The Company has leased its facility in Port Washington, NY since 1988 from an entity owned by Messrs. Richard, Leeds, Bruce Leeds and Robert Leeds, Directors of the Company. Rent expense under this leaseLease payments totaled $953,044$975,088 for fiscal year 2013.2015. The Company believes that at the time the lease was last amended in 2007, these payments were no higher than would be paid to an unrelated lessor for comparable space.
Pursuant to the stockholders agreement, the Company granted to the parties demand and incidental, or "piggy-back,"“piggy-back,” registration rights with respect to the Shares. The demand registration rights generally provide that the holders of a majority of the Shares may require, subject to certain restrictions regarding timing and number of Shares that the Company register under the Securities Act all or part of the Shares held by such stockholders. Pursuant to the incidental registration rights, the Company is required to notify such stockholders of any proposed registration of any Shares under the Securities Act and if requested by any such stockholder to include in such registration any number of sharesShares of Shares held by it subject to certain restrictions. The Company has agreed to pay all expenses and indemnify any selling stockholders against certain liabilities, including under the Securities Act, in connection with the registration of Shares pursuant to such agreement.
Information for our equity compensation plans in effect as of the end of fiscal year 20132015 is as follows:
Under SEC rules, the disclosure on executive compensation is being provided for each of the following:
· | ● | the three other most highly compensated persons serving as executive officers at year end; andend. |
· | one additional person for whom disclosure would have been provided pursuant to the SEC rules, but for the fact that the person was not serving as an executive officer of the Company at the end of the last completed fiscal year. |
In addition, we have included executive compensation disclosure for Bruce Leeds (Vice Chairman) in order to provide full disclosure with respect to our most senior executives.
Our NEOs in 20132015 (based on the criteria noted above) were as follows:
Name of NEO | Position |
Richard Leeds | Chairman and Chief Executive Officer* |
Bruce Leeds | Vice Chairman |
Robert Leeds | Vice Chairman and Chief Executive of the Company's North American Technology Products Group |
Lawrence Reinhold | Executive Vice President and Chief Financial Officer |
Robert Dooley | President of the Company's subsidiaries comprising the Global Industrial business* |
Eric Lerner | Senior Vice President and General Counsel |
David Sprosty* | Former Chief Executive of the North American Technology Products Group |
*Mr. Sprosty's employment terminated in March 2013 at which time his role was taken over by
Robert Leeds.
Central Objectives and Philosophy of Our Executive Compensation Programs
The Company'sCompany’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'sCompany’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'sCompany’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'sCompany’s long-term interest in order to increase the executive'sexecutive’s short-term performance-based compensation. We believe our programs encourage and reward prudent business judgment and appropriate risk-taking over the long-term. We believe the following factors are effective in mitigating risk relating to our compensation programs:
| · | Multiple Performance Factors. We use multiple performance factors that encourage executives to focus on the overall health of the business rather than a single financial measure. |
| · | Award Cap. Our 2011, 2012, 2013, 2014, 2015 and 20142016 NEO Cash Bonus Plans each cap the maximum award payable to any individual. |
| · | Clawback Provision. Our NEO Cash Bonus Plans provide the Company the ability to recapture all or a portion of cash awards (i) from our executive officers to the extent a bonus resulted from reported financial results that upon restatement of such results (other than as a result of changes in accounting principles) would not have generated the bonus or would have generated a lower bonus or (ii) from an executive officer if the Board learns of any misconduct by the executive officer that contributed to the Company having to restate all or a portion of its financial statements. In addition, the Board may recapture cash bonus awards from an executive if the Board determines that the executive engaged in serious ethical misconduct. |
*Effective March 10, 2016, Mr. Reinhold became the Company’s President and Chief Executive Officer. He will continue to serve as the Company’s Chief Financial Officer on an interim basis. Mr. Richard Leeds assumed the role of Executive Chairman and will help guide the Company’s long-term strategic direction and the development of new products and services.
| · | Management Processes. Board and management processes are in place to oversee risk associated with the Company'sCompany’s operations. Our Board as a whole is responsible for overseeing the Company'sCompany’s risk management process. The Board focuses on the Company'sCompany’s general risk management strategy, the most significant risks facing the Company, and seeks to ensure that appropriate risk mitigation strategies are implemented by management. The Company has enhanced its riskRisk management processes, and risk management is now a recurring Audit Committee and Board quarterly agenda item, and is considered part of strategic planning. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and receives information relating to material risks affecting the Company from management and from our Legal, Risk Management/Insurance and Internal Audit departments. |
| · | Long-Term Equity Compensation. A number of factors mitigate risks inherent in long-term equity compensation, specifically the vesting period for stock options and restricted stock unit grants, which we believe causes our executives to focus on long-term achievements and on building stockholder value. |
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 onin the judgmentdiscretion of the Compensation Committee. However, all awards are subject to years long vesting periods.
Elements of Our Executive Compensation Programs
To promote the objectives described above, our executive compensation programs consist of the following principal elements:
· Base salary;
· Non-equity incentive cash compensation, referred to for discussion purposes as bonuses;· Stock–based incentives; and
· Benefits, perquisites and other compensation. | · | Non-equity incentive cash compensation, referred to for discussion purposes as bonuses; |
24 | · | Stock–based incentives; and |
| · | Benefits, perquisites and other compensation. |
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'sCompany’s key compensation goals set forth above. The Company does not have a formal policy regarding internal pay equity.
Base Salary - Salary levels are subjectively determined based on individual and Company performance as well as an objective assessment of prevailing salary levels for comparable companies, derived from widely available published reports of the average of prevailing salary levels for comparable companies (based on industry, revenues, number of employees, and similar factors) in the Company'sCompany’s geographic regions. Such reports do not identify the component companies. Mr. Reinhold'sReinhold’s and Mr. Lerner'sLerner’s minimum salary is set pursuant to their respective employment agreements.
Cash Bonuses - Incentive cash compensation of the Company'sCompany’s NEOs under the 2011, 2012, 2013, 2014, 2015 and 20142016 NEO Cash Bonus Plans described below (and implemented under our 2010 Long-Term Incentive Plan, described below), is disclosed in the Summary Compensation table below as Non-Equity Incentive Compensation, and is based primarily upon an evaluation of Company performance as it relates to three general business areas:
| · | Operational and Financial Performance (utilizing standard metrics such as net sales, operating income, consolidated net income, earnings before interest and taxes ("EBIT"(“EBIT”), gross margin, operating margin, earnings per share, working capital, return on invested capital, stockholder equity and peer group comparisons); |
| · | Strategic Accomplishments (including growth in the business, implementation of systems, process and technology improvements, and growth in the value of the Company'sCompany’s assets, including through strategic acquisition transactions); and |
| · | Corporate Governance and Oversight (encompassing legal and regulatory compliance and adherence to Company policies including the timely filing of periodic reports with the SEC, the Sarbanes-Oxley Act, environmental, employment and safety laws and regulations and the Company'sCompany’s corporate ethics policy). |
In addition, Mr. Dooley and Mr. Lerner havehas a portion of theirhis cash bonus tied to specific business unit or personal objectives, as described below.
Pursuant to SEC rules, and except for disclosure of any actually achieved 20132015 and future financial targets and the Company'sCompany’s actual performance relative to any such achieved 20132015 and future targets, the Company is not disclosing the specific performance targets and actual performance measures for the goals used in its 2011, 2012, 2013, 2014, 2015 and 20142016 NEO Cash Bonus Plans because they represent confidential financial information that the Company does not disclose to the public, and the Company believes that disclosure of this information would cause us competitive harm. The Company believes that these performance goals were reasonably challenging to achieve. Targets are set such that only exceptional performance will result in payouts above the target incentive and poor performance will result in diminished or no incentive payment. The Company believes that these performance goals were reasonably challenging to achieve. We set the target performance goals at a level for which there is a reasonable chance of achievement based upon forecasted performance. Scenarios were developed based upon a range of assumptions used to build our annual budget. We did not perform specific analysis on the probability of the achievement of the target performance goals given that the market is difficult to predict. Rather, we relied upon our experience in setting the goals guided by our objective of setting a reasonably attainable and motivationally meaningful goal.
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.
Stock-Based Incentives - Stock-based incentives, at the present time consisting of (a) non-qualified stock options granted at 100% of the stock'sstock’s fair market value on the grant date (based on the NYSE closing price of the Company'sCompany’s common stock on that date) and/or (b) restricted stock units granted subject to certain conditions, constitute the long-term portion of the Company'sCompany’s executive compensation package. Stock based compensation provides an incentive for executives to manage the Company with a view to achieving results which would increase the Company'sCompany’s stock price over the long-term and, therefore, the return to the Company'sCompany’s stockholders. Stock option, restricted stock and restricted stock unit grants must be approved by the Compensation Committee; however, the Compensation Committee is permitted to delegate this authority to officers of the Company regarding awards to employees who are not officers or directors of the Company and who are not, and are not expected to become, "covered employees"“covered employees” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”). We do not use any specific allocation percentage or formula in determining the size of the cash and equity based components of compensation in relation to each other.
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 effective, generally, until after the Company has disclosed, and the market has had an opportunity to react to, material, potentially market-moving, information concerning the Company.
Messrs. 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'sCompany’s initial public offering, and did not receive any such compensation in 2011, 20122013, 2014 or 2013.2015. As described below, Mr. Reinhold received stock options in 2011 and restricted stock units in 2011; Mr. Dooley received stock options in 2012 and restricted stock units in 2012; Mr. Lerner received stock options in 20122013, 2014 and 2013; and Mr. Sprosty received stock options and restricted stock units in 2011 in connection with2015 pursuant to his hiring.employment agreement.
Benefits, Perquisites and Other Compensation - The Company provides various employee benefit programs to its employees, including 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 NEOs 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-term incentive plans (the 1995 Long-Term Stock Incentive Plan, the 1999 Long-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-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'sCommittee’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'sOfficer’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 Executive Chairman, two Vice Chairmen, the Chief Financial Officer, the Chief Executives of the North American and EMEA Technology Products Groups and the President of the subsidiaries comprisingCompany’s Industrial Products Group and the Global Industrial business)President of the Company’s European Technology 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'sCompany’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'sCompany’s compensation goals. The Compensation Committee did not retain any such consultant in 2011, 20122013, 2014 or 2013.2015.
2010 Long-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-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-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."“Award.” Subject to adjustment in the case of certain corporate changes, Awards may be granted under the 2010 Long-Term Incentive Plan with respect to an aggregate of 7,500,000 sharesShares of the Company'sCompany’s Common Stock. During a calendar year, Awards may be granted to any individual only with respect to a maximum of 1,500,000 sharesShares (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-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 sharesShares 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-Term Incentive Plan provides that granting or vesting of options, 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'stockholders’ equity and shares outstanding.
To the extent applicable, the measures used in performance goals set under the 2010 Long-Term Incentive Plan are determined in a manner consistent with the methods used in the Company'sCompany’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.
2016 NEO Cash Bonus Plan
In 2016, 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 2016 NEO Cash Bonus Plan (“2016 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2016. The 2016 Bonus Plan implements for 2016 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2016.
The following discussion applies to 100% of the 2016 total non-equity incentive compensation for each of Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and the 50% portion of Mr. Lerner’s 2016 total non-equity incentive compensation that is based on the 2016 Bonus Plan.
For 2016, 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 for 2016 (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 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 2016 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, European Technology Products Group, and the Corporate and Other function. These distinct goals relate to various strategic initiatives including optimizing our operations and improving the profitability of our Industrial Products group; further growing our business in France, integrating our Netherlands operations, and improving our UK operations within our European businesses; and cost reduction initiatives within our Corporate and Other function. |
| – | 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 $1,000,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $1,000,000 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 2016 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 2016 Bonus Plan financial and non-financial goals at 100% base case target levels; and in the case of Mr. Lerner achievement of such 2016 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 | | $ | 1,050,000 | |
Bruce Leeds | | $ | 877,500 | |
Robert Leeds | | $ | 877,500 | |
Lawrence Reinhold | | $ | 1,410,000 | |
Eric Lerner | | $ | 275,000 | |
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2016 salary levels discussed below reflect the Compensation Committee’s view that such levels are appropriate in light of the current business performance and expected accomplishments in 2016.
The 2016 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. 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 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.
2015 NEO Cash Bonus Plan
In 2015, 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 2015 NEO Cash Bonus Plan (“2015 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2015. The 2015 Bonus Plan implements for 2015 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2015.
The following discussion applies to 100% of the 2015 total non-equity incentive compensation for each of Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and the 50% portion of Mr. Lerner’s 2015 total non-equity incentive compensation that is based on the 2015 Bonus Plan.
For 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, are as follows:
| · | Financial Goals for 2015 (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 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 European 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 and grow in our UK Operations as well as stabilizing the performance of and improving service levels in our Shared Service Center in Europe; integration of the PEG Group acquisition and continued organic growth within our Industrial Products Group, and successful completion of the previously announced B2B restructuring activities for our North American Technology Products Group (“NA Tech”). 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 $1,000,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $1,000,000 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 Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence 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. 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 | |
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. 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, as occurred in 2015 and as further discussed below under the heading Compensation of NEOS in 2015. 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 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. The cost management and the strategic objectives were met or exceeded in 2015, resulting in a 100% payout of this bonus component.
2014 NEO Cash Bonus Plan
In March 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.Messrs. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr.Lawrence 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'sLerner’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'sexecutive’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 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 EMEAEuropean 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'sCompany’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. 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.Messrs. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr.Lawrence 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 | | $ | 832,000 | |
Robert Leeds | | $ | 832,000 | |
Lawrence Reinhold | | $ | 967,500 | |
Robert Dooley | | $ | 450,000 | |
Eric Lerner | | $ | 255,000 | |
Richard Leeds | | $ | 1,340,000 | |
Bruce Leeds | | $ | 832,500 | |
Robert Leeds | | $ | 832,500 | |
Lawrence Reinhold | | $ | 967,500 | |
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'sCommittee’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 185% 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'sexecutive’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 financial objectives (45% of total target bonus) and strategic objectives (30% of total target bonus) for the Industrial Products group. The financial objective is based on an operating income target and each $0.05 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.
As described above, 50% of Mr. Lerner'sLerner’s cash bonus is tied to achievement of certain legal group objectives, 10%20% of which relatesthis portion of the bonus (10% of total target bonus) is tied to cost management and 40%80% of which relatesthis 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'sCompany’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 March 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.Messrs. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr.Lawrence 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'sLerner’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'sexecutive’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 2013 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): These goals relate to various strategic initiatives including enhancing both the North American and EMEAEuropean Technology Product Group'sGroup’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 enhance North American Technology performance. The Compensation Committee believes these initiatives will enhance the Company'sCompany’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. 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 2013 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr.Messrs. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr.Lawrence Reinhold, assuming achievement of the 2013 Bonus Plan financial and non-financial goals at 100% base case target 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 | | | $ | 1,100,000 | |
Bruce Leeds | | $ | 750,000 | | | $ | 750,000 | |
Robert Leeds | | $ | 750,000 | | | $ | 750,000 | |
Lawrence Reinhold | | $ | 825,000 | | | $ | 825,000 | |
Robert Dooley | | $ | 414,000 | | |
Eric Lerner | | $ | 248,000 | | | $ | 248,000 | |
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 2012 (other than for Mr. Dooley and Mr. Lerner). The 2013 salary increases reflect the Compensation Committee'sCommittee’s view that such increases are appropriate in light of 2013 NEO bonuses being set at the same level as 2012.
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 the cap on Mr. Lerner was 180% 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, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive'sexecutive’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 financial objectives (45%) and strategic objectives (30%) for the Industrial 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 are tied to achievement of various sales, customer service, and marketing initiatives including expanding the 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'sLerner’s cash bonus is tied to achievement of certain legal group objectives, 10%20% of which relatesthis portion of the bonus (10% of total target bonus) is tied to cost management and 40%80% of which relatesthis 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 aan 85% payout of this bonus component.
2012 NEO Cash Bonus Plan
In March 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 achievement 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 2012 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, and to the 25% portion of Mr. Sprosty's 2012 total non-equity incentive compensation that is based on the 2012 Bonus Plan, as discussed below.
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 (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. |
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, and in the case of Mr. Sprosty, achievement of such 2012 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 North American Technology Products Group at 100% base case target levels (75% of the bonus), 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 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 260% of the target base case bonus. The cap on Mr. Sprosty's total bonus was 185% 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, 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.
2011 NEO Cash Bonus Plan
In March 2011, 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 2011 NEO Cash Bonus Plan ("2011 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. The 2011 Bonus Plan implemented for 2011 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2011.
For 2011, 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 2011 (20% of total cash bonus target) |
– | Strategic Accomplishments (14%): These goals relate to various strategic initiatives relating to enhancing our management and business information systems, and implementing distribution/warehouse system improvements. The Compensation Committee believes these initiatives will enhance the Company's operational infrastructure and efficiency. |
– | Corporate Governance Goals (6%): These goals relate to continuing improvements in our internal processes and procedures that the Compensation Committee believes will generally benefit stockholders. |
Under the 2011 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of the following NEOs, assuming achievement of the 2011 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 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 for 2010, and take into account the 2011 base salary increases. The 2011 salary increases reflect the Compensation Committee's view that such increases were appropriate in light of 2011 NEO bonuses being set at the same level as 2010 and 2010 NEO base salary having been held at the same level as 2009.
David Sprosty, a former named executive officer, joined the Company in October, 2011, and left the Company's employ in March 2013. See "Employment Arrangements with Named Executive Officers" and "Potential Payments Upon Termination or Change of Control."
Under the 2011 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 2011 Bonus Plan imposed a cap on the total bonus that could be payable to any executive at 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.
Compensation of NEOs in 20132015
In determining the compensation of the Company'sCompany’s Chief Executive Officer for fiscal year 20132015 and approving the compensation of the Company'sCompany’s other NEOs, the Committee considered, among the other factors discussed above, the achievement of the performance based criteria established under the 20132015 Bonus Plan.
The Compensation Committee determined that the Company and management had performed adequately, particularly given trends in the general economic environment and in the technology products industry in which the Company competesCompany’s North American Technology Group formerly competed that had affected the Company'sCompany’s business throughout fiscal year 2013.2015. It was the view of the Compensation Committee that management had executed acceptably 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 20132015 were consistent with the philosophy and objectives of the Company'sCompany’s compensation programs. The Compensation Committee determined that the Company met or substantially met its 20132015 corporate governance non-financial goals, including for the Industrial Products Group, described above, but did not achieve its NA Tech B2B restructuring goals, and met or substantially metonly achieved 50% of its strategic goals. In this regard theEuropean Technology Products Group objectives. The Compensation Committee also exercised its discretion to provide partial achievement credit for two strategic goalsreset the sales growth target and one governance goal that were only partially achieved, resultingadjusted operating income growth target to eliminate the contribution of the NA Tech business exited in a 92.5% payout of this bonus component.2015. The CompanyCompany’s revised sales growth target of $3.55$1.905 billion was 94%99%% achieved ($3.35 billion),after adjusting for the exit from the NA Tech business and constant currency, resulting in a 70%95% payout of this bonus component. Furthermore, the Company did not achieveachieved its 2013 minimum 2015 adjusted operating income financial goals,growth target, resulting in a 0%80% payment of this bonus component. Accordingly, pursuant to the 20132015 Bonus Plan formulas, 20132015 non-equity incentive plan/bonus compensation for each Named Executive Officer was paid at only 32.5%80% of the target level. However,level (50% of which was waived by each of Messrs. Richard, Robert and Bruce and Robert Leeds each requested that their bonus be reduced to $100,000 each (a reduction of $257,000, $143,500 and $143,500 respectively)Leeds).
The 20132015 threshold, target and maximum bonus amounts for each of our Named Executive Officers are found in the Grants of Plan-Based Awards table on page 39.37.
Employment Arrangements of the Named Executive Officers
Richard Leeds
Richard Leeds has no employment agreement and is an "at will"“at will” employee. Base salary accounted for 85%55% and bonus accounted for 13%42% of Mr. Leeds total cash compensation for 2013.2015. Mr. Leeds’ bonus for 2015 was determined as described above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($560,000 of his 2015 bonus, and actual 2015 bonus paid was $560,000). Mr. Leeds salary for 20142016 is set at $701,000. See the discussion of 2012 Bonus Plan and 2013 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2012 and 2013.$734,450.
Bruce Leeds
Bruce Leeds has no employment agreement and is an "at will"“at will” employee. Base salary accounted for 82%61% and bonus accounted for 15%36% of Mr. Leeds total cash compensation for 2013.2015. Mr. Leeds’ bonus for 2015 was determined as described above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($351,000 of his 2015 bonus, and actual 2015 bonus paid was $351,000). Mr. Leeds salary for 20142016 is set at $568,000. See the discussion of our 2012 Bonus Plan and 2013 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2012 and 2013.$600,000.
Robert Leeds
Robert Leeds has no employment agreement and is an "at will"“at will” employee. Base salary accounted for 82%61% and bonus accounted for 15%36% of Mr. Leeds total cash compensation for 2013.2015. Mr. Leeds’ bonus for 2015 was determined as described above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($351,000 of his 2015 bonus, and actual 2015 bonus paid was $351,000). Mr. Leeds salary for 20142016 is set at $577,000. See the discussion of our 2012 Bonus Plan and 2013 Bonus Plan regarding Mr. Leeds non-equity incentive awards for 2012 and 2013.$604,000.
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'sCompany’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 53% and bonus accounted for 45% of Mr. Reinhold'sReinhold’s total cash compensation for 2015. Mr. Reinhold’s bonus for 20132015 was determined as described above under the heading 20132015 NEO Cash Bonus Plan.
Mr. Reinhold received a grant of equity compensation in 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 2011 as well as a desire to further align his interests with those of the Company's stockholders. Base salary accounted for 68% and bonus accounted for 29% of Mr. Reinhold's total cash compensation for 2013. In 2011, Mr. Reinhold received a grant of 100,000 restricted stock units that vest in ten equal installments beginning on November 14, 2012. The Compensation Committee decided to make these equity awards in recognition of Mr. Reinhold's accomplishments in 2011 and in order to further align his interests with those of our stockholders. HisReinhold’s salary for 20142016 is set at $660,000.
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."
Robert Dooley
$717,000. In February 2016, Mr. Dooley has no employment agreement and is an "at will" employee. Base salary accounted for 55% and bonus accounted for 42% of Mr. Dooley's total cash compensation for 2013. Mr. Dooley's salary for 2014 is set at $450,000. Mr. Dooley's bonus for 2013 was determined as described above under the heading 2013 NEO Cash Bonus Plan. In March 2012, Mr. DooleyReinhold received a grant of 50,000 restricted stock units under the 2010 Long-Term Incentive Plan. The restricted stock unitsPlan, which vest in ten equal annual installments of 5,000 units each, beginning Marchthree installments: 16,667 Shares on February 1, 2013.2017; 16,667 Shares on February 1, 2018 and 16,666 Shares February 1, 2019. In addition in March 2012February 2016, Mr. DooleyReinhold was granted an option to purchase 50,000 sharesShares 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