176,566           127,369        1,120,126  

Thomas G. Lokar

Chief Human Resources Officer

       2016          332,577        68,823        435,578        233,888        183,454            24,129        1,278,449  
                                                                           

Jon D. Brinton

Executive Vice President and General Manager, Mitel Cloud Services

       2016          312,369        29,218        290,385        155,925        280,508       


    18,682        1,087,087  
                                           
                                                                           

 

                

 

(1) Compensation to Mr. Spooner is paid in Canadian dollars, but converted to U.S. dollars at the average rate for the relevant period. The Canadian dollar salaries for 2016, 2015, and 2014 are as follows: 2016—C$549,543 2015—C$530,837 and 2014—C$453,143.  
     Compensation to Mr. Bevington from January 1, 2015 to July 3 2015 was paid in British pounds sterling but converted to U.S. dollars at the average rate for the relevant period. The British pounds sterling salary for 2015 and 2014 for Mr. Bevington is as follows: 2015—£115,369 and 2014—£176,300. Compensation for July 4, 2015 to December 31, 2015, and all of 2016 was paid in U.S. dollars.  
(2) The compensation value of share-based awards is based on the fair value of the award on the grant date which is equal to the closing Mitel stock price on the same day. The grant-date fair value of awarded RSUs is expensed on a straight-line basis over the vesting period of the award.  
(3) The compensation value of option-based awards is based on the fair value of the award on the grant date using the Black-Scholes option-pricing model for each award commensurate with Topic 718. The grant-date fair value of awarded options is expensed on a straight-line basis over the employee service period, which is the vesting period of the award. Assumptions used in the Black-Scholes option-pricing model are summarized as follows:  


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Year Ended December 31,
2016

        

Year Ended December 31,
2015

        

Year Ended December 31,
2014

Risk-free interest rate

           1.3%            1.5%            1.6%

Dividends

           0.0            0.0            0.0

Expected volatility

           52.0            52.0            55.0

Annual forfeiture rate

           10.0            10.0            10.0

Expected life of the options

           5 years            5 years            5 years

Weighted average fair value per option

           $3.15            $4.18            $4.57

 

(4) Change in pension value is related to a defined benefit plan that was closed to new service in November 2012. Mitel has no deferred compensation earnings.  
(5) For fiscal 2016, all other compensation includes contributions under defined contribution plan, car allowance, relocation assistance, tax equalization payment, and other perquisites and personal benefits, as set forth in the table below.  

 

Name          

Matching

contributions

under defined

contribution

plan ($)

           

Car allowance

($)

            Relocation
assistance ($)
           

Tax equalization

payment ($)

            Other ($)  

Richard D. McBee

             7,950                18,000                               150,502                4,104  

Steven E. Spooner

             14,714                9,060                                              4,580  

Graham Bevington

             8,383                               14,848                               3,750  

Thomas G. Lokar

             7,389                8,000                                              8,740  

Jon D. Brinton

             7,006                8,000                                              3,676  

 

(6) For fiscal 2015, the change in the pension value was a decline of $57,306.  

 

Equity Incentive and Other Compensation Plans

2006 Equity Incentive Plan

The 2006 Equity Incentive Plan was established to assist in attracting, retaining and motivating employees, directors, officers and consultants through performance related incentives. The 2006 Equity Incentive Plan provided flexibility and choice in the types of equity compensation awards, including options, deferred share units, RSUs, performance share units and other share-based awards. Prior to March 5, 2010, the 2006 Equity Incentive Plan provided that, unless otherwise determined by the Compensation Committee, one-quarter of the Mitel common shares that an option holder is entitled to purchase become eligible for purchase on each of the first, second, third and fourth anniversaries of the date of grant, and that options expire on the fifth anniversary of the date of grant. The 2006 Equity Incentive Plan was amended on March 5, 2010 such that, unless otherwise determined by the Compensation Committee, any options granted after that date will vest as to one-sixteenth of the Mitel common shares that an option holder is entitled to purchase on the date which is three months after the date of grant and on each subsequent quarter, and that options expire on the seventh anniversary of the date of grant. The 2006 Equity Incentive Plan provides that in no event may an option remain exercisable beyond the tenth anniversary of the date of grant.

As of the date hereof, options to acquire 3,990,589 Mitel common shares and restricted stock unit awards for 58,300 Mitel common shares were granted and outstanding under the 2006 Equity Incentive Plan and options to acquire 3,661,771 Mitel common shares vested under the 2006 Equity Incentive Plan. During the year ended December 31, 2016, there were 70,150 vested RSUs under the 2006 Equity Incentive Plan. Effective May 8, 2014, new equity grants were made under the 2014 Equity Incentive Plan (described below). Shares subject to outstanding awards under the 2006 Equity Incentive Plan which lapse, expire or are forfeited or terminated will no longer become available for grants under this plan.


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2014 Equity Incentive Plan

The Corporation adopted the 2014 Equity Incentive Plan on May 8, 2014, which is referred to as the 2014 Equity Incentive Plan.

The 2014 Equity Incentive Plan provides that the Compensation Committee is authorized to determine the individuals to whom equity awards will be granted, the number of Mitel common shares subject to equity grants and other terms and conditions of equity grants. Other than the number of shares available for grant under the 2014 Equity Incentive Plan and the term of the 2014 Equity Incentive Plan, the 2014 Equity Incentive Plan is substantially similar to the 2006 Equity Incentive Plan, except that whereas no RSUs granted pursuant to the 2006 Equity Incentive Plan could vest and be payable after December 31 of the third calendar year following the year of service for which the RSU was granted, under the 2014 Equity Incentive Plan the duration of the vesting period and other vesting terms applicable to the grant of RSUs is set out in the applicable Award Agreement without any such restriction. In addition, the 2006 Equity Incentive Plan contained an “evergreen” provision in which the number of Mitel common shares authorized for issuance under the 2006 Equity Incentive Plan increased by 3% on each of March 5, 2011, 2012 and 2013. In contrast, the number of Mitel common shares authorized for issuance under the 2014 Equity Incentive Plan is fixed at 8,900,000 Mitel common shares. The 2014 Equity Incentive Plan will expire no later than 2024.

As of the date hereof, options to acquire 2,455,879 Mitel common shares, RSUs for 3,516,911 Mitel common shares and performance share units to acquire 894,000 Mitel common shares (if maximum performance is achieved) were granted and outstanding under the 2014 Equity Incentive Plan. During the year ended December 31, 2016, we granted options to acquire 919,806 Mitel common shares and RSUs for 1,824,162 Mitel common shares under the 2014 Equity Incentive Plan and options to acquire 533,633 Mitel common shares vested under the 2014 Equity Incentive Plan. During the year ended December 31, 2016, there were 671,159 vested RSUs under the 2014 Equity Incentive Plan.

2017 Omnibus Incentive Plan

The Corporation intends to place before Shareholders at the Meeting, the 2017 Omnibus Incentive Plan (the “2017 Plan”) for approval. The 2017 Plan will have 10,000,000 Mitel common shares available for issuance through a variety of equity compensation awards including options, deferred share units, RSUs, performance share units and other share-based awards. In addition, the 2017 Plan includes provisions that are intended to allow Mitel to make cash bonus awards that could be eligible for a U.S. tax deduction under Section 162(m) of the Tax Code if the Compensation Committee so desires. See the description of the prior Equity Incentive Plans immediately below and “Business to be Transacted at the Meeting – Ordinary Resolution No. 1 – The 2017 Omnibus Incentive Plan” below for further details on the 2017 Plan. No awards have been made under this Plan.

Material Terms of the 2006 Equity Incentive Plan and the 2014 Equity Incentive Plan:

Terminations

Subject to certain provisions relating to the termination of the participant’s employment, term of office or engagement with the Corporation by virtue of the participant’s death, disability or retirement, the 2006 Equity Incentive Plan and the 2014 Equity Incentive Plan, which are collectively referred to as the Equity Incentive Plans, provide that:

 

   

in respect of termination without cause, unless otherwise specified in the award agreement with the participant, any options that are exercisable at the date of such termination may be exercised for a period of ninety (90) days after the termination date or for the remaining term of such option, whichever is lesser. Any options that are not yet exercisable will immediately expire and be cancelled and any other awards that have not yet vested are immediately forfeited to the Corporation.

 

   

in respect of a voluntary resignation of a participant (other than a director), all options, to the extent they were exercisable at the date of such resignation, may be exercised for a period of thirty (30) days after the date of resignation or for the remaining term of such option, whichever is lesser. Any options that are not yet exercisable will immediately expire and be cancelled and any other awards that have not yet vested are immediately forfeited to the Corporation.

 

   

in respect of termination of employment or services for cause of a participant (or for a breach of fiduciary duty in the case of a director), any options and any other awards held by the participant, whether or not exercisable at the termination date, will immediately expire and be cancelled.


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in respect of termination of a director’s appointment (other than for breach of fiduciary duty), the Compensation Committee may permit the exercise of all options held by such director, whether or not exercisable at the termination date and provide for the vesting of any or all other awards held by the director on the termination date.

Other specific provisions apply upon the death of a holder of deferred share units of the Corporation.

Eligibility

Persons eligible to receive awards under the Equity Incentive Plans are employees and directors of Mitel and its subsidiaries, as well as other individuals, as determined by the Compensation Committee, who perform services for Mitel or a subsidiary in the capacity of a consultant.

Participation Limits

The number of Mitel common shares issuable under the Equity Incentive Plans to persons who are reporting insiders (as defined in Part VI of the TSX Company Manual), at any time, under all security-based compensation arrangements of the Corporation, cannot exceed 10% of issued and outstanding Mitel common shares. The number of Mitel common shares issued under the Equity Incentive Plans to such insiders, within any one year period, under all security-based compensation arrangements of the Corporation, cannot exceed 10% of Mitel’s issued and outstanding Mitel common shares.

Exercise Price of Options

The exercise price per share for each option issued under the Equity Incentive Plans may not be less than 100% of the closing price of the Mitel common shares on the trading day immediately preceding the date of grant.

Change of Control

The Equity Incentive Plans provide that, unless otherwise determined by the Compensation Committee or the Mitel Board, any options outstanding immediately prior to the occurrence of a Change in Control (as defined in the Equity Incentive Plans) but which are not then exercisable, shall terminate and be cancelled upon the occurrence of a Change in Control and shall be of no further force or effect. Unless otherwise determined by the Mitel Board or the Compensation Committee, any vested outstanding options that are in-the-money shall be cashed out as of the date of such Change in Control or other date as determined by the Compensation Committee or the Mitel Board. The Mitel Board or Compensation Committee shall also have the right to provide for the acceleration of vesting of any outstanding options or to provide for the conversion or exchange of any option into or for options, right or other securities in any entity participating in or resulting from the Change of Control.

In addition, unless otherwise determined by the Compensation Committee or the Mitel Board, any unvested or unearned restricted share units, deferred share units, performance share units or other share-based awards outstanding immediately prior to the occurrence of a Change in Control shall terminate and be cancelled. The Board or the Compensation Committee shall, however, have the right to accelerate the vesting or determine that any restricted share units, deferred share units, performance share units or other share-based awards outstanding immediately prior to the occurrence of Change in Control shall become fully vested and fully earned upon the occurrence of such event.

Assignment

Subject to certain exercise rights for options held by a participant upon death, disability or retirement, no assignment or transfer of any awards, whether voluntary, involuntary, by operation of law or otherwise is permitted. Notwithstanding the foregoing, an eligible participant may transfer an award (other than an award of incentive stock options) to a permitted assign and an award of incentive stock options may only be transferred by will or by the law of descent and distribution.


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Amendments to the Equity Incentive Plans

The Mitel Board may, without notice or shareholder approval, at any time, amend the Equity Incentive Plans, provided that such amendment does not alter or impair any rights or increase any obligations with respect to an award previously granted under the Equity Incentive Plans, unless consented to by the affected participant. Specifically, the Mitel Board may amend the Equity Incentive Plans without shareholder notice or approval for the following amendments:

 

   

Amend the general vesting provisions of an award;

 

   

Amend the general term of an option provided that no option held by an insider may extend beyond its original expiry date and no option may be exercised beyond the tenth anniversary of the date of grant;

 

   

Amend any of the provisions contained in article 9 (Termination of Employment) of the Equity Incentive Plans;

 

   

Add covenants of the Corporation for the protection of directors, employees and consultants;

 

   

Amend any provision as may be necessary or desirable with respect to matters that may be expedient to make such amendment in the Mitel Board’s good faith opinion; and

 

   

Change or correct any provision required to cure or correct any ambiguity, defect, inconsistent provision, clerical omission, mistake or manifest error.

 

   

Notwithstanding the above, none of the following amendments shall be made to the Equity Incentive Plans without approval of the TSX and the NASDAQ, to the extent such approval is required, and the approval of shareholders in accordance with the requirements of such exchange(s):

 

   

Increase the number of Mitel common shares issuable under the Equity Incentive Plans (except in connection with a Change in Control or pursuant to the provisions of the Equity Incentive Plan);

 

   

Increase the number of Mitel common shares issuable to insiders (except in connection with a Change in Control or pursuant to the provisions of the Equity Incentive Plans);

 

   

Increase the number of Mitel common shares issuable to directors;

 

   

Amend the exercise period of any options held by insiders;

 

   

Extend the expiration of an option beyond ten (10) years from the date of grant;

 

   

Reduce the exercise price of any options held by insiders (except in connection with the purposes of maintaining option value in connection with a Change in Control);

 

   

Add any form of financial assistance available to a participant;

 

   

Permit options or rights under the Equity Incentive Plans to be transferred other than for normal estate settlement purposes;

 

   

Amend the amendment section of the Equity Incentive Plans; and

 

   

Make any other amendments which the applicable exchange rules require shareholder approval.


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Inducement Options

On January 19, 2011, Richard McBee was granted stock options to acquire 515,175 Mitel common shares as a component of his employment compensation. These stock options were granted as an inducement material to his entering into employment with Mitel and will vest on the same vesting schedule as options granted under the 2006 Equity Incentive Plan. These options are outside of the pool of stock options available for grant under the 2006 Equity Incentive Plan, the 2014 Equity Incentive Plan and all other security-based compensation arrangements.

Total Equity Awards Outstanding

As of the date hereof, options to acquire 7,172,481 Mitel common shares, RSUs to acquire 3,575,211 Mitel common shares and performance share units to acquire 894,000 Mitel common shares (if maximum performance is achieved) were granted and outstanding under the following Plans: 2005 Stock Plan, 2013 Equity Incentive Plan, 2006 Equity Incentive Plan and 2014 Equity Inventive Plan. There were also inducement options to acquire 515,175 Mitel common shares. In aggregate the total outstanding equity awards represents approximately 9.8% of the Corporation’s outstanding Mitel common shares.

The following table sets out information in respect of our 2005 Stock Plan and 2013 Equity Incentive Plan and the Corporation’s 2006 Equity Incentive Plan, and 2014 Equity Incentive Plan and inducement options as of December 31, 2016, and also aggregates plans approved by Mitel shareholders collectively and all of the plans not approved by Mitel shareholders collectively:

 

      Plan Category          

Number of Securities

to be issued upon

exercise of

outstanding options

 

(a)

 

 

Weighted average exercise price of outstanding options

 

(b)

 

 

Number of Securities

to be issued upon

vesting of restricted

stock units

 

(c)

 

 

 

Number of securities remaining available

for future issuance

under equity compensation plans (excluding securities reflected in column (a) and (c))

 

(d)

 

2005 Stock Plan   104,203   $        2.38   N/A   N/A
2006 Equity Incentive Plan   4,253,181   $        6.20   121,800   N/A
Inducement options (1)   515,175   $        5.16   N/A   N/A
2013 Equity Incentive Plan   927,344   $        8.14   N/A   N/A
2014 Equity Incentive Plan (2)   2,489,992   $        8.55   3,013,144   5,503,136
Plans approved by Mitel Shareholders   6,743,173   $        7.07   3,134,944   4,691,206
Plans not approved by Mitel Shareholders   1,546,722   $        6.76   N/A   N/A
      (1) The 515,175 inducement options remain outstanding as of March 31, 2017.
      (2) The aggregate number of Mitel common shares that may be issued under the 2014 Equity Incentive Plan is 8,900,000.


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Grant of Plan-Based Awards

2016 Executive Equity Awards

 

Name   Grant
Date
   
Estimated Future Payouts Under Non-
Equity Incentive Plan Award

 
  Estimated Future Payouts Under Equity Incentive Plan Award    






 

All Other
Stock
Awards:
Number
of Shares

Of Stock
or Units
(#)

 

 
 
 
 
 

 
 
 

 

   





All Other
Option
Awards:
Number of
Securities

Underlying
Options

(#)

 
 
 
 
 

 
 

 

  Exercise or
Base Price
of Option
Awards

($/Sh)

   

Grant Date

Fair Value

($)

 

 

 

     

 

Threshold ($)

 

 

 

   

 

Target

($)

 

 

 

 

    Max ($)     Threshold
(#)
  Target

(#)

  Max

(#)

       

Richard D. McBee

        406,875       1,017,188       1,627,500       none   none                            
    3/1/2016                                         229,500             7.17     1,645,515  
    3/1/2016                                                 280,500     7.17     883,575  

Steven E. Spooner

        214,595       343,352       858,380       none   none                            
    3/1/2016                                         135,000             7.17     967,950  
    3/1/2016                                                 165,000     7.17     519,750  

Graham Bevington

        195,000       292,500       780,000       none   none                            
    3/1/2016                                         67,500             7.17     483,975  
    3/1/2016                                                 82,500     7.17     259,875  

Thomas G. Lokar

        167,500       217,750       502,500       none   none                            
    3/1/2016                                         60,750             7.17     435,578  
    3/1/2016                                                 74,250     7.17     233,888  

Jon D. Brinton

        157,500       204,750       630,000       none   none                            
    3/1/2016                                         40,500             7.17     290,385  
    3/1/2016                                                 49,500     7.17     155,925  

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding stock options for the purchase of Mitel common shares outstanding as of December 31, 2016 to our directors and NEOs. The closing price of the Mitel common shares on the NASDAQ on December 31, 2016 was $6.80 per share.

 

Name  

  Number of    
  securities    
  underlying     
  unexercised    
  options    

  (#)    

  exercisable    

 

  Number of    

  securities    

  underlying    
  unexercised options    

  (#) unexercisable    

 

Number of

securities

underlying
unexercised
    unearned options    

(#)

  Option
Exercise
  Price ($)  
    Option
Expiration
Date
                 
Terence H. Matthews   18,038     —     —       3.06       6-Dec-19  

Chairman

  18,313     —     —       3.94       7-Mar-20  
    18,313     —     —       3.80       1-Jul-20  
    16,190     —     —       4.64       5-Sep-20  
    10,146     —     —       9.58       12-Dec-20  
    9,329     —     —       8.79       5-Feb-21  
    9,281     —     —       10.83       20-May-21  
    9,281     —     —       9.96       14-Aug-21  
    9,816     —     —       9.96       13-Nov-21  
    3,585     —     —       9.70       5-Mar-22  
    10,000     —     —       8.94       14-May-22  
    4,220     —     —       8.94       14-May-22  


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Name  

  Number of    
  securities    
  underlying     
  unexercised    
  options    

  (#)    

  exercisable    

 

  Number of    

  securities    

  underlying    
  unexercised options    

  (#) unexercisable    

 

Number of

securities

underlying
unexercised
    unearned options    

(#)

  Option
Exercise
  Price ($)  
    Option
Expiration
Date
    4,542     —     —       8.30       12-Aug-22  
    4,307     —     —       8.75       11-Nov-22  
    5,278     —     —       7.17       4-Mar-23  
    —     10,000     —       7.17       4-Mar-23  
    5,674     —     —       6.74       26-May-23  
    4,723     —     —       8.12       10-Aug-23  
    5,713     —     —       6.62       9-Nov-23  
Peter D. Charbonneau   32,668     —     —       6.50       16-Sep-17  
Lead Director   20,441     —     —       4.00       7-Jul-18  
    10,083     —     —       3.29       7-Sep-18  
    8,756     —     —       3.05       23-Dec-18  
    8,756     —     —       3.44       7-Mar-19  
    10,550     —     —       4.22       26-Jun-19  
    10,544     —     —       2.61       6-Sep-19  
    10,819     —     —       3.06       6-Dec-19  
    10,338     —     —       3.94       7-Mar-20  
    10,338     —     —       3.80       1-Jul-20  
    6,782     —     —       4.64       5-Sep-20  
    4,960     —     —       9.58       12-Dec-20  
    4,778     —     —       8.79       5-Feb-21  
    4,682     —     —       10.83       20-May-21  
    4,682     —     —       9.96       14-Aug-21  
    4,854     —     —       9.96       13-Nov-21  
    1,154     —     —       9.70       5-Mar-22  
    10,000     —     —       8.94       14-May-22  
    —     10,000     —       7.17       4-Mar-23  
Francisco Partners   62,200     —     —       6.50       16-Sep-17  
Benjamin H. Ball/   28,336     —     —       4.00       7-Jul-18  
Director (2)   21,250     —     —       3.29       7-Sep-18  
    18,819     —     —       3.05       23-Dec-18  
    18,131     —     —       3.44       7-Mar-19  
    22,343     —     —       4.22       26-Jun-19  
    21,569     —     —       2.61       6-Sep-19  
    20,194     —     —       3.06       6-Dec-19  
    20,263     —     —       3.94       7-Mar-20  
    20,263     —     —       3.80       1-Jul-20  
    8,588     —     —       4.64       5-Sep-20  
    7,061     —     —       9.58       12-Dec-20  
    6,909     —     —       8.79       5-Feb-21  
    6,828     —     —       10.83       20-May-21  
    6,828     —     —       9.96       14-Aug-21  
    6,972     —     —       9.96       13-Nov-21  
    966     —     —       9.70       5-Mar-22  
    10,000     —     —       8.94       14-May-22  
    10,000     —     —       8.94       14-May-22  
    —     10,000     —       7.17       4-Mar-23  
David M. Williams   9,721     —     —       10.83       20-May-21  
Director   4,595     —     —       9.96       14-Aug-21  
    4,850     —     —       9.96       13-Nov-21  
    294     —     —       9.70       5-Mar-22  
    10,000     —     —       8.94       14-May-22  
    —     10,000     —       7.17       4-Mar-23  
Sudhakar Ramakrishna   7,500     —     —       8.94       14-May-22  
Director   15,000     30,000     —       8.94       14-May-22  
    —     10,000     —       7.17       4-Mar-23  
John P. McHugh   9,238     —     —       3.05       23-Dec-18  


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Name  

  Number of    
  securities    
  underlying     
  unexercised    
  options    

  (#)    

  exercisable    

 

  Number of    

  securities    

  underlying    
  unexercised options    

  (#) unexercisable    

 

Number of

securities

underlying
unexercised
    unearned options    

(#)

  Option
Exercise
  Price ($)  
    Option
Expiration
Date
Director   10,200     —     —       3.44       7-Mar-19  
    11,008     —     —       4.22       26-Jun-19  
    12,675     —     —       2.61       6-Sep-19  
    11,713     —     —       3.06       6-Dec-19  
    10,475     —     —       3.94       7-Mar-20  
    10,475     —     —       3.80       1-Jul-20  
    9,213     —     —       4.64       5-Sep-20  
    6,356     —     —       9.58       12-Dec-20  
    6,071     —     —       8.79       5-Feb-21  
    6,215     —     —       10.83       20-May-21  
    6,215     —     —       9.96       14-Aug-21  
    6,508     —     —       9.96       13-Nov-21  
    1,964     —     —       9.70       5-Mar-22  
    10,000     —     —       8.94       14-May-22  
    2,316     —     —       8.94       14-May-22  
    2,493     —     —       8.30       12-Aug-22  
    2,364     —     —       8.75       11-Nov-22  
    2,897     —     —       7.17       4-Mar-23  
    —     10,000     —       7.17       4-Mar-23  
    3,114     —     —       6.74       26-May-23  
    2,592     —     —       8.12       10-Aug-23  
    3,565     —     —       8.12       10-Aug-23  
Richard D. McBee   892,575     —     —       5.16       19-Jan-18  
President and Chief Executive Officer   515,175     —     —       5.16       19-Jan-18  
    56,250     —     —       4.22       26-Jun-19  
    46,937     14,063     —       3.80       1-Jul-20  
    156,250     93,750     —       10.11       3-Apr-21  
    109,375     140,625     —       9.70       5-Mar-22  
    52,593     227,907     —       9.70       4-Mar-23  
Steven E. Spooner   25,000     —     —       8.79       15-Jul-17  
Chief Financial Officer   18,750     —     —       4.22       26-Jun-19  
    12,500     9,375     —       3.80       1-Jul-20  
    100,000     100,000     —       5.73       9-Oct-20  
    46,875     28,125     —       10.11       3-Apr-21  
    43,312     55,688     —       9.70       5-Mar-22  
    30,937     134,063     —       7.17       4-Mar-23  
Graham Bevington   30,000     —     —       8.79       15-Jul-17  
Executive Vice President,   9,375     —     —       4.22       26-Jun-19  
Chief Sales Officer   30,000     —     —       3.80       1-Jul-20  
    24,375     5,625     —       10.11       3-Apr-21  
    15,625     9,375     —       9.96       14-Aug-21  
    8,437     6,563     —       9.70       5-Mar-22  
    32,506     41,794     —       7.17       4-Mar-23  
    15,468     67,032     —       7.17       4-Mar-23  
Thomas G. Lokar   58,437     26,563     —       8.79       5-Feb-21  
Chief Human Resources Officer   18,331     23,569     —       9.70       5-Mar-22  
  13,921     60,329     —       7.17       4-Mar-23  
Jon D. Brinton   7,000     —     —       8.79       15-Jul-17  
Executive Vice President and General Manager, Mitel Cloud Services   20,000     —     —       4.00       7-Jul-18  
  30,000     —     —       4.22       26-Jun-19  
  24,375     5,625     —       3.80       1-Jul-20  
  15,625     9,375     —       10.11       3-Apr-21  
  18,331     23,569     —       9.70       5-Mar-22  
  9,281     40,219     —       7.17       4-Mar-23  


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(1)

Stock option awards were granted pursuant to the 2006 Equity Incentive Plan or the 2014 Equity Incentive Plan. In the case of Mr. McBee, a portion of the options were granted as an inducement (as described in note 3 below); all of these stock options have not been exercised to date.

(2)

The stock options granted to Francisco Partners Management, LLC include options granted in lieu of director fees to Mr. Ball.

(3)

515,175 of the stock options granted to Mr. McBee as a component of his employment compensation, have been granted as an inducement, material to his entering into employment with us in 2011. These inducement options will vest on the same vesting schedule as options granted under the 2006 Equity Incentive Plan. These options are outside of the pool of stock options available for grant under the 2006 Equity Incentive Plan, the 2014 Equity Incentive Plan and all other security-based compensation arrangements of the Corporation, and were granted in accordance with the NASDAQ rules permitting inducement option grants to the Chief Executive Officer in certain circumstances.

(4)

Martha Bejar joined the Board on March 10, 2017.

Restricted Stock Units Outstanding for Executive Officers and Directors

The following table sets forth information regarding RSUs for Mitel common shares granted as of December 31, 2016 to our directors and NEOs. The closing price of the Mitel common shares on the NASDAQ on December 31, 2016 was $6.80 per share.

 

Name  

Number of

shares or units

of shares that

have not

vested (#)

 

Market or

payout value

of share-

based awards

that have not

vested ($)

 

Equity

incentive plan

awards:

number of

unearned

shares, units or

other rights

that have not

vested (#)

 

Equity

incentive plan

awards: market

or payout

value of

unearned

shares, units or

other rights

that have not

vested ($)

         

Richard D. McBee
President and Chief Executive Officer

 

  462,138   3,142,538    
         

Steven E. Spooner
Chief Financial Officer

 

  222,275   1,511,470    
         

Graham G. Bevington
Executive Vice President and Chief Sales Officer

 

  125,825   855,610    
         

Thomas G. Lokar

Executive Vice President and Chief Human Resources Officer

 

  90,375   614,550    
         

Jon D. Brinton

         

Executive Vice President and General Manager, Mitel Cloud Services

 

  75,875   515,950    
         

Benjamin H. Ball

fbo Francisco Partners (1)

Director

 

  10,000   68,000    
         

Peter D. Charbonneau
Director

 

  10,000   68,000    
         

Terence H. Matthews
Director

 

 

  10,000   68,000    


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Name  

Number of

shares or units

of shares that

have not

vested (#)

 

Market or

payout value

of share-

based awards

that have not

vested ($)

 

Equity

incentive plan

awards:

number of

unearned

shares, units or

other rights

that have not

vested (#)

 

Equity

incentive plan

awards: market

or payout

value of

unearned

shares, units or

other rights

that have not

vested ($)

         

John P. McHugh

Director

 

  10,000   68,000    
         

Sudhakar Ramakrishna

Director

 

  10,000   68,000    
         

David M. Williams

Director

 

  10,000   68,000    
  (1)

Stock option grants to Mr. Ball in lieu of director fees were granted directly to Francisco Partners Management, LLC, of which Mr. Ball is a partner.

Incentive Plan Awards – Option Exercises and Stock Vested

The following table lists, with respect to each of our NEOs and directors, the value of all option-based and share-based awards that have been exercised and all non-equity incentive plan compensation vested during the year ended December 31, 2016.

 

Name   Option Awards   Stock Awards
 

Number of

Shares
Acquired on
Exercise (#)

 

Value

realized on
exercise ($)  (1)

(2)

 

Number of

Shares
Acquired on
Vesting (#)

 

Value

realized on
vesting ($)  (1)

(2)

         

Richard D. McBee

 

      87,162   615,622
         

Steven E. Spooner

 

      31,975   213,913
         

Graham G. Bevington

 

      20,400   146,268
         

Thomas G. Lokar

 

      9,875   70,804
         

Jon D. Brinton

 

      12,750   91,418
         

Benjamin H. Ball, fbo Francisco Partners (3)

 

      20,000   143,400
         

Peter D. Charbonneau

 

      10,000   66,900
         

Terence H. Matthews

 

      21,244   153,322
         

John P. McHugh

 

      16,361   112,955
         

Sudhakar Ramakrishna

 

      7,500   50,175
         

David M. Williams

 

      10,000   66,900


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(1)

Represents the total value of options that vested during the year ended December 31, 2016. The values were calculated using the closing price of our Mitel common shares on the NASDAQ on the date the options vested (or if the option vested on a non-trading day, the next trading day).

(2)

Stock options granted to board members vested immediately upon grant where equity is elected in lieu of cash while Annual Awards cliff vest at the end of the fiscal year in which they are granted.

(3)

Stock option grants to Mr. Ball in lieu of director fees were granted directly to Francisco Partners Management, LLC, of which Mr. Ball is a partner.

(4)

Martha Bejar joined the Board on March 10, 2017.

Pension and Retirement Plans

The Corporation maintains defined contribution pension plans that cover substantially all of our employees. We contribute to defined contribution pension plans based on a percentage, as specified in each plan, of a participating employee’s pensionable earnings.

The following table sets forth, for each of our NEOs, information regarding defined contribution pension plan amounts credited to or earned by each of them during or as at the end of the year ended December 31, 2016.

Defined Contribution Plan Table

Name  

  Accumulated
  value at start of

  year $

  Compensatory $  

  Non-

  compensatory  (1)

  $

 

  Accumulated
  value at year end

  $

                 

Richard D. McBee

  9,962    7,950    2,108    20,020 

Steven E. Spooner

  98,998    14,714    26,329    140,041 

Graham G. Bevington

  189,902    8,383    (4,561)   193,724 

Thomas G. Lokar

  12,359    7,389    1,381    21,129 

Jon D. Brinton

  109,948    7,006    6,264    123,218 

 

 

(1)

Includes the effect of plan market value and foreign exchange, where applicable.

There were no material accrued obligations at the end of the year ended December 31, 2016 pursuant to our defined contribution pension plans.

We currently maintain a defined benefit pension plan for certain of our past and present employees in the United Kingdom. The plan was closed to new employees in June 2001. The plan was closed to new service in November 2012. The defined benefit plan provides pension benefits based on length of service up to November 2012 and final average earnings. The pension costs are actuarially determined using the projected benefits method pro-rated on services and management’s best estimate of the effect of future events. Pension plan assets are valued at fair value. As of December 31, 2016, the $248.0 million projected benefit obligation exceeded the fair value of the defined benefit plan assets of $168.4 million, resulting in a pension liability of $79.6 million.

Pension Benefits

 

Name   Plan Name  

 

 Number of 

year 

credited 
service 

 

 

Present  

value of  

accumulated
benefit ($)

 

 Payments

 during last

 fiscal year

 ($)

                 
         

Graham G. Bevington

  Mitel Networks Limited Family Security Plan   13 years    886,546      


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For the purposes of the pension plan in the United Kingdom, the age of retirement is 65 years. There are provisions for early retirement starting at 55 years with the benefit decreasing for each of the years retired before 65 years. This value is determined by the plan actuary. There is no policy for granting additional years of service or additional credit of service. In November 2012, the defined benefit plan was closed to new service. Since November 2012, Mr. Bevington receives amounts under a defined contribution plan, as disclosed above.

Assumed Plans

On April 29, 2015, in connection with the acquisition of Mavenir, the Corporation adopted the 2005 Stock Plan and the 2013 Equity Incentive Plan.

2005 Stock Plan

The 2005 Stock Plan provided flexibility and choice in the types of equity compensation awards, including options, deferred share units, RSUs, performance share units and other share-based awards. Various vesting schedules were granted under the plan and were determined at the time of the original grant date. The 2005 Stock Plan provides that in no event may an option remain exercisable beyond the tenth anniversary of the date of grant.

As of the date hereof, options to acquire 84,899 Mitel common shares and no RSUs were outstanding under the 2005 Stock Plan. As of the year ended December 31, 2016, 55,724 options had vested under the 2005 Stock Plan. Common shares subject to outstanding awards under the 2005 Stock Plan which lapse, expire, terminate or are forfeited will no longer become available for grant under the 2005 Stock Plan.

2013 Equity Incentive Plan

The 2013 Equity Incentive Plan provided flexibility and choice in the types of equity compensation awards, including options, deferred share units, RSUs, performance share units and other share-based awards. Various vesting schedules were granted under the plan and were determined at the time of the original grant date. The 2013 Equity Incentive Plan provides that in no event may an option remain exercisable beyond the tenth anniversary of the date of grant.

As of the date hereof, options to acquire 641,114 Mitel common shares and no RSUs were outstanding under the 2013 Equity Incentive Plan. As of the year ended December 31, 2016, 386,676 options had vested under the 2013 Equity Incentive Plan. Mitel common shares subject to outstanding awards under the 2013 Equity Incentive Plan which lapse, expire, terminate or are forfeited will no longer become available for grants under the 2013 Equity Incentive Plan.

On February 28, 2017, Mitel completed the sale of its Mobile Division (formerly Mavenir Systems, Inc.) to the parent company of Xura, Inc. As of February 28, 2017, a total of 1,004,929 Mitel common shares were subject to options granted to Mitel employees of the Mobile Division under the 2005 Stock Plan and 2013 Equity Incentive Plan. In connection with the sale, all unvested options immediately expired and were cancelled and all vested options (representing 658,419 Mitel common shares) held by Mobile Division employees must be exercised by May 28, 2017 after which such options shall be cancelled. As a result, and as of the date hereof, 83,649 Mitel common shares remain subject to options granted under the 2005 Stock Plan and 2013 Equity Incentive Plan to employees who remained with Mitel after the sale.


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  17.

Employment Agreements, Termination and Change of Control

Employment Agreements

Richard D. McBee. Rich McBee is employed as our CEO and President. Effective as of January 13, 2011, we executed an Employment Agreement with Mr. McBee. Mr. McBee is employed for an indefinite term, subject to termination in accordance with the terms of his employment agreement. If Mr. McBee’s employment is terminated by us without cause, or if, in the event of a “change of control” (as such term is defined in his employment agreement) of the Corporation we either terminate Mr. McBee’s employment without cause or Mr. McBee ends his employment relationship with us, in either case within 12 months of such change of control, he will receive a severance payment totaling 24 months’ salary and bonus compensation (such monthly bonus compensation being 1/36 of the aggregate bonus compensation received by Mr. McBee during the three most recently completed fiscal years), paid over a 24-month period, plus benefit continuation and, except in the event of a change of control, continued vesting of options for the same period. In the event of a change of control, all equity based compensation becomes 100% fully vested and payable, and any performance-based targets shall be deemed to have been satisfied at 100%. For the year ended December 31, 2016, Mr. McBee received a base salary of $813,750, equity awards, a monthly car allowance of $1,500, fuel and maintenance reimbursement for one vehicle and he participated in our standard employee benefit plans. Mr. McBee was also entitled to receive an annual targeted bonus payment of 125% of base salary, dependent upon the achievement of business goals and subject to the approval of the Compensation Committee. Mr. McBee’s employment agreement contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

Steven E. Spooner. Steve Spooner is employed as our CFO, reporting to our President and CEO. Effective as of March 12, 2010, we executed an Amended and Restated Employment Agreement with Mr. Spooner under which he is employed for an indefinite term, subject to termination in accordance with its terms. If Mr. Spooner’s employment is terminated by us without cause, or if, in the event of a “change of control” (as such term is defined in his employment agreement) of the Corporation we either terminate Mr. Spooner’s employment without cause or Mr. Spooner ends his employment relationship with us, in either case within 12 months of such change of control, he will receive a severance payment totaling 18 months’ salary and bonus compensation (such monthly bonus compensation being 1/36 of the aggregate bonus compensation received by Mr. Spooner during the three most recently completed fiscal years), paid over an 18-month period, plus benefit continuation and, except in the event of a change of control, continued vesting of options for the same period. In the event of a change of control, all equity based compensation becomes 100% fully vested and payable, and any performance-based targets shall be deemed to have been satisfied at 100%. Upon death or disability, Mr. Spooner is entitled to a lump sum payment of one year’s total salary plus bonus and, in addition, accelerated vesting of 25% of any remaining unvested options. For the year ended December 31, 2016, Mr. Spooner received a base salary of C$568,464, equity awards, a monthly car allowance of C$1,000, fuel and maintenance reimbursement for one vehicle and he participated in our standard employee benefit plans. Mr. Spooner is also entitled to receive an annual bonus payment in an amount determined by the Compensation Committee, in its sole discretion. Mr. Spooner’s employment agreement contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

Graham G. Bevington. Graham Bevington is employed as our Executive Vice President and Chief Sales Officer, reporting to our President and CEO. Mr. Bevington is employed for an indefinite term, subject to termination in accordance with the terms of his employment letter agreement, as amended. If Mr. Bevington’s employment is terminated by us without cause, or if, in the event of a “change of control” (as such term is defined in his employment agreement) of the Corporation we either terminate Mr. Bevington’s employment without cause or Mr. Bevington ends his employment relationship with us, in either case within 12 months of such change of control, he will receive a severance payment totaling 16 months’ salary and bonus compensation (such monthly bonus compensation being 1/36 of the aggregate bonus compensation received by Mr. Bevington during the three most recently completed fiscal years), paid in a lump sum. In the event Mr. Bevington’s employment is terminated by us without cause, or by Mr. Bevington for “good reason” (as such term is defined in his employment agreement), within 12 months of a “change of control” (as such term is defined in his employment agreement), all equity based compensation shall become 100% fully vested upon the change of control, and any performance-based targets shall be deemed to have been satisfied at 100%. For the year ended December 31, 2016, Mr. Bevington received a base salary of $390,000, equity awards and he participated in our standard employee benefit plans. Mr. Bevington is also entitled to receive an annual bonus payment related to his achievement of defined targets. Mr. Bevington’s employment agreement contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.


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Thomas G. Lokar Thomas Lokar is employed as our Chief Human Resources Officer. Mr. Lokar is employed for an indefinite term, subject to termination in accordance with the terms of his employment agreement. If Mr. Lokar’s employment is terminated by us without cause, or if, in the event of a “change of control” (as such term is defined in his employment agreement) of the Corporation we either terminate Mr. Lokar’s employment without cause or Mr. Lokar ends his employment relationship with us, in either case within 12 months of such change of control, he will receive a severance payment totaling 12 months’ salary and bonus compensation (such monthly bonus compensation being 1/36 of the aggregate bonus compensation received by Mr. Lokar during the three most recently completed fiscal years), paid in a lump sum. In the event Mr. Lokar’s employment is terminated by us without cause, or by Mr. Lokar for “good reason” (as such term is defined in his employment agreement), within 12 months of a “change of control” (as such term is defined in his employment agreement), all equity based compensation shall become 100% fully vested upon the change of control, and any performance-based targets shall be deemed to have been satisfied at 100%. For the year ended December 31, 2016, Mr. Lokar received a base salary of $335,000, equity awards, a yearly car allowance of $8,000, and he participated in our standard employee benefit plans. Mr. Lokar was also eligible to receive an annual variable, at-risk payment of 65% of base salary. Mr. Lokar’s employment agreement contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

Jon D. Brinton Jon Brinton is employed as our Executive Vice President & General Manager, Mitel Cloud Services. Mr. Brinton is employed for an indefinite term, subject to termination in accordance with the terms of his employment agreement. If Mr. Brinton’s employment is terminated by us without cause, or if, in the event of a “change of control” (as such term is defined in his employment agreement) of the Corporation we either terminate Mr. Brinton’s employment without cause or Mr. Brinton ends his employment relationship with us, in either case within 12 months of such change of control, he will receive a severance payment totaling 12 months’ salary and bonus compensation (such monthly bonus compensation being 1/36 of the aggregate bonus compensation received by Mr. Brinton during the three most recently completed fiscal years), paid in a lump sum. In the event Mr. Brinton’s employment is terminated by us without cause, or by Mr. Brinton for “good reason” (as such term is defined in his employment agreement), within 12 months of a “change of control” (as such term is defined in his employment agreement), all equity based compensation shall become 100% fully vested upon the change of control, and any performance-based targets shall be deemed to have been satisfied at 100%. For the year ended December 31, 2016, Mr. Brinton received a base salary of $315,000, equity awards, a yearly car allowance of $8,000, and he participated in our standard employee benefit plans. Mr. Brinton was also eligible to receive an annual variable, at-risk payment of 65% of base salary. Mr. Brinton’s employment agreement contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

Potential Payments upon Termination or Change of Control

Information regarding payments to our NEOs in the event of a termination or a change in control may be found in the table below. This table sets forth the estimated amount of payments each NEO would be entitled to receive upon the occurrence of the indicated event, assuming that the event occurred on December 31, 2016 and using average exchange rates for the year ended December 31, 2016. The salary payments are calculated based on the salaries stated in the employment agreements of each NEO as of December 31, 2016. Amounts potentially payable under plans which are generally available to all salaried employees, such as health, life and disability insurance, are excluded from the table. Actual payments made at any future date may vary, including the amount the NEO would have accrued under the applicable benefit or compensation plan as well as the price of the Mitel common shares.

In the event of retirement, resignation or termination for cause, no salary, benefits or other compensation is payable to a NEO beyond the last effective date of employment and the NEO would only be entitled to exercise equity that had already vested or would continue to vest in accordance with the terms of their employee agreement and consistent with the plan under which they were granted, and no incremental payments or benefits are payable. In the event of death or disability, a pro rata portion of the next instalment of any equity award due to vest shall immediately vest, based on the number of days elapsed since the last instalment vested compared to the period from the last vesting date to the next vesting date (or if none have vested, the date of grant). Had an NEO died or if their employment had been terminated due to disability on December 31, 2016, the incremental value the NEO would have received was: Richard D. McBee ($nil), Steven E. Spooner ($975,462), Graham Bevington ($nil), Thomas G. Lokar ($nil) and Jon D. Brinton ($nil).


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Potential Payments upon Termination or Change of Control

 

      Termination without Cause    Change of Control
           
Name    Salary and
   Bonus ($)  (1) (2)    
  

   Equity Vesting 

   ($) (3) (4) 

  

Salary and Bonus

($) (1) (2)

  

   Equity Vesting 

   ($) (3) (4) 

                     
         

Richard D. McBee (5)

   3,899,045    2,636,835    3,899,045    5,809,873
         

Steven E. Spooner (5)

   1,258,195    301,250    1,258,195    1,844,283
         

Graham Bevington

   669,800    114,188    502,350    970,585
         

Thomas G. Lokar

   579,482       579,482    614,550
         

Jon D. Brinton

   513,164    206,525    513,164    740,950

 

 

(1)

See Section 16 – “Summary Compensation Table” for the salary and bonus payments used in calculating payments on termination without cause or change of control.

(2)

In addition, upon termination without cause or a change of control resulting in termination, each NEO would be entitled to:

   

benefit continuation during the severance or notice periods, as applicable, or where not available, a cash payment in-lieu,

   

a payment equal to car allowance over the applicable period, and

   

in respect of pension, an amount equal to the employer contribution over the applicable period.

In the event of a change of control without termination, each NEO would only be entitled to the indicated payments under “Change of Control” – “Equity Vesting”. No payments for salary or bonus would be payable.

(3)

The amounts related to stock options and other equity awards are based upon the fair market value of the Mitel common shares of $6.80 per share as reported on the NASDAQ on December 30, 2016, the last trading day of the Corporation’s year ended December 31, 2016.

(4)

Upon a change of control, all vested options are paid out at the change of control price. The amounts related to stock options and other equity awards are based upon a value of the Mitel common shares of $6.82 per share (change of control price), which is the highest per share price in the 5 trading days prior to December 31, 2016 as reported on the NASDAQ, as required by the 2006 Equity Incentive Plan and the 2014 Equity Incentive Plan.

(5)

Upon a change of control, all equity based compensation for Mr. McBee and Mr. Spooner becomes 100% fully vested and payable, and any performance-based targets shall be deemed to have been satisfied at 100%. In all other circumstances following a change of control, an amount is only payable if the employee is terminated either by Mitel without cause within twelve months of the change of control, or by the employee for good reason within twelve months of the change of control.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy circular with management of Mitel and, based on such review and discussion, the compensation committee recommended to the Mitel Board that the information set forth under “Compensation Discussion and Analysis” below be included in this proxy circular.

Respectfully submitted,

Compensation Committee

Benjamin H. Ball, Chair

John P. McHugh

David M. Williams

 

D.

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Mitel’s compensation program for executive officers is designed to attract, retain, motivate and engage highly skilled and experienced individuals who excel in their field. The objective of the program is to focus our executives on the key business factors that affect shareholder value. Mitel believes that its compensation programs are consistent with those objectives, and are in the best interest of shareholders. Detailed disclosure of our executive compensation program is provided under “Compensation Discussion and Analysis” starting on page 18 and the compensation tables and accompanying narrative disclosure.


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The Mitel Board has adopted a policy to hold a non-binding advisory vote to approve executive compensation as disclosed in the management information circular at each annual meeting. This shareholder vote forms an important part of the ongoing process of engagement between shareholders and the Mitel Board on executive compensation. Last year, approximately 91% of the shareholder votes cast on this proposal were voted in favor of the proposal.

At the meeting, shareholders will have an opportunity to vote to approve executive compensation through consideration of the following advisory resolution:

“Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders approve the executive compensation disclosed in the management proxy circular delivered in advance of the 2016 annual meeting of shareholders of the Corporation.”

Approval of this resolution will require that it be passed by a majority of the votes cast by shareholders in person and by proxy. Because your vote is advisory, it will not be binding upon the Mitel Board. However, the compensation committee will take into account the results of the vote when considering future executive compensation arrangements.

THE BOARD OF DIRECTORS OF MITEL RECOMMENDS THAT YOU VOTE FOR THE ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION DISCLOSED IN THIS MANAGEMENT PROXY CIRCULAR.

The named proxyholders, if named as proxy, intend to vote the common shares represented by such proxy for approval of the advisory resolution to approve Mitel’s executive compensation, unless the shareholder has directed in the proxy that such common shares be voted against it or such shareholder abstains from voting.

 

E.

ADVISORY VOTE ON FREQUENCY OF SAY ON PAY VOTES

As described in section D above, in accordance with the requirements of Section 14a of the Exchange Act and the related rules of the SEC, our shareholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers. This Resolution No. 4 affords shareholders the opportunity to cast an advisory vote on how often we should include a say-on-pay proposal in our proxy materials for future annual shareholder meetings or any special shareholder meeting for which we must include executive compensation information in the proxy statement for that meeting (a “say-on-pay frequency proposal”). At the meeting, shareholders will have an opportunity to vote to have the say-on-pay vote every year, every two years, or every three years through the consideration of the following advisory resolution:

“Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders determine whether the preferred frequency of an advisory vote on the executive compensation of the Corporation’s NEOs as set forth in the Corporation’s proxy statement should be every one year, two years, or three years.”

A plurality of the votes cast for Resolution No. 4 will determine the shareholders’ preferred frequency for holding an advisory vote on executive compensation. This means that the option for holding an advisory vote every one year, two years, or three years receiving the greatest number of votes will be considered the preferred frequency of the shareholders.

THE BOARD OF DIRECTORS OF MITEL RECOMMENDS THAT YOU VOTE TO HOLD SAY ON PAY VOTES EVERY YEAR (AS OPPOSED TO EVERY TWO OR THREE YEARS).

The named proxyholders, if named as proxy, intend to vote the common shares represented by such proxy for approval to hold an advisory vote on executive compensation every one year, unless the shareholder abstains from voting or has directed in the proxy that such common shares be voted in favor of holding an advisory vote on executive compensation every two years or three years.


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F.

INTEREST OF MANAGEMENT, NOMINEES AND OTHERS IN MATERIAL TRANSACTIONS

 

  18.

Review, Approval or Ratification of Transactions Involving Related Parties

The Audit Committee of the Mitel Board has adopted written standards and procedures regarding transactions involving related parties, which are set forth in the Audit Committee Charter. The Audit Committee considers “related party transactions” as any transaction in which the Corporation was or is to be a participant and the amount involved exceeds US$120,000, and in which any related person (as defined in Item 404(a) of Regulation S-K) had or will have a direct or indirect material interest. The Audit Committee reviews and approves related party transactions between the Corporation and persons or entities that are deemed to be related parties to the Corporation to ensure that the terms are fair and reasonable to the Corporation and to ensure that corporate opportunities are not usurped. The Audit Committee provides a report to the Mitel Board that includes:

 

   

a summary of the nature of the relationship with the related party and the significant commercial terms of the transaction, such as price and total value;

 

   

the parties to the transaction;

 

   

an outline of the benefits to the Corporation of the transaction;

 

   

whether terms are at market and whether they were negotiated at arm’s length; and

 

   

for related party transactions involving our officers or directors, whether there has been any loss of a corporate opportunity.

Since January 1, 2016, Mitel has been involved in the following related party transactions.

Wesley Clover International Corporation

We lease our Ottawa-based headquarters facilities from Wesley Clover International Corporation (formerly Kanata Research Park Corporation), 390 March Road, Ottawa, ON, K2K 0G7, a corporation wholly-owned by our chairman Dr. Matthews.

We negotiated a lease in October 2010 under terms and conditions that management believes reflected then-current market rates. The initial term of the lease was five years and three months ending on February 15, 2016 and could be renewed at our option for an additional five years. However, in November 2013, we amended the lease for our Ottawa-based headquarter facilities, which, among other things, extended the term of the lease for an additional five years, two months, expiring on April 30, 2021. We have also been granted an option to extend the lease term for an additional five-year period, at then-current market rates.

The lease contains property reinstatement terms which have not been accrued at this time as the amount is not estimable. The lease contains certain changes in the rental rate over the term of the lease. During the year, we recorded lease payments for base rent and operating costs of $4.6 million. At December 31, 2016, balances payable relating to the lease totaled nil.

Other Parties Related to Dr. Matthews

We have entered into technology transfer, technology licensing and distribution agreements with certain companies related to Dr. Matthews under terms reflecting what management believes were prevailing market conditions at the time the agreements were entered into. These companies develop technology that we integrate with, distribute or sell alone or as part of our own products. In the normal course of business, we may enter into purchase and sale transactions with other companies related to Dr. Matthews under terms reflecting what management believes are then-prevailing market conditions.


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We made sales to and purchases from other companies related to Dr. Matthews, arising in the normal course of business, of $1.5 million and $3.4 million, respectively, for the year. The balances receivable and payable at December 31, 2016 as a result of these transactions were $0.3 million and $0.8 million, respectively.

Shareholders’ Agreement

We, Francisco Partners Management, LLC, Francisco Partners GP II Management (Cayman) Limited and Francisco Partners GP III Management, LLC, which are referred to as the Francisco Partners Group, and Dr. Terence H. Matthews and Wesley Clover International Corporation (formerly known as Kanata Research Park Corporation which was formerly known as Wesley Clover Corporation), which are referred to as the Matthews Group, are parties to a shareholders’ agreement, or the Shareholders’ Agreement, which became effective at the closing of our IPO. As at March 31, 2017, each of the Matthews Group and Francisco Partners Group beneficially owned less than 10% of the Mitel common shares of the Corporation. All of the provisions of the Shareholders’ Agreement are expressly subject to any requirements as to governance imposed by applicable securities laws and by any exchange on which our securities are listed. The Shareholders’ Agreement covers matters as set forth below.

Board Nomination Rights

The terms of the Shareholders’ Agreement provide that so long as the Francisco Partners Group beneficially owns at least 15% of our outstanding Mitel common shares, the Francisco Partners Group may nominate three members of our board of directors; that so long as the Francisco Partners Group beneficially owns at least 10% of our outstanding Mitel common shares, the Francisco Partners Group may nominate two members of our board of directors; and that so long as the Francisco Partners Group beneficially owns at least 5% of our outstanding Mitel common shares, the Francisco Partners Group may nominate one member of our board of directors. The Shareholders’ Agreement also provides that so long as the Matthews Group beneficially owns at least 10% of our outstanding Mitel common shares, the Matthews Group may nominate two members of our board of directors; and that so long as the Matthews Group beneficially owns at least 5% of our outstanding Mitel common shares, the Matthews Group may nominate one member of our board of directors. As of March 31, 2017, the Francisco Partners Group and the Matthews Group each held less than 10% of the outstanding Mitel common shares of the Corporation and each is therefore entitled to nominate one member of our board of directors. Further, each of the Francisco Partners Group and the Matthews Group, to the extent they beneficially own at least 5% of our outstanding Mitel common shares, will nominate our Chief Executive Officer to serve as a member of our board of directors.

Committee Representation

The Shareholders’ Agreement provides that, for so long as the Francisco Partners Group beneficially owns at least 10% of our outstanding Mitel common shares, unless prohibited by U.S. federal securities laws or the NASDAQ rules, the Francisco Partners Group is entitled to designate one member of each committee of our board of directors, other than our audit committee. As of March 31, 2017, the Francisco Partners Group hold less than 10% of the outstanding Mitel common shares of the Corporation.

Special Approval Rights of the Francisco Partners Group

The Shareholders’ Agreement provides that we may not take certain significant actions, such as acquisitions and mergers, incurrence of certain debt, declaration of dividends and amendments to our organizational documents, without the approval of the Francisco Partners Group if the Francisco Partners Group owns at least 15% of our outstanding common shares. As of March 31, 2017, the Francisco Partners Group hold less than 15% of the outstanding Mitel common shares of the Corporation.

 

  19.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors, executive officers (as defined under the 1933 Act as noted above), and shareholders owning more than 10% of any class of a company’s outstanding equity shares (other than certain banks, investment funds and other institutions holding securities for the benefit of third parties or in customer fiduciary accounts) to file reports of ownership and changes of ownership with the SEC. As of January 1, 2017, we are required to comply with Section 16(a) because we are no longer eligible to rely upon foreign private issuer exemptions under U.S. securities laws and NASDAQ’s corporate governance rules.

Based solely upon its review of the copies of such forms it received, or written representations from certain reporting persons for whom no such forms were required, the Corporation is aware of no late Section 16(a) filings.


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G.

BUSINESS TO BE TRANSACTED AT THE MEETING

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