A Model for 2011 Executive Comp changes

The following was provided by Lawndale Capital:

“In an 8-K filing on January 4, 2012, P&F Industries (O-PFIN) disclosed it has entered into a new 3-year Employment Agreement (“New Agreement”) with current Chairman and CEO Richard Horowitz replacing one that expired at the end of 2011 (the “Expired Agreement.”)

Previously, Lawndale Capital Management, P&F’s largest independent shareholder, in a May 25, 2011 13D filing and letter to P&F’s board, called for a reduction or elimination of egregious compensation terms in any new contract with Mr. Horowitz, in particular lower “guaranteed” base compensation. Lawndale’s 13D filing and this May 25, 2011 letter can be found at: http://www.sec.gov/Archives/edgar/data/75340/000093583611000074/pf13da.htm

It appears that the New Agreement differs from the Expired Agreement in several material respects:
Mr. Horowitz’ Base Salary has been reduced from the Expired Agreement’s minimum $975,000/year to $650,000/year;

  • Mr. Horowitz’ “Target Bonus” has been reduced to 50% of Base Salary vs. 90% of Base in the Expired Agreement and, in addition, PFIN’s Compensation Committee has the right in Year 2 or 3 of the New Agreement to reduce the Target Bonus % (from 50%) and apply such Target amount into a long-term cash or equity incentive plan;
  • Mr. Horowitz’ “maximum bonus”, based on exceeding performance targets, is established at 150% of Base Salary vs. no apparent maximum in the Expired Agreement at all; and
  • The New Agreement allows someone, other than Mr. Horowitz, to be elected Chairman of P&F’s Board without triggering an onerous and costly “Termination Without Cause or for Good Reason” event. In the Expired Agreement any removal of Mr. Horowitz as Chairman triggered the same costly Termination/severance provisions. “

About hopsuz

Experienced leader, both as CEO and as board Chair. Founder of the 25 year old The Hopgood Group, LLC. Co-author of the award winning "Board Leadership for the Company in Crisis". Consultant to companies large and small. Expertise in board evaluations and leadership challenges.
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