The specialty measurements and inspection systems maker, Faro Technologies (FARO-$17.82) leases its headquarters in Lake Mary, Florida from Xenon Research, Inc., all of the issued and outstanding capital stock of which is owned by Simon Raab, the Company's co-founder, and Diana Raab, his spouse. The fixed rent under the lease is $302,750.00 per annum payable monthly, increasing on an annual basis by three percent over the fixed rent for the preceding year (until the lease expires in July 2011). The lease is a “net lease,” meaning that the Company also is responsible for real estate taxes and insurance expenses covering the leased premises.
The term of the lease commenced as of July 1, 2006 (about the time that Raab started to feel the impact of a 50% reduction in his base pay because he went into ‘semi-retirement’). Pursuant to his employment agreement, Raab transitioned from Chief Executive Officer to Co-Chief Executive Officer during 2005 and altered his full-time commitment to no more than 80 hours per month. Dr. Raab, who holds a Ph.D. in Mechanical Engineering from McGill University, saw his salary slashed to $200,000 per annum.
Rabb is the beneficial owner of 1.25 million, or 8.6%, of the Common Stock of Faro, worth an estimated $22.3 million (which also includes an exercisable option to purchase 90,000 shares at $2.23 per share).
Raab’s reverse-engineering into semi-retirement could not have been better timed—for him. Back in March 2006, the Company, as a result of an internal review that it conducted, announced that it had “recently learned of suspicious payments in connection with foreign sales activities in China.” Specifically, an investigation—still ongoing—is underway to verify allegations that its salespeople operating in China and the Asia/Pacific region paid kickbacks to government officials (in possible violation of the anti-bribery, books and records and internal controls provisions of the Foreign Corrupt Practices Act).
The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year. - John Foster Dulles, American statesman (1888 – 1959)
If this Co-Chief Executive appointment goes sour, Rabb, 53, can still measure his success in real estate management.