UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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the Registrant |X|
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a Party other than the Registrant |_|
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|_| Preliminary
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for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|x
| Definitive Proxy Statement
|_| Definitive
Additional Materials
|_| Soliciting
Material under Rule 14a-12
Systemax
Inc.
(Name of
Registrant as Specified in Its Charter)
------------------------------------------------------------
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
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how it was determined):
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11 Harbor
Park Drive
Port
Washington, New York 11050
April 29,
2008
Dear
Stockholders:
You are
cordially invited to attend the 2008 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 2:00 p.m. on
Thursday, June 12, 2008. Your Board of Directors looks 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.
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 date, sign and return the
enclosed proxy card as soon as possible in the envelope
provided. Your cooperation will ensure that your shares are
voted.
I hope that you will attend the Annual
Meeting, and I look forward to seeing you there.
Sincerely,
Richard
Leeds
Chairman
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 12, 2008
Dear
Stockholders:
The 2008
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
Thursday, June 12, 2008 at 2:00 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 vote upon a proposal to approve the Company’s Executive
Incentive Plan;
|
3.
|
To
consider and vote upon a proposal to approve amendments to the Company's
1999 Long-Term Stock Incentive
Plan;
|
4.
|
To
consider and vote upon a proposal to ratify the appointment of Ernst &
Young LLP as the Company’s independent registered public accountants;
and
|
5.
|
To
transact such other business as may properly come before the meeting and
any and all adjournments or postponements
thereof.
|
The Board
of Directors has fixed the close of business on April 17, 2008 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 SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE. 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 SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
Sincerely,
CURT S. RUSH
General
Counsel and Secretary
Port
Washington, New York
April 29,
2008
Systemax
Inc.
11
Harbor Park Drive
Port
Washington, New York 11050
________________________
PROXY
STATEMENT
________________________
This
proxy statement is furnished in connection with the solicitation of proxies on
behalf of the Board of Directors (the “Board”) of Systemax Inc., a Delaware
corporation (the “Company”), for the 2008 Annual Meeting of Stockholders of the
Company to be held on June 12, 2008 (the “Annual Meeting”). The
notice of the Annual Meeting, this proxy statement, the accompanying proxy and
the annual report of the Company for the year ended December 31, 2007 are first
being mailed on or about April 29, 2008 to stockholders of record as of the
close of business on April 17, 2008. You can ensure that your shares
are voted at the meeting by signing, dating and promptly returning the enclosed
proxy in the envelope provided. Sending in a signed proxy will not
affect your right to attend the meeting and vote in person. You may
revoke your proxy at any time before it is voted by notifying the Company’s
Transfer Agent, American Stock Transfer & Trust Company, 59 Maiden Lane, New
York, NY 10038, Attention: Proxy Department, in writing, or by executing a
subsequent proxy, which revokes your previously executed proxy. The
Company’s principal executive offices are located at 11 Harbor Park Drive, Port
Washington, New York 11050.
Voting
Procedures
Proxies
will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1, 2, 3 and
4. Under the Delaware General Corporation Law and the Company’s
Amended and Restated Certificate of Incorporation or the Company’s By-Laws, (1)
the affirmative vote of a plurality of the outstanding shares of common stock of
the Company (the “Shares”) entitled to vote and present, in person or by
properly executed proxy, at a meeting at which a quorum is present will be
required to elect the nominated directors of the Board (Proposal 1), (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 Company’s Executive Incentive Plan
(Proposal 2), (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 in order to approve the
amendments to the Company’s 1999 Long-Term Stock Incentive Plan (Proposal 3) and
(4) 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
4).
A quorum
is representation in person or by proxy at the Annual Meeting of at least a
majority of the outstanding Shares of the Company. Abstentions 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. 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 shares
are held through a broker, nominee, fiduciary or other custodian, you must
provide voting instructions to the record holder in accordance with the record
holder’s requirements in order to ensure the shares are properly
voted. Under the rules of the New York Stock Exchange, member brokers
who do not receive instructions from beneficial owners will be allowed to vote
on the election of directors of the Board (the “Directors”) and on the
ratification of the independent accountants.
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 meeting during normal business hours at the offices of
the Company at least ten days prior to the Annual Meeting.
On April
17, 2008, there were outstanding and entitled to vote (excluding Company
treasury shares) 36,628,782 Shares entitled to one vote per
share. Stockholders will not be entitled to appraisal rights in
connection with any of the matters to be voted on at the Annual
Meeting.
ELECTION
OF DIRECTORS
Item
1 on Proxy Card
At the
meeting, seven Directors are to be elected to serve until their successors have
been elected and qualified. Information regarding such nominees is
set forth below.
The
accompanying proxy will be voted for 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 for
the other Board nominees and, unless the Board of Directors reduces the number
of nominees, for such other person or persons as the Board of Directors may
designate.
Each of
the nominees has served as a director during the fiscal year ended December 31,
2007. If 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.
Nominees
Richard
Leeds, age 48, has served as Chairman and Chief Executive Officer of the Company
since April 1995. Mr. Leeds joined the Company in 1982. Mr. Leeds
graduated from New York University in 1982 with a B.S. in
Finance. Richard Leeds is the brother of Bruce and Robert
Leeds.
Bruce
Leeds, age 52, has served as Vice Chairman since April 1995. Mr.
Leeds served as President of International Operations from 1990 until March
2005. Mr. Leeds joined the Company after graduating from Tufts
University in 1977 with a B.A. in Economics.
Robert
Leeds, age 52, has served as Vice Chairman since April 1995. Mr.
Leeds served as President of Domestic Operations from April 1995 until March
2005. Mr. Leeds graduated from Tufts University in 1977 with a B.S.
in Computer Applications Engineering and joined the Company in the same
year.
Gilbert
Fiorentino, age 48, has served as a Director of the Company since May 25,
2004. Mr. Fiorentino is President of SYX Services Inc., a subsidiary
of the Company, and General Manager of the Company’s Technology Products
business. Mr. Fiorentino graduated in 1981 from the University of
Miami with a B.S. degree in Economics and graduated in 1984 from the University
of Miami Law School.
Robert D.
Rosenthal, age 59, has served as a Director of the Company since July
1995. He has been the lead independent director since October 11,
2006. Mr. Rosenthal is Chairman and Chief Executive Officer of First
Long Island Investors LLC, which he co-founded in 1983. Mr. Rosenthal
is a 1971 cum laude
graduate of Boston University and a 1974 graduate of Hofstra University Law
School.
Stacy S.
Dick, age 51, has served as a Director of the Company since November
1995. Mr. Dick became a Managing Director of Rothschild Inc. in
January 2004 and has served as an executive of other entities controlled by
Rothschild family interests since March 2001. Mr. Dick graduated from
Harvard University with an A.B. degree magna cum laude in 1978 and a
Ph.D. in Business Economics in 1983. He has served as an adjunct
professor of finance at the Stern School of Business (NYU) since
2004.
Ann R.
Leven, age 67, has served as a Director of the Company since May
2001. Ms. Leven served as Treasurer and Chief Fiscal Officer of the
National Gallery of Art in Washington D.C. from December 1990 to October
1999. From August 1984 to December 1990, she was Chief Financial
Officer of the Smithsonian Institution. Ms. Leven has been a Director
of the Delaware Investment’s Family of Mutual Funds since September
1989. From December 1999 to May 2003, Ms. Leven was a Director of
Recoton Corporation. From 1975 to 1993, Ms. Leven taught business
strategy and administration at the Columbia University Graduate School of
Business. She received an M.B.A. degree from Harvard University in
1964.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY
CARD.
Independence
of Directors
In the
judgment of the Board, each of the following Directors of the Company meets the
standards for independence required by the New York Stock Exchange and the
Securities Exchange Act of 1934 (the “Exchange Act”): Robert D. Rosenthal, Stacy
S. Dick and Ann R. Leven. The Board made this determination based on
(a) the absence of any of the express disqualifying criteria relating to
director independence set forth in Section 303A of the Corporate Governance
Rules of the New York Stock Exchange and (b) the criteria for independence
required of audit committee directors by Section 10A(m)(3) of Exchange
Act. As a “controlled company,” the Company is exempt from the New
York Stock Exchange requirements that listed companies have a majority of
independent directors. A “controlled company” is defined by the New
York Stock Exchange as a company of which more than 50% of the voting power is
held by an individual, group or other company. The Company is a
“controlled company” in that more than 50% of the voting stock of the Company,
in the aggregate, is owned by certain members of the Leeds
family (including Richard Leeds, Robert Leeds and Bruce Leeds, each
of whom is an officer and Director of the Company) and certain Leeds’ family
trusts (collectively, the “Leeds Group”). The members of the Leeds
Group have entered into a Stockholders Agreement with respect to certain shares
of Company stock they each own. See “Transactions With Related
Persons” below.
Meetings
of Non-Management Directors
The New
York Stock Exchange requires the “non-management 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
interested parties to communicate directly with the presiding director or with
the non-management directors as a group. The Board’s non-management directors
meet separately in executive sessions, chaired by the Lead Independent Director
(currently Robert D. Rosenthal), at least quarterly.
Interested
parties wishing to communicate directly with the Lead Independent Director or
the non-management members of the Board as a group should address their inquires
by mail sent to the attention of 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).
Corporate
Ethics Policy
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). A copy can
also be obtained by writing to Systemax Inc., Attention: Board of Directors
(Corporate Governance), 11 Harbor Park Drive, Port Washington, NY
11050.
Stockholder
Communications with Directors
Stockholders
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. Your letter should indicate that you are a
stockholder of the Company. Depending on the subject matter of your
inquiry, management will forward the communication to the Director or Directors
to whom it is addressed; attempt to handle the inquiry directly, as might be the
case if you request information about the Company or it is a stockholder related
matter; or not forward the communication if it is primarily commercial in nature
or if it relates to an improper or irrelevant topic. At each Board
meeting, a member of management presents a summary of all communications
received since the last meeting that were not forwarded and makes those
communications available to any requesting Director.
Director
Attendance at Annual Meetings
The
Company expects each Director to attend its Annual Stockholders Meeting, unless
he or she has a valid excuse such as illness or a conflict in
schedules. The Company usually schedules a separate Board meeting in
conjunction with the Stockholders meeting, to elect officers and discuss other
Company matters. At last year’s annual meeting, held on June 7, 2007,
all of the Directors attended the meeting. The Company expects all of
its Directors to attend this year’s Annual Meeting.
Board
Meetings
During
the year 2007, the Board of Directors held four meetings, the Audit Committee
held eleven meetings, the Compensation Committee held six meetings, the
Nominating/Corporate Governance Committee held three meetings and the Executive
Committee held no meetings. All of the Directors attended at least
75% of all of the meetings of the Board and the respective committees of the
Board of which they were members.
Committees
of the Board
The Board
of Directors has the following standing committees:
Audit
Committee
The Audit
Committee is appointed by the Board to assist the Board with oversight of (i)
the integrity of the financial statements of the Company, (ii) the Company’s
compliance with legal and regulatory requirements, (iii) the independence and
qualifications of the Company’s external auditors, and (iv) the performance of
the Company’s internal audit function and external auditors. It is
the Audit Committee’s responsibility to retain or terminate the Company’s
independent registered public accountants, who audit the Company’s financial
statements, to prepare the Audit Committee report that the Securities and
Exchange Commission requires to be included in the Company’s Annual Proxy
Statement. (See “Report of the Audit Committee” below.) As
part of its activities, the Audit Committee meets with the Company’s independent
registered public accountants 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.
The Board
adopted an Audit Committee Charter in June 2000, which was revised in February
2003 and again in August 2006. A copy of the Audit Committee Charter is
available on the Company’s website, www.systemax.com, or can be obtained by
writing to Systemax Inc., Attention: Board of Directors (Corporate Governance),
11 Harbor Park Drive, Port Washington, NY 11050.
The
members of the Audit Committee are Stacy S. Dick, Robert D. Rosenthal and Ann R.
Leven (Chairperson). All the members of the Audit Committee are
non-management directors (i.e. they are neither officers nor 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
New York Stock Exchange. In addition, the Board has determined that
each of the members of the Audit Committee is an “audit committee financial
expert” as defined by regulations of the Securities and Exchange
Commission.
Interested
parties wishing to communicate directly with the Chairman of the Audit Committee
or the Audit Committee as a group should address their inquires by mail to the
attention of the Audit Committee 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).
Nominating/Corporate
Governance Committee
The
Nominating/Corporate Governance Committee’s responsibilities include, among
other things (i) identifying individuals qualified to become Board members and
recommending to the Board nominees to stand for election at any meeting of
stockholders, (ii) identifying and recommending nominees to fill any vacancy,
however created, in the Board, and (iii) developing and recommending to the
Board a code of business conduct and ethics and a set of corporate governance
principles (including director qualification standards, responsibilities and
compensation) and periodically reviewing the code and principles. The
current members of the Nominating/Corporate Governance Committee are Robert D.
Rosenthal (Chairman), Stacy S. Dick and Ann R. Leven. In nominating candidates
to become Board members, the Committee shall take into consideration such
factors as it deems appropriate, including the experience, skill, integrity and
background of the candidates. The Committee may consider candidates
proposed by management or stockholders but is not required to do
so. The Committee does not have any formal policy with regard to the
consideration of any Director candidates recommended by the security holders 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. Stockholders may
propose candidates for Board membership by writing to Systemax Inc., Attention:
Nominating/Corporate Governance Committee, 11 Harbor Park Drive, Port
Washington, NY 11050 so that the nomination is received by the Company by March
31, 2009 to be considered for the 2009 annual meeting. Nominees
proposed by stockholders will receive the same consideration as will other
nominees. The Charter for the Nominating/Corporate Governance
Committee was amended in August 2006. The Charter for the Nominating/Corporate
Governance Committee is available on the Company’s website (www.systemax.com) or
can be obtained by writing to Systemax Inc., Attention: Board of Directors
(Corporate Governance), 11 Harbor Park Drive, Port Washington, NY
11050.
Compensation
Committee
The
Compensation Committee’s responsibility is to review and approve corporate goals
relevant to the compensation of the Chief Executive Officer and, after an
evaluation of the Chief Executive Officer’s performance in light of such goals,
to set the compensation of the Chief Executive Officer. The
Compensation Committee also approves (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. The Committee is also responsible for reviewing and making
periodic recommendations to the Board with respect to the general compensation,
benefits and perquisite policies and practices of the Company including the
Company’s incentive-based and equity-based compensation plans. The
Compensation Committee also prepares an annual report on executive compensation
for inclusion in the annual proxy statement. (See “Compensation
Committee Report to Stockholders” below.) The charter for the Compensation
Committee was amended in August 2006. The current members of the Compensation
Committee are Stacy S. Dick (Chairman), Robert D. Rosenthal and Ann R.
Leven. The charter for the Compensation Committee is available on the
Company’s website (www.systemax.com) or can be obtained by writing to Systemax
Inc., Attention: Board of Directors (Corporate Governance), 11 Harbor Park
Drive, Port Washington, NY 11050.
Executive
Committee
The
Executive Committee consists of the Chairman of the Board and any Vice Chairman
and such other Directors as may be named thereto by the Board. The
current members of the Executive Committee are Messrs. Richard Leeds, Robert
Leeds, Bruce Leeds and Robert D. Rosenthal, the Lead Independent Director. 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. The Executive Committee is also
authorized to manage the affairs of the Corporation between meetings of the
Board; the Committee has all of the powers of the Board not inconsistent with
any provisions of the Delaware General Corporation Law, the Company’s By-Laws or
other resolutions adopted by the Board but does not generally exercise such
authority.
Compensation
of Directors
The
Company’s policy is not to pay compensation to Directors who are also employees
of the Company or its subsidiaries. Each non-employee Director receives annual
compensation as follows: $50,000 per year as base compensation, $5,000 per year
for each committee of which such director is a non-chair member, $15,000 per
year for each committee chair, and a grant each year of shares of Company stock
(restricted for sale for two years) in an amount equal to $25,000 divided by the
fair market value of such stock on the date of grant. The Lead
Independent Director, currently Robert D. Rosenthal, also receives an additional
$10,000 per year. The restricted stock grants were made pursuant to
the 2006 Stock Incentive Plan for Non-Employee Directors, which was approved by
stockholders at the 2006 Annual Stockholders’ Meeting.
DIRECTOR
COMPENSATION FOR YEAR ENDED DECEMBER 31, 2007
The
following table sets forth compensation on information regarding payments in
2007 to our non-employee Directors:
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
Ann
R. Leven
|
$75,000
|
$25,000
|
__
|
__
|
__
|
__
|
$100,000
|
Robert
D. Rosenthal
|
$85,000
|
$25,000
|
__
|
__
|
__
|
__
|
$110,000
|
Stacy
S. Dick
|
$75,000
|
$25,000
|
__
|
__
|
__
|
__
|
$100,000
|
|
(1)These
columns represent the dollar amount recognized for financial reporting
purposes with respect to the 2007 year for the fair value of stock awards
and option awards with respect to grants in 2007. Fair values
have been determined under SFAS 123R. For the stock awards,
fair value was calculated using the closing price of the Shares on the
date of grant and multiplying it by the number of shares subject to
grant. In accordance with SEC rules, this amount disregards the
estimate of forfeitures on service-based awards.
The
following table presents the aggregate number of outstanding stock awards
and stock option awards held by each of our non-employee Directors on
December 31, 2007:
|
|
Name:
|
Stock Awards
|
Option Awards
|
|
|
Ann
R. Leven
|
2,927
|
13,000
|
|
|
Robert
D. Rosenthal
|
2,927
|
11,000
|
|
|
Stacy
S. Dick
|
2,927
|
19,500
|
|
|
REPORT
OF THE AUDIT COMMITTEE*
The Audit
Committee of the Board operates under its charter, which was originally adopted
by the Board in 2000 and revised in February 2003 and August
2006. Management is responsible for the Company’s internal accounting
and financial controls, the financial reporting process, the internal audit
function and compliance with the Company’s policies and legal
requirements. The Company’s independent registered public accountants
are responsible for performing an independent audit of the Company’s
consolidated financial statements in accordance with standards of the Public
Company Accounting Oversight Board (United States) and for issuance of a report
thereon; they also perform limited reviews of the Company’s 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’s 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 Company management and by the independent
registered public accountants, as well as by other experts that the Committee
hires.
The
Committee reviewed and discussed the audited consolidated financial statements
of the Company for the year ended December 31, 2007 with management, who
represented that the Company’s consolidated financial statements for fiscal 2007
were prepared in accordance with U.S. generally accepted accounting
principles. It discussed with Ernst & Young LLP, the Company’s
independent registered public accountants for fiscal 2007, those matters
required to be reviewed pursuant to Statement of Accounting Standards No. 61
(“Communication with Audit Committees”), as amended by Statement of Accounting
Standards No. 90 (Audit Committee Communications). The Committee has
received from Ernst & Young LLP written independence disclosures and the
letter required by Independence Standards Board Standard No. 1 (“Independence
Discussions with Audit Committees”) and had a discussion with Ernst & Young
LLP regarding their 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 Company for the year ended December 31, 2007 as audited by
Ernst & Young LLP be included in the Company’s Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
|
Ann R. Leven
(Chair)
|
Stacy
S. Dick
|
Robert
D. Rosenthal
|
_____________________________
*
|
This
report shall not be deemed incorporated by reference into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934,
except to the extent we specifically incorporate this information by
reference.
|
EXECUTIVE
OFFICERS
The
following table sets forth certain information with respect to the executive
officers of the Company as of April 17, 2008.
Name
|
Age
|
Office
|
Richard
Leeds
|
48
|
Chairman
and Chief Executive Officer; Director
|
Bruce
Leeds
|
52
|
Vice
Chairman; Director
|
Robert
Leeds
|
52
|
Vice
Chairman; Director
|
Gilbert
Fiorentino
|
48
|
President
of SYX Services Inc.; Director
|
Lawrence P.
Reinhold
|
48
|
Executive
Vice President and Chief Financial Officer
|
Thomas
Axmacher
|
48
|
Vice
President and Controller
|
Curt S.
Rush
|
54
|
General
Counsel and Secretary
|
For
information on Richard Leeds, Bruce Leeds, Robert Leeds and Gilbert Fiorentino,
see page 2.
Lawrence
P. Reinhold was appointed Executive Vice President and Chief Financial Officer,
the principal financial officer of the Company, effective January 17,
2007. Mr. Reinhold was a business, finance and accounting consultant
in 2006. Previously he was Executive Vice President and Chief
Financial Officer of Greatbatch, Inc., a publicly traded developer and
manufacturer of components used in implantable medical devices from 2002 through
2005; Executive Vice President and Chief Financial Officer of Critical Path,
Inc. a publicly traded communications software company in 2001; and a Managing
Partner of PricewaterhouseCooopers LLP with responsibility for its Technology,
Information, Communications, Media and Entertainment industry practice in the
Midwestern United States from 1998 until 2000 (and held other positions at that
firm from 1982 until 2000). He received his B.S. degree in Business
Administration in 1982 and his M.B.A. in 1987 from San Diego State University
and received his Certified Public Accountant license in California in
1984.
Thomas
Axmacher was appointed Vice President and Controller of the Company effective
October 2, 2006. He was previously Chief Financial Officer of
Curative Health Services, Inc., a publicly traded health care
company. He held that position from 2001 to 2006. From
1991 to 2001 Mr. Axmacher served as Vice President and Controller of that
company. From 1986 to 1991 Mr. Axmacher served as Vice President and
Controller of Tempo Instrument Group, an electronics
manufacturer. Mr. Axmacher received his B.S. degree in Accounting in
1982 from Albany University and his M.B.A. in 1992 from Long Island
University.
Curt S.
Rush has been General Counsel and Secretary of the Company since
1996. Prior to joining the Company, Mr. Rush was employed from 1993
to 1996 as Corporate Counsel to Globe Communications Corp. and from 1990 to 1993
as Corporate Counsel to the Image Bank, Inc. Prior to that he was a
corporate attorney with the law firms of Shereff, Friedman, Hoffman &
Goodman and Schnader, Harrison, Segal & Lewis. Mr. Rush graduated
from Hunter College in 1981 with a B.A. degree in Philosophy and graduated with
honors from Brooklyn Law School in 1984 where he was Second Circuit Review
Editor of the Law Review. He was admitted to the Bar of the State of
New York in 1985.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The
following table provides certain information regarding the beneficial ownership
(1)
of the Shares as of April 17, 2008, the record date for the Annual Meeting, by
(i) each of the Directors and officers listed in the summary compensation
table, (ii) all current Directors and officers as a group and
(iii) each person known to the Company to be the beneficial owner of 5% or
more of any class of the Company’s voting securities.
Directors and Executive
Officers
|
|
Amount
and Nature of
Beneficial Ownership (a)
|
|
|
Percent of Class
|
|
Richard
Leeds (2)
|
|
|
10,494,937
|
|
|
|
28.6 |
% |
Bruce
Leeds (3)
|
|
|
8,421,004
|
|
|
|
23.0 |
% |
Robert
Leeds (4)
|
|
|
8,421,006 |
|
|
|
23.0 |
% |
Gilbert
Fiorentino
(5)
|
|
|
1,137,763 |
|
|
|
3.1 |
% |
Stacy
S. Dick (6)
|
|
|
22,927 |
|
|
|
* |
|
Robert
D. Rosenthal (7)
|
|
|
48,927 |
|
|
|
* |
|
Ann
R. Leven (8)
|
|
|
16,927 |
|
|
|
* |
|
Lawrence P. Reinhold
(9)
All
current Directors and executive officers of the Company (10
persons)
|
|
|
29,000
25,588,120
|
|
|
|
*
69.8
|
% |
|
|
|
|
|
|
|
|
|
Other Beneficial
Owners of 5% or More of the Company’s Voting Stock
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
(a)
|
Amounts
listed below may include shares held in partnerships or trusts that are
counted in more than one individual’s
total.
|
(1)
|
As
used in this table “beneficial ownership” means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of
any security. A person is deemed as of any date to have
“beneficial ownership” of any security that such person has a right to
acquire within 60 days after such date. Any security that any
person named above has the right to acquire within 60 days is deemed to be
outstanding for purposes of calculating the ownership percentage of such
person, but is not deemed to be outstanding for purposes of calculating
the ownership percentage of any other person. Unless otherwise
stated, each person owns the reported shares directly and has the sole
right to vote and determine whether to dispose of such
shares.
|
(2)
|
Includes
3,136,666 shares owned by Mr. Leeds directly, 2,890,769 shares owned by
the Richard Leeds 2006 GRAT and 896,155 shares owned by the Richard Leeds
2007 GRAT. Also includes 1,838,583 shares owned by a limited
partnership of which Richard Leeds is the general partner, 235,850 shares
owned by a limited partnership of which a limited liability company
controlled by Mr. Leeds is the general partner, 977,114 shares owned by
irrevocable trusts for the benefit of his brothers’ children for which
Richard Leeds acts as co-trustee and 519,800 shares owned by a limited
partnership in which Richard Leeds has an indirect pecuniary
interest. Mr. Leeds’ mailing address is Richard Leeds, c/o
Systemax Inc., 11 Harbor Park Drive, Port Washington, NY
11050.
|
(3)
|
Includes
3,137,166 shares owned by Mr. Leeds directly, 2,890,769 shares owned by
the Bruce Leeds 2006 GRAT and 896,155 shares owned by the Bruce
Leeds 2007 GRAT. Also includes 977,114 shares owned by
irrevocable trusts for the benefit of his brothers’ children for which
Bruce Leeds acts as co-trustee and 519,800 shares owned by a limited
partnership in which Bruce Leeds has an indirect pecuniary
interest. Mr. Leeds’ mailing address is Bruce Leeds, c/o
Systemax Inc., 11 Harbor Park Drive, Port Washington, NY
11050.
|
(4)
|
Includes
2,137,168 shares owned by Mr. Leeds directly, 3,666,037 shares owned by
the Robert Leeds 2006 GRAT and 1,120,887 shares owned by the Robert Leeds
2007 GRAT. Also includes 977,114 shares owned by irrevocable
trusts for the benefit of his brothers’ children for which Robert Leeds
acts as co-trustee and 519,800 shares owned by a limited partnership in
which Robert Leeds has an indirect pecuniary interest. Mr.
Leeds’ mailing address is Robert Leeds, c/o Systemax Inc., 11 Harbor Park
Drive, Port Washington, NY 11050.
|
(5)
|
Includes
options to acquire 320,003 shares that are currently exercisable pursuant
to the terms of the Company’s 1995 and 1999 Long-Term Stock Incentive
Plan.
|
(6)
|
Includes
options to acquire a total of 19,500 shares that are exercisable
immediately pursuant to the terms of the Company’s 1995 Stock Plan for
Non-Employee Directors
|
(7)
|
Includes
options to acquire a total of 11,000 shares that are exercisable
immediately pursuant to the terms of the Company’s 1995 Stock Plan for
Non-Employee Directors.
|
(8)
|
Includes
options to acquire a total of 13,000 shares that are exercisable
immediately pursuant to the terms of the Company’s 1995 Stock Plan for
Non-Employee Directors.
|
(9)
|
Includes
options to acquire 25,000 shares that are currently exercisable pursuant
to the terms of the Company’s 1999 Long-Term Stock Incentive
Plan.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s executive officers and
Directors and persons who own more than ten percent of a registered class of the
Company’s equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
Directors and ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of Section 16(a) forms received by it, or
written representations from certain reporting persons, the Company believes its
executive officers and Directors complied with all such filing requirements for
the year ended December 31, 2007 with the exception of the late filing of a Form
4 by one of its Directors.
TRANSACTIONS
WITH RELATED PERSONS
Under the
Company’s Corporate Ethics Policy, officers, Directors and all 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 an individual’s
private interest interferes in any way with the interests of the
Company. A conflict situation can arise when a Company Representative
takes actions or has interests that may make it difficult to perform his or her
Company work objectively and effectively. Conflicts of interest also
arise when a Company Representative, or a member of his or her family, receives
improper personal benefits as a result of his or her position in the
Company. Company Representatives cannot allow any consideration such
as the receipt of gifts or financial interests in other businesses or personal
or family relationships to interfere with the independent exercise of his or her
business judgment and work activities to the benefit of the
Company. Loans to, or guarantees of obligations of, Company
Representatives are prohibited unless permitted by law and authorized by the
Board or a Committee designated by the Board. If a Company
Representative becomes aware of a potential conflict of interest he or she must
communicate such potential conflict of interest to the Company.
The
Company’s corporate approval policy requires related party transactions
(specifically Company agreements, including leases, with “related parties” and
sales or purchases of inventory or other Company assets by “related parties”) to
be approved by the Company’s Audit Committee as well as the Company’s CEO, CFO
and General Counsel.
Leases
The
Company has leased its facility in Port Washington, NY since 1988 from Addwin
Realty Associates, an entity owned by Richard Leeds, Bruce Leeds and Robert
Leeds, Directors of the Company and the Company’s three senior officers and
principal stockholders. Rent expense under this lease totaled $612,000 for the
year ended December 31, 2007. The Company believes that these
payments were no higher than would be paid to an unrelated lessor for comparable
space.
Stockholders
Agreement
Certain
members of the Leeds family (including Richard Leeds, Bruce Leeds and Robert
Leeds) and family trusts of Messrs. Leeds entered into a stockholders agreement
pursuant to which the parties agreed to vote in favor of the nominees for the
Board designated by the holders of a majority of the Shares held by such
stockholders at the time of the Company’s initial public offering of the
Shares. In addition, the agreement prohibits the sale of the Shares
without the consent of the holders of a majority of the Shares held by all
parties to the agreement, subject to certain exceptions, including sales
pursuant to an effective registration statement and sales made in accordance
with Rule 144. The agreement also grants certain drag-along rights in
the event of the sale of all or a portion of the Shares held by holders of a
majority of the Shares. As of December 31, 2007, the parties to the
stockholders agreement beneficially owned 24,779,200 Shares subject to such
agreement (constituting approximately 69 % of the Shares
outstanding).
Pursuant
to the stockholders agreement, the Company granted to the parties demand and
incidental, or “piggy-back,” registration rights with respect to the
Shares. The demand registration rights generally provide that the
holders of a majority of the Shares may require, subject to certain restrictions
regarding timing and number of Shares, that the Company register under the
Securities Act all or part of the Shares held by such
stockholders. Pursuant to the incidental registration rights, the
Company is required to notify such stockholders of any proposed registration of
the Shares under the Securities Act and if requested by any such stockholder to
include in such registration any number of shares of Shares held by it subject
to certain restrictions. The Company has agreed to pay all expenses
and indemnify any selling stockholders against certain liabilities, including
under the Securities Act, in connection with registrations of Shares pursuant to
such agreement.
Related
Business
Richard
Leeds and Robert Leeds are minority owners of a wholesale business that sells
certain products to mass merchant customers. These products are, in
some instances, similar to the type of products sold by the
Company. The Company believes that the sales volume of competitive
products sold by this wholesale business is not significant. In 2007
the Company subleased office space to this business at an annual rent of
approximately $34,000. The Company believes this sublease was entered into on an
arms-length basis. The Company did not transact any other business with this
wholesale business in 2007.
Related
Insurance Broker
The son
of Bruce Leeds, the Company’s Vice Chairman, was an employee/shareholder of
a company that was an independent representative of an insurance brokerage firm
that handled certain of the Company’s insurance matters during 2006 and
2007. This brokerage firm earned approximately $440,000 in
commissions from the Company in 2007. The Company believes that its
transactions with this insurance brokerage firm were made on an arms-length
basis.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Objectives
and Philosophy of Our Executive Compensation Programs
The
Company’s executive compensation programs are designed to achieve a number of
important objectives, including attracting and retaining individuals of superior
ability and managerial talent, rewarding individual contributions to the
achievement of the Company’s business objectives, promoting integrity and good
corporate governance, and motivating executive officers to manage the Company in
a manner that will enhance the Company’s growth and financial performance for
the benefit our stockholders, customers and other constituencies.
Compensation
of the Company’s executive officers is determined based primarily upon an
evaluation of Company performance as it relates to three general business
areas:
·
|
Operational
and Financial Performance (utilizing standard metrics such as net sales,
operating income, gross margin, earnings per share, working capital,
stockholder equity and peer group
comparisons);
|
·
|
Strategic
Accomplishments (including growth in the business and in the value of the
Company’s assets); and
|
·
|
Corporate
Governance and Oversight (encompassing legal and regulatory compliance and
adherence to company policies including the timely filing of periodic
reports with the SEC, the Sarbanes-Oxley Act, employment and safety laws
and regulations and the Company’s corporate ethics
policy).
|
In
determining the compensation of a particular executive, consideration is given
to the specific corporate responsibilities that executive is charged with as
they relate to the foregoing business areas.
Elements
of Our Executive Compensation Programs
To
promote the objectives described above, our executive compensation programs
typically consist of the following principal elements:
·
|
Stock–based
incentives (other than for the Chairman/CEO and the two Vice Chairman of
the Company who are considered majority stockholders of the Company);
and
|
·
|
Benefits,
perquisites and other compensation.
|
Base Salary - Salary levels
generally are determined based on individual and Company performance as well as
a subjective assessment of prevailing levels among the Company’s
competitors.
Cash Bonuses - In
establishing annual bonuses, the Company considers such factors relating to the
Company’s overall performance and assigns such weight to each such factor as it,
in its discretion, deems appropriate. The Company may also consider
its assessment of each individual’s contribution to the Company’s performance.
If stockholders approve Proposal 2, the Company will determine cash bonuses to
its most highly compensated officers pursuant to the Systemax Executive
Incentive Plan.
Stock–Based Incentives -
Stock-based incentives, at the present time consisting of (a) stock options
granted at 100% of the stock’s fair market value on the grant date and/or (b)
restricted stock units granted subject to certain performance conditions,
constitute the long-term portion of the Company’s executive compensation
package. Stock options provide an incentive for executives to manage
the Company with a view to achieving results which would increase the Company’s
stock price and, therefore, the return to the Company’s
stockholders. The number and timing of stock option grants are
decided in part based on the Company’s subjective assessment of prevailing
levels of similar compensation among the Company’s competitors. Stock
option and restricted stock unit grants must be approved by the Compensation
Committee of the Board, or, with respect to grantees who are not officers or
directors, by the Compensation Committee’s designee. Richard Leeds
(Chairman and CEO), Bruce Leeds (Vice Chairman) and Robert Leeds (Vice Chairman)
do not receive stock options or other stock–based incentives as part of their
compensation. The Messrs. Leeds are members of a family group that
together owns more than 60% of the stock of the Company.
Benefits, Perquisites and Other
Compensation - The Company provides various employee benefit programs to
its executive officers, including medical, dental and life insurance benefits
and our 401(k) plan, which includes Company contributions. The
Company also provides Company-owned or leased cars or automobile allowances and
gasoline cost reimbursement to certain executive officers and other Company
managers as well as other benefits generally available to all
employees. Certain Company executives also have or are entitled to
receive severance payments, relocation allowances and/or change of control
payments pursuant to negotiated employment agreements they have with the Company
(see below). The Company does not provide to executive officers
any (a) pension benefits or (b) deferred compensation under any
defined contribution or other plan on a basis that is not
tax-qualified.
Role
of the Compensation Committee
The
Compensation Committee’s responsibility is to review and approve corporate goals
relevant to the compensation of the Chief Executive Officer and, after an
evaluation of the Chief Executive Officer’s performance in light of such goals,
to set the compensation of the Chief Executive Officer. The
Compensation Committee also approves, upon the recommendation of the Chief
Executive Officer, (a) the annual compensation of the other executive officers
of the Company, (b) the annual compensation of certain subsidiary managers, and
(c) all individual stock incentive grants to other executive
officers. The Committee is also responsible for reviewing and making
periodic recommendations to the Board with respect to the general compensation,
benefits and perquisite policies and practices of the Company including the
Company’s stock-incentive based compensation plans.
Stock
Option Grant Practices
In order
to avoid any impropriety or even the appearance of any impropriety with respect
to the timing of equity grants, the Compensation Committee adopted the following
policies in 2007:
1.
|
The
Compensation Committee will not, except in unusual circumstances, delegate
to the Company officers the authority to grant options to
employees. Instead, Company management will present to the
Compensation Committee in advance a list of prospective grantees with the
specific number of option shares proposed to be granted to each
grantee. The Compensation Committee shall then consider and if
agreed, in its discretion, approve the list (with or without
modification). The grant date of such options shall be the date
of the Committee approves the list and the exercise price of such options
shall be the NYSE closing price of the Company stock on the grant
date.
|
2.
|
The
Compensation Committee will be cognizant of timing the grant of options in
relation to the publication of Company earnings releases and other public
announcements so as to avoid any perception of “spring-loading”
or “bullet-dodging,” i.e. granting options just after the release of
unfavorable news or before the release of favorable news. Stock
option grants will not be made, generally, until after the Company has
disclosed, and the market has had an opportunity to react to, material,
potentially market-moving, information concerning the
Company.
|
3.
|
In
general, employee stock option grants will be made at fixed times each
year.
|
Tax
Deductibility Considerations
It is our
policy generally to qualify compensation paid to executive officers for
deductibility under section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”). Section 162(m) generally prohibits
deducting the compensation of executive officers that exceeds $1,000,000 unless
that compensation is based on the satisfaction of objective performance
goals. Our stock incentive plans (the 1995 Long-term Stock Incentive
Plan, the 1999 Long-term Stock Incentive Plan, as amended, the 1995 Stock Option
Plan for Non-Employee Directors and the 2006 Stock Incentive Plan for
Non-Employee Directors) are structured to permit awards under such plans to
qualify as performance-based compensation and to maximize the tax deductibility
of such awards. However, we reserve the discretion to pay
compensation to our executive officers that may not be deductible.
Compensation
of Executive Officers in 2007
In
determining the compensation of the Company’s Chief Executive Officer for the
year 2007 and approving the annual compensation of the Company’s other executive
officers, the Committee considered, among other factors, the increase in Company
revenues from the prior year (19%), the increase in income from operations from
the prior year (54%), the increase in net income from the prior year (54%) and
the increase in diluted earnings per Share (51%). The Compensation Committee
also considered the timely filing of the Company’s annual and quarterly SEC
reports for the year 2007 and the attestation report of Ernst & Young,
an independent registered public accounting firm, on the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2007
(a copy of which is included in the Company’s Annual Report on From 10-K for the
fiscal year ended December 31, 2007).
Compensation
Arrangements of Certain Executive Officers
Richard
Leeds
Richard
Leeds, Chairman and Chief Executive Officer of the Company, has no employment
agreement. Mr. Leeds received an annual salary of $442,600 in 2007
and $420,000 in 2006. He received a cash bonus of $600,000 in both
2007 and 2006. Mr. Leeds received $19,843 in other compensation in
2007 and $27,795 in 2006. He received no stock options or other stock-based
incentive grants in either 2007 or 2006.
Robert
Leeds
Robert
Leeds, Vice Chairman of the Company, has no employment agreement. Mr.
Leeds received an annual salary of $405,365 in 2007 and $389,881 in
2006. He received a cash bonus of $400,000 in 2007 and $250,000 in
2006. Mr. Leeds received $18,923 in other compensation in 2007 and $21,890 in
2006. Mr. Leeds received no stock options or other stock-based incentive grants
in either 2007 or 2006.
Bruce
Leeds
Bruce
Leeds, the Vice Chairman of the Company has no employment agreement. Mr. Leeds
received an annual salary of $405,365 in 2007 and $389,881 in
2006. He received a cash bonus of $400,000 in 2007 and $250,000 in
2006. Mr. Leeds received $21,912 in other compensation in 2007 and $26,061 in
2006. Mr. Leeds received no stock options or other stock-based incentive grants
in either 2007 or 2006.
Gilbert
Fiorentino
On
October 12, 2004, the Company entered into an employment agreement with Gilbert
Fiorentino, the President of SYX Services Inc. and a director of the
Company. The agreement was effective as of June 1, 2004 and expires
on December 31, 2013 unless terminated sooner under the terms of the
agreement. The Company may terminate the agreement without cause on
30 days’ notice provided certain severance payments are made (see
below).
Mr.
Fiorentino’s compensation consists of a base salary at the initial annual rate
of $400,000 (which is increased by five percent per year subject to certain
Company earnings requirements) and a performance bonus of $250,000 per year
(similarly increasing annually) provided that he meets certain performance
criteria previously established from time to time by the Executive Committee of
the Board of Systemax. He is also eligible for an additional bonus,
in the discretion of the Board. In 2007 Mr. Fiorentino received
$456,484 in annual salary and a cash bonus of $1,983,000. In 2006 Mr.
Fiorentino received $453,923 in annual salary and a cash bonus of $950,000. He
received $624,916 in other compensation in 2007 (including a $600,000 dividend
equivalent payment) and $37,709 in other compensation in 2006. His cash bonus in
2007 was determined based on the increase in 2007 in the operating income
(EBITDA) of the Technology Products segment of the Company as compared with
2006. Mr. Fiorentino received no stock options or other stock based incentive
grants in 2007. In 2006 he was granted an option to purchase 166,667 shares of
Company stock pursuant to his employment agreement.
Under the
terms of his employment agreement, Mr. Fiorentino is entitled to a special bonus
of 0.85% of the total proceeds of a “qualified” change of control transaction
upon the first occurrence of a change of control meeting certain
conditions. Additional benefits include medical benefits, life
insurance, an automobile and vacation. The Company has also agreed to
make certain “gross up” payments if other payments to Mr. Fiorentino are deemed
by the IRS to be subject to excise tax.
The
vesting schedule of previously granted options was accelerated as follows: Mr.
Fiorentino’s option to purchase 350,000 shares of Company stock, granted on
February 28, 2003, at an exercise price of $1.76 per Share and his option to
purchase 50,000 shares of Company stock, granted on April 1, 2003, at an
exercise price of $1.95 per Share both now vest at 20% per year with the first
20% vesting on October 12, 2004 (the date of execution of the employment
agreement). Mr. Fiorentino also was granted new options under the
Company’s 1999 Long Term Stock Incentive Plan for 166,667 shares, and the
agreement obligated the Company to issue additional options on 166,667 shares in
each of August 2005 and 2006, at the then-fair market value. Options
vest in five annual cumulative installments of 20% each.
Mr.
Fiorentino also was granted, pursuant to a restricted stock unit agreement (the
form of which is part of his employment agreement), 1,000,000 restricted stock
units under the 1999 Long Term Stock Incentive Plan conditioned on stock holder
approval and the satisfaction of certain performance conditions based on the
earnings before interest, taxes, depreciation and amortization in fiscal 2004 or
fiscal 2005. Such restricted stock units vested in accordance with
the following schedule: 200,000 on May 31, 2005 and 100,000 on April 1, 2006 and
each April thereafter, until April 1, 2015. The restricted stock
units do not reflect actual issued Shares; Shares are distributed within 30 days
after a “Distribution Event”. A Distribution Event is defined as the
earliest of the date that Mr. Fiorentino is no longer employed by the Company,
the date of a change of control (as defined) or January 1, 2006 for the units
that vest in 2005 or the date on which any subsequent units vest for units that
vest after 2005. If the Company pays dividends or makes other
distributions during the term of the restricted stock agreement, however, Mr.
Fiorentino has the right to receive equivalent payments under certain
circumstances, but shares of Company stock shall only be distributed when there
is a Distribution Event.
If Mr.
Fiorentino is terminated by the Company without cause (as defined in Mr.
Fiorentino’s employment agreement), under most circumstances he would become
vested in at least half of the restricted stock units that were awarded to him
(or all of such units under certain circumstances if a “Qualified Change of
Control” as, defined in the agreement, had occurred), subject to the Company’s
right to redeem such units.
Mr.
Fiorentino is subject to a two-year non-competition covenant following
termination of employment, although such period can be shortened to one year or
lengthened to three years by the Company in the event of a Termination Without
Cause (as defined). The Company is obligated to continue the
employee’s salary and certain other benefits for such non-competition period
after an early termination by (a) the Company other than for cause or (b) the
employee for “Good Reason” (as defined) or after the expiration of the agreement
at its scheduled termination date. In the event of a Termination
Without Cause by the Company or a termination by the employee for Good Reason,
certain unvested restricted stock units generally vest and certain options may
vest. In certain instances the Company has the right to redeem vested
restricted stock units at fair market value.
Lawrence
P. Reinhold
Lawrence
P. Reinhold was appointed Executive Vice President and Chief Financial Officer
effective January 17, 2007. The Company entered into an employment agreement
with Mr. Reinhold. The agreement provides for a minimum base salary of $400,000
(which may be increased in 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 four weeks vacation, a relocation
allowance, a car allowance of up to $1,200 per month or a company-leased car,
and an option to purchase 100,000 Shares pursuant to the Company’s 1999 Long
Term Stock Incentive Plan (vesting in four equal annual installments commencing
on the first anniversary of the grant).
The agreement is terminable upon death or total disability, by the
Company for “cause” (as defined) or without cause, or by the employee
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, any accrued but unused vacation time (up to four weeks) and, in
the event of termination for disability or death, the pro rata portion of any
bonus which would otherwise be paid. If Mr. Reinhold resigns for good
reason or if the Company terminates him for any reason other than disability,
death or cause, he shall also receive severance payments equal to 12 months’
base salary (or 24 months’ base salary if termination is within 60 days prior to
or one year following a “change of control,” as defined), one year’s base salary
bonus based on his average annual bonus for the prior two years (unless he was
employed for less than two years in which case he will receive a prorated bonus)
and a reimbursement of costs for COBRA insurance coverage in addition to the
payments paid for other terminations. The employment agreement includes
customary nondisclosure and intellectual property rights provisions and
non-compete/non-solicit provisions effective for one year following termination.
In 2007 Mr. Reinhold received $380,385 in annual salary, a cash bonus of
$325,000, a stock option grant of 100,000 shares of Company stock pursuant to
his employment agreement and $20,921 in other compensation.
Compensation Committee Report to
Stockholders*
The
Compensation Committee of the Board has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K, which
appears in this proxy statement, with the management of
Systemax. Based on this review and discussion, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in Systemax’s proxy statement on Schedule 14A.
COMPENSATION
COMMITTEE
|
Stacy
S. Dick
|
Robert
D. Rosenthal
|
Ann
R. Leven
|
Compensation
Committee Interlocks and Insider Participation
The
members of the Company’s Compensation Committee for fiscal year 2007 were Ann R.
Leven, Robert D. Rosenthal and Stacy S. Dick. The Company employs no
member of the Compensation Committee. No Director of the Company
served during the last completed fiscal year as an executive officer of any
entity whose compensation committee (or other comparable committee, or the
Board, as appropriate) included an officer of the Company. There are
no “interlocks” as defined by the Securities and Exchange
Commission.
___________________________
*
|
This
report shall not be deemed incorporated by reference into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934,
except to the extent we specifically incorporate this information by
reference.
|
SUMMARY
COMPENSATION TABLE
The
following table sets forth the compensation earned by the Chief Executive
Officer (“CEO”, our principal executive officer), Chief Financial Officer
(“CFO”, our principal financial officer), and the three most highly compensated
officers other than the CEO and CFO (collectively the “Named Executive
Officers”) for the years ended December 31, 2006 and 2007:
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
(1)
|
|
|
Non-Equity
Incentive Plan Compen-sation
($)
|
|
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
|
|
All
Other Compen-sation
($)
|
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Richard
Leeds
Chairman
and Chief Executive Officer (Principal Executive Officer)
|
|
|
2006
|
|
|
$
|
420,000
|
|
|
$
|
600,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
27,795 |
(2)
|
|
$ |
1,047,795
|
|
|
|
|
2007
|
|
|
|
442,600 |
|
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
$19,843 |
(2) |
|
$
|
1,062,443 |
|
Lawrence
P. Reinhold
Executive Vice
President
and Chief Financial
Officer (Principal Financial
Officer)
|
|
|
2006
2007
|
|
|
$ |
-
380,385
|
|
|
$ |
-
325,000
|
|
|
|
-
-
|
|
|
$ |
-
714,073
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
$ |
-
20,921 |
(3) |
|
$ |
-
1,440,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
Leeds
Vice
Chairman
|
|
|
2006
2007
|
|
|
$
$
|
389,881
$405,365 |
|
|
$
$
|
250,000
$400,000 |
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
- |
|
|
|
-
-
|
|
|
$ |
26,061 |
(4)
|
|
$ |
665,942
827,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,912 |
(4) |
|
|
|
|
Robert
Leeds
Vice
Chairman
|
|
|
2006
2007
|
|
|
$
$
|
389,881 $405,365
|
|
|
$
$
|
250,000
$400,000 |
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
- |
|
|
|
-
-
|
|
|
$ |
21,890 |
(5) |
|
$
|
661,771
824,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
$18,923 |
(5) |
|
|
|
|
Gilbert
Fiorentino
President
of SYX Services Inc.
|
|
|
2006
|
|
|
$ |
453,923
|
|
|
$ |
950,000
|
|
|
|
-
|
|
|
$ |
917,438 |
|
|
|
-
|
|
|
|
-
|
|
|
$ |
37,709 |
(6) |
|
$ |
2,359,070
|
|
|
|
|
2007
|
|
|
$
|
456,484 |
|
|
$ |
1,983,00 |
|
|
|
- |
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
$ |
624,916 |
(6) |
|
$ |
3,064,400 |
|
|
(1)
This column represents the dollar amount recognized for financial
statement purposes with respect to the 2006 and 2007 fiscal years for the
fair value of stock options granted in 2006 as well as in prior years in
accordance with SFAS 123R. 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.
|
|
(2)
Includes $22,599 in auto-related expenses in 2006 and $19,843 in
2007. In 2006 also includes certain medical insurance and other
employee benefits not generally available to
employees.
|
(3) Includes $17,546 in
auto-related expenses. Also includes Company 401K contributions.
|
(4)
Includes $20,865 in auto-related expenses in 2006 and $21,912 in
2007. In 2006 also includes certain medical insurance and other
employee benefits not generally available to
employees.
|
|
(5)
Includes $16,694 in auto-related expenses in 2006 and $18,923 in
2007. In 2006 also includes certain medical insurance and other
employee benefits not generally available to
employees.
|
|
(6)
In 2007 includes $600,000 in a dividend equivalent payment. Includes
$22,635 in auto-related expense in 2006 and $21,541 in 2007. Also includes
Company 401K contributions and in 2006 certain medical insurance and other
employee benefits not generally available to
employees.
|
GRANTS
OF PLAN-BASED AWARDS IN 2007
The
following table shows information regarding grants of non-equity incentive plan
awards and grants of equity awards that the Company made during the fiscal year
ended December 31, 2007 to each of the Named Executive Officers receiving such
awards:
|
|
|
|
|
All
Other Stock Awards: Number of Shares of Stock or Units
(#)
|
All
Other Option Awards: Number of Securities Underlying
Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Grant
Date Fair Value of Stock and Option Awards(1)
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under Non-Equity Incentive
Plan
Awards
|
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
Lawrence
P. Reinhold
|
1/17/2007
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
100,000
|
$20.15
|
$1,446,307
|
(i)
|
This
column represents the fair value of the stock option on the granted dated
determined in accordance with the provisions of SFAS 123R. As per SEC
rules relating to executive compensation disclosure, the amounts shown
exclude the impact of forfeitures related to service based vesting
conditions. These amounts were calculated using the Black-Scholes
option-pricing model.
|
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2007
The
following table shows information regarding grants of stock options and grants
of unvested stock awards outstanding on the last day of the fiscal year ended
December 31, 2007, including both awards subject to performance conditions and
non-performance based awards, to each of the Named Executive Officers holding
such awards:
|
|
|
|
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
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
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
(g)
|
(h)
|
(i)
|
(j)
|
Lawrence
P. Reinhold
|
-
|
100,000
(1)
|
-
|
$20.15
|
1/17/17
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Gilbert
Fiorentino
|
20,000
(1)
|
-
|
-
|
$7.31
|
10/25/09
|
|
-
|
-
|
-
|
-
|
50,833
(1)
|
-
|
-
|
$1.95
|
2/15/11
|
|
-
|
-
|
-
|
-
|
50,833
(1)
|
-
|
-
|
$3.05
|
5/31/12
|
|
-
|
-
|
-
|
-
|
280,000
(2)
|
70,000 (2)
|
-
|
$1.76
|
2/28/13
|
|
-
|
-
|
-
|
-
|
40,000
(2)
|
10,000 (2)
|
-
|
$1.95
|
4/1/13
|
|
-
|
-
|
-
|
-
|
133,334
(3)
|
33,333 (3)
|
-
|
$5.65
|
10/11/14
|
|
-
|
-
|
-
|
-
|
100,001
(3)
|
66,666 (3)
|
-
|
$6.80
|
3/22/16
|
|
-
|
-
|
-
|
-
|
66,667
(3)
|
100,000
(3)
|
-
|
$8.06
|
8/25/16
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
600,000
|
$10,770,000
|
-
|
-
|
(1) Options
vested 25% per year over four years from date of grant.
|
(2) Options
vested 20% over five years from date of grant.
|
(3) Granted
pursuant to Mr. Fiorentino’s employment contract (see page 14). Options
vest 20% per year over five years from date of
grant.
|
OPTION
EXERCISES AND STOCK VESTED IN 2007
The
following table shows information regarding exercise of options to purchase
Systemax common stock and vesting of stock awards by each of the Named Executive
Officers whose options were exercised or awards vested during the fiscal year
ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Number
of Shares Acquired on Exercised
(#)
|
|
Value
Realized on Exercised
($)
(1)
|
|
Number
of Shares Acquired on Vesting
(#)
|
|
Value
Realized
on
Vesting
($) (1)
|
(a)
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Gilbert
Fiorentino
|
-
|
|
-
|
|
300,000
|
|
$5,363,000
|
(1)
Value realized is based upon the closing price of the company’s stock on the
exercise or vesting date.
If
employment of any of our named officers is terminated without cause (as defined
in the executive’s employment agreement) in a situation not involving a change
in control, the chart below sets forth the severance payments that would have
been made based on a hypothetical termination date of December 31, 2007 and
using the closing price of our stock on the last trading date before that
date. These amounts are estimates and the actual amounts to be paid
can only be determined at the time of the termination of the officer’s
employment.
Termination
of Employment Without Change In Control
Name
|
Cash
Compensation
(Salary)
($)
|
|
Value
of
Accelerated
Vesting
of
Stock Awards
($)
|
|
Medical
and
Other
Benefits
($)
|
|
|
Richard
Leeds
|
--
|
|
--
|
|
--
|
|
--
|
Bruce
Leeds
|
--
|
|
--
|
|
--
|
|
--
|
Robert
Leeds
|
--
|
|
--
|
|
--
|
|
--
|
Gilbert
Fiorentino
|
$912,968(1)
|
|
$2,870,324(2)
|
|
$34,800(3)
|
|
$3,818,092
|
Lawrence
P. Reinhold
|
$400,000(4)
|
|
--
|
|
--
|
|
$400,000
|
Upon a
change in control, the chart below sets forth the change in control payments
that would have been made based on a hypothetical change of control date of
December 31, 2007 and using the closing price of our stock on the last trading
date before that date. These amounts are estimates and the actual
amounts to be paid can only be determined at the time of the change of
control.
Change
In Control Payments
Name
|
|
Value
of
Accelerated
Vesting
of
Stock Awards
($)
|
Medical
and
Other
Benefits
($)
|
|
Richard
Leeds
|
--
|
--
|
--
|
--
|
Bruce
Leeds
|
--
|
--
|
--
|
--
|
Robert
Leeds
|
--
|
--
|
--
|
--
|
Gilbert
Fiorentino
|
$912,968 (1)
(5)
|
$13,030,324(6)
|
$34,800(7)
|
$13,978,092
(8)
|
Lawrence
P. Reinhold
|
$800,000(9)
|
--
|
$34,800
|
$834,800
|
(1)
Represents 2 years’ salary. Additional bonus payment may also be
due.
(2)
Represents accelerated vesting of 100,000 restricted stock units and options to
purchase 66,666 shares of Company stock.
(3)
Represents 2 years’ medical and other benefits.
(4)
Represents 1 year’s salary.
(5) Upon
a “Qualifying Change of Control” as defined in his employment agreement, Mr.
Fiorentino would also receive 0.85% of “Qualifying Value” of “Qualifying Change
of Control” transaction as defined in his employment
agreement.
(6)
Represents accelerated vesting of 600,000 restricted stock units and options to
purchase 66,666 shares of Company stock.
(7) Upon
a change in control, Mr. Fiorentino may be subject to certain excise taxes under
Section 280G of the Code. The Company has agreed to reimburse Mr.
Fiorentino for those excise taxes as well as for any income and excise taxes
payable by the officers as a result of any such reimbursement capped at $6
million in the aggregate.
(8) Total
additional amounts for (a) bonus, (b) change of control payment as described in
footnote (5), and (c) reimbursement of excise taxes as described in footnote (7)
may also be due.
(9)
Represents 2 years’ salary.
APPROVAL
OF THE EXECUTIVE INCENTIVE PLAN
Item
2 on Proxy Card
The
Compensation Committee has determined that the adoption of an executive
incentive plan (the “Systemax Executive Incentive Plan”) will assist the Company
in providing competitive incentive opportunities to executive officers of the
Company who can significantly influence the Company’s performance and improve
its ability to attract and motivate its management team. In this
regard, subject to stockholder approval of this proposal, executive officers of
the Company will be eligible to receive an annual cash bonus, not to exceed 500%
of their base salary, based on the Company’s achievement of certain annual
performance−based goals.
The Board
proposes that stockholders approve the Executive Incentive Plan, so that if
established goals and targets are met, certain payments that would be made under
this plan to the Company’s most highly compensated officers may be deductible by
the Company for federal income tax purposes.
Generally,
Section 162(m) of the Code does not permit publicly held companies like the
Company to deduct compensation paid to certain executive officers to the extent
it exceeds $1 million per officer in any year. However, a
performance−based compensation plan that is approved by stockholders at least
once every five years generally will not be subject to this deduction
limit. So long as the Company complies with these and other
requirements set forth in Section 162(m) of the Code, all amounts paid to
executive officers under the plan will qualify for a federal tax deduction by
the Company.
The
Systemax Executive Incentive Bonus Plan is set forth below:
Systemax
Executive Incentive Plan
·
|
The
purpose of the Systemax Executive Incentive Plan is to promote the
achievement of the Company’s business objectives by providing cash bonus
awards to those executive officers who can significantly impact the
Company’s performance towards those objectives. Further, the
Executive Incentive Plan enhances the Company’s ability to attract,
develop and motivate individuals as members of a talented management
team. As described herein, the cash bonus awards made under the
Executive Incentive Plan may recognize Company, business unit, team and/or
individual performance. The number of Company executives who
are eligible to participate in the Executive Incentive Plan is currently
seven.
|
·
|
If
the Executive Incentive Plan is approved, the Compensation Committee will
administer the plan, and may amend the plan. This committee is
composed entirely of independent directors of the Company, as defined
under Section 162(m) of the Code.
|
·
|
Cash
bonus awards made under the Systemax Executive Incentive Plan will be
subject to a participant achieving one or more performance goals
established by the Compensation Committee. The performance
goals may be based on the overall performance of the Company, and also may
recognize business unit, team and/or individual performance. No
payment will be made under the Executive Incentive Plan unless the
Compensation Committee certifies that at least the minimum objective
performance measures have been met.
|
·
|
Performance
goals will be determined based primarily upon three general business
areas:
|
1)
Operational and Financial Performance (utilizing standard metrics such as net
sales, operating income, gross margin, earnings per share, working capital,
stockholder equity and peer group comparisons);
2)
Strategic Accomplishments (including growth in the business and in the value of
the Company’s assets); and
3)
Corporate Governance and Oversight (encompassing legal and regulatory compliance
and adherence to company policies including the timely filing of periodic
reports with the SEC, the Sarbanes-Oxley Act, employment and safety laws and
regulations and the Company’s corporate ethics policy).
In
determining the compensation of a particular executive, consideration is given
to the specific corporate responsibilities that executive is charged with as
they relate to the foregoing business areas.
·
|
The
Compensation Committee would have the discretion to reduce the amount
payable to, or to determine that no amount will be paid to, a
participant.
|
·
|
The
amount of any cash bonus award will vary based on the level of actual
performance. The amount of any award for a given year is
determined for each participant by multiplying the individual
participant’s actual base salary in effect at the end of that year by a
target percentage (from 0% to 500%), related to the attainment of one or
more performance goals, determined by the Compensation
Committee. The maximum amount payable under the Executive
Incentive Plan to any participant for any fiscal year of the Company
is $5 million. In the event that an award contains more than one
performance goal, participants in the plan will be entitled to receive the
portion of the target percentage allocated to the performance goal
achieved. In the event that the Company does not achieve at
least the minimum performance goals established, no award payment will be
made.
|
·
|
The
actual amount of future payments under the Executive Incentive Plan will
be based on the Company’s future performance as it relates to the three
aforementioned general business areas, the applicable
future performance goals for a particular executive and the target
percentages to be established by the Compensation
Committee.
|
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
EXECUTIVE INCENTIVE PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED
PROXY CARD.
APPROVAL
OF AMENDMENTS TO THE COMPANY’S 1999 LONG-TERM STOCK
INCENTIVE
PLAN
Item
3 on Proxy Card
The
Company’s Board of Directors is recommending that the Company’s 1999 Long Term
Stock Incentive Plan (the “Plan”) be amended to (a) increase the number of
Shares with respect to which awards may be granted under the Plan to a total of
7,500,000 million Shares and (b) extend the expiration date of the Plan to
December 31, 2010. Stockholder approval is being sought in order to
qualify options granted under the plan for incentive compensation treatment
under Section 162(m) of the Code. A copy of the Plan as amended is
attached as Exhibit A to this proxy statement.
The
following is a summary of the principal provisions of the Plan as
amended.
Purpose
The
purposes of the Plan are to promote the interests of the Company and its
stockholders by: (i) attracting and retaining exceptional executive officers and
other key employees, including consultants and advisors to the Company and its
affiliates; (ii) motivating such employees, consultants and advisors by means of
performance-related incentives to achieve longer-ranger performance goals; and
(iii) enabling such employees, consultants and advisors to participate in the
long-term growth and financial success of the Company.
Shares
Available Under the Plan
The
maximum number of Shares that may be the subject of awards under the Plan as
amended will be 7,500,000 Shares. Currently the maximum number is
5,000,000 Shares. As of April 17, 2008, options to purchase 1,426,787
Shares were outstanding under the Plan. No other type of award has
been granted under the Plan. The weighted-average exercise price of
outstanding options previously granted under the Plan is $11.43 The
number of Shares remaining available for future issuance under the Plan is
2,249,614 excluding the Shares that are the subject of this Plan amendment and
4,749,614 including the Shares that are the subject of this Plan
amendment. The maximum number of Shares that may be the subject of
awards granted to any person during any calendar year cannot exceed 1,500,000
Shares per type of awards and 3,000,000 Shares in total. Such number
of Shares is subject to adjustment resulting from stock dividends, split-ups,
conversions, exchanges, reclassifications, or other substitutions of securities
for the Shares. Any Shares underlying what are called Substitute
Awards (awards granted in assumption of, or in substitution for, outstanding
awards previously granted by a company acquired by the Company or with which the
Company combines) under the Plan shall not, except in the case of Shares with
respect to which substitute are granted to employees who are officers or
directors of the Company for purposes of Section 16 of the Exchange Act or any
successor section thereto, be counted against the Shares available for awards
under the Plan.
Shares
subject to options granted under the Plan as of April 17, 2008 were as
follows:
NAME AND
POSITION
NUMBER OF UNITS
------------------------------
---------------------------
Richard
Leeds, Chairman and CEO 0
Bruce
Leeds, Vice Chm. and Pres. 0
Robert
Leeds, Vice Chm. and
Pres.
0
Executive
Group
977,917
Non-Executive
Director
Group 0
Non-Executive
Officer Employee
Group 448,870
On April
17, 2008, the closing price of the Shares, as reported on the New York Stock
Exchange, was $13.30.
If any
option under the Plan shall expire or terminate without having been exercised in
full or if any award should be forfeited or settled for cash or is otherwise
terminated or cancelled without the delivery of Shares, the unpurchased,
forfeited or cancelled Shares may again be made subject to awards under the
plan; provided,
however, that with respect to any options or stock appreciation rights
granted to any individual who is a “covered employee” as defined in Section
162(m) of the Code and the regulations thereunder that is canceled or as to
which the exercise price or grant price is reduced, the number of Shares subject
to such options or stock appreciation rights shall continue to count against the
maximum number of Shares which may be the subject of options and stock
appreciation rights granted to such covered employee and such maximum number of
Shares shall be determined in accordance with Section 162(m) of the Code and
regulations promulgated thereunder. Shares delivered under the Plan
will be made available, at the discretion of the Compensation Committee, either
from authorized but unissued Shares or from previously issued Shares reacquired
by the Company, including Shares purchased on the open market.
Administration
The Plan
is administered by the Compensation Committee which is appointed by the Board
and consists of not less than two members of the Board who are “Non-Employee
Directors” within the meaning of Rule 16b-3(d)(3) (as it may be amended from
time to time) promulgated by the SEC under the Exchange Act and “outside
directors” within the meaning of Section 162(m) of the Code. Under
the Plan, however, options granted to members of the Board who are not also
employees must be granted by action of the full Board and options granted to
consultants can be granted by action of either the Compensation Committee or the
full Board, as applicable. The Board may remove any member of the
Compensation Committee at any time, with or without cause. Options
are granted in the discretion of the Compensation Committee or the
Board. For the balance of this description, references to the
Compensation Committee shall be deemed to refer to the Board in the case of
options granted by the Board to directors or consultants.
Types
of Awards to be Granted
The
Compensation Committee may grant under the Plan only “non-qualified stock
options”, i.e. options that are not considered “incentive options” under Section
422 of the Code. The Compensation Committee may also grant other
stock-based awards, including stock appreciation rights, restricted stock and
restricted stock units, performance awards and other stock-based
awards.
Eligibility
and Conditions of Grant
Persons
eligible to receive awards under the Plan are such employees and directors of,
and consultants and advisors to, the Company and its subsidiaries as the
Compensation Committee may select in its sole discretion.
The
number of Shares or options to be awarded to any individual under the Plan and
the term, the exercise price and the vesting schedule thereof is determined by
the Compensation Committee in its sole discretion (based upon the Compensation
Committee’s determination as to the contribution or anticipated contribution of
the individual to the success of the Company). Options and all rights
thereunder are non-transferable and non-assignable by the holder, except to the
extent that the estate of a deceased holder of an option may be permitted to
exercise such option or as otherwise allowed by the Compensation Committee in
certain instances.
Exercise of Options
Options
shall be exercisable at such rate and times as are fixed by the Compensation
Committee for each option. Notwithstanding the foregoing, all or any
part of any remaining unexercised options granted to any person under the Plan
may be exercised (a) immediately upon (but prior to the expiration of the term
of the option) the holder’s retirement from the Company on or after his or her
65th birthday, (b) subject to the provisions of the Plan concerning termination
of employment, upon the disability (to the extent and in a manner as shall be
determined by the Compensation Committee in its sole discretion) or death of the
holder, (c) upon the occurrence of such special circumstances or event as in the
opinion of the Compensation Committee merits special consideration or (d) with a
few exceptions, if while the holder is employed by, or serving as a director of
or consultant to, the Company there occurs the acquisition by a person or
entity, or a group of persons or entities acting in conjunction, of 20% or more
of the issued and outstanding Shares having ordinary voting power, or a sale,
lease, transfer or other disposition of all or substantially all of the assets
of the Company, or a merger or consolidation of the Company into or with any
other company which results in the acquisition of the Company by a
non-affiliated entity, or any other event which would similarly constitute an
acquisition of the Company by a non-affiliated entity.
Payment
for and Issuance of Shares
Payment
for the Shares purchased pursuant to the exercise of an option shall be made in
full at the time of the exercise by the use of one of the following methods: (a)
paid in cash or its equivalent; (b) if and to the extent permitted by the
Compensation Committee, by exchanging Shares owned by the optionee (which are
not the subject of any pledge or other security interest); or (c) by a
combination of (a) and (b), provided that the combined value of all cash and
cash equivalents and the fair market value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such option exercise
price. The Plan contains standard provisions to assure that any
exercise of an option or the issuance of Shares will comply with applicable
securities and income tax withholding laws.
In the
event that any participant delivers Shares in payment of the exercise price of
any option, the Compensation Committee shall have the authority to grant or
provide for the automatic grant of a restoration option to such
participant. The grant of a restoration option shall be subject to
the satisfaction of such conditions or criteria as the Compensation Committee in
its sole discretion shall establish from time to time. A restoration
option shall entitle the holder thereof to purchase a number of Shares equal to
the number of such Shares so delivered upon exercise of the original
option. A restoration option shall have a per Share exercise price of
not less than 100% of the per Share market value on the date of grant of such
restoration option, a term no longer than the remaining term of the original
option at the time of exercise thereof, and such other terms and conditions as
the Compensation Committee in its sole discretion shall determine.
Amendment
and Termination of the Plan
The Board
may at any time amend, suspend or discontinue the Plan except that no amendment
to the Plan can increase the number of Shares for which options may be granted
under the Plan or to any individual in any calendar year (except pursuant to the
adjustment provisions described above) or change the class of persons to whom
options may be granted without stockholder approval, or permit the granting of
options after December 31, 2010 (except with respect to restoration options with
regard to options that themselves survive beyond 2010). In addition,
no amendment can alter the terms and conditions of any option granted prior to
the amendment, unless the holder consents to such amendment.
Section
162(m) of the Code
Under
Section 162(m) of the Code, publicly-held companies generally may not deduct
compensation that exceeds $1 million to any proxy-named executive officer with
respect to the taxable year. Compensation which is performance-based
(as defined in Section 162(m) and regulations thereunder), however, is not
counted as subject to the deductibility limitations of Section
162(m). Options granted under the Plan are intended to qualify as
performance-based under Section 162(m) and related regulations.
Vote
Required for Approval
Shareholder
approval of the amendment to increase the number of Shares eligible for grant
under the Plan is required pursuant to the Code (as it relates to incentive
stock options and to Section 162(m)). Future amendments to the Plan
will also require stockholder approval pursuant to the rules of the New York
Stock Exchange.
Approval
of the amendments will require the affirmative vote of the holders of a majority
of the votes cast on this 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 TO APPROVE THE COMPANY’S 1999
LONG-TERM STOCK INCENTIVE PLAN AS AMENDED, WHICH IS DESIGNATED AS PROPOSAL NO. 3
ON THE ENCLOSED PROXY CARD.
RATIFICATION
OF INDEPENDENT REGISTERD PUBLIC ACCOUNTANTS
Item
4 on Proxy Card
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 the fiscal
year ended December 31, 2008.
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 the fiscal years ended December 31, 2006 and 2007:
Audit and Audit-related
Fees
Ernst
& Young billed the Company $3,450,745 for professional services rendered for
the audit of the Company’s annual consolidated financial statements for the
fiscal year ended December 31, 2007 and its reviews of the interim financial
statements included in the Company’s Forms 10-Q for that fiscal year and
$2,160,982 for professional services rendered for the audit of the Company’s
annual consolidated financial statements and its internal control over financial
reporting for the fiscal year ended December 31, 2006 and its interim reviews of
the financial statements included in the Company’s Forms 10-Q for that fiscal
year.
Tax Fees
Tax fees
included services for international tax compliance, planning and advice. Ernst
&Young LLP billed the Company for professional services rendered for tax
compliance, planning and advice in 2007 an aggregate of $22,500. Ernst &
Young LLP provided no tax related services to the Company in 2006.
All Other
Fees
No other
fees were billed by Ernst & Young LLP for the years ended December 31, 2006
and 2007.
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 of the
Board 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 2008, WHICH IS DESIGNATED AS PROPOSAL NO. 4 ON THE
ENCLOSED PROXY CARD.
ADDITIONAL
MATTERS
Solicitation
of Proxies
The cost
of soliciting proxies for the Annual Meeting will be borne by the
Company. In addition to solicitation by mail, solicitations may also
be made by personal interview, fax and telephone. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals, and the Company will
reimburse them for expenses in so doing. Consistent with the
Company’s confidential voting procedure, Directors, officers and other regular
employees of the Company, as yet undesignated, may also request the return of
proxies by telephone or fax, or in person.
Annual
Report
The
Annual Report of the Company for the year ended December 31, 2007 will be first
mailed to all stockholders with this proxy statement.
Stockholder
Proposals
Stockholder
proposals intended to be presented at the Annual Meeting, including proposals
for the nomination of Directors, must be received by March 31, 2009, to be
considered for the 2009 annual meeting pursuant to Rule 14a-8 under the Exchange
Act. Stockholders proposals should be mailed to Systemax Inc.,
Attention: Investor Relations, 11 Harbor Park Drive, Port Washington, NY
11050.
Other
Matters
The Board
does not know of any matter other than those described in this proxy statement
that will be presented for action at the meeting. If other matters
properly come before the meeting, the persons named as proxies intend to vote
the Shares they represent in accordance with their judgment.
A
COPY OF THE COMPANY’S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007 IS INCLUDED
AS PART OF THE COMPANY’S ANNUAL REPORT PROVIDED WITH THIS PROXY
STATEMENT. AN ADDITIONAL COPY MAY BE OBTAINED WITHOUT CHARGE UPON
WRITTEN REQUEST. Such request should be sent to: SYSTEMAX INC., 11
Harbor Park Drive, Port Washington, New York 11050, Attention: Investor
Relations or via email to investinfo@systemax.com.
Available
Information
The
Company maintains an internet web site at www.systemax.com. The
Company files reports with the Securities and Exchange Commission and makes
available free of charge on or through this web site its annual reports on Form
10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including
all amendments to those reports. These are available as soon as is
reasonably practicable after they are filed with the SEC. All reports
mentioned above are also available from the SEC’s web site
(www.sec.gov). The information on the Company’s web site or any
report the Company files with, or furnishes to, the SEC is not part of this
proxy statement.
The Board
has adopted the following corporate governance documents (the “Corporate
Governance Documents”):
·
|
Corporate
Ethics Policy for officers, Directors and
employees;
|
·
|
Charter
for the Audit Committee of the
Board;
|
·
|
Charter
for the Compensation Committee of the
Board;
|
·
|
Charter
for the Nominating/Corporate Governance Committee of the Board;
and
|
·
|
Corporate
Governance Guidelines and
Principles.
|
In
accordance with the corporate governance rules of the New York Stock Exchange,
each of the Corporate Governance Documents is available on the Company’s Company
web site (www.systemax.com) or
can be obtained by writing to Systemax Inc., Attention: Board of Directors
(Corporate Governance), 11 Harbor Park Drive, Port Washington, NY
11050.
SYSTEMAX
INC.
P R O X
Y
This
Proxy is Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Curt Rush and Thomas Axmacher, and each of them,
with power of substitution, attorneys and proxies to represent and vote all
shares of Common Stock of Systemax Inc. (the “Company”) which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of Systemax Inc. to be
held on June 12, 2008, at 2:00 p.m., local time, and at any adjournment or
postponements thereof.
Under the
Company’s By-Laws, business transacted at the Annual Meeting of Stockholders is
confined to the purposes stated in the Notice of the Meeting. This proxy will,
however, convey discretionary authority to the persons named herein as proxies
to vote on matters incident to the conduct of the Meeting.
This
proxy when properly executed will be voted in the manner directed herein by the
undersigned stockholder. If no
direction is made, this proxy will be voted FOR the election of all the nominees
and FOR proposals 2, 3 and 4.
(Continued
and to be signed on the reverse side)
ANNUAL
MEETING OF STOCKHOLDERS OF
SYSTEMAX
INC.
June
12, 2008
Please
sign, date and mail your proxy card in the envelope provided as soon as
possible.
Please
detach along perforated line and mail in the envelope provided.
PLEASE SIGN, DATE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE [x]
|
1.
|
Election
of Directors:
Nominees
|
O FOR ALL
NOMINEES
O AGAINST ALL
NOMINEES
O FOR ALL
EXCEPT
(See
instructions below)
|
O
Richard Leeds
O
Bruce Leeds
O
Robert Leeds
O
Gilbert Fiorentino
O
Robert Rosenthal
O
Stacy S. Dick
O
Ann R. Leven
|
|
|
|
INSTRUCTIONS:
To vote against any individual nominee(s), mark “FOR
ALL EXCEPT” and fill in the circle next to each nominee you wish to
vote against, as shown here: [x]
|
|
|
|
|
FOR
|
AGAINST
|
ABSTAIN
|
2.
To consider and vote upon a proposal to approve the Company's Executive
Incentive Plan.
|
[__]
|
[__]
|
[__]
|
3.
To consider and vote upon a proposal to approve amendments to the
Company's 1999 Long-Term Stock Incentive Plan.
|
[__]
|
[__]
|
[__]
|
4.
To consider and vote upon a proposal to ratify the appointment of Ernst
& Young LLP as the Company’s independent registered public accountants
for fiscal 2008.
|
[__]
|
[__]
|
[__]
|
5.
To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
|
|
|
|
To change
the address on your account, please check the box at right and indicate your new
address in the address space above. Please note that changes to the registered
name(s) on the account may not be submitted via this
method. [____]
Signature
of Stockholder: __________________________ Date: _____________
Signature
of Stockholder: __________________________ Date: _____________
Note:
Please sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
Exhibit
A
SYSTEMAX
INC.
1999
Long-Term Stock Incentive Plan
(As
Amended Effective June 12, 2008)
SECTION 1. Purpose. The purposes
of this Systemax Inc. 1999 Long Term Stock Incentive Plan are to promote the
interests of Systemax Inc. and its stockholders by (i) attracting and retaining
exceptional executive personnel and other key employees, including consultants
and advisors to the Company and its Affiliates, as defined below; (ii)
motivating such employees, consultants and advisors by means of
performance-related incentives to achieve longer-ranger performance goals; and
(iii) enabling such employees, consultants and advisors to participate in the
long-term growth and financial success of the Company.
SECTION 2. Definitions. As used
in the plan, the following terms shall have the meanings set forth
below:
“Affiliate” shall mean (i) any entity
that, directly or indirectly, is controlled by the Company and (ii) any entity
in which the Company has significant equity interest, in either case as
determined by the Committee.
“Award” shall mean any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Award, Performance Award
or other Stock-Based Award.
“Award Agreement” shall mean any
written agreement, contract, or other instrument or document evidencing any
Award, which may, but need not, be executed or acknowledged by a
Participant.
“Board” shall mean the Board of
Directors of the Company.
“Code” shall mean the Internal Revenue
Code of 1986, as amended from time to time.
“Committee” shall mean a committee of
the Board designated by the Board to administer the Plan and composed of not
less than two directors, each of whom, to the extent necessary to comply with
Rule 16b-3 and to the extent that such persons are available, is a “Non-Employee
Director” within the meaning of Rule 16b-3 and, to the extent that such persons
are available, each of whom is an “outside director” within the meaning of
Section 162 (m) of the Code.
“Company” shall mean Systemax Inc.,
together with any successor thereto.
“Employee” shall mean (i) an employee
of the Company or of any affiliate and (ii) an individual providing consulting
or advisory services to the Company or any Affiliate as an independent
contractor.
“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the fair
market value of the property or other item being valued, as determined by the
Committee in its sole discretion.
“Incentive Stock Option” shall mean a
right to purchase Shares that is intended to meet the
requirements of Section 422 of the Code or any successor provision
thereto.
“Non-Qualified
Stock Option” shall mean a right to purchase Shares from the Company that is
granted under Section 6 of the Plan and that is not intended to be an Incentive
Stock Option.
“Option” shall mean a Non-Qualified
Stock Option and shall include a Restoration Option.
“Other Stock-Based Award” shall mean
any right granted under Section 10 of the Plan.
“Participant” shall mean any Employee
selected by the Committee to receive an Award under the Plan.
“Performance Award” shall mean any
right granted under Section 9 of the Plan.
“Person” shall mean any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, government or political subdivision thereof or
other entity.
“Plan” shall mean this Systemax 1999
Long-Term Stock Incentive Plan.
“Restoration
Option” shall mean an Option granted pursuant to Section 6(e) of the
Plan.
“Restricted Stock” shall mean any Share
granted under Section 8 of the Plan.
“Restricted Stock Unit” shall mean any
united granted under Section 8 of the Plan.
“Rule 16b-3” shall mean Rule 16b-3 as
promulgated and interpreted by the SEC under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
“SEC” shall mean the Securities and
Exchange Commission or any successor thereto and shall include the Staff
thereof.
“Shares” shall mean the common stock of
the Company, $0.01 par value, or such other securities of the Company as may be
designated by the Committee from time to time.
“Stock Appreciation Right” shall mean
any right granted under Section 7 of the Plan.
“Substitute Awards” shall mean Awards
granted in assumption of, or in substitution for, outstanding awards previously
granted by a company acquired by the Company or with which the Company
combines.
SECTION 3. Administration. (a)
The Plan shall be administered by the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee; (iii) determine the
number of Shares to be covered by, or with respect to which payments, rights, or
other matters are to be calculated in connection with, Awards; (iv) determine
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or cancelled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
cancelled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
(b) Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, and Affiliate,
and Participant, any holder or beneficiary of any Award, any shareholder and any
Employee.
SECTION 4. Shares Available for
Awards.
(a) Shares Available.
Subject to adjustment as provided in Section 4(b), the number of Shares with
respect to which Awards maybe granted under the Plan shall be 7,500,000. The
maximum number of Shares which may be the subject of Options, Stock Appreciation
Rights, Restricted Stock and Restricted Stock Units granted to any individual
during any calendar year shall not exceed 1,500,000 Shares per type of Award and
3,000,000 Shares in total. If, after the effective date of the Plan any Shares
covered by an Award granted under the Plan, or to which such an Award relates,
are forfeited, or if an Award is settled for cash or otherwise terminates or is
cancelled without the delivery of Shares, the Shares covered by such Award, or
to which such Award relates, or the number of Shares otherwise counted against
the aggregate number of Shares with respect to which Awards may be granted, to
the extent of any such settlement, forfeiture, termination or cancellation,
shall again be, or shall become, Shares with respect to which Awards granted;
provided, however, that with
respect to any Options or Stock Appreciation Rights granted to any individual
who is a “covered employee” as defined in Section 162(m) of the Code and the
regulations thereunder that is canceled or as to which the exercise price or
grant price is reduced, the number of Shares subject to such Options or Stock
Appreciation Rights shall continue to count against the maximum number of Shares
which may be the subject of Options and Stock Appreciation Rights granted to
such covered employee and such maximum number of Shares shall be determined in
accordance with Section 162(m) of the Code and regulations promulgated
thereunder. In the event that any Option or other Award granted
hereunder is exercised through the delivery of Shares, the number of Shares
available for Awards under the Plan shall be increased by the number of Shares
surrendered, to the extent permissible under Rule 16b-3.
(b) Adjustments. In the
event that the Committee determines that any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Shares
or other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number of Shares or other securities of the Company (or number
and kinds of other securities of the property) with respect to which Awards may
be granted, (ii) the number of Shares of other securities of the Company (or
number and kinds of other securities or property) subject to outstanding awards,
and (iii) the grant or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award.
(c) Substitute Awards.
Any Shares underlying Substitute Awards shall not, except in the case of Shares
with respect to which substitute are granted to Employees who are officers or
directors of the Company for purposes of Section 16 of the Exchange Act or any
successor section thereto, be counted against the Shares available for Awards
under the Plan.
(d) Sources of Shares
Deliverable Under Awards. Any Shares delivered pursuant to an Award may
consist, in whole or in part, of authorized and unissued and unissued Shares or
of treasury Shares.
SECTION
5. Eligibility.
Any Employee, including any officer or director of the Company, shall be
eligible to be designated a participant.
SECTION 6. Stock
Options.
(a) Grant. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the Employees to whom Options shall be granted, the number of Shares
to be covered by each Option. The option price therefor and the conditions and
limitations applicable to the exercise of the Option. The Committee shall have
the authority to grant Non-Qualified Stock Options. The Committee shall not have
the authority to grant Incentive Stock Options under the Plan.
(b) Exercise Price. The
Committee in it sole discretion shall establish the exercise price at the time
each option is granted.
(c) Exercise. Each Option
shall be exercisable at such times and subject to such terms and conditions as
the Committee may, in its sole discretion, specify in the applicable Award
Agreement or thereafter. The Committee may impose such conditions with respect
to the exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable.
(d) Payment. No Shares
shall be delivered pursuant to any exercise of an Option until full payment in
full of the Option price thereof is received by the Company. Such payment may be
made in cash, or its equivalent, or, if and to what extent permitted by the
Committee, by exchanging Shares owner by the optionee (which are not the subject
of any pledge or other security interest), or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Shares so tendered to the Company as of the date of
such tender is at least equal to such Option price.
(e) Restoration Options.
In the event that any Participant delivers Shares in payment of the exercise
price of any Option granted hereunder in accordance with Section 6(d), the
Committee shall have the authority to grant or provide for the automatic grant
of a Restoration Option to such Participant. The Grant of a Restoration Option
shall be subject to the satisfaction of such conditions or criteria as the
Committee in its sole discretion shall establish from time to time. A
Restoration Option shall entitle the holder therof to purchase a number of
Shares equal to the number of such Shares so delivered upon exercise
of the original Option. A Restoration Option shall have a per share exercise
price of not less than 100% of the per Share Market Value on the date of grant
of such Restoration Option, a term no longer than the remaining term of the
original option at the time of exercise thereof, and such other terms and
conditions as the Committee in its sole discretion shall determine.
Section
7. Stock Appreciation
Rights.
(a) Grant. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the Employees to whom Stock Appreciation Rights shall be granted, the
number of Shares to be covered by each Stock Appreciation Right Award, the grant
price thereof and the conditions and limitations applicable to the exercise
thereof. Stock Appreciation Rights may be granted in tandem with another Award,
in addition to another Award, or freestanding and unrelated to another Award.
Stock Appreciation Rights granted in tandem with or in addition to an Award may
be granted either at the same time as the Award or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after
grant.
(b) Exercise and Payment.
A Stock Appreciation Right shall entitle the Participant to receive an amount
equal to the excess of the Fair Market Value of a Share on the date
of exercise of the Stock Appreciation Right over the grant price
thereof. The Committee shall determine whether a Stock Appreciation
Right shall be settled in cash, Shares or a combination of cash and
Shares.
(c) Other Terms and
Conditions. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine, at or after the grant of a Stock
Appreciation Right, the term, methods of exercise, methods and form of
settlement, and any other terms and conditions of any Stock Appreciation
Right. Any such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of Stock Appreciation
Rights granted or exercised thereafter. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation Right as it
shall deem appropriate.
SECTION
8. Restricted Stock
and Restricted Stock Units.
(a) Grant. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to
determine the Employees to whom Shares of Restricted Stock and Restricted Stock
Units shall be granted, the number of Shares of Restricted Stock and/or the
number of Restricted Stock units to be granted to each Participant, the duration
of the period during which, and the conditions under which, the Restricted Stock
and Restricted Stock Units may be forfeited to the Company, and the other terms
and conditions of such Awards.
(b) Transfer
restrictions. Shares of Restricted Stock and Restricted
Stock Units may not be sold, assigned, transferred, pledged or otherwise
encumbered, except, in the Case of Restricted Stock, as provided in the plan or
the applicable Award agreements. Certificates issues in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and deposited by such Participant, together with a stock power endorsed in the
blank with the company. Upon the lapse of the restrictions applicable to such
Shares of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant’s legal representative.
(c) Payment.
Each Restricted Stock Unit shall have a value equal to the Fair Market Value of
a Share. Restricted Stock Units shall be paid in cash, other securities or other
property, as determined in the sole discretion of the
Committee. Dividends paid on any Shares of Restricted Stock may be
directly to the Participant, or may be reinvested in additional Shares of
Restricted Stock or in additional Restricted Stock Units, as determined by the
Committee in its sole discretion.
(d) Objective Performance Goals,
Formulae or Standards. If the grant of Restricted Stock or
Restricted Stock Units, or the lapse of restrictions or vesting, is based on the
attainment of one or more objective performance goals intended to comply with
Section 162(m) of the Code, then the Committee shall establish the performance
goals and the applicable vesting percentage of the Restricted Stock or
Restricted Stock Units applicable to each Participant or class of Participants
in writing prior to the beginning of the applicable fiscal year or at such later
date as otherwise determined by the Committee, but in any event within three
months after the beginning of the applicable fiscal year and while the outcome
of the performance goals are substantially uncertain. Such
performance goals may incorporate provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar events or
circumstances. With regard to Restricted Stock or Restricted Stock
Units that are intended to comply with Section 162(m) of the Code, to the extent
any such provision would create impermissible discretion under Section 162(m) of
the Code or otherwise violate Section 162(m) of the Code, such provision shall
be of no force or effect. The applicable performance goals shall be
based on one or more of the following performance criteria: Share price,
earnings (including but not limited to EBITDA), earnings per Share, sales,
return on equity, or expenses. Prior to the lapse of restrictions or
vesting of Restricted Stock or Restricted Stock Units which are based on one or
more of the performance goals hereunder, the Committee shall certify in writing
(which may be by approved minutes) that the applicable performance goals were in
fact satisfied.
Section
9. Performance
Awards.
(a) Grant. The Committee
shall have sole and complete authority to determine Employees who shall receive
a “Performance Award”, which shall consist of a right which is (i) denominated
in cash or Shares, (ii) valued, as determined by the Committee, in accordance
with the achievement of such performance goals during such performance periods
as the Committee shall establish, and (iii) payable at such time and in such
form as the Committee shall determine.
(b) Terms and Conditions.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award and the amount and kind of any payment of transfer to be made
pursuant to any Performance Award.
(c) Payment of Performance
Awards. Performance Awards may be paid in a lump sum or in installments
following the close of the performance period or, in accordance with procedures
established by the Committee, on a deferred basis.
SECTION
10. Other Stock-Based
Awards.
(a) General. The
Committee shall have authority to grant to eligible Employees an “Other
Stock-Based Award”, which shall consist of any right which is (i) not an Award
described in Sections 6 through 9 above and (ii) an Award of Shares or an Award
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as deemed by the Committee to be consistent
with the purposes of the Plan; provided that any such rights must comply, to the
extent deemed desirable by the Committee, with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any such
Other Stock-Based Award. Except in the case of an Other Stock-Based Award that
is a Substitute Award, the price at which securities may be purchased pursuant
to any Other Stock Based Award granted under this plan or the provision, if any,
of any such Award that is analogous to the purchase of exercise price, shall not
be less than 100% of the Fair Market Value of the securities which such an Award
relates on the date of grant.
(b) Dividend Equivalents.
In the sole and complete discretion of the Committee, an Award, whether made as
an Other Stock-Based Award under this Section 10 or as an Award granted pursuant
to Sections 6 through 9 hereof,
may
provide the Participant with dividend equivalents, payable in cash, Shares,
other securities or other property on a current or deferred
basis.
Section
11. Amendment and
Termination.
(a) Amendments to the
Plan. The Board may amend, alter, suspend, discontinue, or terminate the
Plan or any portion thereof at any time; provided that no such amendment,
alteration, suspension, discontinuation or termination shall be made without
shareholder approval if such approval is necessary to comply with any mandatory
tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act. Notwithstanding anything to the contrary herein, the Committee
may amend the Plan in such manner as may be necessary so as to have the Plan
conform with the local rules and regulations in any jurisdiction outside the
United States.
(b)Amendments to Awards.
The Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend discontinue, cancel or terminate, any Award theretofore granted,
prospectively or retroactively; provided that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary of an Award
theretofore granted shall not to that extent be effective with the consent of
the affected Participant, holder or beneficiary.
(c) Adjustment of Awards Upon
the Occurrence of Certain Unusual or Nonrecurring Events. The
Committee is hereby authorized to make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4(b) hereof) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of the changes in applicable
laws, regulations, or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
(d) Cancellation. Any
provision of this Plan or any Award Agreement to the contrary notwithstanding,
the Committee may cause an Award granted hereunder to be cancelled in
consideration of a cash payment or alternative Award made to the holder of such
cancelled Award equal in value to the Fair Market Value of such cancelled
Award.
Section
12. General
Provisions.
(a)
Nontransferability.
(i) Each
Award, and each right under any Award, shall be exercisable only by the
Participant during a Participant’s lifetime, if permissible under
applicable law, by the Participant’s guardian or legal representative or by a
transferee receiving such Award pursuant to a qualified domestic relations order
(“QDRO”), as determined by the Committee.
(ii) No
Award that constitutes a “derivative security”, for purposes of Section 16 of
the Exchange Act may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by will or
by the laws of descent and distribution or pursuant to QDRO, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or an Affiliate;
provided that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(b) No Rights to Awards.
No Employee, Participant, or other Person shall have any claim to be granted any
Award, and there is no obligation for uniformity of treatment of Employees,
Participants, or holders or beneficiaries of Awards. The terms and conditions of
Awards need not be same with respect to each recipient.
(c) Share Certificates.
All certificates for Shares or other securities of the Company or any Affiliate
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the plan or the rules, regulations, and other requirements
of the Securities and Exchange Commission, and stock exchange upon which such
Shares or other securities are then listed, and any applicable Federal or state
laws, and the Committee may cause a legend or legends to be put on any
certificates to make appropriate references to such restrictions.
(d) Delegation. Subject
to the terms of the Plan and applicable law, the Committee may delegate to one
or more officers or managers of the Company or any Affiliate, or to a committee
of such officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to, or to cancel,
modify or waive rights with respect to, or to alter, discontinue, suspend, or
terminate Awards held by, Employees who are not officers or directors of the
Company for purposes of section 16 of the Exchange Act, or any successor section
thereto, or who are otherwise not subject to such section and who are not
“covered employees” under Section 162(m) of the Code or would become covered
under such Section.
(e) Withholding. Any
participant may be required to pay the Company or any Affiliate and the Company
or any Affiliate shall have the right and is hereby authorized to withhold from
any Award, from any payment due or transfer made under any Award or under the
Plan or from any compensation or other amount owing to a Participant the amount
(in cash, Shares, other securities, other Awards or other property) of any
applicable withholding taxes in respect of an Award, its exercise, or any
payment or transfer under an Award or under the Plan and to take such other
action as may be necessary in the opinion of the company to satisfy all
obligations for the payment of such taxes. The Committee may provide for
additional cash payments to holders of Awards to help defray or offset any tax
arising from the grant, vesting, exercise or payments of any Award.
(f) Award Agreements.
Each Award hereunder shall be evidenced by an Award Agreement which shall be
delivered to the Participant and shall specify the terms and conditions of the
Award and any rules applicable thereto, including but not limited to the effect
on such Award of the death, retirement or other termination of employment of a
Participant and the effect, if any, of a change in control of the
Company.
(g) No Limit in Other
Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Affiliate from adopting or continuing on effect other
compensation arrangements, which may, but need not, provide for the grant of
options, Restricted Stocks, Shares and other types of Awards provided for
hereunder (subject to shareholder approval if such approval is
required), and such arrangements may either be generally applicable or
applicable only in specific cases.
(h) No Right to
Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any
Affiliate. Further, the company or Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(i) No Rights as
Stockholder. Subject to the provisions of the applicable Award, no
Participant or holder or beneficiary of any Award shall have any rights as a
stockholder with respect to any Shares to be distributed under the Plan until he
or she has become the holder of such Shares. Notwithstanding the foregoing, in
connection with each grant of Restricted Stock hereunder, the applicable Award
shall specify if and to what extent the Participant shall not be entitled to the
rights of a stockholder in respect of Restricted Stock.
(j) Governing Law. The
validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan and any Award Agreement shall be determined in accordance
with the laws of the State of Delaware.
(k) Severability. If any
provision of the Plan or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction or as to any Person or Award, or
would disqualify the Plan or any Award under and law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform the
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
Award, such provision shall be stricken as to such jurisdiction, Person or Award
and the remainder of the Plan and any such Award shall remain in full force and
effect.
(l) Other Laws. The
Committee may refuse to issue or transfer any Shares or other consideration
under an Award if, acting in its sole discretion, it determines that the
issuance or transfer of such Shares or such consideration might violate any
applicable law or regulation or entitle the Company to recover the same under
Section 16(b) of the Exchange Act, and any payment tendered to the Company by a
Participant, other holder or beneficiary in connection with the exercise of such
Award shall be promptly refunded to the relevant Participant, holder or
beneficiary. Without limiting the generality of the foregoing, no Award granted
hereunder shall be construed as an offer to sell securities of the Company, and
no such offer shall be outstanding, unless and until the Committee in its sole
discretion has determined that any such offer, if made, would be in compliance
with all applicable requirements of the U.S. federal securities
laws.
(m) No Trust or Fund
Created. Neither the Plan nor any Award shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company or any Affiliate and a Participant or any other Person. To the
extent that any person acquires a right to receive payments from the Company or
any Affiliate pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company or any
Affiliate.
(n) No Fractional Shares.
No fractional Shares shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of any fractional Shares or
whether such fractional Shares or any rights thereto shall be cancelled,
terminated, or otherwise eliminated.
(o) Headings. Headings
are given to the Sections and subsections of the Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision
thereof.
SECTION
13. Term of the
Plan.
(a) Effective Date. The
Plan shall be effective as of the date of its approval by the directors of the
Company.
(b) Expiration Date. No
Award shall be granted under the Plan after December 31, 2010; provided that the
authority for grant of Restoration Options hereunder in accordance with Section
6(e) shall continue, subject to the provisions of Section 4, as long as any
option granted hereunder remains outstanding. Unless otherwise expressly
provided in the Plan or an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award shall continue after December 31,
2010.
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