ITEM
10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Information
Regarding Our Board of Directors
Our
Board of Directors currently consists of four directors. Our Board seeks directors with established strong professional reputations
and experience in areas relevant to the strategy and operations of our business, particularly the industries, end-markets and
growth segments that our company serves. Each of our directors holds or has held senior executive positions in complex organizations
and has operating experience that meets this objective, as described below. In these positions, they have also gained experience
in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management,
executive compensation, human resources and leadership development. A majority of our non-employee directors has experience serving
on boards of directors and board committees of other public companies, and each of our directors has an understanding of corporate
governance practices and trends. The Board also believes that each of our directors has other key attributes that are important
to an effective board: integrity, candor, analytical skills, the willingness to engage management and each other in a constructive
and collaborative fashion, diversity of experience, qualifications, skills and backgrounds, and the ability and commitment to
devote significant time and energy to service on the Board and its committees. In addition to the above, our Board of Directors
has also considered the specific experience described in the biographical details that follow in determining that such individuals
should serve as a member of our Board of Directors.
Set
forth below are the name, age and the positions and offices held for each of our directors as of April 25, 2019, his principal
occupation, business experience and public company board service during the past five years, and the experience, qualifications,
attributes or skills that qualify such person to serve as a director of our company.
Name
|
|
Age
|
|
Position
|
|
Director
Since
|
Frank
F. Khulusi
|
|
52
|
|
Chairman
of the Board and Chief Executive Officer
|
|
1987
|
Thomas
A. Maloof
(2)(3)
|
|
67
|
|
Director
|
|
1998
|
Ronald
B. Reck
(1)(2)(3)
|
|
70
|
|
Director
|
|
1999
|
Paul
C. Heeschen
(1)(2)(3)
|
|
62
|
|
Director
|
|
2006
|
|
(1)
|
Member
of our Compensation Committee.
|
|
(2)
|
Member
of our Audit Committee.
|
|
(3)
|
Member
of our Nominating and Corporate Governance Committee.
|
Frank
F. Khulusi
is one of our co-founders and has served as our Chairman of the Board and Chief Executive Officer since our inception
in 1987 and as our President from our inception in 1987 to July 1999 and again from March 2001 to March 2012. Mr. Khulusi attended
the University of Southern California. Mr. Khulusi’s areas of relevant experience, qualifications, attributes or skills
include extensive knowledge of the IT direct marketing and solutions industries, over 30 years of experience in leadership and
growth of our company, extensive operations and financial experience, and experience with public company corporate governance.
Thomas
A. Maloof
has served as one of our directors since May 1998. He served as Chief Financial Officer of Hospitality Marketing
Concepts from January 2001 to August 2005, and has been an independent consultant since August 2005. Mr. Maloof served as President
of Perinatal Practice Management, Inc. from February 1998 to November 2000. From August 2004 through April 2005, Mr. Maloof served
on the board of directors of our former subsidiary, eCOST.com, Inc. (Nasdaq: ECST). Mr. Maloof served as a director for Farmer
Brothers Coffee (Nasdaq: FARM) from 2003 to 2011 and The Ensign Group (Nasdaq: ENSG) from 2000 to 2013. Mr. Maloof’s areas
of relevant experience, qualifications, attributes or skills include extensive knowledge of the IT direct marketing and solutions
industries; experience having served on the board of directors of Farmer Brothers and The Ensign Group (including service on the
audit committees of both entities); public accounting and auditing experience; and public company corporate governance, finance
and financial reporting experience.
Ronald
B. Reck
has served as one of our directors since April 1999. Mr. Reck was employed by Applebee’s International from
1987 to 1997, serving most recently as Executive Vice President and Chief Administrative Officer. Since 1998, Mr. Reck has served
as President and Chief Executive Officer of Joron Properties, LLC, a real estate company until December 31, 2014. Mr. Reck’s
areas of relevant experience, qualifications, attributes or skills include extensive knowledge of the IT direct marketing and
solutions industries; extensive experience as a private investor; senior leadership roles with operations experience in complex
public and private companies; and public company corporate governance and financial reporting experience.
Paul
C. Heeschen
has served as one of our directors since February 2006. Mr. Heeschen has served as a member of the board of directors
of New Home Co Inc. (NYSE: NWHM) since February 2014. Mr. Heeschen served from January 1996 to May 2010 as a member of the board
of directors of Diedrich Coffee, Inc., which was acquired by a subsidiary of Green Mountain Coffee Roasters, Inc. in May 2010.
Mr. Heeschen served as Diedrich’s Chairman from February 2001 and as its Executive Chairman from February 2010 to May 2010.
Since 1995, Mr. Heeschen also has been a principal of Heeschen & Associates, a private investment firm. Mr. Heeschen’s
areas of relevant experience, qualifications, attributes or skills include extensive knowledge of the IT direct marketing and
solutions industries; extensive experience as a private investor; senior leadership roles with operations experience in complex
public and private companies; and public company corporate governance, finance and financial reporting experience.
Executive
Officers
Our
executive officers as of April 25, 2019 and their respective ages and positions were as follows:
Name
|
|
Age
|
|
Position
|
Frank
F. Khulusi
|
|
52
|
|
Chairman
and Chief Executive Officer
|
Robert
J. Miley
|
|
48
|
|
President
|
Brandon
H. LaVerne
|
|
47
|
|
Chief
Financial Officer, Treasurer, Chief Accounting Officer and Assistant Secretary
|
Robert
I. Newton
|
|
53
|
|
Executive
Vice President, Chief Legal Officer and Secretary
|
Simon
M. Abuyounes
|
|
65
|
|
Executive
Vice President — IT and Operations
|
The
following is a biographical summary of the experience of our executive officers:
Frank
F. Khulusi
is one of our co-founders and has served as our Chairman of the Board and Chief Executive Officer since our inception
in 1987, served as President until July 1999, and resumed the office of President in March 2001 through March 2012. Mr. Khulusi
attended the University of Southern California.
Robert
J. Miley
joined us in December 2014 and currently serves as President of PCM, Inc. Prior to joining us, Mr. Miley held various
positions at Ingram Micro spanning approximately 20 years, most recently having served as Vice President and General Manager of
Advanced Technology Division in North America. Mr. Miley earned an MBA from the University of Southern California Marshall School
of Business and graduated from the University of California Santa Barbara with a B.A. in Business Economics and a B.A. in Political
Science.
Brandon
H. LaVerne
has served as our Chief Financial Officer since July 2008. Mr. LaVerne previously served as our Interim Chief Financial
Officer, Chief Accounting Officer and Treasurer of the Company since June 2007, and continues to serve as our principal financial
and accounting officer. Prior to June 2007, Mr. LaVerne served as Vice President and Controller and has been with us since October
1998. Prior to joining us, Mr. La Verne worked for Computer Sciences Corporation, and started his career with Deloitte and Touche
LLP. Mr. LaVerne received his B.S. in Accounting from the University of Southern California and is a Certified Public Accountant.
Robert
I. Newton
joined us in June 2004 and currently serves as our Executive Vice President, Chief Legal Officer and Secretary.
Mr. Newton was Of Counsel in the corporate practice group of Morrison & Foerster LLP from February 2000 until joining our
company. Prior to his employment at Morrison & Foerster LLP, Mr. Newton was a partner in the corporate practice group of McDermott,
Will & Emery LLP. Mr. Newton received a B.B.A., with highest honors, and a J.D., with honors, from the University of Texas
at Austin.
Simon
M. Abuyounes
was appointed Executive Vice President — IT and Operations of PCM, Inc. in April 2014. Mr. Abuyounes previously
served as President of PCM Logistics, LLC since June 2005. Prior to June 2005, Mr. Abuyounes has served as Senior Vice President
of Operations and has been with us since June 1995. Prior to joining us, Mr. Abuyounes held various engineering and managerial
positions for over 10 years. Mr. Abuyounes received his B.S. and M.S. degrees in Engineering from the Ohio State University. Mr.
Abuyounes is the brother-in-law of Mr. Khulusi.
Corporate
Governance
Identification
of Our Audit Committee
We
have a separately designated standing audit committee established in accordance with the Securities Exchange Act of 1934. The
members of our audit committee are Thomas A. Maloof (Chair), Paul C. Heeschen and Ronald B. Reck. Our board of directors has determined
that each of the members of our audit committee is “independent” as that term is defined in Rule 10A-3(b)(1) promulgated
under the Exchange Act and is an “independent director” as defined in Rule 5605(a)(2) of the Nasdaq listing standards.
Our board of directors has determined that each of Mr. Maloof and Mr. Heeschen is an “audit committee financial expert”
as that term is defined by regulations of the Securities and Exchange Commission and that each of them has accounting and related
financial management expertise within the meaning of the applicable rules of Nasdaq.
Code
of Business Conduct and Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to each of our directors, officers and employees, including our
principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing
similar functions. Our Code of Business Conduct and Ethics, including any amendments to, or waivers from such code, is posted
in the “Investor Relations” section of our website at www.pcm.com. We will provide a copy of our Code of Business
Conduct and Ethics to any person, without charge, upon receipt of a written request directed to our Secretary at our principal
executive offices.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than ten
percent of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Forms
4 or 5 with the SEC. Those officers, directors and ten percent stockholders are also required by the SEC’s rules to furnish
us with copies of all Section 16(a) forms they file.
Based
solely on our review of the copies of the forms we received, or representations from certain reporting persons that no Forms 5
were required for such persons, we believe that during the fiscal year ended December 31, 2018, all Section 16(a) filing requirements
applicable to our officers, directors and ten percent stockholders were complied with, except for one report involving one exempt
transaction by Mr. Khulusi.
ITEM
11.
|
EXECUTIVE COMPENSATION
|
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Compensation Philosophy and Principles
The
Compensation Committee of our Board of Directors establishes our executive compensation philosophy and principles and oversees
our executive compensation programs. The following are the primary principles of our executive compensation programs, which together
constitute our executive compensation philosophy:
●
|
link
executive compensation to the creation of stockholder value;
|
|
|
●
|
reward
contributions of executive officers that enhance our specific business goals; and
|
|
|
●
|
attract,
retain and motivate high quality individuals.
|
Our
executive compensation programs have been designed and adopted by the Compensation Committee in an effort to implement the above
principles. The key elements of our executive compensation program include base salary, quarterly and annual cash incentives,
stock incentive awards, health and welfare benefits, and other perquisites. The discussion below describes each of the key elements
of our executive compensation for the fiscal year ended December 31, 2018.
Executive
Compensation Process
In
establishing compensation, our Compensation Committee, among other things:
●
|
reviews
the performance of our executive officers and each of the components of their compensation;
|
|
|
●
|
evaluates
the effectiveness of our overall executive compensation program on a periodic basis; and
|
|
|
●
|
administers
our equity and cash incentive plans and, within the terms of these plans, determines the terms and conditions of the awards
under these plans.
|
Our
annual process of determining overall compensation for named executive officers (other than our Chief Executive Officer) begins
with recommendations made by our Chief Executive Officer to our Compensation Committee. In making his recommendation, our Chief
Executive Officer considers a number of factors, including the functional role of the position, the level of the individual’s
responsibility, the individual’s long-term commitment to our company, the demand and scarcity of individuals with similar
skills, knowledge and industry expertise, the seniority of the individual and our Chief Executive Officer’s understandings
and beliefs of retention and motivational requirements for each such executive. After considering the input and recommendations
of our Chief Executive Officer and any input of an independent compensation consultant that may from time to time be engaged by
the Committee, our Compensation Committee makes the final determination of compensation for our named executive officers.
In
addition, our Compensation Committee annually reviews and approves our corporate goals and objectives relative to our Chief Executive
Officer’s compensation, evaluates his compensation in light of such goals and objectives, as well as the input of any independent
compensation consultant, and sets the Chief Executive Officer’s compensation based on this evaluation. While our Chief Executive
Officer submits recommendations to the Compensation Committee regarding his own proposed compensation levels, the Committee retains
the sole authority to determine the compensation of our Chief Executive Officer based on its evaluation of the factors described
below under “Total Compensation for Executive Officers.”
Our
Compensation Committee uses its judgment and experience and works closely with our named executive officers to determine the appropriate
mix of compensation for each individual. Our Compensation Committee historically has not used tally sheets, internal pay equity
studies, accumulated wealth analyses, equity retention policies, benchmarking or similar tools in assisting with compensation
determinations for our named executive officers. The Committee uses its judgment and discretion in determining the amount of base
salary for executive officers and does not target a particular benchmark in relation to salary ranges at other companies. Instead,
base salary is used to recognize the experience, skills, knowledge and responsibilities required of our named executive officers,
taking into account competitive market compensation paid by other companies for similar positions. The Compensation Committee
believes that long-term performance is achieved through the use of stock-based awards and has historically awarded stock options
and restricted stock units (RSUs) to our named executive officers.
In
April 2013, the Compensation Committee engaged Towers Watson, a nationally recognized compensation consulting firm, to advise
the Committee on our director and executive compensation programs and to conduct an independent competitive assessment of our
director and executive officer compensation in an effort to ensure that such compensation levels and practices satisfy our compensation
philosophies and principles and are established in part based upon consideration of objective market compensation data. The objective
of Towers Watson’s 2013 engagement was to ensure that our compensation levels and practices were designed to support long-term
growth and success, reflect best practices and address the needs of our company, employees and stockholders, and to update prior
assessments using more recent market data. In connection with its engagement by the Committee, Towers Watson was instructed to
perform the following assignments:
●
|
provide
an assessment of our total direct compensation (base salary, short-term incentive and long-term incentive) for executive level
positions;
|
|
|
●
|
provide
advice on competitive compensation practices and executive compensation issues and trends and on establishing an appropriate
peer group for comparison;
|
|
|
●
|
provide
independent recommendations to the Committee on Chief Executive Officer and other executive officer and director compensation;
and
|
|
|
●
|
provide
a review and assessment of the Company’s overall compensation programs design for directors and executive officers,
including short-term and long-term incentive practices.
|
Towers
Watson presented its recommendations with respect to our Chief Executive Officer directly to the Compensation Committee, without
the participation of the Chief Executive Officer. The other recommendations of Towers Watson were provided to the Compensation
Committee and our Chief Executive Officer with input from our human resources personnel, who worked directly with Towers Watson
on the assignment. The report was discussed by the Committee at scheduled meetings of the Committee during the second and third
quarters of 2013. The report, together with input to the Committee from our Chief Executive Officer regarding incentive and retention
of our other executive officers and directors, was considered by the Committee in establishing each of the components of executive
and director compensation for fiscal year 2013 and again for fiscal years 2014 through 2018.
Total
Compensation of Executive Officers
Our
executive compensation programs consist primarily of (i) base salary, (ii) short-term incentive compensation in the form of quarterly
or annual cash bonuses and (iii) long-term incentive compensation in the form of stock options and RSUs. We also provide our executive
officers with other benefits, including certain perquisites and severance and change of control agreements discussed in more detail
below. Each of these components of executive compensation has been provided to satisfy our compensation philosophy and principles
after review of market executive compensation data provided by an independent compensation consultant engaged by the Compensation
Committee and, for executives other than the Chief Executive Officer, based in part on qualitative input and recommendations made
to the Compensation Committee by our Chief Executive Officer. For the 2018 fiscal year, each of our executive officers received
cash compensation in the form of an annual base salary and cash bonuses or incentive compensation, and each also received long-term
incentive compensation in the form of stock option and/or RSU awards. The Compensation Committee has not adopted any formal or
informal policies or guidelines for allocating compensation between long-term and short-term compensation, between cash and non-cash
compensation, or among different forms of non-cash compensation other than its determination that the total compensation and each
component of compensation provided to each executive officer in 2018 was within the range of total compensation and the range
of each component of compensation paid to similarly situated executive officers in the peer group as provided in the 2013 Towers
Watson report.
In
determining the compensation for our Chief Executive Officer, in addition to the applicable factors set forth below, the Compensation
Committee also took into consideration the record of his leadership and vision since our company’s inception in 1987; his
close identification with us by our employees and vendors, the financial community and the general public; and the recognition
by the Compensation Committee and others in our industry of the importance of his leadership to our continued success.
Please
refer to the tables under the section entitled “Executive Compensation” below for a detailed presentation of the specific
compensation earned by each of our named executive officers in the 2018 fiscal year.
In
assessing the competitiveness of our executive compensation, our Compensation Committee reviewed, together with other market compensation
data, the report from Towers Watson, which developed comparable market compensation data using 2012 proprietary market databases
and surveys, and public proxy data reported for the year ended December 31, 2012, for direct competitors as well as selected retail
and technology industry peers. The peer group included the following direct competitors and other peers in the retail and technology
industries:
Direct
Peers:
CDW Corp., ePlus, Inc., Insight Enterprises, Inc., PC Connection, Inc. and Systemax, Inc.
Other
Peers:
Black Box Corp., CACI International, Inc., CIBER, Inc., Computer Task Group, Inc., Netgear, Inc., Polycom, Inc., RCM
Technologies, Inc., ScanSource, Inc., TESSCO Technologies, Inc., and Unisys Corporation.
We
include our direct competitors and other retail and technology companies because we compete with them for business, as well as
talent. We include leading national technology companies because they have a large influence on industry compensation practices.
The retail and technology peer companies were included based on the advice of Towers Watson. Survey data used in the report were
collected from Towers Watson’s 2012 Compensation Data Bank for Retail/Wholesale Industry Executives for companies with revenues
under $3 billion. Survey data from the Towers Watson report was updated to June 2013 using a three percent annual aging factor.
These surveys were organized by job title and scope of responsibility for each of our named executive officers. Survey data and
publicly available proxy statements, Form 4s and 8-K filings were combined to develop market competitive pay rates.
The
Compensation Committee used the above described reports provided by Towers Watson, together with other market compensation data
and compensation data from a licensed third party compensation database for companies in the retail/wholesale industry located
in the Los Angeles Metro geography with annual revenues of $1 billion to $3 billion and updated compensation data gathered by
our internal personnel from publicly available proxy data for the peer group. For 2017, in determining comparable market compensation
data in the changing landscape, the Compensation Committee undertook a process to assess whether the existing peer group was still
appropriate to assess the competitiveness of our executive compensation. As a result of this process, two peers were removed (RCM
Technologies and Computer Task Group) given that PCM has significantly outgrown their size, and two peers were added (Anixter
International and Patterson Companies) as replacements, in the market data utilized from publicly available proxy data. This data
was used by the Compensation Committee in 2017 and again in 2018 to confirm that the total compensation and each component of
compensation provided to our named executive officers was within the range of total compensation and each component of compensation
paid to similarly situated officers in the peer group. While the Compensation Committee utilized this peer group and other data
(including the base salary survey data discussed below under “Base Salaries”) as a general guideline, it did not specifically
benchmark total compensation or any compensation component against the companies included in the survey data.
In
setting the total compensation levels and each component of our executive compensation program for 2018, the Compensation Committee
reviewed and considered the comparative peer group data as described above, as well as the qualitative input from the Chief Executive
Officer regarding retention and incentive requirements (for executive officers other than the Chief Executive Officer). The Committee
determined that the total compensation and each component of compensation to be provided to each executive officer in 2018 was
within the range of total compensation and the range of each component of compensation paid to similarly situated executive officers
in the reviewed data. However, the Compensation Committee did not establish any specific peer group comparative percentile targets
or relative percentages of total compensation that any component of compensation should represent for any of our executives.
Base
Salaries
The
base salaries we provide to our executive officers are intended as compensation for each executive officer’s ongoing contributions
to the performance of the operational area(s) for which he or she is responsible. In keeping with our compensation philosophy
to attract and retain high quality individuals, executive officer base salaries have been set at levels which the Compensation
Committee believes are competitive with base salaries paid to executive officers of the peer companies described above and with
the Los Angeles market for executives of publicly traded companies having approximately similar revenues and number of employees
to those of PCM. The Committee used market survey data for general background purposes to determine whether our executive compensation
levels were substantially higher or lower than those of companies within the geographic market in which we compete for qualified
executives. However, as described above, the Compensation Committee does not specifically benchmark base salaries of our executive
officers against those of the companies included in the market data reviewed by the Committee. For executive officers other than
our Chief Executive Officer, base salaries also were established in part after consideration of qualitative input from our Chief
Executive Officer about retention and incentive considerations after his discussions with individual executive officers.
The
base salaries of our executive officers are reviewed annually and adjusted from time to time from the original amounts provided
in employment agreements to recognize individual performance, promotions, competitive compensation levels, retention and incentive
considerations and other qualitative factors. In addition to adjustments made for competitive, retention and incentive reasons,
the Committee has periodically adjusted executive officer base salaries based on its assessment of each executive’s performance
and history with us and our overall budgetary considerations for salary increases. Based in part on the reports provided to the
Committee by the independent compensation consulting firm and other data reviewed by the Committee, the 2018 base salaries for
Messrs. Khulusi, Miley, LaVerne, Newton and Abuyounes were set at $833,000, $500,000, $381,000, $378,000 and $367,000, respectively,
which were unchanged from 2017.
Short-Term
Incentive Compensation
On
May 18, 2018, the Committee and Board of Directors adopted and approved the 2018 Executive Incentive Plan (the “2018 Plan”),
which was effective for the 2018 fiscal year. Under the 2018 Plan, cash incentive amounts were based upon two performance objectives,
weighted differently for each executive eligible to participate in the 2018 Plan: (1) attainment of a target Adjusted EPS (the
“Consolidated Target”) and (2) attainment of individual qualitative targets (the “Qualitative Target”).
Adjusted EPS was defined under the 2018 Plan as diluted adjusted earnings per share, which is adjusted for special charges, if
any, to be excluded from the calculation of Adjusted EPS in the discretion of the Committee, including but not limited to amortization
of purchased intangibles, stock-based compensation and other non-cash adjustments such as goodwill and intangible asset adjustments,
plus material M&A and related litigation costs and fees, unforeseen litigation and restructuring and related costs, and foreign
exchange gains or losses.
The
2018 Plan was funded at an individual target amount for each participant if the Company achieved 100% of the Consolidated Target
for the 2018 calendar year. The 2018 Plan also had a minimum Adjusted EPS for any quantitative cash incentive to be paid under
the 2018 Plan and contained decelerators based on performance below the respective quantitative performance target, with a threshold
set at 89% of target, or the prior year comparable amount, whichever is higher. Quantitative cash incentives would be paid at
32% of the incentive target if the Company’s performance equals the minimum target threshold for payment of the quantitative
cash amounts. If the Company’s performance fell below the threshold, no quantitative cash incentive would be earned.
The
2018 Plan also contained accelerators under which the cash incentive amounts can exceed the above described target amounts, with
the maximum cash incentive amount equal to 200% of target cash incentive amounts, which would be paid if the Company’s performance
equalled or exceeded 110% of the respective performance target. The 2018 Plan further generally allowed for 50% of the annual
cash incentive targets to be paid in non-recoverable quarterly increments based on quarterly targets that make up components of
the respective annual targets.
Messrs.
LaVerne, Newton and Abuyounes each had certain individual qualitative targets that were tailored for his respective responsibilities
to the Company based on recommendations made by our Chief Executive Officer and approved by the Committee and were to be paid
quarterly or annually in the discretion of the Committee. These qualitative targets made up 33% of total cash incentive opportunity
for each of Messrs. LaVerne and Abuyounes and 100% of the cash incentive opportunity for Mr. Newton.
The
total cash incentive opportunity for the participating executive officers equaled $516,460 for Mr. Khulusi, which was 62% of his
2018 annual base salary, $200,000 for Mr. Miley, which was 40% of his 2018 annual base salary, $153,000 for Mr. LaVerne, which
was approximately 40% of his 2018 annual base salary, $152,000 for Mr. Newton, which was approximately 40% of his 2018 annual
base salary and $147,000 for Mr. Abuyounes, which was approximately 40% of his 2018 annual base salary. The schedule below indicates
the mix of performance objectives for each of our named executive officers:
Name
|
|
Consolidated
Target
|
|
|
Qualitative
Target
|
|
Frank F. Khulusi
|
|
|
100
|
%
|
|
|
—
|
|
Robert J. Miley
|
|
|
100
|
|
|
|
—
|
|
Brandon H. LaVerne
|
|
|
67
|
|
|
|
33
|
%
|
Robert I. Newton
|
|
|
—
|
|
|
|
100
|
|
Simon M. Abuyounes
|
|
|
67
|
|
|
|
33
|
|
In
addition to the above, Mr. Miley was eligible to receive an additional annual incentive up to $100,000 tied to the achievement
of certain SG&A targets
which were met as
of December 31, 2018 and therefore 100% of this amount was earned. All amounts funded under the Plan were subject to increase
or reduction for each named executive officer at the sole discretion of the Committee based upon qualitative or quantitative factors
which the Committee may deem appropriate from time to time. In addition to participation in the Plan, all of our executive officers
were eligible for additional discretionary bonuses as could be determined by the Committee. No cash incentive was earned until
it was paid under any of these plans. Therefore, in the event the employment of an executive eligible under these plans terminated
(either by the Company or by the eligible executive, whether voluntarily or involuntarily) before a cash incentive was paid, the
executive was not deemed to have earned that incentive and it was not paid.
Under
the 2018 Plan, the Company achieved 108% of the Consolidated Target, which together with achievement of certain quarterly targets,
resulted in payouts to each of the participating executives in the amounts shown in the tables below for the quantitative portion
of their respective cash incentive opportunity under the plan. The Compensation Committee calculated the 2018 Consolidated Target
utilizing Adjusted EPS. Additionally, based on the recommendation of our Chief Executive Officer, the Compensation Committee awarded
each of Messrs. LaVerne, Newton and Abuyounes 100% of the qualitative portion of their respective incentive opportunity under
the Plan.
The
following table illustrates the calculation of Adjusted EPS, applicable for the 2018 Plan (in thousands):
|
|
Consolidated
|
|
2018 Income before income taxes, as reported
|
|
$
|
32,030
|
|
Add: Amortization of purchased intangibles
|
|
|
2,996
|
|
Add: Severance & restructuring related costs
|
|
|
1,528
|
|
Add: M&A and related litigation costs and fees
|
|
|
1,793
|
|
Add: Stock based compensation
|
|
|
3,059
|
|
Add: Foreign exchange loss
|
|
|
533
|
|
Less: Contingent consideration adjustment
|
|
|
(1,075
|
)
|
2018 Adjusted income before income taxes
|
|
|
40,864
|
|
2018 Adjusted income tax expense
|
|
|
11,565
|
|
2018 Adjusted net income
|
|
$
|
29,299
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
12,437
|
|
|
|
|
|
|
Adjusted EPS
|
|
$
|
2.36
|
|
|
|
|
|
|
2018 Performance Target
|
|
$
|
2.19
|
|
Achievement Percentage
|
|
|
108
|
%
|
Payout Percentage(1)
|
|
|
178
|
%
|
|
(1)
|
The
Payout Percentage equals the actual amount paid to the executive as a percentage of his
respective quantitative target under the Plan. The Payout Percentage reflects the net
effect of the quarterly and annual application of the accelerators and decelerators described
above.
|
The
following table shows the 100% payout targets for each component of the 2018 Plan for each of our named executive officers participating
in the plan, together with the actual cash incentive amounts awarded for such periods under the plan:
Name
|
|
Consolidated
Incentive
at
Target
|
|
|
Consolidated
Incentive
Achieved
|
|
|
Qualitative
Incentive
at
Target
|
|
|
Qualitative
Incentive
Achieved
|
|
Frank F. Khulusi
|
|
$
|
516,460
|
|
|
$
|
917,365
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Robert J. Miley
|
|
|
200,000
|
|
|
|
355,251
|
|
|
|
—
|
|
|
|
—
|
|
Brandon H. LaVerne
|
|
|
102,510
|
|
|
|
182,084
|
|
|
|
50,490
|
|
|
|
50,490
|
|
Robert I. Newton
|
|
|
—
|
|
|
|
—
|
|
|
|
152,000
|
|
|
|
152,000
|
|
Simon M. Abuyounes
|
|
|
98,490
|
|
|
|
174,943
|
|
|
|
48,510
|
|
|
|
40,021
|
|
The
aggregate cash incentives earned by each of our named executive officers for 2018 were as follows:
Name
|
|
Aggregate
Incentive
Target
|
|
|
Aggregate
Incentive
Achieved
|
|
|
%
of
Incentive
Achieved
|
|
Frank F. Khulusi
|
|
$
|
516,460
|
|
|
$
|
917,365
|
|
|
|
178
|
%
|
Robert J. Miley
|
|
|
300,000
|
|
|
|
455,251
|
|
|
|
152
|
|
Brandon H. LaVerne
|
|
|
153,000
|
|
|
|
232,574
|
|
|
|
152
|
|
Robert I. Newton
|
|
|
152,000
|
|
|
|
152,000
|
|
|
|
100
|
|
Simon M. Abuyounes
|
|
|
147,000
|
|
|
|
223,453
|
|
|
|
152
|
|
Long-Term
Incentive Compensation
Our
long-term incentive compensation has historically consisted of stock option or RSU grants, which have been awarded under our equity
incentive plans and administered by the Compensation Committee. We have made periodic grants of stock options and RSUs to executives
for the purpose of aligning their long-term motivations with the interests of our stockholders and in consideration of the fact
that we offer no other significant long-term, deferred or retirement compensation to our executive officers.
The
Compensation Committee is not tied to any particular process or formula to determine the size of the long-term incentive awards
granted to our named executive officers. Consequently, the Committee uses its discretion to grant equity awards and may consider
the various factors discussed below. In fiscal 2018, to determine the size of the equity awards for our named executive officers,
the Committee first reviewed our Chief Executive Officer’s recommendations for options and RSUs to be granted during fiscal
2018 to our executive officers other than the Chief Executive Officer. In each case, the Committee then made determinations of
the specific amounts and terms of stock options and RSUs to be granted to each executive officer, including our Chief Executive
Officer, based on its subjective consideration of the recommendations of the Chief Executive Officer, historical grant information,
the Committee’s views of comparative compensation data provided to the Committee by Towers Watson in its May 2013 report
and other market compensation data, retention and motivational factors, corporate performance, individual performance, the executive’s
level of responsibility, the potential impact that the executive could have on our operations and financial condition and the
market price of our common stock.
Stock
options and RSUs have historically generally been granted to our executive officers based on a subjective and market-based evaluation
by the Compensation Committee (based in part upon recommendations from our Chief Executive Officer with respect to executive officers
other than the Chief Executive Officer) of a recipient’s contributions and continuing value to us and the performance of
his or her respective operational areas of responsibility. Compensation previously realized by our executive officers from the
exercise of vested options or the vesting of RSUs historically has not been considered by our Compensation Committee when giving
new equity awards but may be considered when making future grants.
In
determining what long-term incentive programs to offer our executive officers, the Compensation Committee considers the impact
of ASC 718 (formerly SFAS 123R “Share-Based Payment”) which requires us to expense the compensation costs related
to stock option awards and RSUs ratably over their vesting periods.
From
time to time, our Compensation Committee evaluates the structure of our long-term incentive programs and may make modifications
to these programs to reflect our changing needs and our need to attract, retain and motivate our executive officers. These changes
may be based, in part, on market conditions and the compensation programs of our competitors. As new long-term incentive instruments
are developed and the tax and accounting treatment of various instruments are subject to change over time, management and the
Compensation Committee regularly review our compensation programs to determine whether these programs are accomplishing our goals
in a cost-effective manner.
The
final compensation report of Towers Watson provided to the Compensation Committee in May 2013 included long-term, non-cash incentive
compensation market competitive data and analysis which was reviewed and considered by the Committee in determining the 2018 stock
option and RSU grants to executives. This data and analysis contemplated the annualized expected value of equity award grants
ultimately provided to our executive officers relative to long-term, non-cash incentive compensation provided to peer group executives.
The value of each grant also was analyzed for its effect on total compensation, representing the long-term, non-cash component
of our executive compensation. The Committee determined that the level of each grant in 2018 to each of our executive officers
was within the range of annual long-term, non-cash incentive compensation relative to the considered peer groups for each executive
officer and further determined that the level of each grant in 2018 to each executive officer when considered together with the
total cash compensation for 2018 placed the level of 2018 total compensation for each executive officer within the market range.
Timing,
Pricing and Terms of Share-Based Awards
We
have generally considered share-based awards to our executive officers at regularly scheduled meetings of the Compensation Committee.
Formal approval of share-based awards is obtained on the date of grant. We do not have, and do not intend to have, any program,
plan or practice to time share-based awards in coordination with the release of material non-public information. We also do not
have, and do not intend to have, any program, plan or practice to time the release of material non-public information for the
purpose of affecting the value to executive compensation. The exercise price for stock options we have granted equals the closing
price of our common stock on the grant date. We have granted fixed-price stock options that generally vest in equal quarterly
installments usually over five year period. Our share-based award grants have not historically contained performance vesting features.
Because
the value of share-based awards increase only if the price of our common stock increases after grant, the time vesting feature
of our share-based awards has been intended as an important feature of each grant designed to motivate our executive officers
to enhance our stockholders’ value over a long-term period.
Employment
Agreements and Severance and Change-in-Control Arrangements
In
January 1995, prior to our initial public offering, we entered into an employment agreement with Frank F. Khulusi, our Chairman,
President and Chief Executive Officer. Mr. Khulusi’s employment agreement, which was amended in December 2005 and in December
2008, provides for one-year extensions unless it is terminated by us or Mr. Khulusi. Mr. Khulusi’s annual salary pursuant
to his employment agreement has been increased or decreased periodically and was $833,000 before he voluntarily reduced his annual
salary by $250,000 to $583,000 in December 2014 and continued until May 3, 2016 at which point Mr. Khulusi’s base salary
was reinstated to its prior annual rate of $833,000. Mr. Khulusi is eligible to participate in our employee benefit plans that
are generally available to similarly situated employees.
Mr.
Khulusi’s employment agreement provides that he is entitled to certain severance benefits in the event of a change of control
or if his employment is terminated by us without cause or by Mr. Khulusi for good reason as follows:
●
|
If
Mr. Khulusi’s employment is terminated by the Company without cause (which may occur at any time upon 90 days’
advance written notice to Mr. Khulusi), the Company will pay him his salary through the end of the notice period and, in addition,
a lump sum amount equal to two times the total salary and bonus compensation paid to him for the twelve months immediately
preceding the notice of termination, in each case subject to the December 2008 amendment of Mr. Khulusi’s employment
agreement which amended the agreement to clarify that the agreement is intended to comply with Section 409A of the United
States Internal Revenue Code and related regulations in all instances and that any payments which would cause non-compliance
will be delayed in a manner necessary for compliance;
|
|
|
●
|
If
Mr. Khulusi’s employment is terminated by him for good reason (which may occur upon 30 days’ advance written notice
to the Company), including as a result of the Company notifying him of its decision to not renew the employment agreement
for an additional period as described above, the Company will pay him a lump sum upon such termination equal to two times
the total salary and bonus compensation paid to him for the twelve months immediately preceding the notice of termination;
and
|
|
|
●
|
In
the event of a change of control of the Company, upon consummation of the change of control, Mr. Khulusi’s employment
agreement will terminate and he will receive a lump sum payment equal to two times the total salary (which for this purpose,
Mr. Khulusi’s base salary is deemed to be $833,000 as provided in his employment agreement, as amended) and short-term
cash incentive compensation paid to him for the twelve months immediately preceding the change of control.
|
If
the severance payment payable under his employment agreement in the event of a change of control, either alone or together with
other payments he has the right to receive from us, would not be deductible (in whole or in part) by the Company as a result of
the payment constituting a “parachute payment” under Section 280G of the Internal Revenue Code, the severance payment
under the employment agreement will be reduced to the maximum deductible amount under the Code.
For
the purposes of Mr. Khulusi’s employment agreement, a “change of control” of the Company will be deemed to have
occurred if:
●
|
there
is consummated (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of the Company’s common stock would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Company’s common stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (ii) any
reverse merger in which the Company is the continuing or surviving corporation but in which securities possessing more than
50% of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons
different from those who hold such securities immediately prior to the merger, or (iii) any sale, lease, exchange or other
transfer (in one or more related transactions) of all, or substantially all, of the assets of the Company;
|
|
|
●
|
our
stockholders approve a plan or proposal for the liquidation or dissolution of us;
|
|
|
●
|
any
person other than Mr. Khulusi or certain of his relatives or affiliates become the direct or indirect beneficial owners of
20% or more of our common stock (other than as a result of purchases by such person directly from us); or
|
|
|
●
|
during
any 12-month period, individuals who at the beginning of the period constitute our entire Board of Directors cease for any
reason to constitute a majority thereof unless the election, or the nomination for election by our stockholders, of each new
director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning
of the period.
|
If
Mr. Khulusi’s employment is terminated due to death or disability, the terms of his employment agreement require that he
(or his beneficiaries, as applicable) be paid his salary through the end of the month in which the termination occurs. If Mr.
Khulusi is terminated for cause (which may occur upon 30 days’ advance written notice to Mr. Khulusi), the terms of his
employment agreement require that he be paid his salary through the end of the notice period.
In
October 2014, we entered into an employment agreement with Robert Jay Miley, our President. Pursuant to the terms of our agreement
with Mr. Miley, he is an “at will” employee. Mr. Miley is currently entitled to an annual base salary of $500,000.
He is also eligible to participate in our executive incentive plan in the discretion of our Compensation Committee, and may receive
discretionary bonuses from time to time in the discretion of our Compensation Committee with the input of our Chief Executive
Officer. Mr. Miley is entitled to severance pay equal to twelve months of his then-current annual base salary in the event his
employment is terminated without cause. The severance payment would be made in one lump sum and is contingent upon his execution
of a satisfactory severance and release agreement. Mr. Miley is eligible to participate in benefit plans generally available to
similarly situated employees.
Each
of Messrs. LaVerne and Abuyounes is an “at will” employee. Mr. LaVerne is currently entitled to an annual base salary
of $381,000 and Mr. Abuyounes is currently entitled to an annual base salary of $367,000. Each is eligible to participate in our
executive incentive plan in the discretion of our Compensation Committee, and may receive discretionary bonuses from time to time
in the discretion of our Compensation Committee with the input of our Chief Executive Officer. We have entered into severance
agreements with each of Messrs. LaVerne and Abuyounes, pursuant to which each is entitled to severance pay equal to six months
of his annual base salary in the event his employment is terminated without cause within a twelve month period following a change-in-control
of our company. The severance payments would be made in equal installments over six months and are contingent upon their execution
of a satisfactory severance and release agreement. Each of Messrs. LaVerne and Abuyounes receives a monthly automobile allowance
of $1,000 and is eligible to participate in our employee benefit plans that are generally available to similarly situated employees.
In
June 2004, we entered into an employment agreement with Robert I. Newton, our Executive Vice President, Chief Legal Officer and
Secretary. Mr. Newton’s employment agreement was amended in February 2005. Pursuant to the terms of our agreement with Mr.
Newton, he is an “at will” employee. Mr. Newton is currently entitled to an annual base salary of $378,000. Mr. Newton
is eligible to participate in the qualitative components of our executive incentive plan in the discretion of our Compensation
Committee, and may receive additional discretionary bonuses from time to time in the discretion of our Compensation Committee
with the input of our Chief Executive Officer. Mr. Newton is also entitled to severance pay equal to six months of his annual
base salary in the event his employment is terminated without cause. The severance payments would be made in equal installments
over six months and are contingent upon his execution of a satisfactory severance and release agreement. Mr. Newton receives a
monthly automobile allowance of $1,000 and is eligible to participate in our employee benefit plans that are generally available
to similarly situated employees.
In
addition to the above discussed agreements, under the terms of our option and RSU agreements with our executive officers, upon
the occurrence of a change of control of our company, subject to certain limitations, all of the unvested stock options and RSUs
for Messrs. Khulusi, LaVerne and Newton will become fully vested.
The
stock options and RSUs held by Mr. Miley provide that in the event of a change of control in which Mr. Miley’s stock options
or RSUs are not assumed or replaced, a portion of his unvested awards then outstanding will become vested upon the change of control
in an amount equal to two years of accelerated vesting plus an additional prorated portion of the applicable next cliff vesting
quarterly or annual amount under the respective award based on time served. In the event Mr. Miley’s awards are assumed
or replaced (by a comparable award) in connection with a change of control transaction, Mr. Miley is entitled to accelerated vesting
of his then unvested outstanding awards in an amount equal to one year of accelerated vesting. Mr. Miley is further entitled to
full acceleration of vesting following a change of control with respect to any remaining portion of the unvested awards which
do not accelerate upon the change of control as described above and which are assumed or replaced in the transaction if his employment
is terminated by the successor entity without cause or by Mr. Miley for “good reason” within twelve (12) months of
the change of control.
The
stock options and RSUs held by Mr. Abuyounes provide that, in the event of a change of control, a portion of the unvested options
and RSUs then outstanding in the amount of one year plus a quarter of accelerated vesting will become vested if the option or
RSU is not assumed or replaced (by an option, RSU or comparable cash incentive) by the successor entity as part of such transaction
or, if assumed or replaced, his employment is terminated by the successor entity without cause or by Mr. Abuyounes for “good
reason” within twelve (12) months of the change of control.
The
employment agreements and severance and change-in-control benefits provided to our executives under these agreements were approved
by our Compensation Committee or full Board following our negotiations with our executive officers and were determined to be reasonable
and necessary in order to hire and retain these individuals. Mr. Khulusi’s agreement was originally executed in 1995 and
at that time we established certain change-in-control and severance protections for Mr. Khulusi. We believe that it is important
to provide continued professional stability to those executive-level employees who helped build our company and whose leadership
is important to our continued success. Further, we believe that the interests of our stockholders will be best served if the interests
of our most senior management are aligned with them. Providing change in control benefits, including the severance and share-based
award acceleration benefits, is designed to reduce the reluctance of senior management to pursue potential change of control transactions
that may be in the best interests of our stockholders. The severance and change-in-control benefits offered to our executive officers
did not affect the Compensation Committee’s determination of the total compensation, or any component of compensation, we
provided to our executive officers in 2018.
Copies
of each of the above-referenced employment agreements, as well as summaries of our executive bonus plans, are filed as exhibits
to our periodic reports filed with the Securities and Exchange Commission.
Perquisites
and Other Benefits
We
provide our executive officers, including our Chief Executive Officer, with perquisites that we believe are reasonable, competitive
and consistent with our overall executive compensation program. We believe that our perquisites help us to hire and retain qualified
executives. For additional information regarding perquisites we provided to each of our named executive officers please refer
to the “Summary Compensation Table” below.
Consideration
of Deductibility of Compensation
The
deductibility of compensation that may be paid to our executive officers is just one of many factors we consider in structuring
our compensation programs. Given our changing industry and business, as well as the competitive market for outstanding executives,
the Compensation Committee believes that it is important to retain the flexibility to design compensation programs consistent
with its overall executive compensation philosophy even if some executive compensation is not fully deductible. Accordingly, the
Compensation Committee reserves the right to approve elements of compensation for our officers that are not fully deductible.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation for fiscal years 2018, 2017 and 2016 awarded to or earned by our
Chief Executive Officer, our Chief Financial Officer and each of our other three most highly compensated executive officers serving
at the end of our most recent fiscal year whose total compensation exceeded $100,000. The individuals listed in the following
table are sometimes referred to as the “named executive officers.”
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
($)(3)
|
|
|
Stock
Awards
($)(1)
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank F. Khulusi
|
|
2018
|
|
|
$
|
833,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,008,000
|
|
|
$
|
917,365
|
|
|
$
|
5,427
|
(2)
|
|
$
|
2,763,792
|
|
Chairman of the Board and Chief Executive
|
|
2017
|
|
|
|
833,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,350,000
|
|
|
|
61,975
|
|
|
|
7,760
|
(2)
|
|
|
2,252,735
|
|
Officer
|
|
2016
|
|
|
|
749,667
|
|
|
|
—
|
|
|
|
—
|
|
|
|
903,500
|
|
|
|
981,274
|
|
|
|
5,705
|
(2)
|
|
|
2,640,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Miley
|
|
2018
|
|
|
|
500,000
|
|
|
|
100,000
|
|
|
|
330,445
|
|
|
|
—
|
|
|
|
355,251
|
|
|
|
8,456
|
(2)
|
|
|
1,294,152
|
|
President
|
|
2017
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
201,212
|
|
|
|
206,250
|
|
|
|
24,000
|
|
|
|
7,355
|
(2)
|
|
|
938,817
|
|
|
|
2016
|
|
|
|
400,000
|
|
|
|
25,000
|
|
|
|
88,427
|
|
|
|
90,450
|
|
|
|
480,000
|
|
|
|
5,842
|
(2)
|
|
|
1,089,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brandon H. LaVerne
|
|
2018
|
|
|
|
381,000
|
|
|
|
50,490
|
|
|
|
231,312
|
|
|
|
—
|
|
|
|
182,084
|
|
|
|
16,349
|
(4)
|
|
|
861,235
|
|
Chief Financial Officer
|
|
2017
|
|
|
|
381,000
|
|
|
|
50,490
|
|
|
|
153,096
|
|
|
|
150,000
|
|
|
|
12,301
|
|
|
|
12,420
|
(3)
|
|
|
759,307
|
|
|
|
2016
|
|
|
|
346,330
|
|
|
|
45,716
|
|
|
|
190,118
|
|
|
|
—
|
|
|
|
176,351
|
|
|
|
17,819
|
(4)
|
|
|
776,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert I. Newton
|
|
2018
|
|
|
|
378,000
|
|
|
|
152,000
|
|
|
|
231,312
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,625
|
(3)
|
|
|
777,937
|
|
Executive Vice President, Chief Legal Officer
and
|
|
2017
|
|
|
|
378,000
|
|
|
|
152,000
|
|
|
|
153,096
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
16,500
|
(3)
|
|
|
849,596
|
|
Secretary
|
|
2016
|
|
|
|
342,900
|
|
|
|
187,160
|
|
|
|
190,118
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,138
|
(4)
|
|
|
737,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon M. Abuyounes
|
|
2018
|
|
|
|
367,000
|
|
|
|
48,510
|
|
|
|
231,312
|
|
|
|
—
|
|
|
|
174,943
|
|
|
|
18,957
|
(4)
|
|
|
840,722
|
|
Executive Vice President
|
|
2017
|
|
|
|
367,000
|
|
|
|
40,021
|
|
|
|
153,096
|
|
|
|
150,000
|
|
|
|
11,819
|
|
|
|
17,378
|
(4)
|
|
|
739,314
|
|
— IT and Operations
|
|
2016
|
|
|
|
333,375
|
|
|
|
35,204
|
|
|
|
97,269
|
|
|
|
100,500
|
|
|
|
169,755
|
|
|
|
16,950
|
(4)
|
|
|
753,053
|
|
(1)
|
Represents
the aggregate grant date fair value of stock and option awards, valued in accordance with ASC 718, awarded to each of the
named executive officers for each respective year. For a detailed discussion of the assumptions made in the valuation of stock
and option awards, please see Notes 2 and 5 of our Notes to the Consolidated Financial Statements included in our original
filing of this Annual Report on Form 10-K for the year ended December 31, 2018.
|
(2)
|
Includes
company matched 401(k) contributions on behalf of the executive and company sponsored award trip.
|
(3)
|
Includes
company matched 401(k) contributions on behalf of the executive and car allowance.
|
(4)
|
Includes
company matched 401(k) contributions on behalf of the executive, car allowance and company sponsored award trip.
|
Pay
Ratio Disclosure
As
required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure
about the relationship of the annual total compensation of our employees to the annual total compensation of Mr. Khulusi, our
Chairman and Chief Executive Officer. SEC rules for identifying the median employee and calculating the pay ratio allow companies
to apply various methodologies and assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay
ratio reported by other companies.
CEO
Patio Ratio
For
2018, the median of the annual total compensation of all of our employees, other than Mr. Khulusi, was $43,931. Mr. Khulusi’s
annual total compensation, as reported in the total column of the 2018 Summary Compensation Table, was $2,763,792. Based on this
information, the ratio of the annual total compensation of Mr. Khulusi to the median of the annual total compensation of all employees
was 63 to 1. We believe this ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation
S-K.
Identification
of Median Employee
We
selected December 31, 2018 as the date on which to determine our median employee. For purposes of identifying the median employee
from our worldwide population base, we considered the gross cash compensation of all of our employees, as compiled from our payroll
records, which includes information on base wages, bonus and commission. We selected gross cash compensation as it represents
the principal form of compensation delivered to all of our employees and is readily available in each country. In addition, we
measured compensation for purposes of determining the median employee using the 12-month period ending December 31, 2018. Compensation
paid in foreign currencies was converted to U.S. dollars based on an average exchange rate for the relevant period, and represents
wages paid to such employees in their local countries with different prevailing market wages, including over 1,000 employees
in Manila, Philippines.
The
SEC’s rules requiring pay ratio disclosure allow companies to exercise a significant amount of flexibility in making a determination
as to who is the median employee and does not mandate that each public company use the same method. In addition, our compensation
philosophy means fair pay based on a person’s role in the Company, a subjective determination of the market value of that
person’s job and that person’s performance in that position. As a result, the annual total compensation of our median
employee is unique to that person and is not a good indicator of the annual total compensation of any of our other employees and
is not comparable to the annual total compensation of employees at other companies. Similarly, we would not expect that the ratio
of the annual total compensation of our CEO to our median employee to be a number that can be compared to the ratio determined
by other companies in any meaningful fashion.
Grants
of Plan-Based Awards (2018)
The
following table sets forth information regarding equity awards granted to our named executive officers during the 2017 fiscal
year:
Name
|
|
Grant
Date
|
|
All Other
Stock
Awards:
Number of
Shares or Stock
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 (3)
|
|
Frank F. Khulusi
|
|
05/20/2018
|
|
|
80,000
|
(1)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
1,008,000
|
|
Robert J. Miley
|
|
05/20/2018
|
|
|
—
|
|
|
|
50,000
|
(2)
|
|
|
12.60
|
|
|
|
330,445
|
|
Brandon H. LaVerne
|
|
05/20/2018
|
|
|
—
|
|
|
|
35,000
|
(2)
|
|
|
12.60
|
|
|
|
231,312
|
|
Robert I. Newton
|
|
05/20/2018
|
|
|
—
|
|
|
|
35,000
|
(2)
|
|
|
12.60
|
|
|
|
231,312
|
|
Simon M. Abuyounes
|
|
05/20/2018
|
|
|
—
|
|
|
|
35,000
|
(2)
|
|
|
12.60
|
|
|
|
231,312
|
|
(1)
|
These
RSUs vest annually in equal installments over five years.
|
(2)
|
These
options vest quarterly in equal installments over five years, with full vesting on May
20, 2023, and have a term of seven years.
|
(3)
|
The
grant date fair values of the stock and option awards granted were computed in accordance
with ASC 718. For a detailed discussion of the assumptions made in the valuation of stock
and option awards, please see Notes 2 and 5 of our Notes to the Consolidated Financial
Statements included in our original filing of this Annual Report on Form 10-K for the
year ended December 31, 2018.
|
Outstanding
Equity Awards at Fiscal Year-End (2018)
The
following table sets forth information regarding equity awards for each of our named executive officers outstanding as of December
31, 2018:
|
|
Option Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Grant Date
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares or
Units of Stock
That Have
Not Vested (#)
|
|
|
Market
Value of
Shares or
Units of Stock
That Have Not
Vested ($)
|
|
Frank F.
Khulusi
|
|
06/10/2011
|
|
|
50,000
|
|
|
|
—
|
|
|
|
8.00
|
|
|
|
06/10/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
08/10/2012
|
|
|
13,200
|
|
|
|
—
|
(1)
|
|
|
5.55
|
|
|
|
08/10/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2013
|
|
|
16,200
|
|
|
|
—
|
|
|
|
7.65
|
|
|
|
05/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
48,600
|
|
|
|
5,400
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,200
|
(2)
|
|
|
126,792
|
|
|
|
09/15/2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
28,000
|
(3)
|
|
|
493,080
|
|
|
|
05/20/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54,000
|
(2)
|
|
|
950,940
|
|
|
|
05/20/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,600
|
(2)
|
|
|
1,014,336
|
|
|
|
05/20/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80,000
|
(2)
|
|
|
1,408,800
|
|
Robert J.
Miley
|
|
12/04/2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
(2)
|
|
|
352,200
|
|
|
|
09/15/2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,800
|
(3)
|
|
|
84,528
|
|
|
|
05/20/2016
|
|
|
10,000
|
|
|
|
10,000
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,400
|
(2)
|
|
|
95,094
|
|
|
|
05/20/2017
|
|
|
6,900
|
|
|
|
16,100
|
(1)
|
|
|
18.75
|
|
|
|
05/20/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,800
|
(2)
|
|
|
154,968
|
|
|
|
05/20/2018
|
|
|
5,000
|
|
|
|
45,000
|
(1)
|
|
|
12.60
|
|
|
|
05/20/2025
|
|
|
|
—
|
|
|
|
—
|
|
Brandon H.
LaVerne
|
|
06/10/2011
|
|
|
6,250
|
|
|
|
—
|
|
|
|
8.00
|
|
|
|
06/10/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
08/10/2012
|
|
|
10,000
|
|
|
|
—
|
|
|
|
5.55
|
|
|
|
08/10/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2013
|
|
|
9,100
|
|
|
|
—
|
|
|
|
7.65
|
|
|
|
05/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
11,250
|
|
|
|
1,500
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,400
|
(2)
|
|
|
42,264
|
|
|
|
09/15/2015
|
|
|
9,750
|
|
|
|
5,250
|
(1)
|
|
|
9.53
|
|
|
|
09/15/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
09/15/2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,800
|
(3)
|
|
|
84,528
|
|
|
|
05/20/2016
|
|
|
21,500
|
|
|
|
21,500
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
5,250
|
|
|
|
12,250
|
(1)
|
|
|
18.75
|
|
|
|
05/20/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,400
|
(2)
|
|
|
112,704
|
|
|
|
05/20/2018
|
|
|
3,500
|
|
|
|
31,500
|
(1)
|
|
|
12.60
|
|
|
|
05/20/2025
|
|
|
|
—
|
|
|
|
—
|
|
Robert I.
Newton
|
|
08/21/2009
|
|
|
25,000
|
|
|
|
—
|
|
|
|
7.99
|
|
|
|
08/21/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
02/26/2010
|
|
|
25,000
|
|
|
|
—
|
|
|
|
4.66
|
|
|
|
02/26/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
06/10/2011
|
|
|
25,000
|
|
|
|
—
|
|
|
|
8.00
|
|
|
|
06/10/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
08/10/2012
|
|
|
2,000
|
|
|
|
—
|
|
|
|
5.55
|
|
|
|
08/10/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2013
|
|
|
13,000
|
|
|
|
—
|
|
|
|
7.65
|
|
|
|
05/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
13,500
|
|
|
|
1,500
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,400
|
(2)
|
|
|
42,264
|
|
|
|
09/15/2015
|
|
|
9,750
|
|
|
|
5,250
|
(1)
|
|
|
9.53
|
|
|
|
09/15/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
09/15/2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,800
|
(3)
|
|
|
84,528
|
|
|
|
05/20/2016
|
|
|
21,500
|
|
|
|
21,500
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
5,250
|
|
|
|
12,250
|
(1)
|
|
|
18.75
|
|
|
|
05/20/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,400
|
(2)
|
|
|
112,704
|
|
|
|
05/20/2018
|
|
|
3,500
|
|
|
|
31,500
|
(1)
|
|
|
12.60
|
|
|
|
05/20/2025
|
|
|
|
—
|
|
|
|
—
|
|
Simon M.
Abuyounes
|
|
05/20/2014
|
|
|
13,500
|
|
|
|
1,500
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,400
|
(2)
|
|
|
42,264
|
|
|
|
09/15/2015
|
|
|
9,750
|
|
|
|
5,250
|
(1)
|
|
|
9.53
|
|
|
|
09/15/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
09/15/2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,800
|
(3)
|
|
|
84,528
|
|
|
|
05/20/2016
|
|
|
11,000
|
|
|
|
11,000
|
(1)
|
|
|
10.05
|
|
|
|
05/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,000
|
(2)
|
|
|
105,660
|
|
|
|
05/20/2017
|
|
|
5,250
|
|
|
|
12,250
|
(1)
|
|
|
18.75
|
|
|
|
05/20/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
05/20/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,400
|
(2)
|
|
|
112,704
|
|
|
|
05/20/2018
|
|
|
3,500
|
|
|
|
31,500
|
(1)
|
|
|
12.60
|
|
|
|
05/20/2025
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
These
options vest quarterly in equal installments over five years.
|
(2)
|
These
RSUs vest annually in equal installments over five years.
|
(3)
|
These
RSUs vested 1/5 on May 20, 2016 with the remainder vesting annually in equal installments
over four years.
|
Option
Exercises and Stock Vested (2018)
The
following table provides information regarding each exercise of stock option awards and vesting of RSU awards for each of our
named executive officers during the fiscal year ended December 31, 2018:
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Number
of Shares
Acquired on
Exercise (#)
|
|
|
Value
Realized on
Exercise ($)(1)
|
|
|
Number
of Shares
Acquired on
Vesting (#)
|
|
|
Value
Realized on
Vesting ($)
|
|
Frank
F. Khulusi
|
|
|
—
|
|
|
$
|
—
|
|
|
|
60,800
|
|
|
$
|
766,080
|
|
Robert
J. Miley
|
|
|
—
|
|
|
|
—
|
|
|
|
26,400
|
|
|
|
463,840
|
|
Brandon
H. LaVerne
|
|
|
—
|
|
|
|
—
|
|
|
|
8,200
|
|
|
|
103,320
|
|
Robert
I. Newton
|
|
|
—
|
|
|
|
—
|
|
|
|
8,000
|
|
|
|
100,800
|
|
Simon
M. Abuyounes
|
|
|
137,000
|
|
|
|
2,316,556
|
|
|
|
9,800
|
|
|
|
123,480
|
|
(1)
|
Value
realized was computed by calculating the difference between the market price of our common stock at the exercise date and
the exercise prices of the options exercised.
|
Potential
Payments Upon Termination or Change in Control (2018)
Provisions
of our employment and change of control arrangements with the named executive officers and our equity incentive plan or individual
award agreements thereunder provide for certain payments to our named executive officers at, following or in connection with a
termination of their employment or a change of control of PCM. See “Employment Agreements and Severance and Change-in-Control
Arrangements” in our Compensation Discussion and Analysis section above for a discussion of the specific circumstances that
would trigger payments under the employment agreements with our named executive officers.
The
agreements pursuant to which we granted stock options and RSUs to Mr. Khulusi, Mr. LaVerne and Mr. Newton provide for full acceleration
of vesting of their unvested awards in the event of a change of control of our company. The stock options and RSUs held by Mr.
Miley and Mr. Abuyounes provide that, in the event of a change of control, a portion of the unvested awards then outstanding will
become fully vested. See “Employment Agreements and Severance and Change-in-Control Arrangements” in our Compensation
Discussion and Analysis section above for a discussion of the specific circumstances and amount of equity award acceleration for
each of these executives.
Under
our stock incentive plans, a change of control is deemed to occur upon:
|
●
|
the
direct or indirect acquisition by any person or related group of persons of more than
50% of the total voting power of our outstanding stock;
|
|
|
|
|
●
|
a
change in the composition of our board over a period of 36 months or less such that a
majority of our continuing directors cease to be members of our board;
|
|
|
|
|
●
|
a
merger or consolidation in which we are not the surviving entity or in which we survive
as an entity but in which more than 50% of the voting power of our outstanding securities
are transferred to persons different from those who held such securities immediately
prior to such merger; or
|
|
|
|
|
●
|
the
sale, transfer or other disposition of all or substantially all of our assets or our
liquidation or dissolution.
|
The
table below sets forth the estimated payments that would be made to each of our named executive officers upon voluntary termination,
involuntary termination, a change of control, and death or permanent disability. The actual amounts to be paid out can only be
determined at the time of such named executive officer’s separation from PCM. The information set forth in the table assumes,
as necessary:
|
●
|
The
termination and/or the qualified change in control event occurred on December 31, 2018
(the last business day of our last completed fiscal year);
|
|
●
|
The price per share of our common stock on the date of termination is $17.61 (the closing market price of our common stock on the Nasdaq Global Market on December 31, 2018); and
|
|
●
|
With
respect to unvested equity awards, the awards are not assumed or replaced as described
above and do not remain outstanding following the change of control.
|
Name
|
|
Voluntary
Termination
|
|
|
Death
or
Permanent
Disability
|
|
|
Change
of
Control
|
|
|
Involuntary
Termination
|
|
Frank F. Khulusi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement
|
|
$
|
2,045,598
|
(1)(2)
|
|
|
See
|
(7)
|
|
$
|
2,045,598
|
(2)(3)
|
|
$
|
2,045,598
|
(2)(4)
|
Acceleration of Equity Awards
|
|
|
—
|
|
|
|
—
|
|
|
|
4,034,772
|
(8)
|
|
|
—
|
|
Total
|
|
$
|
2,045,598
|
|
|
|
—
|
|
|
$
|
6,080,370
|
|
|
$
|
2,045,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Miley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
500,000
|
(4)(5)
|
Acceleration of Equity Awards
|
|
|
—
|
|
|
|
—
|
|
|
$
|
744,916
|
(8)
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
$
|
744,916
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brandon H. LaVerne
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
190,500
|
(4)(6)
|
Acceleration of Equity Awards
|
|
|
—
|
|
|
|
—
|
|
|
$
|
613,611
|
(8)
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
$
|
613,611
|
|
|
$
|
190,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert I. Newton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
189,000
|
(4)(6)
|
Acceleration of Equity Awards
|
|
|
—
|
|
|
|
—
|
|
|
$
|
613,611
|
(8)
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
$
|
613,611
|
|
|
$
|
189,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon M. Abuyounes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
183,500
|
(4)(6)
|
Acceleration of Equity Awards
|
|
|
—
|
|
|
|
—
|
|
|
$
|
272,964
|
(8)
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
$
|
272,964
|
|
|
$
|
183,500
|
|
(1)
|
This
severance benefit is provided pursuant to Mr. Khulusi’s employment agreement if his employment with us is terminated
by Mr. Khulusi for “good reason,” as defined in his employment agreement, including if we choose to not renew
the agreement.
|
(2)
|
Estimated severance
payment is to be made in a single lump sum payment upon the termination or change of control, as applicable, subject to compliance
with Section 409A of the Internal Revenue Code.
|
(3)
|
Pursuant to the terms
of his employment agreement, to the extent the severance payment payable to Mr. Khulusi in the event of a change of control,
either alone or together with other payments he has the right to receive from us, would not be deductible (in whole or in
part) by us as a result of the payment constituting a “parachute payment” under Section 280G of the Internal Revenue
Code, the severance payment will be reduced to the maximum deductible amount under the Code.
|
(4)
|
The amount indicated
reflects payments upon a termination not for cause. In the event of the individual’s termination for cause, no payment
would be payable, except that pursuant to Mr. Khulusi’s employment agreement, if he is terminated for cause (which may
occur upon 30 days’ advance written notice), he is to be paid his salary through the end of the notice period.
|
(5)
|
Severance payment
is to be made in one lump sum in the first payroll period after a properly executed release, as defined in Mr. Miley’s
employment agreement, becomes irrevocable.
|
(6)
|
Severance payments
are to be made in equal installments over a period of six months following the date of termination.
|
(7)
|
Upon executive’s
death, we are required to pay to executive’s beneficiaries or estate the compensation to which he is entitled through
the end of the month in which death occurs. Upon executive’s disability, which in the sole opinion of the Board, if
executive is not able to properly perform his duties for more than 270 days in the aggregate or 180 consecutive days in any
twelve month period, then executive’s employment shall terminate on the last day of the month in which the Board determines
executive to be disabled and be entitled to executive’s compensation through executive’s last day of employment.
|
(8)
|
Represents the value
of outstanding stock options and RSUs as of December 31, 2018 that would vest upon consummation of a change in control. Assumes
that the vested options are immediately exercised and the shares received upon exercise are immediately resold at the assumed
per share price on the date of termination. For details regarding acceleration terms for each of the named executive, please
see “Employment Agreements and Severance and Change-in-Control Arrangements” in our Compensation Discussion and
Analysis section above.
|
Director
Compensation (2018)
The
following table provides information regarding the compensation earned for services performed for us as a director by each member
of our board of directors, other than directors who are also named executive officers, during the fiscal year ended December 31,
2018:
Name
|
|
Fees Earned or
Paid in Cash
|
|
|
Option
Awards
(1)(2)
|
|
|
Total
|
|
Thomas A. Maloof (3)
|
|
$
|
91,000
|
|
|
$
|
72,698
|
|
|
$
|
163,698
|
|
Ronald B. Reck (3)
|
|
|
89,500
|
|
|
|
72,698
|
|
|
|
162,198
|
|
Paul C. Heeschen (3)
|
|
|
79,500
|
|
|
|
72,698
|
|
|
|
152,198
|
|
(1)
|
Represents
the aggregate grant date fair value of stock awards awarded to each of the directors during the 2018 fiscal year. For a detailed
discussion of the assumptions made in the valuation of the option awards, please see Notes 2 and 5 of our Notes to the Consolidated
Financial Statements included in our original filing of this Annual Report on Form 10-K for the year ended December 31, 2018.
|
(2)
|
On May 20, 2018,
each of our non-employee directors was awarded options to purchase 11,000 shares of our common stock, which vest annually
over a two year period.
|
(3)
|
Each of our non-employee
directors had the following aggregate number of option awards outstanding and vested as of December 31, 2018: Mr. Maloof —23,750
outstanding and 12,750 vested, Mr. Reck — 43,750 outstanding and 32,750 vested and Mr. Heeschen — 17,375 outstanding
and 6,375 vested; and the following aggregate number of unvested RSUs as of December 31, 2018: Mr. Maloof —2,000,
Mr. Reck —2,000 and Mr. Heeschen —2,000.
|
For
2018, each of our non-employee members of the Board received an annual Board retainer of $56,000, plus an annual retainer
of $10,000 for service on the Audit Committee and $7,500 for service on the Compensation Committee of the Board on which he or
she served. The chairperson of each of our Audit and Compensation Committees also received an additional annual retainer of $17,500
and $8,750, respectively. Directors who are employed by us or any of our affiliates are not paid any additional compensation for
their service on our board of directors. We reimburse each of our directors for reasonable out-of-pocket expenses that they incur
in connection with attending board or committee meetings. We have entered into indemnification agreements with each of our directors,
a form of which has been filed as an exhibit to our periodic reports filed with the Securities and Exchange Commission.
Our
directors are also eligible to participate in our equity incentive plans, which are administered by our Compensation Committee
under authority delegated by our board of directors. The terms and conditions of option and stock bonus grants to our non-employee
directors under our equity incentive plans are and will be determined in the discretion of our Compensation Committee, consistent
with the terms of the applicable plan.
Compensation
Committee Interlocks and Insider Participation
Mr.
Reck and Mr. Heeschen served as members of our Compensation Committee during the fiscal year ended December 31, 2018. There
are no Compensation Committee interlocks between us and other entities involving our executive officers and Board members who
serve as executive officers of such companies.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis with management. Based
on its review and discussions with management, the Committee recommended to our Board that the Compensation Discussion and Analysis
be included in our Form 10-K for the year ended December 31, 2018 and our Proxy Statement for the 2019 Annual Meeting of Stockholders.
The Compensation
Committee
Ronald
B. Reck (Chair)
Paul C.
Heeschen