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SECURITIES AND EXCHANGE COMMISSION | ||||
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INFORMATION REQUIRED IN PROXY STATEMENT | ||||
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SCHEDULE 14A INFORMATION | ||||
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Proxy Statement Pursuant to Section 14(a) of the Securities | ||||
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Filed by the Registrant | ||||
Filed by a Party other than the Registrant | ||||
Check the appropriate box: | ||||
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| Preliminary Proxy Statement | |||
| Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
| Definitive Proxy Statement | |||
| Definitive Additional Materials | |||
| Soliciting Material | |||
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PC CONNECTION, INC. | ||||
(Name of Registrant as Specified in Its Charter) | ||||
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) | ||||
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PC CONNECTION, INC.
730 Milford Road
Merrimack, New Hampshire 03054
(603) 683-2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Wednesday, May 17, 2017
2023 10:00 a.m. EDT
The 20172023 Annual Meeting of Stockholders of PC Connection, Inc., a Delaware corporation, which we refer to as the Company, will be held at the Crowne Plaza Hotel, 2 Somerset Parkway (Exit 8 off the Everett Turnpike), Nashua, New Hampshire 03063our corporate headquarters, 730 Milford Road, Merrimack, NH 03054 on Wednesday, May 17, 20172023 at 10:00 a.m., Eastern time, (EDT) to consider and act upon the following matters:
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1. To elect six directors to serve until the 2024 Annual Meeting of Stockholders;
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2. To approve an amendment to the Company’s 2020 Stock Incentive Plan increasing the number of shares of common stock authorized for issuance under such plan from 1,002,500 to 1,252,500;
3. To ratify the selection by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2023; and
4. To transact such other business as may properly come before the meeting or any adjournment thereof.
Stockholders of record at the close of business on March 24, 201731, 2023 are entitled to notice of and to vote at the meeting or any adjournments thereof. Our stock transfer books will remain open. All stockholders are cordially invited to attend the meeting.
Audio webcast capabilities will be available at https://edge.media-server.com/mmc/p/enows4j9. Teleconference capabilities will also be available at https://register.vevent.com/register/BIbdcf6214e31d4a048245217a3ee7d9e6.
Although audio webcast and teleconference capabilities will be available in order to enable stockholders who wish to listen to the Annual Meeting to do so without attending the Annual Meeting, stockholders will not be able to vote or revoke a proxy via the audio webcast or teleconference. Therefore, to ensure that your vote is counted at the Annual Meeting, the Company encourages its stockholders to complete and return the proxy card included with the Notice Regarding the Availability of Proxy Materials, or through your broker, bank or other nominee’s voting instruction form.
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| By Order of the Board of Directors, |
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| | Patricia Gallup |
| | Chair of the Board |
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Merrimack, New Hampshire | | |
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 17, 2023: The Notice of the 2023 Annual Meeting and Proxy Statement and the Annual Report for the year ended December 31, 2022 are being mailed to stockholders on or about April 19, 2023. The Notice of 2023 Annual Meeting and Proxy Statement and Annual Report for the year ended December 31, 2022 may also be accessed at http://ir.connection.com/financials/annual-reports-and-proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
PC CONNECTION, INC.
730 Milford Road
Merrimack, New Hampshire 03054
PROXY STATEMENT FOR THE 20172023 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Wednesday, May 17, 2017 2023 10:00 a.m. EDT
This Proxy Statement is furnished in connection with the solicitation of proxies by PC Connection, Inc., a Delaware corporation, which we refer to as the Company, (or “we,” “us,”we, us, or “our”)our, by our Board of Directors, or the Board, for our 20172023 Annual Meeting of Stockholders, or the Annual Meeting,“Annual Meeting”, to be held on Wednesday, May 17, 20172023 at 10:00 a.m., Eastern time, (EDT) at the Crowne Plaza Hotel, 2 Somerset Parkway (Exit 8 off the Everett Turnpike), Nashua, New Hampshire 03063our corporate headquarters, 730 Milford Road, Merrimack, NH 03054 or any adjournment or adjournments of the Annual Meeting. You may obtain directions to the location of the meetingAnnual Meeting by contacting Investor Relations at 603‑683‑2262. 603-683-2505.
All proxies will be voted in accordance with the stockholders’ instructions. If no choice is specified, the proxies will be voted in favor of the matters set forth in the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any time before its exercise at the Annual Meeting by delivery of a written revocation to our secretary, or a subsequently dated proxy to our secretarymay be provided electronically or telephonically through the procedures set forth in the enclosed proxy card, or by voting in person atduring the Annual Meeting.
The Notice of Meeting, this Proxy Statement, the enclosed proxy, our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission, or the SEC, and our Annual Report to Stockholders for the year ended December 31, 2016 are being mailed to stockholders on or about April 13, 2017.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 17, 2017:
This proxy statement, form of proxy, and our 2016 Annual Report to Stockholders for the year ended December 31, 2016 are available at http://ir.connection.com/annuals.cfm.
Voting Securities and Votes Required
On March 24, 2017,31, 2023, the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting, there were outstanding and entitled to vote an aggregate of 26,749,66226,280,807 shares of our common stock,Common Stock, $.01 par value per share, or the Common Stock. Stockholders are entitled to one vote per share of Common Stock. Our stock record books will remain openbe available for inspection by stockholders of record for ten days prior to the Annual Meeting at our offices at the above address and at the time and place of the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote at the Annual Meeting shall be necessary to constitute a quorum for the transaction of business. If a quorum is not present, the meeting will be adjourned until a quorum is obtained. Abstentions will be considered as present for purposes of determining whether a quorum is present. Proxies reflecting broker non-votes (where a broker or nominee does not have discretionary authority to vote on a proposal) will be considered as present for purposes of determining whether a quorum is present provided there is at least one routinediscretionary matter to be voted on.
If a quorum is present at the Annual Meeting, the vote required to adopt each of the scheduled proposals will be as follows:
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Election of Directors. Under the Company’s by-laws, anyAny election of directors by stockholders shall be determined by a plurality of the votes cast on the election (candidates who receive the highest number of “for” votes are elected). ShareholdersStockholders may vote “for” or “withhold” authority to vote with respect to one or more director nominees; however, where candidates are unopposed, withhold“withhold” votes will have no effect on the election of such nominees. In addition, shares held of record by stockholders that fail to provide voting instructions and broker non-votes, as described below, will have no effect on the election of such nominees.
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Other Matters. Under the Company’s by-laws, theThe affirmative vote of the holders of a majority of the votes cast (meaning the number of shares voted “for” a proposal must exceed the number of shares voted “against” such proposal) will be required for: approval of the amendment to the Company’s 2020 Stock Incentive Plan (as defined below) (Proposal 2); and the ratification of the selection of the independent registered public accounting firm (Proposal 2)3). ShareholdersStockholders may vote “for,” “against”“against,” or “abstain” from voting on this proposal.Proposal 2 and Proposal 3. Abstentions are not considered votes cast for the foregoing purpose, and will have no effect on the vote for this proposal. Proposal 2 or Proposal 3 or the shares voting on such matter. If you are a stockholder of record and do not cast your vote, no votes will be cast on your behalf on any of the matters of business at the Annual Meeting. The failure to vote by a stockholder of record will have no effect on the vote for Proposal 2 or Proposal 3 or the shares voting on such matter.
Broker Non-Votes. Persons who hold shares on the record date through a broker, bank, or other nomineeintermediary (referred to hereafter as “brokers” for ease of reference) are considered beneficial owners.owners and the shares are referred to as held in “street name”. Brokers holding shares in “street name” must vote according to specific instructions they receive from the beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion. However, brokers holding shares in “street name” for their beneficial owners are prohibited from voting on behalf of the clients in director elections andon certain other non-routine matters unless the brokers have received specific voting instructions from those clients. Accordingly, we expect that a broker cannotwill be unable to vote shares held on behalf of a beneficial owner on ProposalProposals 1 and 2 regarding the election of directors and the amendment to the 2020 Stock Incentive Plan, respectively, unless such broker has received specific voting instructions from the beneficial owner. However, we expect that a broker will have discretion to vote shares held on behalf of a beneficial owner on Proposal 2,3, the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2017,2023, even if such broker has not received specific voting instructions from the beneficial owner. Shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter, will not be counted as votes in favor of such matter and will also not be counted as votes cast or shares voting on such matter.
Votes cast by proxy by mail will be tabulated by the inspector of election appointed for the Annual Meeting, who will also determine whether a quorum is present.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Ownership of Officers and Directors
Unless otherwise provided below, the following table sets forth, as of March 13, 2017,17, 2023, the beneficial ownership of our Common Stock by: (i) persons known by us to own more than 5% of our outstanding shares; (ii) each of our current and nominated directors; (iii)(ii) each of our named executive officers in the Summary Compensation Table under the heading “Executive Compensation” below; and (iv)(iii) all our current directors and executive officers as a group. Unless otherwise indicated, each person has sole investment and voting power, or shares such power with his or her spouse, with respect to the shares set forth in the following table. The inclusion in this table of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
Except as otherwise set forth below, the street address of each beneficial owner is c/o PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054.
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| | Shares of | | Percentage of | |
| | Common Stock | | Common | |
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Name |
| Owned (1) |
| Outstanding (2) |
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Patricia Gallup |
| 14,413,627 | (3) | 54.9 | % |
Timothy McGrath |
| 330,990 | | 1.3 | |
David Beffa-Negrini |
| 84,750 | | * | |
Jack Ferguson |
| 76,930 | | * | |
Thomas Baker |
| 32,342 | | * | |
Barbara Duckett | | 15,127 | | * | |
Gary Kinyon | | 1,250 | | * | |
Jay Bothwick | | — | | * | |
All current directors and executive officers as a group (8 individuals) |
| 14,955,016 | | 56.9 | |
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Name |
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| Outstanding (2) |
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Patricia Gallup |
| 7,611,811 | (3) | 28.5 | % |
David Hall |
| 7,164,462 | (4) | 26.8 |
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Dimensional Fund Advisors, Inc. |
| 2,250,700 | (5) | 8.4 |
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Royce & Associates LLC |
| 1,798,582 | (6) | 6.7 |
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Timothy McGrath |
| 253,321 | (7) | * |
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David Beffa-Negrini |
| 148,800 |
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Jack Ferguson |
| 90,180 |
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Joseph Baute |
| 30,000 |
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Barbara Duckett |
| 15,500 |
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William Schulze |
| 919 |
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Joseph Driscoll (8) |
| — |
| * |
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All current directors and executive officers as a group (8 individuals) |
| 15,314,993 | (9) | 57.3 |
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*Less than 1% of the total number of our outstanding shares of Common Stock on March 13, 2017.
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(1) | The number of shares beneficially owned by each director or executive officer is determined under rules promulgated by the |
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| The number of shares of Common Stock deemed outstanding for purposes of determining such percentages includes |
(3) |
| Includes |
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Stock Ownership of Certain Beneficial Owners
To our knowledge, as of March 17, 2023, the following entities beneficially owned more than 5% of our Common Stock.
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Name and Address | | of Class | | Beneficially Owned | | Outstanding (1) |
David Hall Trust 2003 | | | | | | |
PO Box 256 | | Common Stock | | 6,879,962 | (2) | 26.2% |
Keene, NH 03431 | | | | | | |
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Comack Trust | | | | | | |
PO Box 256 | | Common Stock | | 5,000,000 | (3) | 19.0% |
Keene, NH 03431 | | | | | | |
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BlackRock, Inc. | | | | | | |
55 East 52nd Street | | Common Stock | | 2,510,632 | (4) | 9.6% |
New York, NY 10055 | | | | | | |
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Mawer Investment Management Ltd. | | | | | | |
600, 517 – 10th Avenue SW | | Common Stock | | 1,978,800 | (5) | 7.5% |
Calgary, Alberta, Canada T2R 0A8 | | | | | | |
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Dimensional Fund Advisors, Inc. | | | | | | |
6300 Bee Cave Road, Building One | | Common Stock | | 1,854,344 | (6) | 7.1% |
Austin, Texas, 78746 | | | | | | |
(1) | The number of shares of Common Stock deemed outstanding for purposes of determining such percentages is 26,278,215 as of March 17, 2023. |
(2) | As the sole trustee of the David Hall Trust 2003, Patricia Gallup may be deemed to beneficially own the shares held by the |
(3) | As the sole trustee of the Comack Trust, Patricia Gallup may be deemed to beneficially own the shares held by the Comack Trust. The Comack Trust has the sole power to vote or direct the vote of 0 shares of Common Stock, the shared |
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| The information presented herein is as reported in, and based solely upon, a Schedule 13G/A |
(5) | The information presented herein is as reported in, and based solely upon, a Schedule 13G/A filed with the SEC on February |
(6) | The information presented herein is as reported in, and based solely upon, a Schedule 13G/A filed with the SEC on February 10, 2023 by Dimensional Fund Advisors LP, which we refer to as Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940. Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled funds, group trusts and separate accounts |
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Common Stock listed as owned by Dimensional are owned by the Funds. In its role as investment advisor or manager, Dimensional possesses |
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PROPOSAL ONE
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting. The size of our Board of Directors is currently fixed at six members. Our Bylaws provide that our directors will be elected at each annual meeting of our stockholders to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified.
The personsperson named in the enclosed proxy (Patricia Gallup and David Hall)Gallup) will vote to elect the six nominees named below as our directors unless authority to vote for the election of any or all of the nominees is withheld by marking the proxy to that effect. Each nominee is presently serving as a director, and each nominee has consented to being named in this Proxy Statement and to serve, if elected. If for any reason any nominee should be unable to serve, the person acting under the proxy may vote the proxy for the election of a substitute nominee designated by our Board of Directors. It is not presently expected that any of the nominees will be unavailable to serve.
Our Board of Directors recommends a vote “FOR” the election of the nominees described below.
Set forth below are the name, age, and length of service as a director foris certain biographical information about each nominee ofto our Board of Directors, andincluding the positions and offices held by him or her, his or her principal occupationoccupations and business experience for at least the past five years, and the names of other publicly-held companies of which he or she serves as a director or served as a director during the past five years.experience. Information with respect to the number of shares of Common Stock beneficially owned by each director or nominee, directly or indirectly, as of March 13, 2017,17, 2023, appears under “Security Ownership of Certain Beneficial Owners and Management.”Management”.
Nominees for Election to our Board of Directors
Patricia Gallup, age 63, is69, has been the Chair of our ChairBoard of Directors since September 1994 and Chief Administrative Officer. Ms. GallupOfficer since August 2011. She served as Chief Executive Officer from September 2002 until August 2012 and from 1990 to 2001. Ms. Gallup is a co-founder of our Company, and has servedbeen on our Board of Directors since its inception and has served as an executive officer since 1982.
David Hall, age 67, is a co‑founder of our Company and has served on our Board of Directors since its inception. Mr. Hall served as Vice Chair of our Board of Directors from March 1998 to December 2004. Mr. Hall was an executive officer from 1982 to 1997, and since then has served as an analyst for our Company.
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Joseph Baute, age 89, has served on our Board of Directors since June 2001, and as Vice Chair since August 2012. From 1979 to 1993, Mr. Baute served as Chair and Chief Executive Officer of Markem Corporation, an industrial marking and coding solutions provider. Since 1993, Mr. Baute has worked as an independent consultant. Mr. Baute has served on the boards of directors of several public and private companies, including the Federal Reserve in Boston, State Street Bank, and Houghton-Mifflin Company, as well as several non-profit organizations.
David Beffa-Negrini, age 63,69, has served on our Board of Directors since September 1994. Mr. Beffa-Negriniserved1994, and serves as our Senior Vice President, Corporate Marketinga member of the Audit Committee. He had held a variety of senior management roles with the Company and Creative Services from February 2007 until his retirement effective December 31, 2008. Mr. Beffa-Negrini served as Co-Presidentwas the Co-President of our former subsidiary, Merrimack Services, subsidiary from September 2005 to February 2007, and2007. He served as our Vice President of Corporate Communications from June 2000 to February 2007. Mr. Beffa‑NegriniBeffa-Negrini retired from the Company in 2008.
Jay Bothwick, age 66, has served inon our Board of Directors since March 2022 and as Vice Chair and Secretary since August 2022. Mr. Bothwick also serves as the Chair of the Corporate Development Committee, or the CDC. Mr. Bothwick is a varietyManaging Director of seniorCrossHarbor Capital Partners LLC, an investment and asset management capacitiesfirm focused on commercial real estate since August 2021. Prior to joining CrossHarbor Capital Partners LLC, Mr. Bothwick spent almost 40 years practicing in the areas of merchandising, marketing, and communications during his 25 years of employment with the Company.corporate group at WilmerHale, a national law firm.
Barbara Duckett72,78, has served on our Board of Directors since June 2009.2009, and serves as the Chair of the Compensation Committee and as a member of the Audit and Corporate Development Committees. From 2000 to 2013, Ms. Duckett served aswas the President, Chief Executive Officer, and as a member of the board of directors of Home Healthcare, Hospice and Community Services. Since April 2011,2021, Ms. Duckett has served as a member of the board of directors and as Chair of the Professional Affairs Committee of Cheshire Medical Center. Prior to joining the board of directors at Cheshire Medical Center, Ms. Duckett served as a member of the board of directors of Monadnock Community Hospital. She also has servedHospital, as a director or officer of severalwell as other non-profit and privately-heldprivately held healthcare organizations, at the local, state, and national level.
Jack Ferguson78,84, has servedbeen on our Board of Directors since May 2016.2016, and serves as the Chair of the Audit Committee and as a member of the Compensation and Corporate Development Committees. Mr. Ferguson served as our Executive Vice President from May 2007 to March 2012, Chief Financial Officer from December 2005 to March 2012, and Treasurer from November 1997 to March 2012. From December 1992 to May 2007, Mr. Fergusonhe served in various executive financial executive roles at the Company. Prior to joining the Company, Mr. Ferguson was with Deloitte & Touche, an
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international accounting firm, where he served as a partner for over 15 years on both domestic and international client assignments. He retired from the Company in March 2012.
Gary Kinyon, age 68, has been on our Board of Directors since May 2021. Mr. Kinyon has been a partner at Bradley & Faulkner, P.C. since 1983. He has served as a Corporator and Director of the Savings Bank of Walpole since 2010, and as a Corporator and Trustee of New Hampshire Mutual Bancorp since 2018.
We believe that each of our nominees is qualified to serve as a director of the Company as a result of his or her level of business experience described in the individual biographies above. Each nominee hasThe nominees have served in a broad range of senior management roles, and some have served on other boards of directors.directors or in leadership roles for a variety of nonprofit and community organizations. The Board concluded that the depth of experience and the combination of the different backgrounds of each of our nominees facilitate the Company’s goal of having a diversity of viewpoints and backgrounds on the Board, and gives the Company a broad range of experience on which to draw. Accordingly, the Board concluded that each of these individuals should serve as a director of the Company, in light of its business and structure, at the time of filing this proxy. In particular:
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| Ms. Gallup is a co-founder of the Company and has served as an executive, director, or corporate officer of the Company for over |
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| Mr. Beffa-Negrini |
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● | Ms. Duckett has significant executive management and board-level experience with numerous organizations in the healthcare industry. Accordingly, Ms. Duckett brings to the Board strong business knowledge as well as insight into the growing healthcare industry, which is a sector the Company serves. |
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| Mr. Ferguson served the Company in a variety of executive financial |
● | Mr. Kinyon has been a partner in a general practice law firm specializing in business formation, reorganization, banking, business transactions, commercial/residential financing, contracts and real estate since 1983 thereby possessing the knowledge to assist with the business of the Company and its customers, employees and other stakeholders. |
No family relationship exists between any of our executive officers or directors.
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Board Diversity Matrix (As of April 7, 2023) | ||||
Total Number of Directors | 6 | |||
| Female | Male | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | ||||
Directors | 2 | 4 | | |
Part II: Demographic Background | ||||
White | 2 | 4 | | |
INFORMATION CONCERNING DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS
Board Meetings and Attendance
Our Board of Directors met eleventen times during the year ended December 31, 2016,2022, either in person or by teleconference. During 2016,2022, each director attended at least 75% of the aggregate number of Board meetings and the number of meetings held by all committees on which he or she serves.served. Our Board of Directors does not currently have a policy with regard to the attendance of Board members at our annual meeting of stockholders.stockholders, though all of our current directors virtually attended the 2022 annual meeting.
Board Committees
Our Board of Directors has established twothree standing committees–Audit, Compensation, and Compensation.Corporate Development. The Audit and Compensation Committees each operate under written charters that have been approved by our Board of Directors. We have included the charters of the Audit CommitteeEach charter can be viewed on our website at http://ir.connection.com and the Compensation Committee as Appendixes A and B, respectively,is available in print to this Proxy Statement. They can also be obtained by accessing the website maintained by the SEC at www.sec.gov orany stockholder requesting a copy by contacting our investor relations department at PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054.
Our Board of Directors has determined that all of the members of our twothree standing committees are independent as defined under the rules of the Nasdaq Stock Market including, in the case of all members of the Audit Committee, the independence requirements set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in the case of all members of the Compensation Committee, the independence requirements set forth in Rule 10C-1 under the Exchange Act.
Audit Committee
The Audit Committee’s responsibilities include:
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| appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; |
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| overseeing the work of our independent registered public accounting firm, including resolution of disagreements between Company management and the independent auditor regarding financial reporting and through the receipt and consideration of certain reports and other communications required to be made by the independent registered public accounting firm; |
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● | reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures; |
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| monitoring our internal control over financial reporting, disclosure controls and procedures, and code of business conduct and ethics; |
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| discussing our risk assessment and risk management policies; |
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| establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns; |
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| meeting independently with our internal auditing staff, independent registered public accounting firm, and management; |
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| reviewing policies and procedures for reviewing and approving or ratifying related person transactions; |
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| reviewing and approving or ratifying any related person transactions; and |
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| preparing the audit committee report required by SEC |
The membersChair of our Audit Committee areis Mr. Baute,Ferguson and the members are Ms. Duckett and Mr. Ferguson. Mr. Weatherson served on the Audit Committee until his resignation from the Board of Directors in January 2017.Beffa-Negrini. Our Board of Directors has determined that all three membersMs. Duckett and Mr. Ferguson each qualify as an “audit committee financial expert” as defined by applicable SEC rules. The Audit Committee met sevenfive times during 2016.2022.
Compensation Committee and Subcommittee
The Compensation Committee’s responsibilities include:
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| annually reviewing and approving corporate goals and objectives relevant to our CEO and our other executive officers compensation; |
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| reviewing and approving, or recommending for approval by the Board of Directors, our CEO’s compensation; |
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| reviewing and approving, or recommending for approval by the Board of Directors, the compensation of our other executive officers; |
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| overseeing evaluations of our senior executives; |
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| overseeing and administering our cash and equity incentive plans; |
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| reviewing and making recommendations to our Board of Directors with respect to incentive-compensation and equity-based plans; |
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| reviewing and making recommendations to our Board of Directors with respect to director compensation; |
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● | reviewing and discussing annually with management our “Compensation Discussion and Analysis;” |
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| overseeing any compensation consultants, legal counsel or other advisors that it, in its sole discretion, retains or obtains advice from; and |
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| preparing the |
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The processes and procedures followed by our Compensation Committee in considering and determining executive and director compensation are described below under the heading “Executive and Director Compensation Processes.” The Compensation Committee may form and delegate authority to one or more subcommittees as it deems appropriate from time to time under the circumstances. See Executive and Director Compensation Process for a discussion of certain authority the Compensation Committee has delegated to a committee of the Board of Directors comprised of Ms. Gallup, to issue certain awards under the 2020 Stock Incentive Plan.
The Chair of the Compensation Committee is Ms. Duckett and the other member is Mr. Ferguson. The Compensation Committee met threefour times in 2016. 2022.
Corporate Development Committee
The membersCDC is responsible for evaluating and providing recommendations with respect to strategic transactions by the Company including, but not limited to, potential acquisitions, mergers and other significant business strategies or initiatives. The Chair of the Compensation CommitteeCDC is Mr. Bothwick and the members are Ms. Duckett and Messrs. Baute andMr. Ferguson. Mr. Weatherson served on the Compensation Committee until his resignation from the Board of Directors in January 2017. The Compensation Committee has established a subcommittee (which we refer to as the 162(m) Subcommittee) and delegated to that subcommittee authority to issue equity awards and to determine other qualified performance‑based compensation for our CEO and three other most highly compensated employees (other than the CEO and CFO) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act in accordance with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
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amended, which we refer to as the Code. The 162(m) Subcommittee is comprised of Mr. Baute and Ms. Duckett, who are “outside directors” under IRS regulations.
Controlled Company Status
We are a “Controlled Company” as defined in Nasdaq Stock Market Rule 5615(c). Our Board of Directors has based this determination on the fact that approximately 55%54.9% of our voting stock is beneficially owned or controlled by Ms. Gallup and Mr. Hall.Gallup.
We do not have a standing nominating committee, and the functions of evaluating and selecting directors have been performed by our Board of Directors as a whole. We believe that it is not necessary to have a nominating committee because our directors have generally served for extended terms. Our Board of Directors will from time to time evaluate biographical information and background material relating to and for the purpose of identifying potential candidates and interview selected candidates. Our Board of Directors does not currently have a charter or written policy with regard to the nomination process. We do not have a written policy due to the generally extended terms served by our directors.
Board Leadership Structure
Ms. Gallup is the Chair of our Board of Directors and Chief Administrative Officer of our Company. While the roles of Chief Executive Officer and Chair are separate, our leadership structure does not include a lead independent director. In light of our controlled company status discussed above, we believe that the creation of a lead independent director position is not necessary at this time. Our Board of Directors has determined that having Ms. Gallup act as Chair and as Chief Administrative Officer of our Company is in the best interests of the Company and our stockholders and is consistent with good corporate governance for the following reasons:
● |
| our Chair and Chief Administrative Officer is more familiar with our business and strategy than an independent, non-employee Chair would be, and is thus better positioned to focus our Board’s agenda on the key issues facing our Company; |
● |
| our structure provides strong and consistent leadership for our Company, without risking overlap or conflict of roles; and |
● |
| oversight of our Company is the responsibility of our Board as a whole, and this responsibility can be properly discharged without an independent Chair. |
Our Board decided to separate the roles of Chair and Chief Executive Officer because it believes that this leadership structure offers the following benefits:
● |
| enhancing our Board’s objective evaluation of our Chief Executive Officer; |
● |
| freeing the Chief Executive Officer to focus on company operations instead of Board administration; and |
● |
| providing the Chief Executive Officer with an experienced sounding board. |
In 2022, the Board appointed Jay Bothwick to serve as Vice Chairman.
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Director Independence
Under applicable NASDAQNasdaq rules, a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has determined that noneconsidered whether any of Messrs. Ferguson, Beffa-Negrini, Kinyon or Bothwick, or Ms. Duckett or Messrs. Baute or Ferguson, who comprise our Audit and Compensation Committees, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Each of Messrs. Baute and Ferguson and Ms. Duckett is an “independent director” as defined under Nasdaq Stock Market Inc.
8
Marketplace Rule 5605(a)(2). Our Board of Directors also determined that Mr. Weatherson did not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and wasdetermined that none of these directors has such a relationship. In making such determinations, the Board of Directors considered the relationships that each such director has with the Company and other facts and circumstances the Board of Directors deemed relevant in determining independence, including any commercial relationship between the director and the Company and the director’s equity ownership of the Company. Each of Messrs. Ferguson, Beffa-Negrini, Kinyon and Bothwick, and Ms. Duckett is an “independent director” as defined under Nasdaq Stock Market Inc. Marketplace Rule 5605(a)(2). We are exempt from the requirement that our board have a majority of independent directors because we are a controlled company. Please see “Controlled Company Status” above for information on our controlled company status.
Executive and Director Compensation Processes
Our Compensation Committee generally reviews employee performance and compensation on an annual basis. Our Compensation Committee also compares the salaries of our executive officers to salaries of individuals who hold comparable positions in our immediate peer group as appropriate. The Compensation Committee makes salary determinationsrecommendations based on a number of factors, including the level and breadth of each executive officer’s responsibilities and experience. Salary decisionsrecommendations are also made with a view to retaining our executive talent. The Compensation Committee may, in its discretion, invite the Chief Executive Officer to be present during the
In 2008, our stockholders approvedAfter the foregoing evaluation the Compensation Committee will then recommend the compensation payable to such executive officers for approval by the full Board of Directors. Our Board of Directors, after an evaluation of the recommendation of the Compensation Committee, will then approve the compensation packages for each of our executive officersofficers.
In 2022, our Compensation Committee recommended, and our Board approved, cash performance awards issued pursuant the original Executive Bonus Plan. In 2011, our shareholders approved2020 Stock Incentive Plan, or the Amended and Restated Executive Bonus Plan, which was amended in 2013.Annual cash bonuses2022 Cash Performance Awards. The amounts payable under our Executive Bonus Plan are based onthe 2022 Cash Performance Awards were subject to the achievement of certain company-wide net income and expense leverage goals. Cash bonuses are set asfinancial performance goals with target payments determined based on a percentage of the executive officer's base salary.
Our Compensation Committee administers our Amended and Restated 2007the 2020 Stock Incentive Plan, as amended, and our Amended and Restated 1997 Employee Stock Purchase Plan, as amended. To the extent permitted by applicable law, our Board of Directors or the Compensation Committee may delegate its authority to grant options and other awards that constitute rights under Delaware law to employees and non-executive officers under our Amended and Restated 2007the 2020 Stock Incentive Plan, as amended, to either a committee of our Board or to our Chief Executive Officer, provided that it will fix the terms of such awards to be granted (including the exercise price of such awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to awards that may be granted. The Board of DirectorsCompensation Committee has delegated authority to a committee of the Board of Directors comprised of Ms. Gallup the authority to issue certain awards under the 2020 Stock Incentive Plan, including (i) stock options, (ii) stock appreciation rights, or SARs, (iii) restricted stock awards and (ii) certain other stock-based awards payable only in cash and without any rights to acquire common(iv) restricted stock which we refer to as stock equivalent units, or SEUs,RSUs, to any employee who is not an executive officer or an “officer,” as defined by Rule 16a-1 of the Securities Exchange Act of 1934, as amended. This committee1934. Ms. Gallup may grant up to an aggregate maximum of 350,000 shares of common stockCommon Stock subject to options, with no more than 20,000 shares of common stockCommon Stock subject to options permitted to be granted per individual per calendar year. ItShe may also grant up to an aggregate maximum of 500,000600,000 SARs and shares of SEUs.
The Compensation Committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. In 2015, our Compensation Committee retained Pearl Meyer & Partners, a national consulting firm, as its independent compensation consultant to conduct a competitive assessment of our executive compensation and general compensation programs. Pearl Meyer & Partners provided comparative market data on compensation practices and programs based on an analysis of ten peer companies deemed comparable in terms of product and service offerings and revenue levels. The Compensation Committee used the report to assist in the review of executive compensation.
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Oversight of Risk
Our Board of Directors oversees our risk management processes directly and through its committees. Our management is responsible for risk management on a day-to-day basis. The role of our Board of Directors and its committees is to oversee the risk management activities of management. They fulfill this duty by discussing with management the policies and practices utilized by management in assessing and managing risks and providing input on those policies and practices. In general, our Board of Directors oversees risk management activities relating to business strategy, capital allocation, organizational structure, and certain operational risks;risks, including those arising from cybersecurity threats; our Audit Committee oversees risk
9
management activities related to financial controls and legal and compliance risks, and our Compensation Committee oversees risk management activities relating to the Company���sCompany’s compensation policies and practices. Each committee reports to the full Board on a regular basis, including reports with respect to the committee’s risk oversight activities as appropriate. In addition, since risk issues often overlap, committees from time to time request that the full Board discuss particular risks.
Director Candidates
All of the current members of our Board of Directors have served as directors since 2001, except Ms. Duckett and Mr. Ferguson, who became directors in June 2009 and May 2016, respectively. Where called for, qualificationsQualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. Minimum qualifications include high-level leadership experience in business activities, breadth of knowledge about issues affecting us,the Company, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Company matters. While we do not have a formal policy with regard to the consideration of diversity in identifying director nominees, our Board of Directors desires a group of candidates who represent a diversity of viewpoints, backgrounds, skills, and expertise that enable them to make a significant contribution to our Board of Directors, our Company, and stockholders. In the event of a need for a new or additional director, our Board of Directors would evaluate potential nominees by reviewing their qualifications, results of personal and reference interviews, and such other information as the Board may deem relevant.
We do not currently employ an executive search firm, or pay a fee to any other third party, to locate qualified candidates for director positions.
Our Board of Directors has generally nominated the current directors for re-election at each annual meeting of stockholders. Our Board of Directors has therefore not established special procedures for stockholders to submit directorevaluating stockholder recommendations. If we were to receive recommendations of candidates from our stockholders, the Board of Directors would consider such recommendations in the same manner as all other candidates. ShareholdersStockholders who wish to suggest qualified candidates should send relevant information to the attention of the Corporate Secretary, PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054 (603-683-2262)(603-683-2164).
Communicating with the Board of Directors
We have not implemented a process for our stockholders to send communications to our Board of Directors, other than as set out elsewhere in this proxy. We have not done so primarily due to our status as a controlled company, as discussed earlier.above.
Code of Business Conduct and Ethics Policy
We have adopted a written Code of Business Conduct and Ethics, Policy, which we refer to as the Policy, thatwhich applies to our directors, officers, and employees, including our principal executive officer, principal financial andofficer, principal accounting officer, controller, and persons performing similar functions.functions. We have posted our Policy on our website at http://ir.connection.com.ir.connection.com. In addition, we intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing standards concerning any amendments to, or waivers from, any provision of the Policy that occur in the future.
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Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act requires our directors, executive officers, and holders of more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our Common Stock. Based solely onTo our review of copies of reports filed by individuals required to make filings, or Reporting Persons, pursuant to Section 16(a) ofknowledge, only the Exchange Act or written representations from certain Reporting Persons, we believe that all such reports required to be filed under Section 16(a) of the Exchange Act for 2016 werefollowing report was not timely filed except: with the SEC:
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On February 16, 2016, David Hall gifted 5,000Our Chief Administrative Officer and Chair, Patricia Gallup, had an obligation to file a Form 4 disclosing a sale of shares of Common Stock to an affiliated charity and should have filed a Form 4 on or before February 18, 2016. Mr. Hall reported this transaction on aApril 15, 2022. A Form 4 disclosing the sale of shares of Common Stock was filed with the SEC on February 19, 2016.April 18, 2022.
On March 5, 2016, Joseph Driscoll received 5,000 shares of Common Stock as a result of the vesting of restricted stock units granted in March 2012,Employee, Officer and should have filed a Form 4 on or before March 8, 2016. Mr. Driscoll reported this transaction on a Form 4 filed with the SEC on March 11, 2016.Director Hedging
On May 25, 2016, Jack Ferguson was appointed to the Board of Directors and as a result should have filed a Form 3 on or about June 6, 2016. Mr. Ferguson filed the Form 3 with the SEC on March 27, 2017.
On December 3, 2016, six members ofIn 2022, our Board of Directors each received 500 shares of Common Stock as a resultapproved an amendment to our insider trading policy to prohibit our employees, officers or directors from engaging in any of the vestingfollowing types of restricted stock units grantedtransactions with respect to our securities: short sales, including short sales “against the box”; purchases or sales of puts, calls or other derivative securities; or purchases of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in December 2013, and should have filed a Form 4 on or about December 6, 2016. Eachthe market value of the six directors reported this transaction on a Form 4 filed with the SEC on December 9, 2016.our securities.
Director Compensation
Each director is entitled to receive an annual retainer of $75,000, payable quarterly, for service on the Board. Each independent director also receives an annual retainer of $15,000,$20,000, payable quarterly, for participation in the Board’s audit and compensation committees.quarterly. In addition, Board members who act in a Chair capacity receive annual fees as follows: Board chair, $35,000; Board vice-chair, $45,000; Audit Committee Chair, $10,000; audit committee chair, $10,000; compensation committeeCompensation Committee Chair, $5,000; and sub-committee chair, $5,000. The Chair and members of the CDC receive fees of $50,000 and $10,000, respectively, for each quarter in which the committee is actively engaged in the process of developing and evaluating strategic alternatives, including the holding of multiple meetings in the quarter.
As more fully described below, the following table describes compensation paid to each director for the year ended December 31, 2016,2022, except for compensation paid to Ms. Gallup, which is reflected below in the Summary Compensation Table for Fiscal Years Ended December 31, 2016, 2015,2022, 2021, and 2014. 2020.
Director Compensation for Fiscal Year Ended December 31, 20162022
| | | | | | | | | | |
| | Fees Earned or | | | | | | |||
Name | | Paid in Cash ($) (1) | | Stock Awards ($) (2) | | Total ($) |
| |||
Jay Bothwick | |
| $ 192,500 | |
| $ 220,250 | |
| $ 412,750 | |
Jack Ferguson | |
| 122,500 | |
| — | |
| 122,500 | |
Barbara Duckett | |
| 117,500 | |
| — | |
| 117,500 | |
Gary Kinyon | |
| 101,484 | |
| — | |
| 101,484 | |
David Beffa-Negrini | |
| 92,500 | |
| — | |
| 92,500 | |
|
|
|
|
|
|
|
|
|
|
|
|
| Fees Earned or |
| All Other |
|
|
|
| ||
Name |
| Paid in Cash ($) (1) |
| Compensation ($)(2) |
| Total ($) |
| |||
David Hall |
| $ | 75,000 |
| $ | 100,000 |
| $ | 175,000 |
|
Joseph Baute |
|
| 100,000 |
|
| — |
|
| 100,000 |
|
Donald Weatherson |
|
| 100,000 |
|
| — |
|
| 100,000 |
|
Barbara Duckett |
|
| 95,000 |
|
| — |
|
| 95,000 |
|
David Beffa-Negrini |
|
| 75,000 |
|
| — |
|
| 75,000 |
|
Jack Ferguson |
|
| 47,500 |
|
| — |
|
| 47,500 |
|
(1) |
|
|
(2) |
| Valuation represents the aggregate grant date fair value of the stock awards granted computed in accordance with ASC 718. Please see Note 10, “Stockholders’ Equity and Share-Based Compensation” of our Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022, for further information regarding share-based compensation. As a new member of the Board of Directors, Mr. |
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Compensation Committee of our Board of Directors oversees the design and implementation of our executive compensation program. In this role, the Compensation Committee, which is comprised of threetwo independent directors, evaluates the performance of, and reviews and approves annually all compensation decisions relating to our Chief Executive Officer. Our Chief Executive Officer annually reviews the performance of our other named executive officers
11
and makes recommendations regarding their compensation. Our Compensation Committee may adopt or revise such recommendations in making compensation decisionsrecommendations for our other named executive officers. Our Board of Directors, after evaluating the recommendations made, will then approve compensation for our executive officers.
At the 2022 Annual Meeting of Stockholders, a majority of stockholder votes were cast to approve on an advisory basis the compensation of our named executive officers as disclosed in our 2022 Proxy Statement. The Compensation Committee has established a subcommittee, ornoted the 162(m) Subcommittee, comprised of two of these independent directors, and delegated toaffirmative vote on the 162(m) Subcommittee authority to issue equity awards and to determine other qualified performance-basedCompany’s executive compensation program as it determined executive officer compensation for our Chief Executive Officer and three other most highly compensated employees (other than the Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act in accordance with the requirements of Section 162(m) of the Code.2023.
Our named executive officers consist of our Chief Executive Officer, Interim Chief Financial Officer, and Chief Administrative Officer. For 2016,2022, our Named Executive Officersnamed executive officers were:
| | ||
Name | Title | ||
Timothy McGrath | President and Chief Executive Officer | ||
|
| ||
| Senior Vice President, | ||
Patricia Gallup | Chair and Chief Administrative Officer |
Compensation Objectives
Our Compensation Committee’s primary objectives with respect to executive compensation are to attract, retain, and motivate our executives and to create long-term stockholder value. Additionally, the Committee seeks to ensure that executive compensation is aligned with our corporate strategies and business objectives, and that it promotes the achievement of key strategic and financial performance measures by linking short- and long-term cash and equity incentives to the achievement of measurable company performance goals.
To achieve these objectives, the Compensation Committee evaluates our executive compensation program with the goal of setting compensation at levels the Compensation Committee believes are competitive with those of other companies in our industry and our region that compete with us for executive talent. In addition, our executive compensation program ties a substantial portion of each executive’s overall compensation to managing their respective areas of responsibility and meeting key strategic, financial, and operational goals. These goals include success in (a) demonstrated leadership ability, (b) management development, (c) compliance with our policies, and (d) anticipation of, and response to, changing market and economic conditions that enhance our ability to operate profitably.profitably. From time to time, we also provide a portion of our executive compensation in the form of stock options, restricted stock units,RSUs, and other stock-based awards that vest over time, which we believe helps to attract new management talent, as well as retain our existing executives. We believe such grants align our executives’ interests with those of our stockholders by allowing them to participate in the longer-term success of our Company as reflected in stock price appreciation.
We compete with many other companies for executive personnel. Accordingly, the Compensation Committee generally targets overall base salary and bonus compensation for executives at or near the midpoint of compensation paid to similarly situated executives of companies analyzed in our survey data, described more fully below. We may varyadjust this general target in certain situations when necessary, due to the experience level of the individual or other market factors.
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Components of our Executive Compensation Program
The primary elements of our executive compensation program are:
● |
| base salary; |
● |
|
|
● |
| equity awards; |
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● |
| benefits and other compensation; and |
● |
| severance benefits. |
Allocations between long-term and short-term compensation, cash and non-cash compensation, or the different forms of non-cash compensation vary, depending on our current initiatives and stated goals. Our goals for 20162022 were focused on continuing the growth trend in consolidated net sales and net income that we established in prior years and, additionally, achieving a better leveraging of our expense structure by attaining our targeted selling, general and administrative, or SG&A, expenses as a percentage of net sales.billings. Accordingly, the 2016 performance targets for the Executive Bonus Plan2022 Cash Performance Awards were designed to help achieve these two objectives. A total of 60% of the bonusamount payable pursuant to the 2022 Cash Performance Awards was allocated to the achievement of a net income target of $49.0$79.0 million, and 40% was allocated to achievement of an SG&A expense target of 10.52%10.26% of net sales. Each componentbillings. A multiplier was then applied to a multipliereach component based on the degree to which the respective target was met or exceeded, ranging from 0.5 to 1.7 for each target. No bonuses were to be paid for performance below $44.1 million ofpayment would have been made under the 2022 Cash Performance Awards if net income orwas less than $71.1 million and SG&A expenses were in excess of 11.57%11.29% of net sales. billings.
In 2015 our Compensation Committee retained Peer Group
Pearl Meyer & Partners, a national consulting firm,in its capacity as its independent compensation consultant to conductthe Compensation Committee, conducted a competitive assessment of our executive compensation and general compensation programs. programs in 2018. As part of its assessments, Pearl Meyer & Partners provided comparative market data on compensation practices and programs based on an in-depth analysis of ten peer companies deemed comparable in terms of product and service offerings andand/or revenue levels. Also considered in the analysis was broader market survey data reflecting industry- and size-appropriate comparators. Individual compensation ranges for each executive position were provided that compared the compensation ranges to actual salary levels.
The peer group updated for our Compensation Committee in 2015 was used to benchmark executive compensation levels against companies that have executive positions with responsibilities similar in breadth and scope to ours and that compete with us for executive talent. The following companies, whose executive positions’ responsibilities were most similar to ours, were included in the peer group:
● |
| Anixter International Inc. |
● |
|
● | CACI International Inc. |
● | CDW Corporation |
● |
|
|
● |
| ePlus, Inc. |
● |
| Insight Enterprises, Inc. |
● |
|
|
● |
|
|
● |
|
|
● |
|
|
● |
|
|
The Compensation Committee used the updated survey data provided by Pearl Meyer & Partners in 2018 to assist it in the review and comparison of each element of executive compensation, including base salary, and bonus compensation, and other long-term incentive vehicles for our executives. With this information, the Compensation Committee analyzed compensation for each executive. The Compensation Committee targeted different compensation levels for each element of compensation as described below.
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Base Salary
Base salaries are reviewed at least annually by the Compensation Committee, and in the case of named executive officers other than our Chief Executive Officer, are based on recommendations of the Chief Executive Officer. These salaries are adjusted from time to time to realign salaries with current market levels after taking into account individual responsibilities, performance, experience, and the peer group data.
The Compensation Committee reviews the base salaries of our executives initially by reference to the median base salary level of the updated2018 survey data. The Compensation Committee then makes adjustments to these reference levels for each executive’s base salary based on comparisons to the survey data and evaluation of the executive’s level of
13
responsibility and experience, as well as company-wide performance. The Compensation Committee also considers the executive’s success in achieving business results and demonstrating leadership in determining actual base salary levels.
In 2016,2022, the base salaries of our Chief Executive Officer and Chief Financial Officer were increased by the Compensation Committee as a result of its review and analysis of competitive data, as well as a review of the extent of their individual responsibilities. In 2016,2022, we increased the base salarysalaries of Mr. McGrath and Mr. Baker by 5.0%10% to $945,000$1,265,000 and increased the base salary of Mr. Driscoll by 3.4% to $369,000. Mr. Schulze was named Interim Chief Financial Officer in October 2016 and did not receive a salary increase in connection with his appointment.$412,500, respectively. There was no change in the base salary of our Chief Administrative Officer.
Officer in 2022.
The compensation levels of our executives are established to recognize the relative level of responsibility of each executive. Our Chief Executive Officer’s compensation is higher than the levels of our other executives in order to reflect the generally broader and more significant level of responsibility of our Chief Executive Officer. We have found that the 2018 compensation survey results generally reflectreflected this pattern for most companies.
The Compensation Committee believes that periodically benchmarking and aligning base salaries based on the results of these benchmarks is especially critical to a competitive compensation program. Other elements of compensation are affected by changes in base salary. Annual incentives are targeted and paid out as a percentage of base salary, and the target levels of long-term incentives are also determined as a percentage of base salary.
Executive Bonus PlanCash Performance Awards
In 2008,2022, our shareholdersBoard, upon the recommendation of the Compensation Committee, approved the original Executive Bonus Plan for our executive officers. In 2011, our shareholders approved the Amended and Restated Executive Bonus Plan, and in 2013, our shareholders approved an amendment2022 Cash Performance Awards issued pursuant to the Amended and Restated Executive Bonus2020 Stock Incentive Plan.Annual cash bonusesperformance awards are intended to compensate our executives for the achievement of certain financial performance goals. In 2022, our Board, upon the recommendation of the Compensation Committee, selected company-wide net income and expense leverage goals. Cash bonuses are setgoals as the financial performance goals for 2022 with target payments determined based on a percentage of the executive officer's base salary, with higher-ranked executives typically being compensated at a higher percentage of base salary. However,The Compensation Committee and our Board believe that our success is dependent on the ability of our management group to integrate and work together to meet common company‑widecompany-wide goals. Accordingly, executives arethe financial performance goals for 2022 were based on company-wide financial results and not assigned specific individual goals but instead are collectively responsible for meeting company‑wide goals.Our Compensation Committee develops corporate goals that, if achieved, will result in improved operating performance. In 2016, our
The target bonus percentagespayout amounts under the 2022 Cash Performance Awards were equal to 100% of base salary for our Chief Executive Officer and Chief Financial Officer and 75% of base salary for our Chief Administrative Officer, and 25% for our Interim Chief Financial Officer. In addition, our compensation programThe 2022 Cash Performance Awards also providesprovided incentives for our executives to reach beyond ourtheir target corporate goals. If our executives perform above expectations, they may be entitledperformance exceeded the financial performance goals, the 2022 Cash Performance Awards provided that the executive officers could receive cash payments equal to receive additional bonus amounts that can result in a total annual bonus of up to 170% of their base salary for our Chief Executive Officer, up to 127.5% of base salary for the Chief Administrative Officer, and up to 42.5% for our Interim Chief Financial Officer. salary. Proportionally lower bonuses are providedpayments could be made under the 2022 Cash Performance Awards for achievement levels between 90% and 100% of respective company-wide targets,the financial performance goals, and no bonuses are earned by any executiveamounts would have been paid where less than 90% of the respective company-wide target factor isfinancial performance goal was achieved. OurIn February 2022, our Board, upon the recommendation of our Compensation Committee, approved the following financial performance goals for the 2022 Cash Performance Awards: (i) a consolidated net income goal of $49.0$79.0 million for 2016,2022, reflecting our growth target for the year and (ii) an expense leverage goal to limit 20162022 consolidated SG&A expenses as a percentage of net salesbillings at 10.52%10.26%. The Executive Bonus Plan provides that the two targets be increased or decreased to reflect material changes in revenue growth rates for the IT markets in which the Company competes. This potential adjustment is based on the belief that management should neither receive a windfall from higher-than-expected IT industry growth nor be penalized for lower-than-expected growth. The Company employs an assessment of IT industry revenue growth prepared quarterly by International Data Corporation, or IDC, a global provider of market intelligence for technology markets.
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In 2016, the IDC assessment found that the IT industry grew at higher-than-expected growth. In addition, the two targets were increased to account for our 2016 acquisitions. Accordingly the net income target was increased by $1.5 million to $50.5 million and the SG&A target was increased from 10.52% to 10.69%.
Our executive officers work together as a team, and all executives are assigned the same company‑wide net income and expense leverage goals. In 2016,2022, our net income was $50.2$89.2 million and SG&A expense as a percentage of net salesbillings was 10.67%10.46%. Performance byThis resulted in 112.9% achievement of the Company against its adjusted net income goal, resulting in a payout of 124% of target fell short by 1%,level for that performance factor, and performance
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against98.0% achievement of the adjusted SG&A target was met,expense as a percentage of billings goal, resulting in a payout of 98% of target level for that performance factor. Accordingly, we paid an overall payout at 99.4%aggregate of the combined targets. Accordingly, total bonus payouts for the$2.2 million in bonuses to our named executive officers aggregated $1.2 million.for 2022 pursuant to the 2022 Cash Performance Awards.
The table below describesdetails the bonus payments and the percentagemade to each of base salary for 2016 for theour named executive officers:officers pursuant to the 2022 Cash Performance Awards:
|
|
|
|
|
|
| ||||||
| | | | | | | ||||||
Name of Executive |
| 2016 Bonus Payment |
| Percentage of Base Salary |
|
| 2022 Payment |
| Percentage of Base Salary |
| ||
Timothy McGrath |
| $ | 939,330 |
| 99.4 | % | | $ | 1,437,040 |
| 114 | % |
Patricia Gallup |
| $ | 243,779 |
| 74.6 | % | | $ | 278,604 |
| 85 | % |
William Schulze |
| $ | 54,790 |
| 24.8 | % | ||||||
Joseph Driscoll |
| $ | — |
| — | % | ||||||
Thomas Baker | | $ | 468,600 | | 114 | % |
Equity Awards
Our equity award program is a vehicle for offering long-term incentives to our executives. We believe that equity grants help attract management talent and provide a strong link to our long-term performance and help to align the interests of our executives and our stockholders. In addition, the vesting feature of our equity grants furthers our goal of executive retention by providing an incentive to our executives to remain in our employ during the vesting period. In determining the size of equity grants to our executives, the Compensation Committee and the Chief Executive Officer consider comparative share ownership of executives in our compensation peer group, our company‑widecompany-wide performance, the applicable executive’s performance, the amount of equity previously awarded to the executive, the vesting of such awards, and the recommendation of management.In 2012, our Board of Directors delegated to Patricia Gallup as a committee of the Board the authority to grant stock options and SEUs to non-executive officers of up to 20,000 shares per individual per calendar year, provided that no more than 350,000 shares of options and 350,000 shares of SEUs may be granted in the aggregate. In addition, the delegation limits the vesting of the SEUs to a period of no less than four years and requires the exercise price for options to be equal to the closing stock price of our common stock on the Nasdaq Stock Market on the date of the grant. In September 2015, our Board of Directors increased the number of SEUs that may be granted in the aggregate to 500,000 shares.
Our equity awards have typically taken the form of stock options and restricted stock units, or RSUs. The Compensation Committee and our Chief Executive Officer review all components of the executive’s compensation when determining equity awards to ensure that an executive’s total compensation conforms to our overall philosophy and objectives.
Stock options, when granted, have a ten-year life, and vesting and exercise rights cease shortly after termination of employment except in the case of death or disability. We do not have any equity ownership guidelines for our executives.
Benefits and Other Compensation
We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance, and a 401(k) plan. Executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. We provide a matching contribution equal to 25%50% of the employee’s deferral contributions to the 401(k) plan that does not exceed 6% of their qualified compensation.
No executive officer received aggregate perquisites aggregatingin excess of $10,000 or more in 2016.2022.
Severance Benefits
Pursuant to the employment agreementincentive and retention agreements we have entered into with Mr. McGrath heand Mr. Baker, each is entitled to severance payments for twenty-four months if the Company terminates the executive’s employment other than for cause (as defined in the incentive and retention agreements), subject to a dollar-for-dollar reduction for cash compensation he may receive pursuant to any employment or consulting arrangement in such twenty-four months period. In addition, each is entitled to receive an amount in respect of his annual target bonus under the 2020 Stock Incentive Plan (assuming achievement of 100% of target bonus) prorated for the number of days he is employed for the year in which termination of employment occurs, such amount payable in a lump sum on the date the first installment of severance is paid. In the event of a change in control (as defined in the incentive and retention agreements), each is entitled to additional severance payments and certain otherspecified benefits, including the payment of COBRA continuation coverage costs otherwise payable by Mr. McGrath and Mr. Baker for a period of twenty-four months, in the
17
event of termination of his employment under specified circumstances. We were also party to an offer letter signed by Mr. Driscoll pursuant to which he was entitled to specified benefits in the event of termination of histheir employment under specified circumstances. We have provided more detailed information about these benefits, along with estimates
15
of their value under various circumstances, under the caption “Potential Payments Upon Termination or Change in Control” below.
We believe providing these benefits helphelps us compete for executive talent. After reviewing the practices of companies represented in our 2015 peer group, we believe that our severance and change of control benefits are generally in line with severance packages offered to executives at such companies.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, generally disallows a tax deduction to public companies for compensation in excess of $1.0$1 million paid in any one year to our Chief Executive Officereach of certain of the company’s current and the three other officers (other than the Chief Financial Officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act by reason of being among our three other most highly compensatedformer executive officers. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We periodically review the potential consequences of Section 162(m), and we intend to structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, the Compensation Committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.
We account for equity compensation awarded to our employees per the methods prescribed by ASC 718, which require us to recognize compensation expense in our financial statements for all share-based payments based upon an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is accrued. Given our adoption of ASC 718, we believe that the accounting impact of the different forms of equity compensation awards generally reflects their economic impact. Accordingly, the underlying accounting treatment is not a material consideration in determining the specific nature or size of equity awards granted. The tax impact of the awards on the recipient and the effectiveness of the award in retaining executives are more relevant considerations.
Executive Compensation
The following table sets forth compensation information for our Chief Executive Officer, Chief Financial Officer, and our other most highly compensated executive officer who were servingserved as executive officers as of December 31, 2016, and one otheran executive officer of the Companyduring 2022, who ceased serving as Chief Financial Officer during 2016,were collectively theour named executive officers for the fiscal years indicated.2022.
Summary Compensation Table forfor Fiscal Years Ended December 31, 2016, 20152022, 2021 and 20142020
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Non-Equity | | | |
| | | | |
| | | | | | | | | | Incentive | | | | | | | | |
| | | | | | | Stock | | Plan | | All Other | | | | | |||
| | | | Salary | | Awards | | Compensation | | Compensation | | Total | | |||||
Name and Principal Position |
| Year |
| ($) |
| ($) (1) |
| | ($) (2) |
| ($) (3) | | ($) |
| ||||
Timothy McGrath |
| 2022 | | $ | 1,176,539 | (4) | $ | 2,165,200 | | $ | 1,437,040 | | $ | 9,150 | (5) | $ | 4,787,929 | |
President and Chief Executive Officer |
| 2021 | | | 1,150,000 | | | 887,200 | | | 1,163,800 | | | 8,550 | (6) | $ | 3,209,550 | |
|
| 2020 | | | 1,150,000 | | | — | | | 230,000 | | | 8,550 | (7) | | 1,388,550 | |
| | | | | | | | | | | | | | | | | | |
Thomas Baker |
| 2022 | | | 383,654 | (8) | | 1,082,600 | | | 468,600 | | | 17,026 | (5) | | 1,951,880 | |
Senior Vice President, Chief Financial Officer |
| 2021 | | | 375,000 | | | 1,926,600 | | | 379,500 | | | 8,700 | (6) | | 2,689,800 | |
and Treasurer |
| 2020 | | | 375,000 | | | — | | | 75,000 | | | 14,382 | (7) | | 464,382 | |
| | | | | | | | | | | | | | | | | | |
Patricia Gallup |
| 2022 | | | 327,000 | | | — | | | 278,604 | | | 119,150 | (5) | | 724,754 | |
Chief Administrative Officer and |
| 2021 | | | 327,000 | | | 221,800 | | | 248,193 | | | 118,550 | (6) | | 915,543 | |
Chairman of the Board |
| 2020 | | | 327,000 | | | — | | | 49,050 | | | 118,550 | (7) |
| 494,600 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Equity |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Stock |
| Plan |
| All Other |
|
|
|
| |||
|
|
|
| Salary |
| Bonus |
| Awards |
| Compensation |
| Compensation |
| Total |
| ||||||
Name and Principal Position |
| Year |
| ($) |
| ($) |
| ($) (1) |
|
| ($) (2) |
| ($) (3) |
| ($) |
| |||||
Timothy McGrath |
| 2016 |
| $ | 943,442 | (4) | $ | — |
| $ | 1,980,000 |
| $ | 939,330 |
| $ | 3,975 | (5) | $ | 3,866,747 |
|
President and Chief Executive Officer |
| 2015 |
|
| 900,000 |
|
| — |
|
| — |
|
| 954,000 |
|
| 3,975 | (6) |
| 1,857,975 |
|
|
| 2014 |
|
| 833,654 | (7) |
| — |
|
| 1,350,000 |
|
| 887,750 |
|
| 3,900 | (8) |
| 3,075,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Driscoll |
| 2016 |
|
| 316,096 | (9) |
| — |
|
| 615,750 |
|
| — |
|
| 3,975 | (5) |
| 935,821 |
|
Senior Vice President, Treasurer and |
| 2015 |
|
| 352,423 | (10) |
| — |
|
| — |
|
| 378,420 |
|
| 3,975 | (6) |
| 734,818 |
|
Chief Financial Officer (12) |
| 2014 |
|
| 335,961 | (11) |
| — |
|
| 585,000 |
|
| 360,400 |
|
| 3,900 | (8) |
| 1,285,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Schulze |
| 2016 |
|
| 219,057 |
|
| — |
|
| — |
|
| 54,790 |
|
| 1,476 | (5) |
| 275,323 |
|
Vice President, Interim Treasurer and |
| 2015 |
|
| 213,488 |
|
| — |
|
| 54,400 |
|
| 57,024 |
|
| 1,557 | (6) |
| 326,469 |
|
Chief Financial Officer (13) |
| 2014 |
|
| 206,721 |
|
| — |
|
| 103,500 |
|
| 55,354 |
|
| 1,133 | (8) |
| 366,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Gallup |
| 2016 |
|
| 327,000 |
|
| — |
|
| 49,500 |
|
| 243,779 |
|
| 113,975 | (5) |
| 734,254 |
|
Chief Administrative Officer and |
| 2015 |
|
| 327,000 |
|
| — |
|
| — |
|
| 259,965 |
|
| 113,975 | (6) |
| 700,940 |
|
Chairman of the Board |
| 2014 |
|
| 327,000 |
|
| — |
|
| 45,000 |
|
| 259,965 |
|
| 113,900 | (8) |
| 745,865 |
|
16
(1) |
| Valuation represents the aggregate grant date fair value of the stock awards granted each year computed in accordance with ASC 718. Please see Note |
The RSUs granted to Mr. McGrath in November 2022 vest over four years in equal annual installments, the first installment of which will vest on November 21, 2023.
The RSUs granted to Mr. Baker in November 2022 vest over four years in equal annual installments, the first installment of which will vest on November 21, 2023.
Each RSU represents the right to receive one share of Common Stock upon vesting.
18
(2) |
| Non-equity incentive compensation for our executive officers was awarded pursuant to the |
(3) |
| We have omitted perquisites and other personal benefits in those instances where the aggregate amount of such perquisites and other personal benefits for a named executive officer totaled less than $10,000. |
(4) |
| Effective |
(5) |
| Consists of: (a) our contributions for Ms. Gallup and Messrs. McGrath, |
(6) |
| Consists of: (a) our contributions for Ms. Gallup and Messrs. McGrath, |
(7) |
|
|
| Consists of: (a) our contributions for Ms. Gallup and Messrs. McGrath, |
(8) |
|
|
|
|
|
|
|
|
|
|
17
Grants of Plan BasedPlan-Based Awards
The following table sets forth certain information regarding grants of plan-based awards made to our named executive officers during 2016. 2022.
Grants of Plan-Based Awards for FiscalFiscal Year Ended December 31, 20162022
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts Under | | Stock Awards: | | Grant Date | | ||||||||
| | | | Non‑Equity Incentive Plan Awards (1) | | Number of Shares | | Fair Value of |
| ||||||||
|
| Grant |
| Threshold |
| Target |
| Maximum |
| of Stock or |
| Stock Awards |
| ||||
Name | | Date | | ($) | | ($) | | ($) | | Units(#)(2) | | ($)(3) | | ||||
Timothy McGrath |
| 2/4/2022 | | $ | 575,000 | | $ | 1,150,000 | | $ | 1,955,000 | | | | | | |
| | 11/21/2022 | | | | | | | | | | | 40,000 | | $ | 2,165,200 | |
| | | | | | | | | | | | | | | | | |
Thomas Baker |
| 2/4/2022 | |
| 187,500 | |
| 375,000 | |
| 637,500 | | | |
| | |
| | 11/21/2022 | | | | | | | | | | | 20,000 | | | 1,082,600 | |
| | | | | | | | | | | | | | | | | |
Patricia Gallup | | 2/4/2022 | |
| 163,500 | |
| 327,000 | |
| 555,900 | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All Other |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Stocks |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Awards: |
|
|
|
|
|
|
| |
|
|
|
| Estimated Future Payouts Under |
| Number of |
| Exercise or Base |
| Grant Date Fair |
| ||||||||||
|
|
|
| Non‑Equity Incentive Plan Awards (1) |
| Shares of |
| Price of Stock and |
| Value of Stock and |
| ||||||||||
|
| Grant |
| Threshold |
| Target |
| Maximum |
| Stock or |
| Option Awards |
| Option Awards |
| ||||||
Name |
| Date |
| ($) |
| ($) |
| ($) |
| Units(#) |
| ($/Sh)(2) |
| ($)(3) |
| ||||||
Timothy McGrath |
| 12/17/15 |
| $ | 472,500 |
| $ | 945,000 |
| $ | 1,606,500 |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/16 |
|
|
|
|
|
|
|
|
|
| 80,000 | (4) |
| $ | 24.75 |
| $ | 1,980,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Gallup |
| 12/17/15 |
|
| 122,625 |
|
| 245,250 |
|
| 416,925 |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/16 |
|
|
|
|
|
|
|
|
|
| 2,000 | (5) |
| $ | 24.75 |
|
| 49,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Schulze |
| 12/17/15 |
|
| 27,561 |
|
| 55,121 |
|
| 93,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Driscoll |
| 12/17/15 |
|
| 184,500 |
|
| 369,000 |
|
| 627,300 |
|
|
|
|
|
|
|
|
|
|
|
| 3/2/16 |
|
|
|
|
|
|
|
|
|
| 25,000 | (6) |
| $ | 24.63 |
|
| 615,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
| Threshold, target, and maximum amounts are based on the achievement of certain financial |
(2) |
|
|
(3) |
| Valuation represents the aggregate grant date fair value of the stock awards |
|
|
|
|
|
|
1819
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding equity awards held by our named executive officers as of December 31, 2016.2022.
Outstanding Equity Awards at Fiscal Year Ended December 31, 20162022
| | | | | | |
| | Stock Awards |
| |||
|
| |
| Market |
| |
| | Number of | | Value of |
| |
| | Shares or | | Shares or |
| |
| | Units of | | Units of |
| |
| | Stock That | | Stock That |
| |
| | Have Not | | Have Not |
| |
Name | | Vested (#) | | Vested ($)(1) |
| |
Timothy McGrath |
| 10,000 | (2) |
| 469,000 | |
|
| 24,000 | (3) |
| 1,125,600 | |
|
| 41,000 | (4) |
| 1,922,900 | |
| | 50,000 | (5) | | 2,345,000 | |
| | 20,000 | (6) | | 938,000 | |
| | 15,000 | (7) | | 703,500 | |
| | 40,000 | (8) | | 1,876,000 | |
| | | | | | |
Patricia Gallup |
| 2,500 | (9) | | 117,250 | |
| | 3,750 | (10) | | 175,875 | |
| | | | | | |
Thomas Baker |
| 5,000 | (11) |
| 234,500 | |
| | 3,750 | (12) |
| 175,875 | |
| | 15,000 | (13) |
| 703,500 | |
| | 15,000 | (14) |
| 703,500 | |
| | 20,000 | (15) |
| 938,000 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option Awards |
| Stock Awards |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| Market |
| |
|
| Number of |
|
|
|
|
|
| Number of |
| Value of |
| |
|
| Securities |
|
|
|
|
|
| Shares or |
| Shares or |
| |
|
| Underlying |
|
|
|
|
|
| Units of |
| Units of |
| |
|
| Unexercised |
| Option |
| Option |
| Stock That |
| Stock That |
| ||
|
| Options (#) |
| Exercise |
| Expiration |
| Have Not |
| Have Not |
| ||
Name |
| Exercisable |
| Price ($) (1) |
| Date |
| Vested (#) |
| Vested ($)(2) |
| ||
Timothy McGrath |
| 102,355 |
| $ | 13.13 |
| 7/23/2017 |
| 25,000 | (3) | $ | 702,250 |
|
|
| 50,000 |
|
| 6.77 |
| 4/15/2020 |
| 60,000 | (4) |
| 1,685,400 |
|
|
| — |
|
| — |
| — |
| 105,000 | (5) |
| 2,949,450 |
|
|
| — |
|
| — |
| — |
| 60,000 | (6) |
| 1,685,400 |
|
|
| — |
|
| — |
| — |
| 80,000 | (7) |
| 2,247,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Gallup |
| — |
|
| — |
| — |
| 500 | (8) |
| 14,045 |
|
|
| — |
|
| — |
| — |
| 1,500 | (9) |
| 42,135 |
|
|
| — |
|
| — |
| — |
| 2,000 | (10) |
| 56,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Schulze |
| — |
|
| — |
| — |
| 3,750 | (11) |
| 105,338 |
|
|
| — |
|
| — |
| — |
| 2,500 | (12) |
| 70,225 |
|
|
| — |
|
| — |
| — |
| 1,875 | (13) |
| 52,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Driscoll |
| — |
|
| — |
| — |
| — |
|
| — |
|
(1) |
|
|
| The fair value of |
(2) |
|
|
|
|
| The RSUs granted to Mr. McGrath in November 2013 vest |
(3) |
| The RSUs granted to Mr. McGrath in October 2014 vest |
(4) |
| The RSUs granted to Mr. McGrath in March 2016 vest |
(5) | The RSUs granted to Mr. McGrath in February 2018 vest over six years in equal annual installments of 10,000 units, the first installment of which vested on April 1, 2022. |
(6) | The RSUs granted to Mr. McGrath in October 2019 vest over seven years in equal annual installments of 5,000 units, the first installment of which vested on October 29, 2020. |
(7) | The RSUs granted to Mr. McGrath in December 2021 vest over four years in equal annual installments of 5,000 units, the first installment of which vested on December 17, 2022. |
1920
(8) |
| The RSUs |
(9) | The RSUs granted to Ms. Gallup in February 2018 for her service on the Board of Directors |
(10) |
| The RSUs |
|
|
(11) |
| The |
(12) |
| The |
(13) |
| The |
(14) | The RSUs granted to Mr. Baker in December 2021 vest over four years in equal annual installments of 5,000, the first installment of which vested on December 17, 2022. |
(15) | The RSUs granted to Mr. Baker in November |
Options Exercised and Stock Vested
No options vested during 2022. The following table sets forth certain information regarding stock options exercised and restricted stock units (RSUs) vestedRSUs held by our named executive officers that vested during 2016.2022.
| | | | | | |
| | Stock Awards | | |||
| | Number of Shares | | | | |
| | Acquired on | | Value Realized on | | |
| | Vesting | | Vesting (1) | | |
Name |
| (#) |
| ($) |
| |
Timothy McGrath |
| 50,000 | | $ | 2,601,850 | |
Thomas Baker | | 18,750 | |
| 930,663 | |
Patricia Gallup (2) | | 1,750 | | | 84,570 | |
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock Options |
| Stock Awards |
| ||||||
|
| Number of Shares |
|
|
|
| Number of Shares |
|
|
|
|
|
| Acquired on |
| Value Realized on |
| Acquired on |
| Value Realized on |
| ||
|
| Exercise |
| Vesting(1) |
| Vesting |
| Vesting (2) |
| ||
Name |
| (#) |
| ($) |
| (#) |
| ($) |
| ||
Timothy McGrath |
| 10,306 |
| $ | 155,528 |
| 55,000 |
| $ | 1,434,400 |
|
Patricia Gallup (3) |
|
|
|
|
|
| 3,000 |
|
| 79,305 |
|
William Schulze (4) |
|
|
|
|
|
| 5,625 |
|
| 130,313 |
|
Joseph Driscoll |
|
|
|
|
|
| 17,000 |
|
| 438,080 |
|
(1) |
|
|
| The value realized on vesting equals the number of shares acquired multiplied by the closing price of our Common Stock |
(2) |
| The RSUs were awarded to Ms. Gallup for her service on the Board of Directors. |
CEO Pay Ratio Disclosure
Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. We determined our 2022 median employee for our 2023 proxy statement based on base pay/cash compensation/W-2 wages actually paid during 2022 (annualized in the case of full- and part-time employees who joined the Company during 2022) to each of our 2,684 employees (excluding the Chief Executive Officer) as of December 31, 2022. The annual total compensation of our 2022 median employee (other than the Chief Executive Officer) for 2022 was $73,250. As disclosed in the Summary Compensation Table appearing on page 18, our Chief Executive Officer’s annual total compensation for 2022 was $4,787,929. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was approximately 65
21
to 1 for 2022. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
Pay Versus Performance
Pay Versus Performance Table
The following tables and related disclosures provide information about (i) the total compensation of our principal executive officer, or PEO, and our other named executive officers, or NEOs, as presented in the Summary Compensation Table on page 18, or the SCT Amounts, (ii) the compensation actually paid to our PEO and NEOs, as calculated pursuant to the SEC’s pay-versus-performance rules, or the CAP Amounts, (iii) certain financial performance measures, and (iv) the relationship of the CAP Amounts to those financial performance measures.
This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act and does not necessarily reflect value actually realized by the executives or how our Compensation Committee evaluates compensation decisions in light of company or individual performance. For discussion of how our Compensation Committee seeks to align pay with performance when making compensation decisions, please review Compensation Discussion and Analysis beginning on page 14.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Average | | | | | | | | | | | | | | | |
| | | | | | | | Summary | | Average | | | | | | | | | | | | ||
| | | | | | | | Compensation | | Compensation | | Value of Initial Fixed $100 | | | | | | ||||||
| | Summary | | | | | Table Total for | | Actually Paid to | | Investment Based on: | | | | | | |||||||
| | Compensation | | Compensation | | Non-PEO Named | | Non-PEO Named | | Total | | Peer Group Total | | | | | SG&A | ||||||
| | Table Total | | Actually Paid | | Executive | | Executive | | Shareholder | | Shareholder | | Net | | Percentage of | |||||||
Year | | for PEO (1) | | to PEO (2) | | Officers (1) | | Officers (2) | | Return (TSR) | | Return | | Income | | Billings (4) | |||||||
2022 | | $ | 4,787,929 | | $ | 5,547,279 | | $ | 1,338,317 | | $ | 1,416,376 | | $ | 97.66 | | $ | 119.45 | | $ | 89,219,000 | | 10.46% |
2021 | | $ | 3,209,550 | | $ | 2,339,350 | | $ | 1,802,672 | | $ | 1,649,422 | | $ | 89.27 | | $ | 177.06 | | $ | 69,906,000 | | 10.34% |
2020 | | $ | 1,388,550 | | $ | 480,650 | | $ | 479,491 | | $ | 408,849 | | $ | 95.22 | | $ | 144.92 | | $ | 55,765,000 | | 10.97% |
(1) Our PEO was Timothy McGrath for all years presented in the table. Our NEOs were Thomas Baker and Patricia Gallup for all years presented in the table.
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(2) The following table describes the adjustments, each of which is prescribed by SEC rule, to calculate the CAP Amounts from the SCT Amounts. The SCT Amounts and the CAP Amounts do not reflect the actual amount of compensation earned by or paid to our executives during the applicable years, but rather are amounts determined in accordance with Item 402 of Regulation S-K under the Exchange Act.
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| | PEO | | | | Average of NEO's | |||||||||||||
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| 2022 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| 2020 | ||||||
Total Compensation from SCT | | $ | 4,787,929 | | $ | 3,209,550 | | $ | 1,388,550 | | | $ | 1,338,317 | | $ | 1,802,672 | | $ | 479,491 |
Decrease for aggregate value for stock awards and option awards included in SCT for the covered fiscal year | | $ | (2,165,200) | | $ | (887,200) | | $ | - | | | $ | (541,300) | | $ | (1,074,200) | | $ | - |
Increase for fair value at year end of awards granted during the covered fiscal year that were outstanding and unvested at the covered fiscal year end | | $ | 1,876,000 | | $ | 862,600 | | $ | - | | | $ | 469,000 | | $ | 970,425 | | $ | - |
Increase (decrease) in year-over-year change in fair value at covered fiscal year end of awards granted in any prior fiscal year that were outstanding and unvested at the covered fiscal year end | | $ | 603,200 | | $ | (790,400) | | $ | (604,350) | | | $ | 84,825 | | $ | (42,640) | | $ | (35,254) |
Increase for vesting date fair value of awards granted and vested during the covered fiscal year | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - |
Increase (decrease) in change as of the vesting date (from the end of the prior fiscal year) in fair value of awards granted in any prior fiscal year for which vesting conditions were satisfied during the covered fiscal year | | $ | 445,350 | | $ | (55,200) | | $ | (303,550) | | | $ | 65,534 | | $ | (6,835) | | $ | (35,388) |
Decrease for fair value at end of prior fiscal year of awards granted in any prior fiscal year that failed to meet the applicable vesting conditions during the covered fiscal year | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - |
Increase for dividends or other earnings paid on stock or option awards in the covered fiscal year prior to vesting if not otherwise included in the total compensation for the covered fiscal year | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - |
Compensation Actually Paid | | $ | 5,547,279 | | $ | 2,339,350 | | $ | 480,650 | | | $ | 1,416,376 | | $ | 1,649,422 | | $ | 408,849 |
(3) Our peer group for the calculation of Total Shareholder Return, or TSR, is the NASDAQ Composite-Total Return.
(4) SG&A percentage of billings, a non-GAAP financial measure, is calculated as total SG&A expenses (less any exclusions approved by the Subcommittee) divided by total billings of products and services delivered to customers. We define total billings delivered to customers as net sales plus the amount we are required to net for sales of software under ASC 606. In 2021, the Subcommittee approved $5 million of uncontrolled medical expenses to be excluded from total SG&A expenses.
The following lists the financial performance measures that, in our assessment, represent the most important performance measures we use to link the CAP Amounts for our named executive officers for 2022 (our most recently completed fiscal year), to company performance:
Company Performance Measures
|
Net income |
SG&A percentage of billings |
|
|
Of these measures, we have identified SG&A percentage of billings as the most important of our financial performance measures (that is not already required to be disclosed in the pay versus performance table above) used to link CAP Amounts for our executives for 2022 to company performance.
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Relationship Between Pay and Performance
The following charts show graphically the relationships over the past years of the CAP Amounts for our PEO and NEOs as compared to our cumulative TSR and Peer Group TSR, net income, and SG&A percentage of billings:
Compensation Actually Paid vs TSR
Compensation Actually Paid vs Net Income
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Compensation Actually Paid vs SG&A Percentage of Billings
Employment Agreements with our Named Executive Officers
In January 1998, the Company entered into an employment agreement with Patricia Gallup. The agreement provided for an initial annual base salary of $300,000, subject to an annual adjustment at the discretion of the Board of Directors. Ms. Gallup’s base salary was adjusted to $327,000 as of April 2013. Ms. Gallup is eligible to participate in any bonus and benefit programs that we establish and make available to our employees to the extent that Ms. Gallup’s participation is approved by the Compensation Committee or our Board of Directors.
In May 2008, the Company entered into an employment agreement with Timothy McGrath. The agreement provided for an initial annual base salary of $500,000, subject to an annual adjustment at the discretion of the Board of Directors. Mr. McGrath’s base salary was adjusted to $1,265,000 as of October 2022. The agreement also provided that Mr. McGrath would be eligible for an annual bonus with an incentive target of 100% of his base salary, based on the achievement of performance goals as determined at the discretion of the Board of Directors. Mr. McGrath is also eligible to receive annual equity incentive grants and to participate in our other employee benefit plans, subject to the terms of those plans.
In March 2019, the Company entered into an employment agreement with Thomas Baker. The agreement provided for an initial annual base salary of $375,000, subject to an annual adjustment at the discretion of the Board of Directors. Mr. Baker’s base salary was adjusted to $412,500 as of October 2022. The agreement also provided that Mr. Baker would be eligible for an annual bonus with an incentive target of 100% of his base salary, based on the achievement of performance goals as determined at the discretion of the Board of Directors. Mr. Baker is eligible to receive annual equity incentive grants and to participate in our other employee benefit plans, subject to the terms of those plans.
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Potential Payments Upon Termination or Change in Control
We have entered into an employment agreementincentive and retention agreements with Mr. McGrath and had a signed offer letter from Mr. Driscoll,Baker providing for severance payments for twelvetwenty-four months or until such timein the event the Company terminates the executive’s employment other than for cause, as other employment is secured (whichever is earlier), of their then respective annual base salarydescribed under the caption “Severance Benefits” above. In addition, if employment is terminated by the Company for any reason other than for cause death, or disability as such terms areby Mr. McGrath or Mr. Baker for good reason (as defined in their respective agreements.the incentive and retention agreements) within 12 months of a change in control, the payment in respect of his annual target bonus under any bonus programs then in effect (assuming achievement of 100% of target bonus) shall be for the full year and not prorated for the number of days he is employed for the year in which termination of employment occurs. In addition, upon a change in control 75% of the number of shares of Company stock subject to the unvested portion of each outstanding stock option and other equity award held by Messrs. McGrath and Baker shall become fully vested, exercisable and otherwise free from forfeiture, with the remaining unvested portion of such equity awards continuing to vest and becoming fully exercisable and free from forfeiture on the earlier of (x) the one-year anniversary of the closing of the change in control (assuming continued employment through such date) or (y) the termination of employment by the Company for any reason other than for cause or by Mr. McGrath or Mr. Baker for good reason. The amount paid upon such one-year anniversary of closing or qualified termination with respect to RSUs shall be the greater of the per share price paid to stockholders upon the closing of the change in control or the value on such one year anniversary of any equity into which the Company’s common stock converted upon the closing of the change in control. Under such circumstances, severance payments for Messrs. McGrath and DriscollBaker would have an aggregate value of $945,000$10,844,400 and $369,000, respectively.$3,318,431, respectively, which includes twenty-four months of base salary payments of $2,530,000 and $825,000 in the aggregate, respectively, accelerated vesting RSU value of $7,035,000 and $2,066,531, respectively, based on the closing price of our Common Stock on December 31, 2022 of $46.90 per share, $1,265,000 and $412,500, respectively, in respect of annual target bonuses under any bonus programs then in effect, and $14,400 each in aggregate COBRA continuation coverage costs otherwise payable by Mr. McGrath and Mr. Baker for a period of twenty-four months. Such payments are conditioned upon our receipt of a general release of claims from Messrs. McGrath and Driscoll.Baker. The agreementemployment agreements with Messrs. McGrath and Baker include certain non-compete and non-solicit obligations that extend for twenty-four months and eighteen months, respectively, after termination of employment. We assume, for the purpose of calculating the values for all termination events,above, that the effective date of termination is December 31, 2016. Mr. Driscoll resigned from the Company in October 2016.2022.
20
In the event that we undergo a change in control (referred toan “Acquisition Event” as an "Acquisition Event"defined in the Amended and Restated 1997 Stock Incentive Plan and a "Reorganization Event"“Reorganization Event” as defined in the Amended and Restated 2007 Stock Incentive Plan, as amended)amended, and the 2020 Stock Incentive Plan and as a result our Board of Directors accelerates the vesting of all outstanding unvested equity awards, Mr. McGrath, Mr. Schulze,the outstanding stock option and other equity awards held by Ms. Gallup shall become fully vested. As a result, Ms. Gallup would realize $9,269,700, $228,231, and $112,360, respectively,$293,125, based on the closing price of our Common Stock on December 31, 20162022 of $28.09$46.90 per share, assuming the vesting and sale by eachher of theirthe unvested equity awards presented above. Ms. Gallup is not otherwise entitled to any specific compensation in the event of a change of control transaction.
Compensation Committee Report
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
By the Compensation Committee of the Board of Directors of PC Connection:Connection, Inc.:
| |
| Barbara Duckett, Chair |
|
|
|
|
|
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Ms. Duckett and Messrs. Baute andMr. Ferguson. Mr. Weatherson served on the Compensation Committee until his resignation from the Board of Directors in January 2017. Ms. Duckett and Messrs. Baute,Mr. Ferguson and Weatherson were not at any time during 20162022, nor has Ms. Duckett ever been, an officer or employee of the Company or any of our subsidiaries. Mr. Ferguson served as our Chief Financial Officer from December 2005 to March 2012. Neither Ms.
26
Duckett nor Mr. Ferguson during 2022 had a relationship with the Company that required disclosure under the SEC rules relating to disclosure of related person transactions. None of our executive officers has served as a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as our director or a member of our Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We currently have leases for facilities in Marlow and Merrimack, New Hampshire and two facilities in Keene, New Hampshire with Gallup & Hall, or G&H, a partnership owned solely by Patricia Gallup and the Estate of David McLellan Hall, our principal stockholders.for which Ms. Gallup serves as executor and is also the beneficiary of trusts which will receive the balance of the Estate of David McLellan Hall. The three facilities located in Marlow and Keene, New Hampshire are leased on a month-to-month basis requiring monthly rental payments of $500, $1,344, and $11,773, respectively. These leases also obligate us to pay certain real estate taxes and insurance premiums on the premises. Rent expense under the three leases aggregated $163,404 for each of the years ended December 31, 20162022 and 2015. 2021.
In November 1997, we entered into a fifteen-year lease for ana 114,000 square foot corporate headquarters in Merrimack, New Hampshire with G&H Post, LLC, an entity owned solely by Patricia Gallup and the Estate of David McLellan Hall, our principal stockholders.for which Ms. Gallup serves as executor and is also the beneficiary of trusts which will receive the balance of the Estate of David McLellan Hall. The initial term of the fifteen-year lease ended in November 2013, and we amended the lease in May 2014 to extend the term for an additional five years. The amended term of the five-year lease ended in November 2018, and we exercised our option for an additional five-year term in May 2018. The terms of the new agreement have not yet been finalized. Accordingly, we continue to lease under the terms of the 2014 lease amendment, which requires an annual rental payment of $1,253,208 and provides us the option to renew for an additional five-year term. The lease requires us to pay our proportionate share of real estate taxes and common area maintenance charges as either additional rent or directly to third-party providers and also to pay insurance premiums for the leased property. Rent payments under the lease agreement were $1,253,208 for the years ended December 31, 2022 and 2021.
In August 2008, we entered into a ten-year lease agreement with G&H Post, LLC, an entity owned solely by Patricia Gallup and the Estate of David McLellan Hall, our principal stockholders,for which Ms. Gallup serves as executor and is also the beneficiary of trusts which will receive the balance of the Estate of David McLellan Hall, for an office facility adjacent to our corporate headquarters. The initial term of the 10-year lease ended in July 2018, and we exercised our option for an additional two-year term in May 2018. The terms of the new agreement have not yet been finalized. Accordingly, we continue to lease under the terms of the 2008 lease, which requires an annual rental payment of $257,304 in year eight of the lease$262,860 and provides us the option to renew for two additional two-year terms. The rent for subsequent years shall beis subject to adjustment to reflect increases in a local consumer price index, but such adjustments shall not exceed an increase of 5.0% per year. The lease requires us to pay our proportionate share of real estate taxes and common area maintenance charges either as additional rent or directly to third-party providers and to pay insurance
21
premiums for the leased property. Rent payments under the lease agreement were $252,594 and $246,846$262,860 for the years ended December 31, 20162022 and 2015, respectively.2021.
During 2016,2022, we provided various facilities management, maintenance services, and maintenanceadministrative services to certain affiliates of Patricia Gallup and the Estate of David McLellan Hall, for which Ms. Gallup serves as executor and is also the beneficiary of trusts which will receive the balance of the Estate of David McLellan Hall, in connection with the operation of facilities leased by us from those affiliates. G&H Post, LLC reimbursed us $158,609$174,425 and $175,159$143,347 during 20162022 and 2015,2021, respectively, for those services.
The 1998 PC Connection Voting Trust
In connection with our initial public offering in March 1998, Patricia Gallup and David Hall placed substantially all of the shares of Common Stock that they beneficially owned immediately prior to the public offering into a Voting Trust, or the “Voting Trust”, of which they serve as co‑trustees. The Voting Trust is the record holder of 14,238,188 shares of Common Stock as of the record date, March 24, 2017. The terms of the Voting Trust require that both Ms. Gallup and Mr. Hall, as co-trustees, agree as to the manner of voting the shares of our Common Stock held by the Voting Trust in order for the shares to be voted. In the event the co-trustees are deadlocked with respect to the election of directors at a meeting of stockholders, our Board of Directors may require the co-trustees to execute and deliver to our Secretary a proxy representing all shares issued and outstanding in the name of the Voting Trust and entitled to vote in the election of directors. Such proxy shall confer upon the proxyholder authority to attend the meeting for purposes of establishing a quorum and to vote for the directors nominated by our Board of Directors, provided that such nominees are incumbent directors elected with the consent of the co‑trustees. Each of Ms. Gallup and Mr. Hall may transfer shares of Common Stock for value to unaffiliated third parties. Any shares so transferred will no longer be subject to the Voting Trust and an equal number of the non-transferring co-trustee’s shares will be released from the Voting Trust. Transfers by either of Ms. Gallup or Mr. Hall in excess of 75,000 shares in any 90-day period, or that would decrease the shares held by the Voting Trust to less than a majority of the outstanding shares, will be subject to a right of first refusal to the other. The Voting Trust will terminate when it holds less than 10% of the outstanding shares of our Common Stock or at the death of both co-trustees. In addition, in the event of the death or incapacity of either co‑trustee, or when either of Ms. Gallup or Mr. Hall holds less than 25% of the beneficial interest held by the other in the Voting Trust, the other will become the sole trustee of the Voting Trust with the right to vote all the shares held by the Voting Trust.
All related partyperson transactions discussed above and referenced in this proxy statement were on terms comparable to those we believe we could have obtained in arms-length transactions with unaffiliated third parties.
POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS
Our Board of Directors has adopted written policies and procedures for the review of any transaction, arrangement, or relationship in which we are a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees, or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
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If a related person proposes to enter into such a transaction, arrangement, or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our Interim Chief Financial Officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our Audit Committee. Whenever practicable, the reporting, review, and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the Chair of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
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A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Audit Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Audit Committee will review and consider:
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| the related person’s interest in the related person transaction; |
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| the approximate dollar value of the amount involved in the related person transaction; |
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| the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; |
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| whether the transaction was undertaken in the ordinary course of our business; |
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| whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; |
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| the purpose of, and the potential benefits to us of, the transaction; and |
● |
| any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The Audit Committee may approve or ratify the transaction only if the Audit Committee determines that, under all of the circumstances, the transaction is not inconsistentin, or consistent with, our best interests. The Audit Committee may impose any conditions on us or the related person in connection with the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our Board of Directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
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| interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the Company receiving payment under the transaction; and |
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| a transaction that is specifically contemplated by provisions of our charter or bylaws. |
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Audit Committee in the manner specified in its charter.the Compensation Committee Charter.
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Equity Compensation Plan Information
The following table provides information about our Common Stock that may be issued upon exercise of options, warrants, and rights under all ofthe 2020 Stock Incentive Plan which was approved by our equity compensation plansstockholders as of December 31, 2016, including the Amended and Restated 1997 Stock Incentive Plan, the Amended and Restated 2007 Stock Incentive Plan, as amended, and the Amended and Restated 1997 Employee Stock Purchase Plan, as amended. Our stockholders have approved all of these plans. 2022.
| | | | | | | | |
| | | | | | | Number of Securities Remaining |
|
| | | | | | | Available |
|
| | | | | | | for Future |
|
| | Number of Securities to be | | Weighted-Average | | Issuance Under Equity |
| |
| | Issued Upon Exercise of | | Exercise Price of | | Compensation Plans Excluding |
| |
| | Outstanding Options, | | Outstanding Options, | | Securities Reflected in |
| |
| | Warrants, and Rights (1) (2) | | Warrants, and Rights (3) | | Column (a) (1) (4) |
| |
Plan Category |
| (a) |
| (b) |
| (c) |
| |
Equity Compensation Plans Approved by Security Holders |
| 535,000 | | $ | — | | 221,000 | |
| | | | | | | | |
Equity Compensation Plans Not Approved by Security Holders |
| — | |
| — | | — | |
| | | | | | | | |
Total |
| 535,000 | | $ | — | | 221,000 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Securities Remaining |
|
|
|
|
|
|
|
| Available |
|
|
|
|
|
|
|
| for Future |
|
|
| Number of Securities to be |
| Weighted-Average |
| Issuance Under Equity |
| |
|
| Issued Upon Exercise of |
| Exercise Price of |
| Compensation Plans [Excluding |
| |
|
| Outstanding Options, |
| Outstanding Options, |
| Securities Reflected in |
| |
|
| Warrants, and Rights (1) |
| Warrants, and Rights |
| Column (a)] (1)(2) |
| |
Plan Category |
| (a) |
| (b) |
| (c) |
| |
Equity Compensation Plans Approved by Security Holders |
| 511,355 |
| $ | 3.42 | (3) | 264,745 |
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans Not Approved by Security Holders |
| ─ |
|
| ─ |
| ─ |
|
|
|
|
|
|
|
|
|
|
Total |
| 550,661 |
| $ | 3.42 |
| 364,930 |
|