DEF 14A of CSP Inc /Ma/
Filed Dec 20, 2023 · FY20230000356037-23-000049
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Our Board of Directors currently consists of five members. The Board, upon recommendation of the Nominating Committee, unanimously nominated the five directors listed below for election to the Board at the Annual Meeting. Each of the five nominees currently serves as a member of the Board. Directors elected at the Annual Meeting will hold office until the 2025 Annual Meeting of Stockholders and until their successors are duly elected and qualified. If you withhold authority to vote with respect to the election of any of our nominees, your shares will not be voted in favor of such nominee’s election. However, your shares will be counted for purposes of determining whether there is a quorum.
Nominees for Election
Nominees for Election Listed below are the nominees with his or her age, the year he or she was first elected as a director of the Company, his or her business experience, as well as the director’s particular experiences, qualifications, attributes and skills that led our Board to conclude that the director should serve as a member of our Board.
Nominees for Election
| Name and Age | Business Affiliations, Qualifications and Directorships | | Victor Dellovo (54) | Director of CSPI since August 2012; President and Chief Executive Officer since August 2012; President of Modcomp’s worldwide operations since October 2010; President of Modcomp’s U.S. operations from October 2005 to September 2010; President of Modcomp’s Systems and Solutions division from June 2003 to September 2005, following Modcomp’s acquisition of Technisource Hardware Inc., a company he co-founded in 1997. Mr. Dellovo is an industry veteran with more than 24 years of technology industry experience and leadership, as well as comprehensive knowledge of the Company and its operations. Prior to becoming our Chief Executive Officer Mr. Dellovo led our Modcomp Inc. subsidiary, currently known as CSPi Technology Solutions, for four years. He managed all facets of Modcomp Inc.’s domestic and international business, a role that provided him with insight into our operations and the challenges and opportunities faced by the Company. In addition, his prior positions with Technisource Hardware Inc. as an executive, a co-founder and in various sales and engineering positions have given him a strong knowledge and understanding of the technology industry. Mr. Dellovo’ s experience in the industry and in executive management, coupled with his in-depth knowledge of our Company, contributes to his selection as our President and CEO by our Board and facilitates the Board’s strategic and financial planning as well as other critical management functions. |
Nominees for Election
| Name and Age | Business Affiliations, Qualifications and Directorships | | Charles Blackmon (74) | Director of CSPI since July 2013; Retired; 2005 to 2023 Senior Vice President for Timberland Harvesters, LLC, a company that buys and sells timber and land; from June 2004 to March 2005 served as Chief Financial Officer of Interline Brands Inc., a public company that acts as a direct marketer and distributor of maintenance, repair and operating products including plumbing, electrical, hardware, HVAC and other related items; from 1994 to 2004 served in various senior management positions, including Chief Financial Officer, for MAGNATRAX Corporation or its predecessor American Buildings Company, a public company specializing in manufacturing products for the construction industry; 1971-1979, in public accounting except for one year; Director of Concurrent Computer Corporation from April 2003 to July 2017. Mr. Blackmon has over 40 years of financial management experience and is a certified public accountant. His extensive executive management and financial experience adds invaluable knowledge to our Board. He is Chairman of our Audit Committee, and his expertise in accounting, financial reporting and controls and experience as a chief financial officer of public companies qualifies him as an “audit committee financial expert” under SEC rules and further qualifies him to serve as a member of the Board of Directors. |
Nominees for Election
| Name and Age | Business Affiliations, Qualifications and Directorships | | Ismail “Izzy” Azeri (45) | Director of CSPI since January 2016; CEO, President and Co-founder of mabl, a startup software company that uses machine intelligence to automate routine engineering tasks, from January 2017 to the present; Senior Product Manager-Cloud, for Google, responsible for pricing, packaging, and discount strategy across overall Google Cloud Platform businesses, from May 2014 to January 2017; Founder, President and Board Chairman of Stackdriver, a cloud-based infrastructure monitoring company that grew to a business with 160 customers and 32 employees, that was acquired by Google in January 2014 from July 2012-May 2014; Executive in Residence at Bain Capital Ventures, a venture capital firm, where he evaluated new investment opportunities within software landscape, from March 2012 to July 2012; various positions at Acronis, a leader in disaster recovery software for the SMB segment in sales and marketing and strategic and corporate development, from July 2009 to January 2012; Director corporate business development, VMware Inc., a software company, responsible for acquisitions, venture investments and strategy from May 2006-July 2009; served on the Boards of VMware International from 2006-2009 and Board advisor for VMTurbo from 2009 to 2021; various positions and corporate development, EMC Corp., computer storage company, from May 1996-May 2006. Mr. Azeri has 23 years of managerial experience in operations, strategic partnerships and business development for some of the leading technology organizations in the world. He provides the Board extensive experience in software, cloud and technology products and services, and an in-depth understanding of the software and cloud-based technology that will assist us with product and service strategy for both of our business segments. He is also an expert in technology with significant business development and strategic planning experience, plus he has Board experience. This expertise and experience qualify him to serve as a Board member. |
Nominees for Election
| Name and Age | Business Affiliations, Qualifications and Directorships | | C. Shelton James (84) | Director of CSPI since 1994; Chairman of the Board of Directors since August 2012; Principal, C. Shelton James Associates, a business consulting firm, from 1990 to present; President from 1993 until June 1998 and Director from 1993 until February 2000 of Fundamental Management Corporation; Director from December 1994 until March 2000 and Chief Executive Officer from August 1998 to March 1999 of Cyberguard Corp.; Director from August 1998 to July 2002 and Chief Executive Officer from December 2001 to July 2002 of Technisource, Inc.; Chief Executive Officer and Chairman of the Board of Elcotel from May 1991 to February 2000; Director of Concurrent Computer Corporation from July 1996 to August 2016. He was President of Gould’s Information Systems Business Section from 1980 to 1990 and Chief Financial Officer from 1968 to 1980 of Systems Engineering Labs which was acquired by Gould in 1980. Mr. James is a member of the Company’s Audit Committee. Mr. James was a CPA and worked in public accounting. Mr. James’s experience as a CPA and Chief Financial Officer, overseeing financial reporting processes, internal accounting and financial controls, as well as managing independent auditor engagements, qualifies him as an “audit committee financial expert” within the meaning of SEC regulations. Mr. James has served on ten boards of public companies and nine audit committees during his career. His extensive executive management experience, in addition to his financial expertise, adds invaluable knowledge to our Board and qualifies him for service as a director of our Company. | | Marilyn T. Smith (75) | Director of CSPI since July 2013; Retired Vice President for Information Technology and Chief Information Officer (CIO) for George Mason University, December 2013 to December 2020; Head of Information Services and Technology CIO, Massachusetts Institute of Technology (MIT), 2009 to 2013; President of Life Insurance Co. of the Hanover Insurance Group, and various other management positions from 2000 to 2009; Vice President and CIO for multiple information systems groups within Liberty Mutual Insurance Co. and various positions at John Hancock Financial Services prior to 2000. Ms. Smith’s operational executive management experience, knowledge and experience and her former position as CIO at George Mason University and MIT brings a unique understanding of the technology markets to the Board and qualifies her for service as a director of our Company. |
Nominees for Election
We believe that the qualifications for serving as a director of CSPI include significant accomplishment in a director’s field, together with an ability to make a meaningful contribution to the Board’s oversight of business affairs. Each director must also have an excellent record and reputation for honesty and ethical conduct in both his and her professional and personal activities. We consider Messrs. Azeri, Blackmon, Dellovo, James and Ms. Smith to meet these qualifications, which the Board believes makes each of them well qualified to serve as a director of CSPI.
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS The following table and footnotes provide certain information regarding the fiscal year 2023 compensation of CSPI’s non-employee directors.
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS
| Name (a) | Fees Earned or Paid in Cash(1) (b) | Stock Awards2,(c) | Total (h) | | Izzy Azeri | $30,104 | $56,525 | $86,629 | | Charles Blackmon | $38,018 | $56,525 | $94,543 | | C. Shelton James | $55,104 | $56,525 | $111,629 | | Marilyn Smith | $38,018 | $56,525 | $94,543 |
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS
Notes:
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS
| 1. | Each non-employee director receives (a) a $23,000 annual cash retainer, (b) an additional $552 annual retainer for each Committee membership, (c) a meeting fee of $1,500 per quarterly board and committee meeting, and (d) out of pocket travel expenses in connection with the meetings. In addition, the Chairman of the Board receives an annual fee of $25,000, and the chairpersons of the Audit Committee and of the Compensation Committee each receives an annual fee of $7,500. |
2023 COMPENSATION OF NON-EMPLOYEE DIRECTORS
| 2. | On February 6, 2023 each non-employee director received a restricted stock award of 5,000 shares of common stock. The restricted stock awards vest in full on February 8, 2024. The restricted stock awards do not reflect compensation actually received by the non-employee directors. Instead, the amounts in the stock awards column reflect the aggregate award date fair value computed in accordance with FASB ASC Topic 718. The awards date fair value of a share of restricted stock was the closing price of our common stock on the Nasdaq GM on the date of grant ($11.305 on February 6, 2023). |
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
| Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Awards ($) (f) | Non-Equity Incentive Plan Compensation(5) ($) (g) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(8) ($) (h) | All Other Compensation(9) ($) (i) | Total ($) (j) | | Victor Dellovo, President and CEO | 2023 | $472,500 | — | $343,700(1) | — | $425,537(6) | $58,102 | $24,363 | $1,324,202 | | | 2022 | $472,500 | — | $334,400(2) | — | $283,642(7) | $64,776 | $25,661 | $1,180,979 | | Gary Levine, CFO, Treasurer and Secretary | 2023 | $213,500 | — | $83,470(3) | — | $115,369(6) | $40,092 | $3,754 | $456,181 | | | 2022 | $213,500 | — | $61,600(4) | — | $76,772(7) | $28,137 | $3,750 | $383,759 | | Gary Southwell, Vice President and General Manager of High Performance Products (HPP) | 2023 | $215,000 | — | $68,740(3) | — | $35,000(6) | — | $3,762 | $322,532 | | | 2022 | $215,000 | — | $52,800(4) | — | $8,063(7) | — | $3,792 | $279,655 | | Mike Newbanks, Vice President of Finance and CAO | 2023 | $178,500 | — | $83,470(3) | — | $105,743(6) | — | $1,891 | $372,321 | | | 2022 | $178,500 | — | $61,600(4) | — | $91,636(7) | — | $4,608 | $336,364 |
2023 SUMMARY COMPENSATION TABLE
Notes:
2023 SUMMARY COMPENSATION TABLE
| 1. | On January 6, 2023, Mr. Dellovo received a restricted stock award of 35,000 shares of common stock. The grant date fair value per share of restricted stock was $9.82, the closing price on the date of award. The restricted stock award vests over four years from the date of the award at a rate of 25% per year. |
2023 SUMMARY COMPENSATION TABLE
| 2. | On January 6, 2022, Mr. Dellovo received a restricted stock award of 38,000 shares of common stock. The grant date fair value per share of restricted stock was $8.80, the closing price on the date of award. The restricted stock award vests over four years from the date of the award at a rate of 25% per year. |
2023 SUMMARY COMPENSATION TABLE
| 3. | On January 6, 2023, Messrs. Levine and Newbanks each received a restricted stock award of 8,500 shares of common stock. On January 6, 2023, Mr. Southwell received a restricted stock award of 7,000 shares of common stock. The grant date fair value per share of restricted stock was $9.82, the closing price on the date of award. Each restricted stock award vests over four years from the date of the award at a rate of 25% per year. |
2023 SUMMARY COMPENSATION TABLE
| 4. | On January 6, 2022, Messrs. Levine and Newbanks each received a restricted stock award of 7,000 shares of common stock. On January 6, 2022, Mr. Southwell received a restricted stock award of 6,000 shares of common stock. The grant date fair value per share of restricted stock was $8.80, the closing price on the date of award. Each restricted stock award vests over four years from the date of the award at a rate of 25% per year. |
2023 SUMMARY COMPENSATION TABLE
| 5. | Payments are based on achievement of the (i) Company earnings before taxes (EBIT) per share target for Messrs. Dellovo, Levine and Newbanks and HPP revenue and operating income for Mr. Southwell, which represented 85% of the target Non-Equity Incentive Plan Compensation in 2023 and 2022 and (ii) Key Performance Indicators |
2023 SUMMARY COMPENSATION TABLE
(KPI) for such named executive officer, which represented 15% of the target. Non-Equity Incentive Plan Compensation in 2023 and 2022 (iii) in 2023 if the Company earnings before tax bonus wasn’t achieved and TS division achieved its EBIT targets Messrs. Dellovo and Newbanks would achieve a Special bonus of $50,000 and the bonus would increase for overachieving the target. In 2022 Messrs. Dellovo and Newbanks bonuses were calculated for both EBIT and TS bonuses and the larger of two calculations was the amount paid to the named executive officer.
2023 SUMMARY COMPENSATION TABLE
| 6. | Mr. Dellovo had a target bonus of 50% of his base salary, of which 85% was based on achievement of EBIT goals and 15% was based on KPI. Mr. Levine had a target bonus of 30% of base salary, of which 85% was based on achievement of EBIT goals and 15% was based on KPI. Mr. Southwell had a target bonus of 50% of his base salary, of which 85% was based on the achievement of HPP revenue and operating income goals and 15% of which was based on KPI. Mr. Newbanks’ bonus was based on the TS Division operational results and KPIs. In 2023, Non-Equity Incentive Plan Compensation based on the levels of achievement of these goals, Messrs. Dellovo, Levine, and Newbanks received bonuses of 194% of target. Mr. Southwell received a bonus of 33% of target. |
2023 SUMMARY COMPENSATION TABLE
| 7. | Mr. Dellovo had a target bonus of 50% of his base salary, of which 85% was based on the achievement of EBIT goals and 15% was based on KPI. Mr. Levine had a target bonus of 30% of base salary, of which 85% was based on achievement of EBIT goals and 15% was based on KPI. Mr. Southwell had a target bonus of 50% of his base salary, of which 85% was based on the achievement of HPP revenue and operating income goals and 15% of which was based on KPI. Mr. Newbanks' bonus was based on the TS Division operational results and KPIs. In 2022 Non-Equity Incentive Plan Compensation based on the levels of achievement of these goals, Messrs. Dellovo and Levine received bonuses of 120% of target, Mr. Newbanks received a bonus of 171% of target and Mr. Southwell received a bonus of 7.5% of target. |
2023 SUMMARY COMPENSATION TABLE
| 8. | The Company provides to Messrs. Dellovo and Levine a supplemental “death benefit” retirement plan. The benefits are vested for Mr. Levine. Upon retirement, the plan provides for an annual pay-out of approximately $250,000 for five years for Mr. Dellovo and $50,000 for twenty years for Mr. Levine. For more information, see Note 12 to our Consolidated Financial Statements as of and for the years ended September 30, 2023, and 2022 filed with our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
2023 SUMMARY COMPENSATION TABLE
| 9. | Mr. Dellovo received $6,778 and $7,491 in employer contributions to his 401(k) plan for 2023 and 2022 respectively. For Mr. Dellovo the Company leased a car for 6 months during fiscal year 2023 with a cost of $9,085 and when the lease ended the company purchased a car for $85,000 with an expected useful life of 5 years, and the company incurred a depreciation expense of $8,500. The cost of a Company-provided vehicle for 2022 was $18,170. For Messrs. Levine, Southwell, and Newbanks the amounts of All Other Compensation for 2023 and 2022, respectively, were for the employers’ contributions to the 401(k) plan. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance of our company for each of the last two completed fiscal years. The table below presents information on the compensation of our principal executive officer (“PEO”) and our other named executive officers (“NEOs”) in comparison to certain performance metrics for 2023 and 2022. We are permitted to report as a “smaller reporting company” as defined under the U.S. federal securities laws. Accordingly, we have not included a tabular list of financial performance measures, and the table below does not include a column for a “Company-Selected Measure” as defined in Item 402(v) of Regulation S-K. For further information regarding our compensation philosophy and how we seek to align executive compensation with the Company’s performance, refer to “Compensation of Executive Officers.”
PAY VERSUS PERFORMANCE
| Year | Summary compensation table total for (PEO)(1) | Compensation actually paid to PEO(2) | Average summary compensation table total for non-PEO NEOs(3) | Average compensation average actually paid to non-PEO NEOs(4) | Value of initial fixed $100 investment based on Total Shareholder Return (TSR) (5) | Net Income(6) | | 2023 | $1,324,202 | $2,259,928 | $383,678 | $564,390 | $245.34 | $5,204,000 | | 2022 | $1,180,979 | $1,040,685 | $333,253 | $307,286 | $80.85 | $1,889,000 |
PAY VERSUS PERFORMANCE
| (1) The amounts of total compensation reported for Mr. Dellovo, our PEO, for each corresponding fiscal year in the “Total” column of the Summary Compensation Table. |
PAY VERSUS PERFORMANCE
| (2) The amounts represent the executive compensation actually paid to Mr. Dellovo as computed in accordance with Item 402(v) of Regulation S-K. The amounts do not reflect the actual compensation earned or paid to Mr. Dellovo during the applicable fiscal year. See table directly below these footnotes for calculation. |
PAY VERSUS PERFORMANCE
| (3) The amounts reported represent the average of the amounts reported for the Company’s non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable fiscal year. The non-PEO NEOs include Gary Levine, CFO, Treasurer and Secretary, Gary Southwell, Vice President and General Manager of High Performance Products (HPP), and Mike Newbanks, Vice President of Finance and CAO. |
PAY VERSUS PERFORMANCE
| (4) The amounts reported represent the average amount of executive compensation actually paid for the non-PEO NEOs as a group as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the non-PEO NEOs as a group during the applicable fiscal year. See table directly below these footnotes for calculation. |
PAY VERSUS PERFORMANCE
| (5) Total Shareholder Return is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price as the end and the beginning of the measurement period by the Company’s share price as the beginning of the measurement period. |
PAY VERSUS PERFORMANCE
| (6) Net income represents the amount of net income reflected in the Company’s audited financial statements for the applicable fiscal year. |
PAY VERSUS PERFORMANCE
The table below represents the amount of compensation actually paid to the PEO and average for Non-PEO NEOs as computed in accordance with Item 402(v) of Regulation S-K. The amounts do not reflect the actual compensation earned or paid during the applicable fiscal year.
PAY VERSUS PERFORMANCE
| | PEO | | Average for Non-PEO NEO’s | | | | 2023 | 2022 | 2023 | 2022 | | Total from Summary Compensation Total (SCT) | $1,324,202 | $1,180,979 | $383,678 | $333,253 | | Less the amounts or average amounts reported under the Stock Awards column in the SCT | $(343,700) | $(334,000) | $(78,560) | $(58,667) | | Plus year-end value of stock grants awarded in the applicable fiscal year that are unvested and outstanding as of the end of the applicable fiscal year | $612,500 | $273,220 | $140,000 | $47,933 | | Plus the change in fair value of prior year awards that are outstanding and unvested as of the end of the applicable fiscal year | $525,810 | $(80,475) | $93,649 | $(15,370) | | Plus the change in fair value as of the vesting date of prior year awards that vested at the end of or during the applicable fiscal year | $91,485 | $(8,438) | $17,758 | $(1,240) | | Add dividends paid in fiscal year | $49,631 | $9,798 | $7,865 | $1,376 | | Equals compensation actually paid in fiscal year | $2,259,928 | $1,040,685 | $564,390 | $307,286 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END The table below shows outstanding equity awards held by our named executive officers as of the fiscal year ended September 30, 2023.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| | Option Awards | | | | Stock Awards | | | | Name (a) | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Grant Date of Shares of Stock That Have Not Vested | Number of Shares of Stock that have not Vested(1) (#) (g) | Market Value of Shares of Stock that have not Vested(2) ($) (h) | | Victor Dellovo | — | — | — | — | 1/7/2020 | 7,500 | $131,250 | | | — | — | — | — | 1/4/2021 | 15,000 | $262,500 | | | — | — | — | — | 1/6/2022 | 28,500 | $498,750 | | | — | — | — | — | 1/6/2023 | 35,000 | $612,500 | | Gary Levine | — | — | — | — | 1/7/2020 | 1,250 | $21,875 | | | — | — | — | — | 1/4/2021 | 3,000 | $52,500 | | | — | — | — | — | 1/6/2022 | 5,250 | $91,875 | | | — | — | — | — | 1/6/2023 | 8,500 | $148,750 | | Gary Southwell | — | — | — | — | 1/7/2020 | 1,250 | $21,875 | | | — | — | — | — | 1/4/2021 | 2,500 | $43,750 | | | — | — | — | — | 1/6/2022 | 4,500 | $78,750 | | | — | — | — | — | 1/6/2023 | 7,000 | $122,500 | | Mike Newbanks | — | — | — | — | 1/7/2020 | 1,250 | $21,875 | | | — | — | — | — | 1/4/2021 | 3,000 | $52,500 | | | — | — | — | — | 1/6/2022 | 5,250 | $91,875 | | | — | — | — | — | 1/6/2023 | 8,500 | $148,750 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
Notes:
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| 1. | The restricted stock awards vest in equal installments on the first four anniversaries of the grant date. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| 2. | Value is calculated by multiplying the number of restricted stock awards that have not vested by the closing price of our common stock on the NASDAQ Global Market ($17.50) on September 29, 2023 as the market was closed on September 30, 2023. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
PROPOSAL TWO: