UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
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Systemax Inc.
(Name of Registrant as Specified in Its Charter)
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11 Harbor Park Drive, Port Washington, NY 11050 • 516.608.7000 • investinfo@systemax.com
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Notice of Annual Meeting of Stockholders
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| Date and time: | Monday, June 3, 2019, at 12:00 p.m., local time |
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| Location: | Systemax Inc., 11 Harbor Park Drive, Port Washington, NY 11050 |
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| Purpose: | (1) To elect the 8 director nominees named in the proxy statement; |
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| (4) | Date Filed: | |
Systemax Inc.
11 Harbor Park Drive
Port Washington, New York 11050
April 24, 2017
Dear Stockholders:
You are cordially invited to attend the 2017 Annual Meeting of Stockholders of Systemax Inc. (the “Company”) which will be held at the Company’s corporate offices, located at 11 Harbor Park Drive, Port Washington, New York at 12:00 p.m. on Monday, June 5, 2017. We look forward to greeting those stockholders who are able to attend. On the following pages, you will find the formal Notice of Annual Meeting and Proxy Statement.
For the Annual Meeting, we are pleased to use the “Notice Only” rule adopted by the Securities and Exchange Commission to furnish proxy materials to stockholders over the Internet. We believe this process will provide you with an efficient and quick way to access your proxy materials and vote your shares, while allowing us to reduce the environmental impact and the costs of printing and distributing the proxy materials. On or about April 24, 2017, we mailed to most stockholders a Notice of Internet Availability of Proxy Materials that tells them how to access and review information contained in the proxy materials and our Annual Report on Form 10-K for fiscal year 2016 and vote electronically over the Internet. If you received only the Notice in the mail, you will not receive a printed copy of the proxy materials in the mail unless you request the materials by following the instructions included in the Notice.
At the Annual Meeting, you will be asked to: (1) elect seven directors; (2) approve a non-binding, advisory resolution regarding the compensation of our Named Executive Officers; and (3) ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants for fiscal year 2017. Your Board of Directors recommends that you vote your shares “FOR” proposals (1), (2) and (3). These proposals are more fully described in the accompanying proxy statement.
Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted at the Annual Meeting. Accordingly, please vote your shares over the internet at www.proxyvote.com or by telephone at (800) 690-6903 until 11:59 PM Eastern Time on June 4, 2017, or if you received a paper proxy card, date, sign and return the proxy card as soon as possible in the envelope provided or to the address set forth in the voting instructions therein. Your cooperation will ensure that your shares are voted.
If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker with instructions on how to vote your shares in order for your shares to be voted on important matters presented at the Annual Meeting. If you do not instruct your broker on how to vote in the election of directors and on compensation matters, your shares will not be voted on these matters.
We hope that you will attend the Annual Meeting, and we look forward to seeing you there.
Sincerely,
| RICHARD LEEDS
| LAWRENCE REINHOLD |
| Executive Chairman | President and Chief Executive Officer |
Systemax Inc.
11 Harbor Park Drive
Port Washington, New York 11050
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 5, 2017
Dear Stockholders:
The 2017 Annual Meeting of the Stockholders of Systemax Inc. (the “Company”) will be held at the Company’s offices, 11 Harbor Park Drive, Port Washington, New York, on Monday June 5, 2017 at 12:00 p.m. for the following purposes, as more fully described in the accompanying proxy statement:
| 1. | To elect the Company’s Board of Directors; |
| 2. | To consider and approve a non-binding, advisory resolution regarding the compensation of our Named Executive Officers, as described under the heading “Executive Compensation”; |
| 3. | To consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP as the Company’sour independent registered public accountantsauditor for fiscal year 2017;2019; and |
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| (3) To transact such other business as may properly come before the meeting andor any and all adjournmentsadjournment or postponements thereof. |
The Board of Directors has fixed the close of business on April 13, 2017 as the record date for the determination of the stockholders entitled to notice of and to vote at the meeting and at any adjournment or postponement thereof.
Stockholders are invited to attend the meeting. Whether or not you expect to attend, we urge you to vote your shares. YOU CAN VOTE YOUR SHARES OVER THE INTERNET AT www.proxyvote.com OR BY TELEPHONE AT (800) 690-6903 UNTIL 11:59 PM EASTERN TIME ON JUNE 4, 2017. IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, YOU MAY ALSO VOTE BY SIGNING, DATING, AND RETURNING THE PROXY CARD IN THE ENVELOPE PROVIDED OR TO THE ADDRESS SET FORTH IN THE VOTING INSTRUCTIONS CONTAINED THEREIN. If you attend the meeting, you may vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and you wish to attend the meeting you must obtain a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares and bring it to the meeting. In order to vote your shares at the meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. PLEASE VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE OR IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, SIGN, DATE, AND RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED TODAY.
| Sincerely,postponement. |
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| Who may vote: | ERIC LERNERStockholders of record at the close of business on April 10, 2019 are entitled to notice of, and to vote at, the meeting or any adjournment or postponement. |
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By order of the Board of Directors,
Eric Lerner
Senior Vice President and General Counsel
April 22, 2019
Important notice regarding the availability of proxy materials for the
Annual Meeting of Stockholders to be held on June 3, 2019:
This Notice of Annual Meeting of Stockholders, the accompanying proxy statement and our 2018 Annual Report to Stockholders all are available at www.proxyvote.com.
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Port Washington, New York | |
April 24, 2017 | |
Table of Contents
| 5 |
| 6 |
| General Information | | 9 |
| Frequently Asked Questions | | 11 |
| Proposal No. 1 – Election Of Directors | |
| Corporate Governance | |
| Board of Directors | | 11 |
| Board Leadership Structure | |
| Director Independence | |
| Lead Independent Director | |
| Meetings of Non-Management Directors | | 11 |
| Communicating with the Board | | 11 |
| 12 |
| 12 |
| 12 |
| 12 |
| | 12 |
| Risk Oversight | | 14 |
| Proposal No. 2 – Ratification of Ernst & Young LLP as our Independent Auditor | | 14 |
| Report of the Audit Committee | | 15 |
| Security Ownership Information | | 17 |
| Security Ownership of Management | | 18 |
| Security Ownership of Certain Beneficial Owners | | 19 |
| | 20 |
| Equity Compensation Plans | | 21 |
| Certain Relationships and Related Transactions | | 22 |
| Related Person Transaction Policy | | 23 |
| Transactions With Related Persons | |
| Executive Officers | |
| Compensation Discussion and Analysis | | 23 |
| Executive Summary | |
| Central Objectives and Philosophy of Our Executive Compensation Programs | |
| Risk Management | |
| Elements of Our Executive Compensation Programs | |
| Role of the Compensation Committee and CEO in Compensation Decisions | |
Compensation Committee Report to Stockholders* | | 36 |
| | 36 |
| Executive Compensation | | 37 |
| Summary Compensation Table | | 38 |
| Grants of Plan-Based Awards | | 39 |
| Outstanding Equity Awards at Fiscal Year-End for Fiscal 2018 | | 40 |
| Option Exercises and Stock Vested For Fiscal 2018 | | 41 |
| Employment Arrangements of the Named Executive Officers | |
Potential Payments Upon Termination of Employment Withoutor Change in Control | | 43 |
| Director Compensation | | 44 |
| General Policy | | 45 |
| | 45 |
| CEO Pay Ratio Disclosure | | 46 |
| Additional Matters | 47 |
| 48 |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 5, 2017.
Our Proxy Statement and Annual Report are available online at:
www.proxyvote.com
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 2017use at our Annual Meeting of Stockholders of the Company to be held on Monday, June 5, 2017 (the “Annual Meeting”). The Company has made the proxy materials available to stockholders of record as of the close of business on April 13, 20173, 2019, and at www.proxyvote.com beginning on April 24, 2017 and is first mailing such materials to stockholders that requested printed copies of such materials onany adjournment or about April 24, 2017.
You can ensure that your Shares of common stock of the Company (the “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 4, 2017 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 Board’s recommendations, FOR Proposals 1, 2 and 3. If any other matters properly come before the Annual Meeting, the persons named in theThese proxy will vote at their discretion.
Under the Delaware General Corporation Law and the Company’s Amended and Restated Certificatematerials include our Notice of Incorporation and By-Laws, (1) the affirmative vote of a plurality 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 elect the nominated directors of the Board (Proposal 1); (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 approve the non-binding advisory resolution on executive compensation (Proposal 2); and (3) 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 3).
Messrs. Richard, Bruce 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 outstanding, and they have each separately advised us that they intend to vote all of such Shares they each have the power to vote in accordance with the recommendations of the Board on each of the Proposals identified above, which will be sufficient to constitute a quorum and to determine the outcome of each Proposal.
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 Proposal 1 (Election of Directors) and Proposal 2 (Approval of Executive Compensation) are non-routine matters, and so Shares subject to a broker “non-vote” will not be considered entitled to vote with respect to Proposal 1 and Proposal 2 and will not affect the outcome of the vote on those Proposals.
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 Mr. 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
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| · | 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 13, 2017, the record date, there were outstanding and entitled to vote (excluding Company treasury Shares) 36,948,437 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 2018 Annual Report to Stockholders, which includes our Fiscal 2018 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 22, 2019.
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 24, 2017,22, 2019, we sentmailed to most of our stockholders by mailof record on April 10, 2019 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.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 Sharesshares 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 Sharesshares by proxy, please follow each of the separate proxy voting instructions that you received for your Sharesshares of common stock held in each of your different accounts.
Record Date
We have fixed the close of business on April 10, 2019 as the record date for determining our stockholders entitled to notice of and to vote at our Annual Meeting.
On that date, we had 37,428,796 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 2, 2019.
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 Report on Form 10-K for fiscal year 2016,2018, 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.
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| Proposal No. 1 – Election Of Directors |
At theour Annual Meeting, seveneight directors are to be elected to servehold office until the 2020 annual meeting and until their successors have been elected and qualified. Information regardingAll nominees are current Systemax Board members who were elected by stockholders at the 2018 annual meeting, except for Mr. Paul S. Pearlman, who was appointed to the Board as an independent director in January 2019.
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, 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 2016.
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 reduces the number of nominees, for such other person or persons as the Board may designate.
IfWhen voting by proxy with respect to the election of 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
| 57 | April 1995 |
| Director Since: 1995 | | | |
Bruce Leeds | Vice Chairman | 61 | April 1995 |
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Robert Leeds | Vice Chairman | 61 | April 1995 |
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Lawrence Reinhold | President and Chief Executive Officer | 57 | March 2009 |
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Robert D. Rosenthal | Chairman and Chief Executive Officer of First Long Island Investors LLC | 68 | July 1995 |
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Stacy Dick | Chief Financial Officer of Julian Robertson Holdings | 60 | November 1995 |
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Marie Adler-Kravecas | Retired President of Myron Corporation | 57 | June 2009Age: 59 |
Richard Leeds joined the CompanySystemax in 1982 and served as our Chairman and Chief Executive Officer of the CompanyCEO from April 1995 to March 2016. Mr. Leeds became theuntil becoming our Executive Chairman of the Company in March 2016. He also served as President of the Company’sour Industrial Products groupGroup until 2011.Mr. Leeds, together with his brothers Messrs. Bruce and Robert Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders. 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: 63 |
Bruce Leeds joined the CompanySystemax in 1977 and has served as our Vice Chairman of the Company since April 1995. He also served as President of the Company’sour International Operations until 2005.Mr. Leeds, together with his brothers Messrs. Richard and Robert Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders. 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: 63 |
Robert Leeds joined the CompanySystemax in 1977 and has served as our Vice Chairman of the Company since April 1995. He also served as President of the Company’sour Domestic Operations until 2005 and as Chief Executive of the North American Technology Products Group from 2013 to 2015.Mr. Leeds together with his brothers Messrs. Richard and Bruce Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders.has served as a 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.
Lawrence Reinhold joined the Company in January 2007 and served asChef Executive Vice President and Chief Financial Officer from that date until October 2016.
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| Director Since: 2017 | Age: 52 |
Mr. Reinhold became the Company’s President andLitwin was appointed Chief Executive Officer of Systemax in March 2016. In this expanded role, he assumed overall responsibility for the Company’s operations, including all lines of business and functional groups. Mr. Reinhold has served as a director since March 2009. Additionally, priorJanuary 2019. Prior to joining the Company, Mr. ReinholdSystemax, he was the Chief FinancialExecutive Officer of Adorama, Inc., a publicly traded developerleading multi-channel retailer of professional camera, audio, and manufacturervideo equipment. 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 advisor to several early stage digital and technology companies. Mr. Litwin graduated from Indiana University with a BS degree, and an MBA in Operations from Loyola University, Quinlan School 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.Business in 1992. 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. ReinholdLitwin was selected to serve as a director on our Board due to his contributions since joining the Companye-commerce 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.direct marketing expertise.
Independent Director
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| Director Since: 1995 | Age: 70 |
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 the Chairman 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 has served as an independent directorIndependent Director
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| Director Since: 2017 | Age: 54 |
Mr. Lindbloom was employed by C.H. Robinson Worldwide, Inc. – one of the Company since November 1995. Mr. Dick has served asworld’s largest third-party logistics providers – from June 1990 through March 2018 in various roles, including Chief Information Officer, Chief Financial Officer and Controller. Mr. Lindbloom holds BS and MBA degrees from the Carlson School of Julian Robertson Holdings since November 2008Management at the University of Minnesota. Mr. Lindbloom was selected to serve as a director on our Board due to his supply chain and since 2011, as Chief Financial Officerlogistics expertise.
Independent Director
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| Director Since: 2019 | Age: 65 |
Mr. Pearlman is the managing partner of Tiger Management Advisors LLC. Mr. Dick wasKramer Levin Naftalis & Frankel LLP, a Managing Director of Rothschild Inc. from 2001 to 2008New York City headquartered international law firm, and served as an executive of other entities controlled by Rothschild family interests. He has served as an adjunct professorin that position since August 2000. Mr. Pearlman is a 1978 cum laude graduate of finance at the SternSt. John’s University School of Business (NYU) since 2004Law and adjunct professora 1975 graduate of law at NYU Law School since 2012. Mr. DickGeorge Washington University. Mr.
Pearlman was selected to serve as a director on our Board due to his exceptional knowledgebusiness and legal experience and acumen as well as his management and leadership skills as the head of a prominent international law firm.
Director
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| Director Since: 2009 | Age: 59 |
Lawrence Reinhold joined Systemax as its Chief Financial Officer in the areas of business, finance and economics.
Marie Adler-Kravecas has served as an independent director of the Company since June 2009. Ms. Adler-Kravecas joined Myron Corporation, an international, business-to-business direct marketing company, in 1984January 2007 and served as President and CEO from 1999 to 2004.March 2016 through January 2019. In 2005, Ms. Adler-Kravecas founded Wellconnected, LLC,January 2019, Mr. Reinhold entered into a consumer direct marketing company whichtwo year consulting agreement with Systemax. Mr. Reinhold was sold in 2008. Ms. Adler-Kravecas is currently retired. Shepreviously the CFO of several publicly traded technology companies and a Partner with PricewaterhouseCoopers. Mr. Reinhold is a former member of both the Young President’s Organization and The Executive Group. Ms. Adler-Kravecas currently sits on the Boards of The Armory Art Center & Rockleigh Home for the Aged. Ms. Adler-KravecasCertified Public Accountant. Mr. Reinhold was selected to serve as a director on our Board due to her practicalhis contributions while working at Systemax and his extensive experience and expertise in direct marketingbusiness, strategy, finance, accounting, SEC reporting, public company management, mergers and international business.acquisitions and financial systems.
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 Directorseight members, three of whom are independent under the rules of the SEC and New York Stock Exchange, or NYSE. 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.
Effective January 7, 2019, Mr. Litwin, a member of our Board, became the Chief Executive Officer of Systemax and accordingly no longer met the standards for independence required by the SEC and NYSE rules. Therefore, Mr. Litwin resigned his membership on our Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, but remains a member of the Board.
Effective January 7, 2019, the Board elected Mr. Pearlman to serve as an independent member of the Board , and he was appointed as a member of the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee.
Effective January 7, 2019, Mr. Reinhold entered into a two year consulting agreement with Systemax, pursuant to which he agreed to remain a director of Systemax and the Company agreed that he be nominated by the Board to be elected by stockholders of Systemax during the two year term of the consulting agreement, and if so nominated and elected to serve at least until the 2020 annual meeting of stockholders.
Our Board held 14 meetings in fiscal 2018. All of the directors attended at least 75% of the meetings of the Board and the respective committees of the Board on which they were members.
At last year’s annual meeting of stockholders held on June 4, 2018, 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 as well as our Board Committees 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 attention on different aspects of the strategic and operating challenges and opportunities ahead for the Industrial Products Group.
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.
In connection with its annual review of director independence, the Board has determined that each of the following directorsMessrs. Rosenthal, Lindbloom and Pearlman 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 ExchangeNYSE and Securities and Exchange Commission rules: Mr. Rosenthal, Mr. Dick and Ms. Adler-Kravecas. SEC 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 ExchangeNYSE, 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 Company and each of Mr. Rosenthal, Mr. Dick and Ms. Adler-Kravecas (directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company) 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 Mr. 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 Mr. 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 ExchangeNYSE requirement that listed companies have a majority of independent directors. A “controlled company” is defined by the New York Stock ExchangeNYSE 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, Bruce and Robert Leeds, each of whom is an officer and director 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 “TransactionsTransactions with Related Persons” below.Persons / page 21 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 ExchangeNYSE 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 “Communicating with the Board”). |
The Board’s non-management or independent directors meet separately in executive sessions, chaired by the Lead Independent Director (currently Mr. 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 March 2017.
Our Corporate Governance Guidelines establish our corporate governance principles and practices on a variety of topics, includingSecretary will not distribute communications that are unrelated to the responsibilities, composition and functioningduties of the Board. Board, such as spam, junk mail, mass mailings, business solicitations and advertisements.
The Board has a standing 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 2018. See Executive Committee / page 14 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 | | | |
| Chad M. Lindbloom | I | | | |
| Paul S. Pearlman | I | | | |
| I = Independent Director |  = Chairman |  = 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 adopted 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 October 2016.
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,Mr. Rosenthal served as might be the case if you request information about the Company or if 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 Mr. Robert D. 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 Chairman of the Audit Committee orand the Compensation Committee from January 2018 until April 2018. In April 2018, Mr. Lindbloom was appointed as the Chairman of the Audit Committee and Mr. Litwin was appointed as the Chairman of the Compensation Committee. On January 7, 2019, when Mr. Litwin was appointed as the Chief Executive Officer of Systemax, he resigned his membership on each of the three Board committees but remains a member of the Board. On such date, Mr. Lindbloom was appointed the Chairman of the Compensation Committee and Mr. Pearlman became an independent member of the Board, and was appointed as a group should address their inquiries by mail to the attentionmember of Mr. 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 6, 2016, two directors attended the meeting. The Company does not have a policy with regards to directors’ attendance at the Company’s annual meeting of stockholders.
During fiscal year 2016, the Board of Directors held seven meetings, the Audit Committee, held six meetings; the Compensation Committee held six meetings;and the Nominating/Corporate Governance Committee held six meetings; and the Executive Committee held no meetings. Mr. Dick did not attend at least 75% of the meetings of the Board. Each of the directors attended at least 75% of the committee meetings of the Board of which they were members.Committee.
The Board of Directors has the following standing committees:
Audit Committee
Number of Meetings Held in Fiscal 2018: Eight
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 17 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 March 2017. A copy of the Audit Committee Charter is attached hereto as Appendix A and also available on the Company’s website, www.systemax.com.
The current members of the Audit Committee are Mr. Dick (Chairman), Mr. Rosenthal and Ms. 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, Lindbloom and Mr. RosenthalPearlman 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 2018: Six
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 Mr. Rosenthal (Chairman), Mr. Dick and Ms. 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 director candidates recommended by the security holdersstockholders or any minimum qualifications or specific procedure for identifying and evaluating nominees for director 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 policies and procedures, including the Company’s compensation policies for all its employees as they relatemay engage an independent search firm to risk management, and to review these policies and procedures annually.
assist in identifying qualified board candidates.
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 January 2015. The Nominating/Corporate Governance Committee Charter is available on the Company’s website (www.systemax.com).
Compensation Committee
Number of Meetings Held in Fiscal 2018: Seven
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). / page 38 of this proxy statement. The Compensation Committee also reviews and approves the performance and compensation of the Company’sour Executive Chairman and Vice Chairmen. The current members of the Compensation Committee are Mr. Rosenthal (Chairman), Mr. Dick and Ms. Adler-Kravecas. 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 Executive 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 D. Rosenthal, the Lead Independent Director. Meetings Held in Fiscal 2018: 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.
Stockholder Nominations for DirectorStockholders 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 26, 2017 to be considered for the 2018 annual meeting. Any such proposal shall contain the name, Company security holdings (direct or indirect; of record and/or beneficially) and contact informationits power in 2018. The current members of the person making the nomination; a description of all directExecutive Committee are Messrs. Richard Leeds, Bruce Leeds, Robert Leeds 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.Robert D. Rosenthal.
Board Leadership StructureAs noted above, our Board currently includes three independent directors. Our independent directors have designated Mr. 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 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-employee directors or be an employee, the Board believes that it should have the flexibility to make a determination from time to time
Board’s Role in a manner that is in the best interests of the Company and its stockholders at the time of such determination. Our Board of Directors believes that the most effective Board leadership structure for our Company at the present time, is for the roles of Chief Executive Officer and Executive Chairman of the Board to be separated, and that our Executive Chairman and two Vice Chairmen also have management roles, so that our Executive Chairman and Vice Chairmen and our Chief Executive Officer can focus their attention on different aspects of the strategic and operating challenges and opportunities ahead for the Industrial Products Group and the France technology Value Added Reseller business. Therefore, as noted above, in March 2016 the Board approved an executive management succession plan and effective March 10, 2016, Mr. Reinhold assumed the role as the Company’s President and Chief Executive Officer. In this expanded role, he assumed overall responsibility for the Company’s operations, including all lines of business and functional groups. Mr. Richard Leeds assumed the role of Executive Chairman and, along with the Vice Chairmen, is guiding the Company’s long-term strategic direction. Messrs. Leeds possesses in-depth knowledge of the issues and challenges facing the Company and its businesses and are thus best positioned to identify and develop the strategic opportunities to be considered by the Board and the matters that are most critical to the Company and its stockholders.
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.
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 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 the Company’s operations; (b) provide the Executive Chairman with input as to the preparation of agendas for the Board and committee meetings; (c) advise the Executive 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 Executive 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 Executive Chairman on sensitive issues; and (g) recommend to the Executive 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. As noted above, in March 2016 the Board approved an executive management succession plan and effective March 10, 2016, Mr. Richard Leeds assumed the role of Executive Chairman and Mr. Reinhold assumed the role as the Company’s President and Chief Executive Officer and Messrs. Robert and Bruce Leeds will continue to serve as Vice Chairmen.
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.
15Delegation 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 developingworking with the Audit and recommendingCompensation Committees to develop and recommend 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’sDay-to-Day Risk Management
Our 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 Executive 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 2019 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 2019 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 2018 and 2017, all of which were pre-approved by the Audit Committee:
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| | |
| Fee Category | 2018 ($) | 2017 ($) |
| Audit fees (1) | 1,257,000 | 1,490,000 |
| Audit-related fees (2) | 15,000 | 44,800 |
| Tax fees (3) | 0 | 0 |
| All other fees (4) | 2,000 | 1,400 |
| Total | 1,274,000 | 1,536,200 |
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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 2018 or 2017. |
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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 2019
(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, is reviewed annually, and was most recently revised in 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, 2016.2018. 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 20162018 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, 20162018 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 discussed with Ernst & Young LLP the matters required to be discussed by the Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees. 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 20162018 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.SEC.
Submitted by the Audit Committee of the Board,
Chad M. Lindbloom (Chairman)
Robert D. Rosenthal
Paul S. Pearlman
17
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| AUDIT COMMITTEE | | | |
| | Stacy Dick (Chairman) |
| | Robert D. Rosenthal |
| | Marie Adler-Kravecas |
* | The information contained in this Audit 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. |
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 13, 2017.
Name | Age | Position |
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Richard Leeds | 57 | Executive Chairman; Director |
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Bruce Leeds | 61 | Vice Chairman; Director | | |
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Robert Leeds | 61 | Vice Chairman; Director |
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Lawrence Reinhold | 57 | President and Chief Executive Officer; Director |
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Thomas Clark | 35 | Vice President and Chief Financial Officer |
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Robert Dooley | 63 | President of the Company’s Industrial Products Group |
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Eric Lerner | 59 | Senior Vice President and General Counsel |
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Manoj Shetty | 56 | Senior Vice President and ChiefSecurity Ownership Information Officer |
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Thomas Axmacher | 58 | Vice President and Controller |
For biographical information about Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold, see pages 9 and 10 of this Proxy Statement.
Thomas Clark was appointed Vice President and Chief Financial Officer of the Company in October 2016. Mr. Clark originally joined the Company in 2007. During the past ten years Mr. Clark, has served in a number of senior financial positions at the Company, most recently as Controller of the Industrial Products Group. Previously he held the positions of Director of Finance, and Manager Financial Planning & Analysis at the Company.
Robert Dooley was appointed President of the Company’s Industrial Products Group in January 2012. Mr. Dooley originally joined the Company in 1982 and served in numerous roles until March 2004, including Senior Vice President, Worldwide Computer Sales and Marketing. He also was a director of the Company from June 1995 through March 2004. Mr. Dooley left the Company in 2004 but returned in December 2007 as Vice President, Internet Marketing of the Industrial Products Group.
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.
Thomas Axmacher was appointed Vice President and Controller of the Company 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.
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 tabletables provides certain information regarding the beneficial ownership of the SharesSystemax common stock as of April 13, 2017, by (i) each of the directors, (ii) each of the Named Executive Officers listed in the Summary Compensation table, (iii) 10, 2019 by:
our directors;
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| • | our executive officers named in the Summary Compensation Table / page 39 of this proxy statement; |
all current directors and executive officers and directors as a groupgroup; and (iv)
each person known by us to the Company to be the beneficial owner ofown beneficially more than 5% of any class of the Company’s voting securities.our outstanding common stock
As used in this table “beneficial ownership” meansA person has beneficial ownership of shares if the sole or shared power to vote or direct theperson has voting or to disposeinvestment power over the shares 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 withinsuch power in 60 daysdays. 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 deemed to beas of April 10, 2019, and the listed beneficial owners have sole voting and investment power. A total of 37,428,796 shares of our common stock were outstanding for purposesas 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. April 10, 2019.
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 36,948,437 Shares were outstanding as of April 13, 2017.
| | | Amount and Nature of Beneficial Ownership (a) | | | | |
| Richard Leeds (1) | | | 12,643,830 | | | | 34.2 | % |
| Bruce Leeds (2) | | | 11,277,452 | | | | 30.5 | % |
| Robert Leeds (3) | | | 12,705,136 | | | | 34.4 | % |
| Lawrence Reinhold (4) | | | 369,204 | | | | * | |
| Thomas Clark (5) | | | 17,311 | | | | * | |
| Robert Dooley (6) | | | 135,614 | | | | * | |
| Eric Lerner (7) | | | 92,311 | | | | * | |
| Robert D. Rosenthal (8) | | | 67,655 | | | | * | |
| Stacy Dick (9) | | | 40,531 | | | | * | |
| Marie Adler-Kravecas (10) | | | 26,303 | | | | * | |
| All current directors and executive officers of the Company (12 persons) (11) | | | 25,663,105 | | | | 69.5 | % |
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Other Beneficial Owners of 5% or More of the Company’s Voting Stock | |
| Prescott General Partners LLC (12) | | | | | | | | |
| 2200 Butts Road, Suite 320 | | | | | | | | |
| Boca Raton, FL 33431 | | | 2,118,192 | | | | 5.7 | % |
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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) | 13,249,266 | - | - | 35% |
| Bruce Leeds (3) | 12,048,144 | - | - | 32% |
| Robert Leeds (4) | 12,063,978 | - | - | 32% |
| Barry Litwin | - | 2,108 | | * |
| Robert D. Rosenthal | 66,931 | 2,470 | 6,667 | * |
| Chad M. Lindbloom | - | 680 | - | * |
| Paul S. Pearlman | - | - | - | * |
| Lawrence Reinhold | 166,011 (5) | - | 175,000 | * |
| Robert Dooley | 70,264 | - | 45,348 | * |
| Thomas Clark | 16,130 | - | 17,500 | * |
| Dave Kipe | 857 | - | - | * |
| All of our current directors and executive officers (15 persons) | 25,168,733 | 5,258 | 305,515 | 67.2% |
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| (a) | Amounts listed in this column may include Sharesshares 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 2,850,315 Shares867,192 shares owned by Mr. Richard Leeds directly, 1,295,148 Shares2,000,000 shares owned by the Richard Leeds 2018 GRAT, 1,497,730, owned by the Richard Leeds 2017 GRAT and 762,195 shares owned by the Richard Leeds 2016 GRAT, 906,745 Shares owned by the Richard Leeds 2015 GRAT, and 299,868 Shares owned by the Richard Leeds 2012 GRAT. Also, includes 1,838,583 Sharesshares owned by a limited partnership of which Mr. Richard Leeds is a general partner, 235,850 Sharesshares owned by a limited partnership of which a limited liability company controlled by Mr. Richard Leeds is the general partner, 4,697,521 Shares5,527,916 shares owned by trusts for the benefit of his brothers’ children for which Mr. Richard Leeds acts as co-trustee and 519,800 Sharesshares owned by a limited partnership in which Mr. Richard Leeds has an indirect pecuniary interest. |
(2) | |
| (3) | Includes 2,366,859 Shares2,030,371 shares owned by Mr. Bruce Leeds directly, 1,805,224 Shares1,000,000 shares owned by the Bruce Leeds 2018 GRAT, 630,934 shares owned by the Bruce Leeds 2017 GRAT, and 983,426 shares owned by the Bruce Leeds 2016 GRAT, 423,148 Shares owned by the Bruce Leeds 2015 GRAT, and 191,831 Shares owned by the Bruce Leeds 2012 GRAT. Also, includes 1,838,583 Sharesshares owned by a limited partnership of which Mr. Bruce Leeds is a general partner, 4,132,007 Shares5,045,030 shares owned by trusts for the benefit of his brothers’ children for which Mr. Bruce Leeds acts as co-trustee and 519,800 Sharesshares owned by a limited partnership in which Mr. Bruce Leeds has an indirect pecuniary interest. |
(3) | |
| (4) | Includes 830,556 Shares708 shares owned by Mr. Robert Leeds directly, 1,564,897 Shares1,483,000 shares owned by the Robert Leeds 2018 GRAT, 2,235,363 shares owned by the Robert Leeds 2017 GRAT, 933,578 shares owned by the Robert Leeds 2016 GRAT, 1,269,444 Shares owned by the Robert Leeds 2015 GRAT, 593,337 Shares owned by the Robert Leeds 2015 GRAT, and 318,834 Shares owned by the Robert Leeds 2012 GRAT. Also, includes 1,838,583 Sharesshares owned by a limited partnership of which Mr. Robert Leeds is a general partner, 4,685,656 Shares5,052,946 shares owned by trusts for the benefit of his brothers’ children for which Mr. Robert Leeds acts as co-trustee and 519,800 Sharesshares owned by a limited partnership in which Mr. Robert Leeds has an indirect pecuniary interest. |
(4) | Includes options to acquire a total of 150,000 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 62,500 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. |
| (5) | Includes options to acquire a total1,000 shares held by Mr. Reinhold's spouse, of 12,500 Shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan.which Mr. Reinhold disclaims beneficial ownership. |
(6) | 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, options to acquire a total of 62,500 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 87,500 Shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan. |
(8) | Includes 4,435 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
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(9) | Includes 4,435 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
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(10) | 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 4,435 restricted stock units granted pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
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(11) | Includes options to acquire a total of 17,500 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 65,000 Shares that are currently exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan. |
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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 |
2,114,499 | 5.6% |
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| (1) | Based on information supplied by Prescott General Partners LLC (“PGP”), Prescott Associates L.P. (“Prescott Associates”), Prescott Investors Profit Sharing Trust (“PIPS”) and Thomas W. Smith in a Schedule 13G/A filed with the SEC on February 14, 2017. The Schedule 13G/A modifies the Schedule 13G to reflect, among other things, (i) the addition of PIPS as a Reporting Person and (ii) the removal of Scott J. Vassalluzzo as a Reporting Person.2019. |
The address of the parties is 2200 Butts Road, Suite 320, Boca Raton, FL 33431.
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 2,118,1922,114,499 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 92,01875,229 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. 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 76,50075,000 shares and to dispose or to direct the disposition of 76,50075,000 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. 78 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.
2015, and Amendment No. 7 filed by PGP, Prescott Associates, PIPS and Thomas W. Smith with the SEC on February 14, 2017 (as amended, the “Schedule 13G”).
Section 16(a) Beneficial Ownership Reporting Compliance |
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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 requiresduring fiscal 2018, with the Company’s executive officers and directors and persons who own more than ten percentexception of a registered classForm 4 filing for Mr. Dave Kipe made on August 28, 2018 and a Form 3 filing for Ms. Donna Fielding made on January 14, 2019.
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| Equity Compensation Plans |
Information for our equity compensation plans in effect as of the Company’s equity securities to file reportsend 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 2016, except for the following filings made on behalf of the named persons that were inadvertently filed late by the Company: Form 4s filed with the SEC on March 10, 2016 for Messrs. Reinhold, Dooley, Lerner, Shetty, Axmacher and Simon Taylor (a former executive officer).
2018 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 | 596,148 | $11.64 | 6,224,604 |
| Equity compensation plans not approved by stockholders | - | - | - |
| Total | 596,148 | $11.64 | 6,224,604 |
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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. |
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| Certain Relationships and Related Transactions |
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. |
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| Related Person Transaction Policy |
The Company’sOur 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’sfollowing persons on an escalating basis:
ü our General Counsel,
ü our CFO,
ü our CEO, and
ü our Nominating/Corporate Governance Committee as well as by the Company’s Chief Executive Officer, Chief Financial Officer and General Counsel. Committee.
In this regard, all such transactions are first discussed with the Chief Financial OfficerCFO 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
We utilize the definition of related persons under applicable SEC rules, defined as any executive officer, director or nominee for director of the Company,Systemax, any beneficial owner of more than 5% of the outstanding Sharesshares of the Company’sour common stock, or any immediate family member of any such person.
In reviewing these transactions, the Company striveswe strive to assure that the terms of any agreement between the CompanySystemax and a related party is at arm’s length, fair and at least as beneficial to the CompanySystemax 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 the CompanySystemax entered into an amended and restated lease (the “Lease”) for its Port Washington, NY headquarters (the “Headquarters”). The CompanySystemax 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, the CompanySystemax (the “Landlord”). The Lease provides that it is intended to be a “triple net” lease with theGlobal 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. transactions. Lease payments totaled $981,914$956,123 for fiscal year 2016.
2018.
Stockholders Agreement
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 Sharesshares held by such stockholders at the time of the Company’sour initial public offering of the Shares.shares. In addition, the agreement prohibits the sale of the Sharesshares without the consent of the holders of a majority of the Sharesshares 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 Sharesshares held by holders of a majority of the Shares.shares. As of the end of fiscal year 2016,2018, the parties bound to the stockholders agreement beneficially owned 25,286,700 Shares25,206,438 shares subject to such agreement (constituting approximately 68.5%68% of the Sharesshares outstanding).
Pursuant to the stockholders agreement, the CompanySystemax granted to the parties demand and incidental, or “piggy-back,” registration rights with respect to the Shares.shares. The demand registration rights generally provide that the holders of a majority of the Sharesshares may require, subject to certain restrictions regarding timing and number of Sharesshares that the CompanySystemax register under the Securities Act all or part of the Sharesshares held by such stockholders. Pursuant to the incidental registration rights, the CompanySystemax is required to notify such stockholders of any proposed registration of any Sharesshares under the Securities Act and if requested by any such stockholder to include in such registration any number of Sharesshares of Sharesshares held by it subject to certain restrictions. The CompanySystemax 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 Sharesshares pursuant to such agreement.
EQUITY COMPENSATION PLAN INFORMATIONPurchases of Equity Securities. On July 31, 2018 the Board approved a share repurchase program with a repurchase authorization of up to two million shares of Systemax common stock. Under the share repurchase program, Systemax is authorized to purchase shares from time to time through open market purchases, tender offers or negotiated purchases, subject to market conditions and other factors. On August 3, 2018, Systemax repurchased 232,550 shares of common stock for approximately $9.1 million from certain executive officers and directors. Each share was purchased at a price equal to $38.96 per share, reflecting a 4% discount to the closing price of Systemax's common stock on August 2, 2018 as reflected below:
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| Name |
Number of Shares Purchased | Aggregate Purchase Amount ($) | Net Pre-Tax Proceeds (1) ($) |
| Lawrence Reinhold | 50,000 | 1,948,000 | 1,288,500 |
| Thomas Clark | 10,000 | 389,600 | 212,800 |
| Robert Dooley | 37,500 | 1,461,000 | 1,141,375 |
| Eric Lerner | 106,250 | 4,139,500 | 2,819,250 |
| Thomas Axmacher | 23,800 | 927,248 | 585,006 |
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| (1) | Net value after giving effect to surrender of shares for cashless exercise of option strike price. |
Separation Agreement and Consulting Agreement. Under Mr. Reinhold's previously disclosed separation agreement,on January 7, 2019, he became entitled to receive the following payments: (i) one year’s base salary and the average annual non-equity incentive compensation paid to Mr, Reinhold for ourfiscal years 2016 and 2017; and (ii) his auto allowance and reimbursement of up to 12 months COBRA medical benefits payments. In addition, pursuant to the separation agreement, all of his unvested restricted stock units accelerated and vested. On the separation date, Mr. Reinhold entered into a two year consulting agreement with Systemax, pursuant to which certain option awards previously granted to Mr. Reinhold were terminated, continue to vest or remain exercisable in accordance with their terms during the ongoing consultancy period. Mr. Reinhold remains a director, and receives the standard cash and equity compensation planspaid to non-employee directors as described herein.
Separation Agreement. As noted herein, Mr, Kipe will be leaving Systemax in effect asJune 2019 and entered into a separation agreement pursuant to which he will receive the compensation described under Employment Arrangements of the endNamed Executive Officers / page 44 of fiscal year 2016 is as follows:this proxy statement.
| | | (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 | | | 1,410,250 | | | $ | 12.57 | | | | 5,993,395 | |
| Equity compensation plans not approved by security holders | | | - | | | | - | | | | - | |
| Total | | | 1,410,250 | | | $ | 12.57 | | | | 5,993,395 | |
(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 Officers |
There are no arrangements or understandings between any officer and any other person pursuant to which such person was selected as an officer.
Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Barry Litwin biographical information is on page 5 of this proxy statement.
Vice President and Chief Financial Officer
Age: 37
Thomas Clark was appointed Vice President and CFO of Systemax in October 2016. Mr. Clark originally joined Systemax in 2007. Prior to being appointed Vice President and CFO, Mr. Clark, 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: 65
Robert Dooley was appointed President of our Industrial Products Group in January 2012. Mr. Dooley originally joined Systemax in 1982 and served in numerous roles until March 2004, including Senior Vice President, Worldwide Computer Sales and Marketing. He also was a director of Systemax from June 1995 through March 2004.
Senior Vice President and Chief Human Resources Officer
Age: 48
Donna Fielding joined Systemax in 2018 as Senior Vice President and Chief Human Resources Officer. Prior to joining Systemax, Donna worked in various human resource leadership roles in Fortune 500 organizations, including ADP, Credit Suisse, Pfizer and JPMorgan Chase. Donna has broad experience in traditional human resources as well as cultural transformation, differentiated and specialized talent models, and integrated human capital solutions.
Senior Vice President and Chief Operations Officer
Age: 46
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, Gap Inc., & IKON Office Solutions. Mr. Kipe will be leaving Systemax in June 2019.
Senior Vice President and General Counsel
Age: 61
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.
Senior Vice President and Chief Information Officer
Age: 58
22Manoj 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. Shetty was employed at Mercator (ultimately acquired by IBM) and in the manufacturing sector.
Age: 60
Thomas Axmacher was appointed Vice President and Controller of ContentsSystemax 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.
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| Compensation Discussion and Analysis |
Compensation Discussion and AnalysisIn this section, we discuss the material elements of our compensation programs and policies, including the objectives of our compensation programs and policies, 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.(referred to as “NEOs”), listed below. The following discussion relates to the NEOs and their titles as of the end of our 2016 fiscal year.*
Under SEC rules, the disclosure on executive compensation is being provided for each of the following:
| · | each person who served as chief executive officer or chief financial officer at any time during 2016; and |
| · | the three other most highly compensated persons serving as executive officers at year end, as well as two additional executive officers. |
In addition, we have included executive compensation disclosure for Messrs. Bruce Leeds (Vice Chairman) and Robert Leeds (Vice Chairman) in order to provide full disclosure with respect to our most senior executives.2018.
Our NEOsNEOs* in 2016 (based on the criteria noted above)2018 were as follows:
Name of NEO |
| Position |
| Name | Title |
| Richard Leeds | Executive Chairman* |
| Chairman |
| Bruce Leeds | Vice Chairman |
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| Robert Leeds | Vice Chairman |
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| Lawrence Reinhold | Former President & Chief Executive Officer* |
| Officer* |
| Thomas Clark | Vice President & Chief Financial Officer* |
| Officer |
| Robert Dooley | President, of the Company’s Industrial Products Group |
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Eric LernerDave Kipe | Senior Vice President and General CounselChief Operations Officer |
Central Objectives and Philosophy of Our Executive Compensation Programs
*We define our NEOs for 2018 aseach person who served as chief executive officer or chief financial officer at any time during 2018, and the three other most highly compensated persons serving as executive officers at year end, and two additional executive officers. Mr. Reinhold's employment with Systemax ceased as of January 7, 2019, at which time Mr. Litwin became Chief Executive Officer of Systemax. Mr. Kipe will be leaving Systemax in June 2019. Compensation information for Messrs. Reinhold and Kipe has been included, as each was a NEO as of December 31, 2018. Mr. Litwin's compensation and a description of his employment arrangements can be found on page 44 of this proxy statement.
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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 to both 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 negatively 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 seeks 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. |
* From January 1, 2016 through March 9, 2016, Mr. Richard Leeds served as the Company’s Chief Executive Officer and Chairman. Effective March 10, 2016, Mr. Richard Leeds assumed the role of Executive Chairman and Mr. Reinhold became the Company’s President and Chief Executive Officer. Mr. Reinhold continued to serve as the Company’s Chief Financial Officer on an interim basis through October 31, 2016. At such time, Mr. Clark became the Company’s Chief Financial Officer.
| · | Award Cap. Our 2014, 2015, 2016 and 2017 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, and 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, in the discretion of the Compensation Committee. However, all awards are subject to years long vesting periods.periods and may include performance criteria in the vesting formula. 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. We anticipate making greater use of equity awards as an important component of our compensation programs in the future.
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 2014, 2015, 2016, 2017 and 20172018 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 approved 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 2018 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 (top line sales and margins), implementation of systems, process and technology improvements, cost management, turnaround or divestment of unprofitable business units, 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, compliance with the Sarbanes-Oxley Act, maintaining robust internal controls, OSHA compliance, environmental, employment and safety laws and regulations compliance and enforcement of 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, Messrs. Clark and Lerner have a portion of their cash bonus tied to specific personal objectives, as described below. Prior to 2017, Mr. Dooley had a portion of his cash bonus tied to the achievement of certain financial and non-financial goals by the Industrial Products Group, however, beginning in fiscal year 2017 Mr. Dooley’s entire cash bonus is tied to the achievement of certain financial and non-financial goals by the Industrial Products Group, as further described below.
Pursuant to SEC rules, and except for disclosure of any actually achieved 2016 and future financial targets and the Company’sour actual performance relative to any suchactually achieved 20162018 and future financial targets, the CompanySystemax is not disclosing the specific performance targets and actual performance measures for the financial goals used in its 2014, 2015, 2016 and 2017our 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. TargetsIn 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 our 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 our 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. The Company believes that these performance goals were reasonably challenging to achieve. 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 responsibilities2010 LTIP.
Equity-Based Incentives. Equity based compensation provides an incentive for executives to manage Systemax with a view to achieving results which would increase our stock price over the long-term and, therefore, the return to our stockholders. Historically equity grants included only time based vesting conditions, but in 2019 certain executives and other members of management received equity grants that such executive is charged with as they relate to the foregoing business areas.included both time based and performance based vesting conditions.
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 vesting conditions including both time and / or performance criteria, 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.
Messrs. Richard, Bruce 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 2014, 2015 or 2016. As described below, Messrs. Reinhold, Clark and Lerner received stock options and restricted stock units in 2016. Mr. Lerner received stock options in 2014 and 2015 pursuant to his employment agreement. Mr. Dooley received stock options in 2016.
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 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 the 1999 Long-Term Stock Incentive Plan, as amended, the, the 2006 Stock Incentive Plan for Non-Employee Directors,amended; and the 2010 Long-Term Incentive Plan) arePlan, as 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 Executive Chairman, Vice Chairmen and Chief Executive OfficerCEO and, after evaluation of their performance, in light of such goals, to set their compensation. The Compensation Committee also approves,
approve, upon the recommendation of the Chief Executive OfficerCEO (following consultation with the Executive Chairman and Vice 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. The Compensation Committee is also responsible for
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 2014, 20152016, 2017 or 2016.2018. In March 2019, the Compensation Committee directly retained a compensation consultant to advise on senior corporate management compensation for 2020. Through a separate engagement, management further directly engaged that compensation consultant to advise on compensation strategy for a broader employee population as well as to review and advise upon the structure of our sales commission and compensation plans.
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 2016, 2017 and 2018 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 2019 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 only with respect tolimits including a maximum of 1,500,000 Sharesshares (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 10, 2019 Awards covering 1,105,201 shares are outstanding and 5,656,385 shares remain available for future issuance.
Any employeeThese awards may be:
incentive stock options;
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, cash 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 thatFurther, 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 schedules;
forfeiture provisions;
conditions on the achievement of specified performance goals for the granting or vesting of options, restricted stock, restricted stock units or cash Awards; and performance awards
other material features of Awards.
The Compensation Committee or the Board may be conditioned ondelegate to our officers or managers the achievement of specified performance goals. These goals must be established byauthority 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.
2017 NEO Cash Bonus Planmix of compensation elements, may vary from year to year.
InFor instance, as discussed below, Mr. Reinhold’s non-equity incentive compensation was 100% tied to achievement of the consolidated goals and results of Systemax, while a portion of Mr. Clark’s non-equity incentive compensation is tied to specific personal objectives. Also, prior to 2017 pursuantMr. Dooley had a portion of his non-equity incentive compensation tied 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 2017 NEO Cash Bonus Plan (“2017 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2017. The 2017 Bonus Plan implements for 2017 the 2010 Long-Term Incentive Planconsolidated results of Systemax, and pertains specificallya larger portion tied to the paymentachievement of certain financial and non-financial goals of the Industrial Products Group, but beginning in fiscal 2017 Mr. Dooley’s entire non-equity incentive compensation is tied to NEOs for 2017.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 in 2016, reflecting the Compensation Committee’s belief that their annual performance merited special recognition. In addition, in 2017 Mr. Kipe received a one-time grant of restricted stock units as a sign-on bonus in accordance with the terms of his offer letter; one half vested on the date of the grant and the other half vested on the six month anniversary of the grant date. In 2018, Mr. Kipe also received an annual grant of restricted stock units and a grant of performance based stock options.
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 2017 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 2017. Beginning in 2018 Messrs. Richard, Leeds, Bruce Leeds,and Robert Leeds no longer participated in the NEO Plan and Lawrence Reinhold;are no longer 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 50% portion2016, 2017 and 2018 NEO Plans
Certain features of Messrs. Clark’sthe 2016, 2017 and Lerner’s 2017 total2018 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 is based on the 2017 Bonus Plan,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.
In March 2019 the Compensation Committee adopted the 2019 NEO Plan, a description of which can be found on page 36 of this proxy statement. Certain modifications to component weights and caps were introduced for the 2019 year and will be described in more detail below. The discussion that follows relates to our 2016, 2017 and 2018 NEO Plans.
Systemax Consolidated Financial Goals for 2016, 2017 and 2018.
Adjusted Operating Income Performance. 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. 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 2016, 2017 and 2018.
Strategic Accomplishments. Strategic goals are established surrounding accomplishments within our Industrial Products Group, European Technology Products Group, and the Corporate and Other function. For more information, see 2018 NEO Plan2018--2018 Performance against Objectives / pages 34-35.
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 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. For more information, see 2018 NEO Plan2018--2018 Performance against Objectives / pages 34-35.
Business Unit or Individual Financial and Non-Financial Goal for 2016, 2017 suchand 2018. Business Unit and Individual Goals were set in each period for Mr. Dooley and Mr. Clark, and set for 2018 for Mr. Kipe, and are aligned to the Business Unit Financial Performance of the Industrial Products Group. These objectives are comprised of a variety of measurable strategic, financial and non-financial goals,operational targets and initiatives including sales growth and margin improvement, cost management, process improvement, corporate development, and others as deemed appropriate by the percentage ofCEO in consultation with the executive’s entire cash bonus tiedCompensation Committee. In each case, the selected objectives are considered relevant to such goals and the weightingscope of each component under such goal,executive’s functional areas of operation and are designed to incentivize management to accomplish the businesses’ strategic plan. In 2016 these objectives were administered on an annual basis, but starting in 2017 these goals were administered on both a quarterly and full year basis as follows:described below.
| · | Financial Goals for 2017 (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 or disposition which is completed during the plan year. |
| · | Non-Financial Goals for 2017 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, Targets, Caps and Adjustment Mechanisms. European Technology Products Group, and the Corporate and Other function. These distinct goals relate to various strategic initiatives including optimizing our operations and improving the profitability of our Industrial Products group; further growing our business in France, turning around or exiting unprofitable business units in Europe, completing wind down of previously exited business units, rationalizing internal information management platforms, and cost reduction initiatives within our Corporate and Other function.
|
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise, and the absence of any serious OSHA matters. |
Achievement of each of the target financial goals generates a variable 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 bonus2016, 2017 and 2018 NEO Plans impose a cap on the total 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 for the sales2016, 2017, and 2018.
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 below the 100% level will generate a 5% negative variance in the target bonusnon-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 for 2016, 2017, and 2018.
The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved.
Each $1,000,000$1,500,000 variance in actual achievement (1,000,000 in 2017 and 2016) below the 100% level will generate a 5% negative variance in the target bonusnon-equity incentive compensation amount.
Each $1,000,000$1,500,000 variance in actual achievement (1,000,000 in 2017 and 2016)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.
Business Unit or Individual Goals. Generally, the accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels (as subjectively determined by the CEO and approved by the Compensation Committee) with target non-equity incentive compensation paid out accordingly. Adjusted Operating Income Performance of each business unit above or below plan, would result in either higher potential or lower potential target non-equity incentive levels.
Compensation Committee 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; exercises of such discretion are noted below. Targets and non-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 Systemax at the time the incentive compensation is paid out to receive the payment, though the Compensation Committee has discretion to waive this requirement.
2017 Management Performance Bonus
2018 NEO Plan
In January 2017, in order to enhance accountability and drive timely performance, the compensation committee adopted a revised compensation scheme applicable to senior and executive management. The following discussion relates2018, pursuant to the personal performance objectives2010 LTIP, our Compensation Committee, with input from our CEO, established our 2018 NEO Non-Equity Incentive Plan (“2018 Plan”). The 2018 Plan pertains specifically to the payment of non-equity incentive compensation to NEOs for Mr. Clark, Mr. Lerner,2018, including quarterly measurement and Mr. Dooley, which comprise 50%payment features for a portion of the total target bonusBusiness Unit and Individual Objectives. for each of Mr. Dooley, Mr. Clark and Mr. Lerner, and 100% of the total target bonus for Mr. Dooley.Kipe.
These 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 Chief Executive Officer;CEO in each case, relevant toconsultation with the scope of their functional areas of operation and designed to incentivize management to accomplish the businesses’ strategic plan. BonusCompensation Committee.
Measuring Quarterly Performance.
The achievement of these personal objectives (i.e. -– those not tied to NEO Plan performance) is measured in up to five discrete tranches, one for each quarter, as well as one on an annual basis, with each measurement period typically constituting a 20% portion of the total applicable target bonus for the year. Each quarterly objective is personal while the annual objectives are shared group objectives, common to all participants. Within each measurement period, each individual initiative is weighted as a proportion of the total available target bonus for that period, and is earned based upon an achievement range of 0%, 25%, 50%, 75%, or 100%.follows:
Achievement of each quarterly personal objective and of the shared annual objectives, entitles the employee to receive a portion of the applicable target bonusnon-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 that period, and is earned based upon an achievement range of 0%, 25%, 50%, 75%, or 100%.
A 5% negative variance to target bonusadjusted operating income equates to a 10% reduction in available bonus, while anon-equity incentive compensation, as applied discretely to each measurement period.
A 5% positive variance to target bonusadjusted operating income equates to a 5% increase to available bonus,non-equity incentive compensation, as applied discretely to each measurement period.period and capped at 150% of target available compensation.
100% of Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives related to sales and margin growth, completion of specified cost reduction and certain projects, and improvement in key customer facing logistics metrics.
50% of Mr. Clark’s and Mr. Lerner’s cash bonus is tied to achievement of certain company wide and departmental objectives, completion of certain cost reduction efforts, completion of certain departmental reorganization activities, completion of corporate development projects, implementation of process improvements, and special projects as assigned by the Chief Executive Officer.
Under the 2017 Bonus2018 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 2017 Bonus Plan financial and non-financial goals at 100% base case target levels; andour NEOs in the case of Mr. Clark, assuming achievement of the 2017 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); and in the case of Mr. Dooley, assuming achievement of the financial and non-financial goals of the Industrial Products Group at 100% base case target levels; and in the case of Mr. Lerner achievement of the 2017 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):2018.
| Richard Leeds | | $ | 1,050,000 | |
| Bruce Leeds | | $ | 877,500 | |
| Robert Leeds | | $ | 877,500 | |
| Lawrence Reinhold | | $ | 1,410,000 | |
| Thomas Clark | | $ | 175,000 | |
| Robert Dooley | | $ | 505,000 | |
| Eric Lerner | | $ | 277,500 | |
|
| | | | | | | |
| Name | Target ($) | Cap (%) | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit/ Individual Objectives (%) |
| 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 |
| Dave Kipe | 262,500 | 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 2017 salary levels discussed below reflect the Compensation Committee’s view that such levelsofficers and are appropriate in light of the current business performance and expected accomplishments in 2017.reasonably achievable.
2018 Performance against Objectives.
The 2017 Bonus Plan imposesfollowing table sets out the achievement level (presented as a cappercentage of target) for each plan component as well as 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 / page 39 of this proxy statement.
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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 |
| Lawrence Reinhold | Not Applicable due to Separation Agreement entered into in October 2018 |
| Thomas Clark | 100 | 100 | 107 | 115 | 88 | 88 | 100 | 100 | 91 | 99 | 103 |
| Robert Dooley | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 96 | 104 | 104 |
| Dave Kipe | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 71 | 74 | 74 |
In determining the compensation of our CEO for fiscal 2018 and approving the compensation of our other NEOs, the Compensation Committee considered, among the other factors discussed above, that could be payableSystemax and management had performed well, had overachieved a significant 2018 financial target, completed a major restructuring initiative by selling our former Inmac Wstore IT Distribution business in France, and had continued to outperform the broader Industrial Distribution business, core to Systemax's long term success. 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 2018 were consistent with the philosophy and objectives of our compensation programs. Pursuant to Mr. Reinhold's separation agreement entered into in October 2018, Mr. Reinhold did not receive any executive whose bonus is 100%non-equity incentive compensation in 2018; rather he earned the average of the non-equity incentive compensation that he had received in the prior two fiscal years pursuant to his original employment agreement.
Systemax Consolidated Net Sales target for 2018 was initially set based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 150% of the target base case bonus,Systemax’s continuing operations within our Industrial Products Group and the cap on Mr. Lerner’s and Mr. Clark’s total bonus is capped at 205% of the target base case bonus.our France Value Added Reseller business. The Compensation Committee has theexercised its discretion to adjust financial targetsthe Consolidated Net Sales target upon the completion of the Sale of our France business. The target was amended to include the full year of the Industrial Products Group and the first half of the year for our France business. Consolidated Sales achieved 100% of target. The payout ratio based upon this achievement was 100%.
Systemax Consolidated Adjusted Operating Income target for 2018 was initially 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. The Compensation Committee exercised its discretion to adjust the Consolidated Adjusted Operating Income target upon the completion of the sale of our France business. The target was amended to include the full year of the Industrial Products Group and the Corporate and Other Segment, but to only include the first half of the year for our France business. In addition, the Compensation Committee exercised its discretion to eliminate the net impact of expenses incurred in 2018 associated with the separation agreement entered into with Mr. Reinhold. The payout ratio based upon 7% over achievement to plan was 115%.
Systemax Consolidated Strategic Objectives were assigned a 50% relative weighting related to achievement by the Industrial Products Group Segment of its Financial, Customer, Operations, and Learning and Development Balanced Score Card objectives. The Compensation Committee subjectively determined that 88% of these strategic objectives were accomplished in 2018. In addition, a 37.5% relative weighting was accorded to strategic objectives related to the France Value Added IT Distribution Business regarding specific objectives surrounding market share gains and operating leverage efficiency within our France operations as well as completing the sale of this operation. 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 12.5%. The Compensation Committee subjectively determined that 50% of these objectives were accomplished in 2018. Based upon each relative weight, the payout ratio was 88%. The weightings of each goal are subjectively determined by the Compensation Committee based on such eventsits view of the relative 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 acquisitionsevidenced by the absence of material weaknesses in internal controls and financial reporting, prompt investigation and disposition of any ethical or other one-time chargesgovernance issues that may arise, and the absence of any serious OSHA Matters. The Compensation Committed determined that the Corporate Governance objectives were achieved 100%.
Business Unit and individual objectives for Mr. Dooley, Mr. Clark, and Mr. Kipe related to either discrete quarters or gains, or other unforeseen circumstancesthe full year. Our CEO subjectively determined and the Compensation Committee agreed that can skew normal operating results. TargetsMr. Dooley, Mr. Clark, and bonusesMr. Kipe achieved 95.8%, 90.5%, and 71.0% on a weighted average basis of their objectives, respectively. Mr. Dooley's objectives primarily were associated with the financial performance of the Industrial Products Group including Net Sales, Gross Margin, and Operating Income Performance. In addition, Mr. Dooley was assigned objectives associated with sales force productivity enhancements, product management enhancements, and technological enhancements to the primary e-commerce sites within the Industrial Products Group. 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 France IT Business. Mr. Kipe was assigned objectives related to the improvement of DC Operations, efficiency within our supply chain network, and improvements within inventory management. Based upon business unit and individual performance, the Compensation Committee subjectively confirmed that Mr. Clark and Mr. Dooley earned 104%, 103%, and 74%% of these plan components respectively.
The 2018 threshold, target and maximum non-equity incentive amounts for each of our Named Executive Officers are also subject to adjustment to prevent unreasonable resultsfound in the strict applicationGrants of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.Plan-Based Awards table / page 41 of this proxy statement.
2019 NEO Plan
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.
2016 NEO Cash Bonus Plan
In 2016,2019, 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 20162019 NEO Cash Bonus Plan (“2016 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2016. The 2016 Bonus Plan implements for 2016 the 2010 Long-TermNon-Equity Incentive Plan and(“2019 Plan”). The 2019 Plan pertains specifically to the payment of non-equity incentive compensation to NEOs for 2016.2019. Performance metrics, caps, and measurement criteria were modified in 2019. The modifications are as follow for 2019:
The following discussion applies to 100% of the 2016 total non-equity incentive compensation for each of
Messrs. SysRichard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; the 50% portion of Mr. Lerner’s 2016 total non-equity incentive compensation that is based on the 2016 Bonus Plan; the 25% portion of Mr. Dooley’s 2016 total non-equity incentive compensation that is based on the 2016 Bonus Plan; and the 17% portion of Mr. Clark’s 2016 total non-equity incentive compensation that is based on the 2016 Bonus Plan.temax Consolidated Sales Target Financial Component.
For 2016, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, are as follows:
| · | Financial Goals for 2016 (80% of total cash bonus target) |
| – | Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. Sales are further adjusted for the impact of any acquisition which is completed during the plan year. |
| · | Non-Financial Goals for 2016 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, European Technology Products Group, and the Corporate and Other function. These distinct goals relate to various strategic initiatives including optimizing our operations and improving the profitability of our Industrial Products group; further growing our business in France, integrating our Netherlands operations, and improving our UK operations within our European businesses; and cost reduction initiatives within our Corporate and Other function.
|
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise, and the absence of any serious OSHA matters. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial componentamount is payable starting at achievement of in excess of 80% of the sales target financial goal component amount.
Sales target amount up to 140%is capped at 102% of the sales target financial goal component amount.
Each 1% variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonusnon-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%110% 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 $1,000,000$1,500,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonusnon-equity incentive compensation amount.
Each $1,000,000$1,500,000 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%115% 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 2016 Bonus Plan,Business Unit Goals can be measured between 0 and 100% accomplishment, while individual goal accomplishment can be measured at 0%, 50%, 85%, 100%, or 115% levels (as subjectively determined by the Compensation Committee) with target non-equity incentive compensation paid out accordingly. Adjusted Operating Income Performance of each business unit above or below plan, would result in either higher potential or lower potential target non-equity incentive levels.
Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2016 Bonus Plan financial and non-financial goals at 100% base case target levels; and in the case of Mr. Clark, assuming achievement of the 2016 Bonus Plan goals at 100% base case target levels (17% of the bonus) as well as achievement of performance objectives established for him by the Company (83% of the bonus); and in the case of Mr. Dooley, assuming achievement of the 2016 Bonus Plan goals at 100% base case target levels (25% of the bonus) as well as assuming 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 the 2016 Bonus Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him by the Company (50% of the bonus):
| Richard Leeds | | $ | 1,050,000 | |
| Bruce Leeds | | $ | 877,500 | |
| Robert Leeds | | $ | 877,500 | |
| Lawrence Reinhold | | $ | 1,410,000 | |
| Thomas Clark | | $ | 100,000 | |
| Robert Dooley | | $ | 500,000 | |
| Eric Lerner | | $ | 275,000 | |
The 2016 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 185% of the target base case bonus, the cap on Mr. Lerner’s total bonus is 180% of the target base case bonus, and the cap on Mr. Clark’s total bonus is 190%. 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 repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As described above, 83% of Mr. Clark’s cash bonus is tied to achievement of certain Industrial Products group objectives, 60% of this portion of the bonus (45% of total target bonus) is tied to achievement of financial objectives and 40% of this portion of the bonus (30% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.0 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout for over achievement of the financial objective is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, integration and marketing initiatives and are measured on whether or not the goal is achieved.
As indicated above, 75% of Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives, 60% of this portion of the bonus (45% of total target bonus) is tied to achievement of financial objectives and 40% of this portion of the bonus (30% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.0 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout for over achievement of the financial objective is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, integration and marketing initiatives and are measured on whether or not the goal is achieved.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing efficiency, automation and cost of the contract and litigation management process.
2015 NEO Cash Bonus Plan*
In 2015, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee with input from our Chief Executive Officer, established our 2015 NEO Cash Bonus Plan (“2015 Bonus Plan”) providing for target cash bonuses for the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2015. The 2015 Bonus Plan implements for 2015 the 2010 Long-Term Incentive Plan and pertains specificallyhas discretion to the payment of non-equity incentive compensation to NEOs for 2015.
The following discussion applies to 100% of the 2015 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; the 25% portion of Mr. Dooley’s 2015 total non-equity incentive compensation that is based on the 2015 Bonus Plan; and the 50% portion of Mr. Lerner’s 2015 total non-equity incentive compensation that is based on the 2015 Bonus Plan.
*Mr. Clark was not a Named Executive Officer prior to October 2016, and therefore there is no disclosure inwaive this Section for fiscal years 2014 or 2015.requirement.
For 2015, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, are as follows:
| · | Financial Goals for 2015 (80% of total cash bonus target) |
| – | Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most important individual component and aligns the interests of our executives with those of our stockholders, in addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for unusual or nonrecurring items as determined by our Compensation Committee. |
| – | Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales revenue net of returns on a constant currency basis. Sales are further adjusted for the impact of any acquisition which is completed during the plan year. |
| · | Non-Financial Goals for 2015 (20% of total cash bonus target) |
| – | Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within our Industrial Products Group, and our North American and European Technology Products Groups. These distinct goals relate to various strategic initiatives including enhancing our worldwide information technology systems by continued migration to a new platform specially designed for our needs; improving performance and grow in our UK Operations as well as stabilizing the performance of and improving service levels in our Shared Service Center in Europe; integration of the PEG Group acquisition and continued organic growth within our Industrial Products Group, and successful completion of the previously announced B2B restructuring activities for our North American Technology Products Group (“NA Tech”). The Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency. |
| – | Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise, and the absence of any serious OSHA matters. |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component. The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved. Each $1,000,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $1,000,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year. Accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels with target bonus paid out accordingly.
Under the 2015 Bonus2019 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 plan component for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2015 Bonus Plan financial and non-financial goals at 100% base case target levels; andour NEOs 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); and2019 who are participating 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):our incentive compensation plans.
| 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 2015 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 200% of the target base case bonus, and the cap on Mr. Lerner is 180% of the target base case bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As indicatednoted above, 75% ofMessrs Richard, Robert and Bruce Leeds no longer participate in incentive compensation. In addition, as Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives, 80% of this portion ofReinhold left Systemax as the bonus (60% of total target bonus) is tied to achievement of financial objectives and 20% of this portion of the bonus (15% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.0 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout for over achievement of the financial objective is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, integration and marketing initiatives and are measured on whether or not the goal is achieved.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing efficiency, automation and cost of the contract and litigation management process. The cost management and the strategic objectives were met or exceeded in 2015, resulting in a 100% payout of this bonus component.
2014 NEO Cash Bonus Plan*
In 2014, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer established our 2014in January 2019, he will not participate in the 2019 NEO Cash Bonus Plan (“2014 Bonus Plan”) providing for target cash bonuses forPlan. Finally, since Mr. Kipe will be leaving Systemax in June 2019, he will not participate in the NEOs based on the achievement of certain financial and non-financial performance-based criteria in 2014. The 2014 Bonus Plan implements for 2014 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs for 2014.2019 NEO Plan.
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Name | Target ($) | Cap (%) | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit / Individual Objectives (%) |
| Barry Litwin | 1,113,750 | 111 | 20 | 60 | 16 | 4 | 0 |
Robert Dooley | 600,000 | 172 | 0 | 0 | 0 | 0 | 100 |
Thomas Clark | 225,000 | 172 | 0 | 0 | 0 | 0 | 100 |
The following discussion applies to 100% of the 2014 total non-equity incentive compensation for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold; the 25% portion of Mr. Dooley’s 2014 total non-equity incentive compensation that is based on the 2014 Bonus Plan; and the 50% portion of Mr. Lerner’s 2014 total non-equity incentive compensation that is based on the 2014 Bonus Plan.
For 2014, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals and the weighting of each component under such goal, are as follows:
37
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· | 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 European Technology Products Groups. These distinct goals relate to various strategic initiatives including enhancing our worldwide information technology systems by continued migration to a new platform specially designed for our needs; 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. |
*Mr. Clark was not a Named Executive Officer prior to October 2016, and therefore there is no disclosure in this Section for fiscal year 2014 or 2015.
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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.Report |
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for over achievement of the sales target financial goal component. The adjusted operating income financial goal component is payable at a level of 100% if the target is achieved. Each $500,000 variance in actual achievement below the 100% level will generate a 5% negative variance in the target bonus amount. Each $500,000 variance in actual achievement above the 100% level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished during the fiscal year.
Under the 2014 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr. Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2014 Bonus Plan financial and non-financial goals at 100% base case target levels; and in the case of Mr. Dooley achievement of such 2014 Bonus Plan goals at 100% base case target levels (25% of the bonus) as well as achievement of the financial and non-financial goals of the Industrial Products Group at 100% base case target levels (75% of the bonus); and in the case of Mr. Lerner achievement of such 2014 Bonus Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him by the Company (50% of the bonus):
| Richard Leeds | | $ | 1,340,000 | |
| Bruce Leeds | | $ | 832,500 | |
| Robert Leeds | | $ | 832,500 | |
| Lawrence Reinhold | | $ | 967,500 | |
| Robert Dooley | | $ | 450,000 | |
| Eric Lerner | | $ | 255,000 | |
The 2014 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100% earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Dooley’s total bonus is 200% of the target base case bonus, and the cap on Mr. Lerner is 180% of the target base case bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As indicated above, 75% of Mr. Dooley’s cash bonus is tied to achievement of certain Industrial Products Group objectives, 80% of this portion of the bonus (60% of total target bonus) is tied to achievement of financial objections and 20% of this portion of the bonus (15% of total target bonus) is tied to achievement of strategic objectives for the Industrial Products Group. The financial objective is based on an operating income target and each $1.5 million variance above or below the target generates a 10% positive or negative variance of the bonus payable. The bonus payout is capped at 200% of the target amount. The strategic objectives are tied to achievement of various sales, customer service, and marketing initiatives and are measured on whether or not the goal is achieved. In 2014, the Industrial Products Group’s adjusted operating income performance resulted in an earned bonus of 80% of the bonus tied to this Industrial Products Group financial objective. The strategic objectives were met or partially met, and Mr. Dooley achieved 70% of the bonus for this component.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of total target bonus) is tied to achievement of individual strategic objectives including enhancing the contract management process, enhancing the litigation management and budget process and strengthening the Company’s overall risk management function. The cost management and the strategic objectives were met or exceeded in 2014, resulting in a 219% payout of this bonus component.
Compensation of NEOs in 2016
In determining the compensation of the Company’s Chief Executive Officer for fiscal year 2016 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 2016 Bonus Plan.
The Compensation Committee determinedhas 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 CompanyCompensation Discussion and management had performed adequately, particularly given trendsAnalysis be included in the general economic environmentproxy statement and inincorporated by reference into our Annual Report on Form 10-K for the technology products industry in whichyear ended December 31, 2018.
Submitted by the Company’s former European Technology Group (sold in March 2017) competed throughoutCompensation Committee of the Board,
Chad M. Lindbloom (Chairman)
Robert D. Rosenthal
Paul S. Pearlman
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| Compensation Committee Interlocks and Insider Participation |
At the end of fiscal year 2016. It2018, the members of Systemax’s Compensation Committee were Messrs. Litwin, Lindbloom, and Rosenthal.
Mr. Litwin resigned from the Compensation Committee effective when he became CEO of Systemax on January 7, 2019 and Mr. Pearlman was the viewappointed a member 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,effective as of such date.
Except as noted above with Mr. Litwin, Systemax does not employ any current (or former) member of the Compensation Committee believes that compensation levels for fiscal year 2016 were consistent with the philosophy and objectivesno current (or former) member of the Company’s compensation programs. The Compensation Committee determined thathas ever served as an officer of Systemax.
In addition, none of our current (or former) directors serving on the Company met its 2016 corporate governance non-financial goals, but only achieved 50% of its Industrial Products Group strategic objectives, 75% of the European Technology Products Group strategic non-financial objectives and 75% of the strategic objectives within its Corporate Segment. The Compensation Committee also exercised its discretion to reset the sales growth target and adjusted operating income growth target to eliminate, as applicable,has any revenue and earnings contributable to its NA Tech business exited in 2015, or contributable to its former German business exited in 2016. The Company’s revised sales target was 95.6%% achieved, which resulted in participants’ earning 75% of available target bonus related to this financial metric. Furthermore, the Company’s revised operating income target only partially achieved, which resulted in participants’ earning 30% of the available target for this bonus component. Accordingly, pursuant to the 2016 Bonus Plan formulas, 2016 non-equity incentive plan/bonus compensation for each Named Executive Officer was paid at 41% of the target level.relationship that requires disclosure under SEC regulations.
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| Summary Compensation Table |
The 2016 threshold, target and maximum bonus amounts for each of ourfollowing table sets forth the compensation earned by the Named Executive Officers are found in the Grants of Plan-Based Awards table on page 39.for fiscal years 2016, 2017 and 2018:
Employment Arrangements of the Named Executive Officers
Richard Leeds
Richard Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 61% and bonus accounted for 36% of Mr. Leeds total cash compensation for 2016. Mr. Leeds’ bonus for 2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Leeds salary for 2017 is set at $726,000.
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Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($)(1) |
Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) |
All Other Compensation ($)(4) |
Total ($) |
Richard Leeds
Executive Chairman | 2018 | 960,900 | | | | | 30,000 | 990,900 |
| 2017 | 725,600 | | | | 600,000 | 30,000 | 1,355,600 |
| 2016 | 734,400 | | | | 435,000 | 30,000 | 1,199,400 |
Bruce Leeds
Vice Chairman
Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 61% and bonus accounted for 37% of Mr. Leeds total cash compensation for 2016. Mr. Leeds’ bonus for
| 2018 | 954,700 | | | | | 30,000 | 984,700 |
| 2017 | 600,600 | | | | 500,000 | 30,000 | 1,130,600 |
2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Leeds salary for 2017 is set at $601,000.
| 600,000 | | | | 362,000 | 30,000 | 992,000 |
Robert Leeds
Vice Chairman
Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 61% and bonus accounted for 36% of Mr. Leeds total cash compensation for 2016. Mr. Leeds’ bonus for
| 2018 | 956,200 | | | | | 30,000 | 986,200 |
| 2017 | 603,000 | | | | 500,000 | 30,000 | 1,133,000 |
2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Leeds salary for 2017 is set at $610,000.
Lawrence Reinhold
The Company entered into an employment agreement with Mr. Reinhold on January 17, 2007. The agreement provides for a minimum base salary of $400,000 (which may be increased at the discretion of the Company) and a bonus (which the agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Reinhold meets certain performance objectives (including the Company’s financial performance objectives) established for him by the Company. He is entitled to receive a car allowance or a Company-leased car.
Base salary accounted for 53% and bonus accounted for 43% of Mr. Reinhold’s total cash compensation for 2016. Mr. Reinhold’s bonus for 2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Reinhold’s salary for 2017 is set at $715,000. Compensation that may become payable following the termination of his employment or a change in control of the Company, and other terms of the employment agreement related to such events, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
In February 2016, Mr. Reinhold received a grant of 50,000 restricted stock units under the 2010 Long-Term Incentive Plan, which 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. In addition, in February 2016, Mr. Reinhold 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 December 2016, Mr. Reinhold was granted an option to purchase 100,000 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).
Thomas Clark
Mr. Clark has no employment agreement and is an “at will” employee. Base salary accounted for 73% and bonus accounted for 24% of Mr. Clark’s total cash compensation for 2016. Mr. Clark’s bonus for 2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Clark’s salary for 2017 is set at $362,000. Compensation that may become payable following the termination of his employment or a change in control of the Company, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
In February 2016, Mr. Clark received a grant of 25,000 restricted stock units under the 2010 Long-Term Incentive Plan, which 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. In addition, in February 2016, Mr. Clark was granted an option to purchase 10,000 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 November 2016, Mr. Clark 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).
Robert Dooley
Mr. Dooley has no employment agreement and is an “at will” employee. Base salary accounted for 75% and bonus accounted for 22% of Mr. Dooley’s total cash compensation for 2016. Mr. Dooley’s bonus for 2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Dooley’s salary for 2017 is set at $520,000. Compensation that may become payable following the termination of his employment or a change in control of the Company, are discussed below under “—Potential Payments Upon Termination or Change in Control.”
In February 2016, 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 addition, in December 2016 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).
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 79% and bonus accounted for 17% of Mr. Lerner total cash compensation for 2016. Mr. Lerner’s bonus for 2016 was determined as described above under the heading 2016 NEO Cash Bonus Plan. Mr. Lerner’s salary for 2017 is set at $576,000. 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.”
In February 2016, Mr. Lerner received a grant of 25,000 restricted stock units under the 2010 Long-Term Incentive Plan, which 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. In addition, in February 2016, 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).
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 dates 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 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 D. Rosenthal (Chairman)
Stacy Dick
Marie Adler-Kravecas
| 604,000 | | | | 362,000 | 30,000 | 996,000 | | * | The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as amended, which we refer to as the Securities Act, or under the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing. |
Compensation Committee Interlocks and Insider Participation
The members of the Company’s Compensation Committee for fiscal year 2016 were Mr. Rosenthal, Mr. Dick and Ms. Adler-Kravecas. The Company does not employ any member of the Compensation Committee and no member of the Compensation Committee has ever served as an officer of the Company. In addition, none of our directors serving on the Compensation Committee has any relationship that requires disclosure under SEC regulations.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Named Executive Officers for fiscal years 2014, 2015 and 2016:
Name and Principal Position | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(2) | | | Non-Equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($) | | | Total ($) | | Richard Leeds Executive Chairman | 2016 | | | 734,450 | | | | | | | | | | | | | 435,000 | | | | 30,000(4 | ) | | | 1,199,450 | | | 2015 | | | 731,000 | | | | | | | | | | | | | 560,000 | | | | 29,200 | | | | 1,320,200 | | | 2014 | | | 701,000 | | | | | | | | | | | | | 150,000 | | | | 25,200 | | | | 876,200 | | Bruce Leeds Vice Chairman | 2016 | | | 600,000 | | | | | | | | | | | | | 362,000 | | | | 30,000 | (4) | | | 992,000 | | | 2015 | | | 599,000 | | | | | | | | | | | | | 351,000 | | | | 29,200 | | | | 979,200 | | | 2014 | | | 568,000 | | | | | | | | | | | | | 100,000 | | | | 25,200 | | | | 693,200 | | Robert Leeds Vice Chairman | 2016 | | | 604,000 | | | | | | | | | | | | | 362,000 | | | | 30,000 | (4) | | | 996,000 | | | 2015 | | | 607,000 | | | | | | | | | | | | | 351,000 | | | | 29,200 | | | | 987,200 | | | 2014 | | | 577,000 | | | | | | | | | | | | | 100,000 | | | | 25,200 | | | | 702,200 | | Lawrence Reinhold President & Chief Executive Officer | 2016 | | | 717,000 | | | | | | | 415,500 | | | | 666,500 | | | | 582,000 | | | | 51,683(5 | ) | | | 2,432,969 | | | 2015 | | | 694,000 | | | | | | | | | | | | | | | 816,000 | | | | 33,100 | | | | 1,543,100 | | | 2014 | | | 660,000 | | | | | | | | | | | | | | | 580,500 | | | | 29,100 | | | | 1,269,600 | | Thomas Clark(6) Vice President & Chief Financial Officer | 2016 | | | 231,548 | | | | | | | 207,750 | | | | 218,200 | | | | 75,000 | | | | 16,548 | (7) | | | 749,046 | | | 2015 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | 2014 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Robert Dooley President of the Company’s Industrial Products Group | 2016 | | | 514,000 | | | | | | | | | | | | 463,000 | | | | 150,000 | | | | 24,975(8 | ) | | | 1,152,128 | | | 2015 | | | 484,000 | | | | 82,000 | | | | | | | | | | | | 318,000 | | | | 21,900 | | | | 905,900 | | | 2014 | | | 450,000 | | | | | | | | | | | | | | | | 331,000 | | | | 21,900 | | | | 802,900 | | Eric Lerner Senior Vice President and General Counsel | 2016 | | | 572,000 | | | | | | | | 207,750 | | | | 129,750 | | | | 125,000 | | | | 24,475(9 | ) | | | 1,059,199 | | | 2015 | | | 552,000 | | | | 169,000 | | | | | | | | 111,000 | | | | 106,000 | | | | 21,900 | | | | 959,900 | | | 2014 | | | 532,000 | | | | 170,000 | | | | | | | | 196,750 | | | | 185,000 | | | | 21,900 | | | | 1,105,650 | |
(1) | This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2016. |
(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 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2016. |
(3) | 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; the 2015 figures in this column represent the amount earned in fiscal year 2015 (although paid in fiscal year 2016) pursuant to the 2015 Bonus Plan; and the 2016 figures in this column represent the amount earned in fiscal year 2016 (although paid in fiscal year 2017) pursuant to the 2016 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. |
(4) | Auto-related expenses. |
(5) | Includes auto-related expenses ($30,000), Company 401(k) contributions ($3,900), and dividend equivalent payments on unvested restricted stock ($17,783). |
(6) | Mr. Clark was not a Named Executive Officer prior to October 2016, and therefore no amounts are reported for fiscal years 2014 or 2015 in the Summary Compensation Table. |
(7) | Includes auto-related expenses ($11,100), Company 401(k) contributions ($2,948), and dividend equivalent payments on unvested restricted stock ($2,500).
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(8) | Includes auto-related expenses ($18,000), Company 401(k) contributions ($3,975), and dividend equivalent payments on unvested restricted stock ($3,000). |
(9) | Includes auto-related expenses ($18,000), Company 401(k) contributions ($3,975), and dividend equivalent payments on unvested restricted stock ($2,500). |
GRANTS OF PLAN-BASED AWARDS
The following table sets forth the estimated possible payouts under the cash incentive awards granted to our Named Executive Officers in respect of 2016 performance under the 2016 NEO Plan.
| Name | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#)(2) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($/Sh) | | | | | | Threshold ($) | | | 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 | | | | | | | | | | | | | | | | | | | 2/1/16 | | | | | | | | | | | | | | | 50,000(3 | ) | | | 50,000 | | | | 8.31 | | | | 5.19 | | | | 12/14/16 | | | | | | | | | | | | | | | - | | | | 100,000 | | | | 8.95 | | | | 4.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas Clark | | | | 12,320 | | | | 100,000 | | | | 177,000 | | | | | | | | | | | | | | | | | | | 2/1/16 | | | | | | | | | | | | | | | 25,000(4 | ) | | | 10,000 | | | | 8.31 | | | | 3.17 | | | 11/10/16 | | | | | | | | | | | | | | | - | | | | 50,000 | | | | 8.32 | | | | 3.73 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert Dooley | | | | 60,000 | | | | 500,000 | | | | 925,000 | | | | - | | | | | | | | | | | | | | | 2/1/16 | | | | | | | | | | | | | | | - | | | | 50,000 | | | | 8.31 | | | | 5.19 | | | 12/14/16 | | | | | | | | | | | | | | | | | | | 50,000 | | | | 8.95 | | | | 4.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eric Lerner | | | | 93,500 | | | | 550,000 | | | | 990,000 | | | | | | | | | | | | | | | | | | | 2/1/16 | | | | | | | | | | | | | | | 25,000(4 | ) | | | 25,000 | | | | 8.31 | | | | 5.19 | |
(1) | Amounts presented assume payment of threshold, target and maximum awards at the applicable level. |
(2) | The options awarded to Messrs. Reinhold, Clark, Dooley and Lerner in 2016 vest in equal portions on the first, second, third and fourth anniversaries of the grant date, subject to certain restrictions. |
(3) | The restricted stock vests 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. |
(4) | The restricted stock vests 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. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2016
The following table sets forth information regarding stock option and restricted stock awards previously granted which were outstanding at the end of fiscal year 2016.
The market value of the unvested stock award is based on the closing price of one share of our common stock as of December 30, 2016, the last trading day of the 2016 fiscal year, which was $8.77.
| | | Option Awards | | Stock Awards | | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | 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 | | | 50,000 | | | | - | | | | 11.51 | | 3/13/18 | | | - | | | | - | | | | | | 100,000 | | | | - | | | | 13.19 | | 5/18/19 | | | 70,000(2 | ) | | $ | 613,900 | | | | | | 50,000 | | | | - | | | | 14.30 | | 11/14/21 | | | 50,000(3 | ) | | $ | 438,500 | | | | | | - | | | | 50,000(1 | ) | | | 8.31 | | 2/1/26 | | | 50,000(4 | ) | | $ | 438,500 | | | | | | - | | | | 100,000(1 | ) | | | 8.95 | | 12/14/26 | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas Clark | | | 5,000 | | | | - | | | | 16.63 | | 8/9/20 | | | - | | | | - | | | | | | 5,000 | | | | - | | | | 18.73 | | 3/1/22 | | | - | | | | - | | | | | | - | | | | 10,000(1 | ) | | | 8.31 | | 2/1/26 | | | 25,000(5 | ) | | $ | 219,250 | | | | | | | | | | 50,000(1 | ) | | | 8.32 | | 11/10/26 | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | Robert Dooley | | | 10,000 | | | | - | | | | 19.39 | | 6/7/17 | | | - | | | | - | | | | | | 50,000 | | | | - | | | | 18.73 | | 3/1/22 | | | 30,000(6 | ) | | $ | 263,100 | | | | | | - | | | | 50,000(1 | ) | | | 8.31 | | 2/1/26 | | | - | | | | - | | | | | | - | | | | 50,000(1 | ) | | | 8.95 | | 12/14/26 | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | Eric Lerner | | | 25,000 | | | | - | | | | 14.55 | | 5/3/22 | | | - | | | | - | | | | | | 18,750 | | | | 6,250(1 | ) | | | 9.53 | | 5/3/23 | | | - | | | | - | | | | | | 12,500 | | | | 12,500 | (1) | | | 16.61 | | 5/2/24 | | | - | | | | - | | | | | | 6,250 | | | | 18,750 | (1) | | | 10.62 | | 5/2/25 | | | - | | | | - | | | | | | - | | | | 25,000 | (1) | | | 8.31 | | 2/1/26 | | | 25,000(5 | ) | | $ | 219,250 | |
(1) | Options vest 25% per year over four years from date of grant. |
(2) | Restricted stock units vest in ten equal annual installments of 17,500 beginning May 15, 2011. |
(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.
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(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.
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(6) | Restricted stock units vest in ten equal annual installments of 5,000 beginning March 1, 2013. |
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding exercise of options to purchase Shares of the Company’s common stock and vesting of restricted stock units by the Named Executive Officers that exercised options or whose restricted stock units vested during fiscal year 2016:
| | | 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) | | | | 156,100 | | | | | | | | | | | | | | 10,000(3) | | | | 88,600 | | | | | | | | | | | | | | | | | | | | | Robert Dooley | | | - | | | | - | | | | 5,000(4) | | | | 43,200 | |
(1) | The amount in this column reflects the aggregate dollar amount realized upon the vesting of the restricted stock unit, determined by the market value of the underlying Shares of common stock on the vesting date. |
(2) | Pursuant to a grant of restricted stock units on August 25, 2010, the restricted stock units vest in ten equal annual installments of 17,500 units each, beginning on May 15, 2011. |
(3) | Pursuant to a grant of restricted stock units on November 14, 2011, the restricted stock units vest in ten equal annual installments of 10,000 units each, beginning on November 14, 2012. |
(4) | Pursuant to a grant of restricted stock units on March 1, 2012, the restricted stock units vest in ten equal annual installments of 5,000 units each, beginning on March 1, 2013. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Lawrence Reinhold Former President & Chief Executive Officer | 2018 | 712,000 | | | | | 358,700 | 1,070,700 |
| 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 |
Thomas Clark Vice President & Chief Financial Officer | 2018 | 386,000 | | | | 193,300 | 55,500 | 634,800 |
| 2017 | 361,700 | | | | 285,000 | 24,800 | 671,500 |
| 2016 | 231,600 | | 207,800 | 218,200 | 75,000 | 16,600 | 749,200 |
Robert Dooley President, Industrial Products Group | 2018 | 615,000 | | | | 623,600 | 88,400 | 1,327,000 |
| 2017 | 519,400 | 404,400 | | | 595,600 | 32,800 | 1,552,200 |
| 2016 | 514,000 | | | 463,000 | 150,000 | 25,000 | 1,152,000 |
Dave Kipe (5) Senior Vice President & Chief Operations Officer | 2018 | 540,000 | | 162,000 | 162,000 | 194,500 | 25,600 | 1,105,762 |
| 2017 |
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| 2016 | | | | | | | |
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| (1) | This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2018. |
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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 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2018. |
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| (3) | The 2016 figures in this column represent the amount earned in fiscal 2016 (although paid in fiscal 2017) pursuant to the 2016 NEO Plan; the 2017 figures in this column represent the amount earned in fiscal 2017 (although paid in fiscal 2018) pursuant to the 2017 NEO Plan; and the 2018 figures in this column represent the amount earned in fiscal 2018 (although paid in fiscal 2019) pursuant to the 2018 NEO Plan. For more information, see Grants of Plan-Based Awards / page 41 of this proxy statement. Because these payments were based on predetermined performance metrics, these amounts are reported in the Non-Equity Incentive Plan column. |
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| (4) | The elements of compensation included in the “All Other Compensation” column for fiscal 2018 are set forth in the table below. |
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| (5) | Mr. Reinhold’s employmentKipe was not a Named Executive Officer prior to fiscal year 2018, and therefore no amounts are reported for fiscal years 2016 and 2017 in the Summary Compensation Table. |
The amounts shown for “All Other Compensation” for fiscal 2018 include: (a) auto-related expenses, (b) Systemax 401(k) contributions, and (c) dividend equivalent payments on unvested restricted stock:
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Name |
Auto Related Expenses ($) |
Systemax 401(k) contributions ($) | Dividend Equivalent Payments on Unvested Restricted Stock ($) |
Total ($) |
| Richard Leeds | 30,000 | - | - | 30,000 |
| Bruce Leeds | 30,000 | - | - | 30,000 |
| Robert Leeds | 30,000 | - | - | 30,000 |
| Lawrence Reinhold | 30,000 | 4,100 | 324,600 | 358,700 |
| Thomas Clark | 14,400 | 4,100 | 37,000 | 55,500 |
| Robert Dooley | 18,000 | 4,100 | 66,300 | 88,400 |
| Dave Kipe | 18,000 | 4,100 | 3,500 | 25,600 |
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| 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 2018 performance under the 2018 NEO Plan.
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| 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 ($) | Maximum ($) | | | | |
| Lawrence Reinhold | - | 126,900 | 1,410,000 | 3,666,000 | - | - | - | - |
| Thomas Clark | - | 9,610 | 187,500 | 384,375 | - | - | - | - |
| Robert Dooley | - | 7,500 | 600,000 | 900,000 | - | - | - | - |
| Dave Kipe | | 3,280 | 262,500 | 393,750 | - | - | - | - |
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| (1) | Amounts presented assume payment of threshold, target and maximum awards at the applicable level. |
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| Outstanding Equity Awards at Fiscal Year-End for Fiscal 2018 |
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 2018.
The market value of the unvested stock award is based on the closing price of one share of our common stock as of December 31, 2018, the last trading day of the fiscal 2018, which was $23.75.
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| | | | | | |
| | Option Awards | Stock Awards |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Option Exercise Price ($) | 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 | - | 13.19 | 5/18/19 | 35,000 (1) | 831,250 |
| 50,000 | - | 14.30 | 11/14/21 | 30,000 (1) | 712,500 |
| 25,000 | 25,000 (2) | 8.31 | 2/1/26 | 16,666 (1) | 395,817 |
| 50,000 | 50,000 (3) | 8.95 | 12/14/26 | | |
| Thomas Clark | 5,000 | 5,000 (3) | 8.31 | 2/1/26 | 8,333 (4) | 197,909 |
| 25,000 | 25,000 (3) | 8.32 | 11/10/26 | | |
| Robert Dooley | 20,348 | 20,348 (3) | 18.73 | 3/1/22 | 20,000 (5) | 475,000 |
| 0 | 25,000 (3) | 8.31 | 2/1/26 |
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| 12,500 | 12,500 (3) | 8.95 | 12/14/26 |
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| Dave Kipe | 0 | 17,550 (6) | 31.66 | 10/2/28 | 5,117 (7) | 121,529 |
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| (1) | As noted herein, on January 7, 2019 pursuant to Mr. Reinhold's separation agreement , all of Mr. Reinhold's unvested restricted stock units accelerated and vested. |
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| (2) | Pursuant to Mr. Reinhold's January 7, 2019 consulting agreement , 25,000 unvested options were surrendered and terminated. |
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| (3) | Options vest 25% per year over four years from date of grant. The grant date for each option is terminableten years prior to the option expiration date. |
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| (4) | 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. |
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| (5) | Restricted stock units vest in ten equal annual installments of 5,000 beginning March 1, 2013. |
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| (6) | Upon Mr. Kipe's separation, all unvested options shall terminate. |
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| (7) | Upon Mr. Kipe's separation, all unvested restricted stock units shall be canceled. |
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| Option Exercises and Stock Vested For Fiscal 2018 |
The table below shows stock options that were exercised, and restricted stock units that vested, during fiscal 2018 for each of our Named Executive Officers:
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| 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 | 50,000 50,000 | 1,000,500 1,288,500 | 17,500 (2) 10,000 (2) 16,667 (2) | 533.050 279,600 508,010 |
| Thomas Clark | 10,000 15,000 | 212,800 340,512 | 8,333 (3) | 253,990 |
| Robert Dooley | 37,500 25,000 4,652 | 1,141,375 306,750 53,973 | 5,000 (4) | 142,150 |
| Dave Kipe | - | - | - | - |
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| (1) | The amount in this column reflects the aggregate dollar amount realized upon death or total disability,the vesting of the restricted stock unit, determined by the market value of the underlying shares of common stock on the vesting date. |
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| (2) | As noted herein, on January 7, 2019 pursuant to Mr. Reinhold's separation agreement , all of Mr. Reinhold's unvested restricted stock units accelerated and vested. |
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| (3) | 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. |
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| (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. |
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| Employment Arrangements of the Named Executive Officers |
The 2019 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 2019, 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 97% of Mr. Leeds total cash compensation for 2018. Mr. Leeds’ base salary for 2019 is set at $950,000.
Bruce Leeds – Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 97% of Mr. Leeds total cash compensation for 2018. Mr. Leeds’ base salary for 2019 is set at $950,000.
Robert Leeds – Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 97% of Mr. Leeds total cash compensation for 2018. Mr. Leeds’ base salary for 2019 is set at $950,000.
Barry Litwin – Systemax entered into an employment agreement with Mr. Litwin to employ him as Chief Executive Officer, commencing January 7, 2019 The agreement provides for a minimum annual base salary of $825,000 and an annual cash bonus (the “Bonus”) in an amount to be determined by Systemax under its NEO Plan, which Bonus generally will range from 0%-150% of Mr. Litwin’s annual base salary, with an on-target performance payout of 135% of annual base salary, assuming Mr. Litwin meets the performance objectives (including the financial and other performance objectives) established for him by Systemax. In addition, Mr. Litwin is entitled to a car allowance. Mr Litwin also received a one-time cash sign-on bonus of $614,000; the sign on bonus is subject to repayment (all if terminated in year one, and half if terminated before the end of year two, of the his employment period) if Mr. Litwin’s employment terminates due to his voluntary resignation without “good reason” (as defined) or is terminated by the Company for “cause” (as defined) during the first two years of his employment period. Mr. Litwin's salary for 2019 is set at $825,000.
Robert Dooley – Mr. Dooley has no employment agreement and is an “at will” employee. Base salary accounted for 66% of Mr. Dooley’s total cash compensation for 2018. Mr. Dooley’s non-equity incentive compensation for 2018 was determined as described above under the heading 2018 NEO Plan. Mr. Dooley’s base salary for 2019 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 45 of this proxy statement.
Thomas Clark – Mr. Clark has no employment agreement and is an “at will” employee. Base salary accounted for 61% of Mr. Clark’s total cash compensation for 2018. Mr. Clark’s non-equity incentive compensation for 2018 was determined as described above under the heading 2018 NEO Plan. Mr. Clark’s base salary for 2019 is set at $450,000. 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 45 of this proxy statement.
Lawrence Reinhold – Under Mr. Reinhold's previously disclosed separation agreement on January 7, 2019, he became entitled to receive separation payments as follows: (i) one year’s base salary and the average of Mr. Reinhold’s bonus for fiscal years 2016 and 2017; and (ii) his auto allowance and reimbursement of up to 12 months COBRA medical benefits payments. In addition, pursuant to the separation agreement, all of his unvested restricted stock units accelerated and vested. On the separation date, Mr. Reinhold entered into a two year consulting agreement with Systemax, pursuant to which certain option awards previously granted to Mr. Reinhold were terminated, continue to vest or remain exercisable in accordance with their terms during the ongoing consultancy period. Base salary accounted for 46% of Mr. Reinhold’s total cash compensation for 2018.
Dave Kipe – As noted herein, Mr, Kipe will be leaving Systemax in June 2019 and entered into a separation agreement pursuant to which he will receive the separation payments discussed below under Potential Payments Upon Termination or Change in Control / page 45 of this proxy statement, as well as a $75,000 retention bonus for working through his separation date and a target of $140,000 transition bonus for completing certain projects prior to his separation date. Mr. Kipe's base salary accounted for 49% of Mr. Kipe’s total cash compensation for 2018.
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Potential Payments Upon Termination of Employment 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. As noted herein, Mr, Reinhold entered into a separation agreement pursuant to which he will receive the compensation described under Employment Arrangements of the Named Executive Officers / page 44 of this proxy statement.
The following description is a historical description of what Mr. Reinhold would have been entitled to receive under his employment agreement as of December 31, 2018. Under Mr. Reinhold's employment agreement, his employment was 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 would 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 resigned for “good reason” or if Systemax terminated him without “cause”, he would have been entitled to 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 was terminated without “cause” or if he resigned for “good reason” within 60 days prior to or one year following a “Change in Control” the severance payments would have been increased to equal 24 months’ base salary and the Severance Period would have been extended to 24 months following termination. Notwithstanding the foregoing, any payment scheduled to be made to Mr. Reinhold after his termination of employment would not have been 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. Under Mr. Reinhold's employment agreement, a “Change in Control” was defined as : (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.
Robert Dooley, Thomas Clark, Lawrence Reinhold and Dave Kipe. Pursuant to the restricted stock unit agreements with Mr. Reinhold (dated February 1, 2016, November 11, 2011 and August 25, 2010), Mr. Clark (dated February 1, 2016), and Mr. Dooley (dated March 1, 2012): (i) if the named executive is terminated for cause, any unvested portion of his restricted stock units will terminate and be forfeited; (ii) in the event of a change in control, the named executive will become immediately vested in all of the restricted stock units held by him as of the date of the change in control; (iii) If the named 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; and (iv) if the applicable named 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. The foregoing description was previously applicable to a portion of the restricted stock units held by Mr. Reinhold, all of which became vested upon the cessation of Mr. Reinhold's employment with the Company.
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.
Dave Kipe. As noted herein, Mr, Kipe will be leaving Systemax in June 2019 and entered into a separation agreement pursuant to which he will receive the compensation described below and under Employment Arrangements of the Named Executive Officers / page 44 of this proxy statement. As of December 31, 2018, pursuant to Mr. Kipe's offer letter, if his employment was terminated by Systemax without "cause" he would have been entitled to receive (i) severance payments equal to six months' base salary payable in accordance with Systemax’s normal payroll practices over a period of six months (the "DK Severance Period"); (ii) auto allowance during the DK Severance Period; and (iii)reimbursement during the DK Severance Period for COBRA insurance coverage.
The tables below describes potential payments and benefits upon termination of employment or change in control as of December 31, 2018, the last day of fiscal 2018, and using the closing price of our common stock on December 31, 2018, the last trading day of fiscal 2018. 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
The following represents the payments payable Mr. Reinhold in accordance with his employment agreement as in effect on December 31, 2018, and does not reflect the payments under his separation agreement:
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| 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) | 2,048,000 (1) | 1,336,000 (2) | - | 2,760,000 (3) |
| Value of Accelerated Vesting of Stock Option Awards | - | - | - | 1,126,000 (4) |
| Value of Accelerated Vesting of Restricted Stock Unit Awards | 1,939,568 (5) | 1,167,693 (6) | 1,939,568 (5) | - |
| Medical and Other Benefits | 10,718 (7) | - | - | 21,436 (8) |
| Total | 3,998,286 | 2,506,693 | 1,939,568 | 3,907,436 |
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| (1) | Represents one year’s base salary ($712,000) and the average annual bonus received for the prior two years. Ifnon-equity incentive compensation paid to Mr. Reinhold for fiscal years 2017 and 2018 ($1,336,000). |
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| (2) | Represents the average annual non-equity incentive compensation paid to Mr. Reinhold for fiscal years 2017 and 2018 ($1,336,000). |
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| (3) | Represents two year’s base salary ($1,424,000) and the average annual non-equity incentive compensation paid to Mr. Reinhold for fiscal years 2017 and 2018 ($1,336,000). 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 Change of Control. |
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| (4) | Represents accelerated vesting of 75,000 stock options. Pursuant to Mr. Reinhold’s stock option agreements (dated February 1, 2016 and December 14, 2016), if Mr. Reinhold’s employment was terminated without cause or for good reason within six months following a “change of control,” as defined)in control”, one year’s bonus based on his average annual bonus for the prior two yearshe would become immediately vested in all outstanding unvested stock options, and a reimbursement of costs for COBRA insurance coverage. A “Change in Control” means: (i) approval by the stockholders of the Company of (I) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which the Majority Stockholders (as defined) cease to own, directly or indirectly, in the aggregate at least forty percent (40%) of the then outstanding shares of the Company’s common stock or the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transaction, or (II) the sale of all or substantially all of the assetsMr. Reinhold’s outstanding options would 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 the Company; (ii) the acquisition by any person, entity or “group”, within the meaning81,666 unvested restricted stock units. |
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| (6) | Represents accelerated vesting 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.
49,166 unvested restricted stock units. Pursuant to Mr. Reinhold’s restricted stock unit agreements (dated August 25, 2010 and November 14, 2011), ifon the event of Mr. Reinhold is terminated for cause, any unvested portion of hisReinhold’s death or total disability, 32,500 restricted stock units will terminate and be forfeited. In(50% of the event of a change in control, Mr. Reinhold will become immediately vested in all of theunvested 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.
granted under such agreements) would vest. Pursuant to Mr. Reinhold’s restricted stock unit agreement (dated February 1, 2016), ifon the event of Mr. Reinhold is terminated for cause, any unvested portion of hisReinhold’s death or total disability,16,666 restricted stock units will terminate and be forfeited. In(100% of the event of a change in control, Mr. Reinhold will become immediately vested in all of theunvested restricted stock units held by him asgranted under such agreement) would vest. |
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| (7) | Represents reimbursement of the datemedical and dental insurance payments under COBRA for twelve months. |
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| (8) | Represents reimbursement of the change in control. If Mr. Reinhold’s employment is terminated without cause ormedical and dental insurance payments under COBRA 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 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.24 months. |
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.
Thomas Clark
Thomas Clark
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| 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 | - | - | - | 385,750 (1) |
| Value of Accelerated Vesting of Restricted Stock Unit Awards | 197,909 (2) | 197,909 (3) | 197,909 (2) | - |
| Medical and Other Benefits | - | - | - | - |
| Total | 197,909 | 197,909 | 197,909 | 385,750 |
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| (1) | Represents accelerated vesting of 25,000 stock options. Pursuant to Mr. Clark’s restricted stock unitoption agreement (dated February 1,November 10, 2016), if Mr. Clark 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. Clark 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. Clark’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. Clark’s employment is terminated due to disability or death, his estate or designated beneficiary(ies), whichever is applicable, 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.Pursuant to the Company’s standard option agreements, in the event Mr. Clark’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
Pursuant to Mr. Dooley’s restricted stock unit agreement (dated March 1, 2012), 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.
Pursuant to the Company’s standard option agreements, in the event Mr. Dooley’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.
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 Mr. Lerner’s restricted stock unit agreement (dated February 1, 2016), if Mr. Lerner 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. Lerner 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. Lerner’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. Lerner’s employment is terminated due to disability or death, his estate or designated beneficiary(ies), whichever is applicable, 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.
Pursuant to the Mr. Lerner’s 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’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’sClark’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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| (2) | Represents accelerated vesting of ContentsTermination of Employment Without Change in Control
The following table sets forth the severance payments that would have been made had the employment of Mr. Reinhold, Mr. Clark, Mr. Dooley 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 31, 2016, the last day of the Company’s fiscal year 2016, and using the closing price of our common stock on December 30, 2016, the last trading day of the 2016 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 | | | 1,416,000(1) | | | | 1,490,900(2) | | | | 14,578(3) | | | | 2,921,478 | | | | | | | | | | | | | | | | | | | | | Thomas Clark | | | - | | | | 219,250(4) | | | | - | | | | 219,250 | | | | | | | | | | | | | | | | | | | | | Robert Dooley | | | - | | | | 263,100(5) | | | | - | | | | 263,100 | | | | | | | | | | | | | | | | | | | | | Eric Lerner | | | 784,500(6) | | | | 219,250(7) | | | | 24,701(3) | | | | 1,028,451 | |
(1) | Represents one year’s salary of $717,000 and an average yearly cash bonus of $699,000 paid to Mr. Reinhold for fiscal years 2015 and 2016. Mr. Reinhold would also receive the bonus amount in the event of his death or disability. |
(2) | Represents accelerated vesting of 170,000 unvested restricted stock units granted to Mr. Reinhold if terminated without cause or for good reason. Pursuant to Mr. Reinhold’s restricted stock unit agreements (dated August 25, 2010 and November 14, 2011), on the event of Mr. Reinhold’s death or disability, 60,000 restricted stock units (50% of the unvested restricted stock units granted under such agreements at December 31, 2016) would vest, having a value of $526,200, based on a termination date of December 31, 2016 and using a closing price of our stock on December 30, 2016, the last trading day of the 2016 fiscal year. Pursuant to Mr. Reinhold’s restricted stock unit agreement (dated February 1, 2016), on the event of Mr. Reinhold’s death or disability, 50,000 restricted stock units (100% of the unvested restricted stock units granted under such agreement at December 31, 2016) would vest, having a value of $438,500, based on a termination date of December 31, 2016 and using a closing price of our stock on December 30, 2016, the last trading day of the 2016 fiscal year. |
(3) | Represents reimbursement of medical and dental insurance payments under COBRA for twelve months. |
(4) | Represents accelerated vesting of 25,000 unvested restricted stock units granted to Mr. Clark if terminated without cause or for good reason. Pursuant to Mr. Clark’s restricted stock unit agreement (dated February 1, 2016), on the event of Mr. Clark’s death or disability, 25,000 restricted stock units (100% of the unvested restricted stock units granted under such agreement at December 31, 2016) would vest, having a value of $219,250, based on a termination date of December 31, 2016 and using a closing price of our stock on December 30, 2016, the last trading day of the 2016 fiscal year. |
(5) | Represents accelerated vesting of 30,000 unvested restricted stock units granted to Mr. Dooley if terminated without cause or for good reason. Pursuant to Mr. Dooley’s restricted stock unit agreement (dated March 1, 2012), on the event of Mr. Dooley’s death or disability, 15,000 restricted stock units (50% of the unvested restricted stock units granted under such agreements at December 31, 2016) would vest, having a value of $131,550, based on a termination date of December 31, 2016 and using a closing price of our stock on December 30, 2016, the last trading day of the 2016 fiscal year. |
(6) | Represents one year’s salary of $572,000 and an average yearly cash bonus of $212,500 paid to Mr. Lerner for fiscal years 2015 and 2016. Mr. Lerner would also receive the bonus amount in the event of his death or disability. |
(7) | Represents accelerated vesting of 25,000 unvested restricted stock units granted to Mr. Lerner if terminated without cause or for good reason. Pursuant to Mr. Lerner’s restricted stock unit agreement (dated February 1, 2016), on the event of Mr. Lerner’s death or disability, 25,000 restricted stock units (100% of the unvested restricted stock units granted under such agreement at December 31, 2016) would vest, having a value of $219,250, based on a termination date of December 31, 2016 and using a closing price of our stock on December 30, 2016, the last trading day of the 2016 fiscal year. |
Change in Control Payments
The following table sets forth the change in control payments that would have been made based on a hypothetical change of control date of December 31, 2016, the last day of the Company’s fiscal year 2016, and using the closing price of our common stock on December 30, 2016, the last trading day of the 2016 fiscal year. These amounts are estimates and the actual amounts to be paid can only be determined at the time of the change of control.
| Name | | Cash Compensation (Salary and Bonus) ($) | | | Value of Accelerated Vesting of Stock & Option Awards ($) | | | Medical and Other Benefits ($) | | | Total ($) | | | Lawrence Reinhold | | | 2,133,000(1) (2) | | | | 1,490,900(3) | | | | 29,156(4) | | | | 3,653,056 | | | | | | | | | | | | | | | | | | | | | Thomas Clark | | | - | | | | 219,250(5) | | | | - | | | | 219,250 | | | | | | | | | | | | | | | | | | | | | Robert Dooley | | | - | | | | 263,100(6) | | | | - | | | | 263,100 | | | | | | | | | | | | | | | | | | | | | Eric Lerner | | | 784,500(7) | | | | 230,750(5) (8) | | | | 24,701(9) | | | | 1,039,951 | |
(1) | Represents two year’s salary of $717,000 and an average yearly cash bonus of $699,000 paid to Mr. Reinhold for fiscal years 2015 and 2016. |
(2) | Payments are made to Mr. Reinhold only if he is terminated without “cause” or resigns for “good reason” within 60 days prior to, or one year following, a Change of Control. |
(3) | Represents accelerated vesting of 170,0008,333 unvested restricted stock units. |
| | | (3) | Represents accelerated vesting of 8,333 unvested restricted stock units. Pursuant to Mr. Clark’s restricted stock unit agreement (dated February 1, 2016), on the event of Mr. Clark’s death or total disability, 8.333 restricted stock units (100% of the unvested restricted stock units granted under such agreement at December 31, 2018) would vest. |
(4) | Represents reimbursement of medical and dental insurance payments under COBRA for twenty-four months.48
(5) | Represents accelerated vesting of 25,000Robert Dooley | | | | | | | Type of Payment | Termination by Systemax without “Cause” or Resignation by Employee for “good reason” ($) | 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 ($) | | Cash Compensation (Salary & Non-Equity Incentive Compensation) | - | - | - | - | | Value of Accelerated Vesting of Stock Option Awards | - | - | - | 571,000(1) | | Value of Accelerated Vesting of Restricted Stock Unit Awards | 475,000 (2) | 237,500 (3) | 475,000 (2) | - | | Medical and Other Benefits | - | - | - | - | | Total | 475,000 | 237,500 | 475,500 | 571,000 |
| | | (1) | Represents accelerated vesting of 37,500 stock options. Pursuant to Mr. Dooley’s stock option agreements (dated February 1, 2016 and December 14, 2016), if Mr. Dooley’s employment is terminated without cause or for good reason within six months following a “change in control”, he will become immediately vested in all outstanding unvested stock options, and all of Mr. Dooley’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination. |
| | | (2) | Represents accelerated vesting of 20,000 unvested restricted stock units. |
(6) | Represents accelerated vesting of 30,000 | | | (3) | Represents accelerated vesting of 10,000 unvested restricted stock units. Pursuant to Mr. Dooley’s restricted stock unit agreement (dated March 1, 2012), on the event of Mr. Dooley’s death or total disability, 10,000 restricted stock units (50% of the unvested restricted stock units granted under such agreement at December 31, 2018) would vest. |
Dave Kipe | | | | | | | Type of Payment | Termination by Systemax without “Cause” ($) | 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) | 270,000 (1) | - | - | - | | Value of Accelerated Vesting of Stock Option Awards | - | - | - | - | | Value of Accelerated Vesting of Restricted Stock Unit Awards | -
| - | - | - | | Medical and Other Benefits | 14,673 (2) | - | - | - | | Total | 284,673 | - | - | - |
| | | (1) | Represents six-months base salary. |
| | | (2) | Represents reimbursement of auto allowance and medical, dental and vision insurance payments under COBRA for six months. |
(7) | Represents one year’s salary of $572,000 and an average yearly cash bonus of $212,500 paid to Mr. Lerner for fiscal years 2015 and 2016.Our policy is not to pay compensation to directors who are also employees of Systemax or any of our subsidiaries. Directors are reimbursed for reasonable travel and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel accident insurance policy for such travel. The table below shows the elements and amounts of compensation that we paid our non-management directors for fiscal 2018. | | |
Compensation Element | Amount ($) | | 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 accelerated vesting of 62,500 unvested stock options (only if terminated without “cause” or resigns for “good reason” within six months following a Change of Control). 37,500 of these options on the hypothetical change of control date of December 31, 2016 have no intrinsic value. | | | (1) | Retainer amounts are paid in quarterly installments. |
(9) | Represents reimbursement of medical and dental insurance payments under COBRA for twelve months. |
| (2) | 44
The Company’s policy is not to pay compensation to directors who are also employees of the Company or its subsidiaries. Each non-employeenon-management director receives an 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, andgrant of restricted stock units each year immediately following the annual stockholders meeting a grant of Shares of Company stock (restricted for sale for two years) in an amount equal to $40,000 divided by the closing price per share during the 20 trading days preceding the date of the annual meeting (rounded up to the nearest whole number of shares). Through 2016 the annualSuch restricted stock grantsunits are generally subject to forfeiture if the holder is not a director of Systemax on the date of the second annual meeting following such grant, and cannot be sold while so restricted; such restrictions lapse if the holder dies or becomes disabled or there is a change of control, as defined in the grant agreement. Cash dividend equivalents are paid on unvested restricted stock.
| |
| | | Non-Management Director Compensation in Fiscal 2018 |
The non-management directors received the following compensation during fiscal 2018: | | | | | | | | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Barry Litwin (2) | 70,000 | 40,000 | - | 4,340(3) | 114,340 | | Robert D. Rosenthal | 110,000 | 40,000 | - | 5,092(3) | 155,092 | | Chad M. Lindbloom | 75,000 | 40,000 | - | 2,515(3) | 117,515 | | Paul S. Pearlman (4) | - | - | - | - | - | | Lawrence Reinhold (5) | - | - | - | - | - |
| | | (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 7 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2018. |
| | | (2) | Mr. Litwin became the CEO of Systemax in January 2019 and as of the time of such appointment Mr. Litwin will no longer receive the standard cash and equity compensation normally paid to its non-employee directors, were made pursuantas our policy is not to pay compensation to directors who are also employees of the Company’s 2006 Stock Incentive PlanCompany. |
| | | (3) | Dividend equivalent payments on unvested restricted stock. |
| | | (4) | No information has been provided for Non-Employee Directors, whichMr. Pearlman, as he was approved byappointed a director in January 2019. Starting with his appointment, he shall receive the Company’s stockholders at the 2006 Annual Stockholders’ Meeting. After the 2016 grant the annual restricted stock grants to non-employee directors will be made pursuant to the Company’s 2010 Long-Term Incentive Plan, which was approved by the Company’s stockholders at the 2010 Annual Stockholders’ Meeting. The Lead Independent Director, currently Mr. Rosenthal, also receives an additional $20,000 per year. In addition, each non-employee director received a one-time grant of 10,000 options on October 31, 2016 made pursuant to the Company’s 2010 Long-Term Incentive Plan. Directors are reimbursed for reasonable travelstandard cash and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel accident insurance policy for such travel.
Director Compensation for Fiscal Year 2016
The following table sets forthequity compensation information regarding payments in 2016paid to our non-employee directors:
Name: | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Option Awards $(2) | | | Total ($) | | | Robert D. Rosenthal | | | 105,000 | | | | 40,000 | | | | 34,904 | | | | 179,904 | | | | | | | | | | | | | | | | | | | | | Stacy Dick | | | 85,000 | | | | 40,000 | | | | 34,904 | | | | 159,904 | | | | | | | | | | | | | | | | | | | | | Marie Adler-Kravecas | | | 65,000 | | | | 40,000 | | | | 34,904 | | | | 139,904 | |
| (1) | This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2016.directors. |
| | | (5) | No information has been provided for Mr. Reinhold as until January 2019, he was an employee of Systemax. Following his separation, of employment, Mr. Reinhold remains a director, and he receives the standard cash and equity compensation paid to our non-employee directors. |
51 | (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 9 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2016. |
| | | | | |
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 2016:
Name: | | Stock Awards | | Option Awards | Robert D. Rosenthal | | | 8,835 | | 10,000 (unvested) | | | | | | | | | | |
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, 2018, located in the United States, Canada, and India, including full, part-time and temporary/seasonal employees (1,400 Employees). We used the compensation components utilized in the Summary Compensation Table / page 39 of this proxy statement (“SCT”) for the period from January 1, 2018 to December 31, 2018 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 2018, 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 2018); therefore, the CEO's Total Compensation for purposes of this calculation matches the Total Compensation described in the Summary Compensation Table / page 39 of this proxy statement.
The median team member's estimated Total Compensation for 2018 was $43,500. The ratio of CEO pay to median team member pay is estimated to be 25 to 1. Assuming normalized non equity incentive compensation, the ratio of CEO pay to the median team member pay is estimated to be 62 to 1.
| | | | | | | | | | | | Marie Adler-Kravecas | | | 8,835 | | 10,000 (unvested)
|
5,000 (vested)
| NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
The guiding principles of the Company’s compensation policies and decisions include aligning each executive’s compensation with the Company’s business strategy and the interests of our stockholders and providing incentives needed to attract, motivate and retain key executives who are important to our long-term success. Consistent with this philosophy, a significant portion of the total incentive compensation for each of our executives is directly related to the Company’s financial results and to other performance factors that measure our progress against the goals of our strategic and operating plans.
Stockholders are urged to read the Compensation Discussion and Analysis section of this Proxy Statement, which discusses how our compensation design and practices reflect our compensation philosophy. The Compensation Committee and the Board believe that our compensation design and practices are effective in implementing our guiding principles.
We are required to submit a proposal to stockholders for a (non-binding) advisory vote to approve the compensation of our Named Executive Officers pursuant to Section 14A of the 1934 Act. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the principles, policies and practices described in this proxy statement.
Accordingly, the following resolution is submitted for stockholder vote at the 2017 Annual Meeting:
“RESOLVED, that the stockholders of Systemax Inc. approve, on an advisory basis, the compensation of its Named Executive Officers as disclosed in the Proxy Statement for the 2017 Annual Meeting, including the Summary Compensation Table and the Compensation Discussion and Analysis set forth in such Proxy Statement and other related tables and disclosures.”
The affirmative vote of a majority of the votes cast for this proposal is required to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement.
As this is an advisory vote, the result will not be binding on the Company, the Board or the Compensation Committee, although our Compensation Committee will consider the outcome of the vote when evaluating our compensation principles, design and practices. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the approval of the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT, WHICH IS DESIGNATED AS PROPOSAL NO. 2.
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 2017.
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 2015 and 2016:
Audit and Audit-related Fees
Ernst & Young billed the Company $1,577,655 for professional services rendered for the audit of the Company’s annual consolidated financial statements for fiscal year 2016 and its reviews of the interim financial statements included in the Company’s Forms 10-Q for that fiscal year and $3,081,000 for such services rendered for fiscal year 2015. Ernst & Young also billed the Company $181,544 related to subsidiary statutory audits in 2016.
In accordance with the SEC’s definitions and rules, “audit fees” are fees that were billed to the Company by Ernst & Young for the audit of the Company’s annual financial statements, to be included in the Form 10-K, and review of financial statements included in the Form 10-Qs; for the audit of the Company’s internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects; for the attestation of management’s report on the effectiveness of internal control over financial reporting; and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. “Audit-related fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of the company’s financial statements and internal control over financial reporting, including services in connection with assisting the company in its compliance with its obligations under Section 404 of the Sarbanes-Oxley Act and related regulations.
Tax Fees
Ernst & Young LLP did not provide any professional services for tax compliance, planning or advice in 2016 and 2015.
All Other Fees
Other fees (i.e., those that are not audit fees, audit related fees, or tax fees) of $2,167 were billed by Ernst & Young LLP for each of the fiscal years 2015 and 2016.
The Audit Committee is responsible for approving every engagement of the Company’s independent registered public accountants to perform audit or non-audit services on behalf of the Company or any of its subsidiaries before such accountants can be engaged to provide those services. The Audit Committee does not delegate its pre-approval authority. The Audit Committee has reviewed the services provided to the Company by Ernst & Young LLP and believes that the non-audit/review services it has provided are compatible with maintaining the auditor’s independence.
Stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accountants is not required by the Company’s By-Laws or other applicable legal requirement. However, the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to continue to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of different independent registered public accountants at any time during the year or thereafter if it determines that such a change would be in the best interests of the Company and its stockholders.
Vote Required for Approval
Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accountants will require the affirmative vote of the holders of a majority of the Shares present in person or by proxy and entitled to vote on the issue. There are no rights of appraisal or dissenter’s rights as a result of a vote on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2017, WHICH IS DESIGNATED AS PROPOSAL NO. 3.
Solicitation of Proxies
We are using 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. As a result, beginning on or about April 24, 2017, 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 2016 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, 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 20182020 annual meeting, including proposals for the nomination of directors, must be received by December 26, 2017 to24, 2019 to be considered for the 20182020 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 20162018 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 SecuritiesSEC and Exchange Commission and makesmake available free of charge on or through this web site itsour website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including all amendments to those reports. These are available as soon as is reasonably practicable after they are filed with the SEC. All reports mentioned above are also available from the SEC’s web 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 January 2019). 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). Establishes our corporate governance principles and practices on a variety of topics, including the responsibilities, composition and functioning of the Board.
| · | Corporate Ethics Policy for officers, directors and employees; |
| · | Charter for the Audit Committee of the Board; |
| · | Charter for the Compensation Committee of the Board; |
| · | Charter for the Nominating/Corporate Governance Committee of the Board; and |
| · | Corporate Governance Guidelines and Principles. |
In accordance with the corporate governance rules of the New York Stock Exchange,NYSE, 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”). A copy of the Audit Committee Charter is also attached hereto as Appendix A
| | | | | | | | 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:
KEEP THIS PORTION FOR YOUR RECORDS | DETACH AND RETURN THIS PORTION ONLY |
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 Leeds06 Robert D. Rosenthal
| 02 Bruce Leeds
07 Marie Adler-Kravecas
| 03 Robert Leeds | 04 Lawrence Reinhold | 05 Stacy Dick |
The Board of Directors recommends you vote FOR Proposal 2 and 3:
| | For | Against | Abstain | 2. | The adoption, on an advisory basis, of a resolution approving the compensation of the Named Executive Officers of the Company as described in the “Executive Compensation” section of the 2017 Proxy Statement. | | ☐ | ☐ | ☐ |
3. | A Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants for fiscal year 2017. | | ☐ | ☐ | ☐ |
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 Proposals 1, 2 and 3. 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) | £ |
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 Annual Report, Notice & Proxy Statement are available at www.proxyvote.com
|
SYSTEMAX INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – JUNE 5, 2017
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, Eastern Time on June 5, 2017, 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 PROPOSALS 1, 2 AND 3.
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)
Appendix A
AUDIT COMMITTEE CHARTER
FOR
SYSTEMAX INC.
(revised March 15, 2017)
Purpose of Committee
The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Systemax Inc. (the “Company”) is to (a) assist the Board with oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditor’s qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors; and (b) prepare the report that U.S. Securities and Exchange Commission rules require be included in the Company’s annual proxy statement.
The function of the Committee is oversight. It is not the Committee’s responsibility to certify the Company’s financial statements or to guarantee the report of the independent auditor. The Company’s management is responsible for the (i) preparation, presentation and integrity of the Company’s financial statements, (ii) maintenance of appropriate accounting and financial reporting principles and policies, and (iii) maintenance of internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditor is responsible for planning and carrying out a proper audit and reviews. In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company. As such, it is not the duty or responsibility of the Committee or its members to conduct auditing or accounting reviews or procedures, except to the extent described below under “Performance Evaluation”.
Each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information and (ii) the accuracy of the financial and other information provided to the Committee by such persons and organizations absent actual knowledge to the contrary (which shall be promptly reported to the Company’s Board). In addition, the evaluation of the Company’s financial statements by the Committee is not of the same scope as, and does not involve the extent of detail as, audits performed by the independent auditor, nor does the Committee’s evaluation substitute for the responsibilities of the Company’s management for preparing, or the independent auditor for auditing, the financial statements.
Committee Duties and Responsibilities
The duties and responsibilities of the Committee are to:
| 1. | Retain and terminate the Company’s independent auditors (subject, if applicable, to shareholder ratification). The Committee shall oversee the rotation of the audit partners of the independent auditors as required by the Sarbanes-Oxley Act of 2002. The Committee shall have the sole authority to approve and/or pre-approve all audit engagement fees and terms, as well as all non-audit engagement fees and terms with the independent auditor. The Committee shall not engage the independent auditor to perform non-audit services proscribed by law or regulation. The Committee need not pre-approve non-audit services that fall within the “De Minimis Exception” set forth in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended; |
| 2. | At least annually, obtain and review a report by the independent auditor consistent with Independence Standards Board of Directors Standard No. 1, describing: (a) the independent auditor’s internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with any such issues; and (c) (to assess the auditor’s independence) all relationships between the independent auditor and the Company. After reviewing the foregoing report and the independent auditor’s work throughout the year, the Committee shall evaluate the auditor’s qualifications, performance and independence. This evaluation shall include the review and evaluation of the lead partner of the independent auditor. In making its evaluation, the Committee shall take into account the opinions of management and the Company’s internal auditors (or other personnel responsible for the internal audit function). The Committee shall present its conclusions with respect to the independent auditor to the full Board; |
| 3. | Review and discuss the annual audited financial statements and quarterly financial statements with management and the independent auditor, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and provide the annual Audit Committee report required by the SEC for inclusion in the Company’s annual report on Form 10-K, and otherwise report to the stockholders of the Company in accordance with the rules and regulations of the SEC. |
| 4. | Review and discuss with management earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. This discussion may be done generally (i.e., discussion of the types of information to be disclosed and the type of presentation to be made). The Committee is not required to discuss in advance each earnings press release or each instance in which the Company provides earnings guidance; |
| 5. | As appropriate, obtain advice and assistance from outside legal, accounting or other advisors; |
| 6. | Review and discuss with management policies with respect to risk assessment and risk management. While it is the job of the chief executive officer and senior management to assess and manage the Company’s exposure to risk under the oversight of the Board of Directors, the Committee shall discuss guidelines and policies to govern the process by which this is handled, including working together with the Compensation Committee regarding the Company’s compensation policies for all its employees as they relate to the Company’s risk management goals and objectives. The Committee shall discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures; |
| 7. | Periodically meet separately with management, with internal auditors (or other personnel responsible for the internal audit function), and with independent auditors; |
| 8. | Annually discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management. The discussion shall address, to the extent applicable, any accounting adjustments that were noted or proposed by the independent auditor but were "passed" (as immaterial or otherwise), any communications between the audit team and the auditor's national office with respect to auditing or accounting issues presented by the engagement and any “management” or “internal control” letter issued, or proposed to be issued, by the independent auditor. The Committee shall discuss with the independent auditor: |
| (a) | the responsibilities, budget and staffing of the Company’s internal audit function; |
| (b) | the Company's critical accounting policies and practices; |
| (c) | alternative treatments of financial information within generally accepted accounting principles related to material items the independent auditors have discussed with management, ramifications of use of the alternative disclosures and treatments, and the treatment preferred by the independent auditors; and |
| (d) | other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences. |
The Company’s directors of internal audit shall report directly to the chief financial officer and the Committee at least four times per fiscal year, or more often as necessary;
| 9. | The Committee shall periodically review and discuss with management and the independent auditor: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company. |
| 10. | The Committee shall review disclosures made to the Committee by the Company's Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Forms 10-Q about significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting and any fraud involving management or other employees who have a significant role in the Company's internal control over financial reporting. The Committee shall review with management, the senior internal auditing executive, and the independent auditor, as appropriate, attestations and reports by the independent auditor on internal control over financial reporting. |
| 11. | Set clear hiring policies for the hiring by the Company of employees or former employees of the independent auditors; |
| 12. | Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company, regarding accounting, internal accounting controls, or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters; |
| 13. | Report regularly to the Board. The Committee shall review with the full Board any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors, or the performance of the internal audit function; |
| 14. | Review the content of CEO and CFO disclosures and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002; and |
| 15. | The Committee shall obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act (relating to reports by the independent auditor made to the Company of illegal acts discovered by the independent auditor) has not been implicated. |
Committee Membership
The Committee shall consist of at least three members of the Board, each of whom is, in the business judgment of the Board, “independent” under Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, the rules of the New York Stock Exchange and any other securities exchange on which the Company’s securities are listed. Each member of the Committee shall be financially literate (or shall become so within a reasonable period of time after appointment to the Committee), and at least one member of the Committee shall have “accounting or related financial management expertise” as such qualifications are interpreted by the Board in its business judgment, and qualify as a “financial expert” as defined by the U.S. Securities and Exchange Commission. No Committee member may serve on the audit committees of more than two other public companies, unless the Board has determined that such service will not impair the effectiveness of the member’s service on the Committee. The Board shall periodically determine (a) whether each Committee member meets such independence and experience requirements and (b) whether or not any member of the Committee is an "audit committee financial expert" as that term is defined by the rules and regulations of the Commission.
The members of the Committee shall be appointed by the Board, and shall serve at the pleasure of the Board for such term or terms as the Board may determine.
The compensation to be paid by the Company to any Committee member must consist solely of director’s fees; provided, however, that pension or other deferred compensation that is not contingent on future service to the Company will not be deemed to violate this requirement.
Committee Structure and Operations
A majority of the Committee shall constitute a quorum. The Board shall designate a member of the Committee as its chairperson. The Committee may act by a majority of the members present at a meeting of the Committee. In the event of a tie vote on any issue, the chairperson’s vote shall decide the issue. The Committee shall meet in person or telephonically at least four times a year at a time and place determined by the Committee chairperson, with further meetings to occur when deemed necessary or desirable by the Committee or its chairperson. The Committee may delegate some or all of its duties to a subcommittee comprising one or more members of the Committee. The Committee may ask members of management or others whose advice and counsel are relevant to the issues then being considered by the Committee to attend any meetings and to provide such pertinent information as the Committee may request.
Performance Evaluation
The Committee shall review the adequacy of this charter and evaluate its performance hereunder at least annually and present such report to the full Board. Such report shall include any recommended changes to this charter. The Board shall also review and approve this charter at least annually.
While the fundamental responsibility for the Company’s financial statements and disclosures rests with management and the independent auditor, the Committee shall review: (i) major issues regarding accounting principles, and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (ii) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of using alternative methods under generally accepted accounting principles (“GAAP”) on the financial statements; (iii) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company; and (iv) earnings press releases (paying particular attention to any use of “pro forma,” or “adjusted” non-GAAP, information), as well as financial information and earnings guidance provided to analysts and rating agencies.
Resources and Authority of the Committee
In discharging its oversight responsibilities, the Committee shall have unrestricted access to the Company’s management, books and records and the authority to retain outside counsel, accountants or other consultants in the Committee’s sole discretion. The Committee may direct any officer of the Company, the independent auditor and/or the Company’s internal audit staff to inquire into and report to the Committee on any matter.
Nothing contained in this charter is intended to, or should be construed as, creating any responsibility or liability of the members of the Committee except to the extent otherwise provided under applicable Delaware law which shall continue to set the legal standard for the conduct of the members of the Committee.
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