0001162893-12-000001.txt : 20120110 0001162893-12-000001.hdr.sgml : 20120110 20120110163354 ACCESSION NUMBER: 0001162893-12-000001 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20120110 DATE AS OF CHANGE: 20120110 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STABOSZ TIMOTHY J CENTRAL INDEX KEY: 0001162893 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: 1307 MONROE STREET CITY: LA PORTE STATE: IN ZIP: 46350 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: P&F INDUSTRIES INC CENTRAL INDEX KEY: 0000075340 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 221657413 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-39826 FILM NUMBER: 12520339 BUSINESS ADDRESS: STREET 1: 445 BROADHOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: (631)694-9800 MAIL ADDRESS: STREET 1: 445 BROADHOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: PLASTICS & FIBERS INC DATE OF NAME CHANGE: 19671225 SC 13D/A 1 pf13d14.txt SCHEDULE 13D AMENDMENT NUMBER 7 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (AMENDMENT NO. 7) Under the Securities Exchange Act of 1934 P&F INDUSTRIES, INC. ------------------------------------------------------------------------------- (Name of issuer) COMMON STOCK ------------------------------------------------------------------------------- (Title of class of securities) 692830508 -------------------------------------------------------- (CUSIP number) TIMOTHY J. STABOSZ, 1307 MONROE STREET, LAPORTE, IN 46350 (219) 324-5087 ------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) DECEMBER 28, 2011 -------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [_] The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 692830508 -------------------------------------------------------------------------------- 1. Name of Reporting Person TIMOTHY JOHN STABOSZ -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [_] NOT APPLICABLE (b) [_] -------------------------------------------------------------------------------- 3. SEC Use Only -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF -------------------------------------------------------------------------------- 5. Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization UNITED STATES -------------------------------------------------------------------------------- Number of (7) Sole Voting Power 292,508 Shares ____________________________________________ Beneficially (8) Shared Voting Power 0 Owned by ____________________________________________ Each (9) Sole Dispositive Power 292,508 Reporting ____________________________________________ Person With (10) Shared Dispositive Power 0 -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned 292,508 by each Reporting Person -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes [_] Certain Shares -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 8.1% -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN -------------------------------------------------------------------------------- ITEM 3. Source and Amount of Funds or Other Consideration Item 3 is hereby amended and restated to read as follows: Personal funds in the aggregate amount of $636,797.05 have been used to effect the purchases. No part of the purchase price represents borrowed funds. ITEM 4. Purpose of Transaction Item 4 is hereby amended to add the following: The respondent, who continues to hold the shares for investment purposes, is filing this Amendment #7 to report an increase in his position in the company's common stock to 8.1%, from the 7.0% previously reported in Amendment #6, on September 9, 2011. On December 26, 2011, the respondent sent an e-mail (see Exhibit #1) to Compensation Committee members Kenneth Scheriff and Jeffrey Franklin, and Lead Independent Director Marc Utay (for forwarding to the entire board). In the e-mail, the respondent commented on the company's 8-K, filed on December 12, 2011, announcing that director Dennis Kalick would not stand for reelection at the next annual meeting. Respondent requested the board fill the expiring seat with a new "bonafide independent" member, "sourced from, or with the approval of [the company's] major outside shareholders," or, alternatively, to permanently reduce the board size to 7, and have one MORE of the legacy directors, that are closely "tethered" to the CEO, Richard Horowitz, also step down. In addition, in the aforementioned e-mail, the respondent 1) repeated his request that the board separate the roles of chairman and CEO, 2) repeated his request that the board release the peer group company list utilized by the Compensation Committee to establish a CEO employment agreement renewal, and 3) asked the board to consider a "Dutch Tender" offer (assuming the financing would be obtainable), for the company to buyback up to 500,000 shares of its common stock, at a price range of $4-5. On January 4, 2012, the company filed a Form 8-K, announcing a renewal of CEO Richard Horowitz's employment for another 3 years. As the respondent believed the $650,000 base pay in the contract to be excessive, and he had not received, to date, a response from the board or Compensation Commitee on his e-mail of December 26, 2011...on January 6, 2012, he sent a follow up e-mail (see Exhibit #2) to the Compensation Committee, and entire board, in which he 1) indicated that the base pay for Mr. Horowitz's employment renewal was "wholly inappropriate," and 2) formally demanded that the board release the peer company group utilized in the outside compensation review. The board responded, in a limited, "boilerplate," defensive, and noncommital fashion, by e-mail, on January 7, 2012. Finally, on January 10, 2012, the respondent sent an e-mail to the Compensation Committee, and the entire board (see Exhibit #3). In the e-mail, the respondent 1) noted the positive changes the compensation committee had made in the new employment agreement. More significantly, the respondent 2) made a sweeping, broadbased, and damning case against the compensation committee, for how the $650,000 base salary renewal for Mr. Horowitz remained "unseemly," based on, among other things, a) the CEO's lengthy record of value destruction, and b) peer group comparisons by an outside shareholder, and respected advisory firm Proxy Governance, that suggested the base pay should have been set at roughly HALF of what Mr. Horowitz was awarded. Also, the respondent 3) again, implicitly and explicitly repeated his demand that the board release the peer group companies utilized in the outside compensation review. Despite pernicious and ongoing issues related primarily to corporate governance, and (of course) executive pay, the respondent believes the board has been making frustratingly slow, and sporadic, progress, overall. The respondent intends to continue to communicate, in public forums, press releases, and amended 13D filings, as necessary and/or required by law, to educate and inform the P&F shareholder base, and the broader "corporate governance space," on P&F's corporate governance issues, lack of adequate board independence, and the continued domination of the board, overall, by members whose primary interest is advancing Mr. Horowitz's parochial, pecuniary, and personal interests. Consequentially, respondent continues to believe that P&F's common stock, while fundamentally undervalued, will continue to trade at a discount to what "fair value" might otherwise be perceived as. (The respondent believes that the Company has historically been viewed by many investors, de facto, as a nominally public Company, being operated primarily for the private gain of Richard Horowitz.) ITEM 5. Interest in Securities of the Issuer Item 5 is hereby amended and restated to read as follows: At the close of business on January 9, 2012, respondent has sole voting and dispositive power over 292,508 shares of P&F Industries, Inc.'s common stock. According to the Company's latest Form 10-Q filing, as of November 11, 2011, there were 3,614,562 common shares outstanding. Respondent is therefore deemed to own 8.1% of the Company's common stock. Transactions effected by the respondent in the last 60 days, were performed in ordinary brokerage transactions, and are indicated as follows: 10/31/11 bought 5478 shares @ $4.09 11/08/11 bought 5000 shares @ $3.87 11/10/11 bought 400 shares @ $3.60 11/11/11 bought 2000 shares @ $3.71 11/15/11 bought 722 shares @ $3.60 11/18/11 bought 100 shares @ $3.61 11/21/11 bought 3930 shares @ $3.62 11/23/11 bought 2500 shares @ $3.56 11/30/11 bought 100 shares @ $3.49 12/01/11 bought 1012 shares @ $3.49 12/05/11 bought 1500 shares @ $3.46 12/06/11 bought 1209 shares @ $3.48 12/07/11 bought 291 shares @ $3.48 12/22/11 bought 1500 shares @ $3.52 12/23/11 bought 1500 shares @ $3.52 12/27/11 bought 716 shares @ $3.43 12/28/11 bought 5591 shares @ $3.42 ITEM 7. Material to be Filed as Exhibits Exhibit #1: E-mail dated December 26, 2011, from Timothy Stabosz, to the P&F Compensation Committee, and to the entire board. Exhibit #2: E-mail dated January 6, 2012, from Timothy Stabosz, to the P&F Compensation Committee, and to the entire P&F board. Exhibit #3: E-mail dated January 9, 2012, from Timothy Stabosz, to the P&F Compensation Committee, and to the entire board. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date 01/10/12 Signature Timothy J. Stabosz Name/Title Timothy J. Stabosz, Private Investor EX-1 2 pf1.txt E-MAIL TO P&F COMP. CMTE. AND BOARD DATED 12/26/11 Members of the P&F Compensation Committee Kenneth Scheriff Jeffrey Franklin (and Board of Directors) -- via e-mail -- December 26, 2011 Gentlemen: I hope you had a pleasant holiday. While I'm sure our company's recent 8-K filing was not intended to be a "seasonal present" to the outside shareholder base, I have to admit I took it as a "beacon of hope," for your leading us towards the eventual "promised land" of a fully independently governed P&F, that provides the vigorous level of oversight of Mr. Horowitz that is both desperately needed, and required. Likewise, on the Nominating Committee's addition of Mr. Brownstein to its ranks... ....And yet, we are not where we need to be yet. Even with Mr. Kalick's stepping down (next year) from the board, there will remain 4 of the "Horowitz 4" on the board (Messrs. Horowitz, Goldberg, Solomon, and Dubofsky), as compared to 4 "bonafide unattached" independent directors in Utay, Scheriff, Franklin, and Brownstein. With this in mind, it is imperative that the board be reconstituted in a fashion such that decisions on things like future acquisitions are not deadlocked between the "Horowitz 4," and you other 4 (with Richard breaking ties?), such that horribly misplaced priorities, for P&F's broader shareholder base, are not inappropriately pursued, resulting in poor allocation of capital, or worse, allocation of capital for the self-serving ends of Mr. Horowitz, as has clearly happened in the past. It is my hope, therefore, that the independent members of the board will understand what is at stake, and will seek to fill the Kalick seat with a new bonafide independent member, who is sourced from, or with the approval of, your major outside shareholders. Alternatively, the board size could be permanently reduced to 7, and one more of the "Horowitz 4" could choose to step down from the board. In such a way, we can arrive at a point where the Street can finally be assured, PRIMA FACIE, that P&F is being operated as a bonafide public company, and not primarily for the private gain of Richard Horowitz. You've taken a number of bold and important steps over the last 18 months, and I applaud you for it. I can assure you that these steps do not go unnoticed on the Street, and will, over time, allow the company to be accorded, I am convinced, a higher value, as P&F, and its board, attains a fundamental CREDIBILITY in the marketplace, as the board builds its reputation as an overseer. Bravo! But, again, there's still work to be done. Nothing could more signify the independence of the board, than the establishment of a contract, for P&F's next CEO, that is appropriate to the company's level of income, sales, level of CEO responsibility in a holding company structure, and peer group norms. I fully expect (and demand!) that, should Mr. Horowitz seek, again, to extract an amount from our company that is triple the peer group norms, despite his poor performance, that he will promptly be shown the door, and that other candidates will be interviewed for the position...or the position will be considered for "downsizing" or possible elimination. There is nothing that says that a one-third shareholder, as the son of the founder of the company, has to remain employed by the company, just because of his family name. Or worse, because of who he is "connected" to on "his" board. That's outrageous. Similarly, Mr. Horowitz's penchant for "high living," and the attendant income requirements, are SIMPLY IRRELEVANT to P&F's shareholder base, and I daresay that a self-respecting Chairman of the Board of P&F, would damn well be able to separate his own personal needs and desires....from his responsibilities to his entire shareholder base. It is quite clear, from history, that Horowitz has not, and is NOT CAPABLE of engaging the scruples required in this kind of self-reflection...this to the detriment of P&F's ability to build shareholder value for all, and, more importantly, from your perspective, to the detriment of the image of integrity of P&F's board! The fact of the matter is: Richard's salary, under his current contract, was restored, and it absolutely SHOULD NOT have been. If Richard had any measure of self-respect, vis a vis his credibility with the outside shareholder base, and his self-image as a fiduciary, he would have INSISTED on a permanent reduction (even if token!), for the remaining life of the contract. The fact that he did not is morally damning. This is a major strike against Richard, as it shows that his first loyalty is to himself, and not to the reality of a shrunken down P&F, which HE should have willingly and readily taken responsibility for. Should this not be a major consideration of yours, in discussion of potential renewal of his contract? Does the board want to "re-hire" someone who, I believe, has clearly evidenced he cannot be trusted as a fiduciary...and cannot be trusted to separate, in his OWN mind, his role as Chairman, versus his role as CEO? With all of this in mind, I soberly remind you that your good names are being counted on, in the current contract renewal discussions. I was NOT pleased that the whole impression at the annual meeting that was provided to me was that it was really "up to Richard" whether he stays or goes. I appreciate your disabusing me of that notion, in our private phone call in September, but the very troubling question is: Why was anyone afraid to publicly disabuse RICHARD of that notion, AT the annual meeting? Why was everyone afraid to assert the factual reality that it is not "up to Richard," ultimately, whether he stays or whether he goes? Why was the CEO not, at least gingerly, "slapped down" at the annual meeting, as he rightly should have been?? And why has this board, historically, "walked on eggs" around Mr. Horowitz, cow-towed to him, and ENABLED him, in his grandiosity, and self-absorption? This is all the more reason why my previous request (and subsequent demand) that you separate the Chairman and CEO roles remains a CRITICAL imperative at P&F. Richard needs to be FORCED to think of himself as accountable to something outside of himself, as it comes to running P&F. Where we got into trouble, I am fully convinced, is that the two of you, and Marc, despite being fundamentally decent men, did not have the VOTES to prevent Richard's cronies from pushing through things that exclusively favored Richard, and were ultimately INTENDED to favor Richard, without appropriate thought or consideration to building value for ALL. I am relieved that you have asserted yourselves, over time...but I remain frustrated that this board has had to be PUSHED, in a number of cases, to take the actions that need to be taken. In that regard, besides separating the Chairman and CEO roles, the other thing that simply MUST be done, for the sake of YOUR credibility, is the immediate releasing of the list of peer group companies, from the outside compensation review you are utilizing. I full well understand the GAME that the board has been playing with this issue, with regard to my demands. If it releases the peer group list from the previous Nadel review, I expect such information would be highly damaging to the previous Goldberg/Solomon Compensation Committee's claim to integrity. Since the "Horowitz board," as a majority, is committed to protecting Richard's cronies, a majority of the board has voted to not release Nadel. You have (apparently) further voted to not release the peer group from the current compensation study because there would be an implication of silence and secrecy in not releasing the Nadel group. With malice towards none, and charity for all, let me, therefore, propose, at this time, a COMPROMISE, that involves looking to a better future for P&F, while moving on from the recriminations of the past: I WILL CEASE ALL PUBLIC DEMANDS FOR A RELEASE OF THE PREVIOUS GOLDBERG/SOLOMON NADEL COMPENSATION REVIEW, IF THE BOARD AGREES TO IMMEDIATELY RELEASE THE PEER GROUP LIST FROM THE CURRENT REVIEW YOU ARE UTILIZING. It is absolutely imperative that you do this, as it is the job of the Scheriff/Franklin Compensation Committee to show transparency, and build confidence, that the basis for your decision is rooted in what is FAIR and APPROPRIATE. As you full well know, your outside shareholder base has NO conviction of this, with regard to the previous compensation committee, and the board has thumbed its nose at providing any reassurance, in this regard. (The board wouldn't even disclose to me whether and which of its directors have reviewed the previous Nadel peer group, which is, frankly, despicable.) The notion that P&F's small size justifies "running away" from an obligation that you would otherwise be required to fulfill, as a public company (especially considering what went on with the previous compensation committee), would only serve to keep the kind of "dark cloud" over the Scheriff/Franklin Compensation Committee, that hung over Goldberg/Solomon Compensation Committee. Release the peer group now, and show your shareholder base that you have pledged to operate in a context of openness and accountability for the future. Is that really too much to ask? When, as I expect, you come up with a compensation arrangement for Mr. Horowitz that is (presumably) lower than the expiring contract, but still WAY above peer group norms, as indicated by Proxy Governance, myself, Lawndale Capital, or other observers....but you are not willing to RELEASE that peer group list, is there any reason you shouldn't expect to be called on the carpet for that? Finally, with the recent weakness in P&F stock, I have been increasing my position, and am now up to 7.9% ownership, which is less than 2000 shares shy of the 8.0% level that would require my filing a 13D Amendment. (This represents, I should note, my largest position EVER in P&F.) I fully expect to "trigger" that requirement this week. It would be nice if I could say that one of the reasons that I have been increasing my position in P&F stock is because I think that, besides the asset base, and going concern value of the company, that the governance of the company is improving at a rate that justifies, in my mind, a higher public market valuation. Your fulfilling some of the requests I note above....but most importantly, hiring on P&F's next CEO for a pay package that is CREDIBLE, would go a long way in this regard. Let me just suggest, before closing, we need to be buying back stock. A Dutch Tender for up to 500,000 shares at $4-5 is a wonderful way to increase value that, in my mind, is likely more accretive than ANY possible acquisition candidate. I believe we now have the financial strength to be entertaining this kind of move. It would also be a wonderful expression of confidence, on the part of management and the board, in the future value of our company. Please respond to me promptly, and acknowledge my requests, either personally, in writing, or in an 8-K, as appropriate. Considering the board's spirit of increased cooperation, of late, I would prefer to return to private communication, versus public, if at all possible, for these kinds of discussions. That is the spirit under which this e-mail is sent. With respectful cordiality....and great hope... Timothy Stabosz EX-2 3 pf2.txt E-MAIL TO P&F COMP. CMTE. AND BOARD DATED 01/06/12 Members of the P&F Compensation Committee Kenneth Scheriff Jeffrey Franklin (and Board of Directors) -- via e-mail -- January 6, 2012 Gentlemen: I received no response to my previous e-mail, which is totally unacceptable. I believe the actions of the compensation committee, regarding the rehiring of Mr. Horowitz, while reflecting a contract that is improved from the past, are still wholly inappropriate, specific to the base salary, and do not reconcile with any of the reasonable peer groups that have been indicated by parties that are actually arms length from the CEO, including two of your three largest outside shareholders, as well as the work of independent advisory firm Proxy Governance. Based upon an increase in my position in P&F to 8.1%, from the previous 7.0% reported, I will be filing a 13D amendment on Monday. I would like an answer IMMEDIATELY on whether or not the board has decided that it intends to release the peer group companies used in the compensation analysis. Such decision will be deterministic in how I handle my public response to the compensation committee's, and board's, action...assuming you respond in time to have an effect, either way. I presume you've already made your decision. I'm disappointed...and disgusted that you do not see fit to show appropriate accountability, clarity, and openness, that would allow your outside shareholders, and the corporate governance space, to make their own determination on the legitimacy of the work that was done....something that is ABSOLUTELY NECESSARY, considering past "cronyism" on previous P&F compensation committees. If THIS compensation committee is unwilling to subject its work to reasonable scrutiny, then it, and the board, will called to task for that specific betrayal. I DEMAND YOU STATE YOUR INTENTIONS TO RELEASE THE PEER GROUP UTILIZED IN THE OUTSIDE COMPENSATION REVIEW. Please respond promptly. Timothy Stabosz EX-3 4 pf3.txt E-MAIL TO P&F COMP. CMTE. AND BOARD DATED 01/09/12 Members of the P&F Compensation Committee Mr. Kenneth Scheriff, Chairman Mr. Jeffrey Franklin, member (and Board of Directors) --via e-mail-- January 9, 2012 Dear Messrs. Scheriff and Franklin: Yes, you made some changes, in the renewal of Richard Horowitz's employment agreement, that are certainly improvements from the old contract. You reduced the employment term from 5 years to 3. The "target" bonus percentage was reduced from 90% to 50%, and a maximum bonus of 150% was added, versus none before. You've changed the "termination for cause" provision to require action on just the part of the independent directors, as opposed to the entire board. Finally, you removed a previous clause that, heretofore, stripped the board of its self-respect, and put it in a "financial headlock," in allowing Mr. Horowitz to depart the company for "good reason," and collect an avalanche of golden parachute payments, merely if the board had the audacity to choose a different chairman... But you failed in the most important area...and that is "base pay." Yes, the reduction from a $975,000 base to a $650,000 base will save approximately 9 cents per share, pre-tax, annually. But if you expect to be congratulated, in going from the obscene, to the merely unseemly...I'm not going to do that. I find it interesting that you, the two members of the P&F Compensation Committee, took it upon yourselves to dramatically err on the side of AGAIN overpaying Mr. Horowitz. (Why not consider underpaying, for a wholesome change...or seeking a qualified replacement, willing to work for less, or explore the possible sale or breakup of the company, sans Horowitz, in order to maximize value for ALL shareholders? Were any of these things a consideration??) More ominously, the board has made it clear, through its silence to my demand that you release the peer company group utilized in your "analysis," that it intends to continue to stonewall, to decline to provide transparency, and to defy legitimate efforts by major outside shareholders to "bear witness," and subject your decision making process to appropriate and necessary scrutiny. The implication to me is obvious: YOU HAVE SOMETHING TO HIDE. One would think both of you would INSIST that the board release the peer group comparison companies, so that there is no questioning of your integrity...simply reflecting the fact that the amount of Mr. Horowitz's base pay, under your new regimen, remains roughly DOUBLE what it should be, based upon not just my previous peer group work, but the work of the respected proxy advisory firm, Proxy Governance. Proxy Governance had stated, in 2010, that Mr. Horowitz's overall pay was more than TRIPLE peer group norms. (Unlike the P&F board, both I, and Proxy Governance, actually released the peer groups we used.) Mr. Horowitz's base salary was reduced by exactly one third, from $975,000, to $650,000. Yet, P&F's revenues for 2011 are anticipated to be down by nearly 50%, from the $112 million achieved in 2006, the year prior to the signing of the previous compensation agreement. Furthermore, should P&F's pre-tax income from continuing operations be somewhere on the order of $2.5 million for 2011, that would represent an approximate 60% decline from the $6.5 million achieved in 2006. IF SALES ARE DOWN NEARLY 50%, AND PRE-TAX PROFITS FROM CONTINUING OPERATIONS ARE LIKELY TO BE DOWN OVER 60%, WHY WAS MR. HOROWITZ'S BASE PAY ONLY REDUCED BY 33%? Has Mr. Horowitz shown "exemplary" performance, and creation of shareholder value, the last 5 years (or last 15 years, for that matter), to justify a "double peer" compensation arrangement? Do you realize that P&F's common stock is trading at basically NO HIGHER than it was, 15 years ago, when he fully took the reins, and that our company's compound annual revenue growth, over that same time period, averages a meager 2%? If someone has not outperformed, for a period of 15 years, WHAT BASIS IS THERE to expect that they will, in the future, such that it is justified in paying them TWICE the peer group norms? Was this part of your consideration in evaluating Mr. Horowitz's "worth" to the company?? Did you put MY, and Proxy Governance's, peer group companies "into the mix"? The proper number for this company's CEO would have been $500K, "all in" (bonus and "extras" included), in a typical year (assuming a 10% fully taxed ROE), and not a penny more. It should be noted that if you set the base too high (as you sedulously did), you end up giving away the store, in terms of not just excess base pay, but excessive bonuses, to boot (since the bonus is set as a percent of the base pay). Is this what you were seeking to accomplish? It seems clear to me that the reduction in base pay was an arbitrary, one-third reduction that had little to do with an appropriate "from the ground up" analysis. More likely, in your negotiations, you were "gunning" for a result that you "needed" to reach, in order to keep "hizzoner" (grudgingly) happy. Let me explain to you the considerations that are NOT appropriate or relevant to determining a pay package for a renewal of Mr. Horowitz, that I have every reason to fear, suspect, and believe WERE considerations for this compensation committee: 1) Whether or not Mr. Horowitz can "afford" a reduction of "more than 1/3" to his base pay. 2) Whether or not a reduction of "more than 1/3" would "offend" or "alienate" Mr. Horowitz, or cause him duress. 3) Whether or not Mr. Horowitz's "lifestyle needs," or zip code of residence, "calls for" a higher pay package. IMPORTANT: We're not responsible for funding, being loyal to, or having explicit sympathy towards Mr. Horowitz's lifestyle choices. 4) The fact that Mr. Horowitz's family name "founded" the company. 5) The fact that Mr. Horowitz owns approximately one-third of the company's common stock. 6) Whether or not Mr. Horowitz's "wealth rebuilding needs" (as a result of his unfortunate losses at the hands of Bernard Madoff) "call for" above peer pay, out of "sympathy." 7) The belief that, with a certain outside shareholder presenting a peer group that suggested $300K as an appropriate base pay amount, that "compromising," and adding Horowitz's prior $975K base pay, and $300K, and dividing by two, is the best way to "ride the fence," and neither show excessive favoritism towards the outside shareholders (and Proxy Governance), nor too much favoritism towards Mr. Horowitz. 8) Management's "fear" that a full reduction, by 2/3, in Mr. Horowitz's base pay, to a level truly on par with bonafide peers, would, by implication, make the board look negligent at best, or fiduciarily breaching, at worst, in its previous compensation regimes (i.e. "gradualism," in a scaling down of Mr. Horowitz's pay package, represents "better optics"). 9) The belief that since there are very few direct public comparables for P&F...that the compensation committee can readily err on the high side "with impunity." This CEO has NOT been an asset to P&F, historically; on the contrary, he's been a "ball and chain" on the Street's valuation of our company. While you choose to ignore it, Mr. Horowitz's value is compellingly EVIDENCED in the fact that our company, for much of the last 15 years (and currently), has been worth more as a collection of assets (for its breakup value), than as a going concern (i.e. the "Horowitz discount"). You full well know that, because you, and EVERY SINGLE ONE of the other "legacy" directors, abjectly REFUSE to buy common stock for your own accounts....because, in my view, you evidently see it as a POOR investment for yourselves, and see limited prospects for long term value creation. Therefore, your own beliefs about the company's worth, UNDER MR. HOROWITZ, directly contradict the ultra high value you allege to ascribe to his services, in your work on the compensation committee. That's RANK hypocrisy. (Perversely, outside investors, such as myself, who have the "luxury" of shareholder activism, see more possibility in "unlocking" the value of P&F, through genuine hard work, than its own legacy board members, who have historically, until very recently, been either too feckless, too complacent, too disinterested, or too loyal to Mr. Horowitz, to take on the role of "righting the ship," and ensuring that the entity is managed with value creation for ALL in mind.) Alas, that is what we keep coming back to with the broader P&F board. While it certainly has improved from the "Dark Ages" (and I can't tell you how much I'd prefer to be cheering you on, right now, rather than having to criticize you), I have found this board (with the exception of Mr. Brownstein, who I place no judgement on, either way) to be distinctly lacking in trustworthiness, credibility, and integrity, vis a vis its overall dealings with Mr. Horowitz. Three of the legacy board members (Utay, Franklin, and Scheriff), while independent, were, in my estimation, simply "board sitters," who, until very recently, took their measly board pay, and did pretty much nothing, in exchange, to OVERSEE. Four of the other legacy directors (Solomon, Goldberg, Dubofsky, and Kalick) were (and are) cronies of Mr. Horowitz, who actively, and systematically, sought to advance Horowitz's interests, at the expense of the broader shareholder base, simply for the fact that it "pleased" Mr. Horowitz. All 7 of the legacy directors, historically, deferred to Mr. Horowitz, and his desires...as evidenced by 1) bylaws, 2) compensation clauses, and 3) an appallingly conflicted (former) compensation committee, that, in all 3 cases noted, your outside shareholders had to SHAME you into throwing out. Why did all of this happen? Because, tragically, for many years, no outside shareholders (except, perhaps, for one lone, noble "activist" fund) seemed to care. But why should the board of a company have to be "forced" to fulfill its job of proper oversight of an executive? Doesn't its job exist, APART from whether its feet are being held to the fire? I respectfully submit that YOU ARE NOT CREDIBLE in the outcome you came up with, for Mr. Horowitz's base pay. While admittedly less egregious than in the past, said amount continues to represent an excessive, unnecessary, and inappropriate transfer of wealth from the entire shareholder base, to Mr. Horowitz. But, with the pitifully low share ownership of MOST board members (including both of you), you really have no basis to be VESTED in caring about that, do you? Which is why I asked you to put me on the board a couple years ago. Because, unlike you, when I tell the outside shareholder base that a process involving a renewal of an executive's contract was "robust," the outside shareholder base would have a basis to BELIEVE what I say. Such is NOT the case with you...since you have NO investment to protect. Considering how each of you has been on the board for at least 6 years, and NEITHER of you own ANY common shares outright, and ESPECIALLY considering that you had the chance to buy shares at "bargain basement" prices, in 2009-2010, I think that is shameful and reprehensible. There is simply NO reason why you wouldn't release the peer company comparison group, in order to REASSURE our company's shareholders...unless you are AFRAID of the impression it would create. As far as I'm concerned, your reputations are at stake. Your trustworthiness. Your credibility. Your legitimacy as fiduciaries. I hope you will give that all due consideration. I should also point out that I consider your stance on this matter to be a "disqualifier" for a renewal of your service on the board. Simply put, if you are not willing to show accountability for your decisions, should you run again, I will not be able to support you. (Yes, this issue is THAT important.) The board needs to get past this manifest desire to hide, to dissemble, to obfuscate....to evade, to duck, to bob, and weave. I've witnessed all of that, breathtakingly, in the last 2+ years...in person, and in writing. It's unseemly, it's incriminating, and its odious...especially considering our company's history as a "poster child" for poor corporate governance, and licentious executive compensation. Sunlight is the most effective disinfectant. It's time to open the shutters, as a matter of transparency, and self-respect. We probably wouldn't need to be talking this way, if you would have put me on the board of directors, as I had requested (I would have had a right to inspect the materials I now seek, and would have been "kept privy" of all the goings on at P&F), or if, at last year's annual meeting, you simply would have at least had the decency of adding ONE new independent director, and/or had even ONE of the "crony" directors step down, to show ongoing progress. But you didn't do that. You'll understand if my supposition is that Mr. Horowitz, with an expiring compensation agreement, wanted to do everything he could to continue to "lord over" this board, maintaining as much influence as possible, in order to ensure NO CONSIDERATION would be given to replacing him as CEO...even if he held out for an excessive compensation demand. Is THAT why nothing further happened, this last proxy cycle, to clean up our company's board? I greatly resent the fact that your failure, and the broader board's failure to act, in a more compelling way, to establish your bonafides as fiduciaries, has made me feel helpless, and necessitated my bringing these issues back into the public sphere...most uncomfortable and distasteful for me...considering I own 8.1% of our company, and want to see it thrive and prosper, without embarrassment, or public "fights." I TOLD you as such, in private, but instead of meeting me half way, you (in this case, the entire board) continue to alternate between "circling the wagons," and taking baby steps. It is, quite frankly, infernally frustrating. It's clear that there's more work to be done at P&F, to clean up its governance, and its reputation. Please DO it...or step aside. Those of us who actually have material ownership positions in the company are intensely interested in having value created for us. (It's OUR company.) The foundation of that is a governance structure that "reeks" of integrity, and transparency. Please remember, going forward, who you work for. (Hint: It's NOT Richard Horowitz.) Respectfully, Timothy J. Stabosz P.S.: Just so it's clear, the foregoing are all MY interpretations and opinions and "take" on the relationship of our company's board members to the company itself, and to Mr. Horowitz. I'm sure others would have different opinions...or self-deceptions, for that matter. They are obviously entitled to them.