UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment (Amendment No. )
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☐ | Soliciting Material Pursuant to §240.14a-12 |
PFSweb, 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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505 Millennium Drive
Allen, Texas 75013
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of PFSweb, Inc. (the “Company”), which will be held at Hilton Garden Inn, Allen, Texas, on Wednesday,Tuesday, June 29, 201627, 2018 at 10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to (i) elect seven directors, (ii) approve an amendmentcertain amendments to the Company’s 2005 Employee Stock and Incentive Plan, (iii) approve an amendment to the Company’s shareholder rights plan, (iv) approve, on a non-binding, advisory basis, the compensation of the Company’s Named Executive Officers, and (iv)(v) ratify the appointment of BDO USA, LLP as the Company’s independent auditors. Information about these matters is contained in the attached Proxy Statement.
It is important that your shares be represented at the Annual Meeting, regardless of the number you hold. To ensure your representation at the Annual Meeting, you are urged to complete, date, sign and return the enclosed proxy as promptly as possible. A postage-prepaid envelope is enclosed for that purpose. In addition, to ensure your representation at the Annual Meeting, you may vote your shares by (a) calling the toll free telephone number indicated on the proxy card or (b) accessing the special web site indicated on the proxy card, each as more fully explained in the telephone and internet voting instructions. If you attend the Annual Meeting, you may vote in person even if you have previously returned a proxy card. Please note that if you hold your shares of our common stock through your broker, you will not be able to vote in person at the meeting.meeting unless you obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot.
I sincerely hope you will be able to attend the Annual Meeting, and I look forward to seeing you on June 29, 2016.27, 2018.
Sincerely,
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Michael Willoughby |
Chief Executive Officer |
Allen, Texas
June 2, 2016
PFSweb, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 29, 201627, 2018
The Annual Meeting of Stockholders of PFSweb, Inc. (the “Company”) will be held on Wednesday,Tuesday, June 29, 201627, 2018 at 10:00 a.m. at Hilton Garden Inn, Allen, Texas, for the following purposes:
1.To elect seven directors;
2.To approve amendments to our 2005 Employee Stock and Incentive Plan to increase the number of shares of Common Stock issuable thereunder by 1,000,000 shares and to establish the compensation payable to our outside directors;
3.To approve an amendment to our Rights Agreement with Computershare Shareowner Services, LLC;
4.To approve, on a non-binding, advisory basis, the compensation of the Company’s Named Executive Officers; and
5.To ratify the appointment of BDO USA, LLP as the Company’s independent auditors for the fiscal year ended December 31, 2018.
The Board of Directors has fixed the close of business on May 13, 2016April 30, 2018 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. Each stockholder, even though he or she may presently intend to attend the Annual Meeting, is requested to execute and date the enclosed proxy card and return it without delay in the enclosed postage-paid envelope. Any stockholder present at the Annual Meeting may withdraw his or her proxy card and vote in person on each matter properly brought before the Annual Meeting. Stockholders holding shares in street name must obtain a legal proxy from their broker, bank or other holder of record and present it to the inspectors of election with their ballot to be able to vote at the Annual Meeting.
Please sign, date and mail the enclosed proxy in the enclosed envelope promptly, so that your shares of stock may be represented at the meeting.
By Order of the Board of Directors
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Michael Willoughby |
Chief Executive Officer |
Allen, Texas
June 2, 2016
505 Millennium Drive
Allen, Texas 75013
(972) 881-2900
PROXY STATEMENT
We are furnishing this Proxy Statement in connection with the solicitation of proxies on behalf of the Board of Directors of PFSweb, Inc. (“PFSweb,” the “Company,” “we,” “us,” or “our”) to be voted at the Annual Meeting of Stockholders to be held at Hilton Garden Inn, Allen, Texas, on Wednesday,Tuesday, June 29, 2016,27, 2018, at 10:00 a.m. and at any and all adjournments thereof. This Proxy Statement, the Notice of Annual Meeting, the accompanying proxy and the Annual Report on Form 10-K are first being mailed and/or made available to stockholders on or about June 2, 2016.May 18, 2018.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 29, 2016:27, 2018:
The enclosed proxy statement and 20152017 Annual Report on Form 10-K are available at
www.pfsweb.com/investor-relations/proxy-materials.php.www.corporate.pfsweb.com/proxy-materials.
VOTING PROCEDURES
Your vote is very important. You can vote the shares of PFSweb common stock that are held directly in your name and not through your brokerage account at the Annual Meeting if you are present in person or represented by proxy. You may revoke your proxy at any time before the Annual Meeting by delivering written notice to our Secretary, by submitting a proxy bearing a later date or by appearing in person and casting a ballot at the Annual Meeting. If we receive a properly executed proxy before voting at the Annual Meeting is closed, the persons named as the proxy on the proxy card will vote the proxy in accordance with the directions provided on that card. If you do not indicate how your shares are to be voted, your shares will be voted as recommended by the Board. If you wish to give a proxy to someone other than the persons named on the proxy card, you should cross out the names contained on the proxy card and insert the name(s) of the person(s) who hold(s) your proxy. Please note that the person(s) to whom you give your proxy must be present in person at the Annual Meeting to vote your shares.
Who can vote?
Stockholders of record as of the close of business on May 13, 2016,April 30, 2018, are entitled to vote at the Annual Meeting. On that date, 18,718,924 shares of our common stock were issued, and excluding 33,467 shares of common stock in treasury, 18,685,457 shares of our common stock were outstanding and eligible to vote. Each share is entitled to one vote on each matter presented at the Annual Meeting. The closing sale price of our common stock as reported on the NASDAQ Capital Market on the record date was $13.31 per share.
How do I vote?
You can vote in person at the Annual Meeting if you are a stockholder of record on the record date. Alternatively, a stockholder who holds shares of our common stock of record and not in “street name” may vote shares by giving a proxy via mail, telephone or the Internet. To vote your proxy by mail, indicate your voting choices, sign and date your proxy and return it in the postage-paid envelope provided. You may vote by telephone or the Internet by following the instructions on your proxy. Your telephone or Internet delivery authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy via the mail.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name. The Proxy Statement, the Notice of Annual Meeting, the accompanying proxy and the Annual Report on Form 10-K have been forwarded to you or made available by your broker, bank or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or on
the Internet. All stockholders of record may vote in person at the Annual Meeting. You may also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot to be able to vote at the Annual Meeting.
What shares are represented by the proxy?
The proxy that we are delivering represents all the shares registered in your name with our transfer agent, Computershare Shareowner Services LLC. The proxy that is delivered by your broker, bank or other nominee represents the shares held by you in an account at that institution.
What are “broker non-votes” and why is it important that I submit my voting instructions for shares I hold as a beneficial stockholder?
If a broker or other financial institution holds your shares in its name and you do not provide voting instructions to it, New York Stock Exchange (“NYSE”) rules allow that firm to vote your shares only on routine matters. Proposal No. 4,5, the ratification of BDO USA, LLP as the Company’s independent auditors, is the only routine matter for consideration at the Annual Meeting. For all matters other than Proposal No. 4,5, you must submit voting instructions to the firm that holds your shares if you want your vote to count at the Annual Meeting. When a firm votes a client’s shares on some but not all of the proposals, the missing votes are referred to as “broker non-votes.”
Abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting, and abstentions, but not broker non-votes, as to particular proposals will be treated as shares entitled to vote. Broker non-votes are not considered votes for or against a proposal and, therefore, will have no direct impact on any proposal. Concerning the election of directors, you may: (a) vote for all director nominees as a group; (b) withhold authority to vote for all director nominees as a group; or (c) vote for all director nominees as a group except those nominees you identify on the appropriate line.
How are votes counted?
If you return a signed and dated proxy but do not indicate how the shares are to be voted, those shares will be voted as recommended by the Board. A valid proxy also authorizes the individuals named as proxies to vote your shares in their discretion on any other matters which, although not described in the Proxy Statement, are properly presented for action at our Annual Meeting. If you indicate on your proxy that you wish to “abstain” from voting on an item, your shares will not be voted on that item, but will be counted to determine whether there is a quorum present. There is no right to cumulative voting.
How is a quorum established and what vote is required to approve matters presented at the Annual Meeting?
The presence, in person or by proxy, of at least a majority of the shares outstanding on the record date will constitute a quorum. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum. If a quorum is not present, the Annual Meeting will be rescheduled for a later date.
The following sets forth the votes required to approve the matters presented at the Annual Meeting:
Item No. 1 (Election of Directors) – Each director nominee must receive the affirmative vote of a majority of the votes cast with respect to such director, which means that the number of shares voted “FOR” that director’s election must exceed the number of shares voted “AGAINST” that director’s election. Shareholders will not be allowed to cumulate their votes in the election of directors. Abstentions and broker non-votes will not be considered as votes cast on this proposal and therefore will not affect the outcome of this proposal.
Item No. 2 (Amendment(Amendments to 2005 Employee Stock and Incentive Plan) – The proposal to amend the Company’s 2005 Employee Stock and Incentive Plan requires the affirmative vote of a majority of the shares present in person or represented
by proxy and entitled to vote at the Annual Meeting. As a result, abstentions are treated as votes against the proposal, while broker non-votes have no effect.
Item No. 3 (Amendment to Rights Agreement) – The proposal to amend the Company’s Rights Agreement requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. As a result, abstentions are treated as votes against the proposal, while broker non-votes have no effect.
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Item No. 34 (Advisory Vote on Executive Compensation) – The non-binding advisory proposal to approve the compensation of the Company’s Named Executive Officers requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. As a result, abstentions are treated as votes against the proposal, while broker non-votes have no effect.
Item No. 45 (Ratification of Auditors) –The proposal to ratify the selection of BDO USA, LLP as our independent auditors requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. As a result, abstentions are treated as votes against the proposal, while broker non-votes have no effect.
What is the recommendation of the Board of Directors?
The Board of Directors recommends that stockholders vote (i) FOR the nominees of the Board of Directors (Item No. 1), (ii) FOR the amendmentamendments to our 2005 Employee Stock and Incentive Plan (Item No. 2), (iii) FOR the amendment to our Rights Agreement (Item No 3), (iv) FOR the non-binding advisory approval of the compensation to our Named Executive Officers (Item No. 3)4), and (iv)(v) FOR the ratification of the appointment of BDO USA, LLP as the Company’s independent auditors for the fiscal year ending December 31, 20162018 (Item No. 4)5). If you do not indicate how your shares are to be voted, your shares will be voted as recommended by the Board.
Who will tabulate the vote?
Our transfer agent, Computershare Shareowner Services LLC, will tally the vote, which will be certified by an inspector of election who is a PFSweb employee.election.
Who will bear the expenses of our solicitation? How will we solicit votes?
We will bear our own cost of solicitation of proxies. In addition to the use of the mail, proxies may be solicited by our directors and officers by personal interview, telephone, facsimile or e-mail. Our directors and officers will not receive additional compensation for this solicitation but may be reimbursed for out-of-pocket expenses incurred in connection with these activities. Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares of our common stock held of record by these people or institutions, in which case we will reimburse these brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection with these forwarding activities. We may retain Computershare Shareowner Services LLC to assist in the solicitation of proxies for an estimated fee of $15,000 plus reimbursement of expenses.
Are there appraisal rights?
Stockholders have no dissenters’ rights of appraisal with respect to any of the matters to be voted upon at the Annual Meeting.
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NOMINEES FOR THE BOARD OF DIRECTORS
The Board presently consists of seven members, David I. Beatson, Monica Luechtefeld, Shinichi Nagakura, James F. Reilly, Benjamin Rosenzweig, Peter J. Stein and Michael C. Willoughby, all of whom have been renominated and recommended by the Board of Directors. If elected, such persons are expected to serve until the Company’s 20172019 annual meeting and until their successors are elected and qualified. The shares represented by proxies in the accompanying form will be voted for the election of the nominees unless authority to so vote is withheld. The Board of Directors has no reason to believe that such nominees will not serve if elected, but if any one or more of them should become unavailable to serve as a director, and if the Board designates a substitute nominee or nominees, the person named as proxy will vote for the substitute nominee(s) designated by the Board.
To be elected, a director nominee must receive the affirmative vote of a majority of the votes cast with respect to such director, which means that the number of shares voted “for” that director’s election must exceed the number of shares voted “against” that director’s election. This majority vote standard is in effect because this is an uncontested election of directors (i.e., the number of nominees for director did not exceed the number of directors to be elected as of the record date of the annual meeting). For any contested election, the directors would be elected by a plurality of the votes cast by the shares entitled to vote on the election of directors.
If a director nominee who is serving as a director is not elected at the annual meeting, under our by-laws, as amended, such director must tender his or her resignation to the Board, subject to acceptance by the Board. The Nominating Committee would then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board, taking into account the recommendation of the Nominating Committee, would determine the appropriate responsive action with respect to the tendered resignation within 90 days and publicly disclose its decision. The director who tenders his or her resignation may not participate in the Board’s decision.
Information regarding the method by which votes will be counted appears above under the heading “Voting Procedures.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”"FOR" THE ELECTION OF THE CANDIDATES NOMINATED BY THE BOARD OF DIRECTORS.
The following information, which has been provided by the individuals named, sets forth for each nominee to serve as a member of the Board of Directors, such person’s name, age, principal occupation or employment during at least the past five years, the name of the corporation or other organization, if any, in which such occupation or employment is carried on and the period during which such person has served as a director of the Company. The following information also identifies and describes the key experience, qualifications and skills our directors bring to the Board that are important in light of our business and structure. The directors’ experiences, qualifications and skills that the Board considered in their nomination as qualifications for the member’s inclusion on the Board are included in their individual biographies.
David I. Beatson, age 68,70, has served as a non-employee Director since November 2000. Mr. Beatson is Chief Executive Officer of Ascent Advisors, LLC a consulting firm he founded in 2000. The firm provides strategic direction to firms in the logistics and supply chain industry as well as merger and acquisition advice for private equity firms investing in the industry. Mr. Beatson is a recognized leader in the field of transportation, logistics and supply chain management having served as Chairman and CEO of several leading companies in the industry. From 2007 until 2012 he was CEO of Globalware Solutions (“GWS”), a global supply chain management solution provider with facilities in North America, Asia and Europe. From July 2003 to April 2005, Mr. Beatson served as Regional CEO North America and Member of the Executive Board of Panalpina, Inc., a leading provider of international air and sea freight forwarding, customs brokerage and third party logistics services. From July 1998 to June 2000, Mr. Beatson served as Chairman, President and CEO of Circle International Group, Inc., a global transportation and logistics company. From 1991 to June 1994, Mr. Beatson served as vice-president of sales and marketing and then from June 1994 until July 1998 as president and CEO of Emery Worldwide, a global transportation and logistics company. Prior to 1991, Mr. Beatson held several management positions in the logistics and transportation industry, including American Airlines and CF Airfreight. Mr. Beatson also currently serves as an industry representative member of the Executive Advisory Committee to the National Industrial Transportation League, to which the Air Freight Association elected him in 1995. He also serves on the board of Descartes Systems
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(NASDAQ: (NASDAQ: DSGX), the Executive Board of ATL Partners and two privately held companies. Mr. Beatson received his B.S. degree in Business Administration from The Ohio State University and his M.B.A. from the University of Cincinnati. The Board of Directors believes the characteristics that qualify Mr. Beatson for the Board include his long-term experience in the transportation, logistics and supply chain management industry, leadership experience and judgment and knowledge of the Company’s business.
Monica Luechtefeld, age 67,69, has served as a non-employee Director of the Company since April 2014. Ms. Luechtefeld, a recognized leader in eCommerce & Internet Retailing, founded her own consultancy firm in 2012 to provide advisory services in eCommerce strategy as well as online marketing and emerging digital media. From 1993 to 2012, Ms. Luechtefeld held various executive roles within Office Depot, Inc., a Fortune 200 company. She was Executive Vice President eCommerce and Direct Marketing and most recently served as Executive Vice President of European eCommerce. Her previous leadership positions included Executive Vice President Supply Chain and Information Technology, as well as marketing, sales and business development roles. Ms. Luechtefeld is a trustee for the March of Dimes and Mount Saint Mary’s University. Ms. Luechtefeld received her B.S. degree from Mount Saint Mary’s University and her M.B.A. from the University of Notre Dame. She also received an honorary doctorate degree from Mount Saint Mary’s University. She also serves as a Board Member of Irish Angels, an angel investment group primarily focused on early stage technology companies. The Board of Directors believes the characteristics that qualify Ms. Luechtefeld for the Board include her business and leadership experience and judgment and her broad eCommerce industry knowledge.
Shinichi Nagakura, age 52,54, was appointed as a non-employee Director of the Company in May 2013 in accordance with the provisions of a Securities Purchase Agreement (the “Purchase Agreement”) between the Company and transcosmos inc. (“TCI”), a leading Japanese business process outsourcing company. Mr. Nagakura has been an officer of TCI and/or its affiliates for the last 15 years, including serving as a Director of TCI since 2006, and has experience in investments, business development and sales/marketing in the US and Japan. Prior to TCI, Mr. Nagakura served for ten years with Recruit Holdings Co., Ltd., a leading Japanese publishing and Internet media and marketing services company.which provides integrated human resource services. Mr. Nagakura also serves on the Board of Directors of Merlin Information Systems, Ltd., an international provider of high quality, personalized IT and customer support solutions based in the U.K., and Become Japan Holdings,InfraCommerce Inc., a leaderone stop eCommerce service company in electronic commerce and online comparison shopping.Brazil. He graduated from Sophia University, Tokyo, Japan with a B.A. in International Studies in 1986.
James F. Reilly, age 57,59, has served as a non-employee Director of the Company since its inception in 1999, as lead director from June 2010 to March 2013 and as Chairman since March 2013. Mr. Reilly has been an investment banker since 1983 and is currently the Managing Partner of Stonepine Advisors, LLC, an investment banking firm focused on high growth technology companies. Until June 2010, he was a Senior Advisor to Needham & Company, LLC, a nationally recognized investment banking and asset management firm focused primarily on serving emerging growth industries and their investors. He served in various capacities with Needham & Company, LLC, since January 2004 including Head of West Coast Investment Banking. Previously he was a Managing Director of J.P. Morgan Securities, Inc., an investment banking firm, and a Managing Director in the Technology Group of Warburg Dillon Read, the global investment banking division of UBS AG. From 1983 to 1999, Mr. Reilly was associated with Warburg Dillon Read or one of its predecessor companies and specialized in corporate finance advisory work for a broad range of technology companies. Mr. Reilly is also a director of Equalis, LLC, a privately held provider of commercial support services for open source math. Mr. Reilly received his B.A. degree from Columbia University. The Board of Directors believes the characteristics that qualify Mr. Reilly for the Board and serving as Chairman include his financial and investment background, leadership experience and judgment and knowledge of the Company’s business.
Benjamin Rosenzweig, age 31,33, was appointed as a non-employee Director of the Company in May 2013 in accordance with the provisions of a settlement agreement (the “Settlement Agreement”) between the Company and Privet Fund, L.P. and its affiliates (“Privet”). Mr. Rosenzweig is currently a partner at Privet Fund Management LLC. Prior to joining Privet in September 2008, Mr. Rosenzweig served as an investment banking analyst in the corporate finance group of Alvarez and Marsal from June 2007 until May 2008, where he completed multiple distressed mergers and acquisitions, restructurings, capital formation transactions and similar financial advisory engagements across several industries. Mr. Rosenzweig is currently a Director of Startek, Inc. (NYSE:SRT), where he serves as chair of the Audit Committee and on the Compensation Committee and Nominating & Governance Committee, and Hardinge, Inc. (NASDAQ: HDNG), where he serves as chair of the Compensation Committee and on the Audit Committee.Committee, Potbelly Corporation (NASDAQ: PBPB), where he serves on the Compensation Committee, and Cicero, Inc. (OTC:CICN). Mr. Rosenzweig also served as a Director of RELM Wireless Corp. (NYSE MKT: RWC) until September 2015. Mr. Rosenzweig graduated magna cum laude from Emory University with a Bachelor of Business Administration degree in Finance and a second major in Economics.
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Peter J. Stein, age 46,48, was appointed as a non-employee Director of the Company in January 2016. Mr. Stein has been the General Manager of the Brand Group at Fullscreen, a next generation media company since January 2016. From July 2013 to December 2014, Mr. Stein was the Global CEO of Razorfish, a global digital agency. From 2009 through July 2013, he was the President of the East Region for Razorfish. Prior to Razorfish, Mr. Stein held various leadership positions for technology and consulting companies, including partner at Scient, managing partner at iXL, director of client services at NetResponse, and a consultant for marketing and technology at KPMG. Mr. Stein serves on the board of Panna Cooking, a private corporation. Mr. Stein received a B.S. degree in Marketing from Lehigh University. The Board of Directors believes
the characteristics that qualify Mr. Stein for the Board include his long-term experience in the ecommerce industry, expertise in information technology, leadership experience and judgment.
Michael C. Willoughby, age 52,54, has served as Chief Executive Officer and a Director since March 2013, as President of PFSweb, Inc. since September 2010 and as Chief Information Officer of the Company from October 2001 until April 2016. Mr. Willoughby has previously served as President of Priority Fulfillment Services, a subsidiary of the Company, from February 2006 to September 2010. From 1999 to 2001, Mr. Willoughby served the Company as Vice President of E-Commerce. Prior to joining the Company, Mr. Willoughby served as President and Chief Executive Officer of Design Technologies, Inc., an e-commerce software development firm from 1994 to 1999. Prior to founding Design Technologies, Inc., Mr. Willoughby served as President and Chief Executive Officer of Integration Services, Inc., an IT consulting services company. Mr. Willoughby received his Bachelor of Business Administration degree in Information Systems from Abilene Christian University. The Board of Directors believes the characteristics that qualify Mr. Willoughby for the Board include his long-term experience in the ecommerce industry, expertise in information technology, leadership experience and judgment and extensive knowledge of the Company’s business.
Executive Officers and Officers
In addition to the individuals named above, the following are the names, ages and positions of the other executive officers and officers of the Company:
Executive Officers
Thomas J. Madden, age 54,56, has served as Executive Vice President, Chief Financial and Accounting Officer of the Company since its inception in 1999. Mr. Madden previously served as Chief Financial Officer of Daisytek International Corporation (“Daisytek”), former parent corporation of the Company, from 1997 to 2000, as Vice President — Finance, Treasurer and as Chief Accounting Officer of Daisytek from 1994 to 2000 and as Controller of Daisytek from 1992 to 1994. From 1983 to 1992, Mr. Madden served in various capacities with Arthur Andersen & Co., S.C., including financial consulting and audit manager.
Cynthia D. AlmondC. Travis Hess, age 48,46, has served as Chief ClientRevenue Officer offor the Company since March 2015,and Executive Vice President since 2011 and as Secretary– General Manager of the CompanyCompany’s LiveArea business unit since 2007. Ms. Almond2017, and is responsible for developing and implementing a comprehensive view of our clients in order to ensure their needs are met daily, including leading the development of client engagement processes, implementation of global enterprise solutions, product management and marketing. From 2001 to 2011, Ms. Almond served as Vice President – Client Services. From 1999 to 2001, Ms. Almond served as Director of Account Management. From 1991 to 1999, Ms. Almond served in various marketing, product management and sales capacities for Daisytek.
C. Travis Hess, age 44, has served as Executive Vice President of Sales for the Company since February 2015 and iscurrently responsible for global sales as well as strategic alliancesdirection and partnerships.management of all LiveArea activities, including consulting, digital agency and technology services. Mr. Hess has almost 20 yearspreviously served as Executive Vice President of experience leading sales organizations in multi-channel commerce, digital agency, eBusiness software and enterprise business process outsourcing solutions, including his most recent positionSales from 2015 to 2017. Prior to joining PFSweb, Mr. Hess served as Head of Sales for Loop Commerce from March 2014 to February 2015 and prior to that, EVP of Sales & Corporate Development for Amplifi Commerce from August 2010 to March 2014.
Steven J. StephanR. Zach Thomann, age 52,36, has served as Senior Vice President and General Manager of Technology Servicesthe Company’s PFS Operations business unit since April 20162017 and is responsible for strategic operationdirection and leadershipmanagement of the technologyall PFS Operations activities, including distribution, contact center, client financial services, team. From 2014and omni-channel operations services provided on behalf of PFSweb’s clients. Mr. Thomann served as Senior Vice President and General Manager of Omni-Channel Operations from 2016 to 2017, Vice President and General Manager of Omni-Channel Operations from 2015 to 2016, Mr. Stephan served as Vice President of Technology Services. Mr. Stephan was the FounderProgram Management from 2013 to 2015, Director of Program Management from 2012 to 2013 and President of REV Solutions, Inc. from 2007 until its acquisition by the Company in 2014. Prior to REV Solutions, Mr. Stephan held various positions at Target Corporationprogram management and client implementation roles from 19932003 to 2007 with the most recent being the Vice President of Target Services India.
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Mark Fuentes, age 48,50, has served as Senior Vice President and Chief Information Officer since April 2016 and is responsible for strategic operations and development of the IT Development, Operations and Client Services functions.2016. Mr. Fuentes served as Vice President of IT from 2008 to 2016. Prior to joining PFSweb, Mr. Fuentes worked for Blockbuster as Director of Systems Development.
Elizabeth E. Johnson, age 41,43, has served as Senior Vice President of Digital Marketing since 2017. Ms. Johnson served as Senior Vice President and General Manager of Agency Services since Aprilfrom 2016 and is responsible for leading the agency services team that provides the key strategy, design and digital marketing expertise enabling brands to succeed in commerce. Ms. Johnson served as2017, Vice President and General Manager of Agency Services from 2015 to 2016 and Vice President of Agency Services from 2012 to 2015. From 2008 to 2012, Ms. Johnson served as Director of Client Services and held various account management roles from 1999 to 2008.
Zach Thomann, age 34, has served Effective May 18, 2018, Ms. Johnson no longer serves as Senior Vice President and General Manager of Omni-Channel Operations since April 2016 and is responsible for distribution, contact center and operations services provided on behalf of PFSweb’s clients. Mr. Thomann served as Vice President and General Manager of Omni-Channel Operations from January of 2015 to 2016, Vice President of Program Management from 2013 to 2015, Director of Program Management from 2012 to 2013 and held various program management and client implementation roles from 2003 to 2012.
Officer
Gibson T. Dawson, age 50, has served as Vice President – Corporate Controller ofan executive officer or in any other position with the Company since May 2007. From inception to 2007, Mr. Dawson served as Corporate Controller for PFSweb. Prior to joining the Company, Mr. Dawson was controller for a recorded-music distribution company and prior to that spent more than 8 years with KPMG LLP in the assurance services practice.Company.
Meetings and Committees of the Board
The Board of Directors met a total of 9eleven times during the calendar year ended December 31, 2015.2017. The Board of Directors has determined that, other than Mr. Willoughby, each director is independent within the meaning of applicable Securities and Exchange Commission (“SEC”) rules and NASD listing standards. The independent directors are able to and generally meet in executive session without the Company’s management at each regularly scheduled quarterly Board meeting.
The Board of Directors does not have a policy regarding director attendance at the annual meeting of stockholders, and no current independent director attended the 20152017 annual meeting.
The Board of Directors currently has standinga Nominating, Audit, and Compensation Committees and recently created a Technology and Cybersecurity Committee.
The Nominating Committee is responsible for identifying and evaluating individuals qualified to become Board members and recommending to the Board candidates to stand for election or re-election as directors. The Committee will consider candidates at the recommendation of existing Board members, Company management, search firms or other consultants, or stockholders. Stockholders wishing to recommend director candidates to the Board may do so by writing to the Committee in care of the Corporate Secretary at the Company’s executive office, 505 Millennium Drive, Allen, TX 75013. At a minimum, director candidates should have demonstrated achievement in their particular field of endeavor, significant business or other management experience that would be of value to the Company, integrity and high ethical standards, good communication and leadership skills, and the ability and willingness to commit adequate time and attention to carry out their Board duties effectively. The Committee will evaluate candidates through background and reference checks, interviews and an analysis of each candidate’s qualifications and attributes in light of the current composition of the Board and the Company’s leadership needs at the time. The Nominating Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills, experience and expertise to oversee the Company’s business. During 2015, the Committee retained an outside consultant to assist the Committee in identifying and evaluating additional candidates as possible nominees to the Board of Directors. The current
7
members of the Nominating Committee are Mr. Reilly, Mr. Rosenzweig and Mr. Stein, each of whom has been determined to be independent as discussed above. The Nominating Committee has adopted a charter which is available on the Company’s website at www.pfsweb.com www.corporate.pfsweb.com (the contents of the website are not incorporated in this Proxy Statement by reference). The Nominating Committee met three timesone time during the calendar year ended December 31, 2015.2017.
The Audit Committee is established for the purpose of overseeing the Company’s accounting and financial reporting processes and audits of the Company’s financial statements. The Audit Committee is established to assist the Board in fulfilling its oversight responsibilities by reviewing and reporting to the Board on the integrity of the financial reports and other financial information provided by the Company to its stockholders. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any independent auditor employed by the Company (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Company. The Company’s auditors report directly to the Audit Committee.
The Audit Committee is currently comprised of three directors, Mr. Reilly, Mr. Beatson (who serves as Chairman) and Ms. Luechtefeld, each of whom has been determined by the Board of Directors to be independent as discussed above, and is able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement. The Board of Directors has determined that, based on his relevant experience as described above, Mr. Reilly is qualified as the audit committee financial expert within the meaning of applicable SEC regulations and has the requisite financial sophistication required by the NASD listing standards. The Audit Committee met a total of 13nine times during calendar year 2015.2017. The Committee has adopted a written amended and restated audit committee charter setting out the audit-related functions of the Audit Committee, and the Committee reviews and reassesses the adequacy of the charter on an annual basis. A copy of the charter is available on the Company’s website atwww.pfsweb.com . www.corporate.pfsweb.com.
The Compensation Committee approves, or in some cases recommends, to the Board, remuneration and compensation arrangements involving the Company’s executive officers and other key employees. The current members of the Compensation Committee are Messrs.Mr. Beatson, Mr. Nagakura and Mr. Reilly (who serves as Chairman), each of whom has been determined by the Board of Directors to be independent as discussed above. The Compensation Committee also serves as the Committee which administers the Company’s 2005 Employee Stock and Incentive Plan. The Compensation Committee has adopted a charter which is available on the Company’s website at www.pfsweb.com www.corporate.pfsweb.com. The Compensation Committee met fourthree times during the calendar year ended December 31, 2015.2017.
The Technology and Cybersecurity Committee was formed in 2016 and is responsible for review and oversight of technology-based issues. The Technology and Cybersecurity Committee is comprised of three directors, Ms. Luechtefeld (who serves as Chairman), Mr. Nagakura and Mr. Stein. The Technology and Cybersecurity Committee has adopted a charter which is available on the Company’s website at www.corporate.pfsweb.com. The Technology and Cybersecurity Committee met four times during the calendar year ended December 31, 2017.
During calendar year 2015,2017, no current director or director nominee attended fewer than 75% of the aggregate of all meetings of the Board and the committees, if any, upon which such director served and which were held during the period of time that such person served on the Board or such committee.
Communicating with the Board of Directors
Stockholders wishing to communicate with one or more Directors or the Board as a whole may do so in a writing addressed to the Director(s) or the Board and sent to the Corporate Secretary, PFSweb, Inc., 505 Millennium Drive, Allen, TX 75013.
Code of Ethics
The Board has approved a code of business conduct and ethics in accordance with rules of the SEC and NASD listing standards applicable to all directors, officers and employees, including the chief executive officer, senior financial officers and the principal accounting officer. The code is intended to provide guidance to directors and management to assure compliance with law and promote ethical behavior. Copies of the Company’s code of business conduct and ethics may be found on the Company’s website at www.pfsweb.com www.corporate.pfsweb.com.
8
Board Leadership Structure
Currently, the Company has separated the roles of Chief Executive Officer and Chairman in order to permit the Chief Executive Officer to focus his efforts in improving the Company’s operations. In addition, to assure effective independent oversight of the Company management, all of the other Board members are currently independent directors who may meet in executive session without management present. Similarly, each committee of the Board is comprised entirely of independent directors. The Company’s Bylaws further permit the appointment of a lead independent director by the other independent directors. The lead director is authorized to prepare the agendas for executive sessions of the independent directors and chair those sessions, facilitate communications between the Chairman and other members of the Board, and act as a liaison to shareholders who request direct communication with the Board. Prior to his being appointed as Chairman, Mr. Reilly served as the lead director.
Risk Management
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks more fully described in our annual and quarterly filings with the SEC, including risks relating to dependence on clients and suppliers, competition, cybersecurity and data breaches, product development, credit and liquidity, acquisitions and foreign expansion and other business risks. Management is responsible for the day-to-day management of risks we face, while our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board of Directors, together with its committees, provides company-wide oversight of our management and handling of risk. At meetings of the Board of Directors and its committees, directors receive regular updates from management regarding risk management. Outside of formal meetings, the Board, its committees and individual Board members have regular access to the executive officers of the Company and are often consulted by management in respect of Company operations.
Report of the Audit Committee for the Fiscal Year Ended December 31, 20152017
The following is the report of the Audit Committee with respect to the Company’s audited financial statements for the fiscal year ended December 31, 2015.2017. The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the extent that the Company specifically incorporates such information by reference in such filing.
The Audit Committee of the Company’s Board of Directors is comprised of three independent directors. During fiscal year 2015,2017, the members of the Audit Committee were Mr. Reilly, Mr. Beatson and Ms. Luechtefeld.
Management is responsible for the Company’s internal controls and the financial reporting process. The independent accountants (“auditors”) are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor these processes. The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company’s financial statements. The Audit Committee approved the appointment of the Company’s auditors, BDO USA, LLP, for the fiscal year ended December 31, 2015.2017.
In fulfilling its oversight responsibility of appointing and reviewing the services performed by the Company’s independent auditors, the Audit Committee carefully reviews the policies and procedures for the engagement of the independent auditor, including the scope of the audit, audit fees, auditor independence matters and the extent to which the independent auditor may be retained to perform non-audit related services. The Audit Committee considered the independent auditors’ provision of non-audit services in 20152017 and determined that the provision of those services is compatible with and does not impair the auditors’ independence.
The Audit Committee discussed with the Company’s auditors the scope and plans for the independent audit. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has reviewed and discussed with
9
management and the auditors the Company’s audited financial statements, including the auditor’s judgments about the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. In addition, the Audit Committee reviewed and discussed with management and the auditors both management’s annual report on internal control over financial reporting and the report of the auditors with respect thereto. The Audit Committee discussed with the Company’s auditors thesuch other matters as are required to be discussed between the Audit Committee and the independent registered public accounting firm under Public Company Accounting Oversight Board standards. The Audit Committee has received from the Company’s auditors the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”), Auditing Standard No. 16, Communicationsregarding the independent registered public accounting firm’s communications with Audit Committees and the auditors provided to the Audit Committee concerning independence, and has discussed with the written disclosures and the letter required by PCAOB Auditing Standard No. 16.Company’s auditors.
In addition, the Audit Committee met with the auditors, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
Based on the Audit Committee’s discussion with management and the auditors and the Audit Committee’s review of the representations of management and the report of the auditors to the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2017, which was filed with the Securities and Exchange Commission.
David I. Beatson
Monica Luechtefeld
James F. Reilly
10
Overview of Compensation Program
The Compensation Committee of the Board is responsible for establishing and implementing our compensation philosophy. The Compensation Committee believes that the total compensation paid to our executive officers should be and is fair, reasonable and competitive. In this section of the Proxy Statement, the individuals who served during our fiscal year ended December 31, 20152017 as our Chief Executive Officer and the other executive officers included in the Summary Compensation Table on page 16, are referred to as the “Named Executive Officers.”
Compensation Philosophy and Objectives
The Compensation Committee believes that executive officer compensation be structured to provide competitive base salaries and benefits to attract and retain superior employees and to provide short- and long-term incentive compensation to incentivize executive officers to attain, and to reward executive officers for attaining, established financial and operational goals that are consistent with increasing stockholder value. The Compensation Committee may use cash and stock bonuses and retention based equity awards as key components in the short- and long-term incentive compensation arrangements for executive officers, including the Named Executive Officers.
The Compensation Committee’s goal is to maintain compensation programs that are competitive within our industry and geographic market. Each year, the Compensation Committee reviews the executive compensation program with respect to the external competitiveness of the program, the linkage between executive compensation and the creation of stockholder value, and determines what changes, if any, are appropriate.
In determining the form and amount of compensation payable to Named Executive Officers, the Compensation Committee is guided by the following objectives and principles:
• | Compensation levels should be sufficiently competitive to attract and retain key executives. We aim to ensure that our executive compensation program attracts, motivates and retains high performance talent and rewards them for our achieving and maintaining a competitive position in our industry and geographic market. Total compensation (i.e. maximum achievable compensation) should increase with position and responsibility. | ||
• | Compensation should relate directly to performance and incentive compensation should be a portion of total compensation. We aim to foster a pay-for-performance culture, with the bonus portion of total compensation being “at risk.” Accordingly, any bonus payable as part of total compensation should be tied to and vary with our financial, operational and/or strategic performance. | ||
• | Long-term incentive compensation should align executives’ interests with our stockholders. Awards of equity-based compensation encourage executives to focus on our long-term growth and prospects, and incentivize executives to manage the Company from the perspective of stockholders with a meaningful stake in us, as well as to focus on long-term career orientation. |
Our executive compensation program is designed to reward the achievement of goals regarding growth, productivity and profitability, including such goals as:
• | To assist the Company in achieving and surpassing its internal targets and budgets, including financial and operating targets. |
• | To recruit, motivate and exhibit leadership that aligns employees’ interests with that of our stockholders. |
• | To develop business models and systems that seek out strategic opportunities, which benefit us and our stockholders. |
• | To implement a culture of compliance and commitment to operate our business with the highest standards of professional conduct and compliance. |
11
Compensation Committee Practices and Procedures
The Compensation Committee determines and reviews the value and forms of compensation for the Named Executive Officers and other officers based on the Compensation Committee members’ general knowledge and experience, as well as, if appropriate, compensation surveys prepared by third party firms. The Compensation Committee is authorized to retain compensation consultants to assist the Committee in its efforts.
The Compensation Committee is delegated all authority of the Board as may be required or advisable to fulfill the purposes of the Compensation Committee. The Compensation Committee meets as often as it deems necessary or appropriate.
Role of Executive Officers in Compensation Decisions
The Compensation Committee makes all compensation decisions for all executive officers (which includes the Named Executive Officers). The Compensation Committee actively considers, and has the ultimate authority of approving, recommendations made by the Chief Executive Officer regarding all equity awards to our employees.
The Compensation Committee annually reviews the performance of the Chief Executive Officer and determines the total compensation, including base salary, cash or stock bonus and long-term equity compensation, for the Chief Executive Officer. The Chief Executive Officer does not participate in such determination. The Compensation Committee also authorizes and approves an aggregate pool of short term and long term bonus and incentive cash and equity compensation for non-executive officers, with the allocation of such awards (and other compensation related matters) to be made or approved by the Chief Executive Officer.
Setting Executive Compensation
Based on the foregoing compensation philosophy, the Compensation Committee has structured our annual, short- and long-term compensation to motivate executives to achieve the financial performance objectives we set and to incentivize the executives to achieve and exceed, and to reward the executives for achieving and exceeding, such objectives. During fiscal year 2015,2017, the Compensation Committee did not retain the services of anyretained Alvarez & Marsal as an outside consulting firm.firm to provide broad market information and general assistance to the Compensation Committee in connection with the design of the Company’s executive base salary and incentive compensation plans.
20152017 Executive Officer Compensation Components
For the year ended December 31, 2015,2017, the principal components of compensation for Named Executive Officers were:
• | base salary; | |||
• | performance-based incentive compensation, including both short-term cash or stock incentive compensation and long-term equity incentive compensation; | |||
• | retirement and other benefits; and | |||
• | perquisites and other personal benefits. |
Base Salary
We provide our Named Executive Officers and other employees with a base salary as a component of compensation for services rendered during the year. Base salary ranges for Named Executive Officers are determined for each executive officer based on various factors considered by the Compensation Committee, including his or her position and level of responsibility and his or her actual performance during the preceding year. Base salaries for each year are typically evaluated annually in the first quarter of such year. Merit-based increases to base salaries for executive officers are based on the Compensation Committee’s assessment of various factors, including the individual’s performance during the preceding year and base salary history and market salary data.
12
Performance-Based Incentive Compensation
Our 2005 Employee Stock and Incentive Plan, as amended and restated (the “Plan”) provides the Compensation Committee with the flexibility to design cash and stock-based incentive compensation programs to promote performance and the achievement of our goals and objectives by executive officers and other key employees by allowing them to participate in our long-term growth and profitability. The Compensation Committee believes that providing performance-based incentive compensation is necessary to attract and retain superior executive talent and to align the financial interests
of executive officers with those of our stockholders. A portion of each executive officer’s potential aggregate compensation is in the form of incentive compensation. There are two types of performance-based incentive compensation used by the Compensation Committee. The first type is short-term incentive compensation in the form of a performance based cash or stock award, which generally is earned upon the achievement of certain individual and/or Company performance goals for the applicable fiscal year. The second type is long-term incentive compensation in the form of grants of performance shares, stock options, restricted stock or restricted stock units, which generally are earned upon the achievement ofinclude certain individual and/or Company performance goals for the applicable fiscal year, as well as further vesting conditions, such as continued employment, financial performance and/or comparative market performance of the Company’s common stock.
In May 2013, pursuant to the Plan, the Company issued Performance-Based Cash Awards and Performance Share Awards (as such terms are defined in the Plan) to the Company’s then Named Executive Officers and certain senior management (the “2013 Awards”). Under the terms of the 2013 Awards, the determination of the dollar amount of the Performance-Based Cash Awards and the number of Performance Shares which each such individual received was subject to, and calculated by reference to, the achievement by the Company of a performance goal measured by a range of targeted adjusted EBITDA performance for 2013. EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation and acquisition, restructuring and certain other charges.
The dollar amount of the Performance-Based Cash Awards and number of Performance Shares of the 2013 Awards was determined in March 2014 upon completion of the Company’s 2013 annual financial statements. Based upon the achievement of certain targeted adjusted EBITDA goals, the Company paid the following Performance-Based Cash Awards to the Named Executive Officers and the Named Executive Officers received the following number of Performance Shares (subject to the vesting conditions for the unvested shares):
2013 Named Executive Officers | 2013 Performance- Based Cash Award | As of December 31, 2015 | ||||||||||
2013 Performance Shares | ||||||||||||
Vested | Unvested | |||||||||||
Michael C. Willoughby | $ | 377,450 | 156,534 | 52,178 | ||||||||
Thomas J. Madden | 246,700 | 73,047 | 24,349 | |||||||||
Cynthia D. Almond | 186,550 | 54,129 | 18,043 |
The number of Performance Shares issued under the 2013 Awards shown in the table above are subject to four year vesting, with the first vesting date being December 31, 2013, based upon continued employment and the comparative performance (on an annual and cumulative basis) of the Company’s common stock on NASDAQ compared to the Russell Micro Cap Index.
In March 2014, pursuant to the Plan, the Company issued Performance-Based Cash Awards and Performance Share Awards to the Company’s Named Executive Officers and certain senior management (the “2014 Awards”). Under the terms of the 2014 Awards, the determination of the dollar amount of the Performance-Based Cash Awards and the number of Performance Shares that each such individual received was subject to, and calculated by reference to, the achievement by the Company of a performance goal measured by a range of targeted adjusted EBITDA performance for 2014. Based on the Company’s 2014 financial performance, no 2014 Awards were paid or issued.
In lieu of the 2014 Awards, in March 2015, pursuant to the Plan, the Company issued the following Other Stock-Based Awards and Restricted Stock Unit Awards (as such terms are defined in the Plan) to the Company’s Named
13
Executive Officers. The Restricted Stock Unit Awards are subject to three-year vesting beginning in 2015 based upon continued employment, while Other Stock-Based Awards represent the grant of unrestricted shares of the Company’s common stock.
2014 Named Executive Officers | 2014 Other Stock-Based Award | As of December 31, 2015 | ||||||||||
2014 Restricted Stock Unit Award | ||||||||||||
Vested | Unvested | |||||||||||
Michael C. Willoughby | 5,375 | 5,375 | 10,750 | |||||||||
Thomas J. Madden | 1,750 | 1,750 | 3,500 | |||||||||
Cynthia D. Almond | 1,250 | 1,250 | 2,500 |
In March 2015, pursuant to the Plan, the Company issued Performance-Based Cash Awards, Restricted Stock Units and Performance Share Awards to the Company’s Named Executive Officers and certain senior management (the “2015 Awards”). Under the terms of the 2015 Awards, the determination of the dollar amount of the Performance-Based Cash Awards and the number of Restricted Stock Units and Performance Shares that each such individual received was subject to, and calculated by reference to, the achievement by the Company of a performance goal measured by a range of targeted adjusted EBITDA performance for 2015 as well as for certain of the Restricted Stock Units, individual performance goals, as defined. Based upon the achievement of certain targeted adjusted EBITDA goals, the Company paid the following Performance-Based Cash Awards to the Named Executive Officers and the Named Executive Officers received the following number of Restricted Stock Units and Performance Shares (subject to the vesting conditions for the unvested shares):
|
| 2015 Performance-Based Cash Award |
|
| As of December 31, 2017 |
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 2015 Performance Shares |
|
| 2015 Restricted Stock Units |
| |||||||||||||||||||||||||||||||||||
2015 Named Executive Officers | 2015 Performance- Based Cash Award | As of December 31, 2015 |
|
|
|
|
| Vested |
|
| Unvested |
|
| Forfeited |
|
| Vested |
|
| Unvested |
| |||||||||||||||||||||||
2015 Performance Shares | 2015 Restricted Stock Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Vested | Unvested | Vested | Unvested | |||||||||||||||||||||||||||||||||||||||||
Michael C. Willoughby | $ | — | 25,023 | 75,068 | 47,600 | — |
| $ | - |
|
|
| 25,023 |
|
|
| 25,023 |
|
|
| 50,045 |
|
|
| 47,600 |
|
|
| - |
| ||||||||||||||
Thomas J. Madden | — | 11,374 | 34,122 | 18,744 | — |
| $ | - |
|
|
| 11,374 |
|
|
| 11,374 |
|
|
| 22,748 |
|
|
| 18,744 |
|
|
| - |
| |||||||||||||||
Cynthia D. Almond | — | 8,531 | 25,591 | 18,085 | — | |||||||||||||||||||||||||||||||||||||||
C. Travis Hess | 135,000 | 2,417 | 7,251 | — | — |
| $ | 135,000 |
|
|
| 2,417 |
|
|
| 2,417 |
|
|
| 4,834 |
|
|
| - |
|
|
| - |
| |||||||||||||||
Steven J. Stephan | 118,750 | 4,550 | 13,648 | — | — |
The number of Performance Shares issued under the 2015 Awards shown in the table above are subject to four yearfour-year vesting, with the first vesting date being December 31, 2015. Vesting of the Performance Shares is dependent upon meeting specified criteria which varies across the Named Executive Officers and includes continued employment, the achievement of certain Company performance goals for the applicable fiscal year and the comparative performance (on an annual and cumulative basis) of the Company’s common stock on NASDAQ compared to the Russell Micro Cap Index. Based upon the failure to achieve certain vesting criteria, certain of the Performance Shares did not vest and were forfeited. The vested Restricted Stock Units and Performance Shares were settled in 2016 by the issuance of the number of shares shown as vested in the table above.
In March 2016, pursuant to the Plan, the Company issued Performance-Based Cash Awards, Restricted Stock Units and Performance Share Awards to the Company’s Named Executive Officers and certain senior management (the “2016 Awards”). Under the terms of the 2016 Awards, the determination of the dollar amount of the Performance-Based Cash Awards and the number of Restricted Stock Units and Performance Shares that each such individual received was subject to, and calculated by reference to, the achievement by the Company of a performance goal measured by a range of targeted adjusted EBITDA performance for 2016, and/or achievement by each such individual or one or more individual performance goals. Based on the Company’s 2016 financial performance, no 2016 Awards were paid or issued.
In March 2017, pursuant to the Plan, the Company issued the following Restricted Stock Units. The Restricted Stock Unit Awards are subject to three-year vesting beginning in December 2017 based upon continued employment. The first vested installments of the Restricted Stock Units were settled in 2018 by the issuance of the number of shares shown as vested in the table below.
| 2017 Restricted Stock Unit Award |
|
| As of December 31, 2017 |
| |||||||
|
|
|
|
|
| Vested |
|
| Unvested |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
|
| 30,176 |
|
|
| 10,059 |
|
|
| 20,117 |
|
Thomas J. Madden |
|
| 13,867 |
|
|
| 4,622 |
|
|
| 9,245 |
|
C. Travis Hess (1) |
|
| 18,095 |
|
|
| 6,032 |
|
|
| 12,063 |
|
R. Zach Thomann |
|
| 9,766 |
|
|
| 3,255 |
|
|
| 6,511 |
|
Elizabeth E. Johnson (2) |
|
| 10,547 |
|
|
| 3,516 |
|
|
| 7,031 |
|
(1) | Total Award includes 7,353 Restricted Stock Units issued in August 2017. |
(2) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company, and her unvested Restricted Stock Unit Awards were forfeited. |
In March 2017, pursuant to the Plan, the Company issued the following market-based Performance Share Awards. The Performance Share Awards are subject to three-year vesting beginning in December 2017 based upon continued employment and the comparative performance (on an annual and cumulative basis) of the Company’s common stock on NASDAQ compared to the Russell Micro Cap Index. Based upon the failure to achieve certain vesting criteria, certain of the Performance Shares did not vest and were forfeited. The portion of the Performance Shares which did vest were settled in 2018 by the issuance of the number of shares shown as vested in the table below.
2017 Named Executive Officers |
| 2017 Performance Share Award |
|
| As of December 31, 2017 |
| ||||||||||
|
|
|
|
|
| Vested |
|
| Unvested |
|
| Forfeited |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
|
| 117,685 |
|
|
| 3,822 |
|
|
| 112,455 |
|
|
| 1,408 |
|
Thomas J. Madden |
|
| 54,083 |
|
|
| 1,757 |
|
|
| 51,679 |
|
|
| 647 |
|
C. Travis Hess (1) |
|
| 25,158 |
|
|
| 1,146 |
|
|
| 23,480 |
|
|
| 532 |
|
R. Zach Thomann |
|
| 12,696 |
|
|
| 618 |
|
|
| 11,850 |
|
|
| 228 |
|
Elizabeth E. Johnson (2) |
|
| 13,711 |
|
|
| 668 |
|
|
| 12,797 |
|
|
| 246 |
|
(1) | Total Award includes 11,193 Performance Shares issued in August 2017. |
(2) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company, and her unvested Performance Share Award was forfeited. |
In March 2017, pursuant to the Plan, the Company also issued the following Performance-Based Cash Awards and Performance-Based Share Awards to the Company’s Named Executive Officers and certain senior management (the “2017 Awards”). Under the terms of the 2017 Awards, the determination of the dollar amount of the Performance-Based Cash Awards and the number of Performance Shares that each such individual received was subject to, and calculated by reference to, the achievement by the Company of a performance goal measured by a range of targeted revenue and adjusted EBITDA performance goals for 2017. Based on the Company’s 2017 financial performance, the Performance Shares did not vest and were forfeited.
2017 Named Executive Officers |
| 2017 Performance-Based Cash Award |
|
| 2017 Performance-Based Share Award |
|
| As of December 31, 2017 |
| |||||||||||
|
|
|
|
|
|
|
|
|
| Vested |
|
| Unvested |
|
| Forfeited |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
| $ | - |
|
|
| 104,609 |
|
|
| - |
|
|
| - |
|
|
| 104,609 |
|
Thomas J. Madden |
|
| - |
|
|
| 54,082 |
|
|
| - |
|
|
| - |
|
|
| 54,082 |
|
C. Travis Hess |
|
| 68,681 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
R. Zach Thomann |
|
| - |
|
|
| 6,348 |
|
|
| - |
|
|
| - |
|
|
| 6,348 |
|
Elizabeth E. Johnson (1) |
|
| - |
|
|
| 6,855 |
|
|
| - |
|
|
| - |
|
|
| 6,855 |
|
(1) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company, and her unvested Performance-Based Share Award was forfeited. |
In lieu of the 2017 Awards, in March 2018, pursuant to the Plan, the Company issued the following Other Stock-Based Awards and cash Awards to the Company’s Named Executive Officers. The Other Stock-Based Awards represent the grant of unrestricted shares of the Company’s common stock.
Named Executive Officer |
| 2017 Cash Award |
|
| 2017 Other Stock-Based Award |
| ||
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
| $ | 70,000 |
|
|
| - |
|
Thomas J. Madden |
| $ | 60,000 |
|
|
| - |
|
C. Travis Hess |
| $ | - |
|
|
| 2,692 |
|
R. Zach Thomann |
| $ | 10,000 |
|
|
| 4,711 |
|
Elizabeth E. Johnson (1) |
| $ | 15,000 |
|
|
| - |
|
(1) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company. |
Retirement and Other Benefits
Executive officers are eligible to participate in our 401(k) plan and other benefit programs as described below. The Compensation Committee reviews the overall cost to us of these various programs generally on an annual basis or when changes are proposed. The Compensation Committee believes that the benefits provided by these programs have been important factors in attracting and retaining the overall executive officer group, including the Named Executive Officers.
Our 401(k) plan allows for discretionary employer matching funds of the employee contribution. During 2015,2017, the employer match portion was 12%. of the employee’s contribution to the 401(k) plan. The limit for employee contributions set by the IRS for 2017 was $18,000 per year. Employees that are age 50 or older are allowed to make an additional “catch-up” contribution of up to $6,000 per year. We do not provide any other tax-qualified deferred compensation plans or programs for our executive officers.
14
Executive officers also receive the benefit of life insurance policies, which provide coverage of up to $0.75 million.
Executive officers are also entitled to participate in the various other group health, term life and similar benefit plans available to all of our employees and on the same terms as such employees.
Perquisites and Other Personal Benefits
We provide Named Executive Officers with perquisites and other personal benefits that we and the Compensation Committee believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions.
Tax and Accounting Implications
Deductibility of Executive Compensation
As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code which provides(the “Code”). Section 162(m), as in effect for 2017, provided that we maycould not deduct compensation of more than $1 million that is paid in any year to certain individuals, subjectthe CEO or any of the three other most highly compensated officers (excluding the CFO), unless the compensation qualified as “performance-based compensation” under Section 162(m). In connection with granting incentive compensation to certain exemptions. The Committeeour named executive officers, the Compensation Committee’s historical practice has been to consider the discretion to authorize compensation which does not meet the requirements ofimplications under Section 162(m) and may do soit was our preference to ensure competitive levels of totalqualify our executives’ compensation for deductibility under Section 162(m), to the extent the Compensation Committee believed it to be consistent with the Company’s best interests, while retaining flexibility to grant compensation that may not have qualified for a deduction if the Compensation Committee determined that such compensation was otherwise in the best interests of the Company and its stockholders. The 2017 Tax Act, which was signed into law in December 2017, eliminated the exception for “performance-based” compensation with respect to 2018 and future years. As a result, we expect that, except to the extent that compensation is eligible for limited transition relief applicable to binding contracts in effect on November 2, 2017, compensation over $1 million per year paid to any named executive officers.
2017 Say-on Pay Vote
15 At our last three annual meetings, a non-binding, advisory resolution approving the compensation paid to our named executive officers, as disclosed in our proxy statement for each such annual meeting, including the Compensation Discussion and Analysis, compensation tables and narrative discussions, was approved by our stockholders. In designing an
executive compensation program for 2017, the Compensation Committee recognized the support previously received by the Company’s stockholders for its historical compensation practices.
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included herein.
The Compensation Committee:
David Beatson
Shin Nagakura
James Reilly (Chairman)
The following table sets forth the compensation paid or accrued by the Company to the Company’s Chief Executive Officer, Chief Financial Officer and to each of the three most highly compensated executive officers of the Company (the “Named Executive Officers”) for services rendered to the Company during the three fiscal years ended December 31, 2015:2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Equity |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Stock |
|
| Incentive Plan |
|
| All Other |
|
|
|
|
| |||
|
| Year |
| Salary (1) |
|
| Bonus (2) |
|
| Awards (3) |
|
| Compensation (4) |
|
| Compensation (5) |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
| 2017 |
| $ | 494,542 |
|
| $ | 70,000 |
|
| $ | 1,213,981 |
|
| $ | - |
|
| $ | 25,020 |
|
| $ | 1,803,543 |
|
Chief Executive Officer and |
| 2016 |
|
| 509,124 |
|
|
| - |
|
|
| 920,643 |
|
|
| - |
|
|
| 24,486 |
|
|
| 1,454,253 |
|
President |
| 2015 |
|
| 461,358 |
|
|
| - |
|
|
| 1,540,316 |
|
|
| - |
|
|
| 28,995 |
|
|
| 2,030,669 |
|
Thomas J. Madden |
| 2017 |
| $ | 340,696 |
|
| $ | 60,000 |
|
| $ | 587,466 |
|
| $ | - |
|
| $ | 38,199 |
|
| $ | 1,026,361 |
|
Executive Vice President - |
| 2016 |
|
| 350,873 |
|
|
| - |
|
|
| 437,964 |
|
|
| - |
|
|
| 41,134 |
|
|
| 829,971 |
|
Chief Financial Officer |
| 2015 |
|
| 319,608 |
|
|
| - |
|
|
| 628,256 |
|
|
| - |
|
|
| 34,589 |
|
|
| 982,453 |
|
C. Travis Hess |
| 2017 |
| $ | 279,735 |
|
| $ | - |
|
| $ | 260,755 |
|
| $ | 68,681 |
|
| $ | 22,497 |
|
| $ | 631,668 |
|
Executive Vice President - |
| 2016 |
|
| 274,373 |
|
|
| - |
|
|
| 42,003 |
|
|
| - |
|
|
| 19,437 |
|
|
| 335,813 |
|
Chief Revenue Officer and General Manager - LiveArea |
| 2015 |
|
| 239,258 |
|
|
| - |
|
|
| 119,170 |
|
|
| 135,000 |
|
|
| 18,366 |
|
|
| 511,794 |
|
R. Zach Thomann |
| 2017 |
| $ | 260,843 |
|
| $ | 10,000 |
|
| $ | 182,850 |
|
| $ | - |
|
| $ | 22,481 |
|
| $ | 476,174 |
|
Senior Vice President and General |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manager - PFS Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elizabeth E. Johnson (6) |
| 2017 |
|
| 254,015 |
|
| $ | 15,000 |
|
| $ | 159,676 |
|
| $ | - |
|
| $ | 26,125 |
|
| $ | 454,816 |
|
Senior Vice President - |
| 2016 |
|
| 246,309 |
|
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| 18,597 |
|
|
| 364,906 |
|
Agency Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principle Position | Year | Salary (1) | Stock Awards (2) | Non-Equity Incentive Plan Compensation (3) | All Other Compensation (4) | Total | ||||||||||||||||||
Michael C. Willoughby | 2015 | $ | 461,358 | $ | 1,540,316 | $ | — | $ | 28,995 | $ | 2,030,669 | |||||||||||||
Chief Executive Officer and | 2014 | 401,607 | — | — | 26,014 | 427,621 | ||||||||||||||||||
President | 2013 | 422,985 | 1,339,398 | 377,450 | 27,688 | 2,167,521 | ||||||||||||||||||
Thomas J. Madden | 2015 | $ | 319,608 | $ | 628,256 | $ | — | $ | 34,589 | $ | 982,453 | |||||||||||||
Executive Vice President - | 2014 | 301,223 | — | — | 51,757 | 352,980 | ||||||||||||||||||
Chief Financial Officer | 2013 | 343,561 | 625,050 | 246,700 | 44,824 | 1,260,135 | ||||||||||||||||||
Cynthia D. Almond | 2015 | $ | 267,709 | $ | 519,874 | $ | — | $ | 18,441 | $ | 806,024 | |||||||||||||
Executive Vice President - | 2014 | 230,939 | — | — | 16,194 | 247,133 | ||||||||||||||||||
Chief Client Officer, Secretary | 2013 | 249,804 | 463,168 | 186,550 | 22,431 | 921,953 | ||||||||||||||||||
C. Travis Hess | 2015 | $ | 239,258 | $ | 119,170 | $ | 135,000 | $ | 18,366 | $ | 511,794 | |||||||||||||
Executive Vice President - | ||||||||||||||||||||||||
Sales | ||||||||||||||||||||||||
Steven J. Stephan | 2015 | $ | 266,263 | $ | 117,117 | $ | 138,750 | $ | 19,987 | $ | 542,117 | |||||||||||||
Senior Vice President - | ||||||||||||||||||||||||
Technology Services |
(1) | Salary represents base salary |
(2) | Represents non-performance based cash awards earned. | |
(3) | Represents issuance of Performance Share Awards (“Performance Shares”) and Restricted Stock |
(4) | Represents |
(5) | Represents amounts paid in respect of life insurance premiums, automobile allowance and expenses for the personal use of automobile, Company paid healthcare premiums and, for certain individuals, club dues and memberships. | |
(6) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company. |
16
OUTSTANDING EQUITY AWARDS AT 20152017 FISCAL YEAR END
The following table sets forth the number of unexercised options and equity incentive plan awards for each Named Executive Officer outstanding as of December 31, 2015.2017.
|
|
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| Number of |
|
| Number of |
|
|
|
|
|
|
|
|
|
| Equity incentive |
|
| Equity incentive |
| ||||||||||||||||||||||||||||||||
|
|
|
| Securities |
|
| Securities |
|
|
|
|
|
|
|
|
|
| plan awards: |
|
| plan awards: Market |
| ||||||||||||||||||||||||||||||||
|
|
|
| Underlying |
|
| Underlying |
|
|
|
|
|
|
|
|
|
| Number of |
|
| or payout value of |
| ||||||||||||||||||||||||||||||||
|
|
| Unexercised |
|
| Unexercised |
|
| Option |
|
| Option |
|
| unearned shares that |
|
| unearned shares that |
| |||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards |
|
|
| Options |
|
| Options |
|
| Exercise |
|
| Expiration |
|
| have not vested |
|
| have not vested |
| |||||||||||||||||||||||||||||||||
Named Executive Officer | Grant Date | Number of Securities Underlying Unexercised Options (# Exercisable) | Number of Securities Underlying Unexercised Options (# Unexercisable) | Option Exercise Price ($) | Option Expiration Date | Equity incentive plan awards: Number of unearned shares that have not vested (#) (1) | Equity incentive plan awards: Market or payout value of unearned shares that have not vested (#) (2) |
| Grant Date |
| (# Exercisable) |
|
| (# Unexercisable) |
|
| Price ($) |
|
| Date |
|
| (#) (1) |
|
| ($) (2) |
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Michael C. Willoughby | 5/20/2008 | 8,723 | — | $ | 4.14 | 5/19/2018 | — | $ | — |
| 3/30/2011 |
|
| 50,000 |
|
|
| - |
|
| $ | 5.00 |
|
| 3/29/2021 |
|
|
| - |
|
| $ | - |
| ||||||||||||||||||||
4/19/2010 | 25,000 | — | $ | 4.00 | 4/18/2020 | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||
3/30/2011 | 50,000 | — | $ | 5.00 | 3/29/2021 | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||
5/22/2013 | — | — | $ | — | — | 52,178 | $ | 671,531 | ||||||||||||||||||||||||||||||||||||||||||||||
3/23/2015 | — | — | $ | — | — | 10,750 | $ | 138,353 |
| 3/31/2015 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 25,023 |
|
| $ | 185,921 |
| ||||||||||||||||||||
3/31/2015 | — | — | $ | — | — | 75,068 | $ | 966,125 |
| 3/31/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 132,572 |
|
| $ | 985,010 |
| ||||||||||||||||||||
Thomas J. Madden | 5/16/2007 | 4,255 | — | $ | 4.42 | 5/15/2017 | — | $ | — |
| 5/20/2008 |
|
| 8,723 |
|
|
| - |
|
| $ | 4.14 |
|
| 5/19/2018 |
|
|
| - |
|
| $ | - |
| ||||||||||||||||||||
5/20/2008 | 8,723 | — | $ | 4.14 | 5/19/2018 | — | $ | — |
| 4/19/2010 |
|
| 45,000 |
|
|
| - |
|
| $ | 4.00 |
|
| 4/18/2020 |
|
|
| - |
|
| $ | - |
| |||||||||||||||||||||
4/19/2010 | 45,000 | — | $ | 4.00 | 4/18/2020 | — | $ | — |
| 3/30/2011 |
|
| 65,000 |
|
|
| - |
|
| $ | 5.00 |
|
| 3/29/2021 |
|
|
| - |
|
| $ | - |
| |||||||||||||||||||||
3/30/2011 | 65,000 | — | $ | 5.00 | 3/29/2021 | — | $ | — |
| 3/31/2015 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 11,374 |
|
| $ | 84,509 |
| ||||||||||||||||||||
5/22/2013 | — | — | $ | — | — | 24,349 | $ | 313,372 |
| 3/31/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 60,924 |
|
| $ | 452,665 |
| ||||||||||||||||||||
C. Travis Hess |
| 3/31/2015 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 2,417 |
|
| $ | 17,958 |
| ||||||||||||||||||||||||||||
3/23/2015 | — | — | $ | — | — | 3,500 | $ | 45,045 |
| 3/31/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 20,195 |
|
| $ | 150,049 |
| ||||||||||||||||||||
3/31/2015 | — | — | $ | — | — | 34,122 | $ | 439,150 |
| 8/4/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 15,348 |
|
| $ | 114,036 |
| ||||||||||||||||||||
Cynthia D. Almond | 5/16/2007 | 4,255 | — | $ | 4.42 | 5/15/2017 | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
R. Zach Thomann |
| 9/10/2013 |
|
| 2,500 |
|
|
| - |
|
| $ | 5.61 |
|
| 9/9/2023 |
|
|
| - |
|
| $ | - |
| |||||||||||||||||||||||||||||
5/20/2008 | 654 | — | $ | 4.14 | 5/19/2018 | — | $ | — |
| 3/31/2015 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 1,706 |
|
| $ | 12,676 |
| ||||||||||||||||||||
4/19/2010 | 37,000 | — | $ | 4.00 | 4/18/2020 | — | $ | — |
| 3/31/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 18,361 |
|
| $ | 136,422 |
| ||||||||||||||||||||
Elizabeth E. Johnson (3) |
| 3/30/2011 |
|
| 10,000 |
|
|
| - |
|
| $ | 5.00 |
|
| 3/29/2021 |
|
|
| - |
|
| $ | - |
| |||||||||||||||||||||||||||||
3/30/2011 | 40,000 | — | $ | 5.00 | 3/29/2021 | — | $ | — |
| 3/31/2015 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 1,706 |
|
| $ | 12,676 |
| ||||||||||||||||||||
5/22/2013 | — | — | $ | — | — | 18,043 | $ | 232,213 |
| 3/31/2017 |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 19,828 |
|
| $ | 147,322 |
| ||||||||||||||||||||
3/23/2015 | — | — | $ | — | — | 2,500 | $ | 32,175 | ||||||||||||||||||||||||||||||||||||||||||||||
3/31/2015 | — | — | $ | — | — | 25,591 | $ | 329,356 | ||||||||||||||||||||||||||||||||||||||||||||||
C. Travis Hess | 3/31/2015 | — | — | $ | — | — | 7,251 | $ | 93,320 | |||||||||||||||||||||||||||||||||||||||||||||
Steven J. Stephan | 3/31/2015 | — | — | $ | — | — | 13,648 | $ | 175,650 |
____________________________________
(1) | Awards consist of Performance Share Awards (“Performance Shares”) and Restricted Stock Units (“RSUs” and collectively “the Awards”) under the Plan. The RSUs are subject to |
(2) | Market value is computed by multiplying the number of Performance Share Awards by |
(3) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company. |
OPTION EXERCISES AND STOCK VESTED
17
The following table summarizessets forth certain information with respect to equity compensation plans under which equity securitiesconcerning each exercise of stock options, Stock Appreciation Rights (“SARs”) and similar instruments, and each vesting of stock, including restricted stock, restricted stock units and similar instruments, during the 2017 fiscal year for each of the registrant are authorized for issuance as of December 31, 2015. For additional information about our equity compensation plans, see note 6 to our financial statements in Item 8 of our 2015 annual reportNamed Executive Officers on Form 10-K:an aggregated basis.
Plan category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted- average exercise price of outstanding options, warrants and rights (2) | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by shareholders | 2,081,675 | $ | 6.69 | 363,185 | ||||||||
Equity compensation plans not approved by shareholders | — | — |
|
| Option Awards |
|
| Stock Awards |
| ||||||||||
|
| Number of shares |
|
| Value realized |
|
| Number of shares |
|
| Value realized |
| ||||
Named Executive Officer |
| acquired on exercise (#) |
|
| on exercise ($) |
|
| acquired on vesting (#) |
|
| on vesting ($) (1) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael C. Willoughby |
|
| - |
|
| $ | - |
|
|
| 19,256 |
|
| $ | 143,072 |
|
Thomas J. Madden |
|
| 4,255 |
|
| $ | 7,872 |
|
|
| 8,129 |
|
| $ | 60,398 |
|
C. Travis Hess |
|
| - |
|
| $ | - |
|
|
| 9,870 |
|
| $ | 73,334 |
|
R. Zach Thomann |
|
| - |
|
| $ | - |
|
|
| 9,022 |
|
| $ | 67,033 |
|
Elizabeth E. Johnson (2) |
|
| - |
|
| $ | - |
|
|
| 4,934 |
|
| $ | 36,660 |
|
(1) | Value realized upon vesting is computed by multiplying the number of shares acquired on vesting by $7.43, which was the closing price per share of the Company’s common stock on December 31, 2017, on NASDAQ. |
(2) | Effective May 18, 2018, Ms. Johnson no longer serves as an executive officer or in any other position with the Company. |
EMPLOYMENT, CHANGE OF CONTROL AND TERMINATION ARRANGEMENTS FOR EXECUTIVES
The Company and each of Mr. Willoughby and Mr. Madden and Ms. Almond, have entered into Change in Control and Severance Agreements. Under these agreements, and in consideration of certain commitments of the officer to continue employment, upon the occurrence of a change in control, all unvested options held by the officer immediately vest and become exercisable. During the two year period following a change in control (whenever occurring), if the employment of the officer is terminated (other than for cause, death, disability or retirement), or if there is a material adverse change in the officer’s responsibilities, compensation or benefits to which the officer does not consent, then, in each case, the officer is entitled to receive from the Company (1) all salary and bonus amounts accrued through the date of termination, (2) a severance payment equal to twice the officer’s salary and bonus amount (which is defined as the greater of (i) the highest annual incentive bonus earned by the executive during the last three completed fiscal years or (ii) the executive’s then target bonus, if any) and (3) continuation for two years of all employee benefits (unless otherwise provided by a subsequent employer). If applicable, the officer is also entitled to receive an additional payment to compensate the officer for any additional excise tax liability arising by reason of the receipt of such severance or bonus payment. The agreement terminates upon the voluntary resignation or termination of employment by the officer.
In addition, upon a change in control, allcertain unvested Performance Shares and all Restricted Stock Units issued to the Named Executive Officers immediately vest and each recipient is entitled to receive an additional payment to compensate the officer for any additional excise tax liability arising by reason of the receipt of such shares.
The Company and each of Mr. Willoughby and Mr. Madden have also entered into Executive Severance Agreements. Under these agreements, and in consideration for, among other things, the agreement by the executive to be bound by a restrictive covenant, in the event of the termination of the employment of the executive other than for cause (including termination following a reduction in the executive’s base salary unless such reduction is part of, and proportionate with, a general reduction in officer compensation), the executive is entitled to a severance payment, based on the executive’s years of service, up to a maximum of twice the executive’s salary and the bonus, if any, that the executive would have received for such fiscal year (based upon the executive’s targeted bonus amount and the Company’s actual results for such fiscal year), payable in monthly installments over a period not to exceed two years (based on the executive’s years of service). In addition, in the event of termination without cause, the executive is entitled during the severance period to a continuation of benefits and to the accelerated vesting of all options then held by the executive, and the executive is considered a continuing employee of the Company for all purposes for which the executive’s status as an employee of the Company would entitle the executive to some benefit, including the vesting of Performance Shares and Restricted Stock Units. The severance payment and benefits are reduced by any compensation or benefits received by the executive from any subsequent employer.
Effective as of December 31, 2008, the Company and Mr. Willoughby and Mr. Madden entered into an amendment to the existing Executive Severance Agreements and Change in Control Severance Agreements between the Company and such persons. The primary purpose of such amendment was to modify such agreements so that they conform to
18
Section 409A of the Internal Revenue Code. In addition, the amendment to the Executive Severance Agreement modified the calculation of the severance amount thereunder so that it is based on the highest annual rate of base salary during the 12-month period immediately prior to the qualifying termination.
For purposes of providing quantitative disclosure of the foregoing, assuming that a qualifying triggering event occurred as of December 31, 2017: (i) Mr. Willoughby would have been entitled to receive aggregate cash payments of approximately $1,030,000 (payable over 24 months), other benefits with an estimated value of approximately $105,000, and up to 398,600 shares of the Company’s stock valued at $2,961,598 based on the $7.43 closing price of the Company’s stock on December 31, 2017, (and, in the event of a change in control, an additional amount of up to 24,100 shares of the Company’s stock valued at $179,063 based on the $7.43 closing price of the Company’s stock on December 31, 2017, plus, if applicable, an additional payment to cover any excise tax liability) and (ii) Mr. Madden would have been entitled to receive aggregate cash payments of approximately $710,000 (payable over 24 months), other benefits with an estimated value of approximately $105,000, and up to 183,051 shares of the Company’s stock valued at $1,360,069 based on the $7.43 closing price of the Company’s stock on December 31, 2017 (and, in the event of a change in control, an additional amount of up to 3,812 shares of the Company’s stock valued at $28,323 based on the $7.43 closing price of the Company’s stock on December 31, 2017, plus, if applicable, an additional payment to cover any excise tax liability).
The Company and each of Mr. Hess and Mr. Stephanthe other Named Executive Officers have entered into Severance, Nondisclosure, Nonsolicitation and Noncompete Agreements pursuant toagreements under which, and in consideration for, among other things, the agreement of the namedsuch individual to be bound by a restrictive covenant, in the event of the termination of employment other than for cause, the aforesaid Named Executive Officers are entitled to a severance payment equal to nine months of base salary, payable in monthly installments, and a continuation of benefits during such period.
The Company and Mr. Stephan have entered into an at will Employment Agreement under which Mr. Stephan is entitled to receive a base salary, determined on an annual basis, and to participate in the Company’s equity and incentive plans.
Effective June 2, 2016, the Company and Ms. Almond entered into an Executive Severance Agreement under which, and in consideration for, among other things, the agreement by Ms. Almond to be bound by a restrictive covenant, in the event of the termination ofhis or her employment other than for cause (including termination following a reduction in the executive’shis or her base salary unless such reduction is part of, and proportionate with, a general reduction in officer compensation), Ms. Almondeach such individual is entitled to a severance payment equal to twicebenefit of continuation of base salary, Restricted Stock Units and Performance Shares vesting and employee benefits for the sumnine month period (twelve months in the case of her then current salaryMr. Hess) following termination. In addition, upon a change in control, certain unvested Performance Shares and a bonus amount equal to the greaterall unvested Restricted Stock Units held by such individual immediately vest.
For purposes of providing quantitative disclosure of the midpoint short term incentive bonus forforegoing, assuming that a qualifying triggering event occurred as of December 31, 2017: (i) Mr. Hess would have been entitled to receive aggregate cash payments of approximately $315,000 (payable over twelve months) and other benefits with an estimated value of approximately $35,000, and up to 20,190 shares of the then current year orCompany’s stock valued at $150,012 based on the prior year actual short term inventive bonus, payable in 24 monthly installments. In addition,$7.43 closing price of the Company’s stock on December 31, 2017 (and, in the event of termination without cause,a change in control, an additional amount of up to 10,334 shares of the executiveCompany’s stock valued at $76,782 based on the $7.43 closing price of the Company’s stock on December 31, 2017); (ii) Mr. Thomann would have been entitled to receive aggregate cash payments of approximately $187,500 (payable over nine months) and other benefits with an estimated value of approximately $25,000, and up to 8,166 shares of the Company’s stock valued at $60,673 based on the $7.43 closing price of the Company’s stock on December 31, 2017 (and, in the event of a change in control, an additional amount of up to 8,710 shares of the Company’s stock valued at $64,715 based on the $7.43 closing price of the Company’s stock on December 31, 2017); (iii) Ms. Johnson would have been entitled to receive aggregate cash payments of approximately $202,500 (payable over nine months), other benefits with an estimated value of approximately $25,000, and up to 8,716 shares of the Company’s stock valued at $64,760 based on the $7.43 closing price of the Company’s stock on December 31, 2017 (and, in the event of a change in control, an additional amount of up to 9,373 shares of the Company’s stock valued at $69,641 based on the $7.43 closing price of the Company’s stock on December 31, 2017).
2017 CEO Pay Ratio
Item 402(u) of Regulation S-K requires that we disclose the ratio of annual total compensation of our Chief Executive Officer (“CEO”) to that of the median of the annual total compensation of all our employees except the CEO (the "median employee"). We began the process of identifying our median employee by determining that we had 3,050 employees as of October 6, 2017, the first pay period end date for the month in the United States, which is entitledour largest employee population. Our employee population consisted of our full-time, part-time and temporary employees located in the United States, Belgium, Canada, the U.K. and India. As permitted by SEC rules, we excluded 40 employees in Bulgaria (approximately 1% of our total employee population) from this employee population for purposes of determining our median employee. Of our population, 24% were part-time or temporary and 14% of our population are employed in India.
To determine our median employee, we used "gross pay" for each employee obtained from our internal payroll records as a consistently applied compensation measure. "Gross pay" includes all compensation we paid to each employee, before
withholding for taxes. We believe this consistently applied compensation measure reasonably reflects annual compensation across our employee base. We annualized gross pay for permanent employees who commenced work during fiscal 2017. Our median employee from this population was one of our full-time distribution center employees whose compensation we felt was reasonably representative of the median compensation of all our employees except the CEO. We determined that this person's annual total compensation was $24,199. We then calculated the ratio of our CEO's annual total compensation, $1,803,543, as reported in the "Total" column of the Summary Compensation Table above (which includes contingent and forfeited awards as described in footnote (3) thereto), to that of this median employee. Based upon the methodology described above, we estimate that the ratio of CEO pay to median employee pay is 75:1.
The SEC rules allow companies to use estimates, assumptions, adjustments, statistical sampling and unique definitions of compensation to identify the median employee and calculate the pay ratio. Our estimated pay ratio may not be comparable to other companies because of the differences in how pay ratios may be calculated.
Supplemental Pay Ratio Disclosure. Of the Company’s CEO’s annual total compensation, $1,020,856, or 57%, is subject to vesting based on the Company’s 2017 financial performance and/or the comparative annual or cumulative market performance of the Company’s common stock on NASDAQ as compared to the Russell Micro Cap Index during the severance period from 2017 through 2019. If performance targets are not met, a portion or all of this could be forfeited and not realized. For the 2017 vesting period, $515,990 of the Company’s CEO’s 2017 annual total compensation was forfeited. An additional $193,126, or 11%, of the Company’s CEO annual total compensation is also subject to a continuationvesting based on continued employment with the Company over the period from 2017 through 2019. One third of benefits and to the accelerated vesting of all options then held by the executive,this amount vested in 2017 and the executiveremainder is considered a continuing employeesubject to vesting in 2018 and 2019. Excluding the $515,990 of the Company for all purposes for whichtotal CEO compensation that was forfeited, the executive’s status as antotal CEO compensation amount is $1,287,553 and the ratio of CEO pay to median employee of the Company would entitle the executive to some benefit, including the vesting of Performance Shares and Restricted Stock Units.pay is 53:1.
2015
The following table sets forth the compensation earned by non-employee Directors for their service on the Board of Directors and its committees, as applicable, during the year ended December 31, 2015:2017:
|
| Fees Earned or |
|
| Stock |
|
| Option |
|
|
|
|
| |||
Named Executive Officer |
| Paid in Cash |
|
| Awards (1) |
|
| Awards (1) |
|
| Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David I. Beatson (2) |
| $ | - |
|
| $ | 100,000 |
|
| $ | - |
|
| $ | 100,000 |
|
Monica Luechtefeld (3) |
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| 100,000 |
|
James F. Reilly (4) |
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| 100,000 |
|
Benjamin Rosenzweig (5) |
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| 100,000 |
|
Peter J. Stein (6) |
|
| - |
|
|
| 100,000 |
|
|
| - |
|
|
| 100,000 |
|
_________________
Named Executive Officer | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Total | ||||||||||||
David I. Beatson (1) | $ | — | $ | 100,000 | $ | — | $ | 100,000 | ||||||||
Monica Luechtefeld (2) | — | 100,000 | — | $ | 100,000 | |||||||||||
James F. Reilly (3) | — | 100,000 | — | $ | 100,000 | |||||||||||
Benjamin Rosenzweig (4) | — | 100,000 | — | $ | 100,000 |
(1) | Represents aggregate grant date fair value in accordance with ASC Topic 718. |
(2) | Mr. Beatson had |
(3) | Ms. Luechtefeld had 30,000 options and |
(4) | Mr. Reilly had |
(5) | Mr. Rosenzweig had 40,000 options and |
(6) | Mr. Stein had 30,000 options and 22,073 deferred stock units outstanding as of December 31, 2017. |
For 2015,2017, each non-employee Director received a quarterly retainer (“Retainer”) ofequal to $25,000. Each quarterly Retainer is effected through the issuance of a Deferred Stock Unit (a “DSU”) under the Plan. The DSU represents the right to receive a number of shares of Common Stock equal to the Retainer divided by the closing price of the Common Stock immediately preceding the DSU grant date. Shares are not issuable under the DSU until the Director no longer serves on the Board.
Directors who are also employees of the Company or any of its subsidiaries receive no remuneration for serving as directors or Committee members.
19
Mr. Nagakura is eligible to participate in the Company’s compensation programs for non-employee Directors. As the representative of TCI, however, under TCI’s current policy, Mr. Nagakura is not permitted to receive remuneration for serving as a director of the Company. Accordingly, Mr. Nagakura received no compensation as a Director during 2015.2017.
Effective as of April 2018, the quarterly Retainer was increased to $30,000, which shall continue to be paid through the issuance of DSUs as described above. In addition, effective as of April 2018, the Chairman of the Board and the chairpersons of the Audit, Compensation and Technology and Cybersecurity committees are entitled to receive an annual payment of $7,500. See also Item 2 (Amendments to 2005 Employee Stock and Incentive Plan) for further information regarding compensation payable to our outside directors.
Compensation Committee Interlocks and Insider Participation
During 2015,2017, Mr. Reilly, Mr. Nagakura and Mr. Beatson served on the Compensation Committee. None of the members of the Compensation Committee has had a relationship with the Company or any subsidiary other than as a director or stockholder. No executive officer of the Company served or serves on the Compensation Committee or board of any company that employed or employs any member of Company’s Compensation Committee or Board of Directors.
20
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 24, 2016,30, 2018, certain information regarding the beneficial ownership of the Company’s Common Stock by (i) each person who is known to the Company to beneficially own more than 5% of the Common Stock, (ii) each of the Directors and Named Executive Officers of the Company individually and (iii) the Directors and executive officers of the Company as a group. The information contained in this table reflects “beneficial ownership” as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, as such, also includes shares acquirable within 60 days. Unless otherwise indicated, the stockholders identified in this table have sole voting and investment power with respect to the shares owned of record by them.
Name and Address of Beneficial Owner | Number of Shares | Percent (1) | ||||||
transcosmos, inc. (2) | 3,678,779 | 19.8 | % | |||||
Wellington Management Company, LLP (3) | 1,838,000 | 9.9 | % | |||||
G2 Investment Partners Management LLC (4) | 1,713,689 | 9.2 | % | |||||
Austin W. Marxe and David M. Greenhouse (5) | 1,702,446 | 9.2 | % | |||||
Renaissance Technologies Holding Corporation (6) | 1,029,839 | 5.6 | % | |||||
Thomas J. Madden (7) | 259,920 | 1.4 | % | |||||
Michael C. Willoughby (7) | 218,652 | 1.2 | % | |||||
Cindy Almond (7) | 120,329 | * | ||||||
James F. Reilly (7) | 117,421 | * | ||||||
David I. Beatson (7) | 104,421 | * | ||||||
Benjamin Rosenzweig (7) | 52,528 | * | ||||||
Monica Luechtefeld (7) | 39,753 | * | ||||||
Steven J. Stephan (7) | 31,597 | * | ||||||
C. Travis Hess (7) | 3,908 | * | ||||||
Peter J. Stein (7) | 3,849 | * | ||||||
Shinichi Nagakura (7) | — | * | ||||||
All directors and executive officers as a group (14 persons) (8) | 995,971 | 5.2 | % |
Name and Address of Beneficial Owner |
| Number of Shares |
|
| Percent (1) |
| |
|
|
|
|
|
|
|
|
transcosmos, inc. (2) |
|
|
|
|
|
|
|
21-25-18 Shibuya, Shibuya-ku |
|
|
|
|
|
|
|
Tokyo 150-8530 Japan |
|
| 3,678,779 |
|
| 19.2 | % |
Wellington Management Group, LLP (3) |
|
|
|
|
|
|
|
280 Congress Street, Boston, MA 02210 |
|
| 2,661,718 |
|
| 13.9 | % |
AWM Investment Company, Inc. (4) |
|
|
|
|
|
|
|
527 Madison Avenue, New York, NY 10022 |
|
| 1,560,394 |
|
| 8.1 | % |
Engine Capital Management, LLC (5) |
|
|
|
|
|
|
|
1370 Broadway, New York, NY 10018 |
|
| 1,428,798 |
|
| 7.5 | % |
Thomas J. Madden (6) |
|
| 267,724 |
|
| 1.4 | % |
Michael C. Willoughby (6) |
|
| 238,839 |
|
| 1.2 | % |
James F. Reilly (6) |
|
| 148,188 |
|
| * |
|
David I. Beatson (6) |
|
| 133,188 |
|
| * |
|
Benjamin Rosenzweig (6) |
|
| 87,550 |
|
| * |
|
Monica Luechtefeld (6) |
|
| 74,775 |
|
| * |
|
Peter J. Stein (6) |
|
| 48,871 |
|
| * |
|
Elizabeth E. Johnson (6) |
|
| 25,706 |
|
| * |
|
R. Zach Thomann (6) |
|
| 11,217 |
|
| * |
|
C. Travis Hess (6) |
|
| 8,531 |
|
| * |
|
Shinichi Nagakura (6) |
|
| - |
|
| * |
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (11 persons) (7) |
|
| 1,044,589 |
|
| 5.1 | % |
___________________________
* | Represents less than 1% |
(1) | This table is based on |
(2) | Based on a March 25, 2014 Form SC 13 |
(3) |
Based on a February |
(4) | Based on a February |
(5) | Based on a February |
(6) | Includes the following shares issuable under outstanding vested options and deferred stock units: Thomas J. Madden – 110,000; Michael C. Willoughby – 50,000; |
(7) | Includes |
21
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
| (b) Weighted- average exercise price of outstanding options, warrants and rights (1) |
|
| (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| ||||
Plan category |
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by shareholders |
| 1,674,027 |
|
| $ | 7.87 |
|
|
| 792,927 |
|
Equity compensation plans not approved by shareholders | — |
|
|
|
|
|
| — |
| ||
|
| ||||||||||
(1) Excludes 176,726 service-based restricted stock units, 334,341 performance based and market based restricted stock units and 182,306 deferred stock units |
|
APPROVAL OF AMENDMENTAMENDMENTS TO THE
2005 EMPLOYEE STOCK AND INCENTIVE PLAN
At the Annual Meeting, stockholders are being asked to approve an amendmentamendments to the 2005 Employee Stock and Incentive Plan (as herein amended, the “Plan”) to (i) increase the number of shares of Common Stock reserved for issuance thereunder by 1,000,000 shares as described below. Abelow, (ii) establish the compensation payable to the Company’s outside directors and (iii) rename the Plan as the “2018 Stock and Incentive Plan” and make other conforming changes. An amended and restated copy of the Plan as so amended, is attached to this proxy Statement asAppendix A.
General Information
The Company established the Plan in 1999 to promote the interests of the Company and its stockholders by using investment interests in the Company to attract, motivate and retain highly qualified key personnel, encourage equity ownership among this group, and enhance a mutuality of interest with stockholders in improving the long-term performance of the Company and the value of the Company’s Common Stock. The Plan was last amended and restated in 2014.2016. On May 13, 2016,April 30, 2018, the closing price of the Company’s Common Stock was $13.31.$9.29.
The Company currently maintains the Plan, under which, as of May 20, 2016,April 30, 2018, the Company has issued and outstanding (i)1,191,695 1,021,851 unexercised stock options to employees, directors and others with a weighted average exercise price of $7.37$7.97 per share, (ii) 343,741 unvestedPerformance Awards (as defined in the Plan) under which an aggregate maximum of approximately 428,032 Performance Shares (as defined underin the Plan) whose vesting ismay be issued, subject to satisfactionthe achievement by the Company and/or a business unit thereof of various vesting conditions over the next onea designated range of financial performance, (iii) Performance Awards under which an aggregate maximum of approximately 415,014 Performance Shares may be issued, subject to three years, including the continued employment of the holders thereof and the comparative performance (on an annual and cumulative basis) of the Company’s common stock on NASDAQ compared to the Russell Micro Cap Index and/or the achievement by the Company of future performance goals, (iii) Performance Awards (as defined in the Plan) under which an aggregate maximum of approximately 282,300 Performance Shares and 91,300 Restricted Stock Units (as defined in the Plan) may be issued, subject to the achievement by the Company of a designated range of financial performance based upon the Company’s adjusted EBITDA for the 2016 fiscal year (and, for certain of such Performance Awards, the achievement by the holder thereof of certain individual performance goals) (which Performance Shares, if issued, will be subject to various future four year vesting conditions, commencing with 2016, including continued employment and, for certain Performance Shares, either the achievement by the Company of future financial goals or the comparative performance (on an annual and cumulative basis) of the Company’s common stock on NASDAQ compared to the Russell Micro Cap Index),; (iv) 26,774258,434 unvested Restricted Stock Units subject to vesting over the next twoone to three years, and (v) 91,186216,296 Deferred Stock Units (as defined in the Plan) held by the non-employee members of our Board of Directors under which the underlying shares will be issued upon the termination of service of the holder.
If the stockholders approve the proposed amendmentamendments to the Plan, the number of shares of common stock available for future equity grants to its employees, officers, directors and consultants will be increased by 1,000,000 shares to 1,729,509860,245 shares, plus the number of unissued shares under awards issued and outstanding as of May 20, 2016June 27, 2018 which are thereafter canceled, terminated, expired, forfeited or lapse for any reason, provided, however, that, for purposes of computing how many shares of common stock remain available for awards under the Plan, each share of common stock that is granted in an award under the Plan in a form other than an option or a stock appreciation right (a “Full-Value Award”) will be counted against as 1.22 shares. As of December 31, 2015,2017, approximately 2,1002,560 of the Company’s employees, officers, directors and consultants, representing substantially all of the Company’s full-time employees were eligible to participate in the Plan.
The amendments further establish the compensation payable to the Company’s non-employee outside directors so that each such individual is entitled to receive a quarterly retainer (“Retainer”) equal to $30,000. Each quarterly Retainer is effected through the issuance of an Award, and, if other than in cash, by a number of underlying shares equal to the Retainer divided by the closing price of the Common Stock immediately preceding the Award grant date. Currently, each quarterly Retainer is paid through the issuance of a Deferred Stock Unit (a “DSU”) under the Plan. The DSU represents the right to receive a number of shares of Common Stock equal to the Retainer divided by the closing price of the Common Stock immediately preceding the DSU grant date. Shares are not issuable under the DSU until the Director no longer serves on the Board. The Retainer is in addition to such other compensation as the Board may establish from time to time for service as chairperson of the Board and/or one or more committees thereof.
The Company’s Board of Directors has approved the amendmentamendments to the Plan described above, subject to stockholder approval. The Board of Directors adopted the amendmentamendments to the Plan because it believes that:
• | Additional shares for awards under the Plan are necessary to attract |
22
Description of the Plan
A summary of the Plan, as amended by the amendmentamendments described above, is set forth below. This summary is qualified in its entirety by the full text of the Plan, as amended and restated, which is attached to this proxy statement asAppendix A.
Purpose. The purpose of the Plan is to focus managementdirectors, officers and employees on business performance that creates stockholder value, encourage innovative approaches to the business of the Company, reward for results, and encourage ownership of Company common stock by managementdirectors, officers and employees.
Permissible Awards. The Plan authorizes the granting of awards in any of the following forms:
• | market-priced options to purchase shares of common stock, which may be non-statutory stock options or incentive stock options under the Internal Revenue Code (the “Code”); |
• | stock appreciation rights, which give the holder the right to receive, in cash or stock, the difference between the fair market value per share of common stock on the date of exercise over the fair market value per share of common stock on the date of grant; |
• | restricted stock, which is a grant of shares that are subject to restrictions on transferability and subject to forfeiture on terms set by the Compensation Committee; |
• | restricted stock units, which represent the right to receive shares of common stock (or an equivalent value in cash or other property) in the future, based upon the attainment of stated vesting or performance criteria; |
• | deferred stock units, which represent the vested right to receive shares of common stock (or an equivalent value in cash or other property) in the future; |
• | performance awards, which are payable in cash or stock upon the attainment of specified performance goals; |
• | dividend and interest equivalents, which entitle the participant to payments (or an equivalent value payable in stock or other property) equal to, in the case of dividend equivalents, any dividends paid on the shares of stock underlying an award, or, in the case of interest equivalents, a stated rate of return on the value of an outstanding award; |
• | other stock-based awards in the discretion of the Compensation Committee, including unrestricted stock grants; and |
• | cash awards. |
Shares Available for Awards. Under the Plan, and subject to stockholder approval of the amendment described herein, a total of 1,729,509860,245 shares of common stock are authorized for the future grant of awards under the Plan, which shares will be in a “fungible pool” with shares subject to Full-Value Awards counted against this limit as 1.22 shares, and any shares subject to any other type of award to be counted against this limit as one share for every one share granted.
Any shares of common stock related to awards under the Plan which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, will be available again for grant under the Plan, provided, however, that the following shares of common stock may not again be made available for issuance as awards under the Plan: (i) shares of common stock not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or option, (ii) shares of common stock used to pay the exercise price or withholding taxes related to an outstanding award, or (iii) shares of common stock repurchased on the open market with the proceeds of the option exercise price.
Limitations on Awards. The maximum number of shares of common stock that may be covered by options and stock appreciation rights granted under the Plan to any one employee during any one calendar year is 250,000. The maximum aggregate grant with respect to awards of options, SARs, restricted stock, restricted stock units, deferred stock units, performance shares or other stock-based awards under the Plan (other than options or SARs) that may be granted to any one employee during any one calendar year is 250,000.250,000 shares. The aggregate maximum dollar value of any performance-based cash award or other cash-based award that may be paid to any one employee during any one calendar year under the Plan is $2,500,000.
23
Administration. The Plan is administered by the Compensation Committee. The Compensation Committee has the authority to designate participants; determine the type or types of awards to be granted to each participant and the number,
terms and conditions thereof; establish, adopt or revise any rules and regulations as it may deem advisable to administer the Plan; delegate its authority in the manner described in the Plan; and make all other decisions and determinations that may be required under the Plan. The Board of Directors may at any time administer the Plan. If it does so, it will have all the powers of the Compensation Committee under the Plan.
Performance Goals. All options and stock appreciation rights grantedSection 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1,000,000 paid to certain covered employees during any taxable year. Under the rules in effect prior to January 1, 2018, compensation that qualified as “performance-based” was deductible under the Plan are designedCode Section 162(m) without regard to be exempt from the $1,000,000 deduction limit imposed by Code Section 162(m). Thelimitation.
Prior to January 1, 2018, the Compensation Committee maycould designate any other award granted under the Plan as a qualified performance-based award in order to make the award fully deductible without regard to the $1,000,000 deduction limit imposed by Code Section 162(m). If an award iswas so designated, the Compensation Committee must establishestablished objectively determinable performance goals for the award based on one or more of the following business criteria, which maycould be expressed in terms of company-wide objectives or in terms of objectives that relate to the performance of a division, business unit, affiliate, department or function within the Company or an affiliate or any combination thereof: revenue; sales; profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); earnings (EBIT, EBITDA, Adjusted EBITDA, earnings per share, or other corporate earnings measures); net income (before or after taxes, operating income or other income measures); cash (cash flow, cash generation or other cash measures); stock price or performance; total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); return measures (including, but not limited to, return on assets, capital, equity, or sales, and cash flow return on assets, capital, equity, or sales); market share; improvements in capital structure; expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); business expansion or consolidation (acquisitions and divestitures); internal rate of return or increase in net present value; working capital targets relating to inventory and/or accounts receivable; or planning accuracy (as measured by comparing planned results to actual results).
The Compensation Committee mustwas required to establish such goals within the first quarter of the period for which such performance goal relates (or such later date as may be permitted under applicable tax regulations) and the Compensation Committee maycan for any reason reduce (but not increase) any award, notwithstanding the achievement of a specified goal.
The Tax Cuts and Jobs Act (the “Act”), which was signed December 22, 2017, eliminated the exception for “performance-based” compensation under Code Section 162(m) and expanded the scope of covered employees subject to the limitation to include the chief financial officer (previously excluded) and anyone that was a covered employee for any taxable year beginning after December 31, 2016, effective as of January 1, 2018. The Act, however, grandfathered certain awards and arrangements provided pursuant to a written binding contract that were in effect on November 2, 2017 and which are not modified in any material respect on or after such date. As a result, compensation that the Compensation Committee awarded in 2017 and in prior years with the intent of qualifying as performance-based compensation under Code Section 162(m) that is paid on or after January 1, 2018 may be deductible, subject to satisfying the rules for being grandfathered. In addition, from an after January 1, 2018, compensation awarded in excess of $1,000,000 to the Company’s covered employees, whether performance-based or not, will not be deductible.
Although the Act limits the deductibility of compensation paid to the Company’s covered employees after January 1, 2018, the Compensation Committee will, consistent with past practice, continue to retain flexibility to design compensation programs, including performance-based awards that the Compensation Committee believes are in the best long term interests of the Company and its stockholders, with the deductibility of compensation being one of a variety of considerations taken into account by the Compensation Committee.
Limitations on Transfer; Beneficiaries. No award will be assignable or transferable by an employee other than by will or the laws of descent and distribution or (except in the case of an incentive stock option) pursuant to a qualified domestic relations order. Notwithstanding the foregoing, the Compensation Committee may, but need not, permit other transfers where it concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any option intended to be an incentive stock option to fail to qualify as such, and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including, without limitation, state or federal tax or securities laws applicable to transferable awards. An employee may, in the manner determined by the Compensation Committee, designate a beneficiary to exercise the rights of the employee and to receive any distribution with respect to any award upon the employee’s death. Notwithstanding the foregoing, no right or interest of a participant in any unexercised or restricted award may be transferred or assigned for consideration.
Acceleration Upon Certain Events. Unless otherwise provided in an award certificate or other employee agreement, if an employee’s service terminates by reason of death, disability or retirement after age 65, all of such employee’s outstanding options, stock appreciation rights and other awards that may be exercised will become fully exercisable, all time-based vesting restrictions on his or her outstanding awards will lapse, and the target payout opportunities attainable under such employee’s outstanding performance-based equity awards will be deemed to have been fully earned as of the date of termination based upon an assumed achievement of all relevant performance goals at the “target” level and there will be a pro rata payout in cash or equity, as appropriate, to the employee or his or her estate within thirty (30) days following the date of termination based upon the length of time within the performance period that has elapsed prior to the date of termination. In addition, the Compensation Committee may determine that any performance-based criteria with respect to cash awards held by such person will be deemed wholly or partially satisfied as of the date of death, disability or retirement.
In addition, the Compensation Committee may, in accordance with, and subject to, the terms and provisions of the Plan, determine that upon an employee’s termination of service or upon the occurrence of a change in control, all or a portion of an employee’s options, SARs and other awards in the nature of rights that may be exercised will terminate and expire or become fully or partially exercisable, that all or a part of the restrictions on all or a portion of an employee’s outstanding awards will lapse, and/or that any performance-based criteria with respect to any awards held by an employee will be
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deemed to be wholly or partially satisfied, in each case, as of such date as the Compensation Committee may, in its sole discretion declare. The Compensation Committee may discriminate among employees or among awards in exercising such discretion.
Adjustments. In the event of a stock split, a dividend payable in shares of common stock, or a combination or consolidation of the common stock into a lesser number of shares, the share authorization limits under the Plan will automatically be adjusted proportionately, and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price for such award. If the Company is involved in another corporate transaction or event that affects the common stock, such as an extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares, the share authorization limits under the plan will be adjusted proportionately, and the Compensation Committee may adjust outstanding awards to preserve the benefits or potential benefits of the awards.
Termination and Amendment. The Board of Directors or the Compensation Committee may, at any time and from time to time, terminate or amend the Plan, but if an amendment to the Plan would materially increase the benefits accruing to employees, materially increase the number of shares of stock issuable, expand the types of awards that may be granted, materially expand the class of eligible employees, materially extend the term of the Plan or otherwise constitute a material change requiring stockholder approval under applicable listing requirements or laws, then such amendment will be subject to stockholder approval. In addition, the Board of Directors or the Compensation Committee may condition any amendment on the approval the stockholders for any other reason. No termination or amendment of the Plan may adversely affect any award previously granted without the written consent of the employee.
The Compensation Committee may amend or terminate outstanding awards. However, such amendments may require the consent of the employee and, unless approved by the stockholders, the exercise price of an outstanding option may not be reduced, directly or indirectly, and the original term of an option may not be extended.
Prohibition on Repricing. Outstanding stock options or stock appreciation rights cannot be repriced, directly or indirectly, without the prior consent of the Company’s stockholders. The modification or exchange of an “underwater” option or stock appreciation right (i.e., having an exercise price in excess of the current market value of the underlying stock) for cash or another award would be considered an indirect repricing and would, therefore, require the prior consent of the Company’s stockholders.
Compensation to Non-Employee Directors. The amendments further establish the compensation payable to the Company’s non-employee outside directors so that each such individual is entitled to receive a quarterly retainer (“Retainer”) equal to $30,000. Each quarterly Retainer is effected through the issuance of an Award and, if other than in cash, by a number of underlying shares equal to the Retainer divided by the closing price of the Common Stock immediately preceding the Award grant date. The Retainer is in addition to such other compensation as the Board may establish from time to time for service as chairperson of the Board and/or one or more committees thereof.
Certain U.S. Federal Tax Effects
Non-statutory Stock Options. There will be no federal income tax consequences to the optionee or to the Company upon the grant of a non-statutory stock option under the Plan. When the optionee exercises a non-statutory option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the common stock received upon exercise of the option at the time of exercise over the exercise price, and the Company will be allowed a corresponding deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.
Incentive Stock Options. There generally will be no federal income tax consequences to the optionee or to the Company upon the grant or exercise of an incentive stock option. If the optionee holds the option shares for the required holding period of the later of two years after the date the option was granted or one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and the Company will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and the Company will be allowed a federal income tax deduction equal to such amount. While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.
Stock Appreciation Rights. An employee receiving a stock appreciation right under the Plan will not recognize income, and the Company will not be allowed a tax deduction, at the time the award is granted. When the employee exercises the
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stock appreciation right, the amount of cash and the fair market value of any shares of common stock received will be ordinary income to the employee and the Company will be allowed a corresponding federal income tax deduction at that time.
Restricted Stock. Unless an employee makes an election to accelerate recognition of the income to the date of grant as described below, an employee will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the employee will recognize ordinary income equal to the fair market value of the common stock as of that date (less any amount he or she paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m) (discussed below). If the employee files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m) (discussed below). Any future appreciation in the stock will be taxable to the employee at capital gains rates. However, if the stock is later forfeited, the employee will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.
Restricted or Deferred Stock Units. An employee will not recognize income, and the Company will not be allowed a tax deduction, at the time a stock unit award is granted. Upon receipt of shares of common stock (or the equivalent value in cash or other property) in settlement of a stock unit award, an employee will recognize ordinary income equal to the fair market value of the common stock or other property as of that date (less any amount he or she paid for the stock or property), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m) (discussed below).
Performance Awards. An employee generally will not recognize income, and the Company will not be allowed a tax deduction, at the time performance awards are granted. Upon receipt of shares of cash, stock or other property in settlement of a performance award, the cash amount or the fair market value of the stock or other property will be ordinary income to the employee, and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m) (discussed below).
Code Section 162(m). Code Section 162(m) limits the deductibility of compensation in excess of $1,000,000 paid to a covered employee doing any taxable year. Under the rules in effect prior to January 1, 2018, compensation that qualified as “performance-based” was deductible under Code Section 162(m) without regard to the $1,000,000 limitation.
The Act eliminated the exception for “performance-based” compensation under Code Section 162(m) and expanded the scope of covered employees subject to the limitation to include the chief financial officer (previously excluded) and anyone that was a covered employee for any taxable year beginning after December 31, 2016, effective as of January 1, 2018. The Act, however, grandfathered certain awards and arrangements provided pursuant to a written binding contract that were in effect on November 2, 2017 and which are not modified in any material respect on or after such date. As a result, compensation that the Compensation Committee awarded in 2017 and in prior years with the intent of qualifying as performance based compensation under Code Section 162(m) that is paid on or after January 1, 2018 may not be fully deductible, depending on the application of the special rules for being grandfathered. In addition, from and after January 1, 2018, compensation awarded in excess of $1,000,000 to the Company’s covered employees will not be deductible.
Code Section 409A. It is intended that options, stock appreciation rights, restricted stock awards and stock unit awards granted under the Plan will be exempt from the application of Code Section 409A. If any award is structured in a way that would cause Code Section 409A to apply and if the requirements of 409A are not met, the taxable events as described above could apply earlier than described above and could result in the imposition of additional taxes and penalties.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE PLAN BASED ON FEDERAL TAX LAWS AND REGULATIONS AS IN EFFECT ON JUNE 2, 2016.THE DATE OF THIS PROXY STATEMENT. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE MAY RESIDE.
Benefits to Named Executive Officers and Others
Because grants under the Plan are discretionary, the Company cannot now determine the number of Awards that will be granted to any particular executive officer, to all executive officers as a group or to non-executive officer employees or directors as a group.employees. The number of such Awards will be determined by the Compensation Committee from time to time in accordance with the terms of the Plan. Please refer to the section entitledPerformance-Based Incentive Compensation above for Awards made during the most recent fiscal year under the Plan to our named executive officers.
As described above, non-employee directors will receive a quarterly retainer (“Retainer”) equal to $30,000. Each quarterly Retainer is effected through the issuance of an Award and, if other than in cash, by a number of underlying shares equal to the Retainer divided by the closing price of the Common Stock immediately preceding the Award grant date.
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Recommendation and Vote Required
The Board unanimously recommends that the stockholders vote FOR this Proposal.
The affirmative vote of a majority of the votes entitled to be cast by the holders of the Company’s Common Stock present or represented at the Annual Meeting and entitled to vote thereon is required to approve the amendment to the Plan.
ITEM 3
APPROVAL OF AN AMENDMENT TO THE RIGHTS AGREEMENT
The Company is currently a party to a Rights Agreement, dated as of June 8, 2000, with Computershare Shareowner Services, LLC (formerly known as Mellon Investor Services LLC), as successor to ChaseMellon Shareholder Services, LLC, as amended by Amendment No. 1 thereto dated as of May 30, 2008, Amendment No. 2 thereto dated as of May 24, 2010, Amendment No. 3 thereto dated July 2, 2010, Amendment No. 4 thereto dated as of May 15, 2013, Amendment No. 5 thereto dated as of June 18, 2015 and Amendment No. 6 thereto dated as of July 30, 2015 (as amended, the “Rights Agreement”).
Under Amendment No. 6 to the Rights Agreement, the Rights Agreement will expire on the 30th day after the 2018 Annual Meeting unless continuation of the Rights Agreement is approved by the stockholders of the Company at the Annual Meeting. If continuation of the Rights Agreement is so approved, the Company will enter into Amendment No. 7 to the Rights Agreement. Pursuant to Amendment No. 7, the Rights Agreement will be amended to continue in effect until the 30th day after the 2021 Annual Meeting unless continuation of the Rights Agreement is approved by the stockholders of the Company at the 2021 Annual Meeting or as otherwise set forth therein.
The Board of Directors believes that maintaining the Rights Agreement is an important tool with which it can protect stockholder value. The rights to purchase preferred stock as set forth in the Rights Agreement (the “Rights”) are intended to protect the stockholders of the Company in the event of an unfair or coercive offer to acquire the Company and to provide the Board of Directors with adequate time to evaluate unsolicited offers. The Rights may have anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company without conditioning its offer on a substantial number of shares being acquired. The Rights, however, should not inhibit any prospective offeror willing to make an offer at a fair price and otherwise in the best interests of the Company and its stockholders, as determined by the Board of Directors. The Rights should also not interfere with any merger or other business combination approved by the Board of Directors.
Description of the Rights Agreement
The following is a summary of the material terms of the Rights Agreement, as proposed to be amended by Amendment No. 7 thereto. The statements below are only a summary, and we refer you to the full text of the Rights Agreement, and each of Amendments Nos. 1 to 6 thereto, as well as the proposed Amendment No. 7 thereto, which can be found attached to this proxy statement as Exhibit B.
Under the terms of the Rights Agreement, each share of common stock outstanding has one Right attached to it, so that the purchase of a share of common stock is also a purchase of the attached Right. Except as set forth below, each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $1.00 per share (“Series A Shares”), at a price of $45.00 (the “Purchase Price”), subject to adjustment. The Purchase Price shall be paid in cash.
Until the “Separation Date,” no separate certificates evidence the Rights (“Rights Certificates”), and the Rights are evidenced by the certificates or book entry accounts of the associated common stock, and the Rights may be transferred with, and only with, the associated common stock certificates or associated book entry accounts so that the surrender for transfer of any certificates for common stock or any book entry transfer of common stock also constitutes the transfer of the Rights associated with the common stock represented by such certificates or book account.
The “Separation Date” is the earlier to occur of (a) 10 business days following a public announcement that a person or group of affiliated or associated persons (collectively, an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding common stock or (b) 15 business days (or such later date as may be determined by the action of the Board before any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer if, upon consummation thereof, such person or group would be the beneficial owner of 20% or more of the outstanding common stock. As soon as practicable following the Separation Date, separate Rights Certificates will be mailed to holders of record of the common stock as of the close of business on the Separation Date and, thereafter, such separate Rights Certificates alone will evidence the Rights.
Notwithstanding the foregoing, the Board of Directors may determine, in the exercise of its reasonable judgment, that a person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing definition, shall not be deemed to be an “Acquiring Person,” provided, that, and for so long as (i) such person, together with all affiliates and associates of such person, shall be the beneficial owner of not more than 23% of the common stock then outstanding and (ii) on or before the date upon which such person would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing definition, such person, on behalf of or together with all affiliates and associates of such person, shall have executed and delivered to the Company, and shall be bound by and subject to, a standstill agreement satisfactory in form and substance to the Board of Directors.
In addition, transcosmos inc., and its direct and indirect subsidiaries and affiliates (collectively, the “Transcosmos Entities”) shall not be deemed an “Acquiring Person” so long as the Transcosmos Entities do not increase their beneficial ownership to greater than 5% of the Company’s then outstanding common stock (excluding the securities purchased under the Securities Purchase Agreement, dated May 15, 2013 by and between the Company and transcosmos inc (the “Purchase Agreement”)) and are otherwise in compliance with the terms of the standstill provisions set forth in Section 5.7 of the Purchase Agreement.
The Rights are not exercisable until the Separation Date and will expire on the 30th day after the 2021 Annual Meeting unless continuation of the Rights Agreement is approved by the stockholders of the Company at the 2021 Annual Meeting (the “Final Expiration Date”), unless earlier redeemed by the Company as described below.
In the event that (a) a person becomes an Acquiring Person, or (b) the Board of Directors declares any person to be an adverse person upon a determination that such person has become the beneficial owner of a substantial amount of common stock (which shall in no event be less than 10% of the Common Shares then outstanding), the Rights Agreement provides that proper provision shall be made so that each holder of a Right will thereafter be entitled to receive, upon exercise, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right.
In the event that, at any time following the first date of public announcement by the Company or an Acquiring Person indicating that an Acquiring Person has become such (the “Shares Acquisition Date”), (a) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (b) the Company engages in a merger or other business combination transaction with another person in which the Company is the surviving corporation, but in which its common stock are changed or exchanged or (c) 50% or more of the Company’s assets or earning power is sold or transferred, the Rights Agreement provides that proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, common shares of the acquiring company having a value equal to two times the exercise price of the Right.
The Board of Directors may, at its option, at any time after the right of the Board of Directors to redeem the Rights has expired or terminated (with certain exceptions), exchange all or part of the then outstanding and exercisable Rights (other than those held by the Acquiring Person) for common stock at a ratio of one Common Share per Right, as adjusted; provided, however, that such Right cannot be exercised once a Person, together with such Person’s Affiliates and Associates, becomes the owner of 50% or more of the outstanding common stock. If the Board authorizes such an exchange, the Rights will immediately cease to be exercisable.
The Rights Agreement contains provisions intended to prevent the utilization of voting trusts or similar arrangements that could have the effect of rendering ineffective or circumventing the beneficial ownership rules set forth in the Rights Agreement, as well as provisions under which any Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person shall immediately become null and void.
The Purchase Price payable, and the number of Series A Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (a) in the event of a dividend of Series A Shares on, or a subdivision, combination or reclassification of, the Series A Shares, (b) upon the grant to holders of the Series A Shares of certain rights or warrants to subscribe for Series A Shares or securities convertible into Series A Shares at less than the current market price of the Series A Shares or (c) upon the distribution to holders of the Series A Shares of debt securities or assets (excluding regular quarterly cash dividends and dividends payable in Series A Shares) or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares that are not integral multiples of ne one-thousandth of a Series A Share will be issued and, in lieu thereof, an adjustment in cash will be made based on the closing price of the Series A Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until the earlier of (A) the date a Person becomes an Acquiring Person or (B) the Final Expiration Date, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right, subject to adjustment (the “Redemption Price”). Immediately upon the action of the Board ordering redemption of the Rights, the Rights will no longer be exercisable. Thereafter the only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for common stock (or other consideration) of the Company or for common shares of the Acquiring Person as set forth above.
The Rights Agreement further provides that in the event the Company receives a “Qualifying Offer” (that has not been terminated prior thereto and which continues to be a Qualifying Offer), stockholders representing at least 10% of the shares of common stock then outstanding may request that the Board of Directors call a special meeting of the stockholders to vote to exempt the Qualifying Offer from the operation of the Rights Agreement not earlier than 90, nor later than 120, business days following the commencement of such offer. The Board of Directors must then call and hold a special meeting of the stockholders for a vote on exempting such offer from the terms of the Rights Agreement within 90 business days following receipt of the stockholder demand for the meeting; provided that such period may be extended if, prior to the vote, the Company enters into an agreement (that is conditioned on the approval by the holders of not less than a majority of the outstanding shares of common stock) with respect to a merger, recapitalization, share exchange or a similar transaction involving the Company or the direct or indirect acquisition of more than 50% of the Company’s consolidated total assets (a “Definitive Acquisition Agreement”), until the time of the meeting at which the stockholders will be asked to vote on the Definitive Acquisition Agreement. If no Acquiring Person has emerged, the offer continues to be a Qualifying Offer and if stockholders representing at least a majority of the shares of common stock represented at the meeting at which a quorum is present vote in favor of redeeming the Rights, then such Qualifying Offer shall be deemed exempt from the Rights Agreement on the date that the vote results are certified. If no Acquiring Person has emerged and no special meeting is held by the date required, the Rights will be redeemed, without the need for action by the Board of Directors, at the close of business on the tenth business day following that date.
A “Qualifying Offer,” in summary terms, is an offer determined by the Board of Directors to have each of the following characteristics which are generally intended to preclude offers that are coercive, abusive or clearly illegitimate:
• | is an all-cash tender offer or stock exchange offer or combination thereof for any and all of the outstanding shares of common stock of the Company; |
• | is an offer that has commenced within the meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended, and is made by an offeror (including its affiliates or associates) that beneficially owns no more than 1% of the outstanding common stock of the Company as of the date of such commencement; |
• | is an offer whose per-share price represents a reasonable premium over the highest market price of the Company’s common stock in the preceding 24 months, with, in the case of an offer that includes shares of common stock of the offeror, such per-share offer price being determined using the lowest reported market price for common stock of the offeror during the five trading days immediately preceding and the five trading days immediately following the commencement of the offer; |
• | is an offer which, within 20 business days after the commencement date of the offer (or within 10 business days after any increase in the offer consideration), does not result in a nationally recognized investment banking firm retained by the Board of Directors rendering an opinion to the Board of Directors that the consideration being offered to the Company’s stockholders is either unfair or inadequate; |
• | is subject only to the minimum tender condition described below and other customary terms and conditions, which conditions shall not include any requirements with respect to the offeror or its agents being permitted to conduct any due diligence with respect to the books, records, management, accountants and other outside advisers of the Company; |
• | is accompanied by an irrevocable written commitment by the offeror to the Company that the offer will remain open for at least 120 business days and, if a special meeting is duly requested by the Company’s stockholders with respect to the offer, at least 10 business days after the date of the special meeting or, if no special meeting is held within 90 business days following receipt of the notice of the special meeting, for at least 10 business days following that 90-day period; |
• | is accompanied by an irrevocable written commitment by the offeror to the Company that, in addition to the minimum time periods specified above, the offer will be extended for at least 15 business days after any increase in the price offered, and after any bona fide alternative offer is made; |
• | is conditioned on a minimum of a majority of the shares of the Company’s common stock being tendered and not withdrawn as of the offer’s expiration date; |
• | is accompanied by an irrevocable written commitment by the offeror to the Company to consummate promptly upon successful completion of the offer a second-step transaction whereby all shares of the Company’s Common Stock not tendered into the offer will be acquired at the same consideration per share actually paid pursuant to the offer, subject to stockholders’ statutory appraisal rights, if any; |
• | is accompanied by an irrevocable written commitment by the offeror to the Company that no amendments will be made to the offer to reduce the offer consideration or otherwise change the terms of the offer in a way that is adverse to a tendering stockholder; and |
• | is accompanied by certifications of the offeror and its chief executive officer and chief financial officer (in their individual capacities) that all information that may be material to an investor’s decision to accept the offer have been disclosed, and will continue to be disclosed promptly for the pendency of the offer, fully and accurately disclosed. |
Any offers that have cash as all or partial consideration are subject to further conditions for qualification as “Qualifying Offers,” as set forth in the Rights Agreement. These conditions generally require assurance that the offer is fully financed and that the offeror has sufficient committed resources to consummate the offer. Any offers that have acquiror common stock as all or partial consideration are subject to further conditions for qualification as “Qualifying Offers,” as set forth in the Rights Agreement. These conditions generally require certain safeguards regarding, and access to information about, the acquiror to allow an informed determination as to the value of and risks associated with the stock, including safeguards against developments that adversely affect the value of the stock, that the acquiror’s stock (which may not have subordinated voting rights nor may its ownership be heavily concentrated in one person or group) is listed on a national exchange, that the acquiror meets certain seasoned issuer standards under the Securities Act of 1933 and that no acquiror stockholder approval of the issuance of the consideration to the Company’s stockholders is necessary after commencement of the offer.
The provisions of the Rights Agreement may be amended by the Board of Directors without approval of the holders of Rights; provided, however, that following the date on which a person has become an Acquiring Person, no such amendment will adversely affect the interests of holders of Rights.
Recommendation and Vote Required
The Board unanimously recommends that the stockholders vote FOR this Proposal.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required for approval of this proposal.
ITEM 34
ADVISORY VOTE ON THE COMPENSATION OF
THE COMPANY’S NAMED EXECUTIVE OFFICERS
The Company seeks your advisory vote approving the compensation of our Named Executive Officers as disclosed in this Proxy Statement. We believe that our executive compensation programs are structured in the best manner possible to support our business objectives and are designed to provide competitive total compensation that is tied to the achievement of Company performance objectives and to attract, motivate and retain individuals who will build long-term value for our stockholders. See “Executive Compensation” above. Key characteristics of our executive compensation programs include the following:
• | Pay for Performance. Our compensation programs seek to tie pay to performance and a meaningful portion of our executives’ compensation is incentive based and contingent upon Company financial performance and/or share price performance. |
• | Pay Competitively. We are committed to providing an executive compensation program designed to attract, motivate, reward, and retain executive officers with the skills necessary to successfully lead and manage our business. |
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(i) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);
(ii) to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: , 20 |
Signature
NOTICE
The signature(s) to the foregoing Assignment and Certificate must correspond to the name(s) as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: PFSWEB, INC.
The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Series A Shares (or fractions thereof) issuable upon the exercise of such Rights (or such other securities of the Company or of any other entity that may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security or other identifying number: |
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying number: |
(Please print name and address)
Dated: , 20
Signature |
Signature Guaranteed: |
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: , 20
Signature |
NOTICE
The signature(s) to the foregoing Election to Purchase and Certificate must correspond to the name(s) as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C
PSFWEB, INC.
Summary of Rights to Purchase Preferred Shares
Introduction
On June 8, 2000, the Board of Directors of our Company, PFSweb, Inc., a Delaware corporation, declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.001 per share. The dividend is payable to the stockholders of record as of the close of business on July 6, 2000.
Our Board has adopted this Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group which acquires 15% or more of our outstanding common stock without the approval of our Board. The Rights Agreement should not interfere with any merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement as made between our Company and Chase Mellon Shareholder Services, L.L.C., as the Rights Agent, as of June 8, 2000, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which has been filed with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A dated June 14, 2000. A copy of the agreement is available free of charge from our Company.
The Rights. Our Board authorized the issuance of a Right with respect to each issued and outstanding share of common stock on July 6, 2000. The Rights will initially trade with, and will be inseparable from, the common stock. The Rights are evidenced only by certificates that represent shares of common stock. New Rights will accompany any new shares of common stock we issue after July 6, 2000 until the Separation Date described below.
Exercise Price. Each Right will allow its holder to purchase from our Company one one-thousandth of a share of Series A Preferred Stock (“Preferred Share”) for $67, once the Rights become exercisable. This portion of a Preferred Share will give the stockholder approximately the same dividend and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights will not be exercisable until
• | Ten days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 15% or more of our outstanding common stock, or, if earlier, |
• | 15 business days (or a later date determined by our Board before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if consummated, would result in that person or group becoming an Acquiring Person. |
We refer to the date when the Rights become exercisable as the “Separation Date.” Until that date, the common stock certificates will also evidence the Rights, and any transfer of shares of common stock will constitute a transfer of Rights. After that date, the Rights will separate from the common stock and be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of common stock. Any Rights held by an Acquiring Person are void and may not be exercised.
Consequences of a Person or Group Becoming an Acquiring Person.
• | Flip In. If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, after the Separation Date, for $67, purchase shares of our common stock with a market value of $134, based on the market price of the common stock prior to such acquisition. |
• | Flip Over. If our Company is later acquired in a merger of similar transaction after the Separation Date, all holders of Rights except the Acquiring Person may, for $67, purchase shares of the acquiring corporation with a market value of $134, based on the market price of the acquiring corporation’s stock, prior to such merger. |
Each one one-thousandth of a Preferred Share, if issued:
• | Will not be redeemable. |
• | Will entitle holders to quarterly dividend payments of $0.005 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater. |
• | Will entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of common stock, whichever is greater. |
• | Will have no voting rights except in limited circumstances. |
• | If shares of our common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock. |
The value of one one-thousandth interest in a Preferred Share should approximate the value of one share of common stock.
Expiration. The Rights will expire on July 6, 2010.
Redemption. Our Board may redeem the Rights for $0.001 per Right at any time before a person or group becomes an Acquiring Person and before July 6, 2010. If our Board redeems any Rights, it musts redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $0.001 per Right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.
Exchange. After the right of our Board to redeem the rights has expired, but before an Acquiring Person owns 50% or more of our outstanding common stock, our Board may extinguish the Rights by exchanging one share of common stock for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution Provisions. Our Board may adjust the purchase price of the Preferred Shares, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, a reclassification of the Preferred Shares or common stock. No adjustments to the purchase price of less than 1% will be made.
Amendments. The terms of the Rights Agreement may be amended by our Board without the consent of the holders of the Rights. After a person or group becomes an Acquiring Person, and, as a result, there is a Separation Date, our Board may not amend the agreement in a way that adversely affects the holders of the Rights.
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment No. 1 to Rights Agreement, dated as of May 30, 2008 (this “Amendment No. 1���), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Mellon Investor Services LLC, a New Jersey limited liability company, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000 (“ Rights Agreement ”);
WHEREAS, the Board of Directors of the Company has considered the reasons underlying the adoption of the Rights Agreement and has determined that those reasons continue to be valid at present;
WHEREAS, the Company desires to amend the Rights Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 1.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Rights Agreement and this Amendment No. 1, the parties hereby agree as follows:
1. Amendment to Section 1(a) . Section 1(a) of the Rights Agreement is amended and restated as follows:
(a) “ Acquiring Person ” shall mean any Person who, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall not include (i) the Company, (ii) any wholly owned Subsidiary of the Company and (iii) any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan or for purposes of funding or providing Common Shares to any such Plan (each an “Exempt Person”). Notwithstanding the foregoing, no Person, together with such Person’s Affiliates and Associates (a “Qualified Shareholder”), shall be deemed to be an “Acquiring Person” so long as (x) such Qualified Shareholder is the Beneficial Owner of less than 20% of the Common Shares of the Company then outstanding, and (y) such Qualified Shareholder reports, or is required to report, such Beneficial Ownership on Schedule 13G under the Exchange Act or on Schedule 13D under the Exchange Act (or any comparable or successor report), which Schedule 13D does not state any present intention to (or reserve the right to) hold such Common Shares with the purpose or effect of changing or influencing the control of the Company, nor in connection with or as a participant in any transaction having such purpose or effect. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more (or in the case of a Qualified Shareholder, 20% or more) of the Common Shares of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more (or in the case of a Qualified Shareholder, 20% or more) of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an “Acquiring Person.” Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provision, has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions, then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.
2. Amendment to Section 3(a) . Section 3(a) of the Rights Agreement is hereby amended by deleting the term “15%” in such section, and replacing it with the term “20%”.
3. Amendment to Exhibit C . Exhibit C to the Rights Agreement is hereby amended by deleting the term “15%” in each place in which such term appears in Exhibit C, and replacing it with the term “20%”.
4. Other Terms Unchanged . This Amendment No. 1 shall be effective as of the date hereof and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby.
5. Severability . If any term, provision, covenant or restriction of this Amendment No. 1 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 1 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
6. Governing Law . This Amendment No. 1 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
7. Counterparts . This Amendment No. 1 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
8. Descriptive Headings. Descriptive headings of the several Sections of this Amendment No. 1 are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
MELLON INVESTOR SERVICES LLC, as Rights Agent | ||||
By: | ||||
Name: | ||||
Title: |
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
Amendment No. 2 to Rights Agreement, dated as of May 24, 2010 (this “Amendment No. 2”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Mellon Investor Services LLC, a New Jersey limited liability company, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008 (as amended, the “ Rights Agreement ”);
WHEREAS, the Board of Directors of the Company has considered the reasons underlying the adoption of the Rights Agreement and has determined that those reasons continue to be valid at present;
WHEREAS, the Company desires to amend the Rights Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 2.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Rights Agreement and this Amendment No. 2, the parties hereby agree as follows:
1. Amendment to Section 1(a) . Section 1(a) of the Rights Agreement is amended by adding the following paragraph thereto:
“Notwithstanding the foregoing, the Board of Directors may determine, in the exercise of its reasonable judgment, that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing definition, shall not be deemed to be an “Acquiring Person,” provided, that, and for so long as (i) such Person, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of not more than 23% of the Common Shares then outstanding and (ii) on or before the date upon which such Person would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing definition, such Person, on behalf of or together with all Affiliates and Associates of such Person, shall have executed and delivered to the Company, and shall be bound by and subject to, a standstill agreement satisfactory in form and substance to the Board of Directors.”
2. Other Terms Unchanged . This Amendment No. 2 shall be effective as of the date hereof and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby.
3. Severability . If any term, provision, covenant or restriction of this Amendment No. 2 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 2 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
4. Governing Law . This Amendment No. 2 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
5. Counterparts . This Amendment No. 2 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
6. Descriptive Headings. Descriptive headings of the several Sections of this Amendment No. 2 are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
MELLON INVESTOR SERVICES LLC, as Rights Agent | ||||
By: | ||||
Name: | ||||
Title: |
AMENDMENT NO. 3 TO RIGHTS AGREEMENT
Amendment No. 3 to Rights Agreement, dated as of July 2, 2010 (this “Amendment No. 3”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Mellon Investor Services LLC, a New Jersey limited liability company, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008 and Amendment No. 2 thereto dated as of May 24, 2010 (as amended, the “ Rights Agreement ”);
WHEREAS, the Board of Directors of the Company has considered the reasons underlying the adoption of the Rights Agreement and has determined that those reasons continue to be valid at present;
WHEREAS, the Company desires to amend the Rights Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 3.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Rights Agreement and this Amendment No. 3, the parties hereby agree as follows:
1. Amendment to Section 7(a) . Section 7(a) of the Rights Agreement is amended by deleting the date “July 6, 2010” which appears in clause (i) therein and inserting “July 6, 2015” in its place.
2. Other Terms Unchanged . This Amendment No. 3 shall be effective as of the date hereof and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby.
3. Severability . If any term, provision, covenant or restriction of this Amendment No. 3 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 3 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
4. Governing Law . This Amendment No. 3 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
5. Counterparts . This Amendment No. 3 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
6. Descriptive Headings. Descriptive headings of the several Sections of this Amendment No. 3 are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | ||||
Title: |
MELLON INVESTOR SERVICES LLC, as Rights Agent | ||||
By: | ||||
Name: | ||||
Title: |
AMENDMENT NO. 4 TO RIGHTS AGREEMENT
Amendment No. 4 to Rights Agreement, dated as of May 15, 2013 (this “Amendment No. 4”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Computershare Shareowner Services LLC (formerly known as Mellon Investor Services LLC), a New Jersey limited liability company, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008, Amendment No. 2 thereto dated as of May 24, 2010 (“Amendment No. 2 ”) and Amendment No. 3 thereto dated July 2, 2010 (as amended, the “ Rights Agreement ”);
WHEREAS, the Company desires to amend the Rights Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 4.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Rights Agreement and this Amendment No. 4, the parties hereby agree as follows:
1. Amendment to Section 1(a) . The definition of “Acquiring Person” in Section 1(a) of the Rights Agreement is amended by adding the following as the last paragraph thereto:
“Notwithstanding the foregoing, transcosmos inc., and its direct and indirect Subsidiaries and Affiliates (collectively, the “Transcosmos Entities”) shall not be deemed an Acquiring Person so long as the Transcosmos Entities do not increase their Beneficial Ownership to greater than 5% of the Company’s then outstanding Common Stock (excluding the Securities) and are otherwise in compliance with the terms of the standstill provisions set forth in Section 5.7 of the Securities Purchase Agreement, dated May 15, 2013 by and between the Company and transcosmos inc (the “Purchase Agreement”).” Defined terms used in this paragraph of Section 1(a) that are not otherwise defined herein shall have the meaning set forth in the Securities Purchase Agreement, dated May 15, 2013, by and between the Company and transcosmos inc.”
2. Other Terms Unchanged . This Amendment No. 4 shall be effective as of the date hereof and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby.
3. Severability . If any term, provision, covenant or restriction of this Amendment No. 4 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 3 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
4. Governing Law . This Amendment No. 4 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
5. Counterparts . This Amendment No. 4 may be executed in any number of counterparts (including by PDF, facsimile or other electronic means) and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
6. Descriptive Headings . Descriptive headings of the several Sections of this Amendment No. 4 are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | Thomas J. Madden | |||
Title: | CFO | |||
COMPUTERSHARE SHAREOWNER SERVICES LLC, as Rights Agent | ||||
By: | ||||
Name: | Robert A. Buckley, Jr. | |||
Title: | Senior Vice President |
AMENDMENT NO. 5 TO RIGHTS AGREEMENT
Amendment No. 5 to Rights Agreement, dated as of June 18, 2015 (this “Amendment No. 5”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Computershare Inc., successor in interest to Computershare Shareowner Services LLC (formerly known as Mellon Investor Services LLC), a Delaware corporation, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008, Amendment No. 2 thereto dated as of May 24, 2010, Amendment No. 3 thereto dated July 2, 2010 and Amendment No. 4 thereto dated as of May 15, 2013 (as amended, the “ Rights Agreement ”);
WHEREAS, the Company desires to amend the Rights Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 5.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Rights Agreement and this Amendment No. 5, the parties hereby agree as follows:
1. Amendment to Section 7(a). Section 7(a) of the Rights Agreement is amended by deleting the date “July 6, 2010” which appears in clause (i) therein and inserting “the close of business on the 30th day after the Company’s 2015 annual meeting of stockholders, unless continuation of this Agreement is approved by the stockholders of the Company at that meeting (with such amendments thereto, including any amendment to this Section 7(a), as may be approved at such meeting)” in its place.
2. Notice to Rights Agent . The Company will provide the Rights Agent with notice of the annual meeting and relevant dates referenced in Section 7(a)(i) of the Rights Agreement promptly after the occurrence of such annual meeting, in the event the continuation of the Rights Agreement is not approved.
3. Other Terms Unchanged . This Amendment No. 5 shall be effective as of the date hereof and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights Agreement as amended hereby.
4. Severability . If any term, provision, covenant or restriction of this Amendment No. 5 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 5 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
5. Governing Law . This Amendment No. 5 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
6. Counterparts . This Amendment No. 5 may be executed in any number of counterparts (including by PDF, facsimile or other electronic means) and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
7. Descriptive Headings. Descriptive headings of the several Sections of this Amendment No. 5 are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
COMPUTERSHARE INC., as Rights Agent | ||||
By: | ||||
Name: | ||||
Title: |
AMENDMENT NO. 6 TO RIGHTS AGREEMENT
Amendment No. 6 to Rights Agreement, dated as of July 30, 2015 (this “Amendment No. 6”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Computershare Inc., successor in interest to Computershare Shareowner Services LLC (formerly known as Mellon Investor Services LLC), a Delaware corporation, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008, Amendment No. 2 thereto dated as of May 24, 2010, Amendment No. 3 thereto dated July 2, 2010, Amendment No. 4 thereto dated as of May 15, 2013 and Amendment No. 5 thereto dated as of June 18, 2015 (each, an “ Amendment ” and collectively, as amended, the “ Agreement ”);
WHEREAS, the Company desires to amend the Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 6.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Agreement and this Amendment No. 6, the parties hereby agree as follows:
1. Certain Definitions
(a) Definition of “Acquiring Person.” The first paragraph of the definition of the term “Acquiring Person” contained in Section 1 of the Agreement is hereby amended and restated in its entirety by the following:
““Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the shares of Common Shares then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, or (iv) any Person who becomes the Beneficial Owner of 20% or more of the Common Shares then outstanding as a result of a reduction in the number of Common Shares outstanding due to the repurchase of Common Shares by the Company unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of 20% or more of the then outstanding Common Shares, acquires beneficial ownership of additional Common Shares representing 1% or more of the Common Shares then outstanding.
(b) Definition of “Beneficial Owner.” The definition of the terms “Beneficial Owner” and “beneficially own” contained in Section 1(d) of the Agreement is hereby amended by adding the following thereto as clause (v) therein:
“(v) which are the subject of, or the reference securities for, or that underlie, any Derivative Interest of such Person or any of such Person’s Affiliates or Associates, with the number of Common Shares deemed beneficially owned being the notional or other number of Common Shares specified in the documentation evidencing the Derivative Interest as being subject to be acquired upon the exercise or settlement of the Derivative Interest or as the basis upon which the value or settlement amount of such Derivative Interest is to be calculated in whole or in part or, if no such number of Common Shares is specified in such documentation, as determined by the Board in its sole discretion to be the number of Common Shares to which the Derivative Interest relates.”
(c) Definition of “Definitive Acquisition Agreement”. The definition of the term “Definitive Acquisition Agreement” is hereby added to Section 1 of the Agreement and shall read as follows:
““Definitive Acquisition Agreement” shall mean an agreement, conditioned on the approval by the holders of not less than a majority of the outstanding Common Shares, with respect to a merger, recapitalization, share exchange, or a similar transaction involving the Company or the direct or indirect acquisition of more than 50 percent of the Company’s consolidated total assets.”
(d) Definition of “Derivative Interest”. The following definition of the term “Derivative Interest” is hereby added to Section 1 of the Agreement:
““Derivative Interest” shall mean any derivative securities (as defined under Rule 16a-1 under the Exchange Act) that increase in value as the value of the underlying equity increases, including, but not limited to, a long convertible
security, a long call option and a short put option position, in each case, regardless of whether (x) such interest conveys any voting rights in such security, (y) such interest is required to be, or is capable of being, settled through delivery of such security or (z) transactions hedge the economic effect of such interest.”
(e) Definition of “Exemption Date”. The definition of the term “Exemption Date” is hereby added to Section 1 of the Agreement and shall read as follows:
““Exemption Date” shall have the meaning set forth in Section 23(b) hereof.”
(f) Definition of “Outside Meeting Date”. The definition of the term “Outside Meeting Date” is hereby added to Section 1 of the Agreement and shall read as follows:
““Outside Meeting Date” shall have the meaning set forth in Section 23(b) hereof.”
(g) Definition of “Qualifying Offer”. The definition of the term “Qualifying Offer” is hereby added to Section 1 of the Agreement and shall read as follows:
““Qualifying Offer” shall mean an offer determined by a majority of independent directors of the Company to have, to the extent required for the type of offer specified, each of the following characteristics:
(i) a fully financed all-cash tender offer or an exchange offer offering shares of common stock of the offeror, or a combination thereof, in each such case for any and all of the outstanding Common Shares at the same per share consideration; provided, however, that such per share price and consideration represent a reasonable premium over the highest reported market price of the Common Shares in the immediately preceding 24 months, with, in the case of an offer that includes shares of common stock of the offeror, such per share offer price being determined using the lowest reported market price for common stock of the offeror during the five Trading Days immediately preceding and the five Trading Days immediately following the date on which the Qualifying Offer is commenced;
(ii) an offer that has commenced within the meaning of Rule 14d-2(a) under the Exchange Act and is made by an offeror (including Affiliates and/or Associates of such offeror) that beneficially owns no more than 1 percent of the outstanding Common Shares as of the date of such commencement;
(iii) an offer that, within 20 Business Days after the commencement date of the offer (or within 10 Business Days after any increase in the offer consideration), does not result in a nationally recognized investment banking firm retained by the Board rendering an opinion to the Board that the consideration being offered to the stockholders of the Company is either unfair or inadequate;
(iv) if the offer includes shares of common stock of the offeror, an offer pursuant to which (A) the offeror shall permit representatives of the Company, including, without limitation, a nationally recognized investment banking firm retained by the Board, legal counsel and an accounting firm designated by the Company to have access to such offeror’s books, records, management, accountants and other appropriate outside advisers for the purposes of permitting such representatives to conduct a due diligence review of the offeror in order to permit such investment banking firm (relying as appropriate on the advice of such legal counsel) to be able to render an opinion to the Board with respect to whether the consideration being offered to the Company’s stockholders is fair, and (B) within 10 Business Days after such investment banking firm shall have notified the Company and the offeror that it had completed the due diligence review to its satisfaction (or following completion of such due diligence review within 10 Business Days after any increase in the consideration being offered), such investment banking firm does not render an opinion to the Board that the consideration being offered to the stockholders of the Company is either unfair or inadequate and such investment banking firm does not after the expiration of such 10 Business Day period render an opinion to the Board that the consideration being offered to the stockholders of the Company has become either unfair or inadequate based on a subsequent disclosure or discovery of a development or developments that have had or are reasonably likely to have a material adverse affect on the value of the common stock of the offeror;
(v) an offer that is subject only to the minimum tender condition described below in item (viii) of this definition and other customary terms and conditions, which conditions shall not include any financing, funding or similar conditions or any requirements with respect to the offeror or its agents being permitted any due diligence with respect to the books, records, management, accountants or any other outside advisers of the Company;
(vi) an offer pursuant to which the Company and its stockholders have received an irrevocable written commitment of the offeror that the offer will remain open for not less than 120 Business Days and, if a Special Meeting Demand is duly delivered to the Board in accordance with Section 23(b), for at least 10 Business Days after
the date of the Special Meeting or, if no Special Meeting is held within the Special Meeting Period (as defined in Section 23(b)), for at least 10 Business Days following the last day of such Special Meeting Period (the “ Qualifying Offer Period ”);
(vii) an offer pursuant to which the Company has received an irrevocable written commitment by the offeror that, in addition to the minimum time periods specified in item (vi) of this definition, the offer, if it is otherwise to expire prior thereto, will be extended for at least 15 Business Days after (A) any increase in the price offered, or (B) any bona fide alternative offer is commenced by another Person within the meaning of Rule 14d-2(a) of the Exchange Act; provided, however, that such offer need not remain open, as a result of clauses (vi) and (vii) of this definition, beyond (1) the time which any other offer satisfying the criteria for a Qualifying Offer is then required to be kept open under such clauses (vi) and (vii), or (2) the expiration date, as such date may be extended by public announcement (with prompt written notice to the Rights Agent) in compliance with Rule 14e-1 of the Exchange Act, of any other tender offer for the Common Shares with respect to which the Board has agreed to redeem the Rights immediately prior to acceptance for payment of Common Shares thereunder (unless such other offer is terminated prior to its expiration without any Common Shares having been purchased thereunder) or (3) one Business Day after the stockholder vote with respect to approval of any Definitive Acquisition Agreement has been officially determined and certified by the inspectors of elections;
(viii) an offer that is conditioned on a minimum of at least a majority of the outstanding Common Shares being tendered and not withdrawn as of the offer’s expiration date, which condition shall not be waivable;
(ix) an offer pursuant to which the Company and its stockholders have received an irrevocable written commitment by the offeror to consummate as promptly as practicable upon successful completion of the offer a second step transaction whereby all Common Shares not tendered into the offer will be acquired at the same consideration per share actually paid pursuant to the offer, subject to stockholders’ statutory appraisal rights, if any;
(x) an offer pursuant to which the Company and its stockholders have received an irrevocable written commitment of the offeror that no amendments will be made to the offer to reduce the offer consideration, or otherwise change the terms of the offer in a way that is materially adverse to a tendering stockholder (other than extensions of the offer consistent with the terms thereof);
(xi) an offer (other than an offer consisting solely of cash consideration) pursuant to which the Company has received the written representation and certification of the offeror and, in their individual capacities, the written representations and certifications of the offeror’s Chief Executive Officer and Chief Financial Officer, that (A) all facts about the offeror that would be material to making an investor’s decision to accept the offer have been fully and accurately disclosed as of the date of the commencement of the offer within the meaning of Rule 14d-2(a) of the Exchange Act, (B) all such new facts will be fully and accurately disclosed on a prompt basis during the entire period during which the offer remains open, and (C) all required Exchange Act reports will be filed by the offeror in a timely manner during such period; and
(xii) if the offer includes shares of stock of the offeror, (A) the stock portion of the consideration must consist solely of common stock of an offeror that is a publicly owned corporation, and be freely tradable and is listed on either the New York Stock Exchange or the NASDAQ National Market System, (B) no stockholder approval of the offeror is required to issue such common stock, or, if required, has already been obtained, (C) no Person (including such Person’s Affiliates and Associates) beneficially owns more than 20 percent of the voting stock of the offeror at the time of commencement of the offer or at any time during the term of the offer, and (D) no other class of voting stock of the offeror is outstanding, and the offeror meets the registrant eligibility requirements for use of Form S-3 for registering securities under the Act; including, without limitation, the filing of all required Exchange Act reports in a timely manner during the 12 calendar months prior to the date of commencement of the offer.
For the purposes of the definition of Qualifying Offer, “fully financed” shall mean that the offeror has sufficient funds for the offer and related expenses which shall be evidenced by (i) firm, unqualified, written commitments from responsible financial institutions having the necessary financial capacity, accepted by the offeror, to provide funds for such offer subject only to customary terms and conditions, (ii) cash or cash equivalents then available to the offeror, set apart and maintained solely for the purpose of funding the offer with an irrevocable written commitment being provided by the offeror to the Board to maintain such availability until the offer is consummated or withdrawn, or (iii) a combination of the foregoing; which evidence has been provided to the Company prior to, or upon, commencement of the offer. If an offer becomes a Qualifying Offer in accordance with this definition but subsequently ceases to be a Qualifying Offer as a result of the failure at a later date to continue to satisfy any of the
requirements of this definition, such offer shall cease to be a Qualifying Offer and the provisions of Section 23(b) shall no longer be applicable to such offer.”
(h) Definition of “Qualifying Offer Period” The definition of the term “Qualifying Offer Period” is hereby added to Section 1 of the Agreement and shall read as follows:
““Qualifying Offer Period” shall have the meaning set forth in the definition of Qualifying Offer.”
(i) Definition of “Qualifying Offer Resolution”. The definition of the term “Qualifying Offer Resolution” is hereby added to Section 1 of the Agreement and shall read as follows:
““Qualifying Offer Resolution” shall have the meaning set forth in Section 23(b) hereof.”
(j) Definition of “Special Meeting”. The definition of the term “Special Meeting” is hereby added to Section 1 of the Agreement and shall read as follows:
““Special Meeting” shall have the meaning set forth in Section 23(b) hereof.”
(k) Definition of “Special Meeting Demand”. The definition of the term “Special Meeting Demand” is hereby added to Section 1 of the Agreement and shall read as follows:
““Special Meeting Demand” shall have the meaning set forth in Section 23(b) hereof.”
(l) Definition of “Special Meeting Period”. The definition of the term “Special Meeting Period” is hereby added to Section 1 of the Agreement and shall read as follows:
““Special Meeting Period” shall have the meaning set forth in Section 23(b) hereof.”
2. Amendment of Section 3 . Section 3 of the Agreement is hereby amended by adding the following thereto as paragraph (d) therein.
“(d) The Company may distribute Rights through book-entry or direct registration means and, for such purpose, the provisions in this Agreement that reference Rights Certificates shall be interpreted to reflect that the Rights are book-entry credits to the accounts, that separate Rights Certificates are not issued with respect to some or all of the Rights, and that any legend required on a Rights Certificate may be placed, in substantially similar form, on the direct registration transaction advice with respect to certain Rights.”
3. Amendment of Section 7(a) . Section 7(a) of the Agreement is hereby amended by: (1) deleting clause (i) therein and inserting the following as clause (i) therein:
“(i) the close of business on the 30th day after the Company’s 2018 annual meeting of stockholders, (the “Final Expiration Date”), unless continuation of this Agreement is approved by the stockholders of the Company at that meeting (with such amendments thereto, including any amendment to this Section 7(a), as may be approved at such meeting),” and
(2) adding the following as the last sentence thereof:
“The Company shall provide the Rights Agent with notice of the 2018 annual meeting and relevant dates referenced in Section 7(a)(i) promptly after the occurrence of such annual meeting,”
4. Amendment of Section 7(b) . Section 7(b) of the Agreement is hereby amended and restated in its entirety as set forth below:
“(b) The Purchase Price for each one-thousandth of a Series A Preferred Share pursuant to the exercise of a Right shall initially be $45.00, shall be subject to adjustment from time to time as provided in Section 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.”
5. Amendment of Section 20(b). Section 20(b) of the Agreement is hereby amended and restated in its entirety as set forth below:
“(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person, the determination of the current per share market price of the Common Shares and the existence of a Qualifying Offer) be proved or
established by the Company prior to taking or suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in the absence of bad faith under the provisions of this Agreement in reliance upon such certificate.”
6. Amendment of Section 23 . Section 23 of the Agreement is hereby amended by (i) adding the following as paragraph (b) therein, (ii) renumbering existing paragraph (b) therein as paragraph (c) therein and (iii) deleting the reference to “Section 23(a)” which appears in renumbered paragraph (c) therein and inserting “Section 23(a) or (b)” in its place and stead.
“(b) In the event the Company receives a Qualifying Offer and the Board has not redeemed the outstanding Rights or exempted such offer from the terms of this Agreement or called a special meeting of stockholders by the end of the 90 th Business Day following the commencement (or, if later, the first existence) of a Qualifying Offer, for the purpose of voting on whether or not to exempt such Qualifying Offer from the terms of this Agreement, holders of record (or their duly authorized proxy) of at least 10% of the Common Shares then outstanding may submit to the Board, not earlier than 90 Business Days nor later than 120 Business Days following the commencement (or, if later, the first existence) of such Qualifying Offer, a written demand complying with the terms of this Section 23(b) (the “ Special Meeting Demand ”) directing the Board to submit to a vote of stockholders at a special meeting of the stockholders of the Company (a “ Special Meeting ”) a resolution exempting such Qualifying Offer from the provisions of this Agreement (the “ Qualifying Offer Resolution ”). For purposes of a Special Meeting Demand, the record date for determining holders of record eligible to make a Special Meeting Demand shall be the 90th Business Day following commencement (or, if later, the first existence) of a Qualifying Offer. The Board shall take such actions as are necessary or desirable to cause the Qualifying Offer Resolution to be so submitted to a vote of stockholders at a Special Meeting to be convened within 90 Business Days following the Special Meeting Demand (the “ Special Meeting Period ”); provided, however, that if the Company at any time during the Special Meeting Period and prior to a vote on the Qualifying Offer Resolution enters into a Definitive Acquisition Agreement, the Special Meeting Period may be extended (and any special meeting called in connection therewith may be cancelled) if the Qualifying Offer Resolution will be separately submitted to a vote at the same meeting as the Definitive Acquisition Agreement. A Special Meeting Demand must be delivered to the Secretary of the Company at the principal executive offices of the Company and must set forth as to the stockholders of record making the request (x) the names and addresses of such stockholders, as they appear on the Company’s books and records, (y) the class and number of shares of Common Shares which are owned of record by each of such stockholders, and (z) in the case of Common Shares that is owned beneficially by another Person, an executed certification by the holder of record that such holder has executed such Special Meeting Demand only after obtaining instructions to do so from such beneficial owner and attaching evidence thereof. Subject to the requirements of applicable law, the Board may take a position in favor of or opposed to the adoption of the Qualifying Offer Resolution, or no position with respect to the Qualifying Offer Resolution, as it determines to be appropriate in the exercise of its duties. In the event that no Person has become an Acquiring Person prior to the redemption date referred to in this Section 23(b), and the Qualifying Offer continues to be a Qualifying Offer and either (i) the Special Meeting is not convened on or prior to the last day of the Special Meeting Period (the “ Outside Meeting Date ”), or (ii) if, at the Special Meeting at which a quorum is present, a majority of the shares of Common Shares present or represented by proxy at the Special Meeting and entitled to vote thereon as of the record date for the Special Meeting selected by the Board shall vote in favor of the Qualifying Offer Resolution, then the Qualifying Offer shall be deemed exempt from the application of this Agreement to such Qualifying Offer so long as it remains a Qualifying Offer, such exemption to be effective on the Close of Business on the tenth Business Day after (i) the Outside Meeting Date or (ii) the date on which the results of the vote on the Qualifying Offer Resolution at the Special Meeting are certified as official by the appointed inspectors of election for the Special Meeting, as the case may be (the “ Exemption Date ”). Notwithstanding anything herein to the contrary, no action or vote, including action by written consent, by stockholders not in compliance with the provisions of this Section 23(b) shall serve to exempt any offer from the terms of this Agreement. Immediately upon the Close of Business on the Exemption Date, without any further action and without any notice, the right to exercise the Rights with respect to the Qualifying Offer will terminate.”
7. Amendment of Section 26 . Section 26 of the Agreement is hereby amended by deleting the address for the Company which appears therein and inserting the following in its stead:
“PFSweb, Inc.
505 Millennium Drive
Allen, TX 75013
Attn: Chief Financial Officer”
8. Amendment of Section 26 . Section 26 of the Agreement is hereby further amended by deleting the address for the Rights Agent which appears therein and inserting the following in its stead:
“Computershare Inc.
250 Royall Street
Canton, MA 02066
Attention, Client Services”
9. Amendment of Section 34 . Section 34 of the Agreement is hereby amended by adding the following thereto:
“A signature to this Agreement transmitted electronically shall have the same authority, effect, and enforceability as an original signature.”
10. Amendment to Exhibits B and C . Exhibits B and C of the Agreement are hereby amended to incorporate the applicable terms and provisions of the Agreement, including, for the avoidance of doubt, this Amendment No. 6 and the continuing provisions of all prior Amendments, and all conflicting or inconsistent terms therein shall be deemed amended and modified accordingly.
11. Amendment No. 6. This Amendment No. 6 is made pursuant to and compliant in all respects with Section 27 of the Agreement. Except as expressly amended hereby, the Agreement shall remain in full force and effect.
12. Counterparts. This Amendment No. 6 may be executed in two or more counterparts, each and all of which shall be deemed an original and all of which together shall constitute but one and the same instrument. A facsimile or pdf signature shall be considered the same as an original signature for purposes of execution of this Amendment No. 6.
13. Severability . If any term, provision, covenant or restriction of this Amendment No. 6 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 6 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
14. Governing Law. This Amendment No. 6 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 6 to be duly executed as of the day and year first above written.
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For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | To approve amendments to the Company’s 2005 Employee Stock and Incentive Plan | ¨ | ¨ | ¨ | 3. | Advisory vote to approve named executive officer compensation | ¨ | ¨ | ¨ | |||||||||
4. | Ratification of Auditors | ¨ | ¨ | ¨ |
AMENDMENT NO. 7 TO RIGHTS AGREEMENT
Amendment No. 7 to Rights Agreement, dated as of June __, 2018 (this “Amendment No. 7”), between PFSweb, Inc., a Delaware corporation (the “ Company ”), and Computershare Inc., successor in interest to Computershare Shareowner Services LLC (formerly known as Mellon Investor Services LLC), a Delaware corporation, as successor to ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company (the “ Rights Agent ”).
WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement dated as of June 8, 2000, as amended by Amendment No. 1 thereto dated as of May 30, 2008, Amendment No. 2 thereto dated as of May 24, 2010, Amendment No. 3 thereto dated July 2, 2010, Amendment No. 4 thereto dated as of May 15, 2013, Amendment No. 5 thereto dated as of June 18, 2015 and Amendment No. 6 thereto dated as of July 30, 2015 (each, an “ Amendment ” and collectively, as amended, the “ Agreement ”);
WHEREAS, the Company desires to amend the Agreement on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company has duly authorized this Amendment No. 7.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the Agreement and this Amendment No. 7, the parties hereby agree as follows.
1. Amendment of Section 7(a) . Section 7(a) of the Agreement is hereby amended by: (1) deleting clause (i) therein and inserting the following as clause (i) therein:
“(i) the close of business on the 30th day after the Company’s 2021 annual meeting of stockholders, (the “Final Expiration Date”), unless continuation of this Agreement is approved by the stockholders of the Company at that meeting (with such amendments thereto, including any amendment to this Section 7(a), as may be approved at such meeting),” and
(2) adding the following as the last sentence thereof:
“The Company shall provide the Rights Agent with notice of the 2021 annual meeting and relevant dates referenced in Section 7(a)(i) promptly after the occurrence of such annual meeting,”
2. Amendment to Exhibits B and C . Exhibits B and C of the Agreement are hereby amended to incorporate the applicable terms and provisions of the Agreement, including, for the avoidance of doubt, this Amendment No. 7 and the continuing provisions of all prior Amendments, and all conflicting or inconsistent terms therein shall be deemed amended and modified accordingly.
3. Amendment No. 7. This Amendment No. 7 is made pursuant to and compliant in all respects with Section 27 of the Agreement. Except as expressly amended hereby, the Agreement shall remain in full force and effect.
4. Counterparts. This Amendment No. 7 may be executed in two or more counterparts, each and all of which shall be deemed an original and all of which together shall constitute but one and the same instrument. A facsimile or pdf signature shall be considered the same as an original signature for purposes of execution of this Amendment No. 7.
5. Severability . If any term, provision, covenant or restriction of this Amendment No. 7 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment No. 6 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
6. Governing Law. This Amendment No. 7 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7 to be duly executed as of the day and year first above written.
PFSWEB, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
COMPUTERSHARE INC., as Rights Agent | ||||
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Title: |
. MMMMMMMMMMMM PFSweb, Inc. MMMMMMMMM IMPORTANT ANNUAL MEETING INFORMATION 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ MR ASAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Using ablack inkpen, mark your votes with anXas shown in X this example. Please do not write outside the designated areas. MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on June 26, 2018. Vote by Internet • Go to www.investorvote.com/PFSW •Or scan the QR code with your smartphone •Follow the steps outlined on the secure website Vote by telephone •Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone •Follow the instructions provided by the recorded message Annual Meeting Proxy Card 1234 5678 9012 345 • IF YOU HAVE NOT VOTED VIA THE INTERNET ORTELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
• A Proposals— The Board of Directors recommends a vote FOR all the nominees listed and FOR proposals 2, 3, 4 and 5. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain + 01 - Benjamin Rosenzweig 02 - Monica Luechtefeld 03 - Michael C. Willoughby 04 - Shinichi Nagakura 05 - James F.Reilly 06 - David I. Beatson 07 - Peter J. Stein For Against Abstain For Against Abstain 2.Approval of amendments to 2005 Employee Stock and 3.Approval of an amendment to Rights Agreement with Incentive Plan Computershare Shareowner Services, LLC 4.Advisory vote to approve named executive 5. Ratification of Auditors officer compensation In their discretion, the proxies are authorized to vote upon such other business as may properly be presented at the meeting OR any adjournments or postponements thereof.
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B Non-Voting Items Change of Address —Please print new address below. Comments— Please print your comments below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MR A SAMPLE (THIS AREA IS SET UPTOACCOMMODATE C 1234567890 JNT 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR ASAMPLE AND MR ASAMPLE AND MR ASAMPLE AND 1UPX 3773721 MR ASAMPLE AND MR ASAMPLE AND MR ASAMPLE AND MMMMMMM + 02UAHD
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. Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.TheStockholders.The Proxy Statement and the 20152017 Annual Report to Stockholders are available at:
http://www.pfsweb.com/investor-relations/proxy-materials.php
qwww.corporate.pfsweb.com/proxy-materials/ • IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, ORTELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
• Proxy — PFSweb, Inc. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Thomas J. Madden and Stephanie DelaCruz as proxies, with power to act without the other and with power of substitution, and hereby authorizes them to represent and vote, as designated on the other side, all the shares of stock of PFSweb, Inc. standing in the name of the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held June 27, 2018 or any adjournment thereof. 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 proposals 1, 2, 3, 4 and 5. (Continued and to be marked, dated and signed, on the other side)
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