DEF 14A of Distribution Solutions Group, Inc.
Filed Apr 10, 2025 · FY20240000703604-25-000016
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS Stockholders are entitled to cumulative voting in the election of directors. Under cumulative voting, each stockholder is entitled to that number of votes equal to the number of directors to be elected, multiplied by the number of shares such stockholder owns, and such stockholder may cast his or her votes for one nominee or distribute them in any manner he or she chooses among any number of nominees. Unless otherwise indicated on the proxy card, votes may, in the discretion of the proxies, be equally or unequally allocated among the nominees named below. Directors will be elected by a plurality of the votes cast at the meeting by the holders of shares represented in person or by proxy. Thus, assuming a quorum is present, the seven persons receiving the greatest number of votes will be elected as directors and votes that are withheld will have no effect. The Amended and Restated By-Laws of the Company provide that the Board of Directors shall consist of such number of members, between five and nine, as the Board determines from time to time. At the annual meeting, seven directors are to be elected to serve until the 2026 annual meeting of stockholders. The chart below summarizes the demographics of the seven nominees of our Board of Directors.
PROPOSAL 1: ELECTION OF DIRECTORS
| THE SEVEN NOMINEES FOR THE BOARD OF DIRECTORS |
Peer Group for Compensation Benchmarking
Peer Group for Compensation Benchmarking As a result of the mergers of Lawson, Gexpro Services and TestEquity in 2022, the size of the Company in terms of revenue, profit and market cap increased substantially and we have executives who may be employed as an officer in DSG, or in one of the Company’s operating companies – Lawson, Gexpro Services or TestEquity – for which it may be more appropriate to use a different peer benchmark than that used for a DSG executive. In order to maintain appropriate market benchmarks for our executives and Directors, the Compensation Committee engaged FGMK, LLC ("FGMK"), an independent advisory firm, to review the peer groups to help the Compensation Committee make sound compensation decisions. First, we maintain a DSG peer group of 13 companies aligned with the size and industry classification of DSG (the "DSG Peer Group"). The DSG Peer Group had a median revenue of approximately $1.517 billion and a market capitalization of $1.377 billion for 2024 compared to DSG’s 2024 revenue of $1.804 billion and market capitalization of $1.611 billion.
Peer Group for Compensation Benchmarking
| Distribution Solutions Group, Inc. Peer Group | | | Applied Industrial Technologies, Inc. | Kadant Inc. | | Barnes Group Inc. | MRC Global Inc. | | DXP Enterprises, Inc. | DNOW Inc. | | Global Industrial Company | Park-Ohio Holdings Corp. | | H&E Equipment Services, Inc. | Tennant Company | | Helios Technologies, Inc. | TriMas Corporation | | Herc Holdings Inc. | |
Peer Group for Compensation Benchmarking
Second, we maintain an operating company peer group (“the OPG”). The OPG consists of 14 companies with similar industry classification and revenues to that of the operating companies. The OPG companies had 2024 median revenue of approximately $497 million as compared to the operating companies’ 2024 revenue of $594 million for Lawson, $441 million for Gexpro Services and $771 million for TestEquity. The OPG includes the following companies:
Peer Group for Compensation Benchmarking
| Operating Company (Lawson, TestEquity or Gexpro Services) Peer Group | | | AMPCO-Pittsburgh Corp. | Hurco Companies, Inc. | | Columbus McKinnon Corporation | Insteel Industries, Inc. | | The Eastern Company | NN, Inc. | | Enerpac Tool Group Corp. | Perma-Pipe International Holdings, Inc. | | Enpro, Inc. | Transcat, Inc. | | L.B. Foster Company | Twin Disc, Incorporated | | The Gorman-Rupp Company | Trex Company, Inc. |
Peer Group for Compensation Benchmarking
The Compensation Committee believes that the proxy peer group benchmarking provides an accurate indicator of total compensation paid by companies with executives that have skills and responsibilities similar to the Company’s executives. Compensation for the Company’s executives is generally managed within the ranges of compensation paid by companies in their applicable peer group.
NEO Compensation Competitiveness Compared to the Peer Group
NEO Compensation Competitiveness Compared to the Peer Group Annually, as part of our determination of the competitiveness of our executive officers' Total Cash Compensation ("TCC") and Total Direct Compensation ("TDC") to market practices, we have analyzed and reported on each NEO’s actual TCC (current base salary and three-year average AIP bonus payout) and actual TDC (current base salary, three-year average AIP bonus payout and the three-year average LTI grant value) compared to the peer groups' median and 75th percentiles. Since Mr. King does not receive compensation for his services to the Company, a benchmarking is not necessary. Accordingly, we are providing our benchmark analysis for only four of our five current NEOs, Messrs. Knutson, Connors, Frazee and Lanuza. Mr. Knutson has the dual role of CFO of DSG and Lawson. Accordingly, we are providing a comparison of his TCC and TDC to CFOs of the DSG peer group. Since Messrs. Connors, Frazee and Lanuza serve as an executive of their respective operating company and not DSG, we compared their compensation to CEOs of the OPG. With respect Messrs. Connors and Frazee, the amounts reported reflect legacy compensation plans in which each participated prior to the Company's 2022 merger. These plans have a pay mix with a lesser emphasis on annual cash compensation and a greater emphasis on long-term value creation. The table below provides a comparison of our NEOs' TCC compensation to their respective peer group, as described above.
NEO Compensation Competitiveness Compared to the Peer Group
| | Median TCC, in ($000s) | 75th Percentile TCC, in ($000s) | Company TCC, in ($000s) | | Name and Title | | | | | Ronald J. Knutson (1) | $993.0 | $1,102.6 | $765.5 | | Executive Vice President, Chief Financial Officer and Treasurer | | | | | Robert H. Connors (1) | 933.3 | 1,312.4 | 557.5 | | President and Chief Executive Officer, Gexpro Services | | | | | Russell S. Frazee (1) | 933.3 | 1,312.4 | 557.1 | | President and Chief Executive Officer, TestEquity | | | | | Cesar A. Lanuza (1) | 933.3 | 1,312.4 | 998.0 | | President and Chief Executive Officer, Lawson | | | |
NEO Compensation Competitiveness Compared to the Peer Group
(1) Represents the NEO's 2024 Base Salary and average AIP earned from 2022 to 2024. The table below provides a comparison of our NEOs' TDC compensation to their respective peer group, as described above.
NEO Compensation Competitiveness Compared to the Peer Group
| | Median TDC, in ($000s) | 75th Percentile TDC, in ($000s) | Company TDC, in ($000s) | | Name and Title | | | | | Ronald J. Knutson (1) | $1,986.1 | $2,205.2 | $1,381.5 | | Executive Vice President, Chief Financial Officer and Treasurer | | | | | Robert H. Connors (2) | 1,705.3 | 3,140.4 | N/A | | President and Chief Executive Officer, Gexpro Services | | | | | Russell S. Frazee (2) | 1,705.3 | 3,140.4 | N/A | | President and Chief Executive Officer, TestEquity | | | | | Cesar A. Lanuza (1) | 1,705.3 | 3,140.4 | 2,731.1 | | President and Chief Executive Officer, Lawson | | | |
NEO Compensation Competitiveness Compared to the Peer Group
(1) Represents the NEO's 2024 Base Salary, average AIP earned from 2022 to 2024 and the average grant date fair value of the equity awards granted from 2022 to 2024. (2) Messrs. Frazee and Connors have not been participants in the Company's LTIP. Accordingly, they have not received long-term incentive awards in the most recent three-year period.
Role of the Independent Compensation Consultant
Role of the Independent Compensation Consultant The Compensation Committee has the authority to engage and has from time to time engaged the services of outside consultants to assist in making decisions regarding the establishment of DSG’s compensation philosophy and programs, including for executives and directors. In 2024, the Compensation Committee engaged FGMK to perform benchmarking analyses of executive officer and director compensation and make recommendations on peer group determination, performance metrics and incentive opportunity levels for the NEOs, as well as for independent members of the Board of Directors. FGMK was asked to make recommendations related to equity award incentives, including plan design, performance metrics and goals, and related incentive opportunities and estimated plan costs. FGMK performs no other services for the Company. The Compensation Committee has reviewed the independence of FGMK in light of SEC rules and Nasdaq listing standards regarding compensation consultants and has concluded that FGMK's work for the Compensation Committee does not raise any conflict of interest. All work performed by FGMK is subject to review and approval of the Compensation Committee who has the right to terminate FGMK at any time.
Elements of Total Compensation
Elements of Total Compensation In determining the type and amount of compensation for each eligible executive at our operating companies, other than our Chairman, President and CEO, we have used both annual cash compensation, which includes a base salary and an annual incentive award, as well as a long-term incentive opportunity, which is equity based. Additionally, certain NEOs received a pre-merger grant of time-based and performance-based equity interests that reward certain NEOs for achievement of long-term performance goals. Our compensation programs have been designed to encourage and reward the creation of long-term stockholder value, while at the same time avoiding the encouragement of unnecessary or excessive risk-takings. The Compensation Committee believes the mix of these forms of compensation, in the aggregate, supported the Company's overall compensation objectives of attracting top talent for executive positions, incentivizing such executive officers, motivating and rewarding the achievement of individual and company goals and aligning the interests of executive officers with those of our stockholders. Our annual and long-term incentive plans provided for additional compensation for achievement above set performance targets such that an executive's compensation may reach the 75th percentile of market levels based upon performance. The following table describes each executive compensation element utilized in 2024 for our NEOs based on the philosophy and objectives described above as well as each element's link to our compensation philosophy.
Elements of Total Compensation
| Compensation Element | Philosophy Statement | Talent Acquisition and Retention | Accountability for Business Performance (Align to Stockholder Interests) | Accountability for Individual Performance (Support Company Performance and Value Creation) | | Base Salary | We intend to provide base pay competitive to the market of industry peers across other industries where appropriate. Our goal is to strike a balance between attracting and retaining talent, expecting superior results and finding individuals who can focus on transforming our business. Base salary maintains a standard of living, is used to compete in the market for talent and forms the foundation for other reward vehicles. | X | | | | Annual Incentive Plan (1) | The 2024 AIP, as defined in the Annual Incentive Plan section, was designed to reward specific annual performance against business measures, such as Sales Revenue, Adjusted EBITDA, Working Capital and Equity Value, set by the Board at the start of the plan year. The amount of the 2024 AIP reward was determined by formula and can vary from 0% to 150% of an individual executive's original target incentive. | X | X | X | | Long-Term Incentive Plan ("LTIP")(2) & Equity Incentives | The LTIP was designed to align NEOs with the long-term interests of stockholders. Starting in 2022, the primary focus of the long-term incentive program transitioned to equity awards primarily granted in the form of non-qualified stock options that were significantly "out of the money" and will only realize value in the event of significant appreciation in the Company's stock price. RSUs were granted as a retention incentive aligned with future changes to share price. | X | X | X | | Other Compensation and Benefit Programs | DSG's operating companies offer employee benefits programs that provide protections for health, welfare and retirement. These programs are standard within the United States and include healthcare, life, disability, dental and vision benefits, as well as a 401(k) program and other federally provided programs outside of the United States. A deferred compensation program is also provided to a select group of our management, including our NEOs, to provide for tax-advantaged savings beyond the limits of qualified plans. | X | | |
Elements of Total Compensation
(1) NEOs are eligible for the annual incentive plan based on performance against performance measures at the operating company level. Equity value is determined based on DSG performance. Mr. Knutson is a participant in the Lawson operating company annual incentive plan based on his dual role. (2) Messrs. Connors and Frazee are not participants in the Company's LTIP; however, they entered into incentive agreements pre-merger whereby they are eligible for time-based and performance-based equity interests that would be payable in connection with a change-in-control or similar type of transaction.
Base Salary
Base Salary The Compensation Committee is responsible for reviewing our Chief Executive Officer’s and other executive officers’ base salaries. The base salaries of all executive officers are reviewed and adjusted when necessary to reflect individual roles, performance and the competitive market. Except for Mr. King, annual base salary and cash bonuses are the primary cash-based element of our executive officers’ compensation structure. We provide NEOs and other employees, except for Mr. King, who does not receive any compensation from the Company in connection with his roles of Chairman, President & CEO, with a base salary to compensate them for services rendered during the fiscal year. Base salary represents the only fixed component of the three elements of our executive compensation program and is intended to provide a baseline minimum amount of annual compensation for our NEOs. Our base salary philosophy is intended to keep our fixed costs at an appropriate level for each role. In setting base salaries for the CEO and other executives, the Compensation Committee considers: •Competitive market data based upon peer group benchmarking; •The experience, skills and competencies of the individual; •The duties and responsibilities of the respective executive; •The ability of the individual to effectively transform our company and culture; and •The individual's ability to achieve superior results. We typically consider adjustments to NEO base salaries on an annual basis as part of our review process, as well as upon a promotion. The following table sets forth information regarding the annualized base salary rates at the end of 2023 and 2024 for our NEOs:
Annual Incentive Plan
Annual Incentive Plan We require our NEOs to be focused on achievement of the critical, strategic and tactical objectives that lead to annual success. Based on the annual achievement of pre-established annual goals, at both the operating company and overall DSG combined performance level, NEOs are eligible to earn an annual incentive under the Annual Incentive Plan ("AIP"). Mr. Lanuza, as CEO of Lawson, and Mr. Knutson, in his dual role as CFO of DSG and CFO of Lawson, participated in the 2024 Lawson AIP ("Lawson AIP"). Executives who have duties and responsibilities at both the operating company as well as the DSG/holding company levels will generally be tied to annual incentive plan performance goals of the operating company he or she is aligned with for the plan year. Therefore, Mr. Knutson's performance goals and associated incentive compensation opportunity is aligned with the Lawson AIP. Mr. Connors, as CEO of Gexpro Services, participated in the 2024 Gexpro Services AIP ("Gexpro AIP"). Mr. Frazee, as CEO of TestEquity, participated in the 2024 TestEquity AIP ("TestEquity AIP"). Lastly, Mr. King does not receive any compensation from the Company in connection with his roles of Chairman, CEO & President, and therefore did not participate in the AIP. In 2024, the individual objectives of each of our NEOs supported their respective individual areas of responsibility, profitability and long-term strategic goals. For each of our NEOs, the individual objectives were tied to the performance of their respective operating companies measured in terms of Adjusted EBITDA, Adjusted net sales, working capital and DSG enterprise value. 2024 AIP Pursuant to the terms of the 2024 annual incentive plans, each NEO was granted a threshold, target and maximum bonus award opportunity expressed as a percentage of base salary. These bonus award opportunities range from 0% to 150% of the target AIP opportunity for our NEOs, with the exception of the DSG Enterprise Value performance goal which opportunity ranges from 0% to 125% of the target AIP opportunity and the Gexpro Services Strategic Synergies performance goal which opportunity ranges from 0% to 100% of the target AIP opportunity. At the beginning of each year, the Compensation Committee approves the assignment of a threshold, target and maximum objective for each financial performance measure. The target objectives for each performance goal for our NEOs, other than DSG Equity Value, are established based upon the operating company budget approved by the Board. Actual year-end financial results for such measures are compared to plan objectives in order to determine the amount of any AIP bonus. If actual financial results fall between the threshold and target or the target and maximum objectives, bonuses are proportionately increased as a result of the threshold or target objective being exceeded. Notwithstanding the other provisions of the AIP, the Committee may reduce or eliminate any bonus payable to a NEO based upon the Committee's determination of individual performance or other factors it deems relevant. The Compensation Committee may not increase any bonus payable to a NEO without a special meeting called to review and approve such requests.
Compensation Performance Metrics
Compensation Performance Metrics The DSG operating companies, including Lawson, Gexpro Services, and TestEquity, utilized pre-established performance criteria for their respective annual incentive plans that are intended to align executive compensation with their 2024 business objectives. The Adjusted EBITDA, Adjusted Net Sales and Working Capital metrics described below are based on each individual operating company. Compensation Performance Metrics (Lawson Operating Company)
2024 AIP Target Opportunity & Goal Weighting
2024 AIP Target Opportunity & Goal Weighting Under the 2024 AIP, target opportunities as a percent of each NEO's salary were set as follows:
2024 AIP Target Opportunity & Goal Weighting
| | 2024 AIP Target | | 2024 AIP Goal Weighting | | | | | | | Percent of Base Salary | Amount | Adjusted EBITDA | Adjusted Net Sales | Working Capital | DSG Enterprise Value | Strategic Synergies | | J. Bryan King | —% | $— | —% | —% | —% | —% | —% | | Ronald J. Knutson | 80% | 420,000 | 30% | 30% | 20% | 20% | —% | | Robert H. Connors | 50% | 205,000 | 25% | 20% | 20% | 20% | 15% | | Russell S. Frazee | 75% | 318,750 | 40% | 20% | 20% | 20% | —% | | Cesar A. Lanuza | 100% | 600,000 | 30% | 30% | 20% | 20% | —% |
Compensation Performance Targets
| | AIP Performance Targets | | | | | Threshold | Target | Maximum | | Adjusted EBITDA | $74,792 | $83,102 | $91,412 | | Payout Percentage | 50% | 100% | 150% | | Adjusted Net Sales | $545,652 | $574,371 | $603,292 | | Payout Percentage | 50% | 100% | 150% | | Working Capital | 22.20% | 21.70% | 21.20% | | Payout Percentage | 50% | 100% | 150% | | DSG Equity Value | 20.00% | 25.00% | 35.00% | | Payout Percentage | 50% | 100% | 125% |
Compensation Performance Targets
| | AIP Performance Targets | | | | | Threshold | Target | Maximum | | Adjusted EBITDA | $49,489 | $55,020 | $60,522 | | Payout Percentage | 50% | 100% | 125% | | Adjusted Net Sales | $423,035 | $445,300 | $467,565 | | Payout Percentage | 50% | 100% | 125% | | Working Capital | 29.70% | 27.90% | 26.10% | | Payout Percentage | 50% | 100% | 125% | | DSG Equity Value | 20.00% | 25.00% | 35.00% | | Payout Percentage | 50% | 100% | 125% | | Strategic Synergies | N/A | $5.7 | N/A | | Payout Percentage | N/A | 100% | N/A |
Compensation Performance Targets
| | AIP Performance Targets | | | | | Threshold | Target | Maximum | | Adjusted EBITDA | $69,929 | $77,366 | $81,234 | | Payout Percentage | 50% | 100% | 125% | | Adjusted Net Sales | $854,551 | $880,980 | $907,409 | | Payout Percentage | 50% | 100% | 125% | | Working Capital | 23.50% | 23.00% | 22.50% | | Payout Percentage | 50% | 100% | 125% | | DSG Equity Value | 20.00% | 25.00% | 35.00% | | Payout Percentage | 50% | 100% | 125% |
Compensation Performance Targets & Payout Percentages
Compensation Performance Targets & Payout Percentages The tables below represent the annual payout percentages for each operating company based on 2024 results compared to the pre-established performance metrics. Compensation Performance Targets & Payout Percentages (Lawson Operating Company) The 2024 AIP financial performance measure targets and payout percentages for the Lawson Operating Company were as follows (dollars in thousands):
Compensation Performance Targets & Payout Percentages
| | | 2024 AIP Performance Targets | | | | | Actual Results | Threshold | Target | Maximum | | Adjusted EBITDA | $59,086 | $74,792 | $83,102 | $91,412 | | Payout Percentage | —% | 50.0% | 100.0% | 150.0% | | Adjusted Net Sales | $486,378 | $545,652 | $574,371 | $603,292 | | Payout Percentage | —% | 50.0% | 100.0% | 150.0% | | Working Capital | 23.9% | 22.20% | 21.70% | 21.20% | | Payout Percentage | —% | 50.0% | 100.0% | 150.0% | | DSG Equity Value | 4.9% | 20.00% | 25.00% | 35.00% | | Payout Percentage | —% | 50.0% | 100.0% | 125% |
Compensation Performance Targets & Payout Percentages
Compensation Performance Targets & Payout Percentages (Gexpro Services Operating Company) The 2024 AIP financial performance measure targets and payout percentages for the Gexpro Services Operating Company were as follows (dollars in thousands):
Compensation Performance Targets & Payout Percentages
| | | 2024 AIP Performance Targets | | | | | Actual Results | Threshold | Target | Maximum | | Adjusted EBITDA | $56,476 | $49,489 | $55,020 | $60,522 | | Payout Percentage | 106.6% | 50.0% | 100.0% | 125.0% | | Adjusted Net Sales | $438,902 | $423,035 | $445,300 | $467,565 | | Payout Percentage | 85.7% | 50.0% | 100.0% | 125.0% | | Working Capital | 29.90% | 29.70% | 27.90% | 26.10% | | Payout Percentage | —% | 50.0% | 100.0% | 125.0% | | DSG Equity Value | 4.9% | 20.00% | 25.00% | 35.00% | | Payout Percentage | —% | 50.0% | 100.0% | 125% | | Strategic Synergies | $5,700 | N/A | $5,700 | N/A | | Payout Percentage | 100.0% | N/A | 100.0% | N/A |
Compensation Performance Targets & Payout Percentages
Compensation Performance Targets & Payout Percentages (TestEquity Operating Company) The 2024 AIP financial performance measure targets and payout percentages for the TestEquity Operating Company were as follows (dollars in thousands):
Compensation Performance Targets & Payout Percentages
| | | 2024 AIP Performance Targets | | | | | Actual Results | Threshold | Target | Maximum | | Adjusted EBITDA | $55,481 | $69,929 | $77,366 | $81,234 | | Payout Percentage | —% | 50.0% | 100.0% | 125.0% | | Adjusted Net Sales | $770,395 | $854,551 | $880,980 | $907,409 | | Payout Percentage | —% | 50.0% | 100.0% | 125.0% | | Working Capital | 23.2% | 23.50% | 23.00% | 22.50% | | Payout Percentage | 74.0% | 50.0% | 100.0% | 125.0% | | DSG Equity Value | 4.90% | 20.00% | 25.00% | 35.00% | | Payout Percentage | —% | 50.0% | 100.0% | 125% |
Q4 EBITDA Incentive Program
Q4 EBITDA Incentive Program Due to a number of factors, including softer overall economic conditions, continual sales transformation activities, slower recovery for test and measurement demand, and disruption to the government business facing the Company during 2024, we reassessed the total cash compensation program that had been previously approved by the Board for our broad-based employees and executives. Accordingly, the Board amended the compensation packages and award structure related to management's total cash compensation program as approved at the start of 2024 and established an opportunity to earn a portion of their opportunity based on the respective operating company performance against Adjusted EBITDA for the 4th quarter of 2024. This resulted in an additional payment of $19,922 to Mr. Frazee and is included in the 2024 AIP Payout table.
2024 AIP – Performance Results and AIP Bonus Payments
2024 AIP – Performance Results and AIP Bonus Payments The actual financial results as compared to the performance goals resulted in 2024 AIP payouts equal to 0% for Messrs. Knutson and Lanuza, 58.8% for Mr. Connors, 21.1% for Mr. Frazee, and 12.2% of the aggregate target award opportunity for all NEOs. Upon the conclusion of the year, the Board assessed the performance of the NEO team and provided additional incentive payments to recognize their efforts in driving strategic initiatives, additional support provided to integrate acquisitions made during the year and to drive improved results in 2024. These payments are not included in the table below; however, the information is disclosed in the Summary Compensation Table on page 49.
2024 AIP – Performance Results and AIP Bonus Payments
| | 2024 AIP Payout | | | | Target Payout | Actual Payout | | J. Bryan King (1) | $— | $— | | Ronald J. Knutson | 420,000 | — | | Robert H. Connors | 205,000 | 120,501 | | Russell S. Frazee (2) | 318,750 | 67,097 | | Cesar A. Lanuza | 600,000 | — |
2024 AIP – Performance Results and AIP Bonus Payments
(1) Mr. King is not an active participant in the AIP plan and does not accept cash incentives based on performance. (2) Mr. Frazee's 2024 AIP payout is inclusive of a payout of $19,922 under the Q4 EBITDA Incentive Program as described above.
Equity-Based Incentives/Long-Term Incentive Plan ("LTIP")
Equity-Based Incentives/Long-Term Incentive Plan ("LTIP")
Equity-Based Incentives
Equity-Based Incentives In 2024, the primary focus of the long-term incentive program continued to focus on equity awards primarily granted in the form of non-qualified stock options that were significantly "out of the money" at grant and will only realize value in the event of significant appreciation in the Company's stock price. We also continue to utilize RSUs as a retention tool as appropriate. Senior executives leading the other operating companies prior to the merger date are entitled to equity-based incentives that are separate and apart from the equity awards described herein. Our equity award program is the primary vehicle for offering long-term incentives to our NEOs and other eligible executives. We grant incentive equity awards pursuant to the Distribution Solutions Group, Inc. Equity Compensation Plan, as amended, which was last approved by our stockholders in 2022. We are increasingly emphasizing for our NEOs, and other eligible executives, the grant of non-qualified stock option awards, which have value only to the extent, if any, that our stock price increases following their grant. Accordingly, all equity awards granted to our NEOs after the strategic combination of DSG were in the form of non-qualified stock option awards, with the exception of an RSU grant to Mr. Knutson in 2023 and Mr. Lanuza in 2024, as described below. As a result, a significant portion of our NEOs’ total compensation is entirely at risk, depending on long-term stock price performance. Mr. Lanuza Equity Grant In addition to the non-qualified stock options granted as part of Mr. Lanuza’s employment agreement dated as of April 4, 2022, Mr. Lanuza was granted 100,000 RSUs on June 3, 2024. One-fifth of the award shall vest on each of June 3, 2025, June 3, 2026, June 3, 2027, June 3, 2028 and June 3, 2029 contingent upon Mr. Lanuza’s continued employment through each date. RSUs were granted to Mr. Lanuza as a retention incentive, which are aligned to the long-term interests of stockholders by rewarding him for the Company’s share price change. Mr. Connors' Equity Incentives Prior to the merger of Gexpro Services with the Company in 2022, Gexpro Services was controlled by 301 HW Opus Investors, LLC (“Gexpro Services Stockholder”), a portfolio company and affiliate of LKCM Headwater Investments III, L.P. (“HW3”). In connection with HW3’s acquisition of Gexpro Services in 2020, HW3 entered into an operating agreement for Gexpro Services Stockholder with, among others, members of Gexpro Services’ management team, including Mr. Connors. The operating agreement and other ancillary documents provided for the issuance of equity interests in Gexpro Services Stockholder to members of Gexpro Services’ management, which equity interests were subject to certain time-based and performance-based vesting hurdles. As of the date hereof, Mr. Connors has satisfied all of the time-based vesting hurdles associated with his equity grant. Mr. Connors' equity grant in Gexpro Services Stockholder is also subject to performance-based vesting hurdles, which vesting hurdles have not been satisfied to date. The performance-based vesting hurdles are tied to HW3 achieving certain investment returns based on multiples of invested capital in connection with any liquidity event or similar change-of-control transaction by Gexpro Services Stockholder. As a result of Gexpro Services' merger with the Company, Mr. Connors’ equity incentives are indirectly tied to the value of the Company’s common stock, as Gexpro Services Stockholder’s principal asset is the shares of Company common stock it received in connection with the merger, including the subsequent issuance of shares of Company common stock pursuant to the earnout provisions of the merger agreement. Any amounts ultimately paid by Gexpro Services Stockholder to its members, including HW3 and Mr. Connors, will not be borne by the Company’s stockholders as any such amounts will be paid by Gexpro Services Stockholder in accordance with the terms and provisions of its operating agreement. Mr. Frazee's Equity Incentives Prior to the merger of TestEquity with the Company in 2022, TestEquity was controlled by LKCM TE Investors, LLC (“TestEquity Stockholder”), a portfolio company and affiliate of LKCM Headwater Investments II, L.P. and LKCM Headwater II Sidecar Partnership, L.P. (collectively, “HW2”). In connection with HW2’s acquisition of TestEquity in 2018, HW2 entered into an operating agreement for TestEquity Stockholder with, among others, members of TestEquity’s management team, including Mr. Frazee. The operating agreement and other ancillary documents provided for the issuance of equity interests in TestEquity Stockholder to members of TestEquity’s management, which equity interests were subject to certain time-based and performance-based vesting hurdles. As of the date hereof, Mr. Frazee has satisfied the substantial majority of the time-based vesting hurdles associated with his equity grant. Mr. Frazee’s equity grant in TestEquity Stockholder is also subject to performance-based vesting hurdles, which vesting hurdles have not been satisfied to date. The performance-based vesting hurdles are tied to HW2 and other members of TestEquity Stockholder achieving in excess of a certain distribution threshold in connection with any liquidity event or similar change-of-control transaction by TestEquity Stockholder. As a result of TestEquity's merger with the Company, Mr. Frazee’s equity incentives are indirectly tied to the value of Company common stock, as TestEquity Stockholder’s principal asset is the shares of the Company common stock it received in connection with the merger, including the subsequent issuance of shares of Company common stock pursuant to the earnout provisions of the merger agreement. Any amounts ultimately paid by TestEquity Stockholder to its members, including HW2 and Mr. Frazee, will not be borne by the Company’s stockholders as any such amounts will be paid by TestEquity Stockholder in accordance with the terms and provisions of its operating agreement.
Equity Compensation
Equity Compensation Mr. King did not receive any equity compensation for his services as President & CEO of the Company because he elected not to receive any form of equity compensation for his services.
Pay vs. Performance Table
Pay vs. Performance Table As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation and our financial performance for each of the last three completed calendar years. In determining the “compensation actually paid” to our NEOs, we are required to make various adjustments to amounts that have been previously reported in the Summary Compensation Table ("SCT") in previous years, as the SEC’s valuation methods for this section differ from those required in the SCT. The table below summarizes compensation values both previously reported in our SCT, as well as the adjusted values required in this section for the 2022, 2023 and 2024 calendar years.
Pay vs. Performance Table
| | | | | | | | Value of Initial Fixed $100 Investment Based on | | | | | Year | SCT Total for PEO (1) | Compensation Actually Paid to PEO (1) | SCT Total for PEO (2) | Compensation Actually Paid to PEO (2) | Average SCT Total for Non-PEO NEOs (3) | Average Compensation Actually Paid to Non-PEO NEOs (3) | Total Shareholder Return (4) | DSG Peer Group Total Shareholder Return (4) | Net Income (5) | Adjusted EBITDA (5) | | 2024 | $— | $— | $— | $— | $1,390,124 | $1,407,286 | $125.6 | $169.6 | $(7,332)(6) | $175,257(6) | | 2023 | — | — | — | — | 1,990,077 | 4,474,898 | 115.3 | 126.9 | (8,967)(6) | 157,036(6) | | 2022 | — | — | 211,021 | 192,805 | 1,904,708 | 2,046,997 | 67.3 | 87.7 | 7,406(7) | 123,028(7) |
Pay vs. Performance Table
(1) Represents Mr. King who was elected as PEO effective May 1, 2022. Mr. King does not receive any compensation in connection with his role. (2) Represents Mr. DeCata and his role as PEO through his resignation date effective May 1, 2022. (3) Represents the following NEOs for each year: •2022: Messrs. Knutson and Lanuza. •2023: Messrs. Knutson and Lanuza. •2024: Messrs. Knutson, Connors, Frazee and Lanuza. (4) The values disclosed in this column represent the measurement period value of an initial investment of $100 in our units and the DSG Peer Group as of December 31, 2021, and then valued again on each of December 31, 2022, December 31, 2023 and December 31, 2024.The returns of each company in the peer group have been weighted to reflect their market capitalization. (5) Net income and Adjusted EBITDA are shown in $000s. (6) DSG consolidated operating results, including the results of acquisition activity subsequent to the date of acquisition. (7) Includes the operating results of TestEquity and Gexpro Services for the full year, as well as the operating results of Lawson subsequent, but not prior to the April 1, 2022 merger date, in accordance with GAAP accounting guidance for reverse acquisitions, as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation
PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation As discussed, Mr. King does not receive any compensation from the Company in his role as President & CEO. As such, there is not a reconciliation to compensation actually paid.
Average Non-PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation
Average Non-PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation
Average Non-PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation
| Year | Salary | Bonus and Non-Equity Incentive Compensation | Other Compensation (1) | SCT Table Total | Deductions from SCT Total (2) | Additions to SCT Total (3) | Compensation Actually Paid to Non-PEO NEOs | | 2024 | $482,224 | $52,024 | $19,415 | $1,390,124 | $801,500 | $818,662 | $1,407,286 |
Average Non-PEO Summary Compensation Table Total to Compensation Actually Paid Reconciliation
(1) This column reflects “All Other Compensation” reported in the SCT for each year shown. (2) This column reflects the aggregate grant date fair value of equity-based awards granted each year as reported in the Stock Awards and SPR/Option Awards columns of the SCT for the applicable year, calculated in accordance with FASB ASC Topic 718. We do not sponsor or maintain any defined benefit pension plans and therefore, no deduction was made related to pension value. (3) This column reflects the value of equity-based awards calculated in accordance with Item 402(v) of Regulation S-K as required pursuant to SEC rules and based on the Company's closing stock price on December 31, 2024 (the last trading day of the year) of $34.40. Compensation actually paid is determined by taking the “Total Compensation” column amount from the SCT for each covered fiscal year and adjusting as follows for our PEO and Non-PEO Named Executive Officers, respectively. No adjustments are provided for Mr. King as PEO since he does not receive any compensation with respect to his service to the Company.
Adjustments to Determine Average Compensation Actually Paid for Non-PEO NEOs
Adjustments to Determine Average Compensation Actually Paid for Non-PEO NEOs
Adjustments to Determine Average Compensation Actually Paid for Non-PEO NEOs
| Covered Fiscal Year | 2024 | | Average SCT Total for Non-PEO NEOs | $1,390,124 | | Pension Adjustments (1) | | | Subtract “Change in Actuarial Present Value” reported in the SCT for the covered fiscal year | — | | Add pension value attributable to covered fiscal year’s “service cost” | — | | Add pension value attributable to the entire “prior service cost” of benefits granted (or credit for benefits reduced) in a plan amendment made in the covered fiscal year attributable to prior service periods | — | | Equity Adjustments (2) | | | Subtract fair value (as of grant date) reported in the “Stock Awards” and “Option Awards” columns in the SCT for the covered fiscal year | 801,500 | | Add fair value (as of end of year) of equity awards granted during the covered fiscal year that remain unvested as of year end | 860,000 | | Add fair value (as of vesting date) of equity awards granted during the covered fiscal year that vest during the covered year | — | | Add the change in fair value from the prior year-end to the covered fiscal year-end for equity awards granted in prior fiscal years that were outstanding and unvested at the end of the prior year | (45,348) | | Add the change in fair value from the prior year-end to covered year-end for equity awards granted in prior fiscal years that vested during covered fiscal year | 4,010 | | Subtract fair value (as of end of prior year) for equity awards granted in prior fiscal years that were forfeited during covered fiscal year | — | | Add incremental fair value (as of modification date) of equity awards modified during covered fiscal year | — | | Add dividends or other earnings paid on equity awards during covered fiscal year prior to vesting date of award that are not otherwise included in the total compensation for the covered fiscal year | — | | Total Adjustments | $1,407,286 |
Adjustments to Determine Average Compensation Actually Paid for Non-PEO NEOs
(1) We do not sponsor or maintain any defined benefit pension plans and therefore, no adjustments were made related to pension value. (2) The fair value or incremental fair value of all incentive equity awards is determined in accordance with ASC 718, “Compensation – Stock Compensation.” The assumptions used for the fair value valuations in this table were completed using assumptions that did not differ materially from those assumptions used to determine the grant date fair value of our equity awards reflected in the Summary Compensation Table. In order to properly value the option awards using the Black-Scholes model we use for such grant date fair value, we made appropriate adjustments to the grant date assumptions to reflect changes in the historical and implied stock price volatility, expected life (including remaining vesting periods, remaining expiration periods and option gain levels), dividend yield and risk-free interest rates as of each measurement date. The value of outstanding performance-based awards in the covered fiscal year is based upon the probable outcome of the performance conditions as of the last day of the fiscal year. As shown in the tables above, changes in the market price of our granted equity awards following the date of the grant impacts the level of compensation that is actually paid to the NEOs participating in the LTIP. To assist in understanding the changes in value of the equity awards reflected above, the following table reflects the value of one share of our common stock as of each of the following dates. If that date reflects a non-business day, the value reported is the last trading date of the applicable calendar year. As shown, the annual stock price appreciation from year-ending 2023 to 2024 is 9.0% and the 3-year appreciation from year-ending 2021 to 2024 is 25.6%. (1) Stock price reflects the post-Stock Split adjusted price level. (2) Stock price reflects the Lawson year-end stock price prior to the DSG merger date. (3) Stock price reflects the merger date of the operating companies that comprise DSG.
Required Tabular Disclosure of Most Important Measures to Determine FY 2024 CAP
| Most Important Performance Measures | | Adjusted EBITDA | | Adjusted Net Sales | | Working Capital | | DSG Equity Value |
Relationship between CAP and the Company's and the DSG Peer Group's Cumulative TSR over FY 2022 - 2024
Relationship between CAP and the Company's and the DSG Peer Group's Cumulative TSR over FY 2022 - 2024
Other NEOs Granted Pay Opportunity, Realizable and Realized Compensation
Other NEOs Granted Pay Opportunity, Realizable and Realized Compensation The Summary Compensation Table on page 49 reports the grant date fair value of equity awards in accordance with ASC 718 measurement guidance – the “granted pay opportunity.” We believe that understanding the actual value of equity awards granted to our NEOs provides greater insight into the alignment with the Company’s retention and motivation objectives. The chart below illustrates the aggregate realizable and realized compensation for Messrs. Knutson and Lanuza over the three-year performance period and the 2024 realizable and realized compensation for Messrs. Connors and Frazee. Realizable compensation is lower than the granted pay opportunity due to a majority of the granted and outstanding awards consisting of non-qualified stock options that are "out of the money" and will only realize value in the event of further appreciation in the Company's stock price. (1) The 2022-2024 aggregate granted pay opportunity, realizable and realized compensation for Mr. Knutson covers the entire performance cycle, as well as from Mr. Lanuza's hire date of April 4, 2022 through December 31, 2024. The granted pay opportunity for Messrs. Connors and Frazee is based on 2024 compensation. (2) In the chart above, “Granted Pay Opportunity” equals the sum of the three prior years (i.e., 2022-2024): (i) salary (as reported in the SCT on page 49), (ii) target award opportunity of AIP, and (iii) the grant date fair-value of LTIP awards as reported in the SCT. (3) In the chart above, “Realizable Pay” equals the sum of the three prior years: (i) salary earned, (ii) AIP earned, and (iii) the value of all earned long-term incentive awards for the completed performance cycle, as well as unvested LTIP awards for the ongoing performance cycle. All unvested long-term incentive awards are valued based on our stock price as of December 31, 2024 (the last trading day of the year) of $34.40. (4) In the chart above, “Realized Pay” equals the sum of the three prior years: (i) salary earned, (ii) AIP earned, and (iii) the value of all earned LTIP awards for the completed performance cycle. (5) The chart above does not include the equity incentives granted to Messrs. Frazee and Connors described in the "Equity-Based Incentives/Long-Term Incentive Plan ("LTIP")" section.
Corporate Governance Practices Impacting Executive Compensation
Corporate Governance Practices Impacting Executive Compensation The continued focus on our overall pay-for-performance philosophy is supported by the Company's compensation governance framework, which is demonstrated by the following policies: •Anti-Hedging Policy - Our Anti-Hedging policy prohibits our directors, NEOs and other key executive officers from hedging the economic interest in the Company securities that they hold (as described in more detail under "Anti-Hedging Policy" on page 22). •Clawback Policy - Our Clawback Policy protects the Company in the event that the Company is required to prepare an accounting restatement (as described in more detail under "Clawback Policy" on page 22). •No Gross-Up on Change-in-Control Payments - We do not pay tax gross-ups for change in control ("CIC") payments under Code Section 280G. •Independent Compensation Consultant - The Compensation Committee's engagement of an independent compensation consultant that does not provide any services to management and that had no prior relationship with management prior to the engagement. •Compensation Practices Not Permitted: ◦A supplemental executive retirement plan (SERP); ◦Single-trigger golden parachute payments; ◦Perquisites for former or retired executives; ◦Personal use of corporate aircraft, personal security systems maintenance and/or installation, car allowance, or executive life insurance; and ◦Payments for cause terminations or resignations other than for good reason following a change-in-control.
Separation and Change-in-Control
Separation and Change-in-Control Employment and Change-in-Control Agreements Messrs. Lanuza and Knutson have employment agreements with Lawson as further described in the "Employment Agreements" section on page 46. Employment and change-in-control contracts help attract executives to work for the Company and its subsidiaries by protecting them from certain risks, such as position elimination in the event of a business reorganization or a change-in-control or sale of the Company or any of its subsidiaries. The executives or their heirs may receive benefits per the terms of their employment agreement in case of the executive's disability or death.
Robert H. Connors
Robert H. Connors Mr. Connors is employed under an employment agreement dated as of December 30, 2019, as the President and Chief Executive Officer of Gexpro Services. Pursuant to the agreement, Mr. Connors is entitled to receive a base salary of $400,000 per annum and is eligible for future merit increases as appropriate. The base salary may be increased by the Compensation Committee of the Company's Board of Directors. Mr. Connors is employed on an "at will" basis, and his employment may be terminated at any time at the option of GexPro Services or Mr. Connors, on the terms and subject to the conditions set forth in the agreement. The agreement provides that he is eligible for a base salary and a performance-based annual incentive bonus. In the event GexPro Services terminates Mr. Connors without Cause or if he terminates his employment for Good Reason (each as defined in the employment agreement), Mr. Connors (or if Mr. Connors dies while employed by the Company and prior to his attainment of age 65, his designated beneficiaries) will receive his then current base salary for one year and coverage under GexPro Services' health benefit plans for an additional one year following termination, at his or the beneficiaries’ cost. Mr. Connors has agreed not to compete with GexPro Services, its subsidiaries and other entities in which GexPro Services and its subsidiaries have an ownership interest during the period of his employment and for a period of twelve months thereafter. Mr. Connors is also a party to an equity incentive operating agreement entered into prior to the date of the Company's merger with Gexpro Services (the "Connors ME Agreement"). An overview of the Connors ME Agreement and the equity interests that Mr. Connors are entitled to are described in the CD&A.
Russell S. Frazee
Russell S. Frazee Mr. Frazee is employed under an amended and restated employment agreement dated as of August 6, 2018, as the President and Chief Executive Officer of TestEquity. Pursuant to the agreement, Mr. Frazee is entitled to receive a base salary of $250,000 per annum and is eligible for future merit increases as appropriate. The base salary may be increased by the Compensation Committee of the Company's Board of Directors. Mr. Frazee is employed on an "at will" basis, and his employment may be terminated at any time at the option of TestEquity or Mr. Frazee, on the terms and subject to the conditions set forth in the agreement. The agreement provides that he is eligible for a base salary and a performance-based annual incentive bonus. In the event TestEquity terminates Mr. Frazee without Cause or if he terminates his employment for Good Reason (each as defined in the employment agreement), Mr. Frazee will receive his then current base salary for six months, a pro rata bonus and coverage under TestEquity's health benefit plans until the earliest of: (i) six months after the date of his termination of employment; (ii) the date he is no longer eligible for benefits under COBRA; or (iii) the date he obtains other employment that offers medical benefits. Mr. Frazee has agreed not to directly or indirectly solicit any employee who was employed by TestEquity or its subsidiaries for a period of twelve months or eighteen months depending upon the type of termination as defined within his agreement. Mr. Frazee is also a party to an equity incentive operating agreement entered into prior to the date of the Company's merger with TestEquity (the "Frazee ME Agreement"). An overview of the Frazee ME Agreement and the equity interests that Mr. Frazee are entitled to are described in the CD&A.
2024 SUMMARY COMPENSATION TABLE
2024 SUMMARY COMPENSATION TABLE The following table sets forth the compensation for the last three fiscal years awarded to or earned by individuals who served during 2024 as the Company's CEO and each of the Company's four other most highly compensated executive officers in 2024.
2024 SUMMARY COMPENSATION TABLE
| | | | | | | SPR/ | Non-Equity | | | | | | | | | Stock | Option | Incentive Plan | All Other | | | Name and Principal | | | Salary | Bonus | Awards | Awards | Compensation | Compensation | | | Position | | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | Total ($) | | J. Bryan King (7) | | 2024 | — | — | — | — | — | — | — | | | Chairman, President and Chief Executive Officer | 2023 | — | — | — | — | — | — | — | | | | 2022 | — | — | — | — | — | — | — | | Ronald J. Knutson | | 2024 | 493,125 | 40,000 | — | — | — | 25,110 | 558,235 | | | Executive Vice President, Chief Financial Officer and Treasurer | 2023 | 470,625 | — | 406,600 | 1,441,350 | 393,446 | 23,848 | 2,735,869 | | | | 2022 | 423,943 | — | — | — | 383,749 | 21,218 | 828,910 | | Robert H. Connors | | 2024 | 410,769 | 20,500 | — | — | 120,501 | 12,200 | 563,970 | | | President and Chief Executive Officer, Gexpro Services | 2023 | — | — | — | — | — | — | — | | | | 2022 | — | — | — | — | — | — | — | | Russell S. Frazee | | 2024 | 425,000 | 39,844 | — | — | 67,097 | 13,800 | 545,741 | | | President and Chief Executive Officer, TestEquity | 2023 | — | — | — | — | — | — | — | | | | 2022 | — | — | — | — | — | — | — | | Cesar A. Lanuza | | 2024 | 600,000 | 60,000 | 3,206,000 | — | — | 26,551 | 3,892,551 | | | President and Chief Executive Officer, Lawson | 2023 | 600,000 | — | — | — | 614,760 | 29,526 | 1,244,286 | | | | 2022 | 448,079 | — | — | 1,993,250 | 519,379 | 19,798 | 2,980,506 |
2024 SUMMARY COMPENSATION TABLE
(1) The amounts listed in this column represent the base salary paid to the NEOs in 2024. (2) The amounts listed represent discretionary bonus payments paid in 2025 to recognize their efforts in driving strategic initiatives, additional support provided to integrate acquisitions made during the year, and to drive improved results in 2024. (3) The amounts reported in this column for 2024 reflect the aggregate grant date fair value of RSUs awarded under the Distribution Solutions Group, Inc. Equity Compensation Plan, as amended, granted during 2024. The grant date fair value of the RSUs has been determined in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the RSUs, please see Note 10 to our consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. (4) The amounts reported in this column represent the grant date fair value of nonqualified stock options under the Distribution Solutions Group, Inc. Equity Compensation Plan, as amended, granted during 2022 and 2023. The grant date fair value of the options has been determined in accordance with ASC Topic 718. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the options, please see Note 10 to our consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. (5) Amounts represent AIP bonuses earned (rather than paid) in the respective year. The AIP bonuses awarded in 2024 reported above were paid out in 2025. For a discussion of our AIP, see the subsections of this proxy statement above entitled “Non-Equity (Annual) Incentive Plan ("AIP")”. (6) See All Other Compensation table for details regarding the amounts in this column for 2024. (7) Mr. King does not receive any compensation in connection with his roles of Chairman, President & CEO.
GRANTS OF PLAN BASED AWARDS IN 2024
GRANTS OF PLAN BASED AWARDS IN 2024
GRANTS OF PLAN BASED AWARDS IN 2024
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock (#) | Grant Date Fair Value of Stock ($) | | | Named Executive Officer | Grant Date | Threshold ($) | Target ($) | Maximum ($) | | | | J. Bryan King (1) | | | | | | | | | Ronald J. Knutson | | | | | | | | | | 2024 AIP (2) | | 210,000 | 420,000 | 609,000 | | | | Robert H. Connors | | | | | | | | | | 2024 AIP (2) | | 102,500 | 205,000 | 248,563 | | | | Russell S. Frazee | | | | | | | | | | 2024 AIP (2) | | 159,375 | 318,750 | 398,438 | | | | Cesar A. Lanuza | | | | | | | | | | 2024 AIP (2) | | 300,000 | 600,000 | 870,000 | | | | | 2024 RSU Grant (3) | 6/3/2024 | | | | 100,000 | 3,206,000 |
GRANTS OF PLAN BASED AWARDS IN 2024
(1) Mr. King is not an active participant in the AIP plan and does not accept cash incentives based on performance. (2) Reflects potential awards under the 2024 AIP. These awards were paid in February 2025 for Lawson and March 2025 for TestEquity and Gexpro Services. (3) RSUs were granted to Mr. Lanuza as a retention incentive which are aligned to the long-term interests of stockholders by rewarding him for Lawson's share price change.
Narrative Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table
Narrative Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table See above for a detailed summary of our “Annual Incentive Plan” and “Equity-Based Incentives/Long-Term Incentive Plan ("LTIP")”, including the general vesting conditions applicable to Mr. Lanuza’s stock option award. For a description of the effect of a termination of employment or change of control on the vesting or exercisability of the NEOs’ incentives, please see “Summary Table of Potential Payments Upon Termination or Change in Control.”
OUTSTANDING EQUITY AWARDS ON DECEMBER 31, 2024
OUTSTANDING EQUITY AWARDS ON DECEMBER 31, 2024
OUTSTANDING EQUITY AWARDS ON DECEMBER 31, 2024
| | Stock Performance Rights and Stock Option Awards (1) | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Options/SPRs | | Options/SPR Exercise Price ($) | Options/ SPR Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($)(2) | | Named Executive Officer | Exercisable (#) | Unexercisable (#) | | | | | | J. Bryan King (3) | | | | | | | | Ronald J. Knutson | 17,484 | — | 12.35(4) | 12/31/2025 | | | | | 10,034 | — | 15.27(5) | 12/31/2026 | | | | | 38,400 | 57,600 | 27.50(6) | 1/27/2033 | | | | | 12,000 | 18,000 | 40.00(6) | 1/27/2033 | | | | | 24,000 | 36,000 | 55.00(6) | 1/27/2033 | | | | | 24,000 | 36,000 | 70.00(6) | 1/27/2033 | | | | | | | (7) | | 12,000 | 412,800 | | Robert H. Connors (3) | | | | | | | | Russell S. Frazee (3) | | | | | | | | Cesar A. Lanuza | 40,000 | 160,000 | 27.50(8) | 4/12/2032 | | | | | 20,000 | 30,000 | 40.00(8) | 4/12/2032 | | | | | 40,000 | 60,000 | 55.00(8) | 4/12/2032 | | | | | 40,000 | 60,000 | 70.00(8) | 4/12/2032 | | | | | | | (9) | | 100,000 | 3,440,000 |
OUTSTANDING EQUITY AWARDS ON DECEMBER 31, 2024
(1) The data in these columns includes SPR grants, which have similar characteristics to options as they are tied to performance of the Company’s stock price but are settled in cash upon exercise. (2) RSUs are reflected at the closing stock price at December 31, 2024 (the last trading day of the year) of $34.40. (3) Messrs. King, Connors and Frazee do not have any outstanding equity awards payable by the Company as of December 31, 2024. (4) Represents the SPRs granted on 1/8/18 as part of the 2018-2020 LTIP, which vested on 12/31/2020. (5) Represents the SPRs granted on 3/5/19 as part of the 2019-2021 LTIP, which cliff vest on 12/31/2021 subject to the recipient’s continued employment with the Company. (6) Mr. Knutson was awarded an option to purchase 246,000 shares of Company common stock in connection with his employment agreement dated January 27, 2023. The options were granted as follows: (a) 96,000 of the options have an exercise price of $27.50, (b) 30,000 of the options have an exercise price of $40.00, (c) 60,000 of the options have an exercise price of $55.00 and (d) 60,000 of the options have an exercise price of $70.00. One-fifth of each tranche of options vest and became exercisable on the first, second, third, fourth and fifth anniversaries of the grant date. (7) Represents the RSUs granted on 1/27/23 as part of Mr. Knutson's employment agreement, which vest in one-fifth increments on the following dates: 1/27/2024, 4/1/2024, 4/1/2025, 4/1/2026 and 4/1/2027. (8) Mr. Lanuza was awarded an option to purchase 450,000 shares of Company common stock in connection with his employment agreement dated April 4, 2022. The options were granted as follows: (a) 200,000 of the options have an exercise price of $27.50, (b) 50,000 of the options have an exercise price of $40.00, (c) 100,000 of the options have an exercise price of $55.00 and (d) 100,000 of the options have an exercise price of $70.00. One-fifth of each tranche of options vest and became exercisable on the first, second, third, fourth and fifth anniversaries of the grant date. (9) Represents the RSUs granted on 6/3/24 to Mr. Lanuza, which vest annually in one-fifth increments starting on the first anniversary date of the grant.
SPR/OPTION EXERCISES AND STOCK VESTED IN 2024
SPR/OPTION EXERCISES AND STOCK VESTED IN 2024 The following table represents the number of SPRs exercised in 2024, as well as the number of shares acquired in 2024 upon vesting related to Mr. Knutson's January 27, 2023 award agreement.
SPR/OPTION EXERCISES AND STOCK VESTED IN 2024
| | SPR Awards | | Stock Awards | | | Named Executive Officer | Number of shares acquired on vesting (#) | Value realized on exercise ($) (1) | Number of shares acquired on vesting (#) | Value realized on vesting ($) (2) | | J. Bryan King | — | — | — | — | | Ronald J. Knutson | 15,966 | 369,852 | 8,000 | 268,520 | | Robert H. Connors | — | — | — | — | | Russell S. Frazee | — | — | — | — | | Cesar A. Lanuza | — | — | — | — |
SPR/OPTION EXERCISES AND STOCK VESTED IN 2024
(1) Represents the aggregate dollar value realized upon exercise of SPRs (2) Represents the aggregate dollar value realized upon vesting of the RSU awards related to Mr. Knutson's January 27, 2023 award agreement, 4,000 shares vested on each of January 27, 2024 and April 1, 2024 respectively.
NON-QUALIFIED DEFERRED COMPENSATION
NON-QUALIFIED DEFERRED COMPENSATION Under the Lawson executive deferral plan, certain executives, including the Lawson NEOs, may defer portions of their base salary, bonus, and LTIP award amounts. Deferral elections are made by eligible executives by the end of the year proceeding the plan year for which the election is made. A Lawson executive may defer a minimum of $2,000 aggregate of base salary, bonus and/or LTIP award. The maximum deferral amount for any plan year is 80% of base salary, 100% of bonus and 100% of LTIP amounts. Lawson also makes a contribution to the 2004 Deferral Plan equal to the amount the executives, including NEOs, would have received under the applicable tax-qualified 401(k) plan, but for Internal Revenue Code limits. The investment options available to an executive include funds generally similar to or as available through its qualified retirement plan. Lawson does not provide for any above market return for participants in the 2004 Executive Deferral Plan. A Lawson executive may elect to receive distributions under three scenarios, receiving benefits in either a lump sum or in annual installments up to five years in the event of termination and up to fifteen years in the event of death or disability. Upon demonstrating an unforeseeable financial emergency and receipt of approval from the Compensation Committee, a Lawson executive may interrupt deferral or be allowed to access funds in his deferred compensation account.
NON-QUALIFIED DEFERRED COMPENSATION
| Named Executive Officer | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/Distributions in Last FY ($) | Aggregate Balance at Last FYE ($)(3) | | J. Bryan King | — | — | — | — | — | | Ronald J. Knutson | 8,000 | 6,825 | 361,225 | — | 3,187,155 | | Robert H. Connors | — | — | — | — | — | | Russell S. Frazee | — | — | — | — | — | | Cesar A. Lanuza | — | 10,200 | 795 | — | 29,634 |
NON-QUALIFIED DEFERRED COMPENSATION
(1) Represents contributions in 2025 pertaining to 2024 earnings. (2) Represents profit sharing and 401(k) contributions in excess of the 2024 IRS annual compensation limit of $345,000. (3) Amounts reported at the beginning of the fiscal year were $0, $2,811,105, $0, $0 and $18,639 for Messrs. King, Knutson, Connors, Frazee and Lanuza.
SUMMARY TABLE OF POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
SUMMARY TABLE OF POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL The following table outlines potential payments to our NEOs under existing contracts, agreements, plans or arrangements for various scenarios under termination or a CIC, assuming a December 31, 2024 termination date and the closing price of our common stock of $34.40 on that date. The termination benefits are further described in the foregoing Compensation Agreements section. Payments to Messrs. Knutson and Lanuza may be reduced if it would result in the imposition of an excise tax under Code Section 280G and the reduction would result in the NEO receiving a greater amount net of tax payment. The actual amounts payable can only be calculated at the time of the event. This table only reflects amounts with respect to contracts and agreements that are beyond those benefits generally available to all salaried employees. In addition, upon termination, payments due to executives include distribution of any balance in the Lawson deferred compensation plan, any accrued and unpaid vacation and all other benefits that have been accrued but not yet paid. In order for the NEOs to receive the acceleration of benefits listed below upon a CIC, termination of employment is required within a designated time period after the occurrence of a CIC. This approach is commonly referred to as a "double trigger" acceleration upon a CIC.
SUMMARY TABLE OF POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
| Named Executive Officer | | Termination After a Change of Control | Termination Without Cause by DSG | Voluntary Termination for Good Reason by Executive | Death | Disability | | J. Bryan King (1) | | | | | | | | Ronald J. Knutson (2)(3) | | | | | | | | | Base Salary | $1,050,000 | $1,050,000 | $1,050,000 | $1,050,000 | $1,050,000 | | | Annual Incentive Plan | — | — | — | — | — | | | 2023 RSUs (4) | 412,800 | 412,800 | 412,800 | 412,800 | 412,800 | | | 2023 Options (5) | 397,440 | 99,541 | 99,541 | 99,541 | 99,541 | | | Medical Benefits | 32,162 | 32,162 | 32,162 | 32,162 | 32,162 | | | Cutback Deduction (6) | — | — | — | — | — | | | Total | $1,892,402 | $1,594,503 | $1,594,503 | $1,594,503 | $1,594,503 | | Robert H. Connors (7) | | | | | | | | | Base Salary | $440,000 | $440,000 | $440,000 | $— | $— | | | Annual Incentive Plan | — | — | — | — | — | | | Medical Benefits | — | — | — | — | — | | | Cutback Deduction | — | — | — | — | — | | | Total | $440,000 | $440,000 | $440,000 | $— | $— | | Russell S. Frazee (8) | | | | | | | | | Base Salary | $212,500 | $212,500 | $212,500 | $— | $— | | | Annual Incentive Plan | — | — | — | — | — | | | Medical Benefits | 7,308 | 7,308 | 7,308 | — | — | | | Cutback Deduction | — | — | — | — | — | | | Total | $219,808 | $219,808 | $219,808 | $— | $— | | Cesar A. Lanuza (2)(9) | | | | | | | | | Base Salary | $1,200,000 | $1,200,000 | $1,200,000 | $— | $— | | | Annual Incentive Plan | — | — | — | — | — | | | 2023 Options (5) | 828,000 | 199,082 | — | 199,082 | 199,082 | | | 2024 RSUs (4) | 3,440,000 | 464,510 | — | 464,510 | 464,510 | | | Medical Benefits | 46,023 | 46,023 | 46,023 | 0 | 0 | | | Cutback Deduction (6) | (560,952) | — | — | — | — | | | Total | $4,953,071 | $1,909,614 | $1,246,023 | $663,592 | $663,592 |
SUMMARY TABLE OF POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
(1) Mr. King does not receive any compensation in connection with his roles of Chairman, President & CEO. (2) Termination payment does not include the payouts of deferred compensation of $3,187,155 and $29,634 due to Messrs. Knutson and Lanuza, respectively. These amounts are discussed above under the caption “Nonqualified Deferred Compensation”. (3) Pursuant to Mr. Knutson's employment agreement, severance includes two (2) times his 2024 salary, full acceleration of outstanding equity, and two (2) years of benefits continuance. (4) The value of accelerated RSUs are based on the Company's stock price as of December 31, 2024 ($34.40). (5) Calculated as the number of unvested options multiplied by the spread between the Company's stock price as of December 31, 2024 ($34.40) and the exercise prices of the outstanding awards. (6) Pursuant to the "better of" net payment terms upon a CIC in their respective employment agreements, Mr. Knutson would receive a full payment net of all taxes without a cut-back to preclude Sec. 4999 excise taxes. Mr. Lanuza would receive a payment cut-back to preclude Sec. 4999 excise taxes. (7) Pursuant to Mr. Connors' employment agreement, severance includes one (1) times his 2024 salary and one (1) year of benefits continuance. (8) Pursuant to Mr. Frazee's employment agreement, severance includes six (6) months of his 2024 salary and six (6) months of benefits continuance. (9) Pursuant to Mr. Lanuza's employment agreement, severance includes two (2) times his 2024 salary, full acceleration of outstanding equity, and two (2) years of benefits continuance.
PAY RATIO
PAY RATIO As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For 2024, our last completed fiscal year: •The annual total compensation of the median employee of our company (other than our CEO) was $67,605; and •As previously discussed, Mr. King does not receive any compensation in connection with his roles of Chairman, President & CEO Based on this information, for 2024 the pay ratio of the annual total compensation of Mr. King, our CEO, to the annual total compensation of our median employee was 0 to 1, as Mr. King does not receive any compensation in connection with his roles of Chairman, President & CEO. In determining the annual total compensation of our median employee, we took the following steps: (1) We determined that, as of December 31, 2024, our combined workforce included approximately 4,400 individuals, comprised of approximately 1,610 in sales and marketing, approximately 1,880 in operation and distribution and approximately 860 in management and administration. Approximately 1,740 individuals are within Lawson, 1,160 are within TestEquity, 740 are within Gexpro Services, and 710 are within Canada Branch Division. a.We selected December 31, 2024, which is within the last three months of 2024, as the date upon which we would identify the “median employee” because it enabled us to make such identification in a reasonably efficient manner. (2) To identify the “median employee” from our employee population, we compared the amount of base salary, bonus, paid time off, overtime, 401(k) Company contributions, profit sharing contributions and non-qualified deferred compensation Company contributions, as reflected in our payroll records for 2024. a.In making this determination, we annualized the compensation of any full-time employee who was hired in 2024 but did not work for us for the entire fiscal year. Since we do not widely distribute annual equity awards to our employees, such awards were excluded from our compensation measure. Less than 1% of our employees receive equity awards. (3) We identified our median employee using this total cash compensation measure, which was consistently applied to all our employees included in the calculation. Compensation paid in foreign currencies were converted to US dollars based on the average exchange rate in effect during the 2024 calendar year. (4) Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2024 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $67,605. There has been no change in our employee population or employee compensation arrangements since that median employee was identified that we believe would significantly impact our pay ratio disclosure.
DIRECTOR COMPENSATION IN 2024
DIRECTOR COMPENSATION IN 2024
Director Compensation
Director Compensation The Compensation Committee is responsible for reviewing director compensation and making adjustments to the structure when necessary to reflect material changes to the complexity of the Company. The Company's non-employee directors are eligible to receive an annual cash retainer of $75,000 (paid on a quarterly basis) for participating in the Board and Board committee meetings. Our non-employee directors also received a regular cycle annual RSU grant with a grant date fair value of $125,000 that cliff-vests upon the one-year anniversary of the date of grant. Directors' travel expenses for attending meetings are reimbursed by the Company. The Compensation Committee meets annually to review and approve director compensation. Director fees are pro-rated for periods of service less than a full year. The independent Lead Director and the Chairpersons of the respective Board committees are also eligible for cash retainers as follows:
Director Compensation
| Committee Chairperson | Additional Cash Retainer ($) | | Independent Lead Director | 50,000 | | Audit | 25,000 | | Compensation | 20,000 | | Nominating and Corporate Governance | 10,000 |
Director Compensation
The members of the respective Board committees are also eligible for the additional cash retainers as follows:
Director Compensation
| Committee Member | Additional Cash Retainer ($) | | Audit | 10,000 | | Compensation | 7,500 | | Nominating and Corporate Governance | 5,000 |
Director Compensation Table
Director Compensation Table The following table shows compensation earned in 2024 by non-employee directors.
Director Compensation Table
| Director | 2024 Fees Earned or Paid in Cash ($) | 2024 Stock Awards ($) (1) | 2024 Total ($) | | Andrew B. Albert (2) | 122,500 | — | 122,500 | | I. Steven Edelson | 162,500 | 125,000 | 287,500 | | Lee S. Hillman | 470,000 | 125,000 | 595,000 | | J. Bryan King (3) | — | — | — | | Mark F. Moon | 92,500 | 125,000 | 217,500 | | Bianca A. Rhodes | 90,000 | 125,000 | 215,000 | | M. Bradley Wallace (4) | — | — | — | | Robert S. Zamarripa | 92,500 | 125,000 | 217,500 |
Director Compensation Table
(1) Represents the grant date fair value of the RSUs under the Distribution Solutions Group, Inc. Equity Compensation Plan, as amended, for 2024 board service. The grant date fair value of the RSUs has been determined in accordance with ASC Topic 718. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the RSUs, please see Note 10 to our consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. As of December 31, 2024, each of our non-employee directors held 3,465 unvested RSUs, with the exception of J. Bryan King and M. Bradley Wallace, who did not receive any RSUs for their 2024 board service. (2) As previously disclosed, Mr. Albert did not stand for reelection at the 2024 Annual Meeting and his service as a member of the Board of Directors concluded on May 23, 2024. (3) J. Bryan King waived his right to the regular cycle annual RSU grant for 2024, as well as any director fees for 2024. (4) M. Bradley Wallace waived his right to the regular cycle annual RSU grant for 2024, as well as any director fees for 2024.