CompUSA 2011 Annual Report Download - page 17

Download and view the complete annual report

Please find page 17 of the 2011 CompUSA annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 125

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125

On May 9, 2011, following several meetings of the Executive Committee and after extensive discussions with Mr. Fiorentino and his counsel, the
Company announced that it had accepted the resignation of Mr. Fiorentino, and that it had executed an agreement with Mr. Fiorentino, effective May
6, 2011, under which Mr. Fiorentino surrendered certain assets to the Company valued at approximately $11 million at May 9, 2011: these assets
included the surrender of 1,130,001 shares of Systemax common stock and $480,000 in cash. The shares surrendered consisted of 580,001 shares of
fully vested unexercised stock options, 2) 100,000 shares of fully vested restricted stock awards and 3) 450,000 shares directly owned by Mr.
Fiorentino. The shares surrendered were valued at fair value on May 6, 2011 in the case of the stock options and restricted stock awards and at fair
value on May 12, 2011 in the case of the owned shares. The agreement also required Mr. Fiorentino to disclose his and his immediate family’s
personal assets; forfeit undisclosed assets discovered by the Company; disclose information regarding certain matters that led to his being notified of
the Company’s intent to terminate him; and to fully cooperate with the Company in the future. Mr. Fiorentino and the Company also exchanged
mutual general releases and nondisparagement commitments, and Mr. Fiorentino agreed to a 5 year noncompetition obligation. The $11 million
settlement value included a financial statement benefit to the Company related to the surrender of shares and cash payment of approximately $8.4
million which was recorded in the second quarter of 2011 under special (gains) charges, net of related legal and professional fees of approximately
$1.3 million for the quarter ended June 30, 2011 and $1.8 million for the first six months of 2011. The remainder of the settlement value,
approximately $2.6 million, was the intrinsic value of the fully vested unexercised stock options on the date of the settlement agreement for which
there is no financial statement impact. The amount of the settlement with Mr. Fiorentino was based on negotiation with him, and was not based on any
specific level or nature of damages incurred by the Company, and does not constitute restitution.
On June 21, 2011 Systemax Inc. received notice that the Securities and Exchange Commission (“SEC”) has initiated a formal investigation into the
matters discovered by the Audit Committee’s internal investigation. The Company is fully cooperating with the SEC in its formal investigation and
does not expect to comment further on developments related to this matter and disclaims any intention or obligation to update any of the information
contained herein except as required by law.
For the third and fourth quarters of 2011, $0.4 million and $0.6 million, respectively, of additional legal and professional fees were incurred related to
follow up of the completed investigation and ancillary matters, and for the first nine months of 2011 and for fiscal 2011 related fees totaled $2.2
million and $2.8 million, respectively. The Company expects to incur additional expenses related to this matter in future quarters in connection with
the ongoing follow up to the completed investigation of matters related to Mr. Fiorentino’s actions, providing cooperation to the SEC and in pursuing
related matters.
In addition, in April 2011, the Company also terminated the employment of Carl Fiorentino and Patrick Fiorentino (employees of the Company and
Gilbert Fiorentino's brothers), and Mr. Gerdy Carballos based on the determination that they had assisted in, participated in and/or had knowledge of
the improper activities. The Company also terminated the employment of Ms. Andrea Fongyee (assistant to Mr. Gilbert Fiorentino) in May 2011. In
January 2012, the Company commenced a lawsuit in Miami-Dade County Circuit Court in Florida against, among others, Carl Fiorentino, Patrick
Fiorentino, Andrea Fongyee and Gerdy Carballos, seeking recovery of damages incurred by the Company due to their actions.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Table of Contents
15