Systemax Inc.11 Harbor Park Drive
Port Washington, New York 11050
PROXY STATEMENT
General Information
ThisThese proxy statement ismaterials are being furnished in connection with the solicitation ofto solicit proxies on behalf of the Board of Directors (the “Board”) of Systemax Inc., a Delaware corporation (the “Company”), for the 2015use at our Annual Meeting of Stockholders of the Company to be held on Monday, June 8, 2015 (the “Annual Meeting”). The Company has made the proxy materials available to stockholders of record as of the close of business on April 14, 20154, 2018, and at www.proxyvote.com beginning on April 29, 2015 and is first mailing such materials to stockholders that requested printed copies of such materials onany adjournment or about April 29, 2015.
You can ensure that your shares are votedpostponement. Our Annual Meeting will take place at the meeting by voting your shares over the internet at www.proxyvote.com or by telephone at (800) 690-6903 until 11:59 PM Eastern Time on June 7, 2015 or by signing, dating and promptly returning a proxy, if you received a proxy by mail, in the envelope provided or to the address contained in the voting instructions therein. Voting your shares over the internet, by telephone or by sending in a signed proxy will not affect your right to attend the meeting and vote in person.
The Company’s principal executive offices areour headquarters located at 11 Harbor Park Drive, Port Washington, New York 11050.NY, at 12:00 p.m., local time.
Proxies will be voted as specified by the stockholders. Where specific choices are not indicated, proxies will be voted, per the BoardThese proxy materials include our Notice of Directors’ recommendations, FOR proposals 1 and 2. If any other matters properly come before the Annual Meeting, the persons named in the proxy will vote at their discretion.
Under the Delaware General Corporation Law and the Company’s Amended and Restated Certificate of Incorporation and By-Laws, (1) the affirmative vote of a plurality of the outstanding shares of common stock of the Company (the “Shares”) entitled to vote and present, in person or by properly executed proxy, at a meeting at which a quorum is present will be required to elect the nominated directors of the Board (Proposal 1); and (2) the affirmative vote of a majority of the outstanding Shares entitled to vote and present, in person or by properly executed proxy, at a meeting at which a quorum is present will be required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants (Proposal 2).
Richard Leeds, Bruce Leeds and Robert Leeds (each a director and officer of the Company), together with trusts for the benefit of certain members of their respective families and other entities controlled by them, as applicable, beneficially owned as of our record date more than 50% of the shares of common stock, and they have each separately advised us that they intend to vote all of such shares of common stock they each have the power to vote in accordance with the recommendations of the Board of Directors on each of the items of business identified above, which will be sufficient to constitute a quorum and to determine the outcome of each item under consideration.
A quorum is representation in person or by proxy at the Annual Meeting of at least a majority of the outstanding Shares. Abstentions will have no effect on the election of directors (Proposal 1). Abstentions on other matters will be treated as votes cast on particular matters as well as shares present and represented for purposes of establishing a quorum, with the result that an abstention has the same effect as a negative vote regarding such other matters. Where nominee record holders do not vote on specific issues because they did not receive specific instructions on such issues from the beneficial owners, such broker non-votes will not be treated as votes cast on a particular matter, and will therefore have no effect on the vote, but will be treated as shares present or represented for purposes of establishing a quorum.
If your shares are held through a broker, bank or other nominee, you must provide voting instructions to such record holder in accordance with such record holder’s requirements in order to ensure that your shares are properly voted. Please note that the rules regarding how brokers may vote your shares have changed. Brokers may no longer vote your Shares on the election of directors, or any other non-routine matters, in the absence of your specific instructions as to how to vote. We encourage you to provide instructions to your broker regarding the voting of your Shares. If you do not provide your broker or other nominee with instructions on how to vote your “street name” Shares, your broker or nominee will not be permitted to vote them on such non-routine matters (a broker “non-vote”). Please note that Item 1 (Election of Directors) is a non-routine matters, and so Shares subject to a broker “non-vote” will not be considered entitled to vote with respect to Item 1 and will not affect the outcome of the vote on that Item.
A list of stockholders of the Company satisfying the requirements of Section 219 of the Delaware General Corporation Law shall be available for inspection for any purpose germane to the Annual Meeting during normal business hours at the offices of the Company at least ten days prior to the Annual Meeting.
Revocability of Proxies
Any person signing a proxy in the form accompanying this proxy statement has the power to revoke it prior to the Annual Meeting or at the Annual Meeting prior to the vote pursuant to the proxy.
A proxy for a stockholder of record may be revoked by any of the following methods:
| · | by writing a letter delivered to Eric Lerner, Senior Vice President and General Counsel of the Company, stating that the proxy is revoked; |
| · | by submitting another proxy with a later date (i.e., by signing and submitting a new proxy card or by re-voting by phone or by Internet as instructed above); only your latest proxy card, phone or Internet vote will be counted; or |
| · | by attending the Annual Meeting and voting in person. |
Beneficial holders whose shares are held of record by a broker, bank or other nominee may revoke their proxy at any time before it is voted by following the instructions of their broker, bank or other nominee. In addition, please note, that if a stockholder’s shares are held of record by a broker, bank or other nominee and that stockholder wishes to vote at the Annual Meeting, the stockholder must bring to the Annual Meeting a letter from the broker, bank or other nominee confirming that stockholder’s beneficial ownership of the shares.
On April 14, 2015, the record date, there were outstanding and entitled to vote (excluding Company treasury shares) 36,818,158 Shares, entitled to one vote per Share. Only stockholders of record at the close of business on the record date will be entitled to vote at the Annual Meeting and at anyProxy Statement and all adjournmentsour 2017 Annual Report to Stockholders, which includes our Fiscal 2017 Form 10-K. In addition, these proxy materials may include a proxy card for our Annual Meeting. These proxy materials are first being sent or postponements thereof. Stockholders will not be entitledmade available to appraisal rights in connection with anyour stockholders commencing on April 20, 2018.
Notice of the matters to be voted on at the Annual Meeting.
Internet PostingAvailability of Proxy Materials
Why did I receive a notice regarding the internet availability of proxy materials instead of paper copies of the proxy materials?
We have implemented the Securities and Exchange Commission, or SEC, “Notice Only” 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.copies. As a result, beginning on or about April 29, 2015,20, 2018, we sentmailed to most of our stockholders by mailof record on April 16, 2018 a Notice of Internet Availability of Proxy Materials 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 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.
If you own shares of common stock in more than one account—for example, in a joint account with your spouse and in your individual brokerage account—you may have received more than one notice. To vote all of your shares by proxy, please follow each of the separate proxy voting instructions that you received for your shares of common stock held in each of your different accounts.
Record Date
We have fixed the close of business on April 16, 2018 as the record date for determining our stockholders entitled to notice of and to vote at our Annual Meeting.
On that date, we had 37,174,265 shares of common stock outstanding. Stockholders as of the record date will have one vote per share on each voting matter.
Quorum
The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at our Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum.
Abstentions and “broker non-votes” (discussed below) will be counted as present for purposes of establishing a quorum.
How to Vote
Stockholders of record. If you are a “stockholder of record” (meaning your shares are registered in your name with our transfer agent, American Stock Transfer & Trust Company, LLC)you may vote either in person at our Annual Meeting or by proxy.
If you decide to vote by proxy, you may do so in any one of the following three ways:
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| You may vote your shares 24 hours a day by logging on to a secure website, www.proxyvote.com, and following the instructions provided. You will need to enter identifying information that appears on your proxy card or the Notice. The internet voting system allows you to confirm that your votes were properly recorded. |
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| You may vote your shares 24 hours a day by calling the toll free number (800) 690-6903, and following instructions provided by the recorded message. You will need to enter identifying information that appears on your proxy card or the Notice. As with the internet voting system, you will be able to confirm that your votes were properly recorded. |
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| If you received a proxy card, you may mark, sign and date your proxy card and return it by mail in the enclosed postage-paid envelope. |
Internet and telephone voting is available through 11:59 PM Eastern Time on Sunday, June 3, 2018.
If you vote by mail, your proxy card must be received before our Annual Meeting to assure that your vote is counted. We encourage you to vote promptly.
Beneficial owners. If, like most stockholders, you are a beneficial owner of shares held in “street name” (meaning a broker, trustee, bank or other nominee holds shares on your behalf), you may vote in person at our Annual Meeting only if you obtain a legal proxy from the nominee that holds your shares. Alternatively, you may vote by completing, signing and returning the voting instruction form that the nominee provides to you or by following any telephone or Internet voting instructions described on the voting instruction form, the Notice or other materials that the nominee provides to you.
No matter in what form you own your shares – We encourage you to vote promptly.
Votes Required to Adopt the Proposals
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| Ø | Proposal 1 – The affirmative vote of a plurality of the outstanding shares of common stock entitled to vote and present, in person or by proxy, at a meeting at which a quorum is present will be required to elect the nominated directors to the Board. |
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| Ø | Proposal 2 – The affirmative vote of a majority of the outstanding shares of common stock entitled to vote and present, in person or by proxy, at a meeting at which a quorum is present will be required to ratify the appointment of Ernst & Young LLP as our independent auditors. |
How Shares Will Be Voted
Proxies will be voted as specified by the stockholders. Where specific choices are not indicated, proxies will be voted, per the Board’s recommendations, FOR Proposals 1 and 2. If any other matters properly come before our Annual Meeting, the persons named in the proxy will vote at their discretion.
List of Stockholders
A list of our stockholders satisfying the requirements of Section 219 of the Delaware General Corporation Law will be available for inspection for any purpose germane to our Annual Meeting during normal business hours at our headquarters at least ten days prior to our Annual Meeting.
Changing or Revoking Your Proxy
Your attendance at our Annual Meeting will not automatically revoke your proxy.
Stockholders of record. If you are a stockholder of record, you may change or revoke your proxy at any time before a vote is taken at our Annual Meeting by giving notice to us in writing or at our Annual Meeting, by executing and forwarding to us a later-dated proxy or by voting a later proxy over the telephone or the Internet.
Beneficial owners. If you are a beneficial owner of shares, you should check with the broker, trustee, bank or other nominee that holds your shares to determine how to change or revoke your vote.
Abstentions
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| Ø | Proposal 1 – Abstentions will have no effect on the election of directors. |
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| Ø | Proposal 2 – Abstentions will have the same effect as a negative vote regarding the ratification of Ernst & Young LLP as our independent auditors. |
Broker Non-Votes
A “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because they do not have discretionary voting power for that proposal and have not received instructions from the beneficial owner.
If you are a beneficial owner whose shares are held by a broker, as stated above you must instruct the broker how to vote your shares. If you do not provide voting instructions, your broker is not permitted to vote your shares on the election of directors.
In the absence of voting instructions, the broker can only register your shares as being present at our Annual Meeting for purposes of determining a quorum and may vote your shares on ratification of the appointment of our auditor.
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| Frequently Asked Questions |
How can I access the proxy materials over the Internet?
Your Notice of the Internet Availability of the proxy materials, proxy card or voting instruction card will contain instructions on how to view our proxy materials for theour Annual Meeting on the Internet. Our proxy materials and annual reportAnnual Report on Form 10-K for fiscal year 2014,2017, as well as the means to vote by Internet, are available at www.proxyvote.comwww.proxyvote.com.
How may I obtain a paper copy of the proxy materials?
If you receive aThe Notice of the Internet Availability of the proxy materials, you will find on your noticeprovides instructions about how to obtain a paper copy of the proxy materials. If you did not receive the notice, you will receive a paper copy of the proxy materials by mail.
What is “householding”?
SEC rules allow us to send a single copy of the proxy materials or the Notice of Internet Availability of Proxy Materials to be delivered to multiple stockholders sharing the same address and last name, or who we reasonably believe are members of the same family in a manner provided by such rules. This practice is referred to as “householding” and can result in significantwe use this process to achieve savings of paper and mailing costs. In accordance with SEC rules, stockholders sharing the same address and last name, or who we reasonably believe are members of the same family, will receive one copy of the proxy materials or Notice of Internet Availability of Proxy Materials.
How can I find voting results of theour Annual Meeting?
We will announce preliminary voting results at theour Annual Meeting and we will publicly disclose the results on a Form 8-K within four business days of theour Annual Meeting, as required by SEC rules.
PROPOSAL NO. |
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| Proposal No. 1 – Election Of Directors |
At theour Annual Meeting, seven Directorsdirectors are to be elected to servehold office until the 2019 annual meeting and until their successors have been elected and qualified. InformationAll nominees are current Systemax Board members who were elected by stockholders at the 2017 annual meeting, except for Messrs. Litwin and Lindbloom, who were appointed to the Board in July and December 2017 to fill vacancies resulting from the departure of two previous directors.
There are no family relationships among any of our directors or executive officers or nominees for director or executive officer, except that Messrs. Richard, Bruce and Robert Leeds are brothers. Except as disclosed herein, regarding Messrs. Richard, Bruce and Robert Leeds, there were no arrangements or understandings between any director or nominee for director and any other person pursuant to which such nominees is set forth below. Each of the nominees servedperson was selected as a director during fiscal year 2014.
or nominee for director.
The accompanying proxy will be voted forFOR the election of the Board’s nominees unless contrary instructions are given. If any Board nominee is unable to serve, which is not anticipated, the persons named as proxies intend to vote, unless the Board of Directors reduces the number of nominees, for such other person or persons as the Board of Directors may designate.
IfWhen voting by proxy with respect to the election of Directors,directors, stockholders may vote in favor of all nominees, withhold their votes as to all nominees or withhold their votes for specific nominees.
There are no family relationships among any of our Directors or executive officers or nominees for Director or executive officer, except that Messrs. Richard, Bruce and Robert Leeds are brothers. Except as disclosed herein, regarding Messrs. Richard, Bruce and Robert Leeds, there were no arrangements or understandings between any Director or nominee for Director and any other person pursuant to which such person was selected as a Director or nominee for Director.Nominees
Name of Nominee |
Principal Occupation | Age | Director Since |
| Richard Leeds |
Executive Chairman
Chairman and Chief Executive Officer of the Company | 55 | April 1995 |
Bruce LeedsDirector Since: 1995 | Vice Chairman of the Company | 59 | April 1995 |
Robert Leeds | Vice Chairman of the Company and Chief Executive of the Company’s North American Technology Products Group | 59 | April 1995 |
Lawrence Reinhold | Executive Vice President and Chief Financial Officer of the Company | 55 | March 2009 |
Robert Rosenthal | Chairman and Chief Executive Officer of First Long Island Investors LLC | 66 | July 1995 |
Stacy Dick | Chief Financial Officer of Julian Robertson Holdings | Age: 58 | November 1995 |
Marie Adler-Kravecas | Retired President of Myron Corporation | 55 | June 2009 |
Richard Leeds joined the CompanySystemax in 1982 and has served as our Chairman and ChiefCEO from April 1995 until becoming our Executive OfficerChairman in March 2016. He also served as President of the Company since April 1995. Mr. Leeds graduated from New York University with a B.S. degree in Finance. Mr. Leeds, together with his brothers Bruce and Robert Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders.our Industrial Products Group until 2011. Mr. Leeds was selected to serve as Executive Chairman of our Board due to his experience and depth of knowledge of the CompanySystemax and the direct marketing, computer and industrial products industries, his role in developing and managing the Company’sour business strategies and operations, as well as his exceptional business judgment and leadership qualities.
Vice Chairman
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| Director Since: 1995 | Age: 62 |
Bruce Leeds joined the CompanySystemax in 1977 and has served as our Vice Chairman of the Company since April 1995. Mr. Leeds graduated from Tufts University with a B.A. degree in Economics. Mr. Leeds, together with his brothers Richard and Robert Leeds, are the majority stockholdersHe also served as President of the Company and the sons of one of the Company’s founders.our International Operations until 2005. Mr. Leeds was selected to serve as a director on our Board due to his experience and depth of knowledge of the CompanySystemax and the direct marketing, computer and industrial products industries, his role in developing and managing the Company’sour business strategies and operations, his experience in international business as well as his exceptional business judgment.
Vice Chairman
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| Director Since: 1995 | Age: 62 |
Robert Leeds joined the CompanySystemax in 1977 and has served as our Vice Chairman of the Company since April 1995. From April 18, 2011 to October 2011, Mr. LeedsHe also served as the InterimPresident of our Domestic Operations until 2005 and as Chief Executive of the Company’s North American Technology Products Group. On March 1,Group from 2013 to 2015. Mr. Leeds was selected to servehas served as the Chief Executive of the Company’s North American Technology Products Group. Mr. Leeds graduated from Tufts University with a B.S. degree in Computer Applications Engineering. Mr. Leeds, together with his brothers Richard and Bruce Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders.director since April 1995. Mr. Leeds was selected to serve as a director on our Board because of his experience and depth of knowledge of the CompanySystemax and the direct marketing, computer and industrial products industries, his role in developing and managing the Company’sour business strategies and operations, his significant computer and technology industry experience as well as his exceptional business judgment.
President and Chief Executive Officer
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| Director Since: 2009 | Age: 58 |
Lawrence Reinhold joined the CompanySystemax in January 2007 and has served as Executive Vice President and Chief Financial Officer sinceCFO from that date.date until becoming our President and CEO in March 2016. In this expanded role, he assumed overall responsibility for our operations, including all lines of business and functional groups. Additionally, Mr. Reinhold has served as a Director since March 2009. Priorprior to joining the Company,Systemax, Mr. Reinhold was the Chief Financial Officer of a publicly traded developer and manufacturer of medical devices; the Chief Financial Officer of a publicly traded communications software company; and a regional Managing Partner of a Big 4 International Public Accounting Firm. He received his B.S.B.A. degree, summa cum laude, and M.B.A. degree from San Diego State University. Mr. Reinhold is a Certified Public Accountant. From 2011 through 2013, he also served on the board of directors and audit committee of Pulse Electronics, a publicly traded electronics manufacturer. Mr. Reinhold was selected to serve as a director on our Board due to his contributions since joining the CompanySystemax and his extensive experience and expertise in business, strategy, finance, accounting, SEC reporting, public company management, mergers and acquisitions and financial systems as well as his serving as a CFO of other public technology companies and a partner with an international accounting firm.
Independent Director
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| Director Since: 1995 | Age: 69 |
Robert D. Rosenthal has served as an independent Director of the Company since July 1995. He has been the lead independent director since October 2006. Mr. Rosenthal is Chairman and Chief Executive Officer of First Long Island Investors LLC, which he co-founded in 1983. Mr. Rosenthal is a 1971 cum laude graduate of Boston University and a 1974 graduate of Hofstra University Law School. Mr. Rosenthal is the chairmanChairman and CEO of a wealth management company that invests in numerous public companies and is also an attorney and member of the bar of the State of New York. Mr. Rosenthal was selected to serve as a director on our Board due to his financial, investment and legal experience and acumen.
Stacy Dick
Independent Director
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| Director Since: 2017 | Age: 51 |
Mr. Litwin is the Chief Executive Officer of Adorama, Inc., a leading multi-channel retailer of professional camera, audio, and video equipment, a position he has servedheld since 2015. Previous executive roles included overseeing e-commerce and marketing for Sears Holdings, Inc, Office Depot, and Newark Electronics, Inc, in addition to serving as an independent Director of the Company since November 1995.advisor to several early stage digital and technology companies. Mr. Dick has served as Chief Financial Officer of Julian Robertson Holdings since November 2008 and, since 2011, as Chief Financial Officer of Tiger Management Advisors LLC. Mr. Dick was a Managing Director of Rothschild Inc. from 2001 to 2008 and served as an executive of other entities controlled by Rothschild family interests. Mr. DickLitwin graduated from HarvardIndiana University with a BS degree, and an A.B. degree magna cum laude and a Ph.D.MBA in Business Economics. He has served as an adjunct professor of finance at the SternOperations from Loyola University, Quinlan School of Business (NYU) since 2004 and adjunct professor of law at NYU Law School since 2012. in 1992. Mr. DickLitwin was selected to serve as a director on our Board due to his exceptional knowledgee-commerce and experience in the areas of business, finance and economics.direct marketing expertise.
Marie Adler-Kravecas has served as an independent
Independent Director
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| Director Since: 2017 | Age: 53 |
Mr. Lindbloom was employed by C.H. Robinson Worldwide, Inc. – one of the Company sinceworld’s largest third-party logistics providers – from June 2009. Ms. Adler-Kravecas joined Myron Corporation, an international, business-to-business direct marketing company,1990 through March 2018 in 1984various roles, including Chief Information Officer, Chief Financial Officer and served as PresidentController. Mr. Lindbloom holds BS and MBA degrees from 1999 to 2004. In 2005, Ms. Adler-Kravecas founded Wellconnected, LLC, a consumer direct marketing company whichthe Carlson School of Management at the University of Minnesota. Mr. Lindbloom was sold in 2008. Ms. Adler-Kravecas is currently retired. Ms. Adler-Kravecas received a B.S. degree in Marketing and Business Administration from George Washington University. She has been a member of the Young President’s Organization since 2003 and The Executive Group from 2004 to 2008. Ms. Adler-Kravecas has been on the Board of the Children’s Aid and Family Service since 2004. Ms. Adler-Kravecas was selected to serve as a director on our Board due to her practical experience in direct marketinghis supply chain and international business.logistics expertise
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE DIRECTOR NOMINEES, WHICH IS DESIGNATED AS PROPOSAL NO. 1.The Board Recommends That You Vote for the Election
of All the Director Nominees (Proposal No. 1)
Our Board currently consists of seven members, three of whom are independent under SEC and NYSE rules. Our Board is led by Executive Chairman Mr. Richard Leeds and Vice Chairmen, Messrs. Bruce Leeds and Robert Leeds. Our independent directors have designated Mr. Rosenthal to be the Lead Independent Director.
Mr. Stacy Dick resigned from the Board in July 2017 and Ms. Marie Adler-Kravecas resigned from the Board in December 2017. Neither Mr. Stacy Dick nor Ms. Marie Adler-Kravecas has advised Systemax of any disagreement on any matter relating to the operations, policies, or practices of Systemax. Mr. Barry Litwin was appointed to the Board in July 2017 and Mr. Chad Lindbloom was appointed to the Board in December 2017. Concurrently with tendering their respective resignations, upon resigning, each of Mr. Dick and Ms. Adler-Kravecas agreed to consult with Systemax on a limited basis for a period of twelve months in order to ensure a smooth transition of duties.
Our Board held ten meetings in fiscal 2017. During fiscal 2017, Mr. Litwin did not attend 75% or more of the meetings of the Board during his tenure as a member of the Board, in that there were only two meetings in that period of his tenure, one of which he was unable to attend. Each of the current (and former) directors attended at least 75% of the meetings of the Board committees on which he (or she) served.
At last year’s annual meeting of stockholders held on June 5, 2017, two directors attended the meeting. We do not have a policy with regards to directors’ attendance at our annual meeting of stockholders.
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| Board Leadership Structure |
We believe that the current mix of employee directors and non-employee independent directors that make up our Board, along with the independent oversight of our Lead Independent Director, benefits Systemax and our stockholders.
Although the Board does not have an express policy on whether or not the roles of CEO and Executive Chairman of the Board should be separate and if they are to be separate, whether the Executive Chairman of the Board should be selected from the non-management directors or be an employee, the Board believes that it should have the flexibility to make a determination from time to time in a manner that is in the best interests of Systemax and our stockholders at the time of such determination.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for Systemax and our stockholders.
Our Board believes that the most effective Board leadership structure for Systemax at the present time, is for the roles of CEO and Executive Chairman of the Board to be separate. Further, the Board believes that our Executive Chairman and two Vice Chairmen should also have management roles, so that our Executive Chairman and Vice Chairmen remain in closer touch with the operations of our business and so that, together with our CEO, they can focus their attentionon different aspects of the strategic and operating challenges and opportunities ahead for the Industrial Products Group and the France Technology Value Added Reseller businesses.
The Board believes that the independent directors provide effective oversight of management. Moreover, in addition to feedback provided during the course of Board meetings, the independent directors have regular executive sessions. Following an executive session of independent directors, the Lead Independent Director acts as a liaison between the independent directors and the Executive Chairman regarding any specific feedback or issues, provides the Executive Chairman with input regarding agenda items for Board and Committee meetings, and coordinates with the Executive Chairman regarding information to be provided to the independent directors in performing their duties.
Our Corporate Governance Guidelines provide the flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate.
Independence of DirectorsIn connection with its annual review of director independence, the Board has determined that each of the following DirectorsRobert D. Rosenthal, Barry Litwin and Chad Lindbloom has no material relationship with Systemax (directly or nomineesas a partner, stockholder, or officer of the Companyan organization that has a relationship with Systemax) and meets the standards for independence required by the New York Stock Exchange and Securities and Exchange Commission rules: Robert Rosenthal, Stacy Dick and Marie Adler-Kravecas. rules. The Board has not adopted any other categorical standards of materiality for independence purposes.
The Board made this determination based on (a)
ü the absence of any of the express disqualifying criteria relating to director independence set forth in Section 303A of the Corporate Governance Rules of the New York Stock Exchange, and (b) the criteria for independence required of audit committee directors by Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act.
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| ü | the criteria for independence required of audit committee directors by Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and |
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| ü | information provided by the directors to Systemax, which did not indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial) which would impair the independence of any of the non-management directors. |
Although the Board has not adopted categorical standards of materiality for independence purposes (other than those set forth in the NYSE listing standards and the Exchange Act), information provided by the Directors to the Company did not indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial) which would impair the independence of any of the non-employee Directors. The Board has determined that there is no material relationship between the CompanySystemax and each of Mr.Messrs. Rosenthal, Mr. DickLitwin and Ms. Adler-KravecasLindbloom (directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company)Systemax) and that each of them is independent pursuant to the NYSE listing standards.
In making its determination, the Board took into consideration that certain Systemax directors and executive officers have each invested funds with or through a private investment firm, of which RobertMr. Rosenthal is Chairman and CEO (and which firm receives fees in respect of such investments), and may continue to do so in the future. The Board (in each case with Mr. Rosenthal and the investing directors being recused) determined that such relationship was not material to Mr. Rosenthal. In addition in making its determination, the Board took into consideration that the asset management firm of which Stacy Dick is the CFO invests proprietaryRosenthal and third-party capital in a number of investment funds that are managed by independent investment advisory firms. Some Systemax executive officers and directors have made investments in these independently managed funds. Mr. Dick does not receive any direct or indirect compensation from any of these funds or their independent advisory firms. The Board (in each case with Mr. Dick and the investing directors being recused) determined that such relationship was not material to Mr. Dick.affect his independence.
As a “controlled company,” the CompanySystemax is exempt from the New York Stock Exchange requirement that listed companies have a majority of independent directors. A “controlled company” is defined by the New York Stock Exchange as a company of which more than 50% of the voting power for the election of directors is held by an individual, group or other company. The CompanySystemax is a “controlled company” in that more than 50% of the voting stock for the election of directors of the Company,Systemax, in the aggregate, is owned by certain members of the Leeds family (including Messrs. Richard, Leeds, Bruce Leeds and Robert Leeds, each of whom is an officer and Directordirector of the Company)Systemax) and certain Leeds’ family trusts and other entities controlled by them (collectively, the “Leeds Group”). The members of the Leeds Group have entered into a Stockholders Agreement with respect to certain Sharesshares they each own. See “Transactions WithTransactions with Related Persons” below.Persons / page 20 of this proxy statement.
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| Lead Independent Director |
The independent directors have designated Mr. Rosenthal to serve as our Lead Independent Director.
In addition to presiding at executive sessions of non-management directors, the Lead Independent Director has the responsibility to coordinate the activities of the independent directors, and to perform the following functions:
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| Ø | advise the Executive Chairman of the Board as to an appropriate schedule of Board meetings, seeking to ensure that the independent directors can perform their duties responsibly while not interfering with the flow of Systemax’s operations; |
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| Ø | provide the Executive Chairman with input as to the preparation of agendas for the Board and committee meetings; |
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| Ø | advise the Executive Chairman as to the quality, quantity, and timeliness of the flow of information from our management that is necessary for the independent directors to effectively and responsibly perform their duties, and although our management is responsible for the preparation of materials for the Board, the Lead Independent Director may specifically request the inclusion of certain material; |
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| Ø | recommend to the Executive Chairman the retention of consultants who report directly to the Board; |
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| Ø | assist the Board and our officers in assuring compliance with and implementation of the corporate governance policies; and be principally responsible for recommending revisions to the corporate governance policies; |
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| Ø | coordinate and develop the agenda for, and moderate executive sessions of, the independent directors of the Board, and act as principal liaison between the independent directors and the Executive Chairman on sensitive issues; and |
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| Ø | recommend to the Executive Chairman the membership of the various Board committees. |
Meetings of Non-Management Directors |
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| Meetings of Non-Management Directors |
The New York Stock Exchange requires the “non-management directors” or independent directors of a NYSE-listed company to meet at regularly scheduled executive sessions without management and to disclose in their annual proxy statements (1) the name of the non-management director who is chosen to preside at all regularly-scheduled executive sessions of the non-management members of the board of directors and (2) a method for all interested parties to communicate directly with the presiding director or with the non-management directors as a group (this method is described below under “Communications with Directors”). statements:
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| Ø | the name of the non-management director who is chosen to preside at all regularly-scheduled executive sessions of the non-management members of the board of directors, and |
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| Ø | a method for all interested parties to communicate directly with the presiding director or with the non-management directors as a group (this method is described below under “Communications with the Board”). |
The Board’s non-management or independent directors meet separately in executive sessions, chaired by the Lead Independent Director (currently RobertMr. Rosenthal), at least quarterly.
Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines, which are available on
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| Communicating with the Board |
Stockholders and other interested parties may communicate with the Corporate Governance pageBoard, any committee of our website at www.systemax.com.the Board, any individual director (including the Lead Independent Director) or the independent directors as a group, by directing communication to:
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| Office of the Corporate Secretary Systemax Inc. 11 Harbor Park Drive Port Washington, NY 11050 |
Communications from stockholders will be distributed to the entire Board unless addressed to a particular committee, director or group of directors. The Corporate Governance Guidelines were last amended in April 2010.Secretary will not distribute communications that are unrelated to the duties of the Board, such as spam, junk mail, mass mailings, business solicitations and advertisements.
Our Corporate Governance Guidelines establish our corporate governance principles and practices onThe Board has a variety of topics, including the responsibilities, composition and functioning of the Board. Thestanding Audit Committee, Nominating/Corporate Governance Committee assesses the Guidelines annually , and makes recommendations toCompensation Committee. In addition, the Board on any changeshas an Executive Committee empowered to implement. Our Guidelines address, among other things:act for the Board in certain circumstances, but the Executive Committee did not exercise its power in 2017. See Executive Committee / page 13 of this proxy statement.
Committee Composition
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· | the role and functions of our Board of Directors and management; | | | |
| | Audit Committee | Nominating/Corporate Governance Committee | Compensation Committee |
| Robert D. Rosenthal | I | | | |
| Barry Litwin | I | | | |
| Chad Lindbloom | I | | | |
| I = Independent Director |  = Chairperson |  = Member |
| · | director qualifications, including our director independence standards and director nomination and selection; |
| · | the requirement to hold separate executive sessions of the independent directors; |
| · | the conduct of Board meetings; |
| · | policies for setting director compensation; |
| · | director orientation and continuing education; |
| · | policies regarding director access to management, employees and independent advisors; and |
| · | the annual self-assessment of the Board to evaluate its own effectiveness. |
The Company has adoptedMr. Dick was a Corporate Ethics Policy that applies to all employees of the Company, including the Company’s Chief Executive Officer, Chief Financial Officer and Controller, its principal accounting officer. The Corporate Ethics Policy is designed to deter wrongdoing and to promote honest and ethical conduct, compliance with applicable laws and regulations, full and accurate disclosure of information requiring public disclosure and the prompt reporting of Policy violations. The Company’s Corporate Ethics Policy is available on the Company’s website (www.systemax.com). We intend to disclose on our website, in accordance with applicable laws and regulations, amendments to, or waivers from, our Corporate Ethics Policy. Our Corporate Ethics Policy was last amended in January 2014.
Communications with DirectorsStockholders of the Company who wish to communicate with the Board or any individual Director can write to Systemax Inc., Attention: Investor Relations, 11 Harbor Park Drive, Port Washington, NY 11050 or send an email to investinfo@systemax.com. Your letter or email should indicate that you are a stockholder of the Company. Depending on the subject matter of your inquiry, management will forward the communication to the Director or Directors to whom it is addressed; attempt to handle the inquiry directly, as might be the case if you request information about the Company or it is a stockholder related matter; or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. Interested parties, including non-stockholders wishing to communicate directly with the Lead Independent Director or the non-management members of the Board as a group should address their inquiries by mail sent to the attention of Robert Rosenthal, Lead Independent Director, at the Company’s principal executive office located at 11 Harbor Park Drive, Port Washington, NY 11050. All communications will be promptly relayed to the appropriate recipient(s).
Interested parties, including non-stockholders wishing to communicate directly with the Chairmanmember of the Audit, Committee or the Audit Committee as a group should address their inquiries by mail to the attention of Stacy Dick, Audit Committee Chairman, at the Company’s principal executive office located at 11 Harbor Park Drive, Port Washington, NY 11050. All communications will be promptly relayed to the appropriate recipient(s).
Director Attendance at Annual Stockholders MeetingsAt last year’s annual meeting of stockholders held on June 9, 2014, one Director attended the meeting. The Company does not have a policy with regards to Directors’ attendance at the Company’s annual meeting of stockholders annual stockholder meetings.
During fiscal year 2014, the Board of Directors held seven meetings the Audit Committee held nineteen meetings, (eight of these meetings were ordinary course meetings and eleven of the meetings were special meetings held with independent outside counsel regarding a current investigation by the U.S. Attorney’s Office into allegations arising from the Fiorentino investigation); the Compensation Committee held five meetings; the Nominating/Corporate Governance Committee held five meetings; and Compensation Committee until his resignation from the Executive Committee held no meetings. AllBoard in July 2017. Ms. Adler-Kravecas was a member of the Directors attended at least 85% of all of the meetings ofAudit, Nominating/Corporate Governance Committee and Compensation Committee until her resignation from the Board and 95% of the committees meetings of the Board of which they were members.in December 2017.
The Board of Directors has the following standing committees:
Number of Meetings Held in Fiscal 2017: Seven
The Audit Committee is appointed by the Board to assist the Board with oversight of (i) of:
the integrity of theour financial statements of the Company, (ii) the Company’sstatements;
our compliance with legal and regulatory requirements, (iii) requirements;
the independence and qualifications of the Company’sour external auditors,auditors; and (iv)
the performance of the Company’sour internal audit function and external auditors.
It is the Audit Committee’s responsibility to retain or terminate the Company’sour independent registered public accountants, who audit the Company’sour financial statements, and to prepare the Audit Committee report that the Securities and Exchange CommissionSEC requires to be included in the Company’s Annual Proxy Statement. (See “Reportour annual proxy statement. See Report of the Audit Committee” below.) Committee / page 16 of this proxy statement.
As part of its activities, the Audit Committee meets with the Company’s independent registered public accountantsour auditors at least annually to review the scope and results of the annual audit and quarterly to discuss the review of the quarterly financial results.
In addition, the Audit Committee receives and considers the independent registered public accountants’ comments and recommendations as to internal controls, accounting staff, management performance and auditing procedures.
The Audit Committee is also responsible for establishing procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.for:
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| Ø | the receipt, retention and treatment of complaints received by Systemax regarding accounting, internal accounting controls and auditing matters, and |
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| Ø | the confidential, anonymous submission by employees of Systemax of concerns regarding questionable accounting or auditing matters. |
In addition, the Audit Committee is responsible for reviewing, and discussing with management and reporting to the Board regularly, the Company’sour risk assessment and risk management processes. Whileprocesses, although it is the job of senior managementmanagement’s responsibility to assess and manage the Company’sour exposure to risk under the oversight of the Board of Directors, the Audit Committee reviews and discusses with management the Company’s risk management process. Board.
In addition, the Audit Committee works together with the Compensation Committee regarding the Company’sto ensure that our compensation policies for all of the Company’s employees as the policies relate to the Company’saddress and promote our risk management goals and objectives. The Audit Committee also discusses with management the Company’sour major financial risk exposures and the steps management has taken to monitor and control such exposures.
The Audit Committee Charter was last amended in August 2012. A copy of the Audit Committee Charter is available on the Company’s website, www.systemax.com.
The current members of the Audit Committee are Stacy Dick (chairman), Robert Rosenthal and Marie Adler-Kravecas. None of the current members or nominees of the Audit Committee are officers or employees of the Company. The Committee meets regularly both with and without management participation. As noted above, in the judgment of the Board, each of the members of the Audit Committee meets the standards for independence required by the rules of the Securities and Exchange Commission and the New York Stock Exchange. In addition, the Board has determined that Mr. DickMessrs. Rosenthal, Litwin and Mr. RosenthalLindbloom are “audit committee financial experts” as defined by regulations of the Securities and Exchange Commission.under SEC regulations.
The CompanySystemax does not have a standing policy on the maximum number of audit committees of other publicly owned companies on which the members of the Audit Committee may serve. However, if a member of the Audit Committee simultaneously serves on the audit committee of more than two other publicly-owned companies, the Board must determine whether such simultaneous service would impair the ability of such member to effectively serve on the Audit Committee. Any such determination will be disclosed in the Company’sour annual proxy statement.
Nominating/Corporate Governance Committee
Number of Meetings Held in Fiscal 2017: Five
The Nominating/Corporate Governance Committee’s responsibilities include, among other things (i) identifying individuals qualified to become Board members and recommending to the Board nominees to stand for election at any meeting of stockholders, (ii) identifying and recommending nominees to fill any vacancy, however created, in the Board, and (iii) developing and recommending to the Board a code of business conduct and ethics and a set of corporate governance principles (including director qualification standards, responsibilities and compensation) and periodically reviewing the code and principles. The current members of the Nominating/Corporate Governance Committee are Robert Rosenthal (Chairman), Stacy Dick and Marie Adler-Kravecas. things:
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| Ø | identifying individuals qualified to become Board members and recommending to the Board nominees to stand for election at any meeting of stockholders, |
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| Ø | identifying and recommending nominees to fill any vacancy, however created, in the Board, and |
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| Ø | developing and recommending to the Board a code of business conduct and ethics and a set of corporate governance principles (including director qualification standards, responsibilities and compensation) and periodically reviewing the code and principles. |
In nominating candidates to become Board members, the Nominating/Corporate Governance Committee shall taketakes into consideration such factors as it deems appropriate, including the experience, skill, integrity and background of the candidates. The Nominating/Corporate Governance Committee may consider candidates proposed by management or stockholders but is not required to do so. The Nominating/Corporate Governance Committee does not have any formal policy with regard to the consideration of any Directordirector candidates recommended by the security holdersstockholders or any minimum qualifications or specific procedure for identifying and evaluating nominees for Directordirector as the Board does not believe that such a formalistic approach is necessary or appropriate at this time.
The In addition, the Nominating/Corporate Governance Committee is responsible for developing and recommending to the Board a set of risk management policiesmay engage an independent search firm to assist in identifying qualified board candidates, and procedures, including the Company’s compensation policiesin 2017 we engaged an independent search firm to assist in finding candidates for all its employees as they relate to risk management, and to review these policies and procedures annually.
board vacancies.
The Nominating/Corporate Governance Committee, in seeking qualified Board members, does not have a policy regarding utilizing diversity, however defined, in its selection process. The Nominating/Corporate Governance Committee looks for individuals who have very high integrity, significant business experience and a deep genuine interest in the Company.Systemax. We believe that each of the director nominees and other directors bring these qualifications to our Board of Directors.Board. Moreover, they provide our boardBoard with a diverse complement of specific business skills, experience and perspectives.
The Nominating/Corporate Governance Committee Charter was last amended in August 2012. The Nominating/Corporate Governance Committee Charter is available on the Company’s website (www.systemax.com).12
Stockholder Nominations for Director
Stockholders may propose candidates for Board membership by writing to Systemax Inc., Attention: Nominating/Corporate Governance Committee, 11 Harbor Park Drive, Port Washington, NY 11050 so that the nomination is received by the Company by December 31, 2015 to be considered for the 2016 annual meeting. Any such proposal shall contain the name, Company security holdings (direct or indirect; of record and/or beneficially) and contact information of the person making the nomination; a description of all direct and indirect related party transactions, compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, between the stockholder and its respective affiliates or associates, or others with whom they are acting in concert, on the one hand, and the nominee and his or her respective affiliates, associates and others with whom they are acting in concert, on the other hand; the nominee’s name, age, address and other contact information; any direct or indirect holdings, beneficially and/or of record, of the Company’s securities by the nominee; any information regarding the nominee required to be disclosed about directors under applicable securities laws and/or stock exchange requirements; information regarding related party transactions with the Company and/or the stockholder submitting the nomination and/or the nominee; any actual or potential conflicts of interest; the nominee’s biographical data, current public and private company affiliations, employment history (including current principal employment) and qualifications and status as “independent” under applicable securities laws and stock exchange requirements. Nominees proposed by stockholders will receive the same consideration as other nominees.
Compensation Committee
Number of Meetings Held in Fiscal 2017: Five
The Compensation Committee’s responsibility is to review and approve corporate goals relevant to the compensation of the Chief Executive OfficerCEO and, after an evaluation of the Chief Executive Officer’sCEO’s performance in light of such goals, to set the compensation of the Chief Executive Officer. CEO.
The Compensation Committee also approves (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-based incentive grants. approves:
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| Ø | the annual compensation of the other executive officers of Systemax, |
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| Ø | the annual compensation of certain subsidiary managers, and |
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| Ø | all individual stock-based incentive grants. |
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 CompanySystemax including the Company’sour incentive-based and equity-based compensation plans. The Compensation Committee also prepares an annual report on executive compensation for inclusion in theour annual proxy statement. (See “CompensationSee Compensation Committee Report to Stockholders” below.) The current members/ page 35 of thethis proxy statement. The Compensation Committee are Robert Rosenthal (Chairman), Stacy Dickalso reviews and Marie Adler-Kravecas.
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our Executive Chairman and Vice Chairmen.In addition, it is the Compensation Committee’s responsibility to consider, and work together with the Company’s Audit Committee regarding, the Company’sto ensure our compensation policies for all its employees in the context of how such policies affectaddress and promote the Company’sour risk management goals and objectives.
The Compensation Committee Charter was last amended in May 2013. The Compensation Committee Charter is available on the Company’s website (www.systemax.com).
Executive Committee
The Executive Committee consistsNumber of the Chairman of the Board and any Vice Chairman and such other Directors as may be named thereto by the Board. The current members of the Executive Committee are Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Robert Rosenthal, the Lead Independent Director. Meetings Held in Fiscal 2017: None
Among other duties as may be assigned by the Board from time to time, the Executive Committee is authorized to oversee the operations of the Company, supervise the executive officers of the Company, review and make recommendations to the Board regarding the strategic direction of the Company and review and make recommendations to the Board regarding all possible acquisitions or other significant business transactions. is:
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| Ø | authorized to oversee our operations, |
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| Ø | supervise our executive officers, |
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| Ø | review and make recommendations to the Board regarding our strategic direction, and |
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| Ø | review and make recommendations to the Board regarding all possible acquisitions or other significant business transactions. |
The Executive Committee is also authorized to manage the affairs of the CorporationSystemax between meetings of the Board; the Executive Committee has all of the powers of the Board not inconsistent with any provisions of the Delaware General Corporation Law, the Company’sour Certificate of Incorporation or By-Laws or other resolutions adopted by the Board, but doesthe Executive Committee did not generally exercise such authority.its power in 2017.
Board Leadership Structure
As noted above, our Board currently includes three independent Directors. Richard Leeds has served as Chairman and Chief Executive Officer since April 1995. Our independent directors have designated, Robert Rosenthal, one of the independent directors, to be the Lead Independent Director. We believe that the current mix of employee directors and non-employee independent directors that make up our Board, along with the independent oversight of our Lead Independent Director, benefits the Company and its stockholders.Although the Board does not have an express policy on whether or not the roles of Chief Executive Officer and Chairman of the Board should be separate and if they are to be separate, whether the Chairman of the Board should be selected from the non-employee Directors or be an employee, the Board believes that it should have the flexibility to make a determination from time to time in a manner that is in the best interests of the Company and its stockholders at the time of such determination. At this time, the Board of Directors believes that Mr. Leeds’ service as both Chairman of the Board and CEO is in the best interest of the Company and its stockholders. Mr. Leeds possesses in-depth knowledge of the issues, opportunities and challenges facing the Company and its businesses and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the matters that are most critical to the Company and its stockholders. His combined role has produced decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s stockholders, employees, customers and suppliers, particularly during times of turbulent economic conditions.
The Board believes that the independent directors provide effective oversight of management. Moreover, in addition to feedback provided during the course of Board meetings, the independent directors have regular executive sessions. Following an executive session of independent directors, the Lead Independent Director acts as a liaison between the independent directors and the Chairman regarding any specific feedback or issues, provides the Chairman with input regarding agenda items for Board and Committee meetings, and coordinates with the Chairman regarding information to be provided to the independent directors in performing their duties. The Board believes that this approach appropriately and effectively complements the combined CEO/Chairman structure.
We recognize that different board leadership structures may be appropriate for companies
Board’s Role in different situations and believe that no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for us because it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with a single person setting the tone and having primary responsibility for managing our operations. Having a single leader for both the Company and the Board eliminates the potential for confusion or duplication of efforts, and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this leadership structure.
Lead Independent Director
The independent Directors elect one independent Director to serve as a Lead Independent Director. In addition to presiding at executive sessions of nonemployee Directors, the Lead Independent Director has the responsibility to coordinate the activities of the independent Directors, and to perform the following functions: (a) advise the Chairman of the Board as to an appropriate schedule of Board meetings, seeking to ensure that the independent Directors can perform their duties responsibly while not interfering with the flow of the Company’s operations; (b) provide the Chairman with input as to the preparation of agendas for the Board and committee meetings; (c) advise the Chairman as to the quality, quantity, and timeliness of the flow of information from the Company’s management that is necessary for the independent directors to effectively and responsibly perform their duties, and although the Company’s management is responsible for the preparation of materials for the Board, the Lead Independent Director may specifically request the inclusion of certain material; (d) recommend to the Chairman the retention of consultants who report directly to the Board; (e) assist the Board and the Company’s officers in assuring compliance with and implementation of the corporate governance policies; and be principally responsible for recommending revisions to the corporate governance policies; (f) coordinate and develop the agenda for, and moderate executive sessions of, the independent directors of the Board, and act as principal liaison between the independent directors and the Chairman on sensitive issues; and (g) recommend to the Chairman the membership of the various Board committees.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company and its stockholders. Our Corporate Governance Guidelines, as amended in April 2010, provide the flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate.
Our Board as a whole is responsible for overseeing the Company’sour risk management process. The Board focuses on the Company’sour general risk management strategy, the most significant risks facing the Company,Systemax, and seeks to ensure that appropriate risk mitigation strategies are implemented by management.
Risk management is a recurring Audit Committee and Board quarterly agenda item, and is considered part of strategicbusiness and operations planning.
The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and at least quarterly receives information relating to material Company risk from management and from the Company’sour Legal & Risk Management/InsuranceManagement and Internal Audit Departments.
Delegation to Board Committees
The Board has delegated to each of its committeesCommittees oversight of certain aspects of the Company’sour risk management process.
Among its duties, the Audit Committee reviews with management (a) Company processes with respect to risk assessment and management of risks that may be material to the Company,Systemax, (b) the Company’sour system of disclosure controls and system of internal controls over financial reporting, and (c) the Company’sour compliance with legal and regulatory requirements.
The Compensation Committee is responsible for considering and working together with the Audit Committee regarding the Company’s compensation policies for all itsour employees in the context of how such policies affect and promote the Company’sour risk management goals and objectives.
The Nominating/Corporate Governance Committee is responsible for developing and recommending to the Board a set of risk management policies and procedures, including the Company’sour compensation policies for all itsour employees as they relate to risk management, and to review these policies and procedures annually. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.
The Company’sOur senior management is responsible for day-to-day risk management.
Our Internal Audit Department serves as the primary monitoring and testing function for company-wide policies and procedures, and manages the day-to-day oversight of the risk management strategy for the ongoing business of the Company.Systemax. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels. The Internal Auditor reports directly to our Chief Financial Officer and Audit Committee quarterly, and the Audit Committee considers risk management issues as part of its quarterly agenda.
works closely with our CEO on matters that may impact our exposure to risk.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the CompanySystemax and that our Board leadership structure supports this approach.
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| Proposal No. 2 – Ratification of Ernst & Young LLP as our Independent Auditor |
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of our independent auditor and approves the audit engagement letter with Ernst & Young LLP and its audit fees. The Audit Committee has appointed Ernst & Young LLP as our independent auditor for fiscal 2018 and believes that the continued retention of Ernst & Young LLP as our independent auditor is in the best interest of Systemax and our stockholders.
While not required by law, we are asking our stockholders to ratify the appointment of Ernst & Young LLP as our independent auditor for fiscal 2018 at the Annual Meeting as a matter of good corporate governance. If stockholders do not ratify this appointment, the Audit Committee will consider whether it is appropriate to appoint another audit firm. Even if the appointment is ratified, the Audit Committee in its discretion may appoint a different audit firm at any time during the fiscal year if it determines that such a change would be in the best interest of Systemax and our stockholders.
We expect representatives of Ernst & Young LLP to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and to respond to appropriate questions from stockholders.
Fees Paid to our Independent Auditor
The following table sets forth the fees billed to us by Ernst & Young LLP for services in fiscal 2017 and 2016, all of which were pre-approved by the Audit Committee:
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| Fee Category | 2017 ($) | 2016 ($) |
| Audit fees (1) | 1,490,000 | 1,577,700 |
| Audit-related fees (2) | 44,800 | 181,500 |
| Tax fees (3) | 0 | 0 |
| All other fees (3) | 1,400 | 2,200 |
| Total | 1,536,200 | 1,761,400 |
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| (1) | In accordance with the SEC’s definitions and rules, “audit fees” are fees that were billed to Systemax by Ernst & Young LLP for the audit of our 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 our 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. |
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| (2) | “Audit-related fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and internal control over financial reporting, including services in connection with assisting Systemax in our compliance with our obligations under Section 404 of the Sarbanes-Oxley Act and related regulations. |
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| (3) | Ernst & Young LLP did not provide any professional services for tax compliance, planning or advice in 2017 or 2016. |
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| (4) | Consists of fees billed for other professional services rendered to Systemax. |
Audit Committee Pre-Approval Policy
The Audit Committee is responsible for approving every engagement of Systemax’s independent auditor to perform audit or non-audit services on behalf of Systemax or any of its subsidiaries before such auditors can be engaged to provide those services. The Audit Committee does not delegate its pre-approval authority. The Audit Committee is not permitted to engage the independent auditor to perform any non-audit services proscribed by law or regulation. The Audit Committee has reviewed the services provided to Systemax by Ernst & Young LLP and believes that the non-audit/review services it has provided are compatible with maintaining the auditor’s independence.
The Board recommends that you vote for the proposal to ratify the appointment
of Ernst & Young LLP as our independent auditor for fiscal year 2018
(Proposal No. 2)
REPORT OF THE AUDIT COMMITTEE*
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| Report of the Audit Committee |
The Audit Committee of the Board operates under its Charter, which was originally adopted by the Board in 2000 and was most recently revised in August 2012.March 2017. As set forth in its Charter, the Audit Committee’s job is one of oversight. Management is responsible for the Company’sSystemax’s financial statements, internal accounting and financial controls, the financial reporting process, the internal audit function and compliance with the Company’sour policies and legal requirements. The Company’sOur independent registered public accountantsauditors are responsible for performing an independent audit of the Company’sour consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) and for issuance of a report thereon, and for monitoring the effectiveness of the Company’sour internal controls; they also perform limited reviews of the Company’sour unaudited quarterly financial statements.
The Audit Committee’s responsibility is to engage the independent registered public accountants, monitor and oversee these accounting, financial and audit processes and report its findings to the full Board. It also investigates matters related to the Company’sour financial statements and controls as it deems appropriate. In the performance of these oversight functions, the members of the Audit Committee rely upon the information, opinions, reports and statements presented to them by CompanySystemax management and by the independent registered public accountants, as well as by other experts that the Audit Committee hires.
The Audit Committee met with the Company’sour independent auditors to review and discuss the overall scope and plans for the audit of the Company’sour consolidated financial statements for the year ended December 31, 2014.2017. The Audit Committee has considered and discussed with management and the independent auditors (both alone and with management present) the audited financial statements as well as the independent auditors’ evaluation of the Company’sour internal controls and the overall quality of the Company’sour financial reporting.
Management represented to the Audit Committee that the Company’sour consolidated financial statements for fiscal year 20142017 were prepared in accordance with U.S. generally accepted accounting principles. In connection with these responsibilities, the Audit Committee met with management and Ernst & Young LLP to review and discuss the December 31, 20142017 audited consolidated financial statements. The Audit Committee also discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61 Communication with Audit Committees),Committees, as amended and as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee also received written disclosures and the letter from Ernst & Young LLP required by Rule 3526 of the Public Company Accounting Oversight Board (Communications with Audit Committees Concerning Independence), and the Audit Committee discussed with Ernst & Young LLP the firm’s independence.
Based on the review of the representations of management, the discussions with management and the independent registered public accountants and the review of the Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, to the Committee, the Audit Committee recommended to the Board that the financial statements of the CompanySystemax for fiscal year 20142017 as audited by Ernst & Young LLP be included in the Company’sSystemax’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board,
Robert D. Rosenthal (Chairman)
Barry Litwin
Chad Lindbloom
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| AUDIT COMMITTEE | | | |
| | Stacy Dick (Chairman) | | | |
| | Robert Rosenthal | | |
| | Marie Adler-Kravecas | | |
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| Security Ownership Information |
The following tables provides certain information regarding the beneficial ownership of Systemax common stock as of April 16, 2018 by:
our directors;
our executive officers named in the Summary Compensation Table / page 36 of this proxy statement;
all executive officers and directors as a group; and
each person known by us to own beneficially more than 5% of our outstanding common stock
A person has beneficial ownership of shares if the person has voting or investment power over the shares
or the right to acquire such power in 60 days. Investment power means the power to direct the sale or other disposition of the shares. Except as otherwise described in the notes below, information on the number of shares beneficially owned is as of April 16, 2018, and the listed beneficial owners have sole voting and investment power. A total of 37,174,265 shares of our common stock were outstanding as of April 16, 2018.
The address for each beneficial owner, unless otherwise noted is c/o Systemax Inc., 11 Harbor Park Drive, Port Washington, NY 11050.
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| Security Ownership of Management |
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| Name of Beneficial Owner |
Shares of Common Stock (a) | Restricted Stock Units vesting within 60 days( 1) | Stock Options currently exercisable or becoming exercisable within 60 days (1) | Percent of
Common Stock |
| Richard Leeds (2) | 13,373,120 | - | - | 36% |
| Bruce Leeds (3) | 12,171,998 | - | - | 33% |
| Robert Leeds (4) | 11,940,124 | - | - | 32% |
| Lawrence Reinhold | 73,566 | 17,500 | 200,000 | * |
| Thomas Clark | 10,201 | - | 27,500 | * |
| Robert Dooley | 66,428 | - | 87,500 | * |
| Robert D. Rosenthal | 62,531 | 4,400 | 3,334 | * |
| Barry Litwin | - | - | - | * |
| Chad Lindbloom | - | - | - | * |
| All of our current directors and executive officers (13 persons) |
25,061,921 |
21,900 | 488,384 | 69% |
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| (a) | Amounts listed in this column may include shares held in partnerships or trusts that are counted in more than one individual’s total. |
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| (1) | In computing the percentage of shares owned by each person and by the group, these restricted stock units and stock options, as applicable, were added to the total number of outstanding shares of common stock for the percentage calculation. |
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| (2) | Includes 2,069,932 shares owned by Mr. Richard Leeds directly, 2,000,000 shares owned by the Richard Leeds 2017 GRAT, 898,137 shares owned by the Richard Leeds 2016 GRAT and 159,048 shares owned by the Richard Leeds 2015 GRAT. Also, includes 1,838,583 shares owned by a limited partnership of which Mr. Richard Leeds is a general partner, 235,850 shares owned by a limited partnership of which a limited liability company controlled by Mr. Richard Leeds is the general partner, 5,651,770 shares owned by trusts for the benefit of his brothers’ children for which Mr. Richard Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Richard Leeds has an indirect pecuniary interest. |
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| (3) | Includes 2,549,500 shares owned by Mr. Bruce Leeds directly, 847,654 shares owned by the Bruce Leeds 2017 GRAT, 1,173,354 shares owned by the Bruce Leeds 2016 GRAT, and 74,223 shares owned by the Bruce Leeds 2015 GRAT. Also, includes 1,838,583 shares owned by a limited partnership of which Mr. Bruce Leeds is a general partner, 5,168,884 shares owned by trusts for the benefit of his brothers’ children for which Mr. Bruce Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Bruce Leeds has an indirect pecuniary interest. |
| |
| (4) | Includes 118,370 shares owned by Mr. Robert Leeds directly, 3,100,000 shares owned by the Robert Leeds 2017 GRAT, 1,087,757 shares owned by the Robert Leeds 2016 GRAT, and 222,668 shares owned by the Robert Leeds 2015 GRAT. Also, includes 1,838,583 shares owned by a limited partnership of which Mr. Robert Leeds is a general partner, 5,052,946 shares owned by trusts for the benefit of his brothers’ children for which Mr. Robert Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Robert Leeds has an indirect pecuniary interest. |
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| Security Ownership of Certain Beneficial Owners |
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| | |
| Name and Address of Beneficial Owner |
Shares of Common Stock | Percent of
Common Stock |
Prescott General Partners LLC (1) 2200 Butts Road, Suite 320 Boca Raton, FL 33431 |
2,228,192 | 6% |
| |
| (1) | Based on information containedsupplied by Prescott General Partners LLC (“PGP”), Prescott Associates L.P. (“Prescott Associates”), Prescott Investors Profit Sharing Trust (“PIPS”) and Thomas W. Smith in this Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed”a Schedule 13G/A filed with the SEC nor shall such information be incorporated by reference into any filings underon February 14, 2017. The Schedule 13G/A modifies the Securities ActSchedule 13G to reflect, among other things, (i) the addition of 1933,PIPS as amended, which we refer toa Reporting Person and (ii) the removal of Scott J. Vassalluzzo 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.a Reporting Person. |
PGP, as the general partner of three private investment limited partnerships (including Prescott Associates) (collectively, the “Partnerships”) may be deemed to share the power to vote or to direct the vote and to dispose or to direct the disposition of 2,118,192 shares held by the Partnerships. Prescott Associates has the shared power to vote or to direct the vote and to dispose or to direct the disposition of 2,044,691 shares. PIPS has the sole power to vote or to direct the vote of and to dispose or to direct the disposition of 92,018 shares. Mr. Smith has the sole power to vote or to direct the vote of and to dispose or to direct the disposition of 600,000 shares held by Ridgeview Smith Investments LLC, a limited liability company established by Mr. Smith and of which he is the sole member. In his capacity as investment manager for certain managed accounts, Mr. Smith may be deemed to have the shared power to vote or to direct the vote of 76,500 shares and to dispose or to direct the disposition of 76,500 shares. Voting and investment authority over investment accounts established for the benefit of certain family members and friends of Mr. Smith is subject to each beneficiary’s right, if so provided, to terminate or otherwise direct the disposition of the investment account.
The 13G/A is Amendment No. 7 to the joint filing on Schedule 13G by Thomas W. Smith, Scott J. Vassalluzzo and Steven M. Fischer originally filed with the SEC on July 13, 2009, as amended by Amendment No. 1 filed with the SEC on February 16, 2010, Amendment No. 2 filed with the SEC on February 14, 2011, Amendment No. 3 filed by PGP, Thomas W. Smith and Scott J. Vassalluzzo with the SEC on January 5, 2012, Amendment No. 4 filed by PGP, Thomas W. Smith and Scott J. Vassalluzzo with the SEC on February 14, 2013, Amendment No. 5 filed by PGP, Prescott Associates, Thomas W. Smith and Scott J. Vassalluzzo with the SEC on February 14, 2014, and Amendment No. 6 filed by PGP, Prescott Associates, Thomas W. Smith and Scott J. Vassalluzzo with the SEC on February 13, 2015.
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| Section 16(a) Beneficial Ownership Reporting Compliance |
Based solely upon a review of Forms 3, 4 and 5 furnished to us and written representations from our officers and directors, we believe that all of our officers and directors and all beneficial owners of 10% or more of any class of our registered equity securities timely filed all reports required under Section 16(a) of the Exchange Act during fiscal 2017.
18 |
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| Equity Compensation Plans |
Information for our equity compensation plans in effect as of the end of fiscal 2017 is as follows:
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| | | |
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (1) (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| Equity compensation plans approved by stockholders | 1,001,300 | 11.58 | 6,070,549 |
| Equity compensation plans not approved by stockholders | - | - | - |
| Total | 1,001,300 | 11.58 | 6,070,549 |
| |
| (1) | The weighted-average exercise price does not take into account the shares issuable upon outstanding restricted stock units vesting, which have no exercise price. |
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| Certain Relationships and Related Transactions |
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| Related Person Transaction Policy |
Our written corporate approval policy requires transactions with related persons, to be reviewed and approved or ratified by the following persons on an escalating basis:
ü our General Counsel,
ü our CFO,
ü our CEO, and
ü our Nominating/Corporate Governance Committee.
In this regard, all such transactions are first discussed with the CFO and are submitted to the General Counsel’s office, including for an initial determination of whether such further related person transaction review is required.
We utilize the definition of related persons under applicable SEC rules, defined as any executive officer, director or nominee for director of Systemax, any beneficial owner of more than 5% of the outstanding shares of our common stock, or any immediate family member of any such person.
In reviewing these transactions, we strive to assure that the terms of any agreement between Systemax and a related party is at arm’s length, fair and at least as beneficial to Systemax as could be obtained from third parties.
The Nominating/Corporate Governance Committee, in its discretion, may consult with third party appraisers, valuation advisors or brokers to make such determination.
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| Transactions With Related Persons |
Lease. On December 14, 2016, Global Equipment Company Inc., a wholly owned indirect subsidiary of Systemax entered into an amended and restated lease (the “Lease”) for its Port Washington, NY headquarters (the “Headquarters”). Systemax has leased the Headquarters since 1988 from an entity owned by Messrs. Richard, Bruce and Robert Leeds, directors and officers of, and together with their respective affiliated entities majority stockholders of, Systemax (the “Landlord”). The Lease provides that it is intended to be a “triple net” lease with Global Equipment Company Inc. to pay, or reimburse Landlord for paying, all costs and operating expenses, including taxes, insurance and maintenance expenses, associated with the Lease and the Headquarters. The Lease was reviewed and approved in accordance with the corporate approval policy noted above for related party transactions. Lease payments totaled $936,457 for fiscal 2017.
Stockholders Agreement. Certain members of the Leeds family (including Messrs. Richard, Bruce and Robert Leeds) and family trusts of Messrs. Richard, Bruce and Robert Leeds entered into a stockholders agreement pursuant to which the parties agreed to vote in favor of the nominees for the Board designated by the holders of a majority of the shares held by such stockholders at the time of our initial public offering of the shares. In addition, the agreement prohibits the sale of the shares without the consent of the holders of a majority of the shares held by all parties to the agreement, subject to certain exceptions, including sales pursuant to an effective registration statement and sales made in accordance with Rule 144. The agreement also grants certain drag-along rights in the event of the sale of all or a portion of the shares held by holders of a majority of the shares. As of the end of fiscal 2017, the parties bound to the stockholders agreement beneficially owned 25,236,700 shares subject to such agreement (constituting approximately 68% of the shares outstanding).
Pursuant to the stockholders agreement, Systemax granted to the parties demand and incidental, or “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 Systemax register under the Securities Act all or part of the shares held by such stockholders. Pursuant to the incidental registration rights, Systemax 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 shares of shares held by it subject to certain restrictions. Systemax 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.
There are no arrangements or understandings between any officer and any other person pursuant to which such person was selected as an officer.
The following table sets forth certain information with respect to the executive officers of the Company as of April 14, 2015.
Name | Age | Position |
| | |
Richard Leeds | 55 | Chairman and Chief Executive Officer; Director |
Bruce Leeds | 59 | Vice Chairman; Director |
Robert Leeds | 59 | Vice Chairman and Chief Executive of the Company’s North American Technology Products Group; Director |
Lawrence Reinhold | 55 | Executive Vice President and Chief Financial Officer; Director |
Robert Dooley | 61 | President of the Company’s Industrial Products Group |
Perminder Dale | 54 | Chief Executive of the Company’s EMEA Technology Products Group |
Eric Lerner | 57 | Senior Vice President and General Counsel |
Thomas Axmacher | 56 | Vice President and Controller |
Manoj Shetty | 54 | Senior Vice President and Chief Information Officer |
For biographical information aboutMessrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold seebiographical information is on pages 9 and 105-6 of this Proxy Statement.proxy statement.
Vice President and Chief Financial Officer
Age: 36
Thomas Clark was appointed Vice President and CFO of Systemax in October 2016. Mr. Clark originally joined Systemax in 2007. During the past ten years Mr. Clark, has served in a number of senior financial positions at Systemax, most recently as Controller of the Industrial Products Group. Previously he held the positions of Director of Finance, and Manager of Financial Planning & Analysis at Systemax.
President, Industrial Products Group
Age: 64
Robert Dooley was appointed President of the Company’sour Industrial Products Group in January 2012. Mr. Dooley originally joined the CompanySystemax in 1982 and served in numerous roles until March 2004, including Senior Vice President, Worldwide Computer Sales and Marketing. He also was a Directordirector of the CompanySystemax from June 1995 through March 2004. Mr. Dooley left the Company in 2004 but returned in December 2007 as
Senior Vice President Internet Marketing for the Globaland Chief Operations Officer
Age: 45
Dave Kipe was appointed Senior Vice President and Chief Operations Officer in October 2017. Prior to joining Systemax, Dave worked in various senior leadership roles from private equity start-ups to Fortune 500 organizations, including Scholastic, MSC Industrial, business. Mr. Dooley graduated from Rensselaer Polytechnic InstituteGap Inc., & IKON Office Solutions. He brings with him a B.S. in Physics.
Perminder Dale joined the Company in January 2012 as Chief Executive of the Company’s EMEA Technology Products Group. Mr. Dale has over 20strong background and years of experience in the information technology industry: from 1996 to 2010 Mr. Dale held various significant executive positions with Dell Computer Corporation, including Director of Server Business for Europe, Middle Eastglobal supply chain management and Africa, Director of UK Corporate Sales,operations.
Senior Vice President and General Manager of Emerging Markets (2000 to 2008) and Vice President and General Manager of Global Distribution Channels (2008 to 2010). Mr. Dale also held various management positions with other well-known technology companies, including Sun Microsystems, Siemins NixDorf and Hewlett Packard. Mr. Dale earned his M.B.A. in international business and marketing from University of Bradford Business School.Counsel
Age: 60
Eric Lerner was appointed Senior Vice President and General Counsel in May 2012. He was previously a senior corporate partner at Kramer Levin Naftalis & Frankel, a corporate partner, Co-Chair of the National Corporate Department and member of the Board of Directors of Katten Muchin Zavis Rosenman, and a corporate partner and Chair of the Corporate Department of Rosenman & Colin. He received his JD degree from
Senior Vice President and Chief Information Officer
Age: 57
Manoj Shetty was appointed Senior Vice President and Chief Information Officer of Systemax in August 2014. Mr. Shetty originally joined Systemax in 2000 and has served in several Information Technology roles since that time. Prior to joining Systemax, Mr.Shettywas employed at Mercator (ultimately acquired by IBM) and in the University of Chicagomanufacturing sector.
Vice President and his undergraduate degree from SUNY Binghamton.Controller
Age: 59
Thomas Axmacher was appointed Vice President and Controller of the CompanySystemax in October 2006. He was previously Chief Financial Officer of Curative Health Services, Inc., a publicly traded health care company, and Vice President and Controller of Tempo Instrument Group, an electronics manufacturer. Mr. Axmacher received his B.S. degree in Accounting from Albany University and his M.B.A. from Long Island University.
Manoj Shetty was appointed Senior Vice President and Chief Information Officer of the Company in August 2014. Mr. Shetty originally joined the Company in 2000 and has served in several Information Technology roles since that time. Prior to joining Systemax, Mr. Shetty was employed at Mercator (ultimately acquired by IBM) and in the manufacturing sector.
SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT
The following table provides certain information regarding the beneficial ownership of the Shares as of April 14, 2015, by (i) each of the Directors, (ii) each of the Named Executive Officers listed in the Summary Compensation table, (iii) all current Directors and executive officers as a group and (iv) each person known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities.
As used in this table “beneficial ownership” means the sole or shared power to vote or direct the voting or to dispose or direct the disposition of any security. A person is deemed as of any date to have “beneficial ownership” of any security that such person owns or has a right to acquire within 60 days after such date. Any security that any person named above has the right to acquire within 60 days is deemed to be outstanding for purposes of calculating the ownership percentage of such person, but is not deemed to be outstanding for purposes of calculating the ownership percentage of any other person. Unless otherwise stated, each person owns the reported shares directly and has the sole right to vote and determine whether to dispose of such shares. The address for each beneficial owner, unless otherwise noted is c/o Systemax Inc., 11 Harbor Park Drive, Port Washington, NY 11050.
A total of 36,818,158 Shares were outstanding as of April 14, 2015.
| | | Amount and Nature of Beneficial Ownership (a) | | | | |
| Richard Leeds (1) | | | 12,643,830 | | | | 34.3 | % |
| Bruce Leeds (2) | | | 11,277,452 | | | | 30.6 | % |
| Robert Leeds (3) | | | 12,384,752 | | | | 33.6 | % |
| Lawrence Reinhold (4) | | | 386,574 | | | | 1 | % |
| Robert Dooley (5) | | | 104,400 | | | | * | |
| Eric Lerner (6) | | | 37,500 | | | | * | |
| Robert Rosenthal (7) | | | 72,391 | | | | * | |
| Stacy Dick (8) | | | 45,267 | | | | * | |
| Marie Adler-Kravecas (9) | | | 28,163 | | | | * | |
| All current Directors and executive officers of the Company (12 persons) (10) | | | 25,640,962 | | | | 69.8 | % |
| | | | | | | | | |
Other Beneficial Owners of 5% or More of the Company’s Voting Stock | |
Prescott General Partners LLC (11) 2200 Butts Road, Suite 320 Boca Raton, FL 33431 | | | 2,118,192 | | | | 5.8 | % |
(a) |
| Amounts listed in this column may include shares held in partnerships or trusts that are counted in more than one individual’s total. | | | |
| | | | |
(1) | Includes 1,981,477 shares owned by Mr. Richard Leeds directly, 1,500,000 shares owned by the Richard Leeds 2015 GRAT, 742,283 shares owned by the Richard Leeds 2012 GRAT, 766,290 shares owned by the Richard Leeds 2011 GRAT and 362,026 shares owned by the Richard Leeds 2010 GRAT. Also includes 1,838,583 shares owned by a limited partnership of which Mr. Richard Leeds is a general partner, 235,850 shares owned by a limited partnership of which a limited liability company controlled by Mr. Richard Leeds is the general partner, 4,697,521 shares owned by trusts for the benefit of his brothers’ children for which Mr. Richard Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Richard Leeds has an indirect pecuniary interest. |
(2) |
Includes 2,919,357 shares owned by Mr. Bruce Leeds directly, 700,000 shares owned by the Bruce Leeds 2015 GRAT, 466,064 shares owned by the Bruce Leeds 2012 GRAT, 467,613 shares owned by the Bruce Leeds 2011 GRAT |
Compensation Discussion and 234,028 shares owned by the Bruce Leeds 2010 GRAT. Also includes 1,838,583 shares owned by a limited partnership of which Mr. Bruce Leeds is a general partner, 4,132,007 shares owned by trusts for the benefit of his brothers’ children for which Mr. Bruce Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Bruce Leeds has an indirect pecuniary interest.Analysis |
(3) | Includes 1,074,913 shares owned by Mr. Robert Leeds directly, 2,100,000 shares owned by the Robert Leeds 2015 GRAT, 910,003 shares owned by the Robert Leeds 2012 GRAT, 881,658 shares owned by the Robert Leeds 2011 GRAT and 374,139 shares owned by the Robert Leeds 2010 GRAT. Also includes 1,838,583 shares owned by a limited partnership of which Mr. Robert Leeds is a general partner, 4,685,656 shares owned by trusts for the benefit of his brothers’ children for which Mr. Robert Leeds acts as co-trustee and 519,800 shares owned by a limited partnership in which Mr. Robert Leeds has an indirect pecuniary interest. |
(4) | Includes options to acquire a total of 250,000 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 1999 Long-Term Stock Incentive Plan, options to acquire a total of 37,500 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan and 17,500 restricted stock units granted pursuant to the Company’s 2010 Long-Term Incentive Plan that will vest within 60 days. Also includes 500 shares held by Mr. Reinhold’s spouse, of which Mr. Reinhold disclaims beneficial ownership. |
(5) | Includes options to acquire a total of 10,000 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 1999 Long-Term Stock Incentive Plan and options to acquire a total of 37,500 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan. |
(6) | Includes options to acquire a total of 37,500 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan. |
(7) | Includes options to acquire a total of 7,000 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 1995 and 2006 Stock Incentive Plans for Non-Employee Directors and 4,171 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days. |
(8) | Includes options to acquire a total of 7,000 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 1995 and 2006 Stock Incentive Plans for Non-Employee Directors and 4,171 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days. |
(9) | Includes options to acquire a total of 5,000 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2006 Stock Incentive Plan for Non-Employee Directors and 4,171 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days. |
(10) | Includes options to acquire a total of 42,500 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 1999 Long-Term Stock Incentive Plan and options to acquire a total of 86,250 shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan. |
(11) | Based on information supplied by Prescott General Partners LLC (“PGP”), Prescott Associates L.P., Thomas W. Smith and Scott J. Vassalluzzo in a Schedule 13G/A filed with the SEC on February 13, 2015. The address of the parties is 2200 Butts Road, Suite 320, Boca Raton, FL 33431. Prescott General Partners LLC, Prescott Associates L.P. and Messrs. Smith and Vassalluzzo have the shared power to vote or dispose or to direct the vote or the disposal of 2,118,192; 2,044,691; 768,518; and 192,018, respectively. PGP, as the general partner of three private investment limited partnerships (the “Partnerships ”), may be deemed to share the power to vote or to direct the vote and to dispose or to direct the disposition of 2,118,192 shares held by the Partnerships. Mr. Smith has the sole power to vote or to direct the vote of and to dispose or to direct the disposition of 600,000 shares. Mr. Vassalluzzo has the sole power to vote or to direct the vote of and to dispose or to direct the disposition of no shares. In their capacities as investment managers for certain managed accounts, Messrs. Smith and Vassalluzzo may be deemed to have the shared power to vote or to direct the vote of 168,518 and 92,018 shares, respectively, and to dispose or to direct the disposition of 168,518 and 192,018 shares, respectively. Voting and investment authority over investment accounts established for the benefit of certain family members and friends of Messrs. Smith and Vassalluzzo is subject to each beneficiary’s right, if so provided, to terminate or otherwise direct the disposition of the investment account. The 13G/A is Amendment No. 6 to the joint filing on Schedule 13G by Thomas W. Smith, Scott J. Vassalluzzo and Steven M. Fischer originally filed with the SEC on July 13, 2009, as amended by Amendment No. 1 filed with the SEC on February 16, 2010, Amendment No. 2 filed with the SEC on February 14, 2011, Amendment No. 3 filed with the SEC on January 5, 2012, Amendment No. 4 filed with the SEC on February 14, 2013 and Amendment No. 5 filed with the SEC on February 14, 2014. |
Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires the Company’s executive officers and Directors and persons who own more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, Directors and ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of Section 16(a) forms received by it, or written representations from certain reporting persons, the Company believes its Executive Officers, Directors and ten-percent stockholders complied with all such filing requirements for fiscal year 2014; except for the following filing made on behalf of the named persons that were inadvertently filed late by the Company: a Form 5 for Eric Lerner filed with the SEC on April 1, 2015.
TRANSACTIONS WITH RELATED PERSONSUnder the Company’s Corporate Ethics Policy, all officers, Directors and employees (collectively the “Company Representatives”) are required to avoid conflicts of interest, appearances of conflicts of interest and potential conflicts of interest. A “conflict of interest” occurs when a Company Representative’s private interest interferes in any way with the interests of the Company. A conflict can arise when a Company Representative takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest also arise when a Company Representative, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Company Representatives cannot allow any consideration such as the receipt of gifts or financial interests in other businesses or personal or family relationships to interfere with the independent exercise of his or her business judgment and work activities to the benefit of the Company. Loans to, or guarantees of obligations of, Company Representatives are prohibited unless permitted by law and authorized by the Board or a Committee designated by the Board. If a Company Representative becomes aware of a potential conflict of interest he or she must communicate such potential conflict of interest to the Company.
The Company’s written corporate approval policy requires transactions with related persons, including but not limited to leases with related persons and sales or purchases of Company assets by related persons, to be reviewed and approved or ratified by the Company’s Audit Committee as well as by the Company’s Chief Executive Officer, Chief Financial Officer and General Counsel. In this regard, all such transactions are first discussed with the Chief Financial Officer and are submitted to the General Counsel’s office, including for an initial determination of whether such further related person transaction review is required. The Company utilizes the definition of related persons under applicable SEC rules, defined as any executive officer, director or nominee for director of the Company, any beneficial owner of more than 5% of the outstanding shares of the Company’s common stock, or any immediate family member of any such person. In reviewing these transactions, the Company strives to assure that the terms of any agreement between the Company and a related party is at arm’s length, fair and at least as beneficial to the Company as could be obtained from third parties. The Audit Committee, in its discretion, may consult with third party appraisers, valuation advisors or brokers to make such determination.
Leases
The Company has leased its facility in Port Washington, NY since 1988 from an entity owned by Richard Leeds, Bruce Leeds and Robert Leeds, Directors of the Company. Rent expense under this lease totaled $975,000 for fiscal year 2014. The Company believes that at the time the lease was signed, these payments were no higher than would be paid to an unrelated lessor for comparable space.
Stockholders Agreement
Certain members of the Leeds family (including Richard Leeds, Bruce Leeds and Robert Leeds) and family trusts of Messrs. Leeds entered into a stockholders agreement pursuant to which the parties agreed to vote in favor of the nominees for the Board designated by the holders of a majority of the Shares held by such stockholders at the time of the Company’s initial public offering of the Shares. In addition, the agreement prohibits the sale of the Shares without the consent of the holders of a majority of the Shares held by all parties to the agreement, subject to certain exceptions, including sales pursuant to an effective registration statement and sales made in accordance with Rule 144. The agreement also grants certain drag-along rights in the event of the sale of all or a portion of the Shares held by holders of a majority of the Shares. As of the end of fiscal year 2014, the parties to the stockholders agreement beneficially owned 25,286,700 Shares subject to such agreement (constituting approximately 68.7% of the Shares outstanding).
Pursuant to the stockholders agreement, the Company granted to the parties demand and incidental, or “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 shares 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.
EQUITY COMPENSATION PLAN INFORMATIONInformation for our equity compensation plans in effect as of the end of fiscal year 2014 is as follows:
| | | (a) | | | (b) | | | (c) | |
| | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted- average exercise price of outstanding options, warrants and rights(1) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |
Plan category | | | | | | | | | |
| | | | | | | | | | |
| Equity compensation plans approved by security holders | | | 1,102,250 | | | $ | 16.11 | | | | 6,637,636 | |
| Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
| Total | | | 1,102,250 | | | $ | 16.11 | | | | 6,637,636 | |
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(1) |
The weighted-average exercise price does not take into account the shares issuable upon outstanding restricted stock units vesting, which have no exercise price.Executive Summary |
Compensation Discussion and AnalysisIn this section, we discuss the material elementsobjectives of our compensation programs and policies, including the objectives of our compensation programs and the reasons why we pay each material 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 theof our Named Executive Officers, or NEOs. This(referred to as “NEOs”), listed below. The following discussion focuses on compensation practices relatingrelates to the NEOs for our 2014 fiscal year.
Under SEC rules, the disclosure on executive compensation is being provided for eachand their titles as of the following:
| · | each person who served as chief executive officer or chief financial officer at any time during 2014; and |
| · | the three other most highly compensated persons serving as executive officers at year end. |
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.end of 2017.
Our NEOsNEOs* in 2014 (based on the criteria noted above)2017 were as follows:
Name of NEO |
| Position |
| Name | Title |
| Richard Leeds | Chairman and Chief Executive OfficerChairman |
| Bruce Leeds | Vice Chairman |
| Robert Leeds | Vice Chairman and Chief Executive of the Company’s North American Technology Products Group |
| Lawrence Reinhold | President & Chief Executive Officer |
| Thomas Clark | Vice President and& Chief Financial Officer |
| Robert Dooley | President, of the Company’s Industrial Products Group |
Eric Lerner | Senior Vice President and General Counsel |
Central Objectives and Philosophy of Our Executive Compensation Programs
*We define our NEOs for 2017 aseach person who served as chief executive officer or chief financial officer at any time during 2017, and the three other most highly compensated persons serving as executive officers at year end, and one additional executive officer.
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Central Objectives and Philosophy of Our
Executive Compensation Programs |
The Company’s executiveCompensation Committee designs competitive compensation packages having the proper amount and mix of short term, annual and long-term incentive programs are designed to achieve a number ofserve several important objectives, including objectives:
attracting and retaining individuals of superior ability and managerial talent, talent;
rewarding outstanding individual and team contributions to the achievement of the Company’sour short and long-term financial and business objectives, objectives;
promoting integrity and good corporate governance, and governance;
motivating our executive officers to manage the Company in a manner that will enhance itsfor sustained growth and financial performance, and enhanced stockholder value, for the long-term benefit of our stockholders, customers and employees. Accordingly, in determining the amountemployees; and mix of compensation, the Compensation Committee seeks both to provide a competitive compensation package
mitigating risk and to structure annual and long-term incentive programsreducing risk taking behavior 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 riskmight affect financial results, 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. compensation (as described below).
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:programs including the risk that an executive will take action that is detrimental to our long-term interests in order to increase the executive’s short-term performance-based compensation:
Management Processes. Our Board is responsible for overseeing, and together with our Audit Committee, monitors the risk management processes associated with our operations, and together with our Audit Committee focuses on the most significant risks facing Systemax, and seeking to ensure that appropriate general and specific risk mitigation considerations are implemented by management and considered in our business and operations planning. Our Compensation Committee is responsible for considering risk mitigation issues and for including strategies to mitigate risk in our compensation programs.
Regular Oversight. Risk management is regularly overseen by the Board and Audit Committee on a quarterly basis, covering particular risk management matters in connection with general oversight and approval of corporate matters, and through discussions relating to material risks affecting Systemax presented by management and by our Legal, Risk Management/Insurance and Internal Audit departments. The Compensation Committee members also receive these presentations and take risk mitigation into account in designing 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 NEO Non-Equity Incentive Plans (“NEO Plans”) cap the maximum award payable to any individual.
Clawback Provision. Our NEO Plans provide Systemax the ability to recapture cash awards from our executive officers:
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| ◦ | 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 2012, 2013, 2014 and 2015 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 bonusNEO Plan payment 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 bonuspayment or would have generated a lower bonuspayment; or (ii) from an executive officer |
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| ◦ | if the Board learns of any misconduct by the executive officer that contributed to the CompanySystemax having to restate all or a portion of itsour financial statements. In addition, the Board may recapture cash bonus awards from an executive statements; or |
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| ◦ | if the Board determines that the executive engaged in serious ethical misconduct. |
| · | Management Processes. Board and management processes are in place to oversee risk associated with the Company’s operations. Our Board as a whole is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’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. Risk management is 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. Long-Term Equity Compensation. 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. We believe the long-term vesting period for stock options and restricted stock unit grants causes our executives to focus on long-term achievements and on building stockholder value.
Elements of Our Executive Compensation Programs
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| Elements of Our Executive Compensation Programs |
To promote the objectives described above, our executive compensation programs consist of the following principal elements:
Non-Equity Incentive Compensation;
| · | Non-equity incentive cash compensation, referred to for discussion purposes as bonuses; |
Special Bonus;Equity–Based Incentives; and
| · | Stock–based incentives; and |
| · | Benefits, perquisites and other compensation. |
Benefits, Perquisites and Other Compensation.
The Compensation Committee does not maintain formal policies or any specific allocation percentage or formula for specifically allocating compensation among current and long-term compensation, or among cash and non-cash compensation elements. Instead, theelements, in relation to each other. The Compensation Committee maintains flexibility andfrom time to time adjusts different elements of compensation based upon its evaluation of the Company’sour key business objectives and related compensation goals set forth above. The Company doesWe do not have a formal policy regarding internal pay equity. In addition, we provide our stockholders, pursuant to SEC regulation, with a non-binding “say on pay” advisory vote on our executive compensation every three years. While the Compensation Committee considers the results of the stockholder “say on pay” vote, the voting results are only one among many factors considered by the Compensation Committee in evaluating our compensation principles. design and practices.
Base Salary - . Salary levels are subjectively determined based on individual and CompanySystemax performance as well as an objective assessment of the average prevailing salary levels for comparable companies derived from widely available published reports of the average of prevailing salary levels for comparable companiesin our geographic regions (based on industry, revenues, number of employees, and similar factors) in the Company’s geographic regions., derived from widely available published reports. Such reports do not identify the component companies. Mr. Reinhold’s and Mr. Lerner’s minimum salary is set pursuant to their respective employment agreements.
Cash Bonuses -Non-Equity Incentive Compensation. Incentive cash compensation of the Company’sour NEOs under the 2012, 2013, 20142015, 2016 and 20152017 NEO Cash Bonus Plans described below (and implemented(which operate under our stockholder approved 2010 Long-Term Incentive Plan (“2010 LTIP”), described below), is disclosed in the Summary Compensation table below as Non-Equity Incentive Compensation, and is based primarily upon an evaluation of CompanySystemax performance as it relates to three general business areas:
Operational and Financial Performance, such as net sales, operating income, consolidated net income, earnings before interest and taxes (“EBIT”), gross margin, operating margin, earnings per share, working capital, return on invested capital, stockholder equity and peer group comparisons);
Strategic Accomplishments, such as growth in the business (top line sales and margins), implementation of systems enhancements, process and technology improvements, cost management, turnaround or divestment of unprofitable business units, and growth in the value of our assets, including through strategic acquisition transactions; and
Corporate Governance and Oversight, encompassing legal and regulatory compliance and adherence to Systemax policies including the timely filing of periodic reports with the SEC, compliance with the Sarbanes-Oxley Act, maintaining robust internal controls, OSHA compliance, environmental, employment and safety laws and regulations compliance and enforcement of our corporate ethics policy.
The non-financial Strategic Accomplishments and Corporate Governance and Oversight goals are subjectively determined by the Compensation Committee annually, based on Systemax’s changing needs from time to time, and are intended to encourage cross functional efforts by our management team to support projects that benefit Systemax. Detailed discussion of these goals can be found below in the discussion of the 2017 NEO Plan.
Our performance goals may be expressed i) with respect to Systemax as a whole or with respect to one or more divisions or business units, ii) on a pre-tax or after-tax basis, and iii) on an absolute and/or relative basis. The performance goals may i) employ comparisons with past performance of Systemax (including one or more divisions) and/or ii) 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.
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· | Operational and Financial Performance (utilizing standard metrics such as net sales, operating income, consolidated net income, earnings before interest and taxes (“EBIT”), gross margin, operating margin, earnings per share, working capital, return on invested capital, stockholder equity and peer group comparisons); | | | |
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· | Strategic Accomplishments (including growth in the business, implementation of systems, process and technology improvements, and growth in the value of the Company’s assets, including through strategic acquisition transactions); and | | | |
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| · | 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’s corporate ethics policy). |
To the extent applicable, the measures used in performance goals set under the 2010 LTIP are determined in a manner consistent with the methods used in our 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.
In addition, Mr. Dooley and Mr. Lerner have a portion of their 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 2014 and future financial targets and the Company’sour actual performance relative to any suchactually achieved 20142017 and future financial targets, the CompanySystemax is not disclosing the specific performance targets and actual performance measures for the financial goals used in its 2012, 2013, 2014 and 2015our NEO Cash Bonus Plans because they represent confidential financial information that the CompanySystemax does not disclose to the public, and the CompanySystemax believes that disclosure of this information would cause us competitive harm. The Company believesIn addition, we do not disclose the specific subjective non-financial goals, since they may directly relate to strategic initiatives, plans and tactics being undertaken by our business and may indicate where we intend to devote our resources. We believe that these performance goals were reasonably challengingour competitors having detailed knowledge of where we are devoting our strategic resources and management emphasis could give our competitors an advantage and be harmful to achieve. Targetsour competitive position. Financial 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. We set the financial target performance goals at a level for which there is a reasonablereasonably challenged chance of achievement based upon forecasted performance. Scenarios were developed based upon athe range of assumptions used to build our annual budget.budget and forecasted performance. We did not perform specific analysis on the probability of the achievement of the financial 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. We set the non-financial goals (which are subjectively established by the Compensation Committee (and subjectively measured by the Compensation Committee in four incremental levels of achievement, as discussed below) to reflect a reasonable degree of difficulty to achieve substantial performance.
In determining Special Bonuses. From time to time,the compensationCompensation Committee may make special awards to our executives, in order to reward special achievement in the year that was not covered by the NEO Plan for that year. These awards may take the form of a particular executive, consideration is givencash bonuses or equity awards and are granted pursuant to the specific corporate responsibilities that such executive is charged2010 LTIP.
Equity-Based Incentives. Equity based compensation provides an incentive for executives to manage Systemax with as they relatea view to achieving results which would increase our stock price over the foregoing business areas.long-term and, therefore, the return to our stockholders.
Stock-Based Incentives - Stock-basedOutstanding equity-based incentives at the present time consisting of (a) consist of:
non-qualified stock options granted at 100% of the stock’s fair market value on the grant date (based on the NYSE closing price of the Company’sour common stock on that date) and/or (b) ; and
restricted stock units granted subject to certainvesting conditions, constitute the long-term incentive portion of the Company’sour 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’s stock price over the long-term and, therefore, the return to the Company’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” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “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 CompanySystemax earnings releases and other public announcements. Stock based compensationannouncements, and accordingly such grants generally will not be made effective until after the CompanySystemax has disclosed, and the market has had an opportunity to react to, such material potentially market-moving, information concerning the Company.announcements.
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 2012, 2013 or 2014. As described below, Mr. Dooley received stock options and restricted stock units in 2012; Mr. Lerner received stock options in 2012, 2013 and 2014 pursuant to his employment agreement.
Benefits, Perquisites and Other Compensation- The Company. Systemax provides various employee benefit programs to itsour employees, including NEOs. These benefits include NEOs such as:
medical, dental, life and disability insurance benefits and benefits;
our 401(k) plan, which includes Company contributions. The Company also provides Company-owned or leased cars or Systemax contributions;
automobile allowances and related reimbursements to certain NEOs and certain other CompanySystemax managers which are not provided to all employees. Certain Company executives also have or are entitled to receive employees; and
severance payments, and/or change of control payments pursuant to negotiated employment agreements they have with the Company (seeSystemax (described below). The Company
Systemax 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. Section 162(m) of the Code.Internal Revenue Code (the “Code”) limits to $1,000,000 the U.S. federal income tax deductibility of compensation paid in one year to a company's executive officers. Prior to January 1, 2018, certain types of compensation were deductible if the requirements of Section 162(m) generally prohibits deductingof the Code with respect
to performance-based compensation of executive officers that exceeds $1,000,000 unless that compensation is based on the satisfaction of objective performance goals.were satisfied. Our long-term incentive plans (the 1995 Long-Term Stock Incentive Plan, the 1999 Long-Term Stock Incentive Plan, as amended,amended; the, 1995 Stock Option Plan for Non-Employee Directors, the 2006 Stock Incentive Plan for Non-Employee Directors,Directors; and the 2010 Long-Term Incentive Plan) and the Systemax Executive Incentive Plan, areas amended) were structured to permit awards under such plans to qualify as performance-based compensation and to maximize the tax deductibility of such awards. However, we reserveWhile the discretion to payCode limits the deductibility of compensation paid to our named executive officers, that may not be deductible.
Role of theour Compensation Committee will—consistent with its past practice—continue to retain flexibility to design compensation programs that are in the best long-term interests of Systemax and CEO in Compensation Decisionsour stockholders, with deductibility of compensation being one of a variety of considerations taken into account.
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Role of the Compensation Committee and
CEO in Compensation Decisions |
The Compensation Committee’s role and responsibility, is to and that of our CEO, covers several distinct aspects of setting compensation:
review and approve corporate goals relevant to the compensation of the Chief Executive OfficerChairman, Vice Chairmen and CEO and, after an evaluation of the Chief Executive Officer’stheir performance, in light of such goals, to set the compensation of the Chief Executive Officer. The Compensation Committee also approves,their compensation.
approve, upon the recommendation of the Chief Executive OfficerCEO (following consultation with the twoExecutive Chairman and Vice Chairmen, the Chief Financial Officer, the Chief Executives of the North American and EMEA Technology Products Groups and the President of the Company’s Industrial Products Group)Chairmen), (a) the annual compensation of the other executive officers of the Company,Systemax, (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 grants.
reviewing and making periodic recommendations to the Board with respect to theour general compensation, benefits and perquisite policies and practices, of the Company, including the Company’sour stock-incentive based compensation plans.
The Compensation Committee has the authorityis empowered to retain third party compensation consultants to provide assistance with respect to compensation strategies, market practices, market research data and the Company’sour compensation goals. The Compensation Committee did not retain any such consultant in 2012, 20132015, 2016 or 2014.2017.
2010 Long-Term Incentive Plan
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| 2010 Long-Term Incentive Plan |
Basic Features and Types of Awards
In 2010, the Board of Directorsand our stockholders approved and the stockholders of the Company approved at the 2010 Annual Meeting, the 2010 Long-Term Incentive PlanLTIP in order to promote the interests of the CompanySystemax and itsour stockholders by (i) attracting and retaining exceptional executive personnel and other key employees, including consultants and advisors, to the CompanySystemax and itsour 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 theour long-term growth and financial success of the Company.success.
The 2010 Long-Term IncentiveLTIP sets the basic parameters of our compensation policies and approach to executive compensation, and the annual NEO Plans adopted by the Compensation Committee under the 2010 LTIP implement that approach by linking compensation to achievement of Systemax’s goals as the needs of our business change over time. We believe having consistent compensation policies that permit our compensation programs to adjust to address constantly evolving market conditions allows us to readily address the business challenges we face and motivate our employees to overcome them.
As explained below, certain basic features of the 2015, 2016 and 2017 NEO Plans historically are the same from year to year; however, in 2017 we implemented a compensation program that measured quarterly achievement and provided for quarterly non-equity incentive compensation Awards for certain NEOs. Systemax believes this quarterly program has had a beneficial effect in motivating our employees to achieve our and their goals, and we intend to retain this quarterly feature in our 2018 NEO Plan for certain NEOs.
The 2010 LTIP provides for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performancevarious equity or cash based awards (which may be in the form of cash) or other stock-based awards. Any of the foregoing is referred(“Award”), subject to as an “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 shares of the Company’s Common Stock. During a calendar year, Awards may be granted to any individual with respect tolimits including a maximum of 1,500,000 shares (or $10,000,000 in the case of cash performance awards). per individual per year. An aggregate of 7,500,000 shares of common stock are authorized for stock based Awards, of which as of April 16, 2018 Awards covering 1,013,531 shares are outstanding and 6,080,549 shares remain available for future issuance.
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non-qualified stock options;
stock appreciation rights;
restricted stock;
restricted stock units;
cash performance awards (which may take the form of non-equity incentive compensation under the NEO Plans or may be in the form of special cash “bonuses”); or
other stock-based awards.
In the Summary Compensation Table, of Contents
Any employeecash awards granted as NEO non-equity incentive compensation under the NEO Plan for that year are reported as such in that column, and special cash bonuses awarded other than pursuant to the parameters of the Company or of any affiliate and any individual providing consulting or advisory services toNEO Plan are reported as such in 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.“Bonus” column.
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.
Administration
The Compensation Committee has the authority to administer, interpret and construe any provision of the 2010 LTIP Plan (and the annual NEO Plans adopted under it) and to adopt such rules and regulations for administering the 2010 LTIP Plan and the NEO Plans 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 Further, the Compensation Committee has sole discretion over the terms and conditions of any Award, including:
the persons who will receive Awards;
the type of Awards granted;
the number of shares subject to each Award;
exercise price of and Award;
expiration dates;
vesting of restricted stock, restricted stock units and performance awards may be conditionedschedules;
forfeiture provisions;
conditions on the achievement of specified performance goals. These goals must be established byfor the granting or vesting of options, restricted stock, restricted stock units or cash Awards; and
other material features of Awards.
The Compensation Committee or the Board may delegate to our officers or managers the authority to designate Award recipients, but the Compensation Committee within 90 days of the beginning of the year (or other periodmust grant all Awards to which the performance goals relate) or, if shorter, within the first 25% of the performance period.
The performance goals maythose individuals reasonably considered to 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 respectsubject to the Company asinsider trading provisions of federal securities law, including our officers and directors.
Individual Achievement and Systemax Performance
In determining the compensation of a whole or with respectparticular executive, the Compensation Committee takes into account the ways in which our executives most directly impact our business, and seeks to one or more divisions or business units, (2)correlate their compensation objectives to the ways they can 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 ofeffectively motivated and their contribution objectively measured. Accordingly, 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 setNEO Plans adopted under the 2010 Long-Term Incentive Plan are determined in a manner consistent withLTIP give consideration to the methods used inexecutive’s specific corporate responsibilities as they relate to our business and goals, and therefore the Company’s Forms 10-Kperformance metrics, and 10-Q, except that adjustments will be made for certain items, including special, unusual or non-recurring items, acquisitionsthe amount and dispositions and changes in accounting principles.
2015 NEO Cash Bonus Planmix of compensation elements, may vary from year to year.
In 2015, pursuantFor instance, as discussed below, Mr. Reinhold’s non-equity incentive compensation is 100% tied to achievement of the 2010 Long-Term Incentive Plan previously adopted by the Boardconsolidated goals and results 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 onSystemax, while a portion of Mr. Clark’s non-equity incentive compensation is tied to specific personal objectives. Also, prior to 2017 Mr. Dooley had a portion of his non-equity incentive compensation tied to 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 Planconsolidated results of Systemax, and pertains specificallya larger portion tied to the paymentachievement of certain financial and non-financials goals of the Industrial Products Group, but beginning in fiscal 2017 Mr. Dooley’s entire non-equity incentive compensation is tied to NEOs for 2015.such achievements of the Industrial Products Group. As described below, Messrs. Reinhold and Clark also received stock options and restricted stock units in 2016, and Mr. Dooley received stock options, reflecting the Compensation Committee’s belief that their annual performance merited special recognition.
The following discussion appliesThrough 2017, the non-equity incentive compensation of Messrs. Richard, Bruce and Robert Leeds under the applicable NEO Plan has been 100% tied to 100%achievement of the 2015 totalconsolidated goals of Systemax, but each of Richard Leeds, Bruce Leeds and Robert Leeds voluntarily waived a portion ($1,389,800, $1,162,900, and $1,162,900, respectively) of their earned non-equity incentive compensation for each of Mr.2017. Beginning in 2018 Messrs. Richard, Leeds, Mr. Bruce Leeds, Mr.and Robert Leeds will not be participating in the NEO Plan and Mr. Reinhold;will not be eligible for incentive compensation. In addition, Messrs. Richard, Bruce and Robert Leeds have never received, since our initial public offering, stock options or other stock-based incentives as part of their compensation.
Common Elements of the 25% portion2015, 2016 and 2017 NEO Plans
Certain features of Mr. Dooley’sthe 2015 total2016 and 2017 NEO Plans, such as performance categories, annual caps and partial achievement adjustment mechanisms, are the same under each Plan, and are discussed here for ease of reference.
As explained below, in determining non-equity incentive compensation the financial goals are accorded a more significant weighting factor than the non-financial goals, reflecting the Compensation Committee’s belief that the financial goals are the most critical to enhancing stockholder value, maintaining long term growth, and remaining competitive, and furthermore provide the funding for implementing the strategic accomplishments and corporate governance goals. Achievement and over-achievement of the financial goals results in incremental increases to the available incentive compensation pool in which the participating executives share.
Systemax Consolidated Financial Goals for 2015, 2016 and 2017.
Adjusted Operating Income Performance. The Compensation Committee believes this is basedthe 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. The Compensation Committee believes sales performance is key to Systemax 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 or disposition which is completed during the plan year.
Systemax Consolidated Non-Financial Goals for 2015, Bonus Plan;2016 and 2017.
Strategic Accomplishments. Strategic goals are established surrounding accomplishments within our Industrial Products Group, European Technology Products Group, and the 50% portionCorporate and Other function (and in 2015, around accomplishments in our North American Technology Products Group, since discontinued), as explained in the footnotes to the 2017 NEO Plan Compensation Chart below.
Corporate Governance Goals. 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 explained in the footnotes to the 2017 NEO Plan Compensation Chart below), 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.
Business Unit or Individual Financial and Non-Financial Goal for 2015, 2016 and 2017. Business Unit and Individual Goals were set in each period for Mr. Lerner’sDooley and Mr. Clark and are established tied to the Business Unit Financial Performance of the Industrial Products Group. These objectives are comprised of a variety of measurable strategic, financial and operational targets and initiatives including sales growth and margin improvement, cost management, process improvement, corporate development, and others as deemed appropriate by the CEO in consultation with the Compensation Committee. In each case, the selected objectives are considered relevant to the scope of each executive’s functional areas of operation and are designed to incentivize management to accomplish the businesses’ strategic plan. In each of 2015 total non-equity incentive compensation that is basedand 2016 these objectives were administered on the 2015 Bonus Plan.an annual basis, but in 2017 these goals were administered on both a quarterly and full year basis as described below.
For 2015, such financialTargets, Caps 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 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. |
Adjustment Mechanisms. Achievement of each of the target financial goals generates a variable non-equity incentive payment target bonus payment (base case); reduced bonusesamounts are payable on a pro rata basis for each financial goal component.component and on a partial basis on the non-financial goal components. The bonus for2015, 2016 and 2017 NEO Plans impose a cap on the salestotal non-equity incentive compensation that could be payable to each executive based upon the relative weights of each component.
Systemax Consolidated Sales Target Financial Component.
Sales target financial componentamount is payable starting at achievement of in excess of 80% of the sales target financial goal component amount.
Sales target amount up tois capped at 140% of the sales target financial goal component amount.
Each 1% variance in actual achievement frombelow the 100% level will generate a 5% negative variance in the target non-equity incentive amount.
Each 1% variance in actual achievement above the 100% level generates a 5% positive variance in the target bonusnon-equity incentive amount.
No bonusnon-equity incentive compensation is payable in respect of this componentthe sales target if achievement is 80% or less of the sales target while increased bonusespayments (up to 300% of the target bonusnon-equity incentive compensation amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component.
Systemax Consolidated Adjusted Operating Income Financial Component.
The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved.
Each $500,000$1,000,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonusnon-equity incentive compensation amount.
Each $500,000$1,000,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonusnon-equity incentive compensation amount up to 300% of the target bonusnon-equity incentive compensation amount for this financial component.
Systemax Consolidated Non-Financial Goals. 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 (as subjectively determined by the Compensation Committee) with target bonusnon-equity incentive compensation paid out accordingly.
UnderBusiness Unit or Individual Goals. Generally, the 2015 Bonus Plan,accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels (as subjectively determined by the Compensation Committee set the following cash bonusCommittee) with target amounts fornon-equity incentive compensation paid out accordingly. Adjusted Operating Income Performance of 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 casebusiness unit above or below plan, would result in either higher potential or lower potential 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):non-equity incentive levels.
| 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. Discretion. 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.results; exercises of such discretion are noted below. Targets and bonusesnon-equity incentive compensation are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the CompanySystemax at the time the bonuses areincentive compensation is paid out to receive the bonus.
In addition,payment, though the Board can demand repaymentCompensation Committee has discretion 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% ofwaive 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.requirement.
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.
2017 NEO Cash Bonus Plan
In 2014,2017, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting,LTIP, our Compensation Committee, with input from our Chief Executive Officer,CEO, established our 20142017 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-TermNon-Equity Incentive Plan and(“2017 Plan”). The 2017 Plan pertains specifically to the payment of non-equity incentive compensation to NEOs for 2014.2017; however, in 2017 in a change from prior years arrangements, the Compensation Committee revised Mr. Dooley’s and Mr. Clark’s plans by implementing, a new quarterly measurement and payment feature to a portion of the Business Unit and Individual Objectives.
The following discussion appliesThese objectives are comprised of a variety of measurable strategic, financial and operational initiatives including, sales growth and margin improvement, cost management, process improvement, corporate development, and others as deemed appropriate by the CEO in consultation with the Compensation Committee.
Measuring Quarterly Performance.
Bonus achievement of these personal objectives (i.e. – those not tied to 100%NEO Plan performance) is measured as follows:
Achievement of each quarterly personal objective and of the 2014shared annual objectives, entitles the employee to receive a portion of the applicable target non-equity incentive compensation that may be earned for that period, and is funded based upon achievement of the relative operating income achievement within that period.
Goals are set in up to five equally weighted discrete tranches, one for each quarter, as well as one on an annual basis.
Within each measurement period, each individual initiative is weighted as a proportion of the total available target non-equity incentive compensation for eachthat period, and is earned based upon an achievement range of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; the0%, 25% portion of Mr. Dooley’s 2014 total, 50%, 75%, or 100%.
A 5% negative variance to target adjusted operating income equates to a 10% reduction in available non-equity incentive compensation, that is based on the 2014 Bonus Plan; and the 50% portion of Mr. Lerner’s 2014 totalas applied discretely to each measurement period.
A 5% positive variance to target adjusted operating income equates to a 5% increase to available non-equity incentive compensation, that is based on the 2014 Bonus Plan.as applied discretely to each measurement period and capped at 150% of target available compensation.
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 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 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 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 Bonus2017 Plan, the Compensation Committee set the following cash bonusnon-equity incentive target amounts, cap percentages and relative percentages weights for each plan component 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; andour NEOs 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):2017.
| 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 | |
|
| | | | | | | |
| Name | Target ($) | Cap (%) | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit/ Individual Objectives (%) |
| Richard Leeds | 1,050,000 | 260 | 20 | 60 | 16 | 4 | 0 |
| Robert Leeds | 877,500 | 260 | 20 | 60 | 16 | 4 | 0 |
| Bruce Leeds | 877,500 | 260 | 20 | 60 | 16 | 4 | 0 |
| Lawrence Reinhold | 1,410,000 | 260 | 20 | 60 | 16 | 4 | 0 |
| Thomas Clark | 175,000 | 205 | 10 | 30 | 8 | 2 | 50 |
| Robert Dooley | 505,000 | 150 | 0 | 0 | 0 | 0 | 100 |
The Compensation Committee believes these bonusnon-equity incentive compensation levels are appropriate for each of our named executive officers. The 2014 salary increases discussed below reflect the Compensation Committee’s view that such increasesofficers and are appropriate in light of the current business performance and expected accomplishments in 2014.reasonably achievable.
2017 Performance against Objectives.
The 2014 Bonus Plan imposesfollowing table sets out the achievement level (presented as a cappercentage of target) for each plan component as well the relative payout ratio earned based on the total bonusmechanics of each plan component. The aggregate payouts, expressed in dollars, appear in the Summary Compensation Table.
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| | | | | | | | | | | |
Name | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit/ Individual Objectives (%) | Weighted Average Eligible Non-Equity Incentive Compensation (%) |
| Actual | Payout Ratio | Actual | Payout Ratio | Actual | Payout Ratio | Actual | Payout Ratio | Actual | Payout Ratio |
| Richard Leeds | 106 | 125 | 179 | 245 | 84 | 84 | 100 | 100 | N/A | N/A | 190 |
| Robert Leeds | 106 | 125 | 179 | 245 | 84 | 84 | 100 | 100 | N/A | N/A | 190 |
| Bruce Leeds | 106 | 125 | 179 | 245 | 84 | 84 | 100 | 100 | N/A | N/A | 190 |
| Lawrence Reinhold | 106 | 125 | 179 | 245 | 84 | 84 | 100 | 100 | N/A | N/A | 190 |
| Thomas Clark | 106 | 125 | 179 | 245 | 84 | 84 | 100 | 100 | 93 | 134 | 162 |
| Robert Dooley | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 85 | 118 | 118 |
In determining the compensation of our CEO for fiscal 2017 and approving the compensation of our other NEOs, the Compensation Committee considered, among the other factors discussed above, that couldSystemax and management had performed exceedingly well, and had substantially overachieved the 2017 financial targets, completed a major restructuring initiative in selling our former European Technology Products Group, and had driven significant increases in stockholder value. It was the view of the Compensation Committee that management had executed these initiatives and had positioned Systemax for further growth while managing risk. Based on Systemax and individual performance, the Compensation Committee believes that compensation levels for fiscal 2017 were consistent with the philosophy and objectives of our compensation programs. As part of the evaluation, Messrs. Richard, Robert, and Bruce Leeds recommended to the Compensation Committee that their non-equity incentive compensation be payablereduced to any executive whose bonus is 100% earned57% of target from the 190% of target non-equity incentive compensation they each were eligible for. The Compensation Committee accepted this recommendation.
Systemax Consolidated Net Sales in 2017 was set based upon Systemax’s continuing operation within our Industrial Products Group and our France Value Added Reseller business. Consolidated Sales achieved 106% of target. The payout ratio based upon 6% overachievement to plan was 125%.
Systemax Consolidated Adjusted Operating Income target in 2017 was set based upon Systemax’s continuing operations within our Industrial Products Group, France Technology Value Added Reseller business, as well as within our Corporate and Other Segment. Each segment surpassed plan in each of its continuing operations segments. As a matter of clarity, any costs incurred associated with the NEO plan at 260%divestiture of certain of our European subsidiaries in March 2017 as well as any costs associated with our GAAP and NON GAAP discontinued operations were neither a component of the target base case bonus.or the actual earnings when evaluating performance of this plan component. Performance within our Industrial Products Group surpassed our adjusted operating plan primarily due to significant improvements to gross selling margin, better freight results associated with enhanced utilization of our nationwide distribution network, realization of improved return on investment and marketing efficiency, and cost savings from certain headcount reduction actions taken early in 2017. Within our France business, Adjusted Operating Income performance outperformed our adjusted operating plan primarily from savings realized from the internalization of certain functions previously provided by Systemax’s European Shared Service Center (divested in March 2017) as well as leverage improvements on spend based upon increased sales volume. Within Systemax’s Corporate and Other segment, the Board exercised its discretion to eliminate the income recorded in relation to Messrs. Richard, Robert, and Bruce Leeds waiving a portion of their previously accrued non-equity incentive compensation. The cap on Mr. Dooley’s total bonus is 200%payout ratio based upon 79% over-achievement to plan was 245%.
Systemax Consolidated Strategic Objectives were assigned 37.5% relative weighting related to the Industrial Products Group Segment, and achievement of the target base case bonus,its Financial, Customer, Operations, and the cap on Mr. Lerner is 180% of the target base case bonus.Learning and Development Balanced Score Card objectives. The Compensation Committee hassubjectively determined that 75% of these strategic objectives were accomplished in 2017. In addition, 37.5% relative weighting was accorded to strategic objectives related to the discretionEuropean Technology Products Group Segment and those related to adjust financial targetsspecific objectives surrounding market share gains and operating leverage efficiency within our France operations as well as completing a project to turn around or exit other unprofitable businesses within Europe. The Compensation Committee subjectively determined that 100% of these strategic objectives were accomplished. Finally, the strategic objectives related to rationalizing internal information management platforms, as well as completion of certain cost reduction efforts within our Corporate and Other Segment received a relative weighting of 30%. The Compensation Committee subjectively determined that 75% of these objectives were accomplished in 2017. Based upon each relative weight, the payout ratio was 84.4%. The weightings of each goal are subjectively determined by the Compensation Committee 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 inits view of 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 repaymentrelative importance to the Company for that year of the strategic goal being accomplished.
Systemax Consolidated Corporate Governance 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 cash bonuses paid inethical or governance issues that may arise, and the eventabsence of any serious OSHA Matters. The Compensation Committed determined 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.Corporate Governance objectives were achieved 100%.
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 objectionsBusiness Unit and 20% of this portion of the bonus (15% of total target bonus) is tied to achievement of strategicindividual objectives for Mr. Dooley and Mr. Clark related to either discrete quarters or the Industrial Products Group. The financial objective is based on an operating income targetfull year. Our CEO subjectively determined 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,Compensation Committee agreed that Mr. Clark and Mr. Dooley achieved 70%93.1% and 84.5% on a weighted average basis of their objectives, respectively. Mr. Clark’s objectives primarily were associated with Cost Control, technology and process enhancements, staff development, and the execution of certain disposition activities associated with the business European Technology segment. Mr. Dooley’s objectives were typically associated with the financial performance of the bonus forIndustrial Products Group including Net Sales, Gross Margin, and Operating Income performance. Key sales force and operational productivity enhancements as well as other technology and process enhancement objectives within this component.segment were assigned. Based upon business unit and individual performance, the Compensation Committee subjectively confirmed that Mr. Clark and Mr. Dooley earned 134% and 118% of these plan components respectively.
As described above, 50%The 2017 threshold, target and maximum non-equity incentive amounts for each of Mr. Lerner’s cash bonus is tied to achievementour Named Executive Officers are found in the Grants of certain legal group objectives, 20%Plan-Based Awards table / page 38 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.proxy statement.
2018 NEO Plan
2013 NEO Cash Bonus Plan
In 2013,2018, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting,LTIP, our Compensation Committee, with input from our Chief Executive Officer,CEO, established our 20132018 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-TermNon-Equity Incentive Plan and(“2018 Plan”). The 2018 Plan pertains specifically to the payment of non-equity incentive compensation to NEOs for 2013. The following discussion applies to 100% of2018, and utilizes similar performance metrics, caps and weightings as 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.NEO Plans discussed above.
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 2013 (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, 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’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 Bonus2018 Plan, the Compensation Committee set the following cash bonusnon-equity incentive target amounts, non-equity incentive compensation cap percentages and relative percentages weights for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. 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 | |
| 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 appropriateplan component for each of our Named Executive Officers; these bonus levels are the same as those that were set for the Named Executive OfficersNEOs in 2012 (other than for Mr. Dooley and Mr. Lerner). The 2013 salary increases reflect the Compensation Committee’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’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 the Industrial Products Group, 60% of this 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 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.2018.
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 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.
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. |
| – | 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 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 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.
Compensation of NEOs in 2014
In determining the compensation of the Company’s Chief Executive Officer for fiscal year 2014 and approving the compensation of the Company’s other NEOs, the Committee considered, among the other factors discussed above, the achievement of the performance based criteria established under the 2014 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 competes that had affected the Company’s business throughout fiscal year 2014. 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 2014 were consistent with the philosophy and objectives of the Company’s compensation programs. The Company met or substantially met its 2014 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 partially achieved its 2014 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 special bonuses in the Industrial Products Group. Accordingly, pursuant to the 2014 Bonus Plan formulas, 2014 non-equity incentive plan/bonus compensation for each Named Executive Officer was paid at 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 $397,000 respectively).
The 2014 threshold, target and maximum bonus amounts for each of our Named Executive Officers are found in the Grants of Plan-Based Awards table on page 39.
Employment Arrangements of the Named Executive Officers
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Name | Target ($) | Cap (%) | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit / Individual Objectives (%) |
Richard Leeds | No Longer Participating in Program in 2018 |
RichardRobert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 80% and bonus accounted for 17% of Mr. Leeds total cash compensation for 2014. Mr. Leeds salary for 2015 is set at $731,000. Mr. Leeds’ bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
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Bruce Leeds |
Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 82% and bonus accounted for 14% of Mr. Leeds total cash compensation for 2014. Mr. Leeds salary for 2015 is set at $599,000. Mr. Leeds’ bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
Robert Leeds
Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 82% and bonus accounted for 14% of Mr. Leeds total cash compensation for 2014. Mr. Leeds salary for 2015 is set at $607,000. Mr. Leeds’ bonus for 2014 was determined as described above under the heading 2014 NEO Cash Bonus Plan.
Lawrence Reinhold | 1,410,000 |
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.260
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20 |
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.60
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16 |
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.”4
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0 |
Thomas Clark | 187,500 |
205 |
10 |
30 |
8 |
2 |
50 |
Robert Dooley | 600,000 |
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.150
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0 |
0 |
0 |
0 |
100 |
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.”
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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
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| * | 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. |
The Compensation Committee has reviewed and discussed the above Compensation Discussion and Analysis with management. Based on its review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2017.
Submitted by the Compensation Committee of the Board,
Robert D. Rosenthal (Chairman)
Barry Litwin
Chad Lindbloom
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| 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 TABLEThe 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.At the end of fiscal 2017, the members of Systemax’s Compensation Committee were Messrs. Rosenthal, Litwin and Lindbloom.
Mr. Dick resigned from the Committee on July 31, 2017 and Ms. Adler-Kravecas resigned from the Committee on December 5, 2017. Systemax does not employ any current (or former) member of the Compensation Committee and no current (or former) member of the Compensation Committee has ever served as an officer of Systemax. In addition, none of our current (or former) directors serving on the Compensation Committee has any relationship that requires disclosure under SEC regulations.
(3) | Auto-related expenses. | | | Summary Compensation Table |
The following table sets forth the compensation earned by the Named Executive Officers for fiscal years 2015, 2016 and 2017:
(4) | Includes auto-related expenses ($25,200) and Company 401(k) contributions ($3,900). |
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Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($)(1) |
Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) |
All Other Compensation ($)(4) |
Total ($) | Richard Leeds
Executive Chairman | 2017 | 725,600 | | | | 600,000 | 30,000 | 1,355,600 | | 2016 | 734,400 | | | | 435,000 | 30,000 | 1,199,400 | | 2015 | 731,000 | | | | 560,000 | 29,200 | 1,320,200 | Bruce Leeds Vice Chairman | 2017 | 600,600 | | | | 500,000 | 30,000 | 1,130,600 | | 2016 | 600,000 | | | | 362,000 | 30,000 | 992,000 | | 2015 | 599,000 | | | | 351,000 | 29,200 | 979,200 | Robert Leeds Vice Chairman | 2017 | 603,000 | | | | 500,000 | 30,000 | 1,133,000 | | 2016 | 604,000 | | | | 362,000 | 30,000 | 996,000 | | 2015 | 607,000 | | | | 351,000 | 29,200 | 987,200 | Lawrence Reinhold President & Chief Executive Officer | 2017 | 714,100 | | | | 2,672,000 | 85,200 | 3,471,300 | | 2016 | 717,000 | | 415,500 | 666,500 | 582,000 | 51,700 | 2,432,700 | | 2015 | 694,000 | | | | 816,000 | 33,100 | 1,543,100 | Thomas Clark(5) Vice President & Chief Financial Officer | 2017 | 361,700 | | | | 285,000 | 24,800 | 671,500 | | 2016 | 231,600 | | 207,800 | 218,200 | 75,000 | 16,600 | 749,200 | | 2015 | - | - | - | - | - | - | - | Robert Dooley President, Industrial Products Group | 2017 | 519,400 | 404,400 | | | 595,600 | 32,800 | 1,552,200 | | 2016 | 514,000 | | | 463,000 | 150,000 | 25,000 | 1,152,000 | | 2015 | 484,000 | 82,000 | | | 318,000 | 21,900 | 905,900 |
(5) | Includes auto-related expenses ($18,000) and Company 401(k) contributions ($3,900). |
(1) GRANTS OF PLAN-BASED AWARDSThe following table sets forth
| This column represents the estimated possible payouts under the cash incentive awards granted to our Named Executive Officers in respect of 2014 performance under the 2014 NEO Plan.| Name | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($/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 2014The 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 marketfair value of the unvested stock award ison 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 7 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2017.
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| | (2) | 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 7 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2017. |
| | (3) | The 2015 figures in this column represent the amount earned in fiscal 2015 (although paid in fiscal 2016) pursuant to the 2015 NEO Plan; the 2016 figures in this column represent the amount earned in fiscal 2016 (although paid in fiscal 2017) pursuant to the 2016 NEO Plan; and the 2017 figures in this column represent the amount earned in fiscal 2017 (although paid in fiscal 2018) pursuant to the 2017 NEO Plan. For more information, see the Grants of Plan-Based Awards table / page 38 of this proxy statement. Because these payments were based on predetermined performance metrics, these amounts are reported in 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) | | | $16.61 | | 5/2/24 | | | - | | | | - | |
(1) | Options vest 25% per year over four years from date of grant.Non-Equity Incentive Plan column. |
| | (4) | The elements of compensation included in the “All Other Compensation” column for fiscal 2017 are set forth in the table below. |
| | (5) | Mr. Clark was not a Named Executive Officer prior to October 2016, and therefore no amounts are reported for fiscal 2015 in the Summary Compensation Table. |
(2) | Not treated as outstanding on December 27, 2014. |
The amounts shown for “All Other Compensation” for fiscal 2017 include: (a) auto-related expenses, (b) Systemax 401(k) contributions, (c) dividend equivalent payments on unvested restricted stock, in the following amounts and (d) service awards which are given to every employee when they have been at Systemax at certain yearly milestones: | | | | | | |
Name |
Auto Related Expenses ($) |
Systemax 401(k) contributions ($) | Dividend Equivalent Payments on Unvested Restricted Stock ($) |
Service Award ($) |
Total ($) | | Richard Leeds | 30,000 | - | - | | 30,000 | | Bruce Leeds | 30,000 | - | - | | 30,000 | | Robert Leeds | 30,000 | - | - | | 30,000 | | Lawrence Reinhold | 30,000 | 4,100 | 50,700 | 500 | 85,200 | | Thomas Clark | 14,400 | 4,100 | 5,800 | 500 | 24,800 | | Robert Dooley | 18,000 | 4,100 | 9,000 | 1,750 | 32,800 |
(3)
| | | 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 2017 performance under the 2017 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 ($/Sh) | Grant Date Fair Value of Stock and Option Awards | | | | Minimum ($) | Target ($) | Maximum ($) | | | | | | Richard Leeds | - | 94,500 | 1,050,000 | 2,730,000 | - | - | - | - | | | | | | | | | | | | Bruce Leeds | - | 78,975 | 877,500 | 2,281,500 | - | - | - | - | | | | | | | | | | | | Robert Leeds | - | 78,975 | 877,500 | 2,281,500 | - | - | - | - | | | | | | | | | | | | Lawrence Reinhold | - | 126,900 | 1,410,000 | 3,666,000 | - | - | - | - | | | | | | | | | | | | Thomas Clark | - | 8,970 | 175,000 | 358,750 | - | - | - | - | | | | | | | | | | | | Robert Dooley | - | 6,310 | 505,000 | 757,500 | - | - | - | - | | | | | | | | | | |
| | | (1) | Amounts presented assume payment of threshold, target and maximum awards at the applicable level. |
| | | Outstanding Equity Awards at Fiscal Year-End for Fiscal 2017 |
The following table sets forth information regarding stock option and restricted stock awards previously granted to our Named Executive Officers which were outstanding at the end of fiscal 2017. The market value of the unvested stock award is based on the closing price of one share of our common stock as of December 29, 2017, the last trading day of the fiscal 2017, which was $33.27. | | | | | | | | | | Option Awards | Stock Awards | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Option Exercise Price ($) | 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 | 50,000 | - | 11.51 | 3/13/18 | 52,500(2) | 1,746,700 | | 100,000 | - | 13.19 | 5/18/19 | 40,000(3) | 1,330,800 | | 50,000 | - | 14.30 | 11/14/21 | 33,333(4) | 1,109,000 | | 12,500 | 37,500(1) | 8.31 | 2/1/26 | | | | 25,000 | 75,000(1) | 8.95 | 12/14/26 | | | | Thomas Clark | 5,000 | - | 16.63 | 8/9/20 | 16,666(5) | 554,500 | | 5,000 | - | 18.73 | 3/1/22 | | | | 2,500 | 7,500(1) | 8.31 | 2/1/26 | | | | 12,500 | 37,500(1) | 8.32 | 11/10/26 | | | | Robert Dooley | 50,000 | - | 18.73 | 3/1/22 | 25,000(6) | 831,800 | | 12,500 | 37,500(1) | 8.31 | 2/1/26 | - | | | 12,500 | 37,500(1) | 8.95 | 12/14/26 | - | |
| | | (1) | Options vest 25% per year over four years from date of grant. The grant date for each option is ten years prior to the option expiration date. |
| | | (2) | Restricted stock units vest in ten equal annual installments of 17,500 beginning May 15, 2011. |
(4) | | | (3) | Restricted stock units vest in ten equal annual installments of 10,000 beginning November 14, 2012. |
| | | (4) | Restricted stock units vest in three installments: 16,667 shares on February 1, 2017; 16,667 shares on February 1, 2018; and 16,666 shares on February 1, 2019. |
| | | (5) | Restricted stock units vest in three installments: 8,334 shares on February 1, 2017; 8,333 shares on February 1, 2018; and 8,333 shares on February 1, 2019. |
| | | (6) | Restricted stock units vest in ten equal annual installments of 5,000 beginning March 1, 2013. |
(5) | Restricted stock units vest in ten equal annual installments of 5,000 beginning March 1, 2013. |
OPTION EXERCISES AND STOCK VESTEDThe following table sets forth information regarding exercise of options to purchase shares of the Company’s common stock | | Option Exercises 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) | | | $58,850 | | | | | | | | | | | | | | | | | | | | | Eric Lerner | | | - | | | | - | | | | - | | | | - | |
Stock Vested For Fiscal 2017 |
The table below shows stock options that were exercised, and restricted stock units that vested, during fiscal 2017 for each of our Named Executive Officers: | | | | | | | | Option Awards | Stock Awards | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | | Lawrence Reinhold | - | - | 17,500(2) 10,000(3) 16,667(4) | 295,400 275,900 141,200 | | Thomas Clark | - | - | 8,334(5) | 70,600 | | Robert Dooley | - | - | 5,000(6) | 44,600 |
| | | (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. | | | (4) | Pursuant to a grant of restricted stock units on February 1, 2016, the restricted stock units vest in three installments, 16,667 shares on February 1, 2017; 16,667 shares on February 1, 2018 and 16,666 shares February 1, 2019. |
| | | (5) | Pursuant to a grant of restricted stock units on February 1, 2016, the restricted stock units vest in three installments, 8,334 on February 1, 2017, 8,333 on February 1, 2018 and 8,333 on February 1, 2019. |
| | | (6) | 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. |
| | | Employment Arrangements of the Named Executive Officers |
The 2018 salary levels discussed below reflect the Compensation Committee’s view that such levels are appropriate in light of the current business performance and expected performance in 2018, and takes into account the other compensation elements applicable to each employee.
Richard Leeds – Richard Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 54% of Mr. Leeds total cash compensation for 2017. Mr. Leeds’ non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan, but Mr. Leeds voluntarily waived payment of a portion ($1,389,800) of such award. Mr. Leeds’ salary for 2018 is set at $950,000. As noted above, beginning in 2018 Mr. Leeds will not be participating in the NEO Plan and will not be eligible for incentive compensation.
Bruce Leeds – Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 53% of Mr. Leeds total cash compensation for 2017. Mr. Leeds’ non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan, but Mr. Leeds voluntarily waived payment of a portion $1,162,900) of such award. Mr. Leeds’ salary for 2018 is set at $950,000. As noted above, beginning in 2018 Mr. Leeds will not be participating in the NEO Plan and will not be eligible for incentive compensation.
Robert Leeds – Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 53% of Mr. Leeds total cash compensation for 2017. Mr. Leeds’ non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan, but Mr. Leeds voluntarily waived payment of a portion $1,162,900) of such award. Mr. Leeds’ salary for 2018 is set at $950,000. As noted above, beginning in 2018 Mr. Leeds will not be participating in the NEO Plan and will not be eligible for incentive compensation.
Lawrence Reinhold – Systemax 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 Systemax) 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 our financial performance objectives) established for him by Systemax. The terms “Bonus” is broadly defined in Mr. Reinhold’s employment agreement and includes all non-equity compensation as discussed herein. Mr. Reinhold is entitled to receive a car allowance. Base salary accounted for 21% of Mr. Reinhold’s total cash compensation for 2017. Mr. Reinhold’s non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan. Mr. Reinhold’s base salary for 2018 is set at $712,000. Compensation that may become payable following the termination of his employment or a change in control of Systemax, and other terms of the employment agreement related to such events, are discussed below under Potential Payments Upon Termination or Change in Control / page 42 of this proxy statement.
Thomas Clark – Mr. Clark has no employment agreement and is an “at will” employee. Base salary accounted for 54% of Mr. Clark’s total cash compensation for 2017. Mr. Clark’s non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan. Mr. Clark’s base salary for 2018 is set at $386,000. Compensation that may become payable following the termination of his employment or a change in control of Systemax, are discussed below under Potential Payments Upon Termination or Change in Control / page 42 of this proxy statement.
Robert Dooley – Mr. Dooley has no employment agreement and is an “at will” employee. Base salary accounted for 33% of Mr. Dooley’s total cash compensation for 2017. Mr. Dooley’s non-equity incentive compensation for 2017 was determined as described above under the heading 2017 NEO Plan. Mr. Dooley’s base salary for 2018 is set at $615,000. Compensation that may become payable following the termination of his employment or a change in control of Systemax, are discussed below under Potential Payments Upon Termination or Change in Control / page 42 of this proxy statement.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLLawrence Reinhold
Mr. Reinhold’s employment agreement is terminable upon death | | Potential Payments Upon Termination of Employment 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 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 bonusChange in Control |
Lawrence Reinhold. Mr. Reinhold’s employment agreement is terminable upon death or total disability, by Systemax 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, total disability, cause or voluntary termination by Mr. Reinhold, Systemax will owe no further payments under his employment agreement other than as applicable under disability or medical plans and any accrued but unused vacation time (up to four weeks) and the pro rata non-equity incentive compensation payment noted below. In the event of termination for total disability or death, Mr. Reinhold would also receive the pro rata portion of any non-equity incentive compensation payment which would otherwise be paid based on the average annual non-equity incentive compensation payment received for the prior two years, such payment shall be made within 75 days following the end of the calendar year in which such termination due to total disability or death occurred. If Mr. Reinhold resigns for “good reason” or if Systemax terminates him without “cause”, he shall receive, (i) severance payments equal to 12 months’ base salary, payable in accordance with Systemax’s normal payroll practices over a period of twelve months (the “Severance Period”); (ii) the pro rata non-equity incentive compensation which would otherwise be paid based on the average annual non-equity incentive compensation received for the prior two years, such payment shall be made at the end of the year in which such termination occurred, and (iii) reimbursement during the Severance Period for COBRA insurance coverage. In the event Mr. Reinhold’s employment is terminated without “cause” or if he resigns for “good reason” within 60 days prior to or one year following a “Change in Control” the severance payments shall be increased to equal 24 months’ base salary and the Severance Period shall be extended to 24 months following termination. Notwithstanding the foregoing, any payment scheduled to be made to Mr. Reinhold after his termination of employment shall not be made until the date six months after the date of the termination of employment to the extent necessary to comply with Section 409A(a)(B)(i) of the Code and applicable Treasury Regulations. A “Change in Control” means: (i) approval by the stockholders of Systemax 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 40% of the then outstanding shares of our 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 Systemax; (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 40% of the then outstanding shares of our common stock; or (iii) the approval by the stockholders of Systemax of the complete liquidation or dissolution of Systemax. Lawrence Reinhold, Robert Dooley and Thomas Clark. Pursuant to our standard restricted stock unit agreements, if an executive 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, the executive will become immediately vested in all of the restricted stock units held by him as of the date of the change in control. If the executive’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 Systemax that are represented by those vested restricted stock units.
If the executive’s employment is terminated due to total disability or death, his estate or designated beneficiary(ies), whichever is applicable, will become immediately vested (x) in 50% of the non-vested restricted stock units, with respect to the restricted stock units held by Mr. Dooley and with respect to a portion of the restricted stock units held by Mr. Reinhold, and (y) in all non-vested units and will become immediately entitled to a distribution of that number of shares of common stock of Systemax that are represented by those vested restricted stock units, with respect to the restricted stock units held by Mr. Clark and with respect to a portion of the restricted stock units held by Mr. Reinhold. Pursuant to our standard option agreements, in the event the employment of an above named executive is terminated for any reason other than death, total 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 total 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. Pursuant to the stock option agreements with Mr. Reinhold (dated February 1, 2016 and December 14, 2016), Mr. Dooley (dated February 1, 2016 and December 14, 2016) and Mr. Clark (dated November 10, 2016), if the named executive’s employment is terminated without cause or for good reason within six months following a “change in control”, such named executive will become immediately vested in all outstanding unvested stock options, and all of the named executive’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination.
The tables below describes potential payments and benefits upon termination of employment or change in control as of December 30, 2017, the last day of fiscal 2017, and using the closing price of our common stock on December 29, 2017, the last trading day of fiscal 2017. These amounts are estimates and the actual amounts to be paid can only be determined at the time of the termination of employment or the date of the change in control. Lawrence Reinhold | | | | | | | Type of Payment | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” ($) | Termination Due to Death or Total Disability ($) |
Change In Control Only ($) | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” within a certain period of time prior to or following a Change in Control ($) | | Cash Compensation (Salary & Non-Equity Incentive Compensation) | 2,341,100(1) | 1,627,000(2) | - | 3,055,200(3) | | Value of Accelerated Vesting of Stock Option Awards | - | - | - | 2,760,000(4) | | Value of Accelerated Vesting of Restricted Stock Unit Awards | 4,186,500(5) | 2,647,700(6) | 4,186,500(5) | - | | Medical and Other Benefits | 8,200(7) | - | - | 16,400(8) | | Total | 6,535,800 | 4,274,700 | 4,186,500 | 5,831,600 |
| | | (1) | Represents one year’s base salary ($714,100) and the average annual bonus received for the prior two years. Ifnon-equity incentive compensation paid to Mr. Reinhold for fiscal years 2016 and 2017 ($1,627,000). |
| | | (2) | Represents the average annual non-equity incentive compensation paid to Mr. Reinhold for fiscal years 2016 and 2017 ($1,627,000). |
| | | (3) | Represents two year’s base salary ($1,428,200) and the average annual non-equity incentive compensation paid to Mr. Reinhold for fiscal years 2016 and 2017 ($1,627,000). Payments are made to Mr. Reinhold only if he is terminated without “cause” or 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 (or 24 months’ base salary if termination is“good reason” within 60 days prior to, or one year following, a “changeChange of control,” as defined), one year’s bonus based on his average annual bonus for the prior two years and a reimbursementControl. |
| | | (4) | Represents accelerated vesting 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 common112,500 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) the 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
options. Pursuant to Mr. Dooley’s restrictedReinhold’s stock unit agreement,option agreements (dated February 1, 2016 and December 14, 2016), if Mr. Dooley 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. 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 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. Dooley’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. 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, all unexercised options (vested and unvested) will be forfeited. If Mr. Lerner’sReinhold’s employment is terminated without cause or for good reason within six months following a “change in control”, he will become immediately vested in all outstanding unvested stock options, and all of Mr. Lerner’sReinhold’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination.
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| | | (5) | Represents accelerated vesting of ContentsTermination125,833 unvested restricted stock units. |
| | | (6) | Represents accelerated vesting of Employment Without Change In ControlThe following table sets forth79,583 unvested restricted stock units. Pursuant to Mr. Reinhold’s restricted stock unit agreements (dated August 25, 2010 and November 14, 2011), on the severance payments that would have been made had the employmentevent of Mr. Reinhold, Mr. DooleyReinhold’s death or Mr. Lerner 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 27, 2013, the last daytotal disability, 46,250 restricted stock units (50% of the Company’s fiscal year 2014, and usingunvested restricted stock units granted under such agreements) would vest. Pursuant to Mr. Reinhold’s restricted stock unit agreement (dated February 1, 2016), on the closing priceevent of our commonMr. Reinhold’s death or total disability, 33,333 restricted stock on December 26, 2013, the last trading dayunits (100% 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 & 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 $660,000 and an average yearly cash bonus of $424,300 paid to Mr. Reinhold for fiscal years 2013 and 2014. Mr. Reinhold would also receive the bonus amount in the event of his death or disability.unvested restricted stock units granted under such agreement) would vest. |
(2) | Represents accelerated vesting of 175,000 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, 87,500 restricted stock units (50% of the unvested restricted stock units at December 27, 2014) would vest, having a value of $1,188,250, based on a termination date of December 27, 2014 and using a closing price of our stock on December 26, 2014, the last trading day of the 2014 fiscal year. |
(3) | | (7) | Represents reimbursement of medical and dental insurance payments under COBRA for twelve months. |
(4) | Represents accelerated vesting of 40,000 unvested restricted stock units granted to Mr. Dooley if terminated without cause or for good reason. In the event of Mr. Dooley’s death or disability, 20,000 restricted stock units (50% of the unvested restricted stock units at December 27, 2014) would vest, having a value of $271,600, based on a termination date of December 27, 2014 and using a closing price of our stock on December 26, 2014, the last trading day of the 2014 fiscal year. | | | (8) | Represents reimbursement of medical and dental insurance payments under COBRA for 24 months. |
(5) | Represents one year’s salary of $532,000 and an average yearly cash bonus of $252,000 paid to Mr. Lerner for fiscal years 2013 and 2014. Mr. Lerner would also receive the bonus amount in the event of his death or disability. |
Change In Control PaymentsThe following table sets forth the change in control payments that would have been made based on a hypothetical change of control date of December 27, 2014, the last day of the Company’s fiscal year 2014, and using the closing price of our common stock on December 26, 2014, the last trading day of the 2014 fiscal year. These amounts are estimates and the actual amounts to be paid can only be determined at the time of the change of control.
| Name | | Cash Compensation (Salary and Bonus) ($) | | | Value of Accelerated Vesting of Stock & 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 year’s salary of $660,000 and an average yearly cash bonus of $424,300 paid to Mr. Reinhold for fiscal years 2013 and 2014.
Thomas Clark | | | | | | | Type of Payment | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” ($) | Termination Due to Death or Total Disability ($) |
Change In Control Only ($) | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” within a certain period of time prior to or following a Change in Control ($) | | Cash Compensation (Salary & Non-Equity Incentive Compensation) | - | - | - | - | | Value of Accelerated Vesting of Stock Option Awards | - | - | - | 935,600(1) | | Value of Accelerated Vesting of Restricted Stock Unit Awards | 554,500(2) | 554,500(3) | 554,500(2) | - | | Medical and Other Benefits | - | - | - | - | | Total | 554,500 | 554,500 | 554,500 | 935,600 |
| | | (1) | Represents accelerated vesting of 37,500 stock options. Pursuant to Mr. Clark’s stock option agreement (dated November 10, 2016), if Mr. Clark’s employment is terminated without cause or for good reason within six months following a “change in control”, he will become immediately vested in all outstanding unvested stock options, and all of Mr. Clark’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination. |
(2) | Payments are made to Mr. Reinhold only if he is terminated without “cause” or resigns for “good reason” within 60 days prior to, or one year following, a Change of Control. |
(3) | Represents accelerated vesting of 175,000 | | (2) | Represents accelerated vesting of 16,666 unvested restricted stock units. |
| | | (3) | Represents accelerated vesting of 16,666 unvested restricted stock units. Pursuant to Mr. Clark’s restricted stock unit agreement (dated February 1, 2016), on the event of Mr. Clark’s death or total disability, 16,666 restricted stock units (100% of the unvested restricted stock units granted under such agreement at December 30, 2017) would vest. |
(4) | Represents reimbursement of medical and dental insurance payments under COBRA for twenty-four months.
Robert Dooley | | | | | | | Type of Payment | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” ($) | Termination Due to Death or Total Disability ($) |
Change In Control Only ($) | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” within a certain period of time prior to or following a Change in Control ($) | | Cash Compensation (Salary & Non-Equity Incentive Compensation) | - | - | - | - | | Value of Accelerated Vesting of Stock Option Awards | - | - | - | 1,848,000(1) | | Value of Accelerated Vesting of Restricted Stock Unit Awards | 831,800(2) | 415,900(3) | 831,800(2) | - | | Medical and Other Benefits | - | - | - | - | | Total | 831,800 | 415,900 | 831,800 | 1,848,000 |
| | | (1) | Represents accelerated vesting of 75,000 stock options. Pursuant to Mr. Dooley’s stock option agreements (dated February 1, 2016 and December 14, 2016), if Mr. Dooley’s employment is terminated without cause or for good reason within six months following a “change in control”, he will become immediately vested in all outstanding unvested stock options, and all of Mr. Dooley’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination. |
(5) | Represents accelerated vesting of 40,000 | | | (2) | Represents accelerated vesting of 25,000 unvested restricted stock units. |
| | | (3) | Represents accelerated vesting of 12,500 unvested restricted stock units. Pursuant to Mr. Dooley’s restricted stock unit agreement (dated March 1, 2012), on the event of Mr. Dooley’s death or total disability, 12,500 restricted stock units (50% of the unvested restricted stock units granted under such agreements) would vest. |
(6) | Represents one year’s salary of $532,000 and an average yearly cash bonus of $252,000 paid to Mr. Lerner for fiscal years 2013 and 2014.
(7) | Represents accelerated vesting of 56,250 unvested stock options (only if terminated without “cause” or resigns for “good reason” within six months following a Change of Control). 37,500 of such options on the hypothetical change of control date of December 27, 2014 had no intrinsic value.Our policy is not to pay compensation to directors who are also employees of Systemax or any of our subsidiaries. Directors are reimbursed for reasonable travel and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel accident insurance policy for such travel. The table below shows the elements and amounts of compensation that we paid our non-management directors for fiscal 2017. | | |
Compensation Element | Amount ($) | | Retainers (1) | 65,000 | | Restricted Stock Units (2) | 40,000 | | Committee Chair Annual Retainers (1) | | | Audit Committee | 20,000 | | Compensation Committee | 10,000 | | Nominating/Corporate Governance Committee | 10,000 | | Lead Independent Director Retainer (1) | 20,000 |
(8) | Represents reimbursement of medical and dental insurance payments under COBRA for twelve months. | | | (1) | Retainer amounts are paid in quarterly installments. |
| | | (2) | 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 grantrestricted stock units each year of shares of Company stock (restricted for sale for two years)immediately following the annual stockholders meeting in an amount equal to $40,000 divided by the fair market valueclosing price per share during the 20 trading days preceding the date of suchthe annual meeting (rounded up to the nearest whole number of shares). Such restricted stock units are generally subject to forfeiture if the holder is not a director of Systemax on the date of grant. The Lead Independent Director, currently Robert Rosenthal, also receives an additional $20,000 per year. Thethe second annual meeting following such grant, and cannot be sold while so restricted; such restrictions lapse if the holder dies or becomes disabled or there is a change of control, as defined in the grant agreement. Cash dividend equivalents are paid on unvested restricted stock grants are made pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors, which was approved by the Company’s stockholders at the 2006 Annual Stockholders’ Meeting. Directors are reimbursed for reasonable travel and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel accident insurance policy for such travel.stock.
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| | | Non-Management Director Compensation in Fiscal 2017 |
The non-management directors received the following compensation during fiscal 2017: | | | | | | | | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Robert D. Rosenthal | 110,000 | 40,000 | - | 2,700(2) | 152,700 | Barry Litwin (appointed in July 2017) | 32,500 | 40,000 | - | 400(2) | 72,900 | Chad Lindbloom (appointed in December 2017) | 0 | 20,000 | - | - | 20,000 | Stacy Dick
(resigned in July 2017) | 64,000 | 40,000(3) | - | 3,800(4) | 67,800 | Marie Adler-Kravecas
(resigned in December 2017) | 65,000 | 40,000(3) | - | 2,700(2) | 67,700 |
| | | (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 Fiscal Year 2014The following table sets forth compensationadditional information regarding paymentsassumptions made in 2014calculating the amount reflected in this column, please refer to our non-employee Directors:
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 9Note 7 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 unvested restricted stock awards and stock option awards held by each of our non-employee Directors at the end of fiscal year 2014:
| 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 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 2013 and 2014:
Audit and Audit-related Fees
Ernst & Young billed the Company $2,649,900 for professional services rendered for the audit of the Company’s annual consolidated financial statements for fiscal year 2014 and its reviews of the interim financial statements, included in the Company’s Forms 10-Q for that fiscal year and $1,998,000 for such services renderedour Annual Report on Form 10-K for fiscal year 2013.
2017. |
| | | (2) | Dividend equivalent payments on unvested restricted stock. |
| | | (3) | In accordance with the SEC’s definitions and rules, “audit fees” are fees that were billed to the Company by Ernst & Young for the auditterms of the Company’s annual financial statements, to beplan, upon resignation, these shares were forfeited. Therefore, they are not included in the Form 10-K,total compensation number. |
| | | (4) | Includes dividend equivalent payments on unvested restricted stock units ($1,300) 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” areconsulting 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 2013 and 2014 an aggregate of $42,600 and $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 $2,167 were billed by Ernst & Young LLP for fiscal years 2013 and 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.
($2,500). |
Vote Required for Approval
As permitted under the SEC rules, in order to identify our “median employee” to compare to our CEO, we took into account our entire employee population (other than our CEO) at December 31, 2017, located in the United States, France, Canada, and India, including full, part-time and temporary/seasonal employees (1,600 Employees). We used the compensation components utilized in the Summary Compensation Table / page 36 of this proxy statement (“SCT”) for the period from January 1, 2017 to December 31, 2017 as the compensation measure to identify the median employee, and the median employee’s compensation. We annualized total compensation for those employees who commenced work during 2017, and excluded our cost of providing health and wellness benefits for all employees.
The pay ratio specified below is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S-K under the Exchange Act. In calculating Total Compensation for our median employee and CEO, we included, among other things, base salary, overtime, incentive payments, and stock-based compensation (based on the grant date fair value of awards granted during 2017); therefore, the CEO's Total Compensation for purposes of this calculation matches the Total Compensation described in the SCT / page 36 of this proxy statement.
The median team member's estimated Total Compensation for 2017 was $47,000. The ratio of CEO pay to median team member pay is estimated to be 73:1.
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 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 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 2014 are available at www.proxyvote.com.
The cost of soliciting proxies for the Annual Meeting will be borne by the Company.Systemax. 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 CompanySystemax will reimburse them for expenses in so doing. Consistent with the Company’sour confidential voting procedure, Directors,directors, officers and other regular employees of the Company,Systemax, as yet undesignated, may also request the return of proxies by telephone or fax, or in person.
Submitting Stockholder Proposals and Director Nominations for the Next Annual Meeting
Stockholder proposals intended to be presented at the Annual Meeting,2019 annual meeting, including proposals for the nomination of Directors,directors, must be received by December 31, 2015, to21, 2018 to be considered for the 20162019 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. Any proposal for a director nominee shall contain at a minimum: the name and address of the stockholder making the recommendation; if the stockholder is not a stockholder of record, a representation and satisfactory proof of share ownership; a description of all direct and indirect related party transactions, compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, between the stockholder and its respective affiliates or associates, or others with whom they are acting in concert, on the one hand, and the nominee and his or her respective affiliates, associates and others with whom they are acting in concert, on the other hand; whether the stockholder has been involved in any legal proceeding during the past 10 years; the nominee’s name, age, address and other contact information; any direct or indirect holdings, beneficially and/or of record, of our securities by the nominee; any information regarding the nominee required to be disclosed about directors under applicable securities laws and/or stock exchange requirements; information regarding related party transactions with Systemax and/or the stockholder submitting the nomination and/or the nominee; any actual or potential conflicts of interest; and the nominee’s biographical data, current public and private company affiliations, employment history (including current principal employment) and qualifications and status as “independent” under applicable securities laws and stock exchange requirements. Nominees proposed by stockholders will receive the same consideration as other nominees.
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.Annual Meeting. If other matters properly come before the meeting,Annual Meeting, the persons named as proxies intend to vote the Sharesshares they represent in accordance with their judgment. A COPY OF THE COMPANY’SOUR FORM 10-K FOR FISCAL YEAR 20142017 IS INCLUDED AS PART OF THE COMPANY’SOUR ANNUAL REPORT ALONG WITH THIS PROXY STATEMENT, WHICH ARE AVAILABLE AT www.proxyvote.com.
Available Information
The Company maintains an internet web siteWe maintain a website at www.systemax.com. The Company filesWe file reports with the Securities and Exchange Commission and makes available free of charge on or through this web site its annual reportsour website our Annual Reports on Form 10-K, quarterly reportsQuarterly Reports on Form 10-Q and current reportsCurrent 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 sitewebsite (www.sec.gov). The information on the Company’s web siteour website or any report the Company fileswe file with, or furnishesfurnish to, the SEC is not part of this proxy statement.
The Board has adopted the following corporate governance documents (the “Corporatedocuments: Charter for the Audit Committee of the Board (last amended March 2017). Charter for the Compensation Committee of the Board (last amended May 2013). Charter for the Nominating/Corporate Governance Documents”):Committee of the Board (last amended January 2015). Corporate Ethics Policy (last amended February 2018). | ● | Corporate Ethics Policy for officers, Directors and employees; |
Applies to all of our directors, officers (including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller and any person performing similar functions) and employees.Corporate Governance Guidelines and Principles (last amended March 2017). | ● | Charter for the Audit Committee of the Board; |
Establishes our corporate governance principles and practices on a variety of topics, including the responsibilities, composition and functioning 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 Documentsthese corporate governance documents is available on the Company’s Companyour web site (www.systemax.com under “Investors—Corporate Governance— Corporate Governance Documents”).
| 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 |
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
| | The Board of Directors recommends that you vote FOR the following: | ☐ | ☐ | ☐ | | | |
1.Election of Directors
Nominees
| | | | | | | | | | 01 Richard Leeds
05 Stacy Dick
| 02 Bruce Leeds
06 Robert Rosenthal
| 03 Robert Leeds
07 Marie Adler-Kravecas
| 04 Lawrence Reinhold | | | The Board of Directors recommends you vote FOR proposal 2:
| | | For | Against | Abstain | | | 2.A Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants for fiscal year 2015
| o | o | o | | | | | | | | | | | | | | | | 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 instructions) 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 | | Signature (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
SYSTEMAX INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – JUNE 8, 2015
The stockholder(s) hereby appoint(s) Eric 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 Meeting of Stockholder(s) to be held at 12:00 PM, EDT on June 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 PROMPTLY 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)
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