In this section, we discuss the material elements of our compensation programs and policies, including the objectives of our compensation programs and the reasons why we pay each element of our executives’ compensation. Following this discussion, you will find a series of tables containing more specific details about the compensation earned by, or awarded to, the following individuals, whom we refer to as the Named Executive Officers or NEOs. This discussion focuses on compensation practices relating to the NEO’sNEOs for our 20112014 fiscal year.
The Company’s executive compensation programs are designed to achieve a number of important objectives, including attracting and retaining individuals of superior ability and managerial talent, rewarding individual contributions to the achievement of the Company’s short and long-term financial and business objectives, promoting integrity and good corporate governance, and motivating our executive officers to manage the Company in a manner that will enhance its growth and financial performance for the benefit of our stockholders, customers and employees. Accordingly, in determining the amount and mix of compensation, the Compensation Committee seeks both to provide a competitive compensation package and to structure annual and long-term incentive programs that reward achievement of performance goals that directly correlate to the enhancement of sustained, long-term stockholder value, as well as to promote executive retention.
Our Compensation Committee seeks to design compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. The Company’s variable pay programs are designed to reward outstanding individual and team performance while mitigating risk taking behavior that might affect financial results. Risk taking behavior includes the risk that an executive will take action that is detrimental to the Company’s long-term interest in order to increase the executive’s short-term performance-based compensation. We believe our programs encourage and reward prudent business judgment and appropriate risk-taking over the long term.long-term. We believe the following factors are effective in mitigating risk relating to our compensation programs:
We believe that our compensation policies for employees generally throughout our organization are not reasonably likely to have a material adverse effect on our company. From time to time a limited number of key managers are eligible to receive stock options and/or restricted stock units in varying amounts based on the judgment of the Compensation Committee. However, all awards are subject to years long vesting periods.
To promote the objectives described above, our executive compensation programs consist of the following principal elements:
The Committee does not maintain formal policies for specifically allocating compensation among current and long-term compensation or among cash and non-cash compensation elements. Instead, the Committee maintains flexibility and adjusts different elements of compensation based upon its evaluation of the Company’s key compensation goals set forth above. The Company does not have a formal policy regarding internal pay equity.
In determining the compensation of a particular executive, consideration is given to the specific corporate responsibilities that such executive is charged with as they relate to the foregoing business areas.
The Compensation Committee is cognizant of the timing of the grant of stock based compensation in relation to the publication of Company earnings releases and other public announcements. Stock based compensation grants generally will not be made generally,effective, until after the Company has disclosed, and the market has had an opportunity to react to, material, potentially market-moving, information concerning the Company.
Richard Leeds, Bruce Leeds and Robert Leeds have not historically received stock options or other stock-based incentives as part of their compensation since the Company’s initial public offering, and did not receive any such compensation in 2009, 20102012, 2013 or 2011.2014. As described below, Mr. Reinhold received stock options in 2009 and 2011 and restricted stock units in 2010 and 2011. As described below, Mr. SprostyDooley received stock options and restricted stock units in 2011.2012; Mr. Lerner received stock options in 2012, 2013 and 2014 pursuant to his employment agreement.
Benefits, Perquisites and Other Compensation - The Company provides various employee benefit programs to its employees, including NEO’s.NEOs. These benefits include medical, dental, life and disability insurance benefits and our 401(k) plan, which includes Company contributions. The Company also provides Company-owned or leased cars or automobile allowances and related reimbursements to certain NEO’sNEOs and certain other Company managers which are not provided to all employees. Certain Company executives also have or are entitled to receive severance payments, and/or change of control payments pursuant to negotiated employment agreements they have with the Company (see below). The Company does not provide to executive officers any (a) pension benefits or (b) deferred compensation under any defined contribution or other plan on a basis that is not tax-qualified.
Tax Deductibility Considerations - It is our policy generally to qualify compensation paid to executive officers for deductibility under section 162(m) of the Code. Section 162(m) generally prohibits deducting the compensation of executive officers that exceeds $1,000,000 unless that compensation is based on the satisfaction of objective performance goals. Our long termlong-term incentive plans (the 1995 Long-termLong-Term Stock Incentive Plan, the 1999 Long-termLong-Term Stock Incentive Plan, as amended, the 1995 Stock Option Plan for Non-Employee Directors, the 2006 Stock Incentive Plan for Non-Employee Directors, and the 2010 Long TermLong-Term Incentive Plan) and the Systemax Executive Incentive Plan are structured to permit awards under such plans to qualify as performance-based compensation and to maximize the tax deductibility of such awards. However, we reserve the discretion to pay compensation to our executive officers that may not be deductible.
Role of the Compensation Committee and CEO in Compensation Decisions
The Compensation Committee’s responsibility is to review and approve corporate goals relevant to the compensation of the Chief Executive Officer and, after an evaluation of the Chief Executive Officer’s performance in light of such goals, to set the compensation of the Chief Executive Officer. The Compensation Committee also approves, upon the recommendation of the Chief Executive Officer (following consultation with the two Vice Chairmen, the Chief Financial Officer, the Chief Executives of the North American and EuropeanEMEA Technology Products Groups and the President of the subsidiaries comprising the GlobalCompany’s Industrial business)Products Group), (a) the annual compensation of the other executive officers of the Company, (b) the annual compensation of certain subsidiary managers, and (c) all individual stock incentive grants to other executive officers. The Compensation Committee is also responsible for reviewing and making periodic recommendations to the Board with respect to the general compensation, benefits and perquisite policies and practices of the Company, including the Company’s stock-incentive based compensation plans. The Compensation Committee has the authority to retain third party compensation consultants to provide assistance with respect to compensation strategies, market practices, market research data and the Company’s compensation goals.
2011 “Say on Pay” Advisory Vote on Executive Compensation
We provided stockholders a “say on pay” advisory vote on executive compensation at our 2011 annual meeting of stockholders on June 10, 2011, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). Our 2011 “say on pay” proposal to approve the compensation of the Company’s NEO’s, as disclosed in the Company’s Proxy Statement for the 2011 Annual Meeting, received 87% approval from stockholders. We take this strong stockholder support as an assurance that our executive pay program and practices are reasonable and well-aligned with stockholder expectations. The Compensation Committee and management considered the results of that vote, and given the high approval level, our executive compensation program for fiscaldid not retain any such consultant in 2012, will be consistent with our 2011 program. Further, and in response to our stockholders vote on the frequency of say on pay advisory votes, we will hold an advisory vote on executive compensation every three years. We are committed to being responsive to stockholder feedback, and the results of our say on pay votes help inform the Committee’s discussions about the executive pay program.2013 or 2014.
2010 Long TermLong-Term Incentive Plan
In 2010, the Board of Directors approved, and the stockholders of the Company approved at the 2010 Annual Meeting, the 2010 Long TermLong-Term Incentive Plan in order to promote the interests of the Company and its stockholders by (i) attracting and retaining exceptional executive personnel and other key employees, including consultants and advisors to the Company and its affiliates; (ii) motivating such employees, consultants and advisors by means of performance-related incentives to achieve longer-range performance goals; and (iii) enabling such employees, consultants and advisors to participate in the long-term growth and financial success of the Company.
The 2010 Long TermLong-Term Incentive Plan provides for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards (which may be in the form of cash) or other stock-based awards. Any of the foregoing is referred to as an “Award.” Subject to adjustment in the case of certain corporate changes, Awards may be granted under the 2010 Long TermLong-Term Incentive Plan with respect to an aggregate of 7,500,000 shares of the Company’s Common Stock. During a calendar year, Awards may be granted to any individual with respect to a maximum of 1,500,000 shares (or $10,000,000 in the case of cash performance awards).
Any employee of the Company or of any affiliate and any individual providing consulting or advisory services to the Company or an affiliate, is eligible to receive an award under the 2010 Long TermLong-Term Incentive Plan. The Compensation Committee administers the Plan and determines, in its sole discretion, the terms and conditions of any Award. The Compensation Committee or the Board of Directors may delegate to one or more officers or managers of the Company the authority to designate the individuals who will receive Awards under the Plan provided that the Compensation Committee shall itself grant all Awards to those individuals who could reasonably be considered to be subject to the insider trading provisions of Section 16 of the 1934 Act or whose Awards could reasonably be expected to be subject to the deduction limitations of Section 162(m) of the Code.
The Compensation Committee determines the persons who will receive Awards, the type of Awards granted, and the number of shares subject to each Award. The Compensation Committee also determines the prices, expiration dates, vesting schedules, forfeiture provisions and other material features of Awards. The Compensation Committee has the authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it deems necessary or appropriate. All decisions and determinations of the Compensation Committee are final, binding and conclusive on all parties.
The 2010 Long TermLong-Term Incentive Plan provides that granting or vesting of restricted stock, restricted stock units and performance awards may be conditioned on the achievement of specified performance goals. These goals must be established by the Compensation Committee within 90 days of the beginning of the year (or other period to which the performance goals relate) or, if shorter, within the first 25% of the performance period.
The performance goals may be based on one or more of: share price, revenues, earnings (including but not limited to EBITDA), earnings per share, return on equity, expenses, and objective strategic and governance business goals. Each such performance goal may (1) be expressed with respect to the Company as a whole or with respect to one or more divisions or business units, (2) be expressed on a pre-tax or after-tax basis, (3) be expressed on an absolute and/or relative basis, (4) employ comparisons with past performance of the Company (including one or more divisions) and/or (5) employ comparisons with the current or past performance of other companies, and in the case of earnings-based measures, may employ comparisons to capital, stockholders’ equity and shares outstanding.
To the extent applicable, the measures used in performance goals set under the 2010 Long TermLong-Term Incentive Plan are determined in a manner consistent with the methods used in the Company’s Forms 10-K and 10-Q, except that adjustments will be made for certain items, including special, unusual or non-recurring items, acquisitions and dispositions and changes in accounting principles.
20112015 NEO Cash Bonus Plan
In March 2011,2015, pursuant to the 2010 Long TermLong-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer, established our 20112015 NEO Cash Bonus Plan (“20112015 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2011.2015. The 20112015 Bonus Plan implementedimplements for 20112015 the 2010 Long TermLong-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEO’sNEOs for 2011.2015.
The following discussion applies to 100% of the 2015 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; the 25% portion of Mr. Dooley’s 2015 total non-equity incentive compensation that is based on the 2015 Bonus Plan; and the 50% portion of Mr. Lerner’s 2015 total non-equity incentive compensation that is based on the 2015 Bonus Plan. For 2011,2015, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, wereare as follows:
· | ● | Financial Goals for 2015 (80% of total cash bonus target) |
| – | Adjusted Operating Income GrowthPerformance (60%); the: The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long termlong-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. Sales are further adjusted for the impact of any acquisition which is completed during the plan year. |
| ● | Non-Financial Goals for 2015 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, and our North American and EMEA Technology Products Groups. These distinct goals relate to various strategic initiatives including enhancing our worldwide information technology systems by continued migration to a new platform specially designed for our needs; improving performance in our UK Operations as well as stabilizing the performance of our Shared Service Center in EMEA; integration of the PEG Group acquisition and continued organic growth within our Industrial Products Group, and successful completion of the previously announced restructuring activities for our North American Technology Products Group. The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise, and the absence of any serious OSHA matters. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component. The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved. Each $500,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $500,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year. Accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels with target bonus paid out accordingly.
Under the 2015 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2015 Bonus Plan financial and non-financial goals at 100% base case target levels; and in the case of Mr. Dooley achievement of such 2015 Bonus Plan goals at 100% base case target levels (25% of the bonus) as well as achievement of the financial and non-financial goals of the Industrial Products Group at 100% base case target levels (75% of the bonus); and in the case of Mr. Lerner achievement of such 2015 Bonus Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him by the Company (50% of the bonus):
Richard Leeds | | $ | 1,400,000 | |
Bruce Leeds | | $ | 877,500 | |
Robert Leeds | | $ | 877,500 | |
Lawrence Reinhold | | $ | 1,020,000 | |
Robert Dooley | | $ | 475,000 | |
Eric Lerner | | $ | 265,000 | |
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2015 salary increases discussed below reflect the Compensation Committee’s view that such increases are appropriate in light of the current business performance and expected accomplishments in 2015.
The 2015 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 200% of the target base case bonus, and the cap on Mr. Lerner is 180% of the target base case bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As indicated above, 75% of Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives, 80% of this portion of the bonus (60% of total target bonus) is tied to achievement of financial objectives and 20% of this portion of the bonus (15% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.0 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout for over achievement of the financial objective is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, integration and marketing initiatives and are measured on whether or not the goal is achieved.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing efficiency, automation and cost of the contract and litigation management process.
2014 NEO Cash Bonus Plan
In 2014, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer, established our 2014 NEO Cash Bonus Plan (“2014 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2014. The 2014 Bonus Plan implements for 2014 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2014.
The following discussion applies to 100% of the 2014 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; the 25% portion of Mr. Dooley’s 2014 total non-equity incentive compensation that is based on the 2014 Bonus Plan; and the 50% portion of Mr. Lerner’s 2014 total non-equity incentive compensation that is based on the 2014 Bonus Plan.
For 2014, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, are as follows:
| ● | Financial Goals (80% of total cash bonus target) |
| – | Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales GrowthPerformance (20%);: The Compensation Committee believes sales performance is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. |
| ● | Non-Financial Goals for 2014 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, and our North American and EMEA Technology Products Groups. These distinct goals relate to various strategic initiatives including enhancing our worldwide information technology systems by continued migration to a new platform specially designed for our needs; transforming our EMEA operating model to a Pan-European approach, including substantially completing the implementation of our shared services center in Hungary; expanding the Industrial business through foreign sales initiatives and continued organic growth; and continued shift to a B2B oriented operation along with a stabilization of a profitable consumer business for our North American Technology Products Group. The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes toplinewill generally benefit stockholders. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component. The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved. Each $500,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $500,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
Under the 2014 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2014 Bonus Plan financial and non-financial goals at 100% base case target levels; and in the case of Mr. Dooley achievement of such 2014 Bonus Plan goals at 100% base case target levels (25% of the bonus) as well as achievement of the financial and non-financial goals of the Industrial Products Group at 100% base case target levels (75% of the bonus); and in the case of Mr. Lerner achievement of such 2014 Bonus Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him by the Company (50% of the bonus):
Richard Leeds | | $ | 1,340,000 | |
Bruce Leeds | | $ | 832,500 | |
Robert Leeds | | $ | 832,500 | |
Lawrence Reinhold | | $ | 967,500 | |
Robert Dooley | | $ | 450,000 | |
Eric Lerner | | $ | 255,000 | |
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2014 salary increases discussed below reflect the Compensation Committee’s view that such increases are appropriate in light of the current business performance and expected accomplishments in 2014.
The 2014 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 200% of the target base case bonus, and the cap on Mr. Lerner is 180% of the target base case bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As indicated above, 75% of Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives, 80% of this portion of the bonus (60% of total target bonus) is tied to achievement of financial objections and 20% of this portion of the bonus (15% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.5 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, and marketing initiatives and are measured on whether or not the goal is achieved. In 2014, the Industrial Products Group’s adjusted operating income performance resulted in an earned bonus of 80% of the bonus tied to this Industrial Products Group financial objective. The strategic objectives were met or partially met, and Mr. Dooley achieved 70% of the bonus for this component.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing the contract management process, enhancing the litigation management and budget process and strengthening the Company’s overall risk management function. The cost management and the strategic objectives were met or exceeded in 2014, resulting in a 219% payout of this bonus component.
2013 NEO Cash Bonus Plan
In 2013, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer, established our 2013 NEO Cash Bonus Plan (“2013 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2013. The 2013 Bonus Plan implements for 2013 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2013. The following discussion applies to 100% of the 2013 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; to the 25% portion of Mr. Dooley’s 2013 total non-equity incentive compensation that is based on the 2013 Bonus Plan; and to the 50% portion of Mr. Lerner’s 2013 total non-equity incentive compensation that is based on the 2013 Bonus Plan.
For 2013, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, are as follows:
| ● | Financial Goals (80% of total cash bonus target) |
| – | Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales Performance (20%): The Compensation Committee believes top line sales growth is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. |
· | ● | Non-Financial Goals for 20112013 (20% of total cash bonus target) |
| – | Strategic Accomplishments (seven specific goals weighted at an aggregated 70% of the total non-financial goal)(16%): These goals relate to various strategic initiatives relatingincluding enhancing both the North American and EMEA Technology Product Group’s information technology systems, reducing our costs in Europe, including implementing our shared services center in Hungary, expanding the Industrial business through foreign sales initiatives and the commercial launch of a new online revenue channel for the Industrial business and the implementation of website enhancements and retail strategy initiatives to enhancing our management and business information systems, and implementing distribution/warehouse system improvements.enhance North American Technology performance. The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
| – | Corporate Governance Goals for 2011 (three specific goals weighted at 30% of the total non-financial goal)(4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and proceduressafety protocols that the Compensation Committee believes will generally benefit stockholders. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component. The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved. Each $1 million variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $750,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
Under the 20112013 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of the following NEO’s,Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 20112013 Bonus Plan financial and non-financial goals at 100% base case target levels:levels; in the case of Mr. Dooley achievement of such 2013 Bonus Plan goals at 100% base case target levels (25% of the bonus) as well as achievement of the financial and non-financial goals of the Industrial Products Group at 100% base case target levels (75% of the bonus); and in the case of Mr. Lerner achievement of such 2013 Bonus Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him by the Company at 100% base case target levels (50% of the bonus), as discussed above:
Richard Leeds | $1,100,000 |
Bruce Leeds | $ 750,000 |
Robert Leeds | $ 750,000 |
Lawrence Reinhold | $ 825,000 |
Richard Leeds | | $ | 1,100,000 | |
Bruce Leeds | | $ | 750,000 | |
Robert Leeds | | $ | 750,000 | |
Lawrence Reinhold | | $ | 825,000 | |
Robert Dooley | | $ | 414,000 | |
Eric Lerner | | $ | 248,000 | |
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers;Named Executive Officers; these bonus levels are the same as those that were set for the named executive officersNamed Executive Officers in 2012 (other than for 2010,Mr. Dooley and take into account the 2011 base salary increases.Mr. Lerner). The 20112013 salary increases reflect the Compensation Committee’s view that such increases wereare appropriate in light of 20112013 NEO bonuses being set at the same level as 20102012.
The 2013 Bonus Plan imposed a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus was 185% of the target base case bonus, and 2010 NEOthe cap on Mr. Lerner was 180% of the target base salary having been heldcase bonus. The Compensation Committee had the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the same level as 2009.time the bonuses are paid out to receive the bonus.
David Sprosty, currently a named executive officer, joinedIn addition, the Board can demand repayment to the Company of any cash bonuses paid in October, 2011. Under his employment agreement, he is eligible forthe event that (i) an annual targetthe executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As indicated above, 75% of Mr. Dooley’s cash bonus is tied to achievement certain financial and strategic objectives of $700,000 during each yearthe Industrial Products Group, 60% of employment (and proratedthis portion of the target bonus (45% of the total target bonus) is tied to achievement of financial objectives and 40% of this portion of the target bonus (30% of the total target bonus) is tied to the achievement of strategic objectives for the first year) assuming Mr. Sprosty meets certain performanceIndustrial Products Group. The financial objective is based on an operating income target and each $2.5 million variance below target results in a 10% negative bonus variance. Each $1 million variance above the target results in a 10% positive bonus variance. The bonus payout is capped at 200% of the target amount. The strategic objectives established for him byare tied to achievement of various sales, customer service, and marketing initiatives including expanding the Company; 75%product line, efficiently managing supply chains and logistics capabilities, implementing new sales programs, expanding web market sales, and foreign expansion. In 2013, the Industrial Products Group achieved adjusted operating income of $39.5 million which resulted in an earned bonus of 90% of the bonus tied to this Industrial Products Group financial objective. The strategic objectives were met or substantially met, and Mr. Dooley achieved 90% of the bonus for this component.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing regulatory compliance, implementing technology solutions, and new litigation management tools, and enhancing the interaction of the Legal Department with the other business units. The cost management objective was achieved, and the strategic objectives were met or partially met, resulting in an 85% payout of this bonus component.
2012 NEO Cash Bonus Plan
In 2012, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer, established our 2012 NEO Cash Bonus Plan (“2012 Bonus Plan”) providing for target cash bonuses for the NEOs based on the performance objectivesachievement of certain financial and non-financial performance-based criteria in 2012. The 2012 Bonus Plan implemented for 2012 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2012. The following discussion applies to 100% of the Company’s North American Technology Products Group2012 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and 25%Mr. Reinhold.
For 2012, such financial and non-financial goals, the percentage of the bonus is based on certain Company financial performance objectives under the Company’s Named Executive Officer Cash Bonus Plan for the applicable year; and (ii) a special one-timeexecutive’s entire cash bonus tied to such goals and the weighting of $2,000,000 upon the North American Technology Products Group’s achievement of profitability targets,each component under such goal, were as determined pursuant to the agreement, for two consecutive full fiscal years, with the first year being no later than the year ending December 31, 2014. See “Employment Arrangements with Named Executive Officers.”follows:
Under the 2011 Bonus Plan, achievement | ● | Financial Goals (80% of total cash bonus target) |
| – | Adjusted Operating Income Growth (60%): The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales Growth (20%): The Compensation Committee believes top line sales growth is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. |
| ● | Non-Financial Goals for 2012 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): These goals relate to various strategic initiatives including enhancing both the North American and EMEA Technology Product Group’s information technology systems, reducing our costs in Europe, expanding the Industrial business’ distribution capacity through the operation of our new distribution center, the development of a new online revenue channel for the Industrial business and the creation and implementation of a long-term incentive compensation program for the Company’s senior management. The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component, starting at achievement of in excess of 80% of the target financial goal component amount up to 140% of the target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount for that component, and no bonus is payable in respect of these components if achievement is 80% or less of the target financial component goal amount. Increased bonuses (up to 300% of the target bonus amount for each component) are payable on a pro rata basis for each financial goal component amount achieved. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
Under the 2012 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2012 Bonus Plan financial and non-financial goals at 100% base case target levels:
Richard Leeds | | $ | 1,100,000 | |
Bruce Leeds | | $ | 750,000 | |
Robert Leeds | | $ | 750,000 | |
Lawrence Reinhold | | $ | 825,000 | |
The 2011Compensation Committee believes these bonus levels are appropriate for each of the named executive officers; these bonus levels are the same as those that were set for the named executive officers in 2011. The 2012 salary increases reflect the Compensation Committee’s view that such increases are appropriate in light of 2012 NEO bonuses being set at the same level as 2011.
The 2012 Bonus Plan imposed a cap on the total bonus that could be payable to any executive whose bonus was 100% earned based upon the NEO plan at 300%260% of the target base case bonus. The Compensation Committee had the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, under the 2011 Bonus Plan, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
2010 NEO Cash Bonus Plan
In March 2010, pursuant to the 2010 Long Term Incentive Plan, our Compensation Committee, with input from our Chief Executive Officer, established our 2010 NEO Cash Bonus Plan (“2010 Bonus Plan”) providing for target cash bonuses for the NEO’s based on the achievement of certain financial and non-financial performance-based criteria in 2010. The 2010 Bonus Plan implemented for 2010 the 2010 Long Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEO’s for 2010.
For 2010, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, were as follows:
· | Financial Goals (80% of total cash bonus target) |
– | Adjusted Operating Income Growth (50%); the Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
– | Sales Growth (20%); the Compensation Committee believes top line sales growth is key to our Company remaining competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. |
– | Return on Invested Capital Growth (10%); the Compensation Committee believes this will encourage management to pursue operational efficiencies in establishing strategic goals and planning for growth. Return on Invested Capital is defined as adjusted operating income divided by the sum of (i) the book value of stockholders’ equity plus the book value of interest-bearing obligations minus total cash and cash equivalents. |
· | Non-Financial Goals for 2010 (20% of total cash bonus target) |
– | Strategic Accomplishments (six specific goals weighted at an aggregated 80% of the total non-financial goal): These goals relate to various strategic initiatives that the Compensation Committee believes will enhance the Company’s operational infrastructure. |
– | Corporate Governance Goals for 2010 (two specific goals weighted at 20% of the total non-financial goal): These goals relate to continuing improvements in our internal processes that the Compensation Committee believes will generally benefit stockholders. |
Under the 2010 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of the following NEO’s, assuming achievement of the 2010 financial and non-financial goals at 100% base case target levels:
Richard Leeds | $1,100,000 |
Bruce Leeds | $ 750,000 |
Robert Leeds | $ 750,000 |
Lawrence Reinhold | $ 825,000 |
Under the 2010 Bonus Plan, achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component, starting at achievement of in excess of 80% of the target financial goal component amount up to 140% of the target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount for that component, and no bonus is payable in respect of these components if achievement is 80% or less of the target financial component goal amount. Increased bonuses (up to 300% of the target bonus amount for each component) are payable on a pro rata basis for each financial goal component amount achieved. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
The 2010 Bonus Plan imposed a cap on the total bonus that could be payable to any executive at 300% of the target base case bonus. The Compensation Committee had the discretion to adjust financial targets based on such events as acquisitions or other one- time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, under the 2010 Bonus Plan, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
2009 NEO Cash Bonus Plan
Under the Company’s 2009 Executive Incentive Plan (approved by stockholders in March 2008 and first implemented for the payment of non-equity compensation to NEO’s for 2009) executive officers of the Company were eligible to receive an annual cash bonus, based on the Company’s achievement of certain performance-based goals established by the Compensation Committee relating to Operational and Financial Performance, Strategic Accomplishments and Corporate Governance and Oversight. The amount of any annual award would vary based on performance, and was determined for each participant as a multiple of the participant’s base salary for that year relating to achieving one or more performance goals, up to an annual aggregate bonus per participant of $5 million. In the event that an award contained more than one performance goal, participants in the plan were entitled to receive the portion of the target percentage allocated to the performance goal achieved. In the event that the Company did not achieve at least the minimum performance goals established, no award payment would be made.
In March 2009, pursuant to the Systemax Executive Incentive Plan, our Compensation Committee, with input from our Chief Executive Officer, established our 2009 NEO Cash Bonus Plan (the “2009 Bonus Plan”) providing for target cash bonuses for the NEO’s based on the achievement of certain performance-based criteria in 2009. The performance goals were based on the overall performance of the Company, and recognized business unit, team and/or individual performance. The Compensation Committee had the discretion to reduce the amount payable to, or to determine that no amount will be paid to, a participant. The 2009 Bonus Plan implemented for 2009 the Executive Incentive Plan.
Awards for Messrs. Richard, Robert, and Bruce Leeds and Mr. Reinhold under the 2009 Bonus Plan had the following components: 70% for short-term financial accomplishments (tied 60% to Company consolidated earnings performance and 10% to peer group financial comparisons) and 30% for long-term strategic accomplishments (tied 20% to strategic goals, such as acquisitions and process improvements, and 10% to governance and compliance matters). Those percentages reflect the desire to reward executives for maximizing revenue while controlling costs in a difficult economic environment, while recognizing that a number of strategic initiatives must be accomplished during 2009 to properly position the company for 2010 and beyond. The applicable base salary multiples for calculating base cash bonus awards was 2 times annual salary for each of Messrs. Richard, Bruce and Robert Leeds and 1 times annual salary for Mr. Reinhold. In addition, each of these executive officers would receive a special bonus equal to 50% of their respective base target bonus amount for successful implementation of certain management financial reporting technology enhancements in 2009.
Achievement of the consolidated earnings, peer group and strategic goals was measured on a variable basis depending on the level of accomplishment. Achievement of the governance and compliance and special financial reporting technology goals was measured on the basis of whether or not the goals were effected in 2009.
For each of Messrs. Richard, Bruce, and Robert Leeds and Mr. Reinhold a specific target bonus payment (base case) was established for the consolidated earnings goal as follows: reduced bonuses are payable on a pro rata basis starting at achievement in excess of 70% of the financial target amount up to 100% of the financial target amount; 70% achievement of the financial target would guarantee a bonus of 50% of the target bonus amount for this component; and no bonus is payable in respect of this component if achievement is 70% or less of the financial target. Increased bonuses (up to 400% of target bonus amount for this component) are payable on a pro rata basis for achieving a financial goal amount in excess of the financial target amount, up to 150% of the financial target amount.
In this regard, for each of Messrs. Richard, Robert and Bruce Leeds and Mr. Reinhold, the Compensation Committee set short term financial targets based on comparing the Company’s performance in achieving organic sales growth, operating margin growth and return on invested capital growth to the performance of a peer group comprised of the following public companies, including competitors of the Company, based on publicly available information: Insight Enterprises Inc., PC Connection Inc., PC Mall Inc., Best Buy Co., Inc., Amazon.com, Inc., MSC Industrial Direct Co., Inc. and W.W. Grainger, Inc. These companies were selected because they have one or more of the following attributes: business operations in the industries and markets in which the Company participates, similar revenue and market capitalization, global scope of operations and/or diversified product lines. Bonuses in respect of the peer group companies were set on a variable basis ranging from 50% of the targeted bonus for this component (for underperforming the peer group) to up to 200% of the targeted bonus for this component (for significantly over performing the peer group). However, the Company does not utilize benchmarking to establish bonus payment amounts for the Company’s NEO’s.
Under the 2009 Plan, the Compensation Committee had set the following cash bonus target amounts for each of the following NEO’s, assuming achievement of the 2009 financial, non-financial and special information technology goals at 100% base case target levels.
Richard Leeds | $1,701,000 |
Bruce Leeds | $1,410,000 |
Robert Leeds | $1,410,000 |
Lawrence Reinhold | $ 696,000 |
However, following completion of the results for fiscal 2009, Richard Leeds requested that his actual bonus be reduced to $975,000 (a reduction of $787,000) and Bruce and Robert Leeds each requested that their actual bonuses be reduced to $670,000 (a reduction of $787,000 each). The Compensation Committee approved these reductions.
Compensation of NEOs in 20112014
In determining the compensation of the Company’s Chief Executive Officer for fiscal year 20112014 and approving the compensation of the Company’s other NEO’s,NEOs, the Committee considered, among the other factors discussed above, the achievement of the performance based criteria established under the 20112014 Bonus Plan.
The Compensation Committee determined that the Company and management had performed well,adequately, particularly given trends in the general economic environment and in the technology products industry in which the Company competes that had affected the Company’s business throughout fiscal 2011, andyear 2014. It was the view of the Compensation Committee that management had executed wellacceptably on strategic business initiatives to position the Company for growth while managing risk. Based on Company and individual performance, the Compensation Committee believes that compensation levels for fiscal year 20112014 were consistent with the philosophy and objectives of the Company’s compensation programs. However, although theThe Company met or substantially met its 2011 strategic and2014 corporate governance non-financial goals described above and met or substantially met its strategic goals. In this regard the Compensation Committee exercised its discretion to provide partial achievement credit for one strategic goal that was only partially achieved, resulting in a 93.75% payout of this bonus component. The Company sales growth target of $3.35 billion was 100% achieved after adjusting for constant currency and removing the revenue generated from an acquisition completed in the Netherlands in June 2014, resulting in a 100% payout of this bonus component. Furthermore, the Company did not achieve 100% ofpartially achieved its 2011 minimum2014 adjusted operating income financial goal, resulting in a 35% payment of this bonus component. In this regard the Compensation Committee exercised its discretion to effect adjustments (i.e., eliminating the effect on earnings of certain expenses that were outside the ordinary course of business) relating to restructuring charges in Europe, the Netherlands acquisition, recruitment costs related to the Hungary shared business center and sales growth financial goals.special bonuses in the Industrial Products Group. Accordingly, pursuant to the 20112014 Bonus Plan formulas, 20112014 non-equity incentive plan/bonus compensation for each named executive officer (other than Mr. Sprosty)Named Executive Officer was paid at only 71%60% of the target level. However, Richard Leeds requested that his bonus be reduced to $150,000, and Bruce and Robert Leeds each requested that their bonus be reduced to $100,000 each (a reduction of $651,000, $397,000 and $397,000 respectively).
The 20112014 threshold, target and maximum bonus amounts for each of our named executive officersNamed Executive Officers are found in the “GrantGrants of Plan Based Awards”Plan-Based Awards table on page 36.39.
Employment Arrangements of the Named Executive Officers
Richard Leeds
Richard Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 43%80% and bonus accounted for 56%17% of Mr. Leeds total cash compensation for 2011.2014. Mr. Leeds salary for 20122015 is set at $626,000. See$731,000. Mr. Leeds’ bonus for 2014 was determined as described above under the discussion of our 2011heading 2014 NEO Cash Bonus Plan and 2012 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2011 and 2012.Plan.
Bruce Leeds
Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 47%82% and bonus accounted for 51%14% of Mr. Leeds total cash compensation for 2011.2014. Mr. Leeds salary for 20122015 is set at $518,000. See$599,000. Mr. Leeds’ bonus for 2014 was determined as described above under the discussion of our 2011heading 2014 NEO Cash Bonus Plan and 2012 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2011 and 2012.Plan.
Robert Leeds
Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 47%82% and bonus accounted for 51%14% of Mr. Leeds total cash compensation for 2011.2014. Mr. Leeds salary for 20122015 is set at $518,000. See$607,000. Mr. Leeds’ bonus for 2014 was determined as described above under the discussion of our 2011heading 2014 NEO Cash Bonus Plan and 2012 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2011 and 2012.Plan.
Lawrence Reinhold
The Company entered into an employment agreement with Mr. Reinhold on January 17, 2007. The agreement provides for a minimum base salary of $400,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Reinhold meets certain performance objectives (including the Company’s financial performance objectives) established for him by the Company. He is entitled to receive a car allowance or a Company-leased car.
Base salary accounted for 52% and bonus accounted for 46% of Mr. Reinhold’s total cash compensation for 2014. His salary for 2015 is set at $695,000. Mr. Reinhold’s bonus for 20112014 was determined as described above under the heading 2011 Named Executive Officer2014 NEO Cash Bonus Plan. Mr. Reinhold received a grant of equity compensation in 2009 and 2011 in the form of stock options. The decision by the Compensation Committee to award Mr. Reinhold stock options was based on Mr. Reinhold’s significant accomplishments in 2009 and 2011 as well as a desire to further align his interests with those of the Company’s stockholders. Base salary accounted for 45% and bonus accounted for 53% of Mr. Reinhold’s total cash compensation for 2011. In 2010, Mr. Reinhold received a grant of 175,000 restricted stock units under the 2010 Long Term Incentive Plan. The restricted stock units vest in ten equal annual installments of 17,500 units each, beginning on May 15, 2011. In 2011, Mr. Reinhold received a grant of 100,000 restricted stock units that vest in ten equal installments beginning on November 14, 2012. As in 2009, the Compensation Committee decided to make these equity awards in recognition of Mr. Reinhold’s accomplishments in 2010 and 2011 and in order to further align his interests with those of our stockholders. His salary for 2012 is set at $608,000.
Compensation that may become payable following the termination of his employment or a change in control of the company, and other terms of the employment agreement related to such events, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
David Sprosty
The Company entered into an employment agreement with Mr. Sprosty on October 3, 2011. The agreement provides for a base salary of $700,000 (which may be increased at the discretion of the Company) and cash bonuses. Under the employment agreement, Mr. Sprosty is eligible for (i) a target cash bonus of $700,000 during each year of employment (prorated for the first year and based on assumed achievement at target level) assuming Mr. Sprosty meets certain performance objectives established for him by the Company; 75% of the bonus is based on performance objectives of the North American Technology Products Group for the applicable year and 25% of the bonus is based on certain Company financial performance objectives under the Company’s Named Executive Officer Cash Bonus Plan for the applicable year; and (ii) a special one-time cash bonus of $2,000,000 upon the North American Technology Products Group’s achievement of profitability targets, as determined pursuant to the agreement, for two consecutive full fiscal years, with the first year being no later than December 31, 2014. Of the 75% portion of Mr. Sprosty’s bonus that is based on performance objectives of the North American Technology Products Group, 60% (45% of the total bonus) is based on achieving financial goals for increasing operating income and sales, and 40% (30% of the total bonus) is based on non-financial goals involving implementing various information technology enhancements and retail store improvements. Achievement of the target financial goals set for Mr. Sprosty generates a variable target bonus payment (base case); a reduced bonus is payable for the financial goal component, starting at achievement of in excess of 70% of the target financial goal component amount up to 150% of the target financial goal component amount. No bonus is payable in respect of these components if achievement is 70% or less of the target financial component goal amount. An increased bonus (up to 200% of the target bonus amount for each component) is payable for each financial goal component amount achieved. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.Robert Dooley
Mr. SprostyDooley has no employment agreement and is also entitled to receivean “at will” employee. Base salary accounted for 56% and bonus accounted for 41% of Mr. Dooley’s total cash compensation for 2014. Mr. Dooley’s salary for 2015 is set at $475,000. Mr. Dooley’s bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
In March 2012, Mr. Dooley received a one-time cash relocation bonusgrant of $300,000 payable upon his relocation to Miami, Florida, plus up to $250,00050,000 restricted stock units under the 2010 Long-Term Incentive Plan. The restricted stock units vest in ten equal annual installments of additional reimbursements for his relocation to Miami.5,000 units each, beginning March 1, 2013. In addition in March 2012 Mr. Sprosty has also beenDooley was granted an option to purchase 100,00050,000 shares of common stock pursuant to the Company’s Long Term Stock2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date),.
In March 2014, the Company entered into a performance award based special bonus agreement with Mr. Dooley. Pursuant to such bonus agreement, Mr. Dooley will have the ability to earn a $10,000,000 bonus, payable over three years from December 31, 2016 to December 31, 2018 (half in cash and half in Company stock that is issued pursuant to the 2010 Long-Term Incentive Plan, or at the Company’s option, all in cash). The bonus payment is based on the achievement of a cumulative threshold operating income target of the Industrial Products Group for the three fiscal years ended December 31, 2014, 2015 and 2016 (and the maintenance of a minimum gross margin level in achieving such income level in each such year as well as for the years ended December 31, 2017 and 2018). This special bonus plan aligns Mr. Dooley’s incentives with long term employment and also aligns cumulative earnings of the Industrial Products Group with long-term stockholder value.
Eric Lerner
The Company entered into an employment agreement with Mr. Lerner on April 12, 2012. The agreement provides for a minimum base salary of $480,000 (which may be increased at the discretion of the Company) and a grant of 100,000 restricted stock unitsbonus (which the agreement states is expected to be at least equal to 50% of the Company’s common stock in accordance withbase salary) assuming Mr. Lerner meets certain performance objectives (50% of such bonus is based on the Company’s 2010 Long Term Incentive Plan (vesting over ten years in equal installmentsperformance objective for the Company under its NEO cash bonus plan for the applicable year and 50% of such bonus is based on eachthe achievement of performance objectives established for him by the first ten anniversaries of the grant date)Company). He is also entitled to receive a car allowance or a Company-leased car.allowance.
Base salary accounted for 45%48% and bonus accounted for 54%32% of Mr. Sprosty’sLerner total cash compensation for 2011.2014. Mr. Sprosty was not employed by the Company in 2010. HisLerner’s salary for 20122015 is set at $700,000.$552,000. Mr. Lerner’s non-equity incentive compensation for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan. In addition, he received $170,000 as a discretionary bonus in consideration of his overall performance in 2014, including significant cost savings achieved.
Pursuant to his employment agreement, in May 2012 Mr. Lerner was granted an option to purchase 25,000 shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date). In addition, his employment agreement provides on each of the first, second and third anniversary date of his commencement date he will receive an additional option to acquire at least an additional 25,000 shares of Company’s common stock (each grant will vest over a period of four years with 25% of the options for each grant vesting on the first, second, third and fourth anniversary dates of such grant dates). The decision by the Compensation Committee to award Mr. Lerner stock options was based on a desire to align his interests with those of the Company’s stockholders.
Compensation that may become payable following the termination of his employment, or a change in control of the company, and other terms of the employment agreement as described below, related to such events,event, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
2012 NEO Cash Bonus Plan
37
For 2012, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, were as follows:
· | Financial Goals (80% of total cash bonus target) |
– | Adjusted Operating Income Growth (60%); the Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
– | Sales Growth (20%); the Compensation Committee believes top line sales growth is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. |
· | Non-Financial Goals for 2012 (20% of total cash bonus target) |
– | Strategic Accomplishments (eight specific goals weighted at an aggregated 80% of the total non-financial goal): These goals relate to various strategic initiatives including enhancing both the North American and European Technology Product Group’s information technology systems, reducing our costs in Europe, expanding the Industrial business’s distribution capacity through the operation of our new distribution center, the development of a new online revenue channel for the Industrial business and the creation and implementation of a long-term incentive compensation program for the Company’s senior management . The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
– | Corporate Governance Goals for 2012 (three specific goals weighted at 20% of the total non-financial goal): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component, starting at achievement of in excess of 80% of the target financial goal component amount up to 140% of the target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount for that component, and no bonus is payable in respect of these components if achievement is 80% or less of the target financial component goal amount. Increased bonuses (up to 300% of the target bonus amount for each component) are payable on a pro rata basis for each financial goal component amount achieved. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
Under the 2012 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2012 NEO Cash Bonus Plan financial and non-financial goals at 100% base case target levels, and in the case of Mr. Sprosty, achievement of such 2012 NEO Cash Bonus Plan goals at 100% base case target levels as well as achievement of the financial and non-financial goals of the North American Technology Products Group at 100% base case target levels, as discussed above:
Richard Leeds | $1,100,000 |
Bruce Leeds | $ 750,000 |
Robert Leeds | $ 750,000 |
Lawrence Reinhold | $ 825,000 |
David Sprosty | $ 700,000 |
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers; these bonus levels are the same as those that were set for the named executive officers in 2011. The 2012 salary increases reflect the Compensation Committee’s view that such increases are appropriate in light of 2012 NEO bonuses being set at the same level as 2011 and 2011 NEO base salary having been held at the same level as 2010.
The 2012 Bonus Plan imposes a cap on the total bonus that could be payable to any executive at 300% of the target base case bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other one- time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
Compensation Committee Report to Stockholders*
The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears in this proxy statement, with our management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.
COMPENSATION COMMITTEELawrence Reinhold
The Company entered into an employment agreement with Mr. Reinhold on January 17, 2007. The agreement provides for a minimum base salary of $400,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Reinhold meets certain performance objectives (including the Company’s financial performance objectives) established for him by the Company. He is entitled to receive a car allowance or a Company-leased car.
Base salary accounted for 52% and bonus accounted for 46% of Mr. Reinhold’s total cash compensation for 2014. His salary for 2015 is set at $695,000. Mr. Reinhold’s bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
Compensation that may become payable following the termination of his employment or a change in control of the company, and other terms of the employment agreement related to such events, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
Robert D. Rosenthal (Chairman)Dooley
Stacy S. DickMr. Dooley has no employment agreement and is an “at will” employee. Base salary accounted for 56% and bonus accounted for 41% of Mr. Dooley’s total cash compensation for 2014. Mr. Dooley’s salary for 2015 is set at $475,000. Mr. Dooley’s bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
Marie Adler-Kravecas36
Compensation Committee Interlocks and Insider Participation
The members of the Company’s Compensation Committee for fiscal year 2011 were Marie Adler-Kravecas, Robert D. Rosenthal and Stacy S. Dick. The Company does not employ any member of the Compensation Committee and no member of the Compensation Committee has ever served as an officer of the Company. In addition, none of our directors serving on the Compensation Committee has any relationship that requires disclosure under SEC regulations.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Chief Executive Officer (“CEO”, our principal executive officer), Chief Financial Officer (“CFO”, our principal financial officer), and the three most highly compensated officers other than the CEO and CFO (collectively the “Named Executive Officers”) for fiscal years 2009, 2010 and 2011:
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (2) | All Other Compensation ($) | Total ($) |
Richard Leeds | 2011 | 596,000 | | | | 781,000 | 18,958(3) | 1,395,958 |
Chairman and | 2010 | 567,000 | | | | 462,000 | 23,704 | 1,052,704 |
Chief Executive | 2009 | 567,000 | | | | 975,000 | 21,394 | 1,563,394 |
Officer | | | | | | | | |
Bruce Leeds | 2011 | 494,000 | | | | 533,000 | 21,600(3) | 1,048,600 |
Vice Chairman | 2010 | 470,000 | | | | 315,000 | 20,349 | 798,291 |
| 2009 | 470,000 | | | | 670,000 | 18,321 | 1,158,321 |
Robert Leeds | 2011 | 494,000 | | | | 533,000 | 21,600(3) | 1,048,600 |
Vice Chairman | 2010 | 470,000 | | | | 315,000 | 19,064 | 797,006 |
| 2009 | 470,000 | | | | 670,000 | 16,063 | 1,156,063 |
Lawrence Reinhold | 2011 | 500,000 | | 1,430,000 | 489,025 | 586,000 | 29,709(4) | 3,031,996 |
Executive Vice | 2010 | 471,912 | | 2,168,250 | - | 346,500 | 23,776 | 3,010,438 |
President and | 2009 | 471,625 | | - | 1,013,170 | 719,200 | 26,531 | 2,230,526 |
Chief Financial | | | | | | | | |
Officer | | | | | | | | |
David Sprosty | 2011 | 145,385(5) | | 1,164,000 | 1,018,210 | 175,000 | 5,953(4) | 2,517,522 |
Chief Executive | | | | | | | | |
– Technology | | | | | | | | |
Products Group | | | | | | | | |
| (1) This column represents the fair value of the stock option on theIn March 2012, Mr. Dooley received a grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. These amounts were calculated using the Black-Scholes option-pricing model. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2011. |
| (2) The 2010 figures in this column represent the amount earned in fiscal year 2010 (although paid in fiscal year 2011) pursuant to the 2010 Bonus Plan and the 2011 figures in this column represent the amount earned in fiscal year 2011 (although paid in fiscal year 2012) pursuant to the 2011 Bonus Plan. For more information, see the Grants of Plan-Based Awards table below. Because these payments were based on predetermined performance metrics, these amounts are reported in the Non-Equity Incentive Plan column. |
| (3) Auto-related expenses. |
| (4) Includes auto-related expenses and Company 401(k) contributions.
|
| (5) Mr. Sprosty’s employment commenced in October 2011; the amount presented is his $700,000 base salary pro-rated for 2011. |
GRANTS OF PLAN-BASED AWARDS
The following table sets forth the estimated possible payouts under the cash incentive awards granted to our named executive officers in respect of 2011 performance, and the50,000 restricted stock units and stock options granted to our named executive officers in 2011.
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock Award ($/Sh) |
| | Threshold ($) | Target ($) | Maximum ($) | | | | | |
Richard Leeds | | 264,000 | 1,100,000 | 3,300,000 | | | | | |
Bruce Leeds | | 180,000 | 750,000 | 2,250,000 | | | | | |
Robert Leeds | | 180,000 | 750,000 | 2,250,000 | | | | | |
Lawrence P. Reinhold | 11/14/11 | 198,000 | 825,000 | 2,475,000 | | 100,000(2) | 50,000(3) | $14.30 | $14.30 |
| | | | | | | | | |
David Sprosty | 10/3/11 | 168,000 | 700,000 | 2,100,000 | | 100,000(4) | 100,000(5) | $11.64 | $11.64 |
| | | | | | | | | |
(1) | Amounts presented assume payment of threshold, target and maximum awards at the applicable level. |
(2) | The restricted stock units granted to Mr. Reinhold in November 2011 vest in ten equal annual installments, commencing on November 14, 2012, subject to certain restrictions and acceleration events. |
(3) | The options awarded to Mr. Reinhold in November 2011 vest in equal portions on the first, second, third and fourth anniversaries of the grant date, subject to certain restrictions and acceleration events. |
(4) | The restricted stock units granted to Mr. Sprosty in October 2011 vest in ten equal annual installments, commencing on October 3, 2012, subject to certain restrictions and acceleration events. |
(5) | The options awarded to Mr. Sprosty in October 2011 vest in equal portions on the first, second, third and fourth anniversaries of the grant date, subject to certain restrictions and acceleration events. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2011
The following table sets forth information regarding stock option and restricted stock awards previously granted which were outstanding atunder the end of fiscal year 2011.
The market value of the stock award is based on the closing price of one share of our common stock as of December 30, 2011, which was $16.41.
| Option Awards | Stock Awards |
Name (a) | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Number of Shares or Units of Stock That Have Not Vested (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested ($) (h) |
Lawrence Reinhold | 100,000 | - | $20.15 | 1/17/17 | - | - |
| 37,500 | 12,500(1) | $11.51 | 3/13/18 | - | - |
| 50,000 | 50,000(1) | $13.19 | 5/18/19 | 157,500(2) | $2,584,575 |
| - | 50,000(1) | $14.30 | 11/14/21 | 100,000(3) | $1,641,000 |
| | | | | | |
David Sprosty | - | 100,000(4) | $11.64 | 10/3/21 | 100,000(5) | $1,641,000 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(1)Options vest 25% per year over four years from date of grant. |
(2)Restricted stock units vest in ten equal annual installments of 17,500 beginning May 5, 2011. (3)Restricted stock units vest in ten equal annual installments of 10,000 beginning November 14, 2012. (4)Options vest 25% per year over four years from date of grant. (5)Restricted stock units vest in ten equal annual installments of 10,000 commencing on October 3, 2012. |
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding exercise of options to purchase shares of the Company’s common stock and vesting of restricted stock units by the named executive officers that exercised options or whose restricted stock units vested during fiscal year 2011:
| Option Awards | | Restricted Stock Units Awards |
| | | | | | | |
Name (a) | Number of Shares Acquired on Exercise (#) (b) | | Value Realized on Exercise ($) (c) | | Number of Shares Acquired on Vesting (#) (d) | | Value Realized on Vesting ($) (1) (e) |
Lawrence Reinhold | - | | - | | 17,500(2) | | $253,575 |
| | | | | | | |
(1) The amount in this column reflects the aggregate dollar amount realized upon the vesting of the restricted stock unit, determined by the market value of the underlying shares of common stock on the vesting date.
(2) Pursuant to a grant of restricted stock units on August 25, 2010 theLong-Term Incentive Plan. The restricted stock units vest in ten equal annual installments of 17,5005,000 units each, beginning March 1, 2013. In addition in March 2012 Mr. Dooley was granted an option to purchase 50,000 shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date).
In March 2014, the Company entered into a performance award based special bonus agreement with Mr. Dooley. Pursuant to such bonus agreement, Mr. Dooley will have the ability to earn a $10,000,000 bonus, payable over three years from December 31, 2016 to December 31, 2018 (half in cash and half in Company stock that is issued pursuant to the 2010 Long-Term Incentive Plan, or at the Company’s option, all in cash). The bonus payment is based on the achievement of a cumulative threshold operating income target of the Industrial Products Group for the three fiscal years ended December 31, 2014, 2015 and 2016 (and the maintenance of a minimum gross margin level in achieving such income level in each such year as well as for the years ended December 31, 2017 and 2018). This special bonus plan aligns Mr. Dooley’s incentives with long term employment and also aligns cumulative earnings of the Industrial Products Group with long-term stockholder value.
Eric Lerner
The Company entered into an employment agreement with Mr. Lerner on April 12, 2012. The agreement provides for a minimum base salary of $480,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Lerner meets certain performance objectives (50% of such bonus is based on the performance objective for the Company under its NEO cash bonus plan for the applicable year and 50% of such bonus is based on the achievement of performance objectives established for him by the Company). He is entitled to receive a car allowance.
Base salary accounted for 48% and bonus accounted for 32% of Mr. Lerner total cash compensation for 2014. Mr. Lerner’s salary for 2015 is set at $552,000. Mr. Lerner’s non-equity incentive compensation for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan. In addition, he received $170,000 as a discretionary bonus in consideration of his overall performance in 2014, including significant cost savings achieved.
Pursuant to his employment agreement, in May 15, 2011.2012 Mr. Lerner was granted an option to purchase 25,000 shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date). In addition, his employment agreement provides on each of the first, second and third anniversary date of his commencement date he will receive an additional option to acquire at least an additional 25,000 shares of Company’s common stock (each grant will vest over a period of four years with 25% of the options for each grant vesting on the first, second, third and fourth anniversary dates of such grant dates). The decision by the Compensation Committee to award Mr. Lerner stock options was based on a desire to align his interests with those of the Company’s stockholders.
Compensation that may become payable following the termination of his employment, and other terms of the employment agreement related to such event, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLCompensation Committee Report to Stockholders*
The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears in this proxy statement, with our management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.
Lawrence Reinhold
The Company entered into an employment agreement with Mr. Reinhold on January 17, 2007. The agreement provides for a minimum base salary of $400,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Reinhold meets certain performance objectives (including the Company’s financial performance objectives) established for him by the Company. He is entitled to receive a car allowance or a Company-leased car.
Base salary accounted for 52% and bonus accounted for 46% of Mr. Reinhold’s total cash compensation for 2014. His salary for 2015 is set at $695,000. Mr. Reinhold’s bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
Compensation that may become payable following the termination of his employment or a change in control of the company, and other terms of the employment agreement related to such events, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
Robert Dooley
Mr. Dooley has no employment agreement and is an “at will” employee. Base salary accounted for 56% and bonus accounted for 41% of Mr. Dooley’s total cash compensation for 2014. Mr. Dooley’s salary for 2015 is set at $475,000. Mr. Dooley’s bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
In March 2012, Mr. Dooley received a grant of 50,000 restricted stock units under the 2010 Long-Term Incentive Plan. The restricted stock units vest in ten equal annual installments of 5,000 units each, beginning March 1, 2013. In addition in March 2012 Mr. Dooley was granted an option to purchase 50,000 shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date).
In March 2014, the Company entered into a performance award based special bonus agreement with Mr. Dooley. Pursuant to such bonus agreement, Mr. Dooley will have the ability to earn a $10,000,000 bonus, payable over three years from December 31, 2016 to December 31, 2018 (half in cash and half in Company stock that is issued pursuant to the 2010 Long-Term Incentive Plan, or at the Company’s option, all in cash). The bonus payment is based on the achievement of a cumulative threshold operating income target of the Industrial Products Group for the three fiscal years ended December 31, 2014, 2015 and 2016 (and the maintenance of a minimum gross margin level in achieving such income level in each such year as well as for the years ended December 31, 2017 and 2018). This special bonus plan aligns Mr. Dooley’s incentives with long term employment and also aligns cumulative earnings of the Industrial Products Group with long-term stockholder value.
Eric Lerner
The Company entered into an employment agreement with Mr. Lerner on April 12, 2012. The agreement provides for a minimum base salary of $480,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Lerner meets certain performance objectives (50% of such bonus is based on the performance objective for the Company under its NEO cash bonus plan for the applicable year and 50% of such bonus is based on the achievement of performance objectives established for him by the Company). He is entitled to receive a car allowance.
Base salary accounted for 48% and bonus accounted for 32% of Mr. Lerner total cash compensation for 2014. Mr. Lerner’s salary for 2015 is set at $552,000. Mr. Lerner’s non-equity incentive compensation for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan. In addition, he received $170,000 as a discretionary bonus in consideration of his overall performance in 2014, including significant cost savings achieved.
Pursuant to his employment agreement, in May 2012 Mr. Lerner was granted an option to purchase 25,000 shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date). In addition, his employment agreement provides on each of the first, second and third anniversary date of his commencement date he will receive an additional option to acquire at least an additional 25,000 shares of Company’s common stock (each grant will vest over a period of four years with 25% of the options for each grant vesting on the first, second, third and fourth anniversary dates of such grant dates). The decision by the Compensation Committee to award Mr. Lerner stock options was based on a desire to align his interests with those of the Company’s stockholders.
Compensation that may become payable following the termination of his employment, and other terms of the employment agreement related to such event, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
Compensation Committee Report to Stockholders* The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears in this proxy statement, with our management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.
COMPENSATION COMMITTEE
Robert Rosenthal (Chairman)
Stacy Dick
Marie Adler-Kravecas
| * | The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as amended, which we refer to as the Securities Act, or under the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing. |
Compensation Committee Interlocks and Insider Participation The members of the Company’s Compensation Committee for fiscal year 2014 were Robert Rosenthal, Stacy Dick and Marie Adler-Kravecas. The Company does not employ any member of the Compensation Committee and no member of the Compensation Committee has ever served as an officer of the Company. In addition, none of our directors serving on the Compensation Committee has any relationship that requires disclosure under SEC regulations.
SUMMARY COMPENSATION TABLE The following table sets forth the compensation earned by the Named Executive Officers for fiscal years 2012, 2013 and 2014:
Name and Principal Position | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) | | | Option Awards ($) (1) | | | Non-Equity Incentive Plan Compensation ($) (2) | | | All Other Compensation ($) | | | Total ($) | |
Richard Leeds | 2014 | | | 701,000 | | | | | | | | | | | | | | | | 150,000 | | | | 25,200 | (3) | | | 876,200 | |
Chairman and Chief | 2013 | | | 670,000 | | | | | | | | | | | | | | | | 100,000 | | | | 16,800 | | | | 786,800 | |
Executive Officer | 2012 | | | 648,000 | | | | | | | | | | | | | | | | 396,000 | | | | 21,477 | | | | 1,065,477 | |
Bruce Leeds | 2014 | | | 568,000 | | | | | | | | | | | | | | | | 100,000 | | | | 25,200 | (3) | | | 693,200 | |
Vice Chairman | 2013 | | | 547,000 | | | | | | | | | | | | | | | | 100,000 | | | | 24,000 | | | | 671,000 | |
| 2012 | | | 526,000 | | | | | | | | | | | | | | | | 270,000 | | | | 21,600 | | | | 817,600 | |
Robert Leeds | 2014 | | | 577,000 | | | | | | | | | | | | | | | | 100,000 | | | | 25,200 | (3) | | | 702,200 | |
Vice Chairman and | 2013 | | | 554,000 | | | | | | | | | | | | | | | | 100,000 | | | | 24,000 | | | | 678,000 | |
Chief Executive-North American Technology Products Group | 2012 | | | 538,000 | | | | | | | | | | | | | | | | 270,000 | | | | 21,600 | | | | 829,600 | |
Lawrence Reinhold | 2014 | | | 660,000 | | | | | | | | | | | | | | | | 580,500 | | | | 29,100 | (4) | | | 1,269,600 | |
Executive Vice President | 2013 | | | 632,000 | | | | | | | | | | | | | | | | 268,125 | | | | 28,000 | | | | 928,125 | |
and Chief Financial Officer | 2012 | | | 608,000 | | | | | | | | | | | | | | | | 297,000 | | | | 82,850 | | | | 987,850 | |
Robert Dooley | 2014 | | | 450,000 | | | | | | | | | | | | | | | | 331,000 | | | | 21,900 | (5) | | | 802,900 | |
President of the Company’s Industrial Products Group | 2013 | | | 415,000 | | | | | | | | | | | | | | | | 313,000 | | | | 22,750 | | | | 750,750 | |
Eric Lerner | 2014 | | | 532,000 | | | | 170,000 | | | | | | | | 196,750 | | | | 185,000 | | | | 21,900 | (5) | | | 1,105,650 | |
Senior Vice President and General Counsel | 2013 | | | 516,000 | | | | | | | | | | | | 154,203 | | | | 149,000 | | | | 21,750 | | | | 840,953 | |
(1) | This column represents the fair value of the stock option on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. These amounts were calculated using the Black-Scholes option-pricing model. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2014. |
(2) | The 2012 figures in this column represent the amount earned in fiscal year 2012 (although paid in fiscal year 2013) pursuant to the 2012 Bonus Plan; the 2013 figures in this column represent the amount earned in fiscal year 2013 (although paid in fiscal year 2014) pursuant to the 2013 Bonus Plan and the 2014 figures in this column represent the amount earned in fiscal year 2014 (although paid in fiscal year 2015) pursuant to the 2014 Bonus Plan. For more information, see the Grants of Plan-Based Awards table below. Because these payments were based on predetermined performance metrics, these amounts are reported in the Non-Equity Incentive Plan column. |
(3) | Auto-related expenses. |
(4) | Includes auto-related expenses ($25,200) and Company 401(k) contributions ($3,900). |
(5) | Includes auto-related expenses ($18,000) and Company 401(k) contributions ($3,900). |
GRANTS OF PLAN-BASED AWARDS The following table sets forth the estimated possible payouts under the cash incentive awards granted to our Named Executive Officers in respect of 2014 performance under the 2014 NEO Plan.
Name | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards | |
| | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | | | | | | | | | | | |
Richard Leeds | | | | 268,000 | | | | 1,340,000 | | | | 3,484,000 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bruce Leeds | | | | 166,500 | | | | 832,500 | | | | 2,164,500 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Robert Leeds | | | | 166,500 | | | | 832,500 | | | | 2,164,500 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lawrence Reinhold | | | | 193,500 | | | | 967,000 | | | | 2,515,500 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Robert Dooley | | | | 90,000 | | | | 450,000 | | | | 900,000 | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric Lerner | 5/2/14 | | | 127,500 | | | | 255,000 | | | | 459,000 | | | | - | | | | 25,000 | (2) | | | $16.61 | | | | $7.87 | |
(1) | Amount presented assume payment of threshold, target and maximum awards at the applicable level. |
(2) | The options awarded to Mr. Lerner in May 2014 vest in equal portions on the first, second, third and fourth anniversaries of the grant date, subject to certain restrictions and acceleration events. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2014 The following table sets forth information regarding stock option and restricted stock awards previously granted which were outstanding at the end of fiscal year 2014.
The market value of the unvested stock award is based on the closing price of one share of our common stock as of December 26, 2014, the last trading day of the 2014 fiscal year, which was $13.58.
| | Option Awards | | | | Stock Awards | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | |
Lawrence Reinhold | | | 100,000 | | | | - | | | | $20.15 | | 1/17/17 | | | - | | | | - | |
| | | 50,000 | | | | - | | | | $11.51 | | 3/13/18 | | | - | | | | - | |
| | | 100,000 | | | | - | | | | $13.19 | | 5/18/19 | | | 105,000 | (3) | | | $1,425,900 | |
| | | 37,500 | | | | 12,500 | (1) | | | $14.30 | | 11/14/21 | | | 70,000 | (4) | | | $950,600 | |
| | | | | | | | | | | | | | | | | | | | | |
Robert Dooley | | | 10,000 | | | | - | | | | $19.39 | | 6/7/17 | | | - | | | | - | |
| | | 25,000 | | | | 25,000 | (1) | | | $18.73 | | 3/1/22 | | | 40,000 | (5) | | | $543,200 | |
| | | | | | | | | | | | | | | | | | | | | |
Eric Lerner | | | 12,500 | | | | 12,500 | (1) | | | $14.55 | | 5/3/22 | | | - | | | | - | |
| | | 6,250 | | | | 18,750 | (1) | | | $9.53 | | 5/3/23 | | | - | | | | - | |
| | | - | | | | 25,000 | (1)(2) | | | $16.61 | | 5/2/24 | | | - | | | | - | |
(1) | Options vest 25% per year over four years from date of grant. |
(2) | Not treated as outstanding on December 27, 2014. |
(3) | Restricted stock units vest in ten equal annual installments of 17,500 beginning May 15, 2011. |
(4) | Restricted stock units vest in ten equal annual installments of 10,000 beginning November 14, 2012. |
(5) | Restricted stock units vest in ten equal annual installments of 5,000 beginning March 1, 2013. |
OPTION EXERCISES AND STOCK VESTED The following table sets forth information regarding exercise of options to purchase shares of the Company’s common stock and vesting of restricted stock units by the Named Executive Officers that exercised options or whose restricted stock units vested during fiscal year 2014:
| | Option Awards | | | Stock Awards | |
Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) (1) | |
Lawrence Reinhold | | | - | | | | - | | | | 17,500 | (2) | | | $270,375 | |
| | | | | | | | | | | 10,000 | (3) | | | $152,900 | |
| | | | | | | | | | | | | | | | |
Robert Dooley | | | - | | | | - | | | | 5,000 | (4) | | | $58,850 | |
| | | | | | | | | | | | | | | | |
Eric Lerner | | | - | | | | - | | | | - | | | | - | |
(1) | The amount in this column reflects the aggregate dollar amount realized upon the vesting of the restricted stock unit, determined by the market value of the underlying shares of common stock on the vesting date. |
(2) | Pursuant to a grant of restricted stock units on August 25, 2010, the restricted stock units vest in ten equal annual installments of 17,500 units each, beginning on May 15, 2011. |
(3) | Pursuant to a grant of restricted stock units on November 14, 2011, the restricted stock units vest in ten equal annual installments of 10,000 units each, beginning on November 14, 2012. |
(4) | Pursuant to a grant of restricted stock units on March 1, 2012, the restricted stock units vest in ten equal annual installments of 5,000 units each, beginning on March 1, 2013. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Lawrence Reinhold
Mr. Reinhold’s employment agreement is terminable upon death or total disability, by the Company for “cause” (as defined) or without cause, or by Mr. Reinhold voluntarily for any reason or for “good reason” (as defined). In the event of termination for death, disability, cause or voluntary termination by Mr. Reinhold, the Company will owe no further payments other than accrued but unpaid base salary as applicable under disability or medical plans and any accrued but unused vacation time (up to four weeks). In the event of termination for disability or death, Mr. Reinhold would also receive the pro rata portion of any bonus which would otherwise be paid based on the average annual bonus received for the prior two years. If Mr. Reinhold resigns for good reason or if the Company terminates him for any reason other than disability, death or cause, he shall also receive in addition to the payments paiddescribed above for other terminations, severance payments equal to 12 months’ base salary (or 24 months’ base salary if termination is within 60 days prior to or one year following a “change of control,” as defined), one year’s bonus based on his average annual bonus for the prior two years and a reimbursement of costs for COBRA insurance coverage. A “Change in Control” means: (i) approval by the stockholders of the Company of (I) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which the Majority Stockholders (as defined) cease to own, directly or indirectly, in the aggregate at least forty percent (40%) of the then outstanding shares of the Parent’s common stock or the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transaction, or (II) the sale of all or substantially all of the assets of the Company; (ii) the acquisition by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of beneficial ownership within the meaning of Rule 13-d promulgated under the Securities Exchange Act which would result in the Majority Stockholders ceasing to own, directly or indirectly, in the aggregate, at least forty percent (40%) of the then outstanding shares of the Company’s common stock; or (iii) Thethe approval by the stockholders of the Company of the complete liquidation or dissolution of the Company.
If Mr. Reinhold is terminated for cause, any unvested portion of his restricted stock units will terminate and be forfeited. In the event of a change in control, Mr. Reinhold will become immediately vested in all of the restricted stock units held by him as of the date of the change in control. If Mr. Reinhold’s employment is terminated without cause or for good reason, he will become immediately vested in all non-vested units and will become immediately entitled to a distribution of that number of shares of common stock of the Company that are represented by those vested restricted stock units. If Mr. Reinhold’s employment is terminated due to disability or death, his estate or designated beneficiary(ies), whichever is applicable, will become immediately vested in 50% of the non-vested restricted stock units.
Pursuant to the Company’s standard option agreements, in the event Mr. Reinhold’s employment is terminated for any reason other than death, disability or cause, the vested portions of his options will be exercisable for up to three months, and the unvested portion will be forfeited. In the event of death or disability, the vested portion of his option will be exercisable for up to one year, and the unvested portion will be forfeited. In the event of termination for cause, all unexercised options (vested and unvested) will be forfeited.
Robert Dooley
David Sprosty
Pursuant to Mr. Sprosty’s employmentDooley’s restricted stock unit agreement, is terminable upon “death” or “total disability” (as defined), by the Company for “cause” or “without cause” (as defined), or by Mr. Sprosty voluntarily for any reason or for “good reason” (as defined). In the event of termination for any reason, the Company must pay Mr. Sprosty all accrued but unpaid base salary to the date of termination, any accrued but unused vacation time (up to four weeks) and, in the event of termination for total disability or death, the pro rata portion of any bonus which would otherwise be paid (or the pro rata portion of the average annual bonus paid for the two prior years of employment if Mr. Sprosty has been employed two or more years). If Mr. Sprosty resigns for good reason or if the Company terminates him without cause, he shall also receive severance payments (contingent upon and as express consideration for compliance with his non-compete, non-solicitation and other confidentiality obligations) equal to (a) twelve (12) months’ base salary; (b) the average annual bonus earned by him based on his average annual bonus for the prior two years (unless he was employed for less than two years in which case he will receive an amount equal to the annual target amount of the annual bonus); and (c) a reimbursement of costs for COBRA insurance coverage.
If Mr. SprostyDooley is terminated for cause, any unvested portion of thehis restricted stock units will terminate and be forfeited. In the event of a change in control, Mr. Dooley will become immediately vested in all of the restricted stock units held by him as of the date of the change in control. If Mr. Dooley’s employment is terminated by the Company without cause or for good reason, then as of the date of termination, Mr. Sprostyhe will become immediately vested in all non-vested restricted stock units and will become immediately entitled to a distribution of that number of shares of common stock of the Company that isare represented by those vested restricted stock units. If Mr. Sprosty’sDooley’s employment with the Company is terminated due to his total disability or death, he or his estate or designated beneficiary(ies), whichever is applicable, will become immediately vested in 50% of the non-vested restricted stock units.
Eric Lerner
Mr. Lerner’s employment agreement is terminable upon death or total disability, by the Company for “cause” (as defined) or without cause, or by Mr. Lerner voluntarily for any reason or for “good reason” (as defined). In the event of termination for death, disability, cause or voluntary termination by Mr. Lerner, the Company will owe no further payments other than as applicable under disability or medical plans and any accrued but unused vacation time (up to four weeks). In the event of termination for disability or death, Mr. Lerner would also receive the pro rata portion of any bonus which would otherwise be paid based on the average annual bonus received for the prior two years. If Mr. Lerner resigns for good reason or if the Company terminates him for any reason other than disability, death or cause, he shall also receive in addition to the payments described above for other terminations, severance payments equal to 12 months’ base salary, one year’s bonus based on his average annual bonus for the prior two years and a reimbursement of costs for COBRA insurance coverage for twelve months.
Pursuant to the Company’s standard option agreements, in the event Mr. Lerner’s employment is terminated for any reason other than death, disability or cause, the vested portions of his options will be exercisable for up to three months, and the unvested portion will be forfeited. In the event of death or disability, the vested portion of his option will be exercisable for up to one year, and the unvested portion will be forfeited. In the event of termination for cause, any portion of Mr. Sprosty’sall unexercised options not previously exercised (vested and unvested) will terminate upon the date of his termination from employment.be forfeited. If Mr. SprostyLerner’s employment is terminated without cause or for good reason prior to the exercise in full of his options, he may exercise (to the extent exercisable) his options in whole or in part at any time within three months after the date of termination. If Mr. Sprosty’s employment is terminated due to death or total disability prior to the exercise in full of his options, in the case of total disability, he or his personal representative or the person to whom the options are transferred by will or the laws of descent and distribution, in the case of death, may exercise (to the extent then exercisable) his options in whole or in part at any time within one year after the date of death or the date of total disability, as the case may be. Any unvested options at the time of such termination will be forfeited unless otherwise determined by the Compensation Committee.
If employment is terminated by the Company (or its successor) without cause, or by Mr. Sprosty for good reason, in either case, within six months following a “change in control” (as defined), all of Mr. Sprosty’s outstanding unvested restricted stock unitshe will become immediately vest, andvested in all of his outstanding unvested stock options, will immediately vest and all of Mr. Lerner’s outstanding options shall remain exercisable in accordance with their terms, but in no event for ninety (90)less than 90 days after such termination. A “Change in Control” means: (i) the sale or other disposition of all or substantially all of the assets of the Company; (ii) any sale or exchange of the capital stock of the Company by the stockholders of the Company in one transaction or series of related transactions as a result of which more than fifty percent (50%) of the outstanding voting securities of the Company is acquired by a person or entity or group of related persons or entities; (iii) any reorganization, consolidation or merger of the Company where the outstanding voting securities of the Company immediately before the transaction represent or are converted into less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent corporation) immediately after the transaction; or (iv) the consummation of the acquisition of fifty-one percent (51%) or more of the outstanding stock of the Company pursuant to a tender offer validly made under any federal or state law (other than a tender offer by the Company).
Termination of Employment Without Change In Control
The following table below sets forth the severance payments that would have been made had the employment of Mr. Reinhold, Mr. Dooley or Mr. SprostyLerner been terminated by the Company without cause or by them for “good reason” in a situation not involving a change in control, based on a hypothetical termination date of December 31, 2011,27, 2013, the last day of the Company’s fiscal year 2011,2014, and using the closing price of our common stock on January 3, 2012.December 26, 2013, the last trading day of the 2014 fiscal year. These amounts are estimates and the actual amounts to be paid can only be determined at the time of the termination of the officer’s employment.
Name | Cash Compensation (Salary and Bonus) ($) | Value of Accelerated Vesting of Stock Awards ($) | Medical and Other Benefits ($) | Total ($) |
Lawrence P. Reinhold | 1,074,250(1) | 4,351,750(2) | 20,615(5) | 5,446,615 |
David Sprosty | 1,400,000(3) | 1,690,000(4) | 31,778(5) | 3,121,778 |
Name | | Cash Compensation (Salary and Bonus) ($) | | | Value of Accelerated Vesting of Stock & Option Awards ($) | | | Medical and Other Benefits ($) | | | Total ($) | |
Lawrence Reinhold | | | 1,084,300 | (1) | | | 2,376,500 | (2) | | | 19,787 | (3) | | | 3,480,587 | |
| | | | | | | | | | | | | | | | |
Robert Dooley | | | - | | | | 543,200 | (4) | | | - | | | | 543,200 | |
| | | | | | | | | | | | | | | | |
Eric Lerner | | | 784,000 | (5) | | | - | | | | 29,338 | (3) | | | 813,338 | |
(1) | Represents one year’s salary of $608,000$660,000 and an average yearly cash bonus of $466,250$424,300 paid to Mr. Reinhold for fiscal years 20102013 and 2011.2014. Mr. Reinhold would also receive the bonus amount in the event of his death or disability. |
(2) | Represents accelerated vesting of 257,500175,000 unvested restricted stock units granted to Mr. Reinhold if terminated without cause or for good reason. In the event of Mr. Reinhold’s death or disability, 128,50087,500 restricted stock units (50% of the unvested restricted stock units at December 31, 2011)27, 2014) would vest, having a value of $2,175,875,$1,188,250, based on a termination date of December 31, 201127, 2014 and using a closing price of our stock on January 3, 2012.December 26, 2014, the last trading day of the 2014 fiscal year. |
(3) | Represents one year’s salaryreimbursement of $700,000medical and a target cash bonus amount of $700,000dental insurance payments under COBRA for the first year of his employment period (October 4, 2011 to October 3, 2012). Mr. Sprosty was not employed by the Company in fiscal year 2010. twelve months. |
(4) | Represents accelerated vesting of 100,00040,000 unvested restricted stock units granted to Mr. SprostyDooley if he is terminated without cause or resigns for good reason. In the event of Mr. Sprosty’sDooley’s death or disability, 50,00020,000 restricted stock units (50% of the unvested restricted stock units at December 31, 2011)27, 2014) would vest, having a value of $845,000,$271,600, based on a termination date of December 31, 201127, 2014 and using a closing price of our stock on January 3, 2012.December 26, 2014, the last trading day of the 2014 fiscal year. |
(5) | Represents reimbursementone year’s salary of medical$532,000 and dental insurance payments under COBRAan average yearly cash bonus of $252,000 paid to Mr. Lerner for one year.fiscal years 2013 and 2014. Mr. Lerner would also receive the bonus amount in the event of his death or disability. |
Change In Control Payments
The following table below sets forth the change in control payments that would have been made based on a hypothetical change of control date of December 31, 2011,27, 2014, the last day of the Company’s fiscal year 2011,2014, and using the closing price of our common stock on January 3, 2012.December 26, 2014, the last trading day of the 2014 fiscal year. These amounts are estimates and the actual amounts to be paid can only be determined at the time of the change of control.
Name | Cash Compensation (Salary and Bonus) ($) | Value of Accelerated Vesting of Stock Awards ($) | Medical and Other Benefits ($) | Total ($) |
Lawrence P. Reinhold | 1,682,250(1)(2) | 4,351,750(3) | 30,922(7) | 6,064,922 |
David Sprosty | 1,400,000(4)(5) | 2,216,000(6) | 47,667(7) | 3,663,667 |
Name | | Cash Compensation (Salary and Bonus) ($) | | | Value of Accelerated Vesting of Stock & Option Awards ($) | | | Medical and Other Benefits ($) | | | Total ($) | |
Lawrence Reinhold | | | 1,744,300 | (1)(2) | | | 2,376,500 | (3) | | | 19,786 | (4) | | | 4,140,586 | |
| | | | | | | | | | | | | | | | |
Robert Dooley | | | - | | | | 543,200 | (5) | | | - | | | | 543,200 | |
| | | | | | | | | | | | | | | | |
Eric Lerner | | | 784,000 | (6) | | | 75,938 | (7) | | | 29,338 | (8) | | | 889,276 | |
(1) | Represents two years’year’s salary of $608,000 per year$660,000 and an average yearly cash bonus of $466,250$424,300 paid to Mr. Reinhold for the fiscal years 20102013 and 2011.2014. |
(2) | Payments are made to Mr. Reinhold only if he is terminated without “cause” or resigns for “good reason” within 60 days prior to, or one year following, a Change of Control. |
(3) | Represents accelerated vesting of 257,500175,000 unvested restricted stock units. |
(4) | Represents one years’ salaryreimbursement of $700,000medical and target cash bonus of $700,000dental insurance payments under COBRA for the first year of his employment period (October 4, 2010 through October 3, 2011).twenty-four months. |
(5) | Payments areRepresents accelerated vesting of 40,000 unvested restricted stock units. |
(6) | Represents one year’s salary of $532,000 and an average yearly cash bonus of $252,000 paid to Mr. Sprosty onlyLerner for fiscal years 2013 and 2014. |
(7) | Represents accelerated vesting of 56,250 unvested stock options (only if terminated without “cause” or resigns for “good reason” within six months following a Change of Control.Control). 37,500 of such options on the hypothetical change of control date of December 27, 2014 had no intrinsic value. |
(6) | Represents accelerated vesting of 100,000 unvested restricted stock units and accelerated vesting of 100,000 unvested stock options. |
(7)(8) | Represents reimbursement of medical and dental insurance payments under COBRA for 18twelve months. |
The Company’s policy is not to pay compensation to Directors who are also employees of the Company or its subsidiaries. Each non-employee Director receives annual compensation as follows: $65,000 per year as base compensation, $10,000 per year for each committee chair, except for the Audit Committee Chair who receives $20,000, and a grant each year of shares of Company stock (restricted for sale for two years) in an amount equal to $40,000 divided by the fair market value of such stock on the date of grant. The Lead Independent Director, currently Robert D. Rosenthal, also receives an additional $20,000 per year. The restricted stock grants are made pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors, which was approved by the Company’s stockholders at the 2006 Annual Stockholders’ Meeting. Directors are reimbursed for reasonable travel and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel accident insurance policy for such travel.
Director Compensation For Fiscal Year 20112014
The following table sets forth compensation information regarding payments in 20112014 to our non-employee Directors:
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($)(1) (c) | Total ($) (h) |
Robert D. Rosenthal | 105,000 | 40,000 | 145,000 |
Stacy S. Dick | 85,000 | 40,000 | 125,000 |
Marie Adler-Kravecas | 65,000 | 40,000 | 105,000 |
Name: | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($) | |
Robert Rosenthal | | | 105,000 | | | | 40,000 | | | | 145,000 | |
Stacy Dick | | | 85,000 | | | | 40,000 | | | | 125,000 | |
Marie Adler-Kravecas | | | 65,000 | | | | 40,000 | | | | 105,000 | |
(1) This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 8 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2011. | (1) | This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2014. |
The following table presents the aggregate number of outstandingunvested restricted stock awards and stock option awards held by each of our non-employee Directors at the end of fiscal year 2011:2014:
Name : | Stock Awards | Option Awards |
Marie Adler-Kravecas | 6,989 | 5,000 |
Robert D. Rosenthal | 11,217 | 9,000 |
Stacy S. Dick | 11,217 | 14,250 |
Name: | | Stock Awards | | | Option Awards | |
Robert Rosenthal | | | 6,709 | | | | 7,000 | |
Stacy Dick | | | 6,709 | | | | 7,000 | |
Marie Adler-Kravecas | | | 6,709 | | | | 5,000 | |
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Action is to be taken at the Annual Meeting to ratify the selection of Ernst & Young LLP as independent registered public accountants for the Company for fiscal year 2012.2015.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and to be available to respond to appropriate questions. They will have an opportunity to make a statement if they so desire.
Principal Accounting Fees and Services
The following are the fees billed by Ernst & Young LLP for services rendered during fiscal years 20102013 and 2011:2014:
Audit and Audit-related Fees
Ernst & Young billed the Company $1,771,069$2,649,900 for professional services rendered for the audit of the Company’s annual consolidated financial statements for fiscal year 20112014 and its reviews of the interim financial statements included in the Company’s Forms 10-Q for that fiscal year and $1,731,000$1,998,000 for such services rendered for fiscal year 2010.
2013.
In accordance with the SEC’s definitions and rules, “audit fees” are fees that were billed to the Company by Ernst & Young for the audit of the Company’s annual financial statements, to be included in the Form 10-K, and review of financial statements included in the Form 10-Qs; for the audit of the Company’s internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects; for the attestation of management’s report on the effectiveness of internal control over financial reporting; and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. “Audit-related fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of the company’s financial statements and internal control over financial reporting, including services in connection with assisting the company in its compliance with its obligations under Section 404 of the Sarbanes-Oxley Act and related regulations.
Tax Fees
Tax fees included services for international tax compliance, planning and advice. Ernst & Young LLP billed the Company for professional services rendered for tax compliance, planning and advice in 20102013 and 20112014 an aggregate of $0$42,600 and $0,$40,000, respectively.
All Other Fees
Other fees (i.e., those that are not audit fees, audit related fees, or tax fees) of $1,995 and $2,665$2,167 were billed by Ernst & Young LLP for fiscal years 20102013 and 2011.
2014.
The Audit Committee is responsible for approving every engagement of the Company’s independent registered public accountants to perform audit or non-audit services on behalf of the Company or any of its subsidiaries before such accountants can be engaged to provide those services. The Audit Committee does not delegate its pre-approval authority. The Audit Committee has reviewed the services provided to the Company by Ernst & Young LLP and believes that the non-audit/review services it has provided are compatible with maintaining the auditor’s independence.
Stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accountants is not required by the Company’s By-Laws or other applicable legal requirement. However, the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to continue to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of different independent registered public accountants at any time during the year or thereafter if it determines that such a change would be in the best interests of the Company and its stockholders.
Vote Required for Approval
Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accountants will require the affirmative vote of the holders of a majority of the Shares present in person or by proxy and entitled to vote on the issue. There are no rights of appraisal or dissenter’s rights as a result of a vote on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL 2012,YEAR 2015, WHICH IS DESIGNATED AS PROPOSAL NO. 2.
Solicitation of Proxies
We are using the Securities and Exchange Commission, or SEC, Notice and Access rule that allows us to furnish our proxy materials over the internet to our stockholders instead of mailing paper copies of those materials to each stockholder. As a result, beginning on or about April 30, 2012,29, 2015, we sent to most of our stockholders by mail a notice containing instructions on how to access our proxy materials over the internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received only a notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the notice or on the website referred to in the notice.
The proxy statement and annual report on Form 10-K for fiscal year 20112014 are available at www.proxyvote.com.
The cost of soliciting proxies for the Annual Meeting will be borne by the Company. In addition to solicitation by mail and over the internet, solicitations may also be made by personal interview, fax and telephone. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to their principals and the Company will reimburse them for expenses in so doing. Consistent with the Company’s confidential voting procedure, Directors, officers and other regular employees of the Company, as yet undesignated, may also request the return of proxies by telephone or fax, or in person.
Stockholder Proposals
Stockholder proposals intended to be presented at the Annual Meeting, including proposals for the nomination of Directors, must be received by February 11, 2013,December 31, 2015, to be considered for the 20132016 annual meeting pursuant to Rule 14a-8 under the Exchange Act. Stockholders proposals should be mailed to Systemax Inc., Attention: Investor Relations, 11 Harbor Park Drive, Port Washington, NY 11050.
Other Matters
The Board does not know of any matter other than those described in this proxy statement that will be presented for action at the meeting. If other matters properly come before the meeting, the persons named as proxies intend to vote the Shares they represent in accordance with their judgment.
A COPY OF THE COMPANY’S FORM 10-K FOR FISCAL YEAR 20112014 IS INCLUDED AS PART OF THE COMPANY’S ANNUAL REPORT ALONG WITH THIS PROXY STATEMENT, WHICH ARE AVAILABLE AT www.proxyvote.com.
Available Information
The Company maintains an internet web site at www.systemax.com. The Company files reports with the Securities and Exchange Commission and makes available free of charge on or through this web site its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including all amendments to those reports. These are available as soon as is reasonably practicable after they are filed with the SEC. All reports mentioned above are also available from the SEC’s web site (www.sec.gov)(www.sec.gov). The information on the Company’s web site or any report the Company files with, or furnishes to, the SEC is not part of this proxy statement.
The Board has adopted the following corporate governance documents (the “Corporate Governance Documents”):
· | ● | Corporate Ethics Policy for officers, Directors and employees; |
· | ● | Charter for the Audit Committee of the Board; |
· | ● | Charter for the Compensation Committee of the Board; |
· | ● | Charter for the Nominating/Corporate Governance Committee of the Board; and |
· | ● | Corporate Governance Guidelines and Principles. |
In accordance with the corporate governance rules of the New York Stock Exchange, each of the Corporate Governance Documents is available on the Company’s Company web site (www.systemax.com).
SYSTEMAX INC.
11 HARBOR PARK DRIVE
PORT WASHINGTON, NY 11050
| VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
SYSTEMAX INC. 11 HARBOR PARK DRIVE PORT WASHINGTON, NY 11050 | VOTE BY PHONE –1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
| VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| DETACH AND RETURN THIS PORTION ONLY |
| KEEP THIS PORTION FOR YOUR RECORDS |
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| DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | | | For All | Withhold All | For All Except | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) in the line below |
| For
All
| Withhold
All
| For All
Except
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The Board of Directors recommends that you vote FOR the following: | o☐ | o☐ | o☐ | | | |
1.Election of Directors Nominees | Nominees
| | | |
| | | | |
01 Richard Leeds 05 Stacy S. Dick | 02 Bruce Leeds 06 Robert D. Rosenthal
| 03 Robert Leeds 07 Marie Adler-Kravecas
| 04 Lawrence P. Reinhold | | |
The Board of Directors recommends you vote FOR the following proposal:proposal 2: | |
| For | Against | Abstain | | |
2.A Proposal to ratify the appointment of Ernst & Young LLP as the Company’s Independentindependent registered public accountants for fiscal year 20122015 | o | o | o | | |
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NOTE: The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Stockholder(s). If no direction is made, this proxy will be voted FOR items 1 and 2. If any other matters properly come before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion. This proxy is solicited on behalf of the Board of Directors and may be revoked. | |
For address change/comments, mark here. (see reverse for instructionsinstructions) o | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | | |
| | | | | | |
Signature [PLEASE SIGN WITHIN BOX] | _________
Date
| ______________________
Date | | Signature Joint Owners(Joint Owners) | __________
| Date |
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Proxy Statement & Annual Report is/are available at www.proxyvote.com
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SYSTEMAX INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – JUNE 11, 20128, 2015
The stockholder(s) hereby appoint(s) Curt RushEric Lerner and Thomas Axmacher, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of SYSTEMAX INC. that the stockholder(s) is/are entitled to vote at the Annual meetingMeeting of Stockholder(s) to be held at 2:12:00 PM, EDT on June 11, 2012,8, 2015, at the Company’s Corporate Offices 11 Harbor Park Drive, Port Washington, NY 11050,and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDERS, IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPLYPROMPTLY USING THE ENCLOSED REPLY ENVELOPE
Address change/comments:
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side
(Continued, and to be marked, dated and signed, on the other side)