This proxy statement and form of proxy are furnished in connection with the solicitation of proxies on behalf of ourthe Board of Directors of P.A.M. Transportation Services, Inc. (“PTSI” or the “Company”) for use at our annual meeting of stockholders to be held at the Embassy Suites Dallas-DFW International Airport North, 2401 Bass Pro Drive, Grapevine, Texas 76051,principal executive offices located at 297 West Henri De Tonti Boulevard, Tontitown, Arkansas 72770, on Thursday, May 29, 2008,June 3, 2010, at 9:00 a.m., local time, and at any or all adjournments or postponements of the meeting. The address oftelephone number for our principal executive officesoffice is 297 West Henri DeTonti Boulevard, Tontitown, Arkansas 72770 and our telephone number is(479) 361-9111. This proxy statement and form of proxy are being mailed to stockholders on or about April 29, 2008.
At our annual meeting, stockholders will act upon the matters outlined in the accompanying notice of the meeting, including the election of directors and ratification of appointment of our independent public accounting firm, and consideration of such other business as may properly come before the meeting.
These terms describe how your shares are held. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are a “stockholder of record.” If your shares are held in the name of a broker, bank, trust or other nominee as a custodian, you are a “street name” holder.
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Stockholders who are “street name” holders will need to bring a copy of a brokerage statement reflecting their ownership as of the record date in order to attend the meeting.
A proxy is your legal designation of another person, the “proxy,” to vote on your behalf. By completing and returning the enclosed proxy card, you are giving the persons appointed as proxies by our Board of Directors (the “Board”) the authority to vote your shares as indicated on the proxy card.
The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our common stock outstanding and entitled to vote on the record date will constitute a quorum, permitting business to be conducted at the meeting. As of the record date, 9,709,6079,414,607 shares of our common stock were outstanding and entitled to vote. Proxies that are received and marked as withholding authority, abstentions, and broker non-votes (where a bank, broker or nominee does not exercise discretionary authority to vote on a matter) will be included in the calculation of the number of shares considered to be represented at the meeting.
How do I vote?
You may vote by mail or follow the alternative voting procedures described on the accompanying proxy card. If you complete, sign and return the proxy card, it will be voted as you direct. If no choice is specified on a signed proxy card, the persons named as proxies will vote (1) in favor of the election of all of the nominees for director and (2) in the discretion of the persons named as proxies as to all other matters that may be properly presented at the annual meeting.
If theyou hold shares you own are held in street name, your“street name” through a broker bank or other nominee, asyour broker or nominee may not be permitted to exercise voting discretion with respect to some of the record holder of your shares, is requiredmatters to be acted upon. Under a recent amendment to the New York Stock Exchange (NYSE) rules, brokers no longer have the discretion to vote your shares accordingon the election of directors because director elections, even if uncontested, are no longer considered a routine matter. Even though the Company’s stock is listed on the NASDAQ Stock Market, it is expected that brokers who are members of the NYSE will follow the NYSE rules governing proxy voting with respect to your instructions. Your broker, bank or other nominee is required to send you directions on how to vote those shares. Ifall proxies for all publicly traded companies. Thus, if you do not give instructions to your broker bank or other nominee it will still be able to vote your sharesspecific instructions, including with respect to certain “discretionary” items, butthe election of directors, your shares may not be voted on those matters and will not be allowed to vote yourcounted in determining the number of shares with respect to certain “non-discretionary” items. In the case of non-discretionary items, the shares that do not receive voting instructionsnecessary for approval. Shares represented by such “broker non-votes” will, however, be treated as “broker non-votes.”counted in determining whether there is a quorum.
If, as of the record date, you are a stockholder of record and you attend the meeting, you may vote in person at the meeting. The authorized capital stock of PTSI consists of 40,000,000 shares of common stock, par value $0.01 per share and 10,000,000 shares of preferred stock, par value $0.01 per share. As of the close of business on April 13, 2010, there were 9,414,607 shares eligible to vote.
Can I change myWhat are the Board’s recommendations?
Unless you give other instructions on your proxy after I return mycard, the persons named as proxy card?holders on the proxy card will vote in accordance with the recommendations of the Board. The Board’s recommendations are set forth together with each proposal in this proxy statement. In summary, the Board recommends a vote:
Yes. Any proxy may be revoked by a stockholder at any time before it| · | For the election of the nominated slate of directors (see pages 6–24). |
| · | For the ratification of the appointment of Grant Thornton LLP as PTSI’s independent registered public accounting firm (see pages 25−27). |
What vote is exercised at the annual meeting by delivering to our Secretary a written notice of revocation or a duly executed proxy bearing a later date, or by voting in person at the meeting.
What is the vote required to elect directors?approve each proposal?
The affirmative vote of the holders of shares of our common stock representing a plurality of the shares of our common stock voting on the matter is required for the election of directors. Votes withheld and broker non-votes are not counted toward a nominee’s total.| · | Election of Directors. The affirmative vote of the holders of shares of our common stock representing a plurality of the shares of our common stock voting on the matter is required for the election of directors. Votes withheld and broker non-votes are not counted toward a nominee’s total number of votes. |
| · | Other proposal. For any other proposals, including ratification of the appointment of PTSI’s independent registered public accounting firm, the affirmative vote of a majority of the votes cast in person or by proxy at the annual meeting, assuming a quorum is present, will be required for approval. |
Are there other matters to be voted on at the meeting?
As of the date of this proxy statement, our Board of Directors does not know of any other matters which may come before the meeting, other than the election of directors and ratification of the appointment of PTSI’s
independent registered public account firm, described in this proxy statement. Should any other matter requiring a vote of the shareholdersstockholders arise and be properly presented at the annual meeting, the proxy included with this proxy statement confers upon the persons named in the proxy and designated to vote the shares, discretionary authority to vote or otherwise act with respect to any such matter in accordance with their best judgment.
Can I revoke or change my proxy after I return my proxy card?
Yes. Any proxy may be revoked by a stockholder at any time before it is exercised at the annual meeting by delivering to our Secretary a written notice of revocation or a duly executed proxy bearing a later date, or by voting in person at the meeting.
Who pays for this proxy solicitation?
All costs of soliciting proxies will be paid by us. Our directors, officers, and other employees may, without compensation other than their regular compensation, solicit proxies by further mailingmailings or personal conversation, or by telephone, facsimile or electronic means. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their out-of-pocket expenses for forwarding soliciting material to the beneficial owners of our common stock.
Our Board of Directors encourages stockholders to attend the annual meeting. Whether or not you plan to attend, you are urged to promptly submit your proxy.
Election Of Directors
ELECTION OF DIRECTORS
Our Board of Directors currently consists of nine directors. Members of our Board are elected annually to serve until the next annual meeting of stockholders or until their successors are elected and qualified. Our Board of Directors has nominated for re-election each of the nine current members of our Board. Information about these individuals, who have been nominated for re-election toThe biography of each of the nominees below contains information regarding the person’s service as director, business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused the Board is set forth below.to determine that the person should serve as a director.
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| Frederick P. Calderone | | Director Since 1998 |
Frederick P. Calderone, age 57,59, has served as a Vice President of CenTra, Inc. for the past 1819 years. CenTra is a transportation holding company headquartered in Warren, Michigan. Prior to joining CenTra, Mr. Calderone was a partner with Deloitte, Haskins, & Sells, Certified Public Accountants (now Deloitte & Touche LLP). Mr. Calderone is a certified public accountant and an attorney. Mr. Calderone has served as a director of PTSI since May 1998. He has extensive experience in finance and accounting. Because he has served as director of PTSI for over ten years, he has an enhanced knowledge of PTSI’s corporate governance, personnel matters and growth strat egy. These experiences qualify him for service on the Board.
| Frank L. Conner | | Director Since 2002 |
Frank L. Conner, age 58,60, has served as Executive Vice President of Finance and Accounting and Chief Financial Officer of FedEx Freight East (formerly American Freightways, Inc.) since February 2001. Mr. Conner previously served as a Director of American Freightways from 1989 to February 2001 and held various positions with American Freightways, including serving as Executive Vice President-Finance and Accounting and Chief Financial Officer from November 1995 to February 2001. Mr. Conner previously served thirteen13 years with McKesson Service Merchandise in various positions including General Manager and Chief Financial Officer. Mr. Conner served seven years in public accounting with Peat, MarwickM arwick & Mitchell prior to joining McKesson. Mr. Conner has served as a director of PTSI since July 2002. Mr. Conner has also served as a member of the Board of Directors of First Federal Bancshares of Arkansas, Inc. since September 2003. He has extensive experience in finance and accounting. He has served in senior financial management positions for both private and publicly held companies for over twenty five years. Prior to that his experiences included performing financial audits of banking and non-banking publicly held companies. He has extensive experience dealing with investors, financial institutions, suppliers, government agencies, employees and the general public. He has served on the Board of Directors of three publicly held companies and as a member of several committees of those Boards, including the Audit and Compensation committees. His experience and education including his degree in accounting and certificat ion as a professional accountant qualifies him to serve as a member of the Board and member of the Audit Committee of PTSI.
| Daniel H. Cushman | | Director Since 2009 |
Daniel H. Cushman, age 55, has served as President and CEO since July 2009. Prior to his employment with the Company, Mr. Cushman served as Vice President of Sales and Marketing for CRST International, Inc. in Cedar Rapids, Iowa (“CRST”), from July 2008 to July 2009, and as Vice President and General Manager of Dedicated Services for CRST from March 2008 to July 2008. From January 2007 to March 2008, Mr. Cushman was Senior Executive Vice President and Chief Marketing Officer for Werner Enterprises in Omaha, Nebraska. From January 2002 to December 2006, he served as Executive Vice President Chief Marketing and Operations Officer for Werner Enterprise. These experiences qualify him to serve on the Board and on the Executive Com mittee.
| W. Scott Davis | | Director Since 2007 |
W. Scott Davis,age 45,47, is a private investor and has been a business consultant.consultant since 2006. He is the President and sole owner of WS Davis, Inc., the company through which he performs his consulting work. Mr. Davis has many years of experience in investment banking. From 1987 to 2006, Mr. Davis worked for Stephens Inc., an investment banking firm, including serving as an Executive Vice President of Stephens Inc. from 2002 to 2006. Mr. Davis has served as a director of PTSI since August 2007. He has extensive experience in the investment banking industry. He serves on the Compensation and Stock Option Committee, and that service has enhanced his knowledge of public company executive compensation matters. These experiences qualify him to continue his ser vice on the Board and on the Compensation Committee.
| Christopher L. Ellis | | Director Since 2006 |
Christopher L. Ellis, age 63,65, retired in 2004 after serving as Senior Vice President and Chief Financial Officer of, then publicly traded company, USF Corporation for 14 years. USF Corporation was acquired by Yellow Roadway Corporation in 2005 and is no longer publicly traded. USF Corporation provided supply chain management services, including less than truckload trucking, logistics, freight forwarding, and truckload trucking. Prior to that he served for six years as Vice President and Chief Financial Officer of TNT North America, which included the business of USF Corporation before it was spun off from TNT North America. Mr. Ellis holds an MBA from The Wharton School of BusinessBusi ness at the University of Pennsylvania. Mr. Ellis has served as a director of PTSI since May 2006. He has extensive experience in the transportation industry, which makes him familiar with PTSI’s core customer base and growth strategy. His experiences also include those typically associated with serving in an executive capacity at a large corporation, including corporate governance, employee matters, risk assessment and civic affairs. These experiences and his education and background qualifies him to serve on PTSI’s Board and on the Audit Committee.
| Manuel J. Moroun | | Director Since 2002 |
Manuel J. Moroun, age 80,82, is the President and Chief Executive Officer of CenTra, Inc., a transportation holding company headquartered in Warren, Michigan. Mr. Moroun has been a principal stockholder and officer of CenTra and its predecessor companies since 1954, and its Chief Executive Officer since 1970. CenTra is one of the largest privately held transportation holding companies in the United States. Mr. Moroun has served as a director of PTSI since May 2002. Mr. MorounHe is the father of Matthew T. Moroun, a director of PTSI who has been nominated for re-election at the annual meeting. Mr. Moroun has also served as a member of the Board of Directors of Universal Truckload Services, Inc. since NovemberN ovember 2004. He has more than fifty years experience in the transportation industry. His experiences running large transportation corporations make him uniquely qualified to understand PTSI’s customer base, competition, corporate governance, growth strategy, and industry concerns. His extensive experience qualifies him for service on the Board.
| Matthew T. Moroun | | Director Since 1992 |
Matthew T. Moroun, age 35,37, has served as Vice Chairman and as a director of CenTra, Inc., a transportation holding company basedheadquartered in Warren, Michigan, since 1993. Since 1996, Mr. Moroun has served as Chairman of Oakland Financial Corporation, an insurance holding company, Oakland Financial Corporation, and its subsidiaries, which are based in Sterling Heights, Michigan. Since 1995, Mr. Morounhe has served as Chairman of the Board of Durarock Reinsurance, Ltd., a reinsurance company. Mr. Moroun has served as a director of PTSI since May 1992. Mr. MorounHe is the son of Manuel J. Moroun, a director of PTSI who has been nominated for re-election at the annual meeting. Mr. Moroun has also served as a member of the Board of DirectorsDirecto rs of Universal Truckload Services, Inc. since November 2004. He has extensive experience in the fields of transportation and insurance. His experiences heading large corporations qualify him to understand PTSI’s customer base, competition, corporate governance, growth strategy, and industry concerns. These experiences qualify him for service on PTSI’s Board and on the Executive Committee.
| Daniel C. Sullivan | | Director Since 1986 |
Daniel C. Sullivan, age 67,69, has been a practicing attorney, specializing in transportation law for more than 40 years. Mr. Sullivan has been a principal with the firm of Sullivan, Hincks & Conway, or its predecessor, presently located in Oak Brook, Illinois, since 1972. Mr. Sullivan has served as a director of PTSI since June 1986. Mr. Sullivan has also served as a member of the Board of Directors of Universal Truckload Services, Inc. since November 2004.
Robert W. Weaver,age 58, is one of our co-founders. He has over 25 yearsextensive knowledge in the field of experience with ourtransportation law. His long history on the Board
makes him qualified to understand PTSI’s customer base, industry structure, growth strategy and corporate governance. He serves on the Compensation and Stock Option Committee, and that service has enhanced his knowledge of public company executive compensation matters. These experiences qualify him for service on PTSI’s Board and has served as our President and Chief Executive Officer since 1990. Mr. Weaver has served as a director of PTSI since 1990.on the Compensation Committee.
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| Charles F. Wilkins | | Director Since 1995 |
Charles F. Wilkins, age 69,71, retired in January 1995 after 34 years of employment with Ford Motor Company, and from January 1995 to January 2005 was self-employed as a logistics consultant. He served in various positions with Ford Motor Company in transportation management, including three years of service as Traffic Manager in Europe. Mr. Wilkins retired from the position of Director, Transportation and Traffic Office, in which he had served since 1990. Mr. Wilkins has been a member of the National Motor Carrier Advisory Committee of the Federal Highway Administration and was previously active in the National Industrial Transportation League as Chairman of the Audit Committee and ThirdThi rd Vice Chairman. Mr. Wilkins has served as a director of PTSI since June 1995. He has extensive experience in and knowledge of the transportation industry. He serves on the Compensation and Stock Option Committee, and that service has enhanced his knowledge of public company executive compensation matters. His experiences qualify him for service on PTSI’s Board and on the Audit and Compensation Committees
Unless otherwise instructed, the persons named as proxies intend to vote all proxies received for the re-election of the nine director nominees. All of the nominees have indicated their willingness to continue to serve.serve on the Board of Directors. If any nominee should become unwilling or unavailable to serve, our Board of Directors may select a substitute nominee, and in that event the proxies intend to vote all proxies for the person selected. If a substitute nominee is not selected, the proxies intend to vote for the election of the remaining nominees. Our Board of Directors has no reason to believe that any of the nominees will become unavailable.unavailable to serve.
Your Board of Directors recommendsRecommends that you vote “FOR” the electionStockholders Vote
FOR
Each of the nominees named above.Nominees Named Above
Corporate Governance
Director Independence
Applicable NASDAQ ruleslisting standards require that a majority of our Board of Directors be independent. In March of 2008,Recently, our Board of Directors reviewed the independence of our directors and determined that five of our directors, Messrs. Conner, Davis, Ellis, Sullivan and Wilkins are independent as definedmeet the standards for independence required by applicable NASDAQ rules.listing standards. In making this determination, our Board of Directors has concluded that none of the independent directors has a relationship that, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Currently, Mr. Matthew T. Moroun owns, in the aggregate, more than 50% of PTSI’s voting stock. Therefore, PTSI meets the NASDAQ Global Market requirements to become a “controlled company.” A “controlled company” is defined by NASDAQ Global Market rules as a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. Under these rules, a “controlled company” is not required to comply with all of the NASDAQ Global Market corporate governance standards as they relate to director independence. Although PTSI meets the NASDAQ requirements to be a “controlled company,” PTSI has not elected to become a “controlled company.”
Board Structure and Role in Risk Oversight
Our Board of Directors has chosen to separate the positions of Chairman and Chief Executive Officer (“CEO”). Mr. Matthew T. Moroun is the Chairman of the Board and Mr. Daniel H. Cushman is the CEO and President. This separation of Chairman and CEO allows for greater oversight of PTSI by the Board. The Board is actively involved in oversight of risks that could affect PTSI. This oversight is conducted primarily through committees of the Board, as disclosed in the description of each of the committees below and in the charters of each of the committees, but the
full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within PTSI.
Board Meetings
During 2007,2009, our Board of Directors held fivesix meetings. During 2007,2009, each director attended at least 75%83% of the total number of meetings of our Board and its committees on which he then served.
Board Committees
Our Board of Directors has, and appoints members to, three standing committees: the Audit Committee, the Compensation and Stock Option Committee, and the Executive Committee. The membership of these committees, as of April 15, 2008,2010, was as follows:
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| | Compensation and
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Audit Committee
| | Stock Option Committee
| | Executive Committee
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Frank L. Conner | | W. Scott Davis* | | Matthew T. Moroun |
Christopher L. Ellis* | | Daniel C. Sullivan | | Robert W. Weaver |
Charles F. Wilkins | | Charles F. Wilkins | | |
Each of the members of the Audit Committee and the Compensation and Stock Option Committee is an independent director as defined by applicable NASDAQ rules. Each of these two committees has a charter that has been approved by our Board of Directors and is available on our website, www.pamt.com.
Audit Committee. The Audit Committee has three members and met five times in 2007. The Audit Committee assists our Board of Directors in overseeing our accounting and financial reporting process, internal controls and audit functions, and is directly responsible for the appointment, retention and
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compensation of our registered public accounting firm. Our Board of Directors has determined that Mr. Conner and Mr. Ellis, who are members of the Audit Committee, are each qualified as an audit committee financial expert, as that term is defined in the rules of the Securities and Exchange Commission (“SEC”). Mr. Conner and Mr. Ellis are independent, as independence for audit committee members is defined in the NASDAQ listing standards and the rules of the SEC. More information about the Audit Committee is included below under the heading “Audit Committee Report.”
Compensation and Stock Option Committee. The Compensation and Stock Option Committee has three members and met three times in 2007. The Compensation and Stock Option Committee assists our Board of Directors in carrying out its responsibilities relating to compensation and benefits for our executive officers. The Compensation and Stock Option Committee’s responsibilities and authority include:
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| • | reviewing trends in management compensation and the competitiveness of our executive compensation programs; |
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| • | overseeing development of new compensation plans, and approving or recommending for determination by our Board of Directors revisions of existing plans; |
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| • | evaluating the performance of our Chief Executive Officer; |
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| • | determining, or recommending for determination by our Board of Directors, the salaries, bonus and other compensation for our Chief Executive Officer and each of our other executive officers; |
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| • | reviewing and making recommendations concerning long-term incentive compensation plans, including stock option and other equity-based plans; |
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| • | to the extent eligible to do so, acting as the committee of our Board of Directors that administers equity-based plans, incentive compensation plans and employee benefit plans; and |
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| • | reviewing and approving, or recommending to our Board of Directors for approval, compensation packages for new officers and severance arrangements for officers. |
If a member of a committee of our Board of Directors is absent from a meeting, our bylaws give Board committees authority to unanimously appoint another member of our Board of Directors to act at the meeting in place of the absent committee member. While the Compensation and Stock Option Committee could use this authority, it has no plans to do so. The Compensation and Stock Option Committee has the authority to retain compensation consultants but does not currently use compensation consultants. Compensation for directors is determined by our Board of Directors.
Executive Committee. The Executive Committee exercises the authority of our Board of Directors in accordance with our bylaws between regular meetings of our Board. The Executive Committee did not meet during 2007.
Director Nominating Process. Our Board of Directors does not have a nominating committee that nominates candidates for election to our Board of Directors. That function is performed by our Board of Directors. Each member of our Board participates in the consideration of director nominees. Our Board of Directors believes that it can adequately fulfill the functions of a nominating committee without having to appoint an additional committee to perform that function. Our Board of Directors believes that not having a separate nominating committee saves the administrative expense that would be incurred in maintaining such a committee, and saves time for directors who would serve on a nominating committee if it were established. As there is no nominating committee, we do not have a nominating committee charter.
At least a majority of our independent directors participate in the initial consideration of director nominees. These directors are independent, as independence for nominating committee members is defined in the NASDAQ listing standards. After these independent directors discuss and evaluate potential nominees, they recommend director nominees to the full Board of Directors for selection.
Our Board of Directors will consider as potential nominees persons recommended by stockholders. Recommendations should be submitted to our Board of Directors in care of our Secretary, Larry J. Goddard, at
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our principal executive office, 297 West Henri DeTonti Boulevard, Tontitown, Arkansas 72770. Each recommendation should include a personal biography of the suggested nominee, an indication of the background or experience that qualifies the person for consideration, and a statement that the person has agreed to serve if nominated and elected.
Our Board of Directors has used an informal process to identify potential candidates for nomination as directors. Candidates for nomination have been recommended by an executive officer or director, and considered by our Board of Directors. Generally, candidates have been known to one or more of our Board members. Our Board of Directors has not adopted specific minimum qualifications that it believes must be met by a person it recommends for nomination as a director. In evaluating candidates for nomination, our Board of Directors will consider the factors it believes to be appropriate, which would generally include the candidate’s independence, personal and professional integrity, business judgment, relevant experience and skills, including those related to transportation services, and potential to be an effective director in conjunction with the rest of our Board of Directors in collectively serving the long-term interests of our stockholders. Although our Board of Directors has the authority to retain a search firm to assist it in identifying director candidates, there has to date been no need to employ a search firm. Our Board of Directors does not evaluate potential nominees for director differently based on whether they are recommended to our Board of Directors by a stockholder.
Communications with Directors and Attendance at Annual Meetings
Stockholders may communicate directly with our Board of Directors as a group, by writing to our Board of Directors, care of the Secretary of PTSI, 297 West Henri DeTonti Boulevard, Tontitown, Arkansas 72770. Our Secretary will review all of the correspondence and regularly forward to our Board of Directors a summary of the correspondence, and copies of all of the correspondence that, in his opinion, deals with the functions of our Board of Directors or any of its committees or that our Secretary otherwise determines requires the attention of our Board of Directors. Directors may at any time review a log of all of the correspondence that is addressed to our Board of Directors, and request copies of any and all of the correspondence.
Our Board of Directors has a policy of encouraging our directors to attend the annual meetings of the stockholders. Eight of our directors attended last year’s annual meeting.
Code of Ethics
We have adopted a written code of ethics that applies to all our directors, officers and employees, including our chief executive officer and our chief financial and accounting officer. We have posted a copy of the code on our website, www.pamt.com. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ listing standards concerning any amendments to, or waivers from, any provision of the code.
Compensation Committee Interlocks and Insider Participation
During 2007, Mr. Sullivan served as a member of the Compensation and Stock Option Committee for all of the year, Mr. Matthew Moroun and Mr. Calderone served as members of the committee through August 2, 2007, and Mr. Davis and Mr. Wilkins served on the committee beginning August 2, 2007.
Mr. Matthew Moroun is Chairman of our Board of Directors, which is designated as a non-officer position, a member of the Executive Committee of our Board of Directors, and our largest stockholder. He is the controlling stockholder, Vice Chairman and a director of CenTra, Inc., a transportation holding company based in Warren, Michigan. He is also the Chairman and controlling stockholder of Oakland Financial Corporation, an insurance holding company, and its subsidiaries, based in Sterling Heights, Michigan. Our director, Mr. Manuel Moroun, is the President and Chief Executive Officer of CenTra, and controls a trust that is the other major stockholder of CenTra. He is also a stockholder of Oakland Financial Corporation.
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During 2007, certain subsidiaries of CenTra paid us a total of $2,432,858. These payments represent freight transportation charges of $1,328,351, maintenance services performed in our maintenance facilities and maintenance charges paid by us to third parties on behalf of the subsidiaries and affiliates of CenTra and charged back at the amount paid of $1,104,507.
During 2007, we made payments to certain subsidiaries of CenTra and other companies owned or controlled by our directors, Mr. Manuel Moroun and Mr. Matthew Moroun, in the aggregate amount of $4,100,286. These payments are described below.
Payments were made to a subsidiary of CenTra in the amount of $307,243 for real estate leases. Properties leased from the subsidiary include office and maintenance facilities in two states, and trailer drop yards in nine states. The leases are generally month to month leases with automatic monthly renewal provisions.
Property is also leased from an affiliate of CenTra that is used for trailer drop yards. Payments were made to the affiliate in the amount of $132,415 during 2007 and represent lease payments made in accordance with lease agreements that contain automatic monthly renewal provisions.
Payments in the amount of $419,405 were made to a subsidiary of CenTra during 2007. These payments were for parts and labor charges incurred to repair our equipment.
Payments in the amount of $2,244 were made to a subsidiary of CenTra for the transportation of freight.
We made payments to subsidiaries of Oakland Financial Corporation during 2007 in the amount of $18,466 for insurance premiums paid pursuant to agreements to provide insurance coverage to certain of our independent contractors. Underlying agreements are made directly with the independent contractors. The full amount of these payments to the subsidiaries of Oakland Financial Corporation is recouped by us from the independent contractors.
We purchase physical damage coverage on our tractors and trailers through an unaffiliated insurance broker which is written by a subsidiary of Oakland Financial Corporation. In 2007, we made payments related to these policies in the amount of $2,165,697, and received $2,232,915 in payment for claims filed under these policies.
We purchase commercial auto and general liability insurance issued through an unaffiliated insurance company. A subsidiary of Oakland Financial Corporation serves as third-party administrator for this insurance. In 2007, the subsidiary received $50,000 from the unaffiliated insurance company for handling the claims under this program. Under the commercial auto liability policy, the subsidiary adjusts the claims (which are subject to a $2,500 deductible) and remits the full amounts of the settlements to the claimants. The subsidiary invoices us for the $2,500 deductible amount, for which we paid a total of $1,054,817 in 2007.
On December 6, 2007, we entered into a Consulting Agreement with Mr. Manuel Moroun. The agreement has an initial term of one year, and automatically renews for four additional one-year periods, unless earlier terminated due to death, disability or by mutual agreement. Pursuant to the agreement, Mr. Manuel Moroun provides us with consultation and advice as to the management and operation of PTSI, and such other consulting activities as we may reasonably request and as are reasonably acceptable to him. For the services that Mr. Manuel Moroun renders pursuant to the agreement, we pay him a consulting fee of $100,000 per year, in quarterly installments.
We believe that substantially all of the above transactions were entered into on terms at least as favorable to us as could have been obtained from persons who were not related to us, and each of the transactions was in our best interest. We expect to continue transactions with subsidiaries of CenTra and other companies owned or controlled by our directors, Mr. Manuel Moroun and Mr. Matthew Moroun, in 2008 that are similar to those described above.
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Audit Committee Report
Each member of the Audit Committee is independent, as independence for audit committee members is defined in the NASDAQ listing standards and the rules of the SEC. The Audit Committee’s primary purpose is to assist the Board of Directors in overseeing:
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| • | the accounting and financial reporting process; |
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| • | audits of financial statements and internal control over financial reporting; and |
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| • | internal control and audit functions. |
In carrying out its responsibilities, the Audit Committee supervises the relationship between us and our independent auditor, including having direct responsibility for the auditor’s appointment, compensation and retention, reviewing the scope of its audit services, and approving audit and permissible non-audit services. The Audit Committee reviews and discusses the annual and quarterly financial statements, and reviews the activities of our internal audit function.
Management is responsible for the preparation, presentation and integrity of our financial statements and for the appropriateness of the accounting principles and reporting policies that are used. Management is also responsible for testing the system of internal controls, and reporting to the Audit Committee on any significant deficiencies or material weaknesses that are found.
The Audit Committee discussed with PTSI’s independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”), who is responsible for expressing an opinion on the conformity of our audited financial statements with generally accepted accounting principles, its judgments as to the quality and the acceptability of our financial reporting and such other matters as are required to be discussed with the Audit Committee under standards of the Public Company Accounting Oversight Board (United States), including the matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees). The Audit Committee also reviewed with Grant Thornton management’s assessment included in management’s report on internal control over financial reporting, and Grant Thornton’s opinion on the effectiveness of the company’s internal control over financial reporting.
The Audit Committee has discussed with Grant Thornton that firm’s independence from management and us, and has received from Grant Thornton the written disclosures and letter required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee has considered the compatibility of the provision of non-audit services with maintaining Grant Thornton’s independence.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements in the Annual Report onForm 10-K for the year ended December 31, 2007 with both management and our independent registered public accounting firm. The Audit Committee’s review included a discussion of the quality and integrity of the accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosures in the financial statements.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report onForm 10-K for the year ended December 31, 2007 for filing with the SEC.
Audit Committee
Frank L. Conner
Christopher L. Ellis
Charles F. Wilkins
Compensation Committee Report
The Compensation and Stock Option Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on the review and
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discussion, the committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the SEC.
Compensation and Stock Option Committee | Executive Committee | | Frank L. Conner | W. Scott Davis
Davis* | Matthew T. Moroun |
| Christopher L. Ellis* | Daniel C. Sullivan
| Daniel H. Cushman |
| Charles F. Wilkins | Charles F. Wilkins | |
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Executive Compensation
Compensation Discussion and Analysis
Overview
Our primary goal for the compensation of our three executive officers, Messrs. Weaver, Lawson and Goddard, is to create long-term value for our stockholders. Our compensation program is intended to attract, motivate, reward and retain the management talent required to achieve our corporate objectives and create long-term value for our stockholders, while at the same time making efficient use of our resources. The compensation of our executive officers is designed to reward financial and operating performance, to align their interests with those of our stockholders, and to encourage them to remain with us.
Elements of Compensation
We have three key elements of compensation, annual base salary, cash incentive compensation, and stock options. Annual base salary is intended to attract and retain talented executives, and reward them for annual achievement. Cash incentive compensation is intended to motivate our executive officers to achieve specified financial results or superior performance. Stock options are intended to align the interests of our executive officers with those of our stockholders by linking compensation to stock price appreciation. In addition, when the criteria for vesting of options includes achieving specified financial results, the options also serve the purpose of motivating our executive officers to achieve those results.
Determining Compensation
Compensation for our executive officers is primarily based upon the judgment of the Compensation and Stock Option* Committee of our Board of Directors. We consider competitive market compensation paid by other companies, including truckload dry van carriers and other trucking companies, but we do not attempt to maintain a specified target percentile within a peer group or otherwise rely on compensation paid by other companies to determine our executive compensation.In determining compensation for our executive officers we review and evaluate many factors, including:chairman
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Each of the members of the Audit Committee and the Compensation and Stock Option Committee is an independent director as defined by applicable NASDAQ listing standards. Each of these two committees has a charter that has been approved by our Board of Directors and is available on our website, www.pamtransport.com.
Audit Committee. We have a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee has three members and met four times in 2009. The Audit Committee assists our Board of Directors in overseeing our accounting and financial reporting process, internal controls and audit functions, and is directly responsible for the appointment, retention and compensation of our registered public accounting firm. Our Board of Directors has determined that Mr. Conner and Mr. Ellis, who are members of the Audit Committee, are each qualified as an audit committee financial expert, as that term is defined in the rules of the Securities and Exchange Commission (“SE C”). Mr. Conner and Mr. Ellis are independent, as independence for audit committee members is defined in the NASDAQ listing standards and the rules of the SEC. More information about the Audit Committee is included below under the heading “Audit Committee Report.”
Compensation and Stock Option Committee. The Compensation and Stock Option Committee has three members and met one time in 2009. The Compensation and Stock Option Committee assists our Board of Directors in carrying out its responsibilities relating to compensation and benefits for our executive officers. The Compensation and Stock Option Committee's responsibilities and authority include:
reviewing trends in management compensation and the competitiveness of our executive compensation programs;
overseeing development of new compensation plans, and approving or recommending for determination by our Board of Directors revisions of existing plans;
evaluating the performance of our CEO;
determining, or recommending for determination by our Board of Directors, the salaries, bonus and other compensation for our CEO and each of our other executive officers;
reviewing and making recommendations concerning long-term incentive compensation plans, including stock option and other equity-based plans;
to the extent eligible to do so, acting as the committee of our Board of Directors that administers equity-based plans, incentive compensation plans and employee benefit plans; and
reviewing and approving, or recommending to our Board of Directors for approval, compensation packages for new officers and severance arrangements for officers.
If a member of a committee of our Board of Directors is absent from a meeting, our bylaws give Board committees authority to unanimously appoint another member of our Board of Directors to act at the meeting in place of the absent committee member. While the Compensation and Stock Option Committee could use this authority, it has no plans to do so. The Compensation and Stock Option Committee has the authority to retain compensation consultants but does not currently use compensation consultants. Compensation for directors is determined by our Board of Directors.
Executive Committee. The Executive Committee exercises the authority of our Board of Directors in accordance with our bylaws between regular meetings of our Board. The Executive Committee did not meet during 2009.
Director Nominating Process. Our Board of Directors does not have a nominating committee that nominates candidates for election to our Board of Directors. That function is performed by our Board of Directors. Each member of our Board participates in the consideration of director nominees. Our Board of Directors believes that it can adequately fulfill the functions of a nominating committee without having to appoint an additional committee to perform that function. Our Board of Directors believes that not having a separate nominating committee saves the administrative expense that would be incurred in maintaining such a committee, and saves time for directors who would serve on a nominating committee if it were established. As there is no nominating committee, we do not have a nominating committee charter.
At least a majority of our independent directors participate in the initial consideration of director nominees. These directors are independent, as independence for nominating committee members is defined in the NASDAQ listing standards. After these independent directors discuss and evaluate potential nominees, they recommend director nominees to the full Board of Directors for selection.
Our Board of Directors will consider as potential nominees persons recommended by stockholders. Recommendations should be submitted to our Board of Directors in care of our Secretary, Larry J. Goddard, at P.O. Box 188, Tontitown, Arkansas 72770. Each recommendation should include a personal biography of the suggested nominee, a description of the background or experience that qualifies the person for consideration, and a statement that the person has agreed to serve if nominated and elected.
Our Board of Directors has used an informal process to identify potential candidates for nomination as directors. Candidates for nomination have been recommended by an executive officer or director, and considered by our Board of Directors. Generally, candidates have been known to one or more of our Board members. Our Board of Directors has not adopted specific minimum qualifications that it believes must be met by a person it recommends for nomination as a director. The Board has determined that the Board as a whole must have the right diversity, mix of characteristics and skills for the optimal functioning of the Board in its oversight of the Company. In evaluating candidates for nomination, our Board of Directors will consider the factors it believes to be appropriate, which would generally include the candidate's independence, per sonal and professional integrity, business judgment, relevant experience and skills, including those related to transportation services, and potential to be an effective director in conjunction with the rest of our Board of Directors in collectively serving the long-term interests of our stockholders. Although our Board of Directors has the authority to retain a search firm to assist it in identifying director candidates, there has to date been no need to employ a search firm. Our Board of Directors does not evaluate potential nominees for director differently based on whether they are recommended to our Board of Directors by a stockholder.
Communications with Directors and Attendance at Annual Meetings
Stockholders may communicate directly with our Board of Directors as a group by writing to our Board of Directors, care of the Secretary of PTSI, P.O. Box 188, Tontitown, Arkansas 72770. Our Secretary will review all of the correspondence and regularly forward to our Board of Directors a summary of the correspondence, and copies of all of the correspondence that, in his opinion, deals with the functions of our Board of Directors or any of its
committees or that our Secretary otherwise determines requires the attention of our Board of Directors. Directors may at any time review a log of all of the correspondence that is addressed to our Board of Directors, and request copies of any and all of the correspondence.
Our Board of Directors has a policy of encouraging our directors to attend the annual meetings of the stockholders. All of our directors attended last year's annual meeting.
Code of Ethics
We have adopted a written code of ethics that applies to all our directors, officers and employees, including our CEO and our chief financial and accounting officer. We have posted a copy of the code on our website, www.pamtransport.com. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ listing standards concerning any amendments to, or waivers from, any provision of the code.
Compensation Committee Interlocks and Insider Participation
During 2009, Messrs. Davis, Sullivan and Wilkins served as members of the Compensation and Stock Option Committee for all of the year. No member of the Compensation and Stock Option Committee is, or was during or prior to 2009, an officer or employee of PTSI or any of its subsidiaries. None of our executive officers serves or served as a director or member of the compensation committee of another entity in a case where an executive officer of such other entity serves or served as a director or member of our Compensation and Stock Option Committee.
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| • | PTSI’s performance and growth; |
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| • | financial measurements such as revenue, revenue growth, net operating income and operating ratio, and trends in those measurements; |
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| • | leadership qualities; |
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| • | ability to achieve strategic objectives; |
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| • | scope and performance of business responsibilities; |
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| • | management experience and effectiveness; |
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| • | individual performance, and performance as a management team; |
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| • | current compensation arrangements; and |
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| • | long-term potential to maintain and enhance value for our stockholders. |
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Each member of the Audit Committee is independent, as independence for audit committee members is defined in the NASDAQ listing standards and the rules of the SEC. The Audit Committee's primary purpose is to assist the Board of Directors in overseeing:
the accounting and financial reporting process;
audits of financial statements and internal control over financial reporting; and
internal control and audit functions.
In carrying out its responsibilities, the Audit Committee supervises the relationship between us and our independent auditor, including having direct responsibility for the auditor's appointment, compensation and retention, reviewing the scope of its audit services, and approving audit and permissible non-audit services. The Audit Committee reviews and discusses the annual and quarterly financial statements, and reviews the activities of our internal audit function.
Management is responsible for the preparation, presentation and integrity of our financial statements and for the appropriateness of the accounting principles and reporting policies that are used. Management is also responsible for testing the system of internal controls and reporting to the Audit Committee on any significant deficiencies or material weaknesses that are found.
The Audit Committee discussed with PTSI's independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”), who is responsible for expressing an opinion on the conformity of our audited financial statements with generally accepted accounting principles, its judgments as to the quality and the acceptability of our financial reporting and such other matters as are required to be discussed with the Audit Committee under standards of the Public Company Accounting Oversight Board (United States), including the matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees). The Audit Committee also reviewed with Grant Thornton management's assessment included in management's report on internal control over financial reporting, and Grant Thornton 's opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2009.
The Audit Committee has discussed with Grant Thornton that firm's independence from management and us, and has received from Grant Thornton the written disclosures and letter required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee has considered the compatibility of the provision of non-audit services with maintaining Grant Thornton's independence.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements in the Annual Report on Form 10-K for the year ended December 31, 2009, with both management and our independent registered public accounting firm. The Audit Committee's review included a discussion of the quality and integrity of the accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosures in the financial statements.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2009, for filing with the SEC.
Audit Committee Members
Christopher L. Ellis, Chairman
Frank L. Conner
Charles F. Wilkins
The Compensation and Stock Option Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on the review and discussion, the committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the SEC.
Compensation and Stock Option Committee Members
W. Scott Davis, Chairman
Daniel C. Sullivan
Charles F. Wilkins
Compensation Discussion and Analysis
Overview
Our primary goal for the compensation of our executive officers is to create long-term value for our stockholders. Our compensation program is intended to attract, motivate, reward and retain the management talent required to achieve our corporate objectives and create long-term value for our stockholders, while at the same time making efficient use of our resources. The compensation of our executive officers is designed to reward financial and operating performance, to align their interests with those of our stockholders, and to encourage them to remain with us.
Executive Officers of PTSI
Our executive officers are Daniel H. Cushman, Larry J. Goddard and W. Clif Lawson.
| Name | | Age | | Position | | Years of Service |
| Daniel H. Cushman | | 55 | | President and Chief Executive Officer | | 1 |
| Larry J. Goddard | | 51 | | Vice President of Finance, Chief Financial Officer, Secretary and Treasurer | | 22 |
| W. Clif Lawson (1) | | 56 | | Executive Vice President and Chief Operating Officer | | 25 |
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We generally do not adhere to rigid formulas or react to short-term changes in business performance in determining the amount and mix| (1) | On August 19, 2009, Mr. Lawson became Vice President of compensation elements. We strive to achieve an appropriate mix between annual base salary, cash incentive compensation and stock options to meet our objectives.Employment Agreements Include Annual Base Compensation
We have a multi-yearAutomotive Sales. On June 1, 2010, his employment agreement with eachthe Company will expire. Upon expiration of our executive officers. The current agreements werethe agreement, Mr. Lawson has agreed to be available for consultation for a period of six months.
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Daniel H. Cushman. Mr. Cushman, age 55, has served as President and CEO since July 2009. Prior to his employment with the Company, Mr. Cushman served as Vice President of Sales and Marketing for CRST International, Inc. in Cedar Rapids, Iowa (“CRST”), from July 2008 to July 2009, and as Vice President and General Manager of Dedicated Services for CRST from March 2008 to July 2008. From January 2007 to March 2008, Mr. Cushman was Senior Executive Vice President and Chief Marketing Officer for Werner Enterprises in Omaha, Nebraska. From January 2002 to December 2006, he served as Executive Vice President Chief Marketing and Operations Officer for Werner Enterprises.
Larry J. Goddard. Mr. Goddard, age 51, has served as Vice President of Finance, Chief Financial Officer, Secretary and Treasurer since 1991. Prior to that date Mr. Goddard served in various capacities with the Company and has been with the Company for the past 22 years.
W. Clif Lawson. Mr. Lawson, age 56, served as Executive Vice President and Chief Operating Officer since 1990. On August 19, 2009, he became Vice President of Automotive Sales. He has served with the Company for the past 25 years.
Elements of Compensation
We have three key elements of compensation: annual base salary, cash incentive compensation, and stock options. Annual base salary is intended to attract and retain talented executives, and reward them for annual achievement. Cash incentive compensation is intended to motivate our executive officers to achieve specified financial results or superior performance. Stock options are intended to align the interests of our executive officers with those of our stockholders by linking compensation to stock price appreciation. In addition, when the criteria for vesting of options includes achieving specified financial results, stock options also serve the purpose of motivating our executive officers to achieve those results.
Determining Compensation
Compensation for our executive officers is primarily based upon the judgment of the Compensation and Stock Option Committee of our Board of Directors. The committee considers competitive market compensation paid by other companies, including truckload dry van carriers and other trucking companies, but it does not attempt to maintain a specified target percentile within a peer group or otherwise rely on compensation paid by other companies to determine our executive compensation.
In determining compensation for our executive officers, the committee reviews and evaluates many factors, including:
PTSI's performance and growth;
financial measurements such as revenue, revenue growth, net operating income and operating ratio, and trends in those measurements;
ability to achieve strategic objectives;
scope and performance of business responsibilities;
management experience and effectiveness;
individual performance, and performance as a management team;
current compensation arrangements; and
long-term potential to maintain and enhance value for our stockholders.
The committee generally does not adhere to rigid formulas or react to short-term changes in business performance in determining the amount and mix of compensation elements. The committee strives to achieve an appropriate mix between annual base salary, cash incentive compensation and stock options to meet our objectives.
The committee receives regular updates on our business results from management and reviews the quarterly financial statements and projections to assess whether executive compensation continues to be properly balanced with and supportive of our business objectives. The committee also regularly reviews information, including reported revenue, profit levels, market capitalization and disclosed governance practices, regarding comparably–sized companies in our industry to assess our comparative performance and organizational structure. The committee uses management updates and peer information as tools to evaluate the connection between executive compensation and our performance as a business. This information is reviewed in a subjective manner. There is no implied direct or formulaic linka ge between peer information and our compensation decisions. The committee takes the view that a close connection between compensation and performance objectives encourages our executive officers to make decisions that will result in significant positive short-term and long-term returns for our business and our stockholders without providing an incentive either to take unnecessary risks or to avoid opportunities to achieve long-term benefits even though they may reduce short-term benefits for the executive officers, the business or our stockholders.
Based on these reports, the committee regularly evaluates both the short-term and long-term performance compensation for the executive officers to ensure alignment with our business objectives. The committee also works closely with management regarding long-term equity incentives, which emphasize stockholder returns while providing enhanced retention value for key executives.
Employment Agreements Include Annual Base Compensation
We have a multi-year employment agreement with each of our executive officers. On June 1, 2006, we entered into agreements with Messrs. Goddard and Lawson. On June 29, 2009, we entered into an agreement with our CEO and President, Mr. Cushman. We believe that it is useful to have employment agreements because they set forth the terms under which the executive officers are employed, include annual base salary and severance arrangements, and provide us with one year of protection from competition by our executive officers following termination of their employment with us. The employment agreements also require our executive officers to provide us with three months advance notice if they wish to resign. The annual base compensation for our executive officers set forth in the employment agreements was determined by the Compensa tion and Stock Option Committee and recommended to, and approved by, our Board of Directors.
Cash Incentive Compensation
The Compensation and Stock Option Committee did not establish a cash incentive compensation plan for our executive officers for 2009. The committee determined whether to pay our executive officers a bonus for 2009, and the amount of any bonus. After reviewing our business and financial performance for 2009, the committee determined not to pay a bonus related to performance to any of our executive officers for 2009. However, Mr. Cushman was paid a hiring bonus when he agreed to serve as President and CEO. This bonus is included in the Summary Compensation Table and is further explained in the accompanying footnote.
As of April 15, 2010, the Compensation and Stock Option Committee had not established a cash incentive compensation plan for Mr. Goddard and Mr. Lawson for 2010 and the committee intends to give the matter further
consideration at a later date. Mr. Cushman is eligible to earn a bonus incentive award based on the Company’s audited results of operations for January 1, 2010, through December 31, 2010. The bonus will be a percentage of Mr. Cushman’s annual salary based on the Company’s consolidated operating ratio for the 2010 calendar year determined according to the table provided in Exhibit A to the P.A.M. Transportation Services, Inc. Incentive Compensation Plan for Calendar year 2010. In the event that a bonus is earned in accordance with this plan, 50% will be paid before March 31, 2011, 25% will be paid before March 31, 2012, and the remaining 25% will be paid prior to March 31, 2013.
Stock Options
In March of 2006, the Board of Directors adopted a new stock option plan, the 2006 Stock Option Plan. The plan provides for the issuance of stock options for up to 750,000 shares of our common stock, subject to adjustments. Our officers, directors, key employees and consultants are eligible to receive options under the plan. The plan was approved by our stockholders at their May 24, 2006 annual meeting. We did not issue any options to our executive officers or other employees under the plan during 2006, 2007, 2008 or 2009.
Our most recent grant of stock options to our executive officers was on August 28, 2002. Those options were granted under our 1995 Stock Option Plan that expired in 2005. The options covered 90,000 shares of our common stock for each of Mr. Lawson and Mr. Goddard. The options were scheduled to vest in installments. The first installment vested immediately on grant for 20% of the shares covered by each option. The remaining shares covered by the options were scheduled to vest in equal installments, on March 15 of each year, from March 15, 2003, through March 15, 2008, depending for each annual installment on whether the performance criteria for that installment was met. The primary performance criteria for each installment to vest has been whether our consolidated net income for the most recent year exceed ed the consolidated net income for the immediately preceding year by at least 5%. The exercise price for all of the shares was established at the market price of our stock on the date the options were granted, $23.22.
Other Compensation
We sponsor a retirement savings plan for all of our eligible employees, including our executive officers. The plan qualifies under section 401(k) of the Internal Revenue Code, as amended. This plan allows eligible employees to make tax deductible contributions to the plan. We make employer matching contributions to the plan for each eligible employee. The matching contributions are 50% of each participating employee's voluntary contribution, up to 3% of the participant's compensation. These matching contributions vest at the rate of 20% each year until fully vested after five years.
We offer health, vision and dental insurance to Messrs. Lawson and Goddard and pay the insurance premiums for them. While we make similar insurance available to other employees, we do not pay their insurance premiums.
We allow each of our executive officers to use a company owned automobile. With the exception of this perquisite, our policy is to provide minimal, if any, perquisites to our executive officers. This helps set an example for all employees that personal expenses are not payable from company funds and helps to control expenses.
Post-Employment Compensation
We do not provide a defined benefit pension plan or post retirement health insurance coverage for our executive officers or any of our other employees. We do not offer deferred compensation plans, and do not have agreements that provide compensation to our executive officers based upon the occurrence of a change in control of PTSI.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company's chief executive officer or certain of the company's other most highly compensated executive officers. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (compensation paid only if the individual's or the company's performance meets pre-established objective goals based on performance criteria approved by the stockholders). We periodically review the potential consequences of Section 162(m) and may structure some or all of the compensation for our executive officers so that it will not be subject to the
deduction limitations of Section 162(m). None of the compensation paid to our executive officers for 2009 was structured to be “qualifying performance-based” compensation. For 2009, we were not precluded by Section 162(m) from deducting any compensation that we paid to any of our executive officers.
Share Ownership Guidelines
We do not have stock ownership requirements for our executive officers. However, each of our executive officers owns shares of our common stock, and options to acquire additional shares.
Overview of the Compensation Process
The elements of executive compensation are discussed at meetings of the Compensation and Stock Option Committee, with significant input from our Chairman of the Board and other directors. Annual base salary is generally determined for a multi-year period at the time that employment agreements are negotiated with our executive officers. Cash incentive compensation and other bonuses, and forms of stock-based compensation are discussed from time to time, but there is no set schedule for making determinations regarding these types of compensation, and the committee retains considerable flexibility in deciding when to address these matters. In making its compensation decisions, the committee will usually seek input from our CEO and President regarding elements of his compensation, and that of the other executive officers. However, the comm ittee makes the final decision on executive officer compensation, or recommends compensation of our executive officers to our Board of Directors for approval. The committee is authorized to utilize compensation consultants, but does not presently confer with compensation consultants regarding executive compensation.
Summary Compensation Table
The following table provides information regarding the compensation earned by the executive officers for the three years ended December 31, 2009.
| SUMMARY COMPENSATION TABLE |
| Name and Principal Position | | Year | Salary ($) | Bonus ($) | | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | | Total ($) |
| | | | | | | | | | | |
| Daniel H. Cushman ………………… | | 2009 | 190,769 | 55,000 | (1) | - | - | 13,965 | (2) | 259,733 |
| President and Chief Executive Officer | | 2008 | - | - | | - | - | - | | |
| | 2007 | - | - | | - | - | - | | |
| | | | | | | | | | | |
| Larry J. Goddard …………………… | | 2009 | 245,210 | - | | - | - | 5,390 | (3) | 250,600 |
| Vice President of Finance, Chief Financial Officer, Secretary and Treasurer | | 2008 | 245,635 | - | | - | - | 5,390 | | |
| | 2007 | 232,058 | - | | - | - | 5,390 | | |
| | | | | | | | | | | |
| W. Clif Lawson ….………………… | | 2009 | 319,474 | - | | - | - | 5,000 | (3) | 324,474 |
| Executive Vice President and Chief Operating Officer (4) | | 2008 | 327,096 | - | | - | - | 5,000 | | |
| | 2007 | 307,346 | - | | - | - | 5,000 | | |
| | | | | | | | | | | |
| Robert W. Weaver ………………… | | 2009 | 346,080 | - | | - | - | 230,400 | (5) | 576,480 |
| President and Chief Executive Officer | | 2008 | 529,423 | - | | - | - | - | | |
| | | 2007 | 501,923 | - | | - | - | - | | |
| (1) | Mr. Cushman was paid $55,000 as a hiring bonus when he agreed to serve as President and Chief Executive Officer. This bonus was intended to cover expenses associated with our executive officers on July 26, 2006. We believethe sale of his home in Nebraska, as well as, relocation costs related to his move to Northwest Arkansas. In the event that it is usefulMr. Cushman terminates his employment prior to June 28, 2012, he will have employment agreements because they set forthto repay the terms under which the executive officers are employed, include annual base salary and severance arrangements, and provide us with one yearentire amount. |
| (2) | Other Compensation for Mr. Cushman consists of protection from competition by our executive officers following terminationa monthly reimbursement of their employment with us. The employment agreements also require our executive officers to provide us with three months advance notice if they wish to resign. The annual base compensation for our executive officers set forthliving expenses in the employment agreements was determined by the Compensation and Stock Option Committee and recommended to, and approved by, our Board of Directors.Cash Incentive Compensation
We did not establish a cash incentive compensation plan for our executive officers for 2007. The Compensation and Stock Option Committee determined to evaluate whether to pay our executive officers a bonus for 2007, and the amount of any bonus, after reviewing our business and financial performance for 2007. After reviewing our business and financial performance for 2007, the committee determined not to pay a bonus to any of our executive officers for 2007. As of April 15, 2008, the Compensation and Stock Option Committee had not established a cash incentive compensation plan for our executive officers for 2008 and intends to give the matter further consideration at a later date.
Stock Options
In March of 2006, the Board of Directors adopted a new stock option plan, the 2006 Stock Option Plan. The plan provides$1,800 for the issuancemonths of stock options for up to 750,000 shares of our common stock, subject to adjustments. Our officers, directors, key employees and consultants are eligible to receive options under the plan. The plan was approved by our stockholders at their May 24, 2006 annual meeting. In 2006 and 2007, we did not issue any options to our executive officers or other employees under the plan.
Our most recent grant of stock options to our executive officers was on August 28, 2002. Those options were granted under our 1995 Stock Option Plan that expired in 2005. The options covered 120,000 shares of our stock for Mr. Weaver, and 90,000 shares for each of Mr. Lawson and Mr. Goddard. The options were scheduled to vest in installments. The first installment vested immediately on grant for 20% of the shares covered by each option.July through December, totaling $10,800. The remaining shares covered by$3,165 represents the options were scheduled to vest in equal installments, on March 15 of each year, from March 15, 2003 through March 15, 2008, depending for each annual installment on whether the performance criteria for that installment was met. The primary performance criteria for each installment to vest has been whether our consolidated net income for the most recent year exceeded the consolidated net income for the immediately prior year by at least 5%. The exercise price for all of the shares was established at the market price of our stock on the date the options were granted, $23.22. The performance criteria for the 2006 installment of the options was met, and the options for those shares vested on March 15, 2007. The performance criteria for the 2007 installment was not met, so the final installment of the options, which could have vested for the executive officers on March 15, 2008, did not vest.
Other Compensation
We sponsor a profit sharing plan for all of our eligible employees, including our executive officers. The plan qualifies under section 401(k) of the Internal Revenue Code, as amended. This allows eligible employees to make tax deductible contributionsvalue assigned to the plan. We makeuse of a company owned vehicle.
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| (3) | Other Compensation represents amounts paid as employer matching contributions to theunder our section 401(k) qualified retirement savings plan for each eligible employee. The matching contributions are 50% of each participating employee’s voluntary
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contribution, up to 3% of the participant’s compensation. These matching contributions vest at the rate of 20% each year until fully vested after five years.
We offerand health, vision and dental insurance topremiums paid by the Company on behalf of Messrs. Lawson and Goddard, and payGoddard.
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| (4) | On August 19, 2009, Mr. Lawson became Vice President of Automotive Sales. On June 1, 2010, his employment agreement with the insurance premiums for them. While we make similar insurance available to Mr. Weaver and our other employees, we do not pay their insurance premiums.We allow each of our executive officers to use a company owned automobile. With the exception of this perquisite, our policy is to provide minimal, if any, perquisites to our executive officers. This helps set an example for all employees that personal expenses are not payable from company funds, and helps to control expenses.
Post-Employment Compensation
We do not provide a defined benefit pension plan or post retirement health insurance coverage for our executive officers or any of our other employees. We do not offer deferred compensation plans, and do not have agreements that provide compensation to our executive officers based upon the occurrence of a change in control of PTSI.
Tax Deductibility of Compensation
Section 162(m)Company will expire. Upon expiration of the Internal Revenue Code, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’s chief executive officer or certain of the company’s other most highly compensated executive officers. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (compensation paid only if the individual’s or the company’s performance meets pre-established objective goals based on performance criteria approved by the stockholders). We periodically review the potential consequences of Section 162(m) and may structure some or all of the compensation for our executive officers so that it will not be subject to the deduction limitations of Section 162(m). None of the compensation paid to our executive officers for 2007 was structuredagreement, Mr. Lawson has agreed to be “qualifying performance-based” compensation. For 2007, we were not precluded by Section 162(m) from deducting any compensation that we paid to any of our executive officers.
Share Ownership Guidelines
We do not have stock ownership requirementsavailable for our executive officers. However, each of our executive officers owns shares of our stock, and options to acquire additional shares.
Overview of the Compensation Process
The elements of executive compensation are discussed at meetings of the Compensation and Stock Option Committee, with significant input from our Chairman of the Board and other directors. Annual base salary is generally determinedconsultation for a multi-year period at the time that employment agreements are negotiated with our executive officers. Cash incentive compensation and other bonuses, and forms of stock-based compensation are discussed from time to time, but there is no set schedule for making determinations regarding these types of compensation, and the committee retains considerable flexibility in deciding when to address these matters. In making its compensation decisions, the committee will usually seek input from our President and Chief Executive Officer regarding elements of his compensation, and that of the other executive officers. However, the committee makes the final decision on executive officer compensation, or recommends executive officer compensation to our Board of Directors for approval. six months.
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| (5) | The committee is authorized to utilize compensation consultants, but does not presently confer with compensation consultants regarding executive compensation.
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Summary Compensation Table
The following table provides information regarding the compensation earned by the named executive officers for the two years ended December 31, 2007.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-Equity
| | | | | | | | | | | | Option
| | Incentive Plan
| | All Other
| | | | | | | | | | Awards
| | Compensation
| | Compensation
| | Total
| Name and Principal Position | | Year | | Salary ($) | | ($)(1) | | ($)(2) | | ($) | | ($) | | | | Robert W. Weaver | | | 2007 | | | | 501,923 | | | | — | | | | — | | | | — | | | | 501,923 | | | President and Chief Executive | | | 2006 | | | | 475,000 | | | | 151,256 | | | | 272,105 | | | | 2,500 | | | | 900,861 | | | Officer | | | | | | | | | | | | | | | | | | | | | | | | | | W. Clif Lawson | | | 2007 | | | | 307,346 | | | | — | | | | — | | | | 5,000 | | | | 312,346 | | | Executive Vice President and | | | 2006 | | | | 278,462 | | | | 113,442 | | | | 163,263 | | | | 5,000 | | | | 560,167 | | | Chief Operating Officer | | | | | | | | | | | | | | | | | | | | | | | | | | Larry J. Goddard | | | 2007 | | | | 232,058 | | | | — | | | | — | | | | 5,390 | | | | 237,448 | | | Vice President of Finance, Chief | | | 2006 | | | | 217,302 | | | | 113,442 | | | | 122,447 | | | | 5,530 | | | | 458,721 | | | Financial Officer, Secretary and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | The amounts shown represent the compensation expense we recognized for option awards for the named executive officers, as determined in accordance with SFAS 123(R). Information regarding assumptions made for purposes of determining these amounts can be found in Note 12 “Share-Based Compensation” to our consolidated financial statements in Item 8 “Financial Statements and Supplementary Data” of our Annual Report to the SEC onForm 10-K for the year ended December 31, 2007. | | (2) | | Non-equity incentive plan compensation consists of amounts earned and payable for 2006 under our Executive Incentive Plan, which is a cash incentive plan. In accordance with the plan, this compensation is payable in two equal installments. The first installment was paid in March of 2007, and the second installment was paid in January of 2008. |
Employment Agreements
As discussed above, we haveCompany entered into employment agreements with our executive officers, Messrs. Weaver, Lawson and Goddard. The initial term of oura consulting agreement with Mr. Weaver is from July 10, 2006 toupon the conclusion of his employment agreement on July 10, 2009. We have an option to extendThe terms of the consulting agreement for two additional years, one year at a time. The agreement providesstate that Mr. Weaver with an annual base salarywill be paid $9,600 per week for a period of $500,000six months and subsequent to that $4,800 per week for eacha period of the first two years, and of $550,000 for the third year. If we exercise our option to extend the agreement, the agreement provides Mr. Weaver with an annual base salary of $550,000 for the first year of the extension, and of $600,000 for the second year of the extension.six months. Payments under this arrangement totaled $230,400 during 2009.
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Employment Agreements
As discussed above, we have entered into employment agreements with each of our executive officers. The initial term of our agreement with Mr. Cushman began on July 13, 2009, and extends for 36 months. The agreement provides Mr. Cushman with an annual salary of $400,000. In addition, he is entitled to a bonus of $55,000 to be used at his discretion toward expenses for his relocation to Tontitown, Arkansas, and the sale of his home. In the event of an earlier separation from PTSI, Mr. Cushman will be obligated to repay the bonus. PTSI has also agreed to reimburse Mr. Cushman for up to $1,800 per month for up to eighteen months for temporary living expenses. Mr. Cushman is eligible to earn a bonus incentive award based on the Company’s audited results of operations for January 1, 2010, through December 31, 20 10. The bonus will be a percentage of Mr. Cushman’s annual salary based on the Company’s consolidated operating ratio for the 2010 calendar year determined according to the table provided in Exhibit A to the P.A.M. Transportation Services, Inc. Incentive Compensation Plan for Calendar year 2010. In the event that a bonus is earned in accordance with this plan, 50% will be paid before March 31, 2011, 25% will be paid before March 31, 2012 and the remaining 25% will be paid prior to March 31, 2013.
Our employment agreement with Mr. Lawson began on June 1, 2006, and will expire on June 1, 2010. Upon expiration of this agreement, Mr. Lawson has agreed to be available for consultation for a period of six months. Our agreement provides Mr. Lawson with an annual base salary of $300,000 for the first year, and of $310,000, $335,000 and $355,000 for the second, third and fourth years of the agreement.
The initial term of our employment agreement with Mr. Goddard is from June 1, 2006, through June 1, 2010. We have an option to extend this agreement for one additional year. The agreement provides Mr. Goddard with an annual base salary of $225,000 for the first year, and of $235,000, $250,000 and $265,000 for the second, third and fourth years of the agreement. If we exercise our option to extend our agreement with Mr. Goddard for an additional year, the agreement provides Mr. Goddard with an annual base salary of $280,000 for the additional year.
Under the employment agreements, our executive officers may also participate in bonus and other incentive plans that are approved from time to time by our Board of Directors or Compensation and Stock Option Committee. The executive officers are also entitled to any fringe benefits that we may provide for our employees in the normal course of our business. Additional information regarding the employment agreements, including compensation payable to the executive officers on termination of employment and their non-compete, non-solicitation and confidentiality obligations, is included below under the heading “Potential Payments Upon Termination or Change in Control.”
Messrs. Goddard and Lawson agreed voluntarily that beginning January 1, 2009, their base salaries would be reduced by 5% from the applicable amounts detailed in their employment agreements until such time as financial results for the Company improve. The 5% base salary reduction is not a deferral to be paid to the executive officers in future periods.
Salary and Bonus Compared to Total Compensation
We have not established a proportion that salary and bonus should be of our executive officers' total compensation. As indicated in the Summary Compensation Table, the proportion for 2009 that salary and bonus were of total compensation ranged from 98% to 100% for our executive officers.
The initial terms of our employment agreements with Messrs. Lawson and Goddard are from June 1, 2006 through June 1, 2010. We have an option to extend each of the agreements for one additional year. Our agreement with Mr. Lawson provides him with an annual base salary of $300,000 for the first year of the agreement, and of $310,000, $335,000 and $355,000 for the second, third and fourth years of the agreement. If we exercise our option to extend our agreement with Mr. Lawson for an additional year, the agreement provides Mr. Lawson with an annual base salary of $370,000 for the additional year. Our agreement with Mr. Goddard provides him with an annual base salary of $225,000 for the first year of the agreement, and of $235,000, $250,000 and $265,000 for the second, third and fourth years of the agreement. If we exercise our option to extend our agreement with Mr. Goddard for an additional year, the agreement provides Mr. Goddard with an annual base salary of $280,000 for the additional year.
Under the employment agreements, our executive officers may also participate in bonus and other incentive plans that are approved from time to time by our Board of Directors or Compensation and Stock Option Committee. The executive officers are also entitled to any fringe benefits that we may provide for our employees in the normal course of our business. Additional information regarding the employment agreements, including compensation payable to the executive officers on termination of employment and their
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