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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.    )

 

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KVH Industries, Inc.
50 Enterprise Center
Middletown, RI 02842

April 28, 2017

Dear Fellow Stockholder:

We are pleased to invite you to attend the KVH 2017 Annual Meeting of Stockholders. The meeting will take place on Wednesday, June 7, 2017 at 11:00 a.m. local time in our world headquarters at 50 Enterprise Center, Middletown, Rhode Island.

Our strategy is driven by our commitment to creating breakthrough performance and lasting competitive advantage by integrating hardware, software and service in seamless solutions for our customers – whether it's broadband connectivity for a ship's crew, satellite TV for a family onboard a boat, or fiber optic gyros for cutting-edge autonomous applications. Over the last several years, through acquisitions and investment in our business, we have significantly expanded our product and service offerings to support our strategy and position KVH for continued growth. We are confident that we have in place a highly capable management team and group of directors who are well qualified to oversee the success of the business and to represent all stockholders. We believe that our current strategy will create significant long-term value for KVH stockholders.

In addition to this proxy statement, we encourage you to read our 2016 Annual Report for a more complete picture of our performance and how we are working to increase stockholder value.

Finally, we encourage you to vote – regardless of the size of your share holdings. Every vote is important, and your participation helps us do a better job of listening and acting on what matters to you as a stockholder. You can vote over the Internet, by telephone, or by mailing a completed proxy card as outlined in the accompanying proxy statement.

On behalf of all of us at KVH, we want to thank you for your continued support and ownership of KVH. I hope to see you at the annual meeting.

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The proxy summary is an overview of information that you will find elsewhere in this proxy statement and our 2016 Annual Report. As this section is only a summary, we encourage you to read the entire proxy statement for more information about these topics before you vote.

VOTING MATTERS

ELECTION OF DIRECTOR

The following table provides summary information about our nominees for election to the Board as Class III Directors. Additional information for all Directors, including the nominee, may be found on pages 8 and 15-16.

NON-BINDING "SAY ON PAY" VOTE

We are asking our stockholders to approve, in a non-binding vote, the compensation awarded to our named executive officers for 2016. As described in the Compensation Discussion and Analysis section, the Compensation Committee of our Board of Directors oversees our executive compensation program, which is designed to motivate our executives to increase profitability and stockholder returns, to tie pay to performance effectively, and to compete effectively for and retain managerial talent.

We are asking our stockholders to indicate their support for our named executive officer compensation. We believe the information we have provided in this proxy statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management's interests are aligned with our stockholders' interests to support long-term value creation.

This "say on pay" vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and procedures described in this proxy statement.

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PROXY SUMMARY

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While this vote is advisory and not binding, the Board and the Compensation Committee will consider the outcome of the vote, along with other relevant factors, when considering future executive compensation decisions.

Additional information regarding the non-binding "say on pay" vote may be found on pages 10 to 12.

NON-BINDING "SAY ON FREQUENCY" VOTE

We are asking our stockholders to cast a non-binding vote in favor of holding future non-binding "say on pay" votes once every year, rather than once every two years or once every three years.

At our 2011 annual meeting of stockholders, a majority of the votes cast on the "say on frequency" vote were cast in favor of holding "say on pay" votes once every three years. We believe that, since 2011, a general consensus has developed that it is a good practice to hold "say on pay" votes once every year.

While this vote is advisory and not binding, the Board will consider the outcome of the vote, along with other relevant factors, when determining the frequency of future non-binding "say on pay" votes.

Additional information regarding the non-binding "say on frequency" vote may be found on page 13.

COMMITMENT TO GOOD CORPORATE GOVERNANCE

Our Board of Directors monitors best practices in governance and adopts measures it determines to be in the best interest of stockholders. Highlights of our governance practices include:

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PROXY SUMMARY

2016 BUSINESS HIGHLIGHTS

2016 was another successful year at KVH as we enhanced our market share in the maritime VSAT broadband market and continued to add more products and services for customers in both our mobile connectivity and inertial navigation business segments.

Highlights of our business performance in 2016 include:

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PROXY SUMMARY

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2016 EXECUTIVE COMPENSATION HIGHLIGHTS

The 2016 compensation program for our named executive officers was comprised of three elements – base salary, cash-based incentive compensation and an annual equity grant. We believe the compensation program for our named executive officers included key features that aligned the interests of our executives with KVH's business strategies and goals and stockholders' interests.

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PROXY SUMMARY

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING

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Director Nominees

Term Ending 2017

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PROPOSAL 1 – ELECTION OF DIRECTORS

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Proxies will not be voted at the 2017 annual meeting for more than two candidates.

Messrs. Ryan and Dodez have agreed to serve if elected, and we have no reason to believe that they will be unable to serve. If either of them is unable or declines to serve as a director at the time of the annual meeting, proxies will be voted for another nominee that our Board of Directors will designate at that time.

A majority of the votes properly cast at the annual meeting will be necessary to elect each Class III director to a three-year term. In accordance with our director resignation policy, Mr. Ryan has submitted his resignation in advance of the annual meeting, and his resignation will only become effective if (a) he fails to receive a majority of the votes properly cast on his re-election and (b) our Board accepts his resignation. For more information about majority voting and our director resignation policy, please see "Board of Directors and Committees of the Board – Corporate Governance – Majority Voting."

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Proposal 2 concerns an advisory vote on our executive compensation program.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act, our stockholders are entitled to vote at the annual meeting to approve the compensation of our named executive officers. This proposal is commonly referred to as a "say on pay" proposal.

At our 2011 annual meeting of stockholders, our stockholders voted in favor of holding future "say on pay" votes once every three years. In accordance with the will of our stockholders, our board subsequently determined to submit "say on pay" proposals to our stockholders once every three years. At the 2014 annual meeting, approximately 95% of the votes cast on the non-binding proposal to approve our executive compensation for 2013 were voted in favor of approval. Partially as a result of this overwhelmingly positive stockholder feedback, our Compensation Committee has adopted compensation packages having similar basic structures in subsequent years.

As described in our "Compensation Discussion and Analysis," the executive compensation tables and the accompanying narrative disclosure set forth in this proxy statement, we design our executive compensation program to provide an appropriate mix of fixed and variable pay, to balance rewards for achieving short-term operational performance and long-term stockholder value, and to encourage executive recruitment and retention. Our 2016 executive compensation program provided for (a) fixed compensation in the form of salaries designed to provide a competitive baseline of compensation, (b) short-term variable compensation in the form of a cash-based incentive compensation program designed to reward achievement of our financial and business goals for 2016 and (c) long-term variable compensation in the form of equity awards designed to reward our executives primarily through increases in the price of our common stock. We believe that our executive compensation program appropriately implemented our pay-for-performance philosophy and gave appropriate incentives to our named executive officers to increase stockholder value.

Highlights of our executive compensation program include the following:

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Base Salary.  –  Base salaries of our named executive officers provide fixed compensation to reward individual value that the executive brings to us through experience

and past and expected future contributions to our success while factoring in our specific needs and the base salaries of executives with comparable responsibilities at similar organizations. With the assistance of Radford Surveys and Consulting, an Aon Consulting Company, or Radford, the Compensation Committee reviewed the base salaries of our named executive officers against those of a peer group of companies and other survey data. We refer to the peer group data and the survey data collectively as the survey data. For 2016, the Compensation Committee concluded that the 2015 base salaries of our named executive officers, other than our former Chief Financial Officer, approximated the 50^th percentile of the survey data and therefore determined to make no material changes to those base salaries other than an approximately 3% cost-of-living increase. The Compensation Committee concluded that the base salary of our former Chief Financial Officer was approximately 11% below the 50^th percentile of the survey data and therefore determined to increase his base salary by 4%. We believe that aligning the base salaries of our named executive officers with appropriate benchmarks is especially critical to a competitive compensation program, as other elements of our compensation are determined as a percentage of base salary.

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Annual Cash-based Incentive Compensation.  –  In 2016, we utilized a cash-based incentive compensation plan that tied executive pay to the achievement of our annual business and financial goals and certain individual performance goals. This incentive program awarded compensation based on the degree to which our actual financial results met the financial goals of our internal business plan and the degree to which the executives met their individual performance goals. In 2016, the Compensation Committee approved two formulas for calculating our cash-based incentive compensation for our named executive officers. For the named executive officer responsible for our mobile broadband business unit, the Compensation Committee desired to tie his incentive compensation more directly to the performance of that business unit. Accordingly, 50% of his target incentive compensation was based on the degree of achievement of his business unit performance goals, 25% was based on the degree of achievement of our corporate performance goals and 25% was based on the degree of achievement of individual performance goals.

For all other named executive officers, 75% of each executive's target incentive compensation was based on

the degree of achievement of our corporate performance goals and 25% was based on the degree of achievement of individual performance goals. The Compensation Committee gave greater weight in the formula to corporate performance (including business unit performance for the executive in charge of the mobile broadband business unit) because it wished to align our executives' interest with strong corporate and business unit performance, accountability for budgeted targets and to promote cooperation among them. In 2016 the target incentive compensation (as a percentage of base salary) selected for the named executive officers averaged 17% below the market median. The corporate performance goal was based on the degree of achievement of our goals for revenue and earnings before interest, taxes, depreciation, amortization, acquisition-related expenses, equity-based compensation expenses and any one-time charges approved by the Compensation Committee, or adjusted EBITDA. The mobile broadband business unit performance goal was based on the degree of achievement of our goals for business unit revenue and business unit profit, which was defined as business unit revenue less cost of goods sold and direct operating expenses attributable to the operation of that business unit, but without deductions for depreciation, amortization, acquisition-related expenses, equity-based compensation expenses, or any one-time charges approved by the Compensation Committee, and without any allocation for corporate engineering, marketing or administrative costs. The Compensation Committee selected revenue, adjusted EBITDA and business unit profit as performance measures because it believed that they are strong operating measurements of how well or poorly we performed from a financial standpoint. In 2016, we did not achieve our corporate target for adjusted EBITDA, and we achieved 85% of our target for business unit profit for our mobile broadband business unit. We did not achieve our corporate performance goal for revenue growth or our mobile broadband business unit performance goal for revenue growth. Accordingly, based on the sliding scale used in our 2016 non-equity incentive plan, the Compensation Committee did not make any awards with respect to the portion of each named executive officer's incentive compensation target attributable to corporate performance and awarded 75% of the portion of the one named executive officer's incentive compensation target attributable to mobile broadband business unit performance. Overall, the named executive officers received an average of 38% of their target performance incentive compensation for 2016.

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Long-Term Equity Incentives.  –  Equity incentives are designed to reward the achievement of long-term growth in the price of our common stock. The equity grants to our named executive officers in 2016 consisted of restricted stock awards, with four-year vesting periods

designed to encourage the executives to focus on the long-term performance of our stock price. The Compensation Committee believed that granting equity incentives was the best method of motivating the named executive officers to manage our operations in a manner that is consistent with the long-term interests of our stockholders. The grant date fair values of the equity awards granted to the named executive officers in 2016 remained below the 25^th percentile of the survey data reviewed by the Compensation Committee and ranged from approximately 47% below to 57% below the 50^th percentile of the survey data.

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Pay Practices.  –  We do not use certain executive pay practices that stockholder advocates consider to be problematic. For example, we do not provide extensive perquisites to our named executive officers, we do not have long-term employment agreements, we do not have guaranteed severance programs, and we do not provide any tax gross-ups. We have no guaranteed salary increases, no guaranteed bonuses and no cash-based incentive compensation programs that are not tied to our performance.

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Consultant Independence.  –  Our Compensation Committee's independent consultant is retained directly by the Compensation Committee, provides no other services to us, and has provided the Committee with a written attestation of its independence from management.

The Compensation Discussion and Analysis beginning on page 19 of this proxy statement further describes our compensation program for our named executive officers and the decisions made by the Compensation Committee with respect to 2016.

Stockholders are being asked to vote on the following resolution:

RESOLVED:    That the stockholders of KVH Industries, Inc. hereby approve, on an advisory basis, the compensation of the corporation's named executive officers, as described in the Compensation Discussion and Analysis section, the executive compensation tables and the accompanying narrative disclosure set forth in the corporation's proxy statement for the 2017 annual meeting of stockholders.

Approval of this proposal requires the affirmative vote of the holders of a majority of the votes cast on the proposal at the annual meeting.

As an advisory vote, this proposal is not binding. The outcome of this advisory vote will not determine or overrule any decision by our directors or officers, create or imply any change to the fiduciary duties of our directors or officers or

create or imply any additional fiduciary duties for our directors or officers. However, our Compensation Committee and Board of Directors value the opinions expressed by our stockholders in their vote on this proposal

and will consider the outcome of the vote when making future compensation decisions for named executive officers.

Proposal 3 concerns an advisory vote on the frequency of future "say on pay" votes.

In Proposal 2, we are providing our stockholders the opportunity to approve, in a non-binding "say on pay" vote, the compensation of our named executive officers. Under the Dodd-Frank Act and Section 14A of the Exchange Act, our stockholders are also entitled at the annual meeting to cast an advisory vote regarding the frequency of future non-binding "say on pay" votes. This proposal is commonly referred to as a "say on frequency" proposal. Under this Proposal 3, stockholders may vote for a frequency of once every year, once every two years or once every three years, or may abstain.

The Board of Directors will take into consideration the outcome of the vote on this proposal in making a determination about the frequency of future non-binding "say on pay" votes.

We held our first "say on frequency" vote in 2011. At our 2011 annual meeting of stockholders, a majority of the votes cast on the "say on frequency" vote were cast in favor of holding "say on pay" votes once every three years. Our Board of Directors subsequently determined to follow the will of our stockholders and concluded that we would hold "say on pay" votes once every three years.

We believe that, since 2011, a general consensus has developed that it is a good practice to hold "say on pay" votes once every year. Annual "say on pay" votes would give our stockholders a regular opportunity to provide

prompt feedback to our Board of Directors regarding the adequacy of our executive compensation program for the most recent fiscal year. We believe that annual "say on pay" votes are now a common practice.

A plurality of the votes properly cast on this proposal at the annual meeting will be necessary to approve, in a non-binding vote, the frequency of future non-binding "say on pay" votes. Stockholders are not voting to approve or disapprove the recommendations of the Board of Directors on this proposal.

As an advisory vote, this proposal is not binding. The outcome of this advisory vote will not determine or overrule any decision by our directors or officers, create or imply any change to the fiduciary duties of our directors or officers or create or imply any additional fiduciary duties for our directors or officers. However, our Board of Directors values the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of future non-binding "say on pay" votes.

We expect to hold the next "say on frequency" vote at our annual meeting of stockholders in 2023.

Proposal 4 concerns the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017.

In accordance with its charter, the Audit Committee has selected the firm of Grant Thornton LLP, a registered public accounting firm, to be our independent auditor for the year ending December 31, 2017 and, with the endorsement of the Board of Directors, recommends that stockholders ratify such appointment. Grant Thornton LLP has served in this

capacity since June 6, 2014. We expect that representatives of Grant Thornton LLP will be present at the annual meeting. They will have an opportunity to make a statement if they wish to do so and, if present, will be available to respond to appropriate questions.

A majority of the votes properly cast at the annual meeting will be necessary to ratify the selection by the Audit Committee of our Board of Directors of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017.

Mark S. Ain has served as one of our directors since 1997, the Chairman of our Compensation Committee since 1997, a member of our Audit Committee since 2000, a member of our Nominating and Corporate Governance Committee since February 2004 and the Chairman of the Nominating and Corporate Governance Committee since February 2015. He serves on the Board of Directors of Kronos Incorporated, which he founded in 1977 and served as CEO until 2005. Mr. Ain also serves on the Board of Directors of Xcerra Corporation and various other private companies and charitable organizations. He received a B.S. from the Massachusetts Institute of Technology and an M.B.A. from the University of Rochester. Our Nominating and Corporate Governance Committee determined that Mr. Ain should serve as a director because of his 20 years of experience as a member of our Board of Directors combined with his executive and management experience serving as founder, chief executive officer and Chairman of the Board of Directors of Kronos Incorporated as well as his experience as a member of the Board of Directors of Xcerra Corporation and various private companies.

Stanley K. Honey has served as one of our directors since 1997 and a member of our Nominating and Corporate Governance Committee since February 2004. Mr. Honey was a member of the Audit Committee from 1997 to 2003 and was reappointed in February 2011. Mr. Honey served as the Director of Technology for the America's Cup Event Authority from April 2011 through December 2013, and as a consultant thereafter. From January 2004 through January 2005, Mr. Honey served as the chief scientist of Sportvision Systems, LLC, which he co-founded in November 1997. He served as president and chief technology officer of Sportvision Systems, LLC, from 2000 to January 2004 and as its executive vice president and chief technology officer from 1998 to 2000. From 1993 to 1997, Mr. Honey served as executive vice president of technology for the New Technology Group of News Corporation. From 1989 to 1993, Mr. Honey served as president and chief executive officer of ETAK, Inc., a wholly owned subsidiary of News Corporation. Mr. Honey founded ETAK in 1983 and served as its executive vice president of engineering until News Corporation acquired it in 1989. Mr. Honey received a B.S. from Yale University and an M.S. from Stanford University. Our Nominating and Corporate Governance Committee determined that Mr. Honey should serve as a director because of his 20 years of experience as a member of our Board of Directors as well as his executive and management experience serving in numerous senior level executive positions, his experience as co-founder of Sportvision Systems, LLC and founder of ETAK and his extensive knowledge of our marine customer base and the industry.

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DIRECTORS AND EXECUTIVE OFFICERS

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Martin A. Kits van Heyningen, one of our founders, has served as our president and a director since 1982, chief executive officer since 1990, and as our chairman of the Board of Directors since 2007. From 1980 to 1982, Mr. Kits van Heyningen was employed by the New England Consulting Group, a marketing consulting firm, as a marketing consultant. Mr. Kits van Heyningen received a B.A., cum laude, from Yale University and has been issued six patents. Our Nominating and Corporate Governance Committee determined that Mr. Kits van Heyningen should serve as a director because of his more than 30 years of industry experience as well as his executive leadership and management experience as our founder, president, chief executive officer and Chairman of the Board of Directors.

Charles R. Trimble has served as one of our directors since 1999, a member of our Audit Committee since 2001, a member of our Compensation Committee since 2000 and a member of our Nominating and Corporate Governance Committee since February 2004. From 1981 to 1998, he served as the president and chief executive officer of Trimble Navigation Limited, a GPS company that he founded in 1978. Previously, he served as the manager of integrated circuit research and development at Hewlett-Packard's Santa Clara Division. Mr. Trimble is an elected member of the National Academy of Engineering, and he was Chairman of the United States GPS Industry Council from 1996 to 2013. In addition, Mr. Trimble is a member of the California Institute of Technology (Caltech) Board of Trustees. He received a B.S. in engineering physics, with honors, and an M.S. in electrical engineering from the California Institute of Technology. Our Nominating and Corporate Governance Committee determined that Mr. Trimble should serve as a director because of his 18 years of experience as a member of our Board of Directors combined with his executive leadership and management experience as co-founder, president and chief executive officer of Trimble Navigation Limited as well as his experience as an elected member of the National Academy of Engineering, Chairman of the United States GPS Industry Council and a member of the California Institute of Technology Board of Trustees.

Donald W. Reilly has served as our chief financial officer since December 2016. Before joining us, Mr. Reilly served as vice president, corporate controller and chief accounting officer of Nortek, Inc., a publicly traded manufacturer and distributor of products and systems for use in building and remodeling homes and commercial structures, from November 2011 until its acquisition by Melrose Industries PLC in September 2016. From January 2011 to November 2011, Mr. Reilly served as chief financial officer of Evergreen Solar, Inc., a publicly traded manufacturer of solar panels, wafers and cells. In August 2011, Evergreen Solar filed a voluntary petition for reorganization under the United States Bankruptcy Code. From 2000 until January 2011, Mr. Reilly held several senior financial positions at GTECH Corporation, a gaming technology and services company acquired by Lottomatica, SpA in August 2006 (and now part of International Game Technology PLC), including chief financial officer of GTECH from June 2007 to January 2011 and vice president of business and financial planning from 2000 to 2007. Before joining GTECH, Mr. Reilly served as vice president and chief financial officer of Amtrol, Inc., a manufacturer of water system solutions and HVAC products, from 1998 to 2000 and as corporate controller and director of finance for A.T. Cross Company, a publicly traded manufacturer and distributor of fine writing instruments, from 1992 to 1997. Mr. Reilly began his career at Ernst & Young LLP, where he served as a senior audit manager in Providence, Rhode Island and later at its national office in Cleveland, Ohio. He holds a B.S. in accounting from Providence college and is a certified public accountant in Rhode Island.

Brent C. Bruun has served as our chief operating officer since July 2016. From November 2012 to June 2016, Mr. Bruun served as our executive vice president of mobile broadband. From January 2011 to November 2012, he served as our senior vice president of global sales and business development. He served as our vice president of global sales and business development from July 2008 to December 2010. From January 2008 until joining KVH, Mr. Bruun worked as a private consultant. From January 2007 until January 2008, Mr. Bruun served as senior vice president of strategic initiatives for SES AMERICOM, a satellite operator providing services via its fleet of 16 geosynchronous satellites covering North America. In this position, he concentrated on global mobile broadband opportunities with particular emphasis on the maritime and aeronautical markets. Other positions held at SES AMERICOM included president of Americom's Managed Solutions Division from July 2004 until December 2006 and senior vice president of business development from July 2002 until June 2004. Previously, Mr. Bruun held positions at KPMG LLP and General Electric. Mr. Bruun holds a B.S. in accounting from Alfred University and is a certified public accountant.

Daniel R. Conway has served as our executive vice president of guidance and stabilization since November 2012. From January 2003 to November 2012, he served as our vice president of business development for military and industrial products. From March 2000 to December 2002, Mr. Conway was the vice president of sales and marketing at BENTHOS Inc., an oceanographic technology company with customers in the marine, oil and gas, government and scientific markets. From 1980 to January 2000, he served in a variety of positions at Anteon (formerly Analysis & Technology), including vice president for new business development and acquisition integration from 1997 to January 2000 and vice president of operations for the Newport, Rhode Island operation from 1991 to 1997. Mr. Conway served for five years as a member of the U.S. Navy nuclear submarine force and was a Commander in the U.S. Naval Reserve (Naval Intelligence) for more than 10 years. He is a graduate of the U.S. Naval Academy with post-graduate studies in nuclear engineering, and he received an M.B.A. from the University of Rhode Island.

Robert J. Balog has served as our senior vice president of engineering since October 2008. Previously, he served as our vice president of engineering, satellite products from February 2005 to October 2008. From June 2003 to January 2005, Mr. Balog served as president of his own engineering contract services company, Automation Services, Inc., a contract product development and services group specializing in a wide range of automation solutions. From June 2001 to May 2003, Mr. Balog served as vice president of engineering at ADE Corporation. From 1989 to April 2001, Mr. Balog held a number of positions at Speedline Technologies, Inc., a supplier of capital equipment to the electronics assembly industry, including general manager and vice president of research and development. He has served on the Board of Directors of the Surface Mount Equipment Manufacturers Association, serving as Chairman and numerous other positions. Mr. Balog is the recipient of 11 U.S. patents. Mr. Balog holds a B.S. in Computer Science from Purdue University.

Felise B. Feingold has served as our vice president and general counsel since August 2007. Before joining us, from January 2004 until July 2007, she held the position of vice president and general counsel for The Jean Coutu Group (PJC) USA, Inc., which operated the Brooks/Eckerd pharmacy chain, comprising more than 1,800 stores. Her other experience includes six years, from September 1998 to December 2004, as an attorney with the international law firm of McDermott, Will & Emery. Ms. Feingold holds a B.A. in government from Cornell University, a J.D. from Hofstra University School of Law, and an M.B.A. from Boston University Graduate School of Management.

Compensation Discussion and Analysis

Overview of Executive Compensation Program

Our executive compensation program is overseen and administered by the Compensation Committee of our Board of Directors, which is comprised entirely of independent directors as determined in accordance with various NASDAQ Stock Market, Securities and Exchange Commission, or SEC, and Internal Revenue Code rules. None of its members is a current or former employee of ours. It is the goal of the Compensation Committee to create policies and practices that provide total compensation for executive officers that is fair, reasonable and competitive. The Compensation Committee operates under a written charter adopted by our Board.

All principal elements of compensation paid to our executive officers are subject to approval by the Compensation Committee. Specifically, our Board has delegated authority to the Compensation Committee to determine and approve (1) our compensation philosophy, including evaluating risk management and incentives that create risk, (2) annual base salaries, cash-based incentive compensation and equity-based compensation for our executive officers, and (3) equity-based compensation for our non-executive employees.

There are no material differences in the compensation policies, objectives or program elements and administration for our named executive officers, except that the compensation for our President, Chief Executive Officer, and Chairman of the Board of Directors, or CEO, is determined exclusively by the Compensation Committee, whereas the compensation of our other named executive officers is determined by the Compensation Committee but also takes into account the recommendations of our CEO.

Executive Compensation Philosophy and Objectives

Our executive compensation program is designed to attract, retain and motivate highly qualified executives and align their interests with the interests of our stockholders. The ultimate goal of our executive compensation program is to increase stockholder value by providing executives with appropriate incentives to achieve our business goals. In recent years, our executive compensation program has had three principal elements: annual base salary, annual cash-based incentive compensation, and long-term equity-based compensation.

Our executive compensation objectives are to:

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offer fair and competitive compensation that attracts and retains superior executive talent;

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directly and substantially link rewards to measurable corporate performance;

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align the interests of executive officers with those of stockholders by providing executive officers with an equity stake in our company;

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optimize the cost to the company and value to executives; and

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promote long-term career commitments that support a long-standing internal culture of loyalty and dedication to our interests.

The three principal elements of our executive compensation program seek to provide the following rewards:

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Base salaries provide fixed compensation to reward the individual value that an executive officer brings to us through experience and past and expected future contributions to our success, while factoring in our specific needs and comparable responsibilities at similar organizations.

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Annual cash-based incentive compensation is designed to reward the achievement of our pre-established annual business and financial goals generally set at the beginning of each year, as well as individual performance, determined on a discretionary basis. This incentive program generally awards compensation based on the degree to which our actual financial results meet the financial goals of our internal business plan and on the individual performance of each executive. In recent years, our annual incentive compensation program has been designed to reward achievement of specific targets for internal financial metrics, such as revenue and adjusted EBITDA, over which our executives have more direct control, rather than external metrics, such as stock price performance or total shareholder return, which are influenced by factors extrinsic to our performance, such as broad market trends or the performance of our industry or competitors, over which our executives have no direct control.

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Equity grants are designed to reward the achievement of long-term growth in our stock price and retain our executives. Restricted stock awards were granted with no payment of cash consideration. The restricted stock awards vest in four equal annual installments, the first of

which vested on February 17, 2017, the first anniversary of the grant date.

For a company of our size, we believe that the use of these executive compensation elements strengthens our ability to attract and retain highly qualified executives. We believe this combination of programs provides an appropriate mix of fixed and variable pay, balances short-term operational performance with long-term stockholder value, and encourages executive recruitment and retention.

Our equity incentive program is a key retention tool and our vehicle for offering long-term incentives. Equity incentives with four-year vesting periods are granted annually to executive officers to attract, motivate and retain these executives. We grant equity incentives to executive officers to encourage executive officers to work with a long-term view in the interest of stockholders and to reward the achievement of long-term growth in our stock price. We believe that granting equity incentives is the best method of motivating the executive officers to perform in a manner that is consistent with the long-term interests of our stockholders.

We do not use certain executive pay practices that stockholder advocates consider to be problematic. For example, we do not provide extensive perquisites to our named executive officers, we do not have long-term employment agreements or change-of-control agreements, we do not have guaranteed severance programs, and we do not provide any tax gross-ups. We have no guaranteed salary increases, no guaranteed bonuses and no cash-based incentive compensation programs that are not tied to our performance.

The Compensation Committee also noted that, at our 2014 annual meeting of stockholders, which is the most recent meeting at which our stockholders conducted a "say on pay" vote, our stockholders approved the compensation of our named executive officers for 2013 by a favorable vote of approximately 95% of the votes cast. Partially as a result of this overwhelmingly positive stockholder feedback, our Compensation Committee has continued to employ compensation packages having a similar basic structure to the compensation package used in 2013.

Compensation Decision-making Process

Our executives are compensated principally through a combination of base salary, cash-based incentive compensation paid in the first quarter of the following year and an annual equity grant. In addition, we may also grant an initial equity award to new executive officers when they commence employment. From time to time, we may offer a signing or retention bonus to attract a new executive officer.

The base salary and equity award for each executive, together with the overall cash-based incentive

compensation plan for all executives, are generally established within the first quarter of each fiscal year at meetings of the Compensation Committee held for this purpose. These meetings generally follow one or more informal presentations or discussions of our financial performance, including achievement of performance targets, for the prior fiscal year and an internal business plan for the then-current fiscal year for goal-setting purposes. The annual performance goals actually used for the cash-incentive compensation plan for 2016 were presented to the Compensation Committee in March 2016 but for administrative reasons the Compensation Committee did not formally approve the final form of the plan until July 2016. In deciding the compensation to be awarded to the executive officers other than the CEO for the current year and cash-based incentive compensation earned during the prior fiscal year, the Compensation Committee typically reviews and evaluates recommendations from the CEO. The CEO and the members of the Compensation Committee discuss the CEO's recommendations. In deciding the compensation to be awarded to the CEO for the current year and the cash-based incentive compensation earned by the CEO during the prior year, the Compensation Committee typically receives a written self-assessment from the CEO and recommendations from the Chairman of the Compensation Committee. The members of the Compensation Committee then discuss the Chairman's recommendations. The CEO is not present at the time of these deliberations. The Compensation Committee may accept or adjust any recommendations, and the Compensation Committee makes all final compensation decisions.

Our cash-based incentive compensation program comprises corporate performance goals and, for executives in charge of business units, business unit performance goals, as well as a discretionary element of individual performance for all executives. Under this program, our Compensation Committee approved two formulas for 2016: one formula for executive officers responsible for our mobile broadband and guidance and stabilization business units and one formula for other executive officers. For executive officers in charge of business units, the Compensation Committee desired to tie their incentive compensation more directly to the performance of their respective business units. For executives in charge of a business unit, 50% of each executive's target incentive compensation was based on the degree of achievement of applicable business unit performance goals for 2016, 25% was based on the degree of achievement of our corporate performance goals for 2016, and 25% was based on individual performance, as determined by the Compensation Committee in its discretion. In 2016, the mobile broadband business unit was led by a named executive officer, but the guidance and stabilization

business unit was not. Accordingly, this discussion and analysis does not further address the performance of the guidance and stabilization business unit. For other executive officers, 75% of each executive's target incentive compensation was based on the degree of achievement of our corporate performance goals for 2016 and 25% was based on individual performance, as determined by the Compensation Committee in its discretion. The performance portions of the cash-based incentive compensation program are generally based on formulas approved by the Compensation Committee at the start of each year, but the Compensation Committee has the discretion to award incentive compensation that differs from the formula-based amounts.

Compensation Consultant

Since 2005, the Compensation Committee has engaged Radford as its independent compensation consultant. The Compensation Committee has engaged Radford to advise on matters related to our executive compensation program and to assist in creating an effective and competitive executive compensation program. In 2016, Radford assisted the Compensation Committee by providing comparative market data on compensation practices and programs based on an analysis of executive compensation data.

Radford also provided guidance on industry best practices. In 2016, Radford advised the Compensation Committee in (1) determining base salaries for executives, (2) determining the targets for total cash-based incentive compensation as a percentage of base salary, and (3) designing and determining individual equity grants for the long-term incentive plan for executives.

Radford's competitive assessment in the 2016 report with respect to base salary, cash-based incentive compensation and equity-based compensation was taken into consideration by the Compensation Committee when setting base salaries and making changes to the cash-based incentive compensation and equity-based compensation components of the executive compensation program for 2016. Neither Radford nor any of its affiliates provided any services to us in 2016 other than Radford's services to the Compensation Committee.

Survey Data

With the assistance of Radford, the Compensation Committee compared our executive officers' compensation to data from the Radford Global Technology Survey, which included approximately 107 public high technology companies as of October 1, 2015 with revenues between $50 million and $300 million and median revenue of approximately $178 million.

Compensation Benchmarking Relative to Market

In 2016, the Compensation Committee relied on information provided by Radford in early 2016 for purposes of benchmarking our executive compensation relative to market. Radford provided the Compensation Committee with a comparison of the compensation of our executives to the compensation of executives in benchmark positions with similar titles and level of experience for the most recently available period as of October 1, 2015. The comparison did not consider executive tenure, skill or performance. The Radford data reviewed by the Compensation Committee included market data taken from the aforementioned survey data, which was gathered at the 25^th, 50^th, and 75^th percentiles for (1) base salaries, (2) short-term incentive opportunity, (3) target total cash compensation (base salary plus short-term incentive opportunity), (4) long-term incentives (Black-Scholes value of stock options and full value of other awards), and (5) target total direct compensation (target total cash compensation and long-term incentives).

Historically, the Compensation Committee has generally targeted approximately the median base salary level (50^th percentile) of the base salaries of executives in the survey data used by the Compensation Committee as the basis for comparison. Adjustments to the median base salary levels were made in 2016 based on comparisons to the survey data, market median salary increases and evaluation of other factors, such as executive tenure, skill and performance relative to expectations for average performance for comparable executives, which are not reflected in the survey data. These factors reflected the value each individual brought to us through experience, education and training, our specific needs, and the individual's past and expected future contributions to our success. Radford advised the Compensation Committee that base salary levels are considered to be competitive if they fall within 10% of the desired market position. In 2016, the Compensation Committee concluded that our 2015 base salaries for our named executive officers, other than the CFO, approximated the market 50^th percentile for most executives, ranging from 7% below to 1% above the 50^th percentile of the survey data for their respective positions. The CFO's base salary approximated the 25th percentile of the survey data for his position, which was 11% below the 50th percentile of the survey data.

The Compensation Committee believes that benchmarking and aligning base salaries is especially critical to a competitive compensation program. Other elements of our compensation are affected by changes in base salary. For example, our annual cash-based incentive compensation is targeted and paid out as a percentage of base salary.

Our compensation program allows executives to participate in an annual cash-based incentive compensation program.

Consistent with prior years, the payouts for our executives for achieving the expected level of corporate performance for 2016 (as a percentage of base salary) were targeted at approximately the median (50^th percentile) of payouts for executives in the survey data reviewed by the Compensation Committee in 2016. Radford advised the Compensation Committee that cash-based incentive compensation targets are considered to be competitive if they fall within 15% of the desired market position. As a percentage of base salary, targets for cash-based incentive compensation for the named executive officers for 2015, other than one executive in charge of a business unit, were approximately 10% below the 50^th percentile of the survey data for their respective positions. The Compensation Committee regarded these targets, as a percentage of base salary, as competitive with the market and therefore made no changes to these targets, as a percentage of base salary, from 2015 to 2016. The target for the remaining named executive officer for 2015 was approximately 45% below the 50^th percentile of the survey data for his position. In the case of this named executive officer, the Compensation Committee decided to increase his target for cash-based incentive compensation for 2016 from 50% of base salary to 60% of base salary, which approximated the 25^th percentile for his position.

Our compensation program allows executives to receive equity incentive awards under our equity incentive plans. Our primary goal is to create long-term value for stockholders, and accordingly the Compensation Committee believes that equity incentive awards provide an additional incentive to executive officers to work to maximize stockholder value. In 2014, 2015, and 2016, all named executive officers other than the CEO received the same quantity of equity awards, as their roles and responsibilities were valued at an equivalent level. The Compensation Committee believed that granting equity incentives in this manner was the best method of motivating our executive team to perform in a manner consistent with the long-term interests of our stockholders. The CEO typically receives a larger equity award because he has greater responsibility for achieving our long-term goals and improving stockholder value. Radford advised the Compensation Committee that Radford considers long-term incentive values to be competitive if they fall within 30% of the desired market position. The grant date fair values of the equity awards granted to our named executive officers in 2015 were below the 25^th percentile of the survey data and ranged from approximately 47% below to 57%below the 50^th percentile of the survey data. In light of this information, the Compensation Committee decided to target grant date fair values of equity awards closer to the median of the survey data than those of the restricted stock awards granted in 2014 and 2015. However, because the market price of our common stock on the date of grant in

2016 was substantially lower than its market price on the date of grant of the 2015 awards, increasing the grant date fair values of restricted stock awards required increasing the number of shares subject to the awards. In deciding the number of restricted stock awards to grant, the Compensation Committee took into account the number of shares available for grant under our equity compensation plans and our historical burn rate for grants under those plans, which together placed certain limitations on the size of any increase in the number of restricted stock awards. As a result of this combination of factors, the grant date fair value of the 2016 awards was only slightly higher than the grant date fair value of the 2015 awards (and was below the grant date fair value of the 2014 awards). Despite the increase in the number of shares subject to the 2016 awards, the grant date fair value of those awards remained below the 25^th percentile of the survey data reviewed by the committee (which reflected data regarding grants in 2015) for each position, including the CEO, and ranged from approximately 46% below to 54%below the 50^th percentile of the survey data.

Base Salary

The Compensation Committee defines base salary as the annualized regular cash compensation of an employee, excluding cash bonus awards, corporate contributions to employee benefit plans, and other compensation not designated as salary. As described above, base salaries are set for our named executive officers at a meeting of our Compensation Committee which is held for that purpose in the first quarter of the year.

In establishing base salaries for our named executive officers for 2016, the Compensation Committee took into account the value each individual brings to us through experience, education and training, our specific needs and the individual's past and expected future contributions to our success, as well as our overall corporate performance, the market guidance from the Radford survey data and the recommendations of our CEO (for named executive officers other than himself). The Compensation Committee also considered appropriate cost-of-living adjustments. For 2016, the Compensation Committee made a 3% cost-of-living adjustment to the base salaries of our named executive officers, as well as other small merit increases. For 2016, the adjustment to salaries for our named executive officers, other than our CFO, was an increase equal to approximately 3% of base salary for 2015, and the adjustment for our CFO was an increase of 4% of base salary for 2015. These adjustments were effective January 1, 2016. In addition, one executive also received an increase in his salary in connection with his promotion to Chief Operating Officer in July 2016 based on competitive market data for the Chief Operating Officer position

provided by Radford in its Radford Global Technology Survey dated April 2016.

Annual Cash-based Incentive Compensation

Our management incentive plan is designed to reward our executives for the achievement of annual goals, principally, achievement of corporate financial goals, and, secondarily, achievement of individual goals. It is our philosophy that the executives be rewarded for their performance as a team. We believe this is important to align our executive officers' interests with strong corporate performance and to promote cooperation among them. The executives also are rewarded for achieving individual goals for the year.

Formula for Cash-based Incentive Compensation

The management incentive plan for 2016 was adopted based on our historical financial performance, planned strategic initiatives and the existing economic environment. Annual cash-based incentive compensation opportunities as a percentage of base salary were targeted at 90% of base salary for the CEO and 35% to 55% of base salary for the other named executive officers. In 2016, we only had one named executive officer responsible for a business unit, the mobile broadband business unit. The Compensation Committee approved two formulas for calculating the cash-based incentive compensation with respect to the named executive officers, one formula for the executive responsible for our mobile broadband business unit and one formula for all other named executive officers. The incentive compensation formula for the executive in charge of our mobile broadband business unit for 2016 was based 50% on mobile broadband business unit performance goals, 25% on corporate performance goals and 25% on individual performance. The formula for determining the bonus of all other named executive officers was based 75% on corporate performance goals and 25% on individual performance. The formula for the executive in charge of the mobile broadband business unit gave significantly greater weight to the performance of the mobile broadband business unit, rather than overall corporate performance, in order to emphasis his unique responsibility for the success of that unit.

The portion of the bonus based on corporate performance was based on the degree of achievement of our corporate goals for (i) earnings before interest, taxes, depreciation, amortization, acquisition-related expenses, equity-based compensation expenses, and any one-time charges approved by the Compensation Committee, or adjusted EBITDA, and (ii) revenue. Our corporate goal for adjusted EBITDA was $26.6 million, and our corporate goal for revenue was $206.1 million. The threshold for payment of the portion of the bonus for corporate performance for the

named executive officers was our achievement of 75% of the adjusted EBITDA target, and at this level of achievement, 50% of the target bonus for corporate performance would have been earned. The bonus payment for corporate performance would have been 100% for the named executive officers if we had achieved 100% of our target for adjusted EBITDA. The bonus payment would have increased if we had exceeded our target for corporate revenue by 5%. The maximum bonus payment for corporate performance would have been awarded if we had exceeded the targets for adjusted EBITDA and revenue by 25% and 15%, respectively, in which case the payment would have been 233% of the target bonus for corporate performance. The portion of the bonus plan based on achieving mobile broadband business unit performance goals used the same general structure as the portion based on corporate performance goals but was based on the degree of achievement of that business unit's goals for (i) business unit profit, which was defined as business unit revenue less cost of goods sold and direct operating expenses attributable to the operation of that business unit, but without deductions for depreciation, amortization, acquisition-related expenses, equity-based compensation expenses, or any one-time charges approved by the Compensation Committee, and without any allocation for corporate engineering, marketing or administrative costs, and (ii) revenue. Our goal for mobile broadband business unit profit was $18.8 million, and our goal for mobile broadband business unit revenue was $118.1 million. The Compensation Committee selected adjusted EBITDA, business unit profit and revenue as performance measures because it believed that adjusted EBITDA, business unit profit and revenue are strong operating measurements of how well or poorly we performed from a financial standpoint in 2016. The Compensation Committee believed that sufficient increases in adjusted EBITDA, business unit profit and revenue should have a favorable impact on the value of our common stock, considering the degree to which improvements in these metrics typically influence the valuations of investors and stock market analysts.

The portion of the bonus based on individual performance for named executive officers was based solely on the discretion of the Compensation Committee.

Incentive Compensation Awarded

The Compensation Committee awarded incentive compensation for 2016 based on its assessment of the degree of achievement of performance goals for 2016, as well as individual performance in that year.

The Compensation Committee determined that we did not achieve our corporate minimum targets for revenue or adjusted EBITDA. The Compensation Committee determined that we achieved 85% of our target for mobile

broadband business unit revenue and 80% of our target for mobile broadband business unit profit. Accordingly, based on the sliding scale used in our 2016 non-equity incentive plan, the Compensation Committee did not make any awards with respect to the portion of each named executive officer's incentive compensation target attributable to corporate performance and awarded 75% of the portion of the one named executive officer's incentive compensation target attributable to mobile broadband business unit performance. Individual performance bonuses were awarded based on the Compensation Committee's consideration of qualitative factors (such as the executive's contribution to corporate results and attainment of business unit goals); contribution towards strategic initiatives; and other priorities. Bonuses awarded for individual performance for the named executive officers ranged from

96% to 100% of individual performance targets. Accordingly, total cash-based incentive compensation actually awarded to the named executive officers for 2016 performance was, in the case of our CEO, 22% of his base salary, rather than the targeted 90% of base salary, and, in the case of our other named executive officers (excluding our CFO, who did not participate in the plan), ranged from approximately 9% to 34% of their respective base salaries, rather than the targeted range of 35% to 55% of their respective base salaries. The following table provides information regarding the target non-equity incentive compensation for our named executive officers participating in the 2016 plan and the amount of non-equity incentive compensation actually awarded to them under the plan.

2016 Non-Equity Incentive Plan Compensation

In determining the individual performance bonus for each named executive officer, the Compensation Committee considers individual achievements throughout the year. The following summarizes some of the individual achievements of our named executive officers considered by the Compensation Committee in determining the amounts awarded for individual performance for 2016:

➤

Continued strong leadership and vision for the company, both in the industry and internally, including the creation of strategic growth initiatives for 2017 and a 2020 vision.

➤

Strong focus on new product development, including future technology platforms to support our strategic growth initiatives.

➤

Led the transformation of KVH's leadership/organizational structure and processes to position KVH for future growth.

➤

Recruited a new CFO with strong public company financial experience.

➤

Finalized an agreement with Intelsat and began overseeing our transition to the next generation platform for our mini-VSAT service.

➤

Implemented plans to increase the growth rate of our mini-VSAT service with improved user tools and new service plan designs with new subscribers added to the mini-VSAT network.

➤

Positioned IP-MobileCast for success in the market with a net increase in subscribers, new service models, and cross-selling initiatives.

➤

Developed an innovative and competitive subscription-based service offering to attract new customers to our mini-VSAT network.

➤

Improved coordination and success of cross-selling efforts with training solutions and media content with organizational and process changes.

➤

Our new product lifecycle management system has been completed and is now a standard part of our product development ISO process.

➤

Rolled out automated test process which allows real-time performance monitoring of our mini-VSAT products.

➤

Expanded our automated test methodology for product development and performance monitoring.

➤

Improved predictability and reliability of our process for development and introduction of new products

➤

Successfully managed engineering resources within budget to achieve competing development goals

➤

Achieved continued success in her role as partner and advisor to senior management on legal and compliance matters

➤

Sucessfully guided management through numerous contract negotiations critical to our future

➤

Led effort to enhance our compliance program for the international legal environment in which we operate

➤

Assumed greater responsibility for achieving a successful outcome in numerous human resource compliance matters

Equity Incentive Program

As noted above, for 2016, the Compensation Committee decided to grant restricted stock awards to our named executive officers other than the CEO with grant date fair values closer to the median of the survey data than those of the restricted stock awards granted in 2014 and 2015 in order to bring the value of the awards closer to our goals for competitive compensation, while keeping in mind the total number of shares available for grant and our historical burn rate. The equity grant to our CEO in 2016 was based upon the Radford survey data for grants to other chief executive officers, the CEO's prior performance, the value of equity awards previously granted and unvested, the importance of retaining the CEO's services and the CEO's total target direct compensation relative to the applicable benchmark. When granting equity incentives to our other named executive officers in 2016, a team approach was utilized. In 2016, consistent with the approach used in 2015, all named executive officers other than the CEO received the same equity awards, as their roles and responsibilities were valued at an equivalent level. The Compensation Committee believed that granting equity incentives in this manner was the best method of motivating our executive team to perform in a manner consistent with the long-term interests of our stockholders. The CEO received a larger award because he has greater responsibility for setting the strategy and priorites for achieving our long-term goals.

Timing of Equity Grants

We typically grant equity incentives to executives in the first quarter of each fiscal year, usually in conjunction with the annual review of the individual and collective performance of our executive officers.

We grant restricted stock awards or stock options to new hires on a case-by-case basis. In addition, we typically grant restricted stock awards or stock options to certain non-executive employees each year.

Vesting of Equity Awards

Restricted stock awards are granted with no payment of cash consideration. The restricted stock awards granted to our named executive officers in 2016 vest in four equal annual installments, the first of which vested on February 17, 2017, the first anniversary of the grant date.

Other Compensation and Perquisites

Our named executive officers are eligible to receive the same health and welfare benefits that are available to other employees in the same jurisdiction and a contribution to their benefit premium that is the same percentage as provided to other employees in the same jurisdiction. These benefit programs include health and dental insurance, life insurance, supplemental life insurance, and long-term disability insurance, and certain other benefits. In general, our employees pay between 30% and 34% of the health insurance premium due.

We maintain an Employee Stock Purchase Plan and a tax-qualified 401(k) plan, which provides for broad-based employee participation. Under the 401(k) plan, all of our U.S. employees, including executive officers, are eligible to receive matching contributions from us. We match 50% of all employee 401(k) plan contributions up to 6% of salary, with no maximum annual corporate match per employee. We do not provide defined benefit pension plans or defined contribution retirement plans to our named executive officers or other U.S. employees other than the 401(k) plan.

We provided automobile and/or housing allowances to three named executive officers in 2016. Martin A. Kits van Heyningen's automobile allowance was $20,023 and Robert J. Balog's automobile allowance was $6,000. Brent C. Bruun received $15,000 in 2016 for automobile and housing allowances. No other named executive officers received any other perquisites or other personal benefits or property from us during 2016.

Compensation Recovery

We are currently entitled to recover compensation paid to certain named executive officers pursuant to the Sarbanes-Oxley Act of 2002. Our 2016 Equity and Incentive Plan

also includes broad rights to recover both cash and equity incentives awarded under the plan. Specifically, the 2016 Equity and Incentive Plan provides that all awards under the plan are subject to recoupment or clawback of compensation under any provision of applicable law, any term of any award agreement and any policy that we may adopt from time to time. The administrator is entitled to take whatever action it determines to be necessary or appropriate to recover all or any portion of an award or any stock, payment or other compensation acquired or received in respect of that award arising or resulting from any misconduct, accounting restatement to correct an error, or any other miscalculation, error or mistake.

Equity Ownership by Executives

We do not currently have a formal stock ownership requirement for executives or any related hedging policies. However, stock ownership by executives is encouraged on a voluntary basis. Each of our executive officers holds both vested and unvested stock options and restricted stock awards to the extent shown in the table entitled "Outstanding Equity Awards as of December 31, 2016." The Compensation Committee reviews the vested and unvested stock options and restricted stock awards held by the executives each year.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code limits our ability to deduct annual compensation in excess of $1,000,000 that is paid to each of our CEO and our three

most highly paid executive officers (other than the CEO and the CFO), unless that compensation is "performance-based" within the meaning of Section 162(m) and the regulations promulgated there under. The restricted stock awards that we granted in 2016 under our Amended and Restated 2006 Stock Incentive Plan, or the 2006 Plan, did not qualify as performance-based compensation. We believe that all of our stock options do so qualify and therefore are not subject to the deduction limitation of Section 162(m). The salary and bonuses paid to our executive officers are not exempt from this deduction limit. Accordingly, we may be unable to deduct some of the amounts that may be recognized as ordinary income by our executive officers.

We consider tax deductibility in the design and administration of our executive officer compensation plans and programs. However, we believe that it is in the best interests of our stockholders that we retain flexibility and discretion to make compensation awards, whether or not deductible, when such awards are consistent with our strategic goals.

Rules under generally accepted accounting principles determine the manner in which we account for grants of equity-based compensation to our employees in our consolidated financial statements. Our accounting policies for equity-based compensation are further discussed in note 7 of our audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 9, 2017.

Name and Principal Position		​	Year		​	Salary ($)		​	Bonus ($)(1)		​	Stock Awards ($)(2)		​	Option Awards ($)(3)		​	Non-Equity Incentive Plan Compensation ($)(4)		​	All Other Compensation ($)(5)		​	Total ($)
Martin A. Kits van Heyningen			2016			480,801			1,000			437,000			—			108,180			20,023			1,047,004
President, Chief Executive Officer and			2015			466,797			1,000			—			426,348			309,837			23,600			1,227,582
Chairman of the Board of Directors			2014			453,202			1,000			623,614			—			91,773			18,418			1,188,007
Donald W. Reilly(6)		​	2016		​	9,863		​	—		​	—		​	—		​	—		​	—		​	9,863
Chief Financial Officer		​			​			​			​			​			​			​			​
Brent C. Bruun			2016			311,261			1,000			174,800			—			106,624			22,950			616,635
Chief Operating Officer			2015			266,560			1,000			168,828			—			102,959			22,950			562,296
			2014			257,546			1,000			181,896			—			30,584			20,238			491,264
Robert J. Balog		​	2016		​	275,552		​	1,000		​	174,800		​	—		​	26,453		​	13,950		​	491,755
Senior Vice President, Engineering		​	2015		​	267,526		​	1,000		​	168,828		​	—		​	78,920		​	13,898		​	530,173
​		​	2014		​	259,454		​	1,000		​	181,896		​	—		​	23,351		​	11,360		​	477,061
Felise B. Feingold			2016			263,636			1,000			174,800			—			23,072			6,035			468,543
Vice President, General Counsel			2015			255,957			1,000			168,828			—			66,080			6,047			497,912
Robert W.B. Kits van Heyningen(9)		​	2016		​	142,177		​	1,000		​	174,800		​	—		​	—		​	5,708		​	323,685
Vice President, Research and		​	2015		​	251,844		​	1,000		​	168,828		​	—		​	62,804		​	6,557		​	491,032
Development and Director		​	2014		​	244,245		​	1,000		​	181,896		​	—		​	19,234		​	4,928		​	451,303
Peter A. Rendall(7)			2016			140,326			—			174,800			—			—			4,210			319,336
Former Chief Financial Officer			2015			274,404			1,000			168,828			—			99,472			7,464			551,168
			2014			265,125			1,000			181,896			—			31,815			3,160			482,996
John F. McCarthy(8)		​	2016		​	316,000		​	—		​	—		​	—		​	—		​	—		​	316,000
Former Interim Chief Financial Officer		​			​			​			​			​			​			​			​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Reflects annual holiday bonus earned and paid in 2016, 2015 and 2014.

(2)

Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown represent the aggregate grant date fair value, computed using the closing price of our common stock on the date of grant in accordance with Accounting Standards Codification 718, Compensation – Stock Compensation (ASC 718), of restricted stock awards granted during each year, excluding the impact of estimated forfeitures related to service-based vesting conditions.

(3)

Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown represent the aggregate grant date fair value, computed using the Black-Scholes option pricing model in accordance with ASC 718, of options granted during each year excluding the impact of estimated forfeitures related to service-based vesting conditions. The assumptions made to determine the value of these awards are set forth in Note 7 of our Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 9, 2017.

(4)

For 2016, the table reflects amounts that were earned under our management incentive plan for 2016 performance and that were determined and paid in March 2017. For 2015, the table reflects amounts that were earned under our management incentive plan for 2015 performance and that were determined and paid in March 2016. For 2014, the table reflects amounts that were earned under our management incentive plan for 2014 performance and that were determined and paid in March 2015.

(5)

Reflects the value of 401(k) matching contributions and auto and housing allowances. See "Compensation Discussion and Analysis – Other Compensation and Perquisites" for more information on these allowances. Named executive officers did not receive any other perquisites, personal benefits or property.

(6)

Mr. Reilly commenced employment on December 19, 2016 at an annual salary of $300,000.

(7)

Mr. Rendall's employment with us ended on June 22, 2016.

(8)

Mr. McCarthy served as our interim CFO from May 27, 2016 to December 19, 2016.

(9)

Mr. Robert W.B. Kits van Heyningen was on an approved medical leave of absence at the beginning of 2016 and continued to receive his base salary until May 24, 2016, when he returned to work on a part-time basis, at a reduced base salary of $5,000 per month, as approved by the Compensation Committee. Mr. Robert W.B. Kits van Heyningen did not participate in our non-equity incentive compensation plan for 2016.

​

​

Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2)

​

All Other Stock Awards: Number of Shares of

​

Grant Date Fair Value of Stock and Option

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Name

​

Grant Date(1)

​

Threshold ($)

​

Target ($)

​

Maximum ($)

​

Stock (#)(3)

​

Awards ($)(4)

Martin A. Kits van Heyningen

2/17/2016

50,000

437,000

7/15/2016

—

432,721

864,360

Donald W. Reilly

​

—

​

—

​

—

​

—

​

—

​

—

Brent C. Bruun

2/17/2016

20,000

174,800

7/15/2016

—

171,194

341,959

Robert J. Balog

​

2/17/2016

​

​

​

​

​

​

​

20,000

​

174,800

​

​

7/15/2016

​

—

​

110,221

​

220,166

​

​

​

​

Felise B. Feingold

2/17/2016

20,000

174,800

7/15/2016

—

92,273

184,314

Robert W.B. Kits van Heyningen

​

2/17/2016

​

​

​

​

​

​

​

20,000

​

174,800

​

​

7/15/2016

​

—

​

66,591

​

133,016

​

​

​

​

Peter A. Rendall

2/17/2016

—

—

—

20,000

174,800

John F. McCarthy

​

—

​

—

​

—

​

—

​

—

​

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(1)

Reflects the respective dates on which the grants and 2016 management incentive plan were approved by the Compensation Committee.

(2)

The amounts shown in these columns represent the executives' annual incentive opportunity under the 2016 management incentive plan, which has corporate performance goals, business unit performance goals and an element of individual performance, as determined by the Compensation Committee in its discretion. The thresholds for achievement of corporate performance goals and sales performance goals vary by goal. All target and maximum amounts reflect payment of 100% of the bonus opportunity for individual performance. See "Compensation Discussion and Analysis – Annual Cash-based Incentive Compensation" for more information regarding this plan.

(3)

Represents the grant of restricted stock awards under the 2006 Plan. The restricted stock awards were received without payment of cash consideration. The restricted stock awards vest in four equal annual installments. See "Compensation Discussion and Analysis – Equity Incentive Program" for more information regarding these grants.

(4)

Reflects the grant date fair value of restricted stock awards granted to our named executive officers computed using the market price on the date of grant in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions.

​

Option Awards

​

Stock Awards

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Name

​

Number of Securities Underlying Unexercised Options Exercisable (#)

​

Number of Securities Underlying Unexercised Options Unexercisable (#)(1)

​

Option Exercise Price ($)

​

Option Expiration Date(2)

​

Grant Date of Shares of Stock That Have Not Vested

​

Number of Shares of Stock That Have Not Vested (#)(3)

​

Market Value of Shares of Stock That Have Not Vested ($)(4)

Martin A. Kits van Heyningen

3/11/2013

11,250

132,750

3/12/2014

22,627

266,999

2/17/2016

50,000

590,000

87,500

—

9.32

2/28/2017

22,500

67,500

12.79

3/9/2020

Donald W. Reilly

​

—

​

—

​

—

​

—

​

—

​

—

​

—

Brent C. Bruun

3/11/2013

3,281

38,716

3/12/2014

6,600

77,880

3/9/2015

9,900

116,820

2/17/2016

20,000

236,000

Robert J. Balog

​

​

​

​

​

​

​

​

​

3/11/2013

​

3,281

​

38,716

​

​

​

​

​

​

​

​

​

​

3/12/2014

​

6,600

​

77,880

​

​

​

​

​

​

​

​

​

​

3/9/2015

​

9,900

​

116,820

​

​

​

​

​

​

​

​

​

​

2/17/2016

​

20,000

​

236,000

Felise B. Feingold

3/11/2013

3,281

38,716

3/12/2014

6,600

77,880

3/9/2015

9,900

116,820

2/17/2016

20,000

236,000

Robert W.B. Kits van Heyningen

​

​

​

​

​

​

​

​

​

3/11/2013

​

3,281

​

38,716

​

​

​

​

​

​

​

​

​

​

3/12/2014

​

6,600

​

77,880

​

​

​

​

​

​

​

​

​

​

3/9/2015

​

9,900

​

116,820

​

​

​

​

​

​

​

​

​

​

2/17/2016

​

20,000

​

236,000

​

​

26,250

​

—

​

9.32

​

2/28/2017

​

​

​

​

​

​

Peter A. Rendall

—

—

—

—

—

—

—

John F. McCarthy

​

—

​

—

​

—

​

—

​

—

​

—

​

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​