ARKANSAS BEST
CORPORATION
Notice of
Notice of Annual Meeting & Proxy Statement 2016Annual MeetingProxy Statement2014
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SECURITIES AND EXCHANGE COMMISSION | |||
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SCHEDULE 14A | |||
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Proxy Statement Pursuant to Section 14(a) of | |||
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o | Soliciting Material Pursuant to §240.14a-12 | ||
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ARKANSAS BEST
CORPORATION
Notice of
Notice of Annual Meeting & Proxy Statement 2016Annual MeetingProxy Statement2014
Contents
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting | 2 |
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Proposal II. Ratification of Appointment of Independent Registered Public Accounting Firm |
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Proposal IV. Approval of |
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Procedure for Submitting Stockholder Proposals for | 69 |
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ARKANSAS BEST
CORPORATION
Annual Meeting of Stockholders
Arkansas BestArcBest Corporation
®
To Be Held on April 23, 201426, 2016
To the Stockholders of Arkansas BestArcBest Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders of Arkansas BestArcBest Corporation (the “Company”) on Wednesday,Tuesday, April 23, 201426, 2016 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. In addition to this notice, enclosed are a proxy card and a proxy statement containing information about the following matters to be acted upon at the meeting:
I. |
| To elect |
II. |
| To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year |
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| To conduct an advisory vote on executive compensation; |
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| To approve the material plan terms of the |
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| To act upon such other matters as may properly be brought before the meeting affecting the business and affairs of the Company. |
Only stockholders of record at the close of business on February 24, 201429, 2016 are entitled to notice of and to vote at the meeting or any adjournment(s) or postponement(s) thereof. Whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy card or follow the instructions on the proxy card and vote by Internet or by telephone as promptly as possible. It is important that your shares be represented at the meeting.
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The Board of Directors urges you to sign and date your enclosed proxy card and promptly return it in the enclosed pre-addressed, postage-paid envelope or follow the instructions on the proxy card and vote by Internet or by telephone, even if you are planning to attend the meeting. Many of the Company’s stockholders hold their shares in “street-name” in the name of a brokerage firm or bank. If you hold your shares in “street-name,” please note that only your brokerage firm or bank can sign a proxy on your behalf. Accordingly, you must provide voting instructions to your brokerage firm or bank in order for your shares to be voted. The Board of Directors urges you to contact the person responsible for your account today and instruct them to execute a proxy considering the recommendations of the Board, which are described in this Proxy Statement. Please note that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you will not be permitted to vote in person at the meeting unless you first obtain a legal proxy issued in your name from the record holder.
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By Order of the Board of Directors, February 28, 2014.March 4, 2016.
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Robert A. Young III | Judy R. McReynolds | |
Chairman of the Board |
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3801 OLD GREENWOOD ROAD / P.O. BOX 10048 / FORT SMITH, ARKANSAS 72917-0048 / 479-785-6000
ARKANSAS BEST
CORPORATION
Important Notice Regarding the Availability of
Proxy
Materials for the Stockholder Meeting
To Be Held on April 23, 201426, 2016
The Proxy Statement, proxy card and 20132015 Annual Report on Form 10-K
to stockholders are available at www.arkbest.comwww.arcb.com.
The 20142016 Annual Meeting of Stockholders of Arkansas BestArcBest Corporation (the “Company”) will be held on Wednesday,Tuesday, April 23, 201426, 2016 at 8:00 a.m. (CDT) at the principal offices of the Company located at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903. To obtain directions to attend the Annual Meeting and to vote in person, contact the Company’s Investor Relations Department at toll-free telephone number 800-961-9744, email address invrel@arkbest.cominvrel@arcb.com or through the Company website www.arkbest.comwww.arcb.com.
The matters intended to be acted upon at the Annual Meeting are:
I. |
| Election of |
John W. Alden
Fred A. Allardyce
Stephen E. Gorman
William M. Legg
Kathleen D. McElligott
Judy R. McReynolds
John H. Morris
Craig E. Philip
Steven L. Spinner
Janice E. Stipp
Robert A. Young III
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| Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year |
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| Advisory vote on executive compensation; |
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| Approval of |
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| Consideration of such other matters as may properly be brought before the meeting affecting the business and affairs of the Company. |
The Board of Directors recommends a vote “FOR” each of the nominees for election to the
Board, “FOR” ratification of the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for fiscal year 2014,2016, “FOR” the approval of
the compensation of the Company’s Named Executive Officers, “FOR” approval of a Second Amendment to the 2005 Ownership Incentive Plan and “FOR” the approval of the
material plan terms of the 2005 OwnershipExecutive Officer Annual Incentive Compensation Plan, as amended,
for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code.IRC.
The following proxy materials are being made available at the website location specified above:
· The Proxy Statement for the 20142016 Annual Meeting of Stockholders
· The 20132015 Annual Report on Form 10-K
· The form of proxy card being distributed to stockholders in connection with the 20142016 Annual Meeting of Stockholders
ARKANSAS BEST
CORPORATION
This Proxy Statement is furnished to the stockholders of Arkansas BestArcBest Corporation (“ABC”ArcBest” or the “Company”), formerly known as Arkansas Best Corporation, in connection with the solicitation of proxies on behalf of the ABCArcBest Board of Directors (the “Board”) to be voted at the Company’s Annual Meeting of Stockholders (the “2014“2016 Annual Meeting”) to be held on Tuesday, April 23, 201426, 2016 at 8:00 a.m. (CDT) at the principal offices of the Company for the purposes set forth in this Proxy Statement. This Proxy Statement, the Notice of Annual Meeting, the related proxy card, and the 20132015 Annual Report on Form 10-K to Stockholders are being mailed to stockholders beginning on or about March 19, 2014. ABC’s21, 2016. ArcBest’s principal place of business is at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, and its telephone number is 479-785-6000.
The Board has fixed the close of business on February 24, 201429, 2016 as the record date for the 20142016 Annual Meeting. Only stockholders of record on that date are entitled to vote at the meeting in person or by proxy.
Registered stockholders may vote their shares of the Company’s common stock (“Common Stock”) by proxy or in person at the meeting. To vote by proxy, registered stockholders must either: (i) visit the website designated on the proxy card to submit their proxy on the Internet; (ii) call the toll-free number set forth on the proxy card to submit their proxy telephonically; or (iii) mail their signed and dated proxy card in the envelope provided. Beneficial stockholders should follow the instructions that they receive from their bank, broker or other nominee to have their shares voted.
The proxies named on the enclosed proxy card were appointed by the Board to vote the shares represented by the proxy card. Upon receipt by the Company of either a submitted Internet or telephone vote or a properly signed and dated proxy card, the shares represented thereby will be voted in accordance with the stockholder’s instructions. If a stockholder does not vote either by Internet, telephone or returning a signed proxy card, his or her shares cannot be voted by proxy. Stockholders voting by returning a paper proxy card are urged to mark the ovals on the proxy card to show how their shares are to be voted. If a stockholder returns a signed proxy card without marking the ovals, the shares represented by the proxy card will be voted as recommended by the Board herein and in the proxy card. The proxy also confers discretionary authority to the proxy holders to vote on any other matter not presently known to the Company that may properly come before the meeting.
Registered stockholders may revoke their proxy at any time before the shares are voted at the 20142016 Annual Meeting by: (i) timely submitting a proxy with new voting instructions, using the Internet or telephone voting system; (ii) voting in person at the 20142016 Annual Meeting by completing a ballot; however, attending the meeting without completing a ballot will not revoke any previously submitted proxy; (iii) timely delivery of a valid, duly executed proxy card bearing a later date; or (iv) delivery of written notice of revocation to the Corporate Secretary of the Company at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, by 5:00 p.m. (CDT), on or before April 22, 2014.25, 2016. Beneficial stockholders may change their votes by submitting new voting instructions to their bank, broker or other nominee in accordance with that entity’s procedures.
On the record date, there were 25,868,15525,734,173 shares of the Company’s common stockCommon Stock outstanding and entitled to vote (“Common Stock”).vote. Each share of Common Stock is entitled to one vote. Cumulative voting is not allowed. The holders in person or by proxy of a majority of the total number of shares of Common Stock shall constitute a quorum for purposes of the 20142016 Annual Meeting. If stockholders holding the number of shares of Common Stock necessary for a quorum shall fail to be present in person or by proxy at the time and place fixed for any meeting, the holders of a majority of the shares entitled to vote who are represented in person or by proxy may adjourn the meeting from time to time, until a quorum is present, and at any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. Votes are tabulated by the inspector of elections, Wells Fargo Bank, N.A.
If you hold your shares in “street name,” you will receive instructions from your broker or other nominees describing how to vote your shares. If you do not timely instruct your brokersbroker or nomineesnominee how to vote your shares, theyhe or she may use discretionary authority to vote your shares as they decide as to each matter for which they have discretionary authority under the rules of the New York Stock Exchange. Foron Proposal II (Ratification of Appointment of Independent Registered Public Accounting Firm) to be voted on at the annual meeting, brokers and other nominees will have discretionary authority in the absence of timely instructions from you..
For Proposal I (Election of Directors), Proposal III (Advisory Vote on Executive Compensation), and Proposal IV (Approval of the Second Amendment to the 2005 Ownership Incentive Plan) and Proposal V (Approval of the Material Plan Terms of the 2005 OwnershipExecutive Officer Annual Incentive Compensation Plan, asAs Amended, for Purposes of Complying with the Requirements of Section 162(m) of the Internal Revenue Code) to be voted on at the 2014 Annual Meeting,IRC), you must provide timely instructions on how the broker or other nominee should vote your shares. If you do not give timely instructions to the broker or other nominee on how that broker or nominee should vote your shares, a “broker non-vote” results. Although any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to Proposal I, Proposal III Proposal IV and Proposal V.IV.
Abstentions occur when stockholders are present at the annual meeting but fail to vote or voluntarily withhold their vote for any of the matters upon which the stockholders are voting.
Election of Directors. The Company’s bylaws provide that directors are elected by a plurality of the votes cast by stockholders, in person or by proxy, at a meeting at which a quorum is present. The Company’s bylaws, while not changing the requirement for a plurality vote in the election of directors, require additionally that any director in an uncontested election who does not receive the affirmative vote of a majority of the votes cast must promptly tender his or her resignation to the Board following certification of the stockholder vote. For this purpose, “majority of the votes cast” means the number of FOR votes equals or exceeds the number of WITHHOLD votes, and “votes cast” include only FOR and WITHHOLD votes. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election. The requirement that a director tender his or her resignation if he or she does not receive a majority of the votes cast does not apply in the case of a contested election where the number of nominees exceeds the number of directors to be elected.
Other Matters.The required vote to approve any matter other than the electionProposal II (Ratification of directors Appointment of Independent Registered Public Accounting Firm) and Proposal III (Advisory Vote on Executive Compensation) is the affirmative vote by the holders of a majority of the total number of shares of Common Stock present in person or by proxy and entitled to vote on the matter. The required vote to approve Proposal IV (Approval of Material Plan Terms of the Executive Officer Annual Incentive Compensation Plan, As Amended, for Purposes of Complying with the Requirements of Section 162(m) of the IRC) is the approval of the majority of the votes cast.
Proposal II. With respect to Proposal II, the ratification of the appointment of the Company’s independent registered public accounting firm, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” the proposal.
Proposal III. With respect to Proposal III, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” such proposal. For purposes of Proposal III, broker non-votes are not treated as entitled to vote and, therefore, are not counted for purposes of determining whether a majority has been achieved. Proposal III is a non-binding advisory vote. However, the Board and the Compensation Committee will consider the outcome of the vote on Proposal III when considering future executive compensation decisions.
Proposal IV. With respect to Proposal IV, an abstention is treated as entitled to voteabstentions and therefore, has the same effect as voting “against” such proposal. For purposes of Proposal IV, broker non-votes are not treated as entitled to voteconsidered votes cast and, therefore, aredo not counted for purposeshave an effect on the outcome of determining whether a majority has been achieved.
Proposal V. With respect to Proposal V, an abstention is treated as entitled to vote and, therefore, has the same effect as voting “against” such proposal. For purposes of Proposal V, broker non-votes are not treated as entitled to vote and, therefore, are not counted for purposes of determining whether a majority has been achieved.
Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy card will be voted for the election of each of the director nominees; for the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2014;2016; for the approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers (as defined(listed in the “Compensation Discussion and& Analysis”); for the approval of the Second Amendment to 2005 Ownership Incentive Plan; and for the approval of the material plan terms of the 2005 OwnershipExecutive Officer Annual Incentive Plan.Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”).
The Board of Directors recommends a vote “FOR” Proposal I.
The Board has designated John W. Alden, Fred A. Allardyce, Stephen E. Gorman, William M. Legg, Kathleen D. McElligott, Judy R. McReynolds, John H. Morris, Craig E. Philip, Steven L. Spinner and Janice E. Stipp and Robert A. Young III as nominees for election as Directors of the Company at the 2016 Annual Meeting (each a “Nominee” and “Director”). Robert A. Young III, who has been a Director since 1970 and Chairman of the Board since July 2004, will be retiring from the Board at end of his current term, which expires at the conclusion of the 2016 Annual Meeting.
Each Nominee is currently a Director of the Company. If elected, each Nominee will serve until the expiration of his/her term at the Company’s Annual Meeting of Stockholders in 20152017 or until his/her earlier death, resignation or removal from office.
Each Nominee has indicated his/her willingness to serve as a member of the Board, if elected. If, for any reason not presently known, any of Messrs. Alden, Allardyce, Gorman, Legg, Morris or Spinner, Dr. Philip Spinner or Young or Ms.Mses. McElligott, McReynolds or Stipp are unable or unwilling to serve if elected, your proxy card may be voted for the election in his/her stead of a substitute nominee designated by the Board or a committee thereof, unless the proxy withholds authority to vote for the Nominee.
The Company’s bylaws provide that directors are elected by a plurality of the votes cast by stockholders, in person or by proxy, at a meeting at which a quorum is present. The Company’s bylaws, while not changing the requirement for a plurality vote in the election of directors, require additionally that any director in an uncontested election who does not receive the affirmative vote of a majority of the votes cast must promptly tender his or her resignation to the Board following certification of the stockholder vote. For this purpose, “majority of the votes cast” means the number of FOR votes equals or exceeds the number of WITHHOLD votes, and “votes cast” include only FOR and WITHHOLD votes. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election. The Nominating/Corporate Governance Committee will consider any resignation tendered under this policy and recommend to the Board whether to accept or reject it, and the Board will act on such resignation, taking into account the Nominating/Corporate Governance Committee’s recommendation, within 90 days following the certification of the election results. The Nominating/Corporate Governance Committee in making its recommendation, and the Board in making its decision, may consider any information it deems appropriate, including, without limitation, any reasons given by stockholders for their WITHHOLD votes, the qualifications of the director and his or her contributions to the Board and the Company. The Board will promptly disclose its decision to accept or reject the resignation and, if rejected, the reasons for doing so. If a director’s resignation is not accepted by the Board, then such director will continue to serve until the next annual meeting for the year in which his or her term expires and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board, then the Board, in its sole discretion, may fill any remaining vacancy or decrease the size of the Board. The requirement that a director tender his or her resignation if he or she does not receive a majority of the votes cast does not apply in the case of a contested election where the number of nominees exceeds the number of directors to be elected.
Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy card will be voted for the election of each of the Nominees.
The following information relates to the Nominees named in “Proposal I. Election of Directors.” The information includes the publicly traded company directorships and certain other directorships held by each DirectorNominee for the past five years and the specific experience, qualifications, attributes and skills that each DirectorNominee possesses that led to the conclusion that the person should serve as a Director of the Company. There are no family relationships among Directorsany of the Nominees and executive officers of the Company or its subsidiaries.
Nominees for Election at the 20142016 Annual Meeting, Term Will Expire at the 20152017 Annual Meeting
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| JOHN W. ALDEN, age Key Attributes, Experience and Skills As Vice Chairman and Senior Vice President–Business Development of UPS, Mr. Alden led a global public transportation company and public company board. Through his 35 years at UPS, he gained expertise in the areas of sales and marketing, operations, customer service, management, senior management, business development and public company board strategic planning and oversight. Mr. Alden, Chairman of the Board’s Nominating/Corporate Governance Committee and member of the Board’s Compensation Committee, has served on seven boards over the past |
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| FRED A. ALLARDYCE, age Key Attributes, Experience and Skills Mr. Allardyce has extensive accounting |
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| STEPHEN E. GORMAN, age 60, has been a Director of the Company since July 2015. Mr. Gorman has been Chief Executive Officer of Borden Dairy Co. since July 2014. He served as Executive Vice President and Chief Operating Officer for Delta Air Lines, Inc. from December 2007 until March 2014 and Chief Executive Officer and President of Greyhound Lines, Inc. from 2003 to 2007. Mr. Gorman was President of the North America Division and Executive Vice President Operations Support for Krispy Kreme Doughnuts, Inc. from 2001 to 2003. Prior positions include Executive Vice President of Flight Operations and Technical Operations for Northwest Airlines and Vice President–Operations for Aviall, Inc. Mr. Gorman currently serves on the board of Aeromexico, a multi-national passenger and cargo airline based in Mexico City, and his past board directorships include Greyhound Lines, Inc., Rohn Industries and Timco Aviation. He is a past board member and chairman of Pinnacle Airlines. He holds a Bachelor’s degree in economics from Eureka College and an M.B.A. from Bradley University, for which he currently serves as trustee. Key Attributes, Experience and Skills Mr. Gorman’s leadership skills have contributed to the strategic and operational transformations of different companies in the transportation industry. His 16 years of executive transportation experience ranges from passenger bus carrier to airlines and has been instrumental in the marketing and financial aspects of these companies’ success. Mr. Gorman has extensive board experience, both public and private, having served as chairman of the Pinnacle Airlines board for nearly five years. He has served on five boards, including his current directorship on the Aeromexico board. Mr. Gorman serves as a member of the Company’s Compensation and Nominating/Corporate Governance Committees. |
| WILLIAM M. LEGG, age Key Attributes, Experience and Skills Mr. Legg brings to the Board significant investment banking experience, including finance, private equity, mergers and acquisitions, capital structures and strategic planning. His contributions to the Board include in-depth knowledge of other transportation companies and industry subsets. His years in transportation-related finance bring valuable analytical transportation knowledge to the Board. Mr. Legg has experience in executive compensation, governance and director nomination matters. He |
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| KATHLEEN D. MCELLIGOTT, age 60, has been a Director of the Company since July 2015. Ms. McElligott is Executive Vice President and Chief Information Officer and Chief Technology Officer of McKesson Corporation, a healthcare services and information technology company and pharmaceutical distributor. She joined McKesson in July 2015, after serving as the Chief Information Officer and Vice President, Information Technology at Emerson Electric Co. from February 2010 to July 2015 and Group Chief Information Officer, Industrial Automation and Vice President for Emerson Power Transmission from October 2000 to January 2010. Prior to joining Emerson, Ms. McElligott spent 22 years with General Electric Company in multiple information systems leadership roles, including CIO of Supply Chain at GE Aircraft Engines from 1997 to 2000, IT Manager, Cycolac Business, GE Plastics from 1996 to 1997, and several managerial positions with GE Aircraft Engines from 1988-1996. Ms. McElligott is a former board president of Connections to Success, a St. Louis-based nonprofit organization. She holds a Bachelor’s degree in Computer Science from Kent State University and an M.B.A. from Xavier University. Key Attributes, Experience and Skills Ms. McElligott brings over 32 years of vast experience in the areas of manufacturing and technology to the Board. She has skills in a variety of leadership positions across two globally diversified public businesses, which include experience in the areas of big data, cloud computing, and technology strategy. Ms. McElligott provides the Board with an in-depth knowledge in transportation, enterprise logistics, and strategic planning. Ms. McElligott serves as a member of the Company’s Audit Committee.
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| JUDY R. MCREYNOLDS, age Key Attributes, Experience and Skills As the only member of the Company’s senior management who serves on the Board, Ms. McReynolds provides significant industry-specific experience and unique expertise with respect to both |
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| JOHN H. MORRIS, age Key Attributes, Experience and Skills Mr. Morris has extensive experience in mergers and acquisitions, including the analysis of acquisitions, private equity investing and business and financial structures. He has other public transportation company-related board service as described in the preceding paragraph. Knowledgeable in investment banking and LTL transportation, Mr. Morris has provided consulting services to companies for over 10 years and has been involved in more than 40 acquisitions through his roles at Kelso |
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| DR. CRAIG E. PHILIP, age Key Attributes, Experience and Skills Dr. Philip’s career in the marine, rail and intermodal industries spans more than 30 years. He provides the Board with a unique blend of leadership experience in various modes of freight transportation, in combination with experience in industrial marketing and strategic planning. Dr. Philip currently serves on the Board’s Compensation Committee and Nominating/Corporate Governance Committee. |
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| STEVEN L. SPINNER, age Key Attributes, Experience and Skills Mr. Spinner provides the insight and knowledge that comes from years of senior-level executive management, logistical experience and knowledge of network businesses. His background has given him extensive experience in the wholesale food distribution business, which includes overseeing the organic and acquisition growth of a food distribution company and directing the successful integration of the operational, organizational and technological aspects of two companies. Mr. Spinner brings valuable knowledge to the Board as an active CEO of a public company. Mr. Spinner currently serves on the Board’s Audit Committee. |
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| JANICE E. STIPP, age Key Attributes, Experience and Skills Ms. Stipp has over |
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Board Leadership Structure
Board Leadership Structure
The Company has separatedMr. Young, the positions ofCompany’s current Chairman of the Board, and Chief Executive Officer. The Company believes this separation allowsis retiring from the individuals serving in these positions to effectively utilize their skills and time on behalfBoard at the conclusion of the Company. Robert A.2016 Annual Meeting, as he has reached the mandatory retirement age set forth in the Company’s bylaws. Mr. Young III, who brings more than 43 years of LTL transportation, financehas served as a Director since 1970 and board experience to the Board, serves as nonemployee Chairman of the Board since 2004, and leads the Board in its governance role. Judy R. McReynolds brings significant LTL and truckload experience to her day-to-day leadership rolehe previously served as Chief Executive Officer. For completeOfficer from 1988 until his retirement from that position in 2006.
In preparation for Mr. Young’s retirement, the Board deliberated extensively over several months about the most appropriate leadership structure for the future. The Board has determined that, following Mr. Young’s retirement, a leadership structure comprised of Ms. McReynolds serving in a combined Chairman and Chief Executive Officer role and Mr. Spinner serving as the Lead Independent Director, a role tasked with significant specified duties, is in the best interests of the Company and its stockholders.
In making its decision, the Board considered Ms. McReynolds’ leadership qualities, management capability, knowledge of the Company’s business biographicaland the transportation and logistics industry, the long-term, strategic perspective she has shown thus far as the President and Chief Executive Officer and her demonstrated focus on growing long-term shareholder value. The Board also considered Ms. McReynolds’ long history with the Company. Ms. McReynolds joined the Company in 1997 and has served as the President and Chief Executive Officer since 2010 and previously served as Senior Vice President–Chief Financial Officer and Treasurer from 2006 through 2009. The Board believes having Ms. McReynolds serve as both Chairman and Chief Executive Officer will ensure a smooth transition in Board leadership after Mr. Young’s nearly 12-year tenure as Chairman. The Board also believes that serving as both Chairman and President and Chief Executive Officer will enable Ms. McReynolds to more effectively and efficiently execute the Company’s strategic initiatives and respond to key business issues and risks that she encounters in daily operations.
The Board recognizes that there are a variety of viewpoints concerning a board’s optimal leadership structure and considered all viewpoints in making its decision. The Board reviewed trends in board practices, recommended best practices for corporate governance, and the current board practices of the Company’s peer companies. The Board also considered the speed with which a combined Chairman and Chief Executive Officer can identify company concerns and communicate this information onto other board members, and the ability of a combined Chairman and Chief Executive Officer to provide superior information to other board members given insights into the day-to-day issues faced by a company. The Board also considered the historical Board leadership structure at the Company, which included Mr. Young serving as both Chairman and Ms. McReynolds, see “DirectorsChief Executive Officer until his retirement as Chief Executive Officer, and the current composition of the Company.” BecauseBoard as well as the Company’s management team.
The Board has determined that the election of an executive Chairman should be accompanied by the election of a strong Lead Independent Director with a clearly defined and dynamic leadership role in the governance of the Board. In January 2016, the Board amended the Company’s bylaws to provide that if the Chairman is not an independent Director, the independent Directors shall annually elect one of the independent Directors to serve as the Lead Independent Director. As set forth in the Company’s bylaws, the Lead Independent Director has clearly articulated and extensive authority and responsibilities relating to the Board’s governance and functions, which include (i) calling and chairing meetings of independent Directors, and setting agendas for such meetings; (ii) liaising between the independent Directors and the Chairman and communicating with the Chairman after each meeting of independent Directors to provide feedback; (iii) chairing all Board meetings where the Chairman is not present; (iv) reviewing and advising on Board meeting agendas and meeting schedules; (v) being available for consultation and direct communication with stockholders, when appropriate; and (vi) participating in the annual performance evaluation of individual members of the Board and the Chief Executive Officer (in consultation with the Nominating/Corporate Governance Committee). The Lead Independent Director’s authority and responsibilities generally correspond to those performed by an independent Chairman.
In the Board’s view, Mr. Young, as Chairman, qualifiesSpinner possesses the characteristics and qualities necessary to fulfill the Lead Independent Director’s important role of guiding and facilitating the independent Directors’ participation in the Company’s governance. Mr. Spinner has served as an independent director under NASDAQ requirements,Director since 2011 and has a thorough understanding of the Company does not have aBoard’s oversight role and leading corporate governance practices. The Board believes that Mr. Spinner, as Lead Independent Director.Director, will provide a meaningful balance to the executive Chairman. Supplementing the Lead
Table of the Company is managed under the direction of the Board. ThereContents
Independent Director are nine members of the Board. The three standing Board committees – the(the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee – are an integral part of the Board leadership structure. These committees,Committee), all members of which all members are independent Directors, are discussed below in more detail under “Committees of the Board.” Directors.
The Company’s leadership structure includes an experienced management team, upon whose advice, reports and opinions the Board relies. The Board also relies on the advice of counsel, accountants, executive compensation consultants, auditors, strategic planning consultants and other expert advisors.
The size of the Board and the different types of corporate and transportation backgrounds of the members of the Board allow for timely, effective action in the rapidly evolving trucking industry. See “Key Attributes, Experience and Skills” for each Director under “Directors of the Company.”
A robust committee framework sustains the lines of communication among Directors and with management. Regularly scheduled management reports and presentations, based on operational, financial, legal and risk management aspects of the Company’s operations, provide vital information to the Board. The independent Directors have complete access to, the Chief Executive Officer and otherdirect contact with, members of senior management. The Board also relies on the advice of counsel, accountants, executive compensation consultants, auditors, strategic planning consultants and other expert advisors.
The Board meets on a regularly scheduled basis six times a year to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds special meetings when Board action is required between scheduled meetings. The Board met sixseven times during 2013.2015. During 2013,2015, each member of the Board participated in at least 75% of all Board and applicable committee meetings held during the period for which he/she was a Director.
The Nominating/Corporate Governance Committee has determined that a majority of the members of the Board are independent pursuant to applicable NASDAQ independence standards. Independent Directors are Messrs. Alden, Allardyce, Gorman, Legg, Morris, Philip, Spinner and Young, Dr. Philip, Mses. Stipp and Ms. Stipp.McElligott. Independent Directors met in executive session four times in 2013.2015. During Mr. Young’s tenure as the Chairman of the Board, he has presided at such meetings. Following Mr. Young’s retirement at the conclusion of the 2016 Annual Meeting, Mr. Spinner, as Lead Independent Director, will preside over the meetings of Independent Directors.
It is the Company’s policy that all members of its Board attend each annual meeting of its stockholders, except when illness or other personal matters prevent such attendance. SevenAll of the nine members of the Board at the time of the 2013Company’s 2015 Annual Meeting of Stockholders attended the 2013 Annual Meeting.
such meeting.
Board’s Role in Risk Oversight
The Board believes that the current management structure facilitates risk oversight by combining experienced leadership with independent review by the Board and its committees. To enhance its oversight function, the Board is composed of Directors who are not employed by the Company, with the exception of Ms. McReynolds. Potential risk factors that are monitored through this structure include financial, operational, technological, disaster, environmental, cyberspace,cybersecurity, legal and regulatory, fraud/corruption, employment practices, executive compensation, reputational and legislative areas. Risk factors may present themselves on any of the multiple levels of the Company. The Board is regularly informed through committee reports of each committee’s activities in overseeing risk management within their respective areas of oversight responsibility.
The Audit Committee directly oversees risk management relating to financial reporting and public disclosure and the steps management has taken to monitor and control those exposures. In addition, the Audit Committee is responsible for the oversight of general financial risk matters. The Audit Committee meets regularly with financial management, including the Vice President–Chief Financial Officer, and the Vice President–Controller and the Senior Vice President–Risk and Chief Audit Executive, as well as our external auditors and our Chief Audit Executive.independent registered public accounting firm, Ernst & Young, LLP (“EY”). In addition, the Company’s Risk Management Committee, which consists of several members of senior management, provides periodic reports to the Audit Committee of its activities in various risk management areas, and the Chairman of the Company’s Senior Vice President–Risk Management Committeeand Chief Audit Executive makes presentations to the Audit Committee from time to time regarding various risk or potential risk matters. The Audit Committee also requests and receives from time to time presentations regarding other potential risk areas, including those related to information technology.
The Compensation Committee is responsible for oversight of risk for the Company’s compensation policies and practices for all employees. Management has evaluated the Company’s compensation policies and practices for all employees, including the Named Executive Officers (listed in “Compensation Discussion & Analysis”) and non-executive officers. The evaluation included consideration of whether any of the Company’s compensation policies and practices, including incentive plans, create risks that are reasonably likely to have a material adverse effect on the Company. The primary responsibility for the Company’s evaluation was assigned to the Company’s Risk
Management Committee, which includes as its members the Vice President responsible for the Risk Management Department, the Vice President–General Counsel, the Senior Vice President–Chief Financial Officer, & Chief Information Officer, the Senior Vice President–TaxRisk and Chief Audit Executive, Senior Vice President–Enterprise Customer SolutionsChief Innovation Officer and the Vice President–Controller, as well as other officers. Based on management’s evaluation, including the specific process completed by the Company’s Risk Management Committee, management concluded that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. Management’s evaluation, including the conclusions reached by the Company’s Risk Management Committee, was discussed with the Compensation Committee.
The information used by management and the Company’s Risk Management Committee and provided to the Compensation Committee included a framework of potential risk factors for certain compensation plans and identified how the Company’s existing processes and compensation programs mitigate those risks. Mitigating factors for potential risks identified included:
· a combination of short- and long-term compensation;
· a combination of equity- and cash-based compensation;
·multiple performance metrics;
· relativemultiple performance metric;metrics;
· relative performance metric;
·robust financial control policies and audit practices;
· caps for potential amounts earned under annual and long-term incentive plans;
· clawback policy;
· noa prohibition against hedging transactions or pledging of shares;
· five-year cliff vesting periods for equity awards;
· stock ownership requirements for senior officers;
· utilizing an independent compensation consultant to review executive incentive plans;
·approval of performance criteria, as well as performance results by the Compensation Committee that consists of only independent Directors; and
· review of peer groups by an independent compensation consultant and the Compensation Committee.
The most recent risk management evaluation was provided to the Compensation Committee in January 2014.2016. Based on the information provided and the Compensation Committee’s knowledge of the compensation policies and practices of the Company, the Compensation Committee concluded that the risks arising from the Company’s compensation plans and practices are not reasonably likely to have a material adverse effect on the Company.
The Nominating/Corporate Governance Committee is responsible for overseeing risks associated with corporate governance and reviews corporate governance matters at least once a year. In connection with this responsibility, the Nominating/Corporate Governance Committee annually reviews the Company’s Corporate Governance Guidelines and their implementation.
Committees of the Board
The Board has established Audit, Compensation and Nominating/Corporate Governance committees to devote attention to specific subjects and to assist it in the discharge of its responsibilities. The functions of those committees, their current members, and the number of meetings held during 20132015 are described below.
Audit Committee.Committee. Among The Audit Committee’s current members are Messrs. Allardyce (Chair), Legg and Spinner and Mses. McElligott and Stipp. The Nominating/Corporate Governance Committee has reviewed the responsibilitiesstatus of each of the members and determined that each member of the Audit Committee contained in its charter are: (i) assisting the Board in overseeing matters involving the accounting, auditing, financial reporting and internal control functions of the Company; (ii) being directly responsible for the appointment, termination and oversight of the independent registered public accounting firm for the Company; (iii) responsibility for establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and (iv) implementing the Company’s policy regarding the review and approval of any “related person transaction” as required pursuant tomeets all applicable Securities and Exchange Commission (“SEC”) Regulation S-K, Item 404. Pursuantand National Association of Securities Dealers Automated Quotations (“NASDAQ”) independence standards and financial literacy requirements that apply to theAudit Committee members. Mr. Allardyce and Ms. Stipp are Board-designated Audit Committee Financial Experts. The Audit Committee met six times during 2015. The Audit Committee Charter is posted in the Investor Relations, Governance Charters section of the Company’s website, www.arcb.com.
The Audit Committee reviews, approves or ratifies allassists the Board by fulfilling oversight responsibilities relating to:
· the integrity of financial statements and related person transaction issues broughtfinancial information provided by the Company to its attention. the public and the SEC;
· the Company’s systems of internal controls regarding finance, accounting and compliance with policies, including ethics policies, that management and the Board have established;
· the performance of the Company’s internal audit, accounting and financial reporting functions;
· the Company’s risk management policies and processes to identify, monitor, and manage significant risk exposures; and
· the Company’s compliance with legal and regulatory requirements.
Annually, as part of the Company’s proxy preparation, all Directors and executive officers who are subject to related person transaction disclosure are instructed to report in writing any such transactions to the Company; and further, they are reminded of their obligation to report to the Company any such transactions that may be planned or subsequently occur.
Messrs. Allardyce (Chair) and Spinner and Ms. Stipp are currently members of the Audit Committee. The Nominating/Corporate Governance Committee has determined that each member of In determining whether or not to approve or ratify a related person transaction, the Audit Committee meetsconsiders all applicable SEC and NASDAQ independence standards. Mr. Allardyce is the Board-designated “Audit Committee Financial Expert.” The Audit Committee met seven times during 2013. The Audit Committee Charter is posted in the Corporate Governance section of the relevant facts and circumstances available, including (if applicable) (i) whether there is an appropriate business justification for the transaction; (ii) the benefits that accrue to the Company website, www.arkbest.com.as a result of the transaction; (iii) the terms available to unrelated third parties entering into similar transactions; (iv) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer); (v) the availability of other sources for comparable products or services; (vi) whether it is a single transaction or a series of ongoing, related transactions; and (vii) whether entering into the transaction would be consistent with the Company’s Code of Conduct.
Compensation Committee.Committee. The Compensation Committee is responsible for reviewing and approving executive management compensation. The Compensation Committee’s current members are Messrs. LeggMorris (Chair), Alden Morris and Gorman and Dr. Philip. The Nominating/Corporate Governance Committee has determined that each member of the Compensation Committee meets applicable NASDAQ independence standards, and Internal Revenue Code (“IRC”)IRC Section 162(m) nonemployeeoutside director requirements.requirements and non-employee director requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee met sixfive times in 2013.2015. The Compensation Committee Charter is posted in the CorporateInvestor Relations, Governance Charters section of the Company website, www.arkbest.comwww.arcb.com.
The Board has designated the Compensation Committee to also serve as the Stock Compensation Committee for the Company’s stock compensation plans. The Compensation Committee also has authority to make and administer awards under the 2005 Ownership Incentive Plan.
The Compensation Committee has determined and reviewed the value and forms of compensation for Named Executive Officers and other officers based on the Compensation Committee members’ knowledge and experience; competitive proxy and market compensation information; periodic review and analysis from an independent compensation consultant retained by, and which reports directly to, the Compensation Committee; and management recommendations.
The Compensation Committee directly engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consulting firm in 2013.2015. Meridian reviewed executive compensation practices, including executive compensation design issues, market trends and technical considerations and provided ongoing consulting assistance to the Compensation Committee throughout the year. Other than executive and director compensation consulting to the Board, the Compensation Committee orand the Nominating/Corporate Governance Committee, Meridian does not provide any other services to the Company. The Compensation Committee has assessed the independence of Meridian under the SEC rules and concluded that Meridian’s work for the Board, the Compensation Committee and the Nominating/Corporate Governance Committee does not raise any conflict of interest.
The Compensation Committee did not direct Meridian to perform the above services in any particular manner or under any particular method. The Compensation Committee has the final authority to hire and terminate the consultant and evaluates the consultant periodically. The Compensation Committee also approves the fees paid to its independent compensation consultant.
The Compensation Committee may not and does not delegate its authority to review and determine the forms and values of the various elements of compensation for Named Executive Officers. The Compensation Committee does delegate to Company management the implementation and record-keeping functions related to the various elements of compensation it has approved.approved, to the extent permissible.
The Company has retained Mercer LLC (“Mercer”) to provide additional consulting services at the direction of management and to assist with management’s recommendations for our peer group and executive compensation. Mercer assists management with market analysis, plan design, proxy disclosure review and review of corporate governance practices. The Company has assessed the independence of Mercer under SEC rules and concluded that Mercer’s work for management does not raise any conflict of interest.
Nominating/Corporate Governance Committee. The current members of the Nominating/Corporate Governance Committee are Messrs. Alden (Chair), Legg,Gorman and Morris and Dr. Philip. The Nominating/Corporate Governance Committee has determined that each member of the committee is independent, as defined in applicable NASDAQ independence standards. The Nominating/Corporate Governance Committee’s responsibilities include: (i) identifying individuals believed to be qualified to become Directors and to select and recommend to the Board for its approval the nominees to stand for election as Directors by the stockholders or, if applicable, to be appointed to fill vacancies on the Board; (ii) determining appropriate compensation for Directors; (iii) recommending any changes regarding size, structure, composition, processes and practices of the Board; (iv) reviewing the independence of Directors and assessing whether members are meeting the applicable independence standards required to serve on the various Board committees; (v) reviewing the Company’s corporate governance standards; and (vi) making recommendations regarding succession planning for the Chief Executive Officer of the Company. Meridian consults with the Nominating/Corporate Governance Committee regarding the value and forms of compensation for non-employee Directors. The Nominating/Corporate Governance Committee held fourfive meetings in 2013.2015. The Nominating/Corporate Governance Charter is posted on the CorporateInvestor Relations, Governance Charters section of the Company website, www.arkbest.comwww.arcb.com.
In recommending nominees for the Board, the Nominating/Corporate Governance Committee considers any specific criteria the Board may request from time to time and such other factors as it deems appropriate. These factors may include any special training or skill, experience with businesses and other organizations of comparable size and type, experience or knowledge with businesses or organizations that are particularly relevant to the Company’s current or future business plans, financial expertise, the interplay of the candidate’s experience with the experience of the other Directors, sufficient time to devote to the responsibilities of a director, freedom from conflicts of interest or legal issues and the extent to which, in the Nominating/Corporate Governance Committee’s opinion, the candidate would be a desirable addition to the Board.
Diversity is taken into account when determining how the candidates’ qualities and attributes would complement the other Directors’ backgrounds. Type of advanced studies and certification, type of industry or aspect of transportation experience, area of corporate experience and gender, among other factors, are taken into consideration. The Nominating/Corporate Governance Committee believes that the different business and educational backgrounds of the Directorsmembers of the Board contribute to the overall insight necessary to evaluate matters coming before the Board. The Nominating/Corporate Governance Committee implements its policy of considering a range of candidates by including diversity aspects in its analysis of candidates’ qualifications. A listing of current Directors’ and potential candidates’ qualifications and attributes is periodically discussed in Nominating/Corporate Governance Committee meetings. In these discussions, the effectiveness of this methodology is addressed.
There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the Nominating/Corporate Governance Committee, as different factors may assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition and the Nominating/Corporate Governance Committee’s perceptions about future issues and needs.
The Nominating/Corporate Governance Committee may draw upon individuals known by members of the Board, and at the Nominating/Corporate Governance Committee’s discretion, candidates recommended by management or third parties engaged by the Nominating/Corporate Governance Committee to assist it in identifying appropriate candidates.
The Nominating/Corporate Governance Committee shall considerconsiders any candidate for director recommended by a stockholder if submitted in accordance with the Stockholder Director Nomination Procedure set forth below. The Nominating/Corporate Governance Committee shall considerconsiders the same factors when considering a stockholder-recommended candidate as it does when considering other candidates.
The Nominating/Corporate Governance Committee considers director candidates submitted by stockholders that follow the procedure set forth in the following Stockholder Director Nomination Procedure, in accordance with the Company’s bylaws:
Any stockholder entitled to vote at an annual meeting of stockholders and intending to recommend candidate(s) for nomination for director at that meeting must submit a written stockholder notice to the Company. The information required to be included in a stockholder notice nominating a candidate for the Board is set forth in detail in the Company’s bylaws and includes the following information: (1) as to the stockholder giving the notice and each Stockholder Associated Person (a) the name and address, including business address and telephone number, of such persons, (b) the class and number of shares of the Company which are owned beneficially and of record by such persons, (c) any option, warrant or other derivative security owned by such persons, (d) any agreement pursuant to which such persons have the right to vote any shares of the Company, and (e) any other information relating to such persons required to be disclosed in a proxy statement in connection with the solicitation of proxies relating to the election of directors in a contested election; and (2) as to each person whom the stockholder proposes to nominate for election or re-election as a director (a) all information relating to such person required to be disclosed in a proxy statement relating to the election of directors in a contested election, (b) such person’s written consent to being named in the proxy statement and to serving as a director if elected, and (c) a description of all direct and indirect compensation and other material monetary agreements during the past three years between the stockholder and Stockholder Associated Person and their affiliates and the proposed nominee and his or her other affiliates. “Stockholder Associated Person” of any stockholder means (i) any beneficial owner of shares of stock of the corporation on whose behalf any proposal or nomination is made by such stockholder; (ii) any affiliates or associates of such stockholder or any beneficial owner described in the foregoing clause (i); and (iii) each other person with whom any of the persons described in the foregoing clauses (i) and (ii) either is acting in concert with respect to the corporation or has any agreement, arrangement or understanding (whether written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy given to such person in response to a public proxy solicitation made generally by such person to all stockholders entitled to vote at any meeting) or disposing of any capital stock of the corporation or to cooperate in obtaining, changing or influencing the control of the corporation (except independent financial, legal and other advisors acting in the ordinary course of their respective businesses).
Additionally, for a candidate to be eligible to be a nominee for election as director, the candidate must deliver to the Corporate Secretary a written response to a questionnaire with respect to candidate’s background and qualifications and a written representation and agreement. Such stockholder notice and candidate questionnaire and representation and agreement must be received by the Corporate Secretary at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903 not earlier than 120 days and not later than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders: provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding year’s annual meeting, notice by the stockholder to be timely must be received no earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 100th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made. For information regarding the required information in the stockholder notice and the candidate’s questionnaire and representation and agreement, contact the Corporate Secretary’s office at info@arkbest.cominfo@arcb.com or at 479-785-6000.
Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee is responsible for confidentially receiving, retaining and considering any report pursuant to SEC Rule 205 by an attorney representing the Company. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee Charter is posted in the Corporate Governance section of the Company website, www.arkbest.comwww.arcb.com.
Code of Conduct and Corporate Governance Guidelines and Code of Conduct
The Board has adopted Corporate Governance Guidelines and a Code of Conduct.Conduct and Corporate Governance Guidelines. The full text of both documentsthe Code of Conduct is posted in the Corporate GovernanceInvestor Relations section of the Company website, www.arkbest.comwww.arcb.com.
The Company’s Code of Conduct applies to all of its Directors, officers (including the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller, and any person performing similar functions) and employees. The Company intends to post on its website any amendment to, or waiver from, a provision of the Code of Conduct that applies to its Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller or persons performing similar functions and that relates to any of the following elements of the Code of Conduct: honest and ethical conduct; disclosure in reports or documents filed with the SEC and other public communications; compliance with applicable laws, rules and regulations; prompt internal reporting of code violations; and accountability for adherence to the Code of Conduct.
The Nominating/Corporate Governance Committee is responsible for reviewing and awarding compensation to the non-employee Directors. The Nominating/Corporate Governance Committee sets the levels and forms of non-employee Director compensation based on its experience, review of the compensation paid to directors of comparable publicly traded companies and the advice of Meridian, its independent compensation consultant. The Nominating/Corporate Governance Committee uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board.
Cash Compensation
For the fiscal year ended December 31, 2013,2015, the standard cash compensation arrangement for Non-Employeenon-employee Directors was as follows:
Annual Retainers |
|
|
| |
Board Chair |
| $ | 100,000 |
|
Members |
| $ | 40,000 |
|
Audit Committee Chair |
| $ | 7,500 |
|
Other Committee Chair |
| $ | 5,000 |
|
|
|
|
|
|
Daily Meeting Fees |
|
|
| |
Board Meeting |
| $1,500 per day | ||
Committee Meeting |
| $1,500 per day | ||
Annual Retainers (paid in monthly installments) |
|
|
| |
Board Chair |
| $ | 122,000 |
|
Members |
| $ | 72,000 |
|
Audit Committee Chair |
| $ | 15,000 |
|
Compensation Committee Chair |
| $ | 12,000 |
|
Nominating/Corporate Governance Committee Chair |
| $ | 8,000 |
|
Effective FebruaryFollowing a review of director compensation conducted by Meridian, effective January 1, 2014,2016, the Committee approved the following standard cash compensation arrangement for Non-Employee Directors is as follows. The previous retainer amounts had been in place since 2002.non-employee Directors:
Annual Retainers |
|
|
| |||||
Annual Retainers (paid in monthly installments) |
|
|
| |||||
Board Chair |
| $ | 100,000 |
|
| $ | 130,000 |
|
Members |
| $ | 50,000 |
|
| $ | 80,000 |
|
Lead Independent Director |
| $ | 25,000 |
| ||||
Audit Committee Chair |
| $ | 15,000 |
|
| $ | 15,000 |
|
Compensation Committee Chair |
| $ | 12,000 |
|
| $ | 12,000 |
|
Nominating/Corporate Governance Committee Chair |
| $ | 8,000 |
|
| $ | 8,000 |
|
|
|
|
| |||||
Daily Meeting Fees |
|
|
| |||||
Board Meeting |
| $1,500 per day | ||||||
Committee Meeting |
| $1,500 per day | ||||||
Mr. Young will receive a prorated retainer fee for his service as Board Chair through his retirement in April 2016 effective at the conclusion of the 2016 Annual Meeting. Following Mr. Young’s retirement, Ms. McReynolds, the Company’s President and Chief Executive Officer, will serve as Board Chair. However, she will not receive a Board Chair retainer.
Retainers are cumulative, i.e., each Director who is (i) a Non-Employeenon-employee and (ii) not the Board Chair, receives a “Member Retainer” plus the appropriate retainer fee for any other positions he or she holds.
Only one daily meeting fee is paid in the event of multiple meetings held on the same day.
Equity-Based Awards
The policy for granting equity awards states that the Nominating/Corporate Governance Committee is responsible for granting all equity compensation to Non-Employeenon-employee Directors. Under the terms of this policy, the effective date of an equity award will be the date which is five business days following the Company’s applicable quarterly earnings release.
The restricted stock unit (“RSU”) awards to Non-Employeenon-employee Directors provide for three-year cliff vesting.vesting for awards made through 2015. Based on a review of peer group and industry practices conducted by Meridian, the Committee approved one-year cliff vesting for future RSU awards. All of the RSU awards are subject to accelerated vesting due to death, disability or change in control of the Company. Accelerated vesting for RSUs also occurs upon attainment of normal retirement age (age 65 with five years of service with the Company). Messrs. Alden, Allardyce, Legg, Morris and Young are currently eligible for normal retirement. Upon early retirement (three years of service as a Director), a Director is eligible for accelerated vesting of a pro rata number of shares based on the number of whole months since the award date. Dr. Philip, Mr. Spinner and Ms. Stipp are currently eligible for early retirement. Mr. Gorman and Ms. McElligott are not currently eligible for early retirement. Vested RSU awards are paid in shares, unless deferred under the provisions of the plan, on the earlier to occur of (i) the normal vesting date applicable to the award or (ii) the Director’s termination of service with the Company.
Stock Ownership Policy. The Nominating/Corporate Governance Committee believes that the Directors of the Company should maintain a level of equity holdings in the Company that will further align the interests of Directors with the Company’s stockholders. The Board adopted a Stock Ownership Policy for Directors, which was effective January 1, 2008. Under this policy,provides that Directors must own shares equal to six times their annual retainer. NoA Director covered by the policy is not permitted to sell any shares of Company stock until such time as the Directorhe or she satisfies the stock ownership requirement. Restricted stock, RSUs and stock owned outright count toward the Company’s Stock Ownership Policy requirements. However, RSUs are not reflected as shares beneficially owned in the “Principal Stockholders and Management Ownership” table unless (i) the award is scheduled to vest within 60 days of the measurement date, (ii) the award is fully vested but deferred (and payable on a separation from service with the Company), or (iii) the award (or a portion of the award) is vested either due to the Director’s eligibility for retirement or early retirement pursuant to the award agreement under which the RSU was granted.
The Nominating/Corporate Governance Committee monitors ownership levels annually. As of the review completed in 2013,2015, all of the Directors have met their ownership requirements except for Ms. Stippthe two Directors who became a member ofjoined the Board in 2012.2015, who are in compliance with our prohibition on selling shares until they meet the requirement.
Clawback Policy. The Committee has implemented a policy for the “clawback” of any equity awards granted to a Director whose misconduct contributed to the Company being required to restate its financial statements. Under the terms of the policy, the Board will, to the full extent permitted by governing law, in appropriate cases, effect the cancellation of unvested restricted or deferred stock awards previously granted to the Director if (a) the amount of the equity award was calculated based upon the achievement of certain financial results that were subsequently the subject of the restatement, (b) the Director engaged in intentional misconduct that caused or partially caused the need for the restatement and (c) the amount of the equity award that would have been awarded to the Director had the results been properly reported would have been lower than the amount actually awarded.
The table below summarizes the compensation paid by the Company to Non-Employeenon-employee Directors for the fiscal year ended December 31, 2013.2015.
Name
|
| Fees Earned or |
| Stock |
| All Other |
|
Total |
|
|
| Fees Earned or |
| Stock |
| All Other |
| Total |
|
John W. Alden |
| $ 61,500 |
| $ 101,232 |
| $ – |
| $ 162,732 |
|
|
| $ 80,000 |
| $ 97,173 |
| $ – |
| $ 177,173 |
|
Fred A. Allardyce |
| 64,000 |
| 101,232 |
| – |
| 165,232 |
|
|
| 87,000 |
| 97,173 |
| – |
| 184,173 |
|
William M. Legg(5) |
| 61,500 |
| 101,232 |
| – |
| 162,732 |
| ||||||||||
John H. Morris |
| 55,000 |
| 101,232 |
| – |
| 156,232 |
| ||||||||||
Stephen E. Gorman(5) |
|
| 36,000 |
| 98,460 |
| – |
| 134,460 |
| |||||||||
William M. Legg |
|
| 72,000 |
| 97,173 |
| – |
| 169,173 |
| |||||||||
Kathleen D. McElligott(5) |
|
| 36,000 |
| 98,460 |
| – |
| 134,460 |
| |||||||||
John H. Morris(4) |
|
| 84,000 |
| 97,173 |
| – |
| 181,173 |
| |||||||||
Craig E. Philip |
| 56,500 |
| 101,232 |
| – |
| 157,732 |
|
|
| 72,000 |
| 97,173 |
| – |
| 169,173 |
|
Steven L. Spinner |
| 58,000 |
| 101,232 |
| – |
| 159,232 |
|
|
| 72,000 |
| 97,173 |
| – |
| 169,173 |
|
Janice E. Stipp |
| 58,000 |
| 101,232 |
| – |
| 159,232 |
|
|
| 72,000 |
| 97,173 |
| – |
| 169,173 |
|
Robert A. Young III |
| 109,000 |
| 101,232 |
| 67,408(4) |
| 277,640 |
| ||||||||||
Robert A. Young III(4) |
|
| 122,000 |
| 97,173 |
| 64,851(6) |
| 284,024 |
| |||||||||
(1) | Judy R. McReynolds, the President and Chief Executive Officer of the Company, is not included in this table since she is an employee of the Company and thus received no compensation for her service as a Director. The compensation received by Ms. McReynolds as an officer of the Company is shown in the Summary Compensation Table on page 41. |
(2) | Reflects the aggregate grant date fair value of awards made during 2015 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 determined without regard to estimated forfeitures and adjusted for present value of dividends. Messrs. Alden, Allardyce, Legg, Morris, Spinner and Young, Dr. Philip and Ms. Stipp received an award of 2,700 RSUs under the 2005 Ownership Incentive Plan on May 11, 2015 (computed using the grant date fair value of $35.99 per share on such date). As new members of the Board, Mr. Gorman and Ms. McElligott each received an award of 3,000 RSUs under the 2005 Ownership Incentive Plan on August 10, 2015 (computed using the grant date fair value of $32.82 per share on such date). See Note K to the consolidated financial statements in the Company’s 2015 Annual Report on Form 10-K for additional detail on share-based compensation. Beginning with awards in 2015, dividends are no longer paid on RSUs. |
(3) | As of December 31, 2015, each non-employee Director had the following aggregate number of RSUs outstanding, although only the value of the 2015 RSU award is provided in the Stock Awards column. |
(2)Reflects the aggregate grant date fair value made during 2013 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly Statement of Financial Accounting Standards No. 123R) (“FASB ASC Topic 718”), determined without regard to estimated forfeitures. Messrs. Alden, Allardyce, Legg, Morris, Philip, Spinner, Stipp and Young received an award of 3,700 RSUs under the 2005 Ownership Incentive Plan on November 1, 2013 (computed using the closing price of $27.36 per share on such date). See Note L to the consolidated financial statements in the Company’s 2013 Annual Report on Form 10-K for additional detail on share-based compensation. Dividends are paid on RSUs at the same rate and at the same time as the dividends paid to stockholders.
(3)As of December 31, 2013, none of the Non-Employee Directors held any stock options and each Non-Employee Director had the following aggregate number of RSUs outstanding, although only the value of the 2013 RSU award is provided in the Stock Awards column.
|
| Alden |
| Allardyce* |
| Legg |
| Morris* |
| Philip |
| Spinner |
| Stipp |
| Young |
|
Vested but subject to transfer restrictions |
| 13,100 |
| 21,900 |
| 13,100 |
| 17,500 |
| – |
| – |
| – |
| 13,100 |
|
Unvested |
| – |
| – |
| – |
| – |
| 13,700 |
| 13,500 |
| 8,700 |
| – |
|
Total RSUs Outstanding |
| 13,100 |
| 21,900 |
| 13,100 |
| 17,500 |
| 13,700 |
| 13,500 |
| 8,700 |
| 13,100 |
|
Name |
|
| Vested but Subject to |
| Unvested |
| Total RSUs |
|
John W. Alden |
|
| 8,900 |
| – |
| 8,900 |
|
Fred A. Allardyce* |
|
| 17,700 |
| – |
| 17,700 |
|
Stephen E. Gorman |
|
| – |
| 3,000 |
| 3,000 |
|
William M. Legg |
|
| 8,900 |
| – |
| 8,900 |
|
Kathleen D. McElligott |
|
| – |
| 3,000 |
| 3,000 |
|
John H. Morris* |
|
| 17,700 |
| – |
| 17,700 |
|
Craig E. Philip |
|
| 4,586 |
| 4,314 |
| 8,900 |
|
Steven L. Spinner |
|
| 4,586 |
| 4,314 |
| 8,900 |
|
Janice E. Stipp |
|
| 4,586 |
| 4,314 |
| 8,900 |
|
Robert A. Young III |
|
| 8,900 |
| – |
| 8,900 |
|
*Messrs.Mr. Allardyce and Morris elected to defer theirhis 2009 RSU award of 4,400 RSUs and 2010 award of 4,400 RSUs until theirhis termination from Board service. Mr. AllardyceMorris elected to defer his 20102009 RSU award of 4,400 RSUs, 2011 RSU award of 4,400 RSUs and 2015 award of 2,700 RSUs until his termination from Board service. All deferral elections must be made in the year prior to the year the award is granted.
(4) | Board Chair: Mr. Young; Committee Chairpersons: Mr. Allardyce, Audit Committee and Qualified Legal Compliance Committee; Mr. Morris, Compensation Committee and Mr. Alden, Nominating/Corporate Governance Committee. |
(5) | Mr. Gorman and Ms. McElligott received a prorated annual retainer based on their Board service beginning July 2015. |
|
|
| Young |
| |
Perquisites(i) |
|
| $ | 51,515 |
|
Gross-ups(i) |
|
| 5,966 |
| |
Executive medical premiums(ii) |
|
| 9,927 |
| |
Total |
|
| $ | 67,408 |
|
(6) | For purposes of the column titled “All Other Compensation,” for 2015 Mr. Young’s amount consists of the following: |
Young | ||||
Perquisites(i) | $ | 54,690 | ||
Executive medical premiums(ii) | 10,161 | |||
Total | $ | 64,851 | ||
(i) | Mr. Young’s perquisites include: (a) spousal travel to Company or industry events and any related Company lost tax deduction resulting from the spouse accompanying him on the Company’s corporate aircraft, (b) personal use of an administrative assistant, (c) infrequent personal use of a lodging facility and related hunting property owned by the Company for business entertainment purposes and (d) a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members). It is estimated that 40% of Mr. Young’s administrative assistant’s time is spent on his personal business, and the incremental cost associated with that personal use is estimated to be |
|
|
(ii) | Because Mr. Young is a former officer of the Company, he and his spouse participate in the Company’s fully insured third-party executive medical plan that is provided for life upon retirement. The Company pays the majority of the premium amount for this coverage. The amount shown is total premiums paid by the Company for coverage during |
(5)20Committee Chairpersons: Mr. Allardyce, Audit Committee and Qualified Legal Compliance Committee; Mr. Legg, Compensation Committee; and Mr. Alden, Nominating/Corporate Governance Committee.
The following table sets forth certain information concerning beneficial ownership of the Common Stock as of February 24, 201429, 2016 by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the outstanding shares of Common Stock; (ii) each Director and Named Executive Officer of the Company or ABF Freight, the Company’s largest subsidiary,officer who is listed in the Summary Compensation Table (collectively “Named Executive Officers”), and Director nominees; and (iii) all Directors and executive officers as a group.
Unless otherwise indicated, to the Company’s knowledge, the persons included in the tables below have sole voting and investment power with respect to all the shares of Common Stock beneficially owned by them, subject to applicable community property laws. The number of shares beneficially owned by a person includes RSUs that are (i) scheduled to vest within 60 days after February 24, 2014,29, 2016, (ii) vested but deferred (and payable on a separation from service with the Company), or (iii) the award (or a portion of the award) is vested but unsettled either due to the Director’s or Named Executive Officer’sofficer’s eligibility for normal retirement or early retirement pursuant to the award agreement under which the award was granted. These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person. These shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. On February 24, 2014,29, 2016, there were 25,868,15525,734,173 shares of Common Stock outstanding.
|
| Shares |
| Percentage |
| ||||
|
| Beneficially |
| of Shares |
| ||||
|
| Owned |
| Outstanding |
| ||||
(i) Name / Address |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
BlackRock, Inc.(1) |
| 2,294,541 |
|
|
| 8.87% |
| ||
40 East 52nd Street, New York, NY 10022 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Dimensional Fund Advisors LP(2) |
| 2,185,129 |
|
|
| 8.45% |
| ||
Palisades West, Building One, 6300 Bee Cave Road, Austin, TX 78746 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
The Vanguard Group, Inc.(3) |
| 1,526,515 |
|
|
| 5.90% |
| ||
100 Vanguard Blvd., Malvern, PA 19355 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
State of Wisconsin Investment Board(4) |
|
|
|
|
|
|
| ||
121 East Wilson Street, Madison, WI 53703 |
| 1,459,180 |
|
|
| 5.64% |
| ||
|
|
|
|
|
|
|
| ||
(ii) Name |
| Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Young III(5, 7) |
| Chairman of the Board (also a Director Nominee) |
| 1,207,903 |
|
|
| 4. 67% |
|
John W. Alden(5, 8) |
| Director (also a Director Nominee) |
| 31,000 |
|
|
| * |
|
Fred A. Allardyce(5, 6) |
| Director (also a Director Nominee) |
| 35,500 |
|
|
| * |
|
William M. Legg(5) |
| Director (also a Director Nominee) |
| 35,500 |
|
|
| * |
|
Judy R. McReynolds(5, 9) |
| Director and President–CEO (also a Director Nominee) |
| 25,117 |
|
|
| * |
|
John H. Morris(5, 6) |
| Director (also a Director Nominee) |
| 17,500 |
|
|
| * |
|
Craig E. Phillip(5) |
| Director (also a Director Nominee) |
| – |
|
|
| * |
|
Steven L. Spinner(5) |
| Director (also a Director Nominee) |
| – |
|
|
| * |
|
Janice E. Stipp(5) |
| Director (also a Director Nominee) |
| – |
|
|
| * |
|
Jim A. Ingram(5) |
| Sr. VP–Strategy and ABF Logistics President |
| – |
|
|
| * |
|
James W. Keenan(5, 10) |
| Sr. VP–Enterprise Customer Solutions |
| 39,059 |
|
|
| * |
|
Michael E. Newcity(5) |
| Sr. Vice President–CFO and CIO |
| 1,642 |
|
|
| * |
|
Roy M. Slagle(5, 11) |
| ABF Freight President–CEO |
| 35,796 |
|
|
| * |
|
|
|
|
|
|
|
|
|
|
|
(iii) All Current Directors and Executive Officers as a Group (19 total)(12) |
| 1,555,680 |
|
|
| 5.97% |
| ||
*Less than 1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
| Percentage |
| ||
|
| Beneficially |
| of Shares |
| ||
|
| Owned |
| Outstanding |
| ||
|
|
|
|
|
| ||
(i) Name / Address |
|
|
|
|
|
| |
|
|
|
|
|
|
| |
BlackRock, Inc.(1) |
| 2,393,797 |
| 9.30% |
| ||
55 East 52nd Street, New York, NY 10055 |
|
|
|
|
| ||
|
|
|
|
|
| ||
Dimensional Fund Advisors LP(2) |
| 2,192,679 |
| 8.52% |
| ||
Building One, 6300 Bee Cave Road, Austin, TX 78746 |
|
|
|
|
| ||
|
|
|
|
|
| ||
The Vanguard Group, Inc.(3) |
| 1,847,603 |
| 7.18% |
| ||
100 Vanguard Blvd., Malvern, PA 19355 |
|
|
|
|
| ||
|
|
|
|
|
|
| |
(ii) Name | Position |
|
|
|
|
| |
|
|
|
|
|
|
| |
Robert A. Young III(4, 6) | Chairman of the Board (retiring April 2016) |
| 1,213,103 |
| 4.71% |
| |
John W. Alden(4, 7) | Director (also a Director Nominee) |
| 36,200 |
| * |
| |
Fred A. Allardyce(4, 5) | Director (also a Director Nominee) |
| 40,700 |
| * |
| |
Stephen E. Gorman(4) | Director (also a Director Nominee) |
| – |
| – |
| |
William M. Legg(4) | Director (also a Director Nominee) |
| 32,300 |
| * |
| |
Kathleen D. McElligott(4) | Director (also a Director Nominee) |
| – |
| – |
| |
Judy R. McReynolds(4, 8) | Director and President and CEO (also a Director Nominee) |
| 37,838 |
| * |
| |
John H. Morris(4, 5) | Director (also a Director Nominee) |
| 22,700 |
| * |
| |
Craig E. Philip(4) | Director (also a Director Nominee) |
| 14,586 |
| * |
| |
Steven L. Spinner(4) | Director (also a Director Nominee) |
| 14,386 |
| * |
| |
Janice E. Stipp(4) | Director (also a Director Nominee) |
| 9,586 |
| * |
| |
David R. Cobb(4) | Vice President-Chief Financial Officer |
| 16,431 |
| * |
| |
Jim A. Ingram(4) | ABF Logistics President |
| 4,669 |
| * |
| |
J. Lavon Morton(4, 9) | Sr. Vice President–Risk and Chief Audit Executive |
| 58,601 |
| * |
| |
Timothy D. Thorne(4, 10) | ABF Freight President |
| 2,480 |
| * |
| |
|
|
|
|
|
| ||
(iii) All Current Directors and Executive Officers as a Group (22 total)(11) |
| 1,554,581 |
| 6.01% |
| ||
*Less than 1% |
|
|
|
|
| ||
(1) | Based on information contained in Amendment No. |
|
|
(2) | Based on information contained in Amendment No. |
(3) | Based on information contained in Amendment No. |
|
|
(4) |
|
| Includes RSUs that are (i) scheduled to vest within 60 days after February |
As of February | |||||
Young |
|
|
| ||
Alden |
|
|
| ||
Allardyce |
|
| |||
Gorman | – |
| |||
Legg |
|
| |||
McElligott | – |
| |||
McReynolds |
| – |
| ||
Morris |
|
|
| ||
Philip |
|
|
| ||
Spinner |
|
|
| ||
Stipp | 4,586 | ||||
Cobb |
| – |
| ||
Ingram |
| – |
| ||
|
|
|
| ||
|
| – |
| ||
|
| ||||
| Includes RSUs which are vested and deferred. |
|
|
| Includes |
|
|
| Includes |
|
|
| Includes |
|
|
| |
(9) | Includes |
(10) | Includes 105 shares held by Mr. Thorne in the ArcBest 401(k) and DC Retirement Plan. |
|
|
(11) | Includes |
|
|
The following information sets forth the name, age, principal occupation and business experience during the last five years of each of the current executive officers of the Company and its subsidiaries, ABF Freight the Company’s largest subsidiary.System, Inc. (“ABF Freight”) and ABF Logistics, Inc. (“ABF Logistics”). The executive officers, including the Named Executive Officers, serve at the pleasure of the Board. For information regarding ownership of the Common Stock by the executive officers of the Company, see “Principal Stockholders and Management Ownership” on page 21. There are no family relationships among Directors and executive officers of the Company or its subsidiaries.
|
| |
| JUDY R. MCREYNOLDS, age | |
|
| |
|
| |
|
| |
|
| |
|
| |
| JIM A. INGRAM, age 48, has been President of ABF Logistics since August 2013. For ArcBest, he was Senior Vice President–Strategy from November 2011 through January 2014, Vice President–Strategic Development from April 2010 through October 2011, and Vice President–Market Development from January 2008 to April 2010. Mr. Ingram served as Vice President–Market Development for ABF Freight from February 2006 through December 2007, and from January 2000 through January 2006, he was ABF Freight’s Director–Quotation Services. Between January 1990 and December 1999, he held the positions of Analyst, Senior Analyst and Pricing Manager in ABF Freight’s Pricing Department. Mr. Ingram holds a Bachelor’s degree in Industrial Engineering and an M.B.A. from the University of Arkansas. | |
| MICHAEL E. NEWCITY, age | |
|
|
|
| |
| J. LAVON MORTON, age | |
|
| |
| ||
|
| |
| ||
|
| |
|
| |
| DAVID R. COBB, age | |
|
| DENNIS L. ANDERSON II, age 35, has been Vice President–Strategy for the Company since February 2014. Prior to that, Mr. Anderson served as Director of Strategy from June 2011 through January 2014. For ABF Freight, he was Senior Pricing Analyst from January 2007 to April 2010 and Manager of Pricing from May 2010 until June 2011. He holds a Bachelor’s degree in Industrial Engineering from the University of Arkansas. | |
| ||
|
| |
| WALTER J. ECHOLS, age | |
|
| |
|
| |
| ERIN K. GATTIS, age | |
|
|
|
| |
| MICHAEL R. JOHNS, age | |
| ||
| DANIEL E. LOE, age 41, has been Vice President–Enterprise Solutions for ArcBest since May 2014. Prior to his current position, Mr. Loe had served as Vice President–Yield Management for ABF Freight since 2010. In previous positions with ABF Freight, he had worked as Director of Marketing & Public Relations from 2004 to 2010, and Senior Pricing Analyst from 2000 to 2004. Mr. Loe joined the Company in 1997, working as an Associate Analyst, Analyst, and Lead Analyst in the Pricing Department prior to his promotion to Senior Pricing Analyst in 2000. He holds a Bachelor’s degree in Industrial Engineering from the University of Arkansas. | |
| TRACI L. SOWERSBY, age 46, has been Vice President–Controller, Chief Accounting Officer since April 2015. Prior to joining the Company, Ms. Sowersby spent 17 years with Ernst & Young LLP where she most recently served as Executive Director in the Phoenix Ernst & Young LLP office. Ms. Sowersby’s roles with Ernst & Young LLP included Audit/Assurance Staff through Executive Director, providing expertise in the areas of technical accounting, internal controls and financial reporting. She holds a Bachelor’s degree in accounting from Indiana University-Purdue University of Fort Wayne. Ms. Sowersby is a Certified Public Accountant and has served in the U.S. Army Reserves. | |
|
The purpose of this Compensation Discussion & Analysis (“CD&A”) is to provide you with an overview and analysis of (i) our executive compensation programs; (ii) material compensation changes made during the year for Named Executive Officers; and (iii) the process for review and decision-making for the executive compensation programs. The Compensation Committee (the “Committee”) of the Board of Directors determines the compensation and reviews, approves and oversees the administration of plans and programs for our Named Executive Officers. This discussion should be read in conjunction with the Summary Compensation Table (including the related tables and narrative disclosures).
The Named Executive Officers for 20132015 are listed below:
Named | Title | |
|
| |
Judy R. McReynolds |
| ArcBest President |
|
| |
|
| |
Jim A. Ingram |
| ABF Logistics President |
|
| ABF Freight President |
J. Lavon Morton | ArcBest Senior Vice President–Risk and Chief Audit Executive | |
David R. Cobb | ArcBest Vice President–Chief Financial Officer |
Executive Summary
Our Company
From our rootsAt ArcBest Corporation®, we solve complex transportation and logistics challenges. We began over 90 years ago as an LTL carrier, ABF Freight System, Inc.®, and we have grown significantly over the Arkansas Best companies have significantly expandedpast several years, continuing to diversify and continue to expand our total product and service offering through an array of emerging, non-asset-based businesses that focus on skillful solutions, emerging technologyofferings to meet our customers’ needs. Our companies and our employees’ will to get things done. We are a transportationbrands – ABF Freight®, ABF Logistics®, Panther Premium Logistics®, FleetNet America®, U-Pack® and logistics partner that goes the extra mile, solving the most complex, daily changing problems, one customer at a time. Our problem-solving cultureArcBest Technologies – apply The Skill and personal touch set us apart,The Will® with every shipment and our best-in-class ABF and Panther brands stand for quality in every business we operate.supply chain solution, household move or vehicle repair.
Company Performance
In 2013,2015, ABF Freight’s profitability improved despite lower annual revenue resulting from reduced business levels and less fuel surcharge revenue due to lower diesel fuel prices. As more customers recognized the Company experienced a returnArcBest companies’ ability to profitability asprovide holistic transportation and logistics solutions, the emerging non-assetpercentage of ArcBest revenue provided by its asset-light logistics businesses continued theirreached 30 percent in the fourth quarter of 2015.
The table below summarizes our key 2015 and 2014 financial results.
2015 and 2014 Financial Highlights | |||
| 2015 | 2014 | Change (%) |
Revenue | $2.7 billion | $2.6 billion | +2.1% |
Operating income | $75.5 million | $69.2 million | +9.0% |
Net income | $44.9 million | $46.2 million | –2.9% |
Earnings per diluted share | $1.67 | $1.69 | –1.2% |
Operating ratio | 97.2% | 97.3% | –0.1% |
EBITDA, asset-light logistics businesses | $39.3 million | $40.5 million | –2.9% |
Consolidated operating income growthincreased $6.3 million or 9.0% above 2014. However, net income and ABF Freight produced positive earnings. ABF Freight’s union contract was finalizeddiluted earnings per share were lower in 2015 versus 2014 due to lower income from changes in cash surrender value of life insurance policies, which is reported below the operating income line on the consolidated statements of operations, and implemented on November 3, 2013. Each of the Company’s operating segments experienced revenue growth for the year. A few financial highlights for 2013 include:due to a higher tax rate in 2015.
·27revenue of $2.3 billion, up from to $2.1 billion in 2012
·net earnings of $15.8 million, or $0.59 per share, compared to a net loss of $7.7 million, or $0.31 per share loss, in 2012
·stock price increase of over 250%
Executive Compensation Relative to Company Performance
Overall compensation levels in 2013 for the Named Executive Officers increased compared to 2012, reflecting the improved performance of the Company.
Annual Incentive Compensation: For 2013, the annual cash incentive continued to be based on Return on Capital Employed (“ROCE”) and operating income improvement as compared to the prior year. These metrics were weighted 50% each. Operating income improvement levels over 2012 resulted in a payout under the plan. However, because ROCE was less than the plan threshold, no incentive was earned under that component for 2013. Overall, the payout was below target, as outlined further on page 32.
Executive Compensation Relative to Company Performance
While Company revenue and operating profitability improved in 2015, we did not meet all of our incentive goals for the year, resulting in total compensation that was generally flat compared to 2014.
Annual Incentive Compensation: For 2015, the annual cash incentive was awarded based on operating income and Return on Capital Employed (“ROCE”).
Based on an assessment of the plan goals of the Company, a payout of approximately 53% of the target incentive opportunity under the 2015 annual plan was achieved as outlined further on page 33.
Long-Term Incentive Compensation:The 2011-20132013-2015 cash long-term incentive compensation plan iswas based on Total Shareholder Return (“TSR”) compared to our peer group and ROCE goals. Relative performance under the TSR component and ROCE levels generated a paymentpayout of approximately 129% of the target incentive opportunity under the 2011-2013 plan. However, because ROCE was less than the2013-2015 plan, threshold, no incentive was earned under that component. Overall, the resulting payout was below target, as outlined further on page 34.
A cash long-term incentive award opportunity for 2013-20152015-2017 was granted including metrics for ROCE and TSR consistent with the grant for 2011-20132013-2015 and 2012-2014.2014-2016.
Consistent with equity awards in 2011 and 2012,recent years, an RSU award was granted to Named Executive Officers in 20132015 to further link Named Executive Officer compensation with stock price performance and stockholder interests.
Key Compensation and Governance Policies
The Committee continually reviews the Company’s executive compensation program to maintain compensation practices that are in the best interests of our stockholders. Some of our key policies are summarized below:
What We Do:
· We tie pay to performance. The majority of executive pay is variable.
· Long-term compensation is subject to extended vesting requirements (five years for RSUs and three years for the cash long-term incentive compensation plan).
· We maintain significant stock ownership guidelines for our Named Executive Officers.
· We have a clawback policy.
· We conduct annual risk assessments of our compensation plans.
What We Don’t Do:
· We do not provide tax gross up payments for any amounts considered excess parachute payments.
· We do not permit the repricing of stock options without prior shareholder approval, except in connection with a transaction.
· We do not provide excessive perquisites to our Named Executive Officers.
· We do not permit hedging or pledging of Company stock.
· We do not have single trigger payments upon a change in control.
Compensation Philosophy and Objectives
The primary objectives of the Company’s executive compensation program are to:
· attract and retain highly qualified executives;
· motivate the Company’s leaders to work together as a team to deliver superior business performance;
· encourage balance between short-term results and the long-term strategic decisions needed to ensure sustained business performance over time; and
· ensure that the interests and risk tolerance of the Company’s leaders are closely aligned with those of the Company’s stockholders.
As discussed in the sections that follow, the Company uses a variety of compensation vehicles to meet its compensation philosophy and objectives. The Company does not establish a targeted mix of weightings between the various components. Both internal and external influences on our compensation program fluctuate periodically, and the Company believes that it is in the best interest of the Company, the Company’s stockholders, as well as the Named Executive Officers, to provide the Committee with the flexibility to design a compensation program appropriate to the current market environment and the Company’s goals.
PositionExperience, scope and levelcomplexity of responsibilitythe position, current objectives and responsibilities, internal equity, retention needs and relative compensation of the peer group are all important factors inused to determine the compensation of the Company’s executives. There are internal salary levels, as well as annual and long-term target incentive opportunities for each executive level in the organization. The Company believes this strategy emphasizes the executive team concept.
Each Named Executive Officer is a long-term employee of the Company with tenure ranging from 169 to 3726 years, resulting in a group that is very knowledgeable about ourthe Company and the transportation industry. This knowledge is extremely valuable to both the Company and our stockholders and makes members of our management desired targets for recruitment by other transportation companies. Our compensation program is designed to prevent loss of our existing managerial talent as well as attract future leaders for the Company.
20132015 Variable vs. Fixed Compensation
One of the primary considerations in trying to implement our compensation philosophy and objectives is striking the proper balance between fixed and variable compensation. Fixed compensation ensures that the executive receives a minimum level of compensation irrespective of Company performance, which is important for retention and risk reduction. Variable compensation ties the executive’s compensation to Company performance, aligning the executive’s interests with those of the Company’s stockholders. The charts below show the significant portion of the Named Executive Officers’ 20132015 target compensation that was variable and based either on reaching certain performance goals or the value of the Common Stock.
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Pay for Performance
In addition to being designed to attract and retain effective management, our compensation program also hasprovides a strong relationship between pay and performance and our compensation programs evolve and are adjusted over time to support the Company’s goals and short- and long-term objectives.performance. The following chart illustrates how annual incentive payments (both short- and long-term) track with the Company’s operating income. Correlating annual incentive payments to improvements in operating income performance.reinforces the Company’s emphasis on profitable growth.
Performance-based annual and long-term incentive compensation represents a significant portion of the Named Executive Officers’ compensation package.
Prior to 2010, the annual incentive plan was tied solely to the Company’s ROCE. Starting in 2010, the plan was based 50% on ROCE and 50% on cash flow improvement. In 2012, the cash flow improvement metric was replaced with operating income improvement.
Prior to 2011, the long-term incentive compensation plans were based on EPS growth and ROCE. Beginning in 2011, relative TSR replaced EPS. These plans are described in more detail below.
Response to 20132015 Say on Pay Vote
In 2013,2015, the Company held its thirdfifth annual stockholder advisory vote on the compensation paid to our Named Executive Officers, again resulting in over 90% of votes cast approving such compensation.with approximately 97% support. The Committee considered these results and the overwhelmingthis support expressed by stockholders as well as many other factors in evaluating the Company’s executive compensation programs as discussed in this CD&A. These factors include the Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of data of a selected group of peers. Each of these factors is evaluated in the context of the Committee’s duty to act as the Directors determine to be in the stockholders’ best interests. Based on this evaluation,these considerations, the Committee did not make any changes to our executive compensation program, policies or pay levels as a result of the 20132015 “say on pay” advisory vote.
Roles and Responsibilities in Determining Executive Compensation
The Compensation Committee is responsible for overseeing and approving compensation levels and incentive plans for the Named Executive Officers. The Committee approves salary levels, incentive plan performance metrics, performance goals, targets and maximum payouts, equity awards and the peer group used for benchmarking. The Committee also evaluates the need for, and the provisions of, severance arrangements for the Named Executive Officers. As a part of its responsibilities, the Committee also reviews risks associated with compensation plans.
The Committee retains an independent consultant, Meridian, to assist with the evaluation of compensation programs and award levels and to provide updates to the Committee on trends and issues related to executive compensation as well as to review executive compensation related proxy disclosures. Meridian also participates in Committee meetings, as requested by the Committee, and reviews Committee materials. See “Committees of the Board Compensation–Compensation Committee” for more information regarding the Committee’s independent consultant.
The Company has retained Mercer to provide additional consulting services at the direction of management and to assist with management’s recommendations for our peer group and executive compensation. Mercer assists management with market analysis, plan design, proxy disclosure review, and review of corporate governance practices and periodically participates in Committee meetings and reviews Committee materials.practices.
From time to time, at the Committee’s request, the Company’s Chairman of the Board, President & and Chief Executive Officer, Senior Vice President–Tax &Risk and Chief Audit Executive, Vice President–General Counsel &and Corporate Secretary, Senior Vice President–Chief Financial Officer & Chief Information Officer,and Vice President–Human Resources and ABF Freight President & Chief Executive Officer provide analysis and recommendations to the Committee on compensation issues.
At certain meetings, the President & and Chief Executive Officer presents pay recommendations to the Committee for her direct reports. The President & and Chief Executive Officer does not make recommendations on her own compensation. Some or all of the above-listedpreviously-listed individuals are routinely invited by the Committee to attend Committee meetings in order to provide information relating to matters the Committee is considering. None of the above-listedpreviously-listed individuals participate in discussions concerning their own pay or attend Committee executive sessions, except to the extent requested by the Committee.
Management formulates its recommendations with assistance from Mercer. The Committee considers management recommendations and reviews recommendations fromdiscusses proposals with Meridian before making decisions on compensation to be provided to the executives. The Committee feels these recommendationsdiscussions provide valuable insight in making compensation decisions; however, the Committee alone approves all pay decisions for the Named Executive Officers.
Determining Appropriate Pay Levels and Linkage to Objectives
The Committee compares itsour compensation programlevels with the compensation levels of executives at similar peer entities in our industry to determine whether the Company is providing a competitive compensation program within the market in which we compete for qualified executives. For base salary, the Company has historically targeted betweentargets the 25th and 50th percentilespercentile of the market (i.e., the peer group described on page 30)below) for Named Executive Officers. Annual cash incentives are designed to deliver total cash compensation (salary and annual incentives) to meet or exceedexceeding the 50th percentile of the market only when the Company performs above target performance.performance levels. Total direct compensation, including base salary, annual cash incentives, long-term cash incentives and equity awards, is also targeted to meet or exceed the 50th percentile of the market only when the Company exceeds target performance levels. Although the Committee considers these targets, compensation for each executive may vary from the targets based on the executive’s experience, the scope and complexity of the position, current objectives and responsibilities, internal equity and retention needs.
To assess the competitive range of pay for a particular position,Peer Group. Each year, the Committee, periodically examines pay datawith input from Meridian, reviews the current peer group using criteria such as market capitalization and revenues. Management also makes recommendations for executives in positions of comparable size and complexity at other companies.our peer group, with input from Mercer. The Company’s peer group is designated bydesigned to be composed of the Committee.companies with which we compete in the transportation and logistics industry and for executive talent. The Committee uses the peer group to analyze market compensation rates for its Named Executive Officers and as the performance peer group for the TSR component of the cash long-term incentive plan.
Our peer group for 2015 is provided in the table below. The latestonly change from our 2014 peer group was the removal of Con-way, Inc. due to its acquisition by XPO Logistics, Inc. in depth2015.
Company Name | Revenue in 2015 |
ArcBest Corporation | $ 2,667 |
Echo Global Logistics, Inc. | 1,225 |
Forward Air Corporation | 959 |
Hub Group, Inc. | 3,526 |
J.B. Hunt Transport Services, Inc. | 6,188 |
Landstar System, Inc. | 3,321 |
Old Dominion Freight Line, Inc. | 2,972 |
Roadrunner Transportation Systems, Inc. | 1,995 |
Saia, Inc. | 1,221 |
Swift Transportation Company | 4,229 |
Werner Enterprises, Inc. | 2,094 |
XPO Logistics, Inc. | 3,342 |
YRC Worldwide Inc. | 4,832 |
Mercer conducted an in-depth market analysis was conductedin 2014 for the Company’s executive compensation program in 2011 in conjunction with the Company’s retention assessment and incentive plan review.program. As part of the analysis, the Committee examined peer group salaries, incentive plan designs and practices and reviewed severance and change in control agreements provided by peers.equity award practices. This analysis indicated that total direct compensation for some of the Named Executive Officers was below the desired range. Certain adjustments to target incentive amounts were made in 2015 as a result of the analysis completed by Mercer in 2014 as further discussed below.
Officers is within the desired range when the Company performs well. The next in-depth market analysis of executive compensation will be conducted during 2014.
A change to the peer group was made in 2012, moving to the Stephen’s Transportation Index with the addition of YRC Worldwide, Inc. The change was made to more accurately represent the Company’s direct competitors for business and executive talent at that time. This peer group is also used in the TSR component of the 2012-2014 and 2013-2015 cash long-term incentive plan, and includes the following companies:
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1.12 months ended 9/30/2013
Due to the strong performance orientation of the annual cash incentive, as discussed on page 31,33, and the long-term cash incentives, as described on page 33,34, the Committee is satisfied that above-median total cash and total direct compensation will only be awarded when the Company performs well againstabove market levels. In setting performance goals for the annual and long-term incentive plans, the Committee references the historical ROCE of the S&P 500 companies. The S&P 500 is an appropriate performance benchmark because it is a broad-based group of companies in leading industries in the United States. The S&P 500 reflects the risk and return characteristics of the broader market on an on-going basis. While the S&P 500 includes companies that are larger than the Company, the performance of these companies reflects stable, well-managed organizations. Performance at or above the level of the S&P 500 companies is considered acceptable performance by management and worthy of performance-based incentive payments. ForIn addition, for long-term incentives, the Company also uses TSR relative to the above listed peer group to more directly align the cash long-term incentive plan with above-market shareholder value creation.
The Committee evaluates Named Executive Officers’ compensation by analyzing two general categories: (i) short-term cash compensation and (ii) long-term incentive compensation.
Short-Term Cash Compensation |
| Long-Term Incentive Compensation | |||||||||||||||||||
Base Salary | + | Annual Cash Incentive (1-Yr. Financial Goals) | = | Total Short-Term Cash Compensation | + | Cash Long-Term Incentive (3-Yr. Financial & Market Goals) | + |
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| Equity Awards (5-Yr. vesting) | = | Total Direct Compensation | |||||||||
Although the Committee also reviews retirement, perquisites and other benefits such as the 401(k) plan and health and welfare benefits, these benefits are not referenced against market data or used in determining direct compensation levels. These benefits are more fully described in the “Retirement and Other Benefits” and the “Perquisites” sections of this CD&A.
Components of Compensation
Base Salary. Base salaries for Named Executive Officers are reviewed by the Committee on an annual basis. In establishing base salaries, the Committee reviews the following:
· the Company’s compensation philosophy and objectives as described above;above, including consideration of the executive’s experience, the scope and complexity of the executive’s position, current objectives and responsibilities, internal equity and retention needs;
· market analysis;
· input from the Compensation Committee’s independent consultant, Meridian;
· economic and inflationary factors;
· the Company’s recent and historical financial performance;
· the Company’s strategic plans;
· differences in the level of responsibility and authority between the Named Executive Officers;
·the resources of the Company; and
· the President–President and Chief Executive Officer’s recommendations (on positions other than her own).
The Committee does not assign a specific weighting to any of these factors.
In its review of the onlybase salary of each Named Executive Officer for 2015, the Committee considered the market data available for our peer group and the performance of the officer to determine salary changes. The Committee approved salary increases toeffective July 1, 2015 for the Named Executive Officers relatedas outlined below to promotions.bring salaries up to a competitive level. Mr. Ingram’s salary was increased uponCobb’s increase reflects his promotion to ABF Logistics President effective August 1, 2013. Mr. Ingram also continued to serve as ABC Senior Vice President–Strategy through January 31, 2014. Mr. Newcity’s salary was increased upon his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer effective August 1, 2013.in 2015. The following chart shows the annualized base salary rates in effect as of December 31 for each Named Executive Officer for 20122014 and 2013:2015.
| 2012 Salary | 2013 Salary |
Judy R. McReynolds | $575,000 | $575,000 |
Roy M. Slagle | $375,000 | $375,000 |
James W. Keenan | $294,000 | $294,000 |
Jim A. Ingram | $294,000 | $325,000 |
Michael E. Newcity | $266,000 | $294,000 |
| 2014 | 2015 Annualized |
Percentage |
Judy R. McReynolds | $625,000 | $660,000 | 5.6% |
Jim A. Ingram | $335,000 | $355,000 | 6.0% |
Timothy D. Thorne | $375,000 | $400,000 | 6.7% |
J. Lavon Morton | $320,000 | $340,000 | 6.3% |
David R. Cobb | $255,000 | $315,000 | 23.5% |
(1)The annualized base salary amounts provided in the table above do not match the salary amounts provided in the Summary Compensation Table because the salary changes were not effective at the beginning of the year, except for Mr. Cobb.
Annual Cash Incentive Compensation. The annual cash incentive plan benefit for 20132015 was based on the Company’s ROCE and operating income improvement, as it washas been in 2012. Theprior years. Each of the two performance metrics were equally weighted. Under the plan, participants receive a payout if certain goals for improvement in operating income as compared to the previous year are met and/or if certain ROCE levels are achieved. Operating income is generally determined as operating income as shown by the consolidated financial statements (adjusted for nonrecurring or unusual items and consistent withother items set forth in the historical determination2005 Ownership Incentive Plan). The use of improvement in operating income in Arkansas Best’s financial statements after taking into accountreinforces the required adjustments specified in the annual incentive plan.Company’s emphasis on profitable growth. ROCE is generally calculated by dividing net income (adjusted for nonrecurring or unusual items)items and other items set forth in the 2005 Ownership Incentive Plan) by average adjusted debt plus average equity for the applicable period. The Committee and management believe that ROCE keeps participants focused on the profitable use of Company resources, which increases the value of the Company to its stockholders. Additionally, ROCE is a valuable motivational tool since it can be calculated throughout the year by participants. The use of improvement in operating income as a performance metric reinforces the Company’s emphasis on profitable growth.
TheAs discussed on page 32, the ROCE incentive award performance target and scale isare based on studies conducted since the inception of the ROCE plan in 1998 regarding the historical average ROCE for the S&P 500 publicly traded companies over longer periods of time.
For 2013,Each Named Executive Officers had aOfficer’s target incentive opportunity is expressed as a percentage of their base salary thatearned during the year for which the incentive is multiplied by a performance factor determined byearned. The following table shows the operating income improvementincentive targets for the 2015 fiscal year for the annual incentive program:
Target Incentive | |
Judy R. McReynolds | 100% |
Jim A. Ingram | 65% |
Timothy D. Thorne | 70% |
J. Lavon Morton | 60% |
David R. Cobb | 50% |
Mr. Ingram’s Target Incentive for 2015 was increased from 60% to 65% and ROCE achieved by the Company. The target incentive opportunity for Mr. Ingram was raisedMorton’s from 50% to 60% of base salary to reflect his promotion to ABF Logistics Presidentearned during 2015 based on the market compensation analysis provided by Mercer in 2013. The target for Mr. Newcity was raised from 45% to 50% of base salary to reflect his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer in 2014. Both adjustments were effective for the incentive paid with respect to performance in 2013.
The following table shows the incentive targets for the 2013 fiscal year for the annual incentive plan:
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The following tables show how the Company determined the performance factor applied into varying levels of performance for each half of the incentive paid under the annual cash incentive compensation plan with respect totwo performance inmetrics utilized for fiscal year 2013.
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2015. The performance factor earned for performance at levels between those indicated below is calculated using straight-line interpolation. The operating income component was capped at a 200% performance factor.
ROCE % | Performance | ||
<5% |
| 0% |
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5% |
| 50% |
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10% |
| 100% |
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15% |
| 300% |
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Thefactor and the ROCE component was capped at a 300% performance factor.
Operating Income Improvement | Performance | |
<$15 million | 0% | |
+$15 million | 25% | |
+$29 million | 100% | |
+$70.5 million | 200% | |
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ROCE % | Performance | |
<5% | 0% | |
5% | 50% | |
10% | 100% | |
15% | 300% | |
Actual operating income improvement achieved for the 20132015 fiscal year was less than the threshold performance amount of $15,000,000, andas measured undersuch, the annual planperformance factor for the operating income portion of the incentive was $39.9 million and the0%. Our ROCE for 2015 was 3.66%10.14%, resulting in a performance factor of approximately 106%. Combining the two resulting performance factors (weighted 50% each), produced a payout of approximately 69%53% of the target incentive opportunity. Actual payouts for 2015 performance are shown below:
| 2015 Target Annual Incentive | Actual 2015 Annual |
Judy R. McReynolds | $664,404 | $350,944 |
Jim A. Ingram | $231,888 | $122,485 |
Timothy D. Thorne | $271,250 | $143,277 |
J. Lavon Morton | $204,738 | $108,145 |
David R. Cobb | $158,317 | $ 83,625 |
Long-Term Compensation. The target incentive opportunity for our long-term compensation is expressed as a percent of base salary, with 50% of the target awarded as performance based three-year cash long-term incentive compensation and 50% as time-vested equity awards. Both long-term cash and long-term equity awards are granted under the 2013 annual plan was achieved as reflectedCompany’s 2005 Ownership Incentive Plan. The following table shows the incentive targets for long-term incentive compensation awarded in the table below.2015:
Job Title | 2013 Target | Actual 2013 Annual |
ABC President & CEO | $575,000 | $394,559 |
ABF President & CEO | $262,500 | $180,125 |
ABC Senior Vice President–Enterprise Customer Solutions | $147,000 | $100,870 |
ABC Senior Vice President–Strategy and ABF Logistics President | $167,000 | $114,594 |
ABC Senior Vice President–CFO & CIO | $131,075 | $89,942 |
| Cash Long-term (% of Base Salary) | RSU Value (% of Base Salary) | Total Long-Term Target Incentive (% of Base Salary) |
Judy R. McReynolds | 90.0% | 90.0% | 180% |
Jim A. Ingram | 70.0% | 70.0% | 140% |
Timothy D. Thorne | 70.0% | 70.0% | 140% |
J. Lavon Morton | 67.5% | 67.5% | 135% |
David R. Cobb | 62.5% | 62.5% | 125% |
The value of the Long-Term Compensation Target Incentive Opportunity established for each Named Executive Officer was based, in large part, on the Named Executive Officer’s position within the Company. Because half of the long-term compensation targeted above is delivered in the form of equity awards, the Committee also considers the number of shares available for grant, the number of previously granted awards currently outstanding, the burn rate and potential shareholder dilution.
Cash Long-Term Incentive Compensation. The Committee has awarded three-year cash incentive opportunities annually since 2006.
In January 2013,February 2015, the Committee granted a three-year cash long-term incentive plan award for January 1, 20132015 through December 31, 20152017 using the same components as the 2011-2013 and 2012-2014 plans. The 2013-2015 cash long-term incentive plan components are:used in recent years.
Cash Long-Term Incentive
| Weighting |
Relative TSR Component | 50% |
ROCE Component | 50% |
Management and the Committee believe that the combination of performance measures in the cash long-term incentive plan places an emphasis on the efficient use of corporate assets to create profitable growth during the measurement period and rewards participants when they outperform their peer group. The relative TSR component is intended to more directly align the plan with shareholder value creation relative to our peers while the ROCE component aligns management’s interest with our profitability and appropriate employment of capital.
The payout opportunity for the relative TSR Component is based on the percentile rank of the Compounded Annual Growth Rate (“CAGR”) of our TSR relative to our peer group over the three-year measurement period. The TSR with respect to the Company and each peer company equals the annualized rate of return reflecting price appreciation between the beginning 60-day average share price (ending December 31 of the year immediately prior to the beginning of the measurement period) and the ending 60-day average share price (ending December 31 of the final year of the measurement period), adjusted for dividends paid and the compounding effect of dividends paid on reinvested dividends. CAGR converts the total return into a value that indicates what the return was on an annual basis for the three-year period. The performance peer group for the TSR component of the 2013-20152015-2017 cash long-term incentive plan (which includes the same companies used for the 2012-2014 plan) is listed in the “Determining Appropriate Pay Levels and Linkage to Objectives” section of the CD&A.
For the “ROCEROCE Component,” the Committee used the Company’s three-year average ROCE as its performance measure. The ROCE goal is based on studies conducted by the Company on historical averages of ROCE for S&P 500 publicly traded companies over longer periods of time.time, as discussed on page 32. ROCE is generally calculated by dividing net income (adjusted for nonrecurring or unusual items)items and other items set forth in the 2005 Ownership Incentive Plan) by average debt plus average equity for the applicable period.
For the 2013-2015 cash long-term incentive plan,As described above, the Named Executive Officers have a target incentive opportunity expressed as a percentagepercent of theirbase salary. Base salary is determined based on the average base salary earned during the three-year performance period.The target incentive opportunity for Mr. Ingram was raised from 70% to 75% of base salary to reflect his promotion to ABF Logistics President. The target incentive opportunity for Mr. Newcity was raised from 60% to 70% of base salary due to his promotion to ABC Senior Vice President–Chief Financial Officer & Chief Information Officer. The following table shows the 2013 target incentive for the Named Executive Officers for the 2013-2015 cash long-term incentive plan.
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The following tables show how payments are determinedthe performance factor that will be applied to varying levels of possible performance for each half of the two performance metrics utilized for the 2015-2017 cash long-term incentive planplan. The performance factor earned for the 2013-2015 cash long-term incentive plan:
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performance at levels between those indicated below is calculated using straight-line interpolation. The Relative TSR component was capped at a 200% performance factor.
ROCE % | Performance | ||
<3% |
| 0% |
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3% |
| 30% |
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10% |
| 100% |
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15% |
| 300% |
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Thefactor and the ROCE component was capped at a 300% performance factor.
For the ROCE component of the 2015 award, the threshold payout of 3% was increased to 5%. Payments for the 2013-20152015-2017 cash long-term incentive plan, if any, will be made in early 2016.2018.
Relative TSR | Performance Factor Earned for Relative TSR | |
< 25th percentile | 0% | |
25th percentile | 25% | |
50th percentile | 100% | |
75th percentile | 200% | |
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ROCE % Achieved | Performance Factor Earned on ROCE |
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<5% | 0% |
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5% | 50% |
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10% | 100% |
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15% | 300% |
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The performance period for the 2011-20132013-2015 cash long-term incentive compensation plan ended on December 31, 2013.
2015. The following tables show how payments were determined for each half of this cash long-term incentive award:
Actualactual TSR performancepercentile rank was at the 45th percentile84.3 and ROCE was 1.36% for5.85% as calculated under the 2011-2013terms of the 2013-2015 cash long-term incentive compensation plan. Combining the resulting two performance factors (weighted 50% each), produced a payout of approximately 43%129% of the target incentive opportunity under the 2011-2013 cash long-term incentive plan was achieved as reflected in the table below. The performance factor table for the 2013-2015 award can be found in our proxy statement for our 2014 Annual Meeting of Stockholders.
Job Title | 2011-2013 Target Cash | Actual 2011-2013 |
ABC President & CEO | $474,583 | $204,545 |
ABF President & CEO | $253,000 | $109,043 |
ABC Senior Vice President–Enterprise Customer Solutions | $177,667 | $76,574 |
ABC Senior Vice President and ABF Logistics President | $186,666 | $80,453 |
ABC Senior Vice President–CFO & CIO | $159,591 | $70,703 |
| 2013-2015 Target Cash | Actual 2013-2015 |
Judy R. McReynolds | $509,810 | $659,026 |
Jim A. Ingram | $239,753 | $309,926 |
Timothy D. Thorne | $163,510 | $211,368 |
J. Lavon Morton | $215,050 | $277,992 |
David R. Cobb | $148,221 | $191,604 |
Equity Awards.Long-Term Incentive Compensation. The Company’s policies and practices for aligning the Named Executive Officers’ interests with stockholders’ interests and encouraging stock ownership by Named Executive Officers are described below:
To help align executive interests with those of shareholders,stockholders, the Company awards RSUs.grants RSU awards. As described above, the number of RSUs granted to our Named Executive Officers is based on a target incentive opportunity expressed as a percent of annual base salary in effect at the time of the award approval. In 2013,2015, Named Executive Officers were granted time-vested RSUs under the Company’s 2005 Ownership Incentive Plan as follows:
Named Executive Officer | Target Award | RSUs Granted in 2013 | |
Judy R. McReynolds | $330,000 | 12,100 |
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Roy M. Slagle | $240,000 | 8,800 |
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James W. Keenan | $180,000 | 6,600 |
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Jim A. Ingram | $200,000 | 7,300 |
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Michael E. Newcity | $180,000 | 6,600 |
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The number of RSUs awarded to each Named Executive Officer was based, in large part, on the Named Executive Officer’s position within the Company. Other considerations included the total number of shares available to be granted, the number of previously granted RSUs currently outstanding, burn rate and potential shareholder dilution.
Named Executive Officer | RSUs Granted in 2015 |
Judy R. McReynolds | 15,300 |
Jim A. Ingram | 6,400 |
Timothy D. Thorne | 7,200 |
J. Lavon Morton | 5,900 |
David R. Cobb | 5,100 |
See “Outstanding Equity Awards at 2013 Fiscal Year-End” for additional information regarding these awards. Prior to 2005, the Named Executive Officers were awarded stock options.
The Committee has granted RSUs since 2007. The Committee believes the awardingaward of RSUs with five-year cliff vesting facilitates the Named Executive Officers’ accumulation of an equity interest in the Company and helps to retain key talent. This vesting schedule also assists the Named Executive Officers in complying with the Stock Ownership Policy. Stock will be issued in settlement of the RSUs on the regular five-year vesting date or, if earlier, at the time the Named Executive Officer’s employment terminates due to retirement, death or disability. See “Outstanding Equity Awards at 2015 Fiscal Year-End” for additional information regarding these awards.
Ownership and Retention PolicyPolicy. – The Committee believes that the Named Executive Officers should maintain meaningful equity holdings in the Company in order to align their interests with those of the Company’s shareholders.stockholders. The Board adopted a Stock Ownership Policy (the “Policy”) for Named Executive Officers, which provides that became effective January 1, 2008. Under this Policy, Named Executive Officersthey must own stock with a value equal to or greater than the following multiple of their base salary.
Position Title | Stock Ownership Multiple |
| 3 x base salary |
Other Named Executive Officers | 2 x base salary |
Participants are prohibited from selling any companyCompany stock (except to pay the exercise price of stock options or taxes generated as a result of equity grants or vesting) until the ownership requirement is attained. Stock owned in a Company-sponsored retirement plan, restricted stock, RSUs and stock owned outright each count toward the ownership requirement. The Committee monitors ownership levels annually. As of the last review which took place in February, 2014, all Named Executive Officers have met or exceeded their ownership requirement. The Committee reserves the right to amend or terminate the Policy at any time or waive the restrictions for any individual at its sole discretion. As of the last review which took place in April, 2015, all Named Executive Officers have met or exceeded their ownership requirement.
Equity Award Practices –. The Committee’s policy for granting equity awards states:
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| the Committee is responsible for granting equity-based compensation for all employees; |
· | the award dates for each grant are five business days following the Company’s applicable quarter’s earnings release; |
· | the exercise price or value of the grant is determined by reference to the closing price of the Common Stock on the specified award date; |
· | the number of shares/units awarded will be based on stated dollar amounts for each participant unless otherwise approved by the Board; and |
· | any award which does not conform to these policy requirements must be approved by the Board. |
Retirement and Other Benefits. The Named Executive Officers are eligible to participate in retirement and benefit programs as described below. The Committee generally reviews the overall cost to the Company of the various programs on an annual basis or when changes are proposed. The Committee believes the benefits provided by these programs continue to be important factors in attracting and retaining the overall officer group, including the Named Executive Officers. However, in recent years, these benefits have become more limited as their cost risesrose and general compensation trends movemoved away from the provision ofproviding additional benefits under defined benefit retirement plans.
In the past,Prior to 2009, the Company provided officersNamed Executive Officers with the predominant portion of their long-term compensation through post-employment payments under the Supplemental Benefit Plan (the “SBP”) and Deferred Salary Agreements (“DSA”) retirement programs described on page 36.38. All benefits under these plans have been frozen, and officers now receive a significant portion of their long-term compensation through the performance plan described earlier.plans previously described. As officers promoted or hired after the SBP and DSA freeze, Messrs. NewcityIngram, Thorne and IngramCobb are not participants in the SBP or DSA.
Following are the various benefit programs in which the Named Executive Officers have either active or frozen participation.
Supplemental Benefit Plan – Prior to 2010, the Company maintained a noncontributory, unfunded supplemental pension benefit plan that supplements benefits under the Arkansas Best Corporation Pension Plan (the “Pension Plan”). Under the SBP, the Company will pay sums in addition to amounts payable under the Pension Plan to eligible officers, including the Named Executive Officers. The SBP has been frozen since December 31, 2009. See “2013 Pension Benefits” for more information.
Deferred Salary Agreements – The Company and ABF also have unfunded, noncontributory DSAs with certain of their officers. No Named Executive Officers are active participants in the DSA. See the “2013 Pension Benefits” section for more information.
Pension Plan – As part of their postemployment compensation, the Named Executive Officers participated in the Company’s non-union defined benefit Pension Plan on the same basis as other eligible noncontractual employees. Participation in the Pension Plan was frozen to new entrants effective December 31, 2005. Because the Named Executive Officers were already active Pension Plan participants as of the participation freeze date, they remained in the Plan with other eligible noncontratual employees until the Pension Plan was amended to freeze the participant’s final average compensation and years of credited service as of July 1, 2013. See the “2013 Pension Benefits” section for more information on the benefit and terms and conditions of the Pension Plan.
401(k) and DC Retirement Plan – The Company maintains the Arkansas BestArcBest 401(k) and DC Retirement Plan for eligible noncontractual employees. The Named Executive Officers are eligible to participate in this plan on the same basis as all other eligible employees. The Company matches 50% of the employee’s contributions up to a maximum of 6% of the employee’s eligible earnings subject to the Internal Revenue Service (“IRS”) annual compensation limit.
After the freeze of the accrual of benefits for active participants of the ArcBest Corporation Pension Plan (the “Pension Plan”) effective on July 1, 2013 as described below, the former Pension Plan participants, including the Named Executive Officers, became eligible for Discretionary Defined Contributions. Discretionary Defined Contributions were originally established for those hired after the Pension Plan was frozen to new participants effective December 31, 2005. The Discretionary Defined Contributions are made by the Company and determined annually based on the operating results of the Company and made to the participant’s Arkansas BestArcBest 401(k) and DC Retirement Plan account. The amount of the Discretionary Defined
Contribution is based on a percentage of annual eligible compensation (generally wages and incentive payments).
Voluntary Savings Plan (“VSP”) – The Arkansas BestArcBest VSP is a nonqualified plan which was created to offset the IRC limitations on contributions to the Company’s 401(k) plan for certain eligible officers, including the Named Executive Officers. PriorThe Company does not match contributions to 2010, the Company matched 15% of each participant’s contributions up to a maximum annual match amount of $15,000. The match was suspended for the VSP effective January 1, 2010.VSP. See the “2013“2015 Non-Qualified Deferred Compensation” section for a more detailed description of the VSP. No Named Executive Officers currently have a balance in the VSP.
Health and Welfare Plans – The Company provides medical, dental, vision, life insurance and disability benefits to all eligible noncontractual employees. The Named Executive Officers are eligible to participate in these benefit plans on the same basis as all other eligible noncontractual employees. The Named Executive Officers also have individual long-term disability policies subsidizedpaid by the Company that supplement the group disability policy.
Officer Life Insurance – The Company, ABF FreightCorporate officers and ABF Logisticscertain other subsidiary officers, including the Named Executive Officers, are provided with life insurance coverage of $1 million in the event they suffer accidental death while traveling on Company business.
Post-Employment Supplemental Medical Policy (“Executive Medical Policy”) – The Company provides the Named Executive OfficersCorporate officers and certain other subsidiary officers and their eligible dependents withhave lifetime health coverage under the Company’s Executive Medical Policy following their termination of employment after age 55 with 10 years of service. The health coverage is provided through a fully insured third-party provided health plan. Eligible retired officers from age 55 to 60 pay a premium to the Company, historically equivalent to the then current COBRA rate.rate applicable to qualifying former employees. From age 60 to 65, the terminateda retired officer is required to reimburse the Company an amount equivalent to the premium paid for health coverage by active officers of the Company. For retired officers age 65 and over, nominalreduced premiums are charged by the Company for continued retiree coverage.
The Executive Medical Policy provides that coverage will be forfeited if the officer becomes an employee, consultant or director of, or has an ownership interest in, any competitor of the Company.
Supplemental Benefit Plan – Prior to 2010, the Company maintained a noncontributory, unfunded supplemental pension benefit plan that supplemented benefits under the Pension Plan. Under the SBP, the Company will pay sums in addition to amounts payable under the Pension Plan to eligible officers, including eligible Named Executive Officers. The SBP has been frozen since December 31, 2009. See the “2015 Pension Benefits” section for more information.
Deferred Salary Agreements – The Company and ABF Freight also have unfunded, noncontributory DSAs with certain of their officers. No Named Executive Officers are active participants in the DSA; however, Ms. McReynolds and Mr. Morton have frozen benefits under the DSAs. See the “2015 Pension Benefits” section for more information.
Pension Plan – Eligible Named Executive Officers also participated in the Company’s noncontractual defined benefit Pension Plan on the same basis as other eligible noncontractual employees. Participation in the Pension Plan was closed to new entrants effective December 31, 2005. Named Executive Officers, excluding Mr. Cobb who was hired after the close date, remained active participants in the Plan with other eligible noncontractual employees until July 1, 2013 when participants’ final average compensation and years of credited service were frozen. See the “2015 Pension Benefits” section for more information on the benefit and terms and conditions of the Pension Plan.
Perquisites. Perquisites provided by the Company are generally limited to situations where there is some related business benefit to the Company, such as personal travel cost associated with spousal attendance at Company or industry events. See the “Summary Compensation Table” for a listing of the reportable perquisites for the Named Executive Officers.
Employment Agreements and Change in Control Provisions
None of our Named Executive Officers is party to an employment agreement with the Company. However, the Named Executive Officers do participate in athe 2012 Change in Control Plan for certain senior officers of the Company. The Committee believes this plan serves the best interests of the stockholders since it helps retain executives during uncertain times leading up to and immediately following a change in control. By providing fair compensation in the event of termination following a change in control, the plan allows the executives to reasonably evaluate potential actions without concern over how it may impact them financially.
The plan provides the following benefits if an eligible executive is involuntarily terminated within 24 months following a change in control:
(i) | a cash payment (for Ms. McReynolds the payment is two times her base salary plus two times her average annual cash incentive for the previous three years, and for other Named Executive Officers the payment is | |
(ii) | a prorated annual incentive payment for the year of termination; | |
(iii) | prorated cash long-term incentive payments; | |
(iv) | full vesting of all equity awards; and | |
(v) | a lump sum payment adequate to cover medical and dental premiums for 24 months. |
In addition, upon a change in control, benefits includingunder the DSA and VSP will automatically vest. Also, if the equity awards are not replaced with awards of equal value upon on a change in control, then they will also vest. If the awards are replaced by the successor company and the Named Executive Officer is terminated within 24 months of the change in control, he/she shall become vested as of the termination date in any unvested equity awards.
The benefits are intended to provide the officer participants with a reasonable severance package that is based on the value the officers have created and is realized by the Company’s stockholders in the event of a change in control. None of the change in control provisions requires the Company to gross-up a Named Executive Officer for taxes they may owe on change in control benefits including any excise taxes under IRC Section 4999. Under the terms of the 2012 Change in Control Plan, a best-of-netbest-net calculation will be performed to determine whether change in control benefits due to the Named Executive Officers should be reduced (so no excise tax will be imposed under IRC Section 280G)4999) or should be paid in full (with any excise taxes resulting to be paid in full by the Named Executive Officer). See “Potential Payments upon Termination or Change in Control” for additional information regarding the provisions of the 2012 Change in Control Plan.
Clawbacks
The Committee has implemented a policy for the “clawback” of any bonus or incentive compensation awarded to any executive officer, including a Named Executive Officer, whose misconduct contributed to the Company being required to restate its financial statements. Under the terms of the policy, the Board may require reimbursement of any bonus or incentive compensation awarded or effect the cancellation ofcancel unvested RSUs or deferred stock awards previously granted to the executive officer under the scenarios described as follows:following scenarios:
· | the amount of the bonus or incentive compensation was calculated based |
· | the executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement; and |
· | the amount of the bonus or incentive compensation that would have been awarded to the executive officer had the results been properly reported would have been lower than the amount actually awarded. |
Anti-hedging and Pledging Policies
TheAll Company officers, including Named Executive Officers, are subject to the Insider Trading Agreement which prohibits certain transactions in the Company’s securities, including the purchase or sale of puts, calls, options or other derivative securities based on the Company’s securities. The policy also prohibits monetization transactions, such as forward sale contracts, in which the stockholder continues to own the underlying security without all the risks or rewards of ownership, short-selling Company securities or “selling against the box” (failing to deliver sold securities), as well as any other hedging or pledging transaction involving the Company’s securities.
Tax Implications
Deductibility of Executive Compensation. Section 162(m) of the IRC generally precludes a public company from taking a federal income tax deduction for annual compensation in excess of $1 million per individual paid to its Chief Executive Officer or the other three most highly compensated officers of the Company (other than the Chief Executive Officer or Chief Financial Officer). Under Section 162(m), certain compensation, including “performance-based compensation,” is excluded from this deduction limitation. It is generally the Committee’s intent to structure compensation paid to the officers to be fully deductible. However, the Committee may award compensation that is not fully deductible if it determines that such awards are consistent with its compensation philosophy and in the best interests of the Company and its stockholders. The Committee intends for all compensation paid to Named Executive Officers in 2013 to be deductible.
IRC Section 280G applies to payments made to executives of a company in connection with a changedchange in control and prohibits the deduction of any “excess parachute payment.” Benefits payable under the 2012 Change in Control Plan as well as accelerated vesting of equity awards and annual and long-term cash incentives could result in “excess parachute payments” that are not deductible by us.the Company. For more information regarding amounts payable and benefits available upon the occurrence of certain changes in control, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”
Non-Qualified Deferred Compensation. The Company designs and operates its nonqualified deferred compensation arrangements in a manner that is intended to be exempt or compliant with Section 409A of the IRC and the final regulations issued thereunder.
Key Compensation Actions, Including Changes for 2014
Base Salary: At this time, no salary increases have been approved for Named Executive Officers in 2014.
Annual Incentive Goals and Metrics: For the 2014 Annual Cash Incentive Compensation Plan, the performance metrics will continue to be ROCE and operating income improvement. The 2014 metrics are weighted 50% each.
Long-Term Incentive Plan: The 2014-2016 cash long-term incentive plan continues to be based on ROCE and relative TSR. Under the cash long-term incentive plan, the Company’s relative three-year TSR is compared to our performance peer group.
Risk Assessment: The most recent compensation plan risk assessment by the Committee was conducted in January 2014. For more information on the risk assessment process and results, see the section of this proxy titled “Governance of the Company – Board’s Role in Risk Oversight” in the Corporate Governance section of this proxy.
Peer Group Updates: In conjunction with input from Meridian and Mercer, in January 2014 the Committee reviewed and revised the peer group for market compensation and the performance peer group for the TSR component of the cash long-term incentive plan to more accurately represent the Company’s current competitors. With our aggressive corporate goals to continue to expand into other areas of transportation and logistics in addition to less than truckload, our competitor group has evolved since the peer group was last updated. The following group incorporates a more diverse mix of our transportation- and logistics-related competitors and will be utilized for awards granted in 2014.
·Con-Way, Inc.
·Echo Global Logistics, Inc.
·Forward Air Corp
·Hub Group, Inc.
·J.B. Hunt Transport Services, Inc.
·Landstar System, Inc.
·Old Dominion Freight Line, Inc.
·Roadrunner Transportation Systems, Inc.
·SAIA, Inc.
·Swift Transportation Corporation
·Werner Enterprises
·XPO Logistics, Inc.
·YRC Worldwide, Inc.
The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis with management, and based on the review and discussions, the Compensation Committee recommended to the Board that it be included in the Company’s 20132015 Annual Report filed on Form 10-K and, as applicable, the Company’s 20142016 Proxy Statement.
| Committee Members |
|
William M. Legg, ChairmanJohn H. Morris, Chair
John W. Alden
John H. MorrisStephen E. Gorman
Craig E. Philip
None of the Compensation Committee members are officers or employees or former officers or employees of the Company. No executive officer of the Company serves as a member of the Board of any other entity or the Compensation Committee of any other entity that has one or more executive officers serving as a member of the Board or Compensation Committee. Messrs. Legg,Morris, Alden Morris and Gorman and Dr. Philip served on the Compensation Committee in 2013.2015.
The following table sets forth compensation paid for the fiscal years indicated for our 20132015 Named Executive Officers.
Name and |
| Year |
| Salary |
| Stock |
| Non-Equity |
| Change in |
| All Other |
| Total |
| |||||
Judy R. McReynolds |
| 2013 |
| $ | 575,000 |
| $ | 331,056 |
| $ | 599,104 |
| $ | – |
| $ | 38,382 |
| $1,543,542 |
|
ABC President & CEO |
| 2012 |
| 575,000 |
| 242,055 |
| – |
| 97,574 |
| 30,757 |
| 945,386 |
| |||||
|
| 2011 |
| 525,000 |
| 329,960 |
| 383,093 |
| 92,858 |
| 16,496 |
| 1,347,407 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Roy M. Slagle |
| 2013 |
| 375,000 |
| 240,768 |
| 289,168 |
| 132,125 |
| 58,923 |
| 1,095,984 |
| |||||
ABF Freight President & CEO |
| 2012 |
| 375,000 |
| 176,040 |
| – |
| 220,608 |
| 44,046 |
| 815,694 |
| |||||
|
| 2011 |
| 285,000 |
| 180,800 |
| 103,982 |
| 263,546 |
| 28,107 |
| 861,435 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
James W. Keenan(5) |
| 2013 |
| 294,000 |
| 180,576 |
| 177,444 |
| 38,320 |
| 44,241 |
| 734,581 |
| |||||
ABC Senior Vice President– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Enterprise Customer Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Jim A. Ingram(6) |
| 2013 |
| 306,917 |
| 199,728 |
| 195,047 |
| – |
| 15,081 |
| 716,773 |
| |||||
ABC Senior Vice President–Strategy |
| 2012 |
| 294,000 |
| 132,030 |
| – |
| 63,566 |
| 8,534 |
| 498,130 |
| |||||
ABF Logistics President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Michael E. Newcity |
| 2013 |
| 277,667 |
| 180,576 |
| 160,645 |
| – |
| 14,422 |
| 633,310 |
| |||||
ABC Senior Vice President– |
| 2012 |
| 266,000 |
| 124,695 |
| – |
| 55,248 |
| 8,485 |
| 454,428 |
| |||||
Chief Financial Officer & Chief |
| 2011 |
| 258,000 |
| 169,500 |
| 75,305 |
| 46,015 |
| 513 |
| 549,333 |
| |||||
Information Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Name and
|
| Year
|
| Salary |
| Stock |
| Non-Equity |
| Change in |
| All Other |
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Judy R. McReynolds ArcBest President and CEO |
| 2015 2014 2013
| $ 642,500 600,000 575,000 |
| $ 543,915 329,312 331,056 |
| $ 1,009,070 1,309,673 599,104 |
| $ 16,745 45,704 – |
| $ 48,722 37,443 38,382 |
|
| $ 2,260,952 2,322,132 1,543,542 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Jim A. Ingram ABF Logistics President |
| 2015 2014 2013 | 345,000 330,000 306,917 |
| 227,520 200,800 199,728 |
| 432,411 483,633 195,047
|
| 600 39,641 – |
| 22,187 19,321 15,081 |
|
| 1,027,718 1,073,395 716,773 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Timothy D. Thorne(5) ABF Freight President
|
| 2015 | 387,500 |
| 255,960 |
| 354,645 |
| 4,765 |
| 22,359 |
|
| 1,025,229
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
J Lavon Morton ArcBest Senior Vice President– |
| 2015 2014 2013 | 330,000 307,000 294,000 |
| 209,745 180,720 180,576 |
| 386,137 404,817 188,665 |
| 13,195 12,448 32,658 |
| 20,149 19,740 15,013 |
|
| 959,226 924,725 710,912
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
David R. Cobb(5) ArcBest Vice President– |
| 2015 | 307,494 |
| 181,305 |
| 275,229 |
| – |
| 19,599 |
|
| 783,627 |
| |||||
(1) The amounts reflect the aggregate grant date fair value of RSU awards granted to the Named Executive Officers during 20132015 under the 2005 Ownership Incentive Plan, computed in accordance with FASBFinancial Accounting Standards Board (“FASB”) ASC Topic 718, determined without regard to estimated forfeitures. The fairforfeitures and adjusted for present value of RSU awards is equal to the fair market value of the Common Stock on the date of grant multiplied by the number of RSUs awarded.dividends. The Named Executive Officers each received an award of RSUs under the 2005 Ownership Incentive Plan on November 1, 2013.May 11, 2015. The actual amountvalue realized by the officer as a result of these awards will vary based on a number of factors, including the Company’s performance, stock price fluctuations and applicable vesting. DividendsNo dividends are paid to Named Executive Officers on RSUs at the same rate and at the same time as the dividends paid to Company stockholders.RSUs. See Note LK to the consolidated financial statements in the Company’s 20132015 Annual Report on Form 10-K for additional detail regarding share-based compensation.
(2) Reflects cash compensation earned during 20132015 and paid in January 20142016 from the annual incentive plan and cash compensation earned from 2011-2013 and paid in January 20142016 earned from the 2013-2015 cash long-term incentive plan. See the “2013“2015 Grants of Plan-Based Awards” table for additional information on the 20132015 annual incentive plan Awardaward and the CD&A for additional information on the cash long-term incentive plan.
|
| McReynolds |
| Slagle |
| Keenan |
| Ingram |
| Newcity |
|
| McReynolds |
| Ingram |
| Thorne |
| Morton |
| Cobb |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Annual Incentive Plan |
| $ | 394,559 |
| $ | 180,125 |
| $ | 100,870 |
| $ | 114,594 |
| $ | 89,942 |
|
| $ 350,944 |
| $ 122,485 |
| $ 143,277 |
| $ 108,145 |
| $ 83,625 |
|
C-LTIP |
| 204,545 |
| 109,043 |
| 76,574 |
| 80,453 |
| 70,703 |
|
| 659,026 |
| 309,926 |
| 211,368 |
| 277,992 |
| 191,604 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total |
| $ | 599,104 |
| $ | 289,168 |
| $ | 177,444 |
| $ | 195,047 |
| $ | 160,645 |
|
| $ 1,009,970 |
| $ 432,411 |
| $ 354,645 |
| $ 386,137 |
| $ 275,229 |
|
Annual incentive targets and, in turn, actual incentives have historically been calculated using base salary amounts paid during the year for which the incentive was earned. In accordance with the terms of the Second Amendment to our Executive Officer Annual Incentive Compensation Plan, which modified the method of calculation of base salary, and in an effort to transition the calculation of incentives using base salary earned for (rather than paid in) the year for which the incentive was earned without unfairly penalizing the executives, incentives paid for 2015 performance are calculated using the full amount of base salary earned for the 2015 year plus base salary amounts earned in 2014 but paid in the first pay period of 2015. Incentives earned for future years will be calculated based solely on the value of base salary earned during the year for which the incentive was earned.
(3) Reflects the increase in actuarial present value during 20132015 of each Named Executive Officer’s accumulated benefit under the Company’s legacy Pension Plan, and legacy SBP and DSAs. The values reported are determined using the same assumptions as used by the Company for financial reporting purposes for the Company’s Pension Plan, SBP and DSAs. See “2013the “2015 Pension Benefits” section for additional information on these plans. Interest rate increases resultedindexes used in determining present values increased in some periods resulting in some negative year over year changes in the Pension Plan and SBP. Negative values are not reported in the table above.
The 20132015 change in actuarial present value by plan is as follows:
|
| McReynolds |
| Slagle |
| Keenan |
| Ingram |
| Newcity |
|
| McReynolds |
| Ingram |
| Thorne |
| Morton |
| Cobb |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Pension Plan |
| $ | (201) |
| $ | 45,643 |
| $ | 38,320 |
| $ | (15,660 | ) | $ | (2,374 | ) |
| $ | 4,225 |
| $ | 600 |
| $ | 4,765 |
| $ | – |
| $ | – |
|
Supplemental Benefit Plan |
| (12,964) |
| 61,589 |
| – |
| – |
| – |
|
| 6,582 |
| – |
| – |
| – |
| – |
| ||||||||||
Deferred Salary Agreement |
| 5,711 |
| 24,893 |
| – |
| – |
| – |
|
| 5,938 |
| – |
| – |
| 13,195 |
| – |
| ||||||||||
Total Increase |
| $ | (7,454) |
| $ | 132,125 |
| $ | 38,320 |
| $ | (15,660 | ) | $ | (2,374 | ) |
| $ | 16,745 |
| $ | 600 |
| $ | 4,765 |
| $ | 13,195 |
| $ | – |
|
Earnings with respect to outstanding vested RSUs are not above market and are not included in this column. See “2013“2015 Non-Qualified Deferred Compensation” for additional information on RSUs.
(4) All Other Compensation for 20132015 consists of the following:
|
| McReynolds |
| Slagle |
| Keenan |
| Ingram |
| Newcity |
|
| McReynolds |
| Ingram |
| Thorne |
| Morton |
| Cobb |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
401(k) Company Match |
| $ | 7,650 |
| $ | 7,650 |
| $ | 7,650 |
| $ | 7,650 |
| $ | 7,650 |
|
| $ | 7,950 |
| $ | 7,950 |
| $ | 7,950 |
| $ | 7,950 |
| $ | 7,950 |
|
DC Contribution |
| 10,200 |
| 7,500 |
| 5,880 |
| 6,397 |
| 5,787 |
|
| 10,600 |
| 10,600 |
| 10,600 |
| 10,600 |
| 10,600 |
| ||||||||||
Long-Term Disability Premiums |
| 1,931 |
| 1,931 |
| 1,139 |
| 854 |
| 805 |
|
| 1,931 |
| 958 |
| 1,465 |
| 1,419 |
| 869 |
| ||||||||||
24-Hour Accidental Death Premiums |
| 180 |
| 180 |
| 180 |
| 180 |
| 180 |
|
| 180 |
| 180 |
| 180 |
| 180 |
| 180 |
| ||||||||||
Perquisites(i) |
| 13,298 |
| 33,144 |
| 20,187 |
| – |
| – |
|
| 24,428 |
| – |
| – |
| – |
| – |
| ||||||||||
Gross-Ups(ii) |
| 5,123 |
| 8,518 |
| 9,205 |
| – |
| – |
|
| 3,633 |
| 2,499 |
| 2,164 |
| – |
| – |
| ||||||||||
Total Other Compensation |
| $ | 38,382 |
| $ | 58,923 |
| $ | 44,241 |
| $ | 15,081 |
| $ | 14,422 |
|
| $ | 48,722 |
| $ | 22,187 |
| $ | 22,359 |
| $ | 20,149 |
| $ | 19,599 |
|
(i) Perquisite values for Ms. McReynolds and Messrs. Slagle and Keenan include expenses for spousal travel to Company or industry events and any related Company lost tax deduction resulting from the spouse accompanying the Named Executive Officer on a Company airplane. Ms. McReynolds’ perquisite value includes a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members). In general, the Company’s executive officers are not allowed to use corporate aircraft for personal trips. When appropriate for business purposes, executive officers’ spouses are permitted to accompany them on trips. Executive officers are also permitted to invite their spouse or other personal guests to occasionally accompany them on business trips when space is available. When the spouse’s or guest’s travel does not meet the IRS standard for “business use,” the cost of that travel, determined under the IRS Standard Industrial Fare Level, is imputed as income to the executive officer, and if the spouse’s travel was related to a business purpose, the Company will reimburse the executive officer for the associated income tax resulting from the imputed income. Ms. McReynolds’ perquisite value includes a Christmas gift from the Company (the Company also provides a Christmas gift to each of the other Board members).
The Company determines the cost of personal use of Company aircraft using all aircraft operating costs and total flight hours as prescribed by IRS Notice 2005-45applicable Treasury Regulations and related regulations.guidance. Under IRS rules, spousal travel on a business trip is generally considered nonbusiness travel. The incremental cost to the Company included in the perquisite values above is based on the Company’s normalincremental effective income tax rate.
(ii) Tax gross-ups for Ms. McReynolds and Messrs. Slagle and Keenan are for spousal travel to a Company or industry event.
(5) Mr. Keenan wasMessrs. Thorne and Cobb were not a Named Executive OfficerOfficer’s for 2011 and 2012.2013 or 2014. Accordingly, the table includes Mr. Keenan’sMessrs. Thorne and Cobb’s compensation for 20132015 only.
(6)42Mr. Ingram was not a Named Executive Officer for 2011. Accordingly, the table includes Mr. Ingram’s compensation for 2012 and 2013 only.
The following table provides information related to non-equity and equity-based awards made to the Named Executive Officers for the 20132015 fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
|
|
|
|
|
| Estimated Future Payouts |
| All Other |
|
|
|
|
|
|
|
| Estimated Future Payouts |
| All Other |
| |||||||||||||
Name |
| Award |
| Grant |
| Approval |
| Threshold |
| Target |
| Maximum |
| Number |
| Grant |
|
| Award |
| Grant |
| Approval |
| Threshold |
| Target |
| Maximum
|
| Number |
| Grant |
| |
|
| AIP |
| 02/20/2013 |
| N/A |
| $ | – |
| $ 575,000 |
| $ 1,437,500 |
|
|
|
|
|
| AIP |
| 02/23/2015 |
| 02/23/2015 |
| $ – |
| $ 664,404 |
| $1,661,010 |
|
|
|
|
|
Judy R. McReynolds |
| RSU |
| 11/01/2013 |
| 07/24/2013 |
|
|
|
|
|
|
| 12,100 |
| $ 331,056 |
|
| RSU |
| 05/11/2015 |
| 04/30/2015 |
|
|
|
|
|
|
| 15,300 |
| $ 543,915 |
| |
|
| C-LTIP |
| 02/20/2013 |
| N/A |
| – |
| 503,559 |
| 1,258,898 |
|
|
|
|
|
| C-LTIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 595,321 |
| 1,488,303 |
|
|
|
|
| |
|
| AIP |
| 02/20/2013 |
| N/A |
| – |
| 262,500 |
| 656,250 |
|
|
|
|
|
| AIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 231,888 |
| 579,719 |
|
|
|
|
| |
Roy M. Slagle |
| RSU |
| 11/01/2013 |
| 07/24/2013 |
|
|
|
|
|
|
| 8,800 |
| 240,768 |
| ||||||||||||||||||
|
| C-LTIP |
| 02/20/2013 |
| N/A |
| – |
| 289,772 |
| 724,430 |
|
|
|
|
| ||||||||||||||||||
|
| AIP |
| 02/20/2013 |
| N/A |
| – |
| 147,000 |
| 367,500 |
|
|
|
|
| ||||||||||||||||||
James W. Keenan |
| RSU |
| 11/01/2013 |
| 07/24/2013 |
|
|
|
|
|
|
| 6,600 |
| 180,576 |
| ||||||||||||||||||
|
| C-LTIP |
| 02/20/2013 |
| N/A |
| – |
| 212,036 |
| 530,089 |
|
|
|
|
| ||||||||||||||||||
|
| AIP |
| 02/20/2013 |
| N/A |
| – |
| 167,000 |
| 417,500 |
|
|
|
|
| ||||||||||||||||||
Jim A. Ingram |
| RSU |
| 11/01/2013 |
| 07/24/2013 |
|
|
|
|
|
|
| 7,300 |
| 199,728 |
|
| RSU |
| 05/11/2015 |
| 04/30/2015 |
|
|
|
|
|
|
| 6,400 |
| 227,520 |
| |
|
| C-LTIP |
| 02/20/2013 |
| N/A |
| – |
| 243,418 |
| 608,545 |
|
|
|
|
|
| C-LTIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 248,908 |
| 622,270 |
|
|
|
|
| |
|
| AIP |
| 02/20/2013 |
| N/A |
| – |
| 131,075 |
| 327,688 |
|
|
|
|
|
| AIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 271,250 |
| 678,125 |
|
|
|
|
| |
Michael E. Newcity |
| RSU |
| 11/01/2013 |
| 07/24/2013 |
|
|
|
|
|
|
| 6,600 |
| 180,576 |
| ||||||||||||||||||
Timothy D. Thorne |
| RSU |
| 05/11/2015 |
| 04/30/2015 |
|
|
|
|
|
|
| 7,200 |
| 255,960 |
| ||||||||||||||||||
|
| C-LTIP |
| 02/20/2013 |
| N/A |
| – |
| 202,441 |
| 506,102 |
|
|
|
|
|
| C-LTIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 277,083 |
| 692,708 |
|
|
|
|
| |
| AIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 204,738 |
| 511,845 |
|
|
|
|
| |||||||||||||||||||
J. Lavon Morton |
| RSU |
| 05/11/2015 |
| 04/30/2015 |
|
|
|
|
|
|
| 5,900 |
| 209,745 |
| ||||||||||||||||||
|
| C-LTIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 229,777 |
| 574,442 |
|
|
|
|
| ||||||||||||||||||
|
| AIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 158,317 |
| 395,793 |
|
|
|
|
| ||||||||||||||||||
David R. Cobb |
| RSU |
| 05/11/2015 |
| 04/30/2015 |
|
|
|
|
|
|
| 5,100 |
| 181,305 |
| ||||||||||||||||||
|
| C-LTIP |
| 02/23/2015 |
| 02/23/2015 |
| – |
| 197,215 |
| 493,039 |
|
|
|
|
| ||||||||||||||||||
(1) Award Types:
AIP = annual incentive compensation plan
RSU = restricted stock units granted under the 2005 Ownership Incentive Plan
C-LTIP = three-year cash long-term incentive compensation plan (2013-2015(2015-2017 plan period)
(2) The performance criteria for the 20132015 annual incentive plan award were approved by the Committee on February 20, 2013.23, 2015. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column with respect to the 20132015 annual incentive plan award represent the threshold, target and maximum payment levels of the 20132015 annual incentive plan. The target amount reflected is calculated based on base salary earned in 2015 plus any amount earned in 2014, but paid in 2015. Awards under the annual incentive plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Annual Cash Incentive Compensation.” The actual amount of the 2013 annual incentive plan award paid for 20132015 performance with respect to each Named Executive Officer is set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”
(3) The performance criteria for the 2013-20152015-2017 cash long-term incentive compensation plan award were approved by the Committee on February 20, 2013.23, 2015. Amounts shown in the “Estimated Future Payouts under Non-Equity Incentive Plan Awards” column represent the threshold, target and maximum payment levels with respect to cash long-term incentive compensation plan awards granted in 2013.2015. The incentive amounts are based on the average of (i) actual base salary amounts earned in 2015 plus any amount earned in 2014, but paid in 2015 to each Named Executive Officer during 2015, (ii) a projected level of base salary for 2016, based on each Named Executive Officer’s base salary as of December 31, 2015, and (iii) a projected level of base salary for 2017, based on each Named Executive Officer’s base salary as of December 31, 2015. Awards under the cash long-term incentive compensation plan are described in greater detail in the narrative following this table and in “Compensation Discussion & Analysis – Components of Compensation – Cash Long-Term Cash Incentive Compensation.”
(4) Reflects the full grant date fair value ($27.36($35.55 per share)share), computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures and adjusted for present value of dividends, of RSU awards made under the 2005 Ownership Incentive Plan on November 1, 2013.May 11, 2015.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Non-Equity Incentive Compensation
Annual Incentive Compensation Plan: The 2013 awards granted under the Company’s annual incentive compensation plan were made on February 20, 2013. Awards under the annual incentive compensation plan become payable based on the Company’s actual performance for the year in relation to pre-established performance goals. Annual incentive compensation plan awards earned are generally paid as soon as administratively practicable following the date the awards are calculated and approved, but no later than March 15 of the year following the year to which the performance goals relate. Participants generally must be employed on the payment date in order to receive payment of their earned annual incentive compensation plan awards. However, if participants terminate during the plan year due to early retirement (age 55 with 10 years of service), normal retirement (age 65), death or disability, such participants remain eligible to receive a prorated annual incentive compensation plan award, provided, in the case of early or normal retirement, the individual has been a participant for at least 90 days during the plan year. Payment of the prorated incentive, if any, is made at the end of the measurement period and based upon actual performance results. Upon any other termination, a participant’s award will be forfeited, unless the Committee, in its discretion, decides that a prorated award should be paid. The 2012 Change in Control Plan provides for immediate payment of an earned award upon a qualified termination following a change in control, except where payment must be delayed six months for key employees as required by Section 409A of the IRC. For awards that have not reached the end of the measurement period, the benefit amount will be prorated based on the number of whole months completed during the measurement period as of the date of the qualified termination. Target incentive levels and information on performance goals are set forth in the “Compensation Discussion & Analysis —– Components of Compensation —– Annual Cash Incentive Compensation.” Additional information regarding the treatment of these awards upon termination or a change in control is provided in “Potential Payments upon Termination or Change in Control.”
For 2013, the performance goals under the annual incentive compensation plan were based on the level of operating income improvement and the ROCE for the Company, and these performance goals were equally weighted. See “Compensation Discussion & Analysis — Components of Compensation — Annual Cash Incentive Compensation” for further detail regarding awards under the Company’s annual incentive compensation plan.
Cash Long-Term Incentive Compensation Plan: The 2013 awards granted under the cash long-term incentive compensation plan were granted on February 20, 2013 with respect to the 2013-2015 performance period. Awards under the cash long-term incentive compensation plan become payable based on the Company’s actual performance over a three-year measurement period in relation to pre-established performance goals. The performance goals for the 2013-2015 period are relative TSR and ROCE. Generally, participants in the cash long-term incentive compensation plan must remain employed through the end of the measurement period in order to receive payment of any earned award. However, if participants have at least 12 months of employment during a measurement period, such participants are eligible for a prorated benefit upon normal retirement (age 65) or early retirement (age 55 with 10 years of service), death or disability with payment determined based on their base salary received and the period of time employed during the measurement period and payment, if any, is made at the end of the measurement period based upon actual performance results.
Additional detail regarding the 20132015 awards granted under the cash long-term incentive compensation plan can be found in the “Compensation Discussion &Analysis —& Analysis – Components of Compensation —– Cash Long-Term Cash Incentive Compensation.”
Stock Awards under the 2005 Ownership Incentive Plan
RSUs were granted under the Company’s 2005 Ownership Incentive Plan on November 1, 2013.May 11, 2015. Vesting and settlement of RSUs generally occurs on the earlier of the fifth anniversary of the award date or the date the participant experiences a qualifying termination from employment with the Company. Upon a participant’s normal retirement (age 65) or termination due to death or disability, the RSUs will fully vest. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreement for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be
distributed as soon as administratively possible, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC. Upon early retirement eligibility (age 55 with 10 years of service), if a minimum of 12 months have elapsed since the award date, the participant becomes vested in a pro rata number of RSUs based on the number of whole months since the award date. The remaining shares subject to the RSUs will continue to vest with respect to 1/60 of the total number of shares subject to the award each month through the participant’s normal retirement date or, if sooner, the end of the vesting period. A participant does not have to terminate employment in order to vest upon normal or early retirement eligibility, but no RSUs will be distributed until actual termination or the fifth anniversary of the award date, if earlier. Dividend equivalentsNo dividends are paid to Named Executive Officers on RSUs after December 31, 2014. Prior to January 1, 2015, dividend equivalents were paid on RSUs to Named Executive Officers at the same rate and at the same time as the dividends paid to Company stockholders.
The following table provides information related to any equity-based awards outstanding as of December 31, 20132015 for the Named Executive Officers:
Option Awards(1) |
| Stock Awards |
| ||||||||||
|
| Number of |
| Number of |
|
|
|
|
|
|
|
|
|
|
| Securities |
| Securities |
|
|
|
|
|
|
|
|
|
|
| Underlying |
| Underlying |
|
|
|
|
| Number of |
| Market Value of |
|
|
| Unexercised |
| Unexercised |
| Option |
| Option |
| Shares or Units |
| Shares or Units |
|
|
| Options |
| Options |
| Exercise |
| Expiration |
| of Stock that |
| of Stock that |
|
Name |
| (#) Exercisable |
| (#) Unexercisable |
| Price |
| Date |
| Have Not Vested |
| Have Not Vested |
|
|
|
|
|
|
| ($) |
|
|
| (#)(2) |
| ($)(3) |
|
Judy R. McReynolds |
| 7,500 |
| – |
| $ 29.1000 |
| 1/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,000(4) |
| $ 269,440 |
|
|
|
|
|
|
|
|
|
|
| 14,600(5) |
| 491,728 |
|
|
|
|
|
|
|
|
|
|
| 14,600(6) |
| 491,728 |
|
|
|
|
|
|
|
|
|
|
| 16,500(7) |
| 555,720 |
|
|
|
|
|
|
|
|
|
|
| 12,100(8) |
| 407,528 |
|
Roy M. Slagle |
|
|
|
|
|
|
|
|
| 533(4) |
| 17,951 |
|
|
|
|
|
|
|
|
|
|
| 2,533(5) |
| 85,311 |
|
|
|
|
|
|
|
|
|
|
| 3,733(6) |
| 125,727 |
|
|
|
|
|
|
|
|
|
|
| 8,000(7) |
| 269,440 |
|
|
|
|
|
|
|
|
|
|
| 8,800(8) |
| 296,384 |
|
James W. Keenan |
|
|
|
|
|
|
|
|
| 7,100(4) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 7,100(5) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 7,100(6) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 9,000(7) |
| 303,120 |
|
|
|
|
|
|
|
|
|
|
| 6,600(8) |
| 222,288 |
|
Jim A. Ingram |
|
|
|
|
|
|
|
|
| 7,100(4) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 7,100(5) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 7,100(6) |
| 239,128 |
|
|
|
|
|
|
|
|
|
|
| 9,000(7) |
| 303,120 |
|
|
|
|
|
|
|
|
|
|
| 7,300(8) |
| 245,864 |
|
Michael E. Newcity |
|
|
|
|
|
|
|
|
| 1,100(4) |
| 37,048 |
|
|
|
|
|
|
|
|
|
|
| 7,500(5) |
| 252,600 |
|
|
|
|
|
|
|
|
|
|
| 7,500(6) |
| 252,600 |
|
|
|
|
|
|
|
|
|
|
| 8,500(7) |
| 286,280 |
|
|
|
|
|
|
|
|
|
|
| 6,600(8) |
| 222,288 |
|
|
| Stock Awards |
|
|
|
| Number of Shares or Units of |
| Market Value of Shares or Units |
Name |
| Stock that Have Not Vested |
| of Stock that Have Not Vested |
|
| (#)(1) |
| ($)(2) |
Judy R. McReynolds |
| 14,600(3) |
| $ 312,294 |
|
| 16,500(4) |
| 352,935 |
|
| 12,100(5) |
| 258,819 |
|
| 8,200(6) |
| 175,398 |
|
| 15,300(7) |
| 327,267 |
Jim A. Ingram |
| 7,100(3) |
| 151,869 |
|
| 9,000(4) |
| 192,510 |
|
| 7,300(5) |
| 156,147 |
|
| 5,000(6) |
| 106,950 |
|
| 6,400(7) |
| 136,896 |
Timothy D. Thorne |
| 3,500(3) |
| 74,865 |
|
| 4,000(4) |
| 85,560 |
|
| 5,800(5) |
| 124,062 |
|
| 4,000(6) |
| 85,560 |
|
| 7,200(7) |
| 154,008 |
J. Lavon Morton |
| –(8) |
| – |
|
| – |
| – |
|
| – |
| – |
|
| – |
| – |
|
| – |
| – |
David R. Cobb |
| 7,100(3) |
| 151,869 |
|
| 8,000(4) |
| 171,120 |
|
| 5,800(5) |
| 124,062 |
|
| 4,000(6) |
| 85,560 |
|
| 5,100(7) |
| 109,089 |
(1)All stock options previously granted are fully vested and (i) have an exercise price not less than the closing price of the Common Stock on the grant date, (ii) became exercisable with respect to 20% of total option shares each year, generally starting on the first anniversary of the grant date and (iii) are granted for a term of 10 years. Following a participant’s termination as a result of death, disability, normal retirement (age 65) or early retirement (age 55 with 10 years of service), a participant will have until the earlier of two years from the date of termination or the ten-year anniversary of the grant date to exercise stock options.
(2) Vesting of RSUs generally occurs on the fifth anniversary of the award date, and settlement of RSUs generally occurs at that time or, if earlier, upon the award holder’s qualifying termination of employment. Upon a participant’s eligibility for normal retirement (age 65) or termination due to death or disability, RSUs generally will become vested in full. If termination of the participant occurs within 24 months of a change in control of the Company for good reason or without cause (as defined in the RSU agreements for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), the participant’s RSUs awarded become fully vested and will be distributed as soon as administratively possible, except for RSUs where payment must be delayed for six months for key employees as required by
Section 409A of the IRC. Upon early retirement (age 55 with 10 years of service), the participant is entitled to the vesting of a pro rata number of RSUs based on the number of whole months elapsed since the award date, if there has elapsed a minimum of twelve months since the award date. Employees,From that 12-month anniversary forward, employees, including Named Executive Officers, who have attained the early retirement age and service requirements but have not terminated employment, continue to vest in 1/60th of their RSU awards each month. Mr. Slagle has attained early retirement age in accordance with the terms of the RSU awards. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(3)(2) Reflects the value of unvested RSUs as of December 31, 20132015 awarded under the 2005 Ownership Incentive Plan. The value is based on the closing market price of the Common Stock of $33.68$21.39 on December 31, 2013.2015.
(4)These RSU awards fully vest on April 29, 2014, the fifth anniversary of their grant date. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(5)These RSU awards fully vest on July 28, 2015, the fifth anniversary of their grant date. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(6) (3) These RSU awards fully vest on May 2, 2016, the fifth anniversary of their grant date. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(7)(4) These RSU awards fully vest on May 4, 2017, the fifth anniversary of their grant date. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(8)(5) These RSU awards fully vest on November 2,1, 2018, the fifth anniversary of their grant date. Dividend equivalents are paid at the same rate and at the same time as dividends paid to the Company’s stockholders.
(6)These RSU awards fully vest on May 8, 2019, the fifth anniversary of their grant date.
(7)These RSU awards fully vest on May 11, 2020, the fifth anniversary of their grant date.
(8)Mr. Morton did not have any outstanding unvested equity awards as of December 31, 2015 because his awards became fully vested upon his attainment of normal retirement age on September 25, 2015.
The following table provides information related to stock options exercised in 2013 by the Named Executive Officers and RSUs that became vested during the 20132015 fiscal year for the Named Executive Officers.
|
| Option Awards |
| Stock Awards |
|
|
| Stock Awards | ||||||
Name |
| Number of |
| Value Realized |
| Number of Shares |
| Value Realized |
|
|
| Number of Shares |
| Value Realized |
Judy R. McReynolds |
| – |
| $ – |
| 4,600 |
| $ 48,346 |
|
|
| 14,600 |
| $ 448,074 |
Roy M. Slagle |
| 7,500 |
| 24,150 |
| 9,107 |
| 214,803 |
| |||||
James W. Keenan |
| 3,500 |
| 11,270 |
| 4,100 |
| 43,091 |
| |||||
Jim A. Ingram |
| 400 |
| 1,184 |
| 4,100 |
| 43,091 |
|
|
| 7,100 |
| 217,899 |
Michael E. Newcity |
| – |
| – |
| 650 |
| 6,832 |
| |||||
Timothy D. Thorne |
|
| 3,500 |
| 107,415 | |||||||||
J. Lavon Morton |
|
| 22,726(3) |
| 638,288 | |||||||||
David R. Cobb |
|
| 7,100 |
| 217,899 | |||||||||
(1) Value realized from the exercise of stock options is equal to the difference between the closing market price of the Company’s Common StockThe 2010 RSU awards vested on the date of exercise and the exercise price of the options, multiplied by the number of shares with respect to which the option is being exercised.
(2)July 28, 2015. All the shares issued for the 20082010 RSU award at final vesting are free of allvesting and ownership restrictions. All shares owned by executive officers are subject to company imposed restrictions that limit trading during periods when officers have material nonpublic information as well as the Company’s policy related to minimum stock ownership for executive officers as discussed in the CD&A.Compensation Discussion & Analysis.
(3)Mr. Slagle was subject to pro rata vesting in 2013 because he had attained early retirement age under the terms of the RSU awards. Awards that vest on a pro rata basis due to attainment of retirement or early retirement age are not settled until the earlier of the original vesting date (five years from the grant date) or a qualifying termination event. As such, while the value of all pro rata vesting in 2013 is reflected in the Options Exercised and Stock Vested table above, Mr. Slagle has not yet received the shares that vested in 2013 due to early retirement age.
(4)The pro rata vesting of RSUs is outlined in the table below. Of Mr. Slagle’s 9,107 vested shares in 2013, 307 shares related to final vesting of the 2008 RSU award, with the remainder attributable to pro rata vesting. Vested but unissued RSUs will be settled at the earlier of five years from the award date or a qualifying termination event. The value of the vested but not issued RSUs is reported in the 2013 “Nonqualified Deferred Compensation Table.”
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)(2) Value realized from RSU vesting is equal to the closing market price of the Common Stock on the date of vesting multiplied by the number of vested shares.
(3)Mr. Morton became fully vested in his 2010 RSU award on July 28, 2015. He became vested in all of his other outstanding RSU awards upon his attainment of normal retirement age on September 25, 2015. As such, while the value of all vesting in 2015 is reflected in the Options Exercised and Stock Vested table above, Mr. Morton is not eligible to receive the vested but not yet settled RSU awards until the earlier of (i) five years from the award date; or (ii) six months following his retirement date as required under Section 409A of the IRC. The value of vested but not issued RSUs is reported in the “2015 Nonqualified Deferred Compensation” table.
The pro rata vesting of RSUs is outlined in the table below. Of Mr. Morton’s 22,726 vested shares in 2015, 933 shares related to final vesting of the 2010 RSU award, while the remainder is attributable to pro rata vesting that occurred before he attained normal retirement age.
Morton Vested in 2015 | |
2010 RSU Award | 933 |
2011 RSU Award | 2,133 |
2012 RSU Award | 4,200 |
2013 RSU Award | 5,060 |
2014 RSU Award | 4,500 |
2015 RSU Award | 5,900 |
Total vesting in 2015 | 22,726 |
The following table sets forth information as of December 31, 20132015 with respect to the Company’s compensation plans under which equity securities of the Company are authorized for issuance:
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
| Number of Securities |
| |||||||||
|
|
|
|
|
| Remaining Available for |
| |||||||||
|
| Number of Securities to be |
| Weighted-Average |
| Future Issuance Under |
| |||||||||
|
| Issued Upon Exercise of |
| Exercise Price of |
| Equity Compensation Plans, |
| |||||||||
|
| Outstanding Options, |
| Outstanding Options, |
| Excluding Securities |
| |||||||||
Plan Category |
| Warrants and Rights |
| Warrants and Rights(3) |
| Reflected in Column (a) |
|
| Number of Securities to be |
| Weighted-Average |
| Number of Securities | |||
|
| (a) |
| (b) |
| (c) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Equity Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plans Approved by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Holders |
| 1,477,160(1) |
|
| $ 29.100 |
|
| 498,554 |
|
|
| 1,313,550(1) |
| $ – |
| 1,133,117 |
Equity Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plans Not Approved |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Security Holders(2) |
| 2,030 |
|
| 29.100 |
|
| – |
|
| ||||||
By Security Holders |
| – |
| – |
| – | ||||||||||
Total |
| 1,479,190 |
|
| $ 29.100 |
|
| 498,554 |
|
|
| 1,313,550 |
| $ – |
| 1,133,117 |
(1) This amount includes stock option awardsreflects outstanding under the 2002 Arkansas Best Corporation Stock Option Plan (the “Prior Plan”) and RSU awards under the 2005 Ownership Incentive Plan. No grants were made from the Prior Plan after April 20, 2005. On April 20, 2005, the Company’s stockholders approved the 2005 Ownership Incentive Plan, which provides for the award of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, RSUs and performance award units. The 2005 Ownership Incentive Plan does not permit reload options. The aggregate number of shares that may be issuedhave been reserved for issuance pursuant to awards under the 2005 Ownership Incentive Plan as of December 31, 2013, is 2,200,000 shares plus any shares subject to outstanding awards under the Prior Plan and the Arkansas Best Corporation Non-Qualified Stock Option Plan (see note 2 below) that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares) on or after April 20, 2005.3,100,000. No options have been granted under the Company’s 2005 Ownership Incentive Plan. The Board’s Compensation Committee administers each of these plans.the 2005 Ownership Incentive Plan.
(2)On April 19, 2000, the Company adopted its Non-Qualified Stock Option Plan (“2000 Non-Qualified Plan”) as a broad- based plan with 1,000,000 option shares authorized for awards. No grants were made from the 2000 Non-Qualified Plan after April 20, 2005. No awards were ever made under the 2000 Non-Qualified Plan to members of the Board or to its Named Executive Officers at any time during which they were a Named Executive Officer.
(3)The weighted-average exercise price does not include RSU awards.
The following table illustrates the present value of the accumulated benefit as of December 31, 20132015 under the Arkansas Best Corporation Pension Plan, (the “Pension Plan”), ABC Supplemental Benefit Plan (the “SBP”),SBP and Deferred Salary Agreements (collectively “DSA”)DSA for the Named Executive Officers:Officers.
|
|
|
| Number of |
|
|
|
| |||||||||
|
|
|
| Years |
|
|
| Payments | |||||||||
|
|
|
| Number of Years |
| Present Value of |
| Payments During |
|
|
|
| Credited |
| Present Value of |
| During Last |
Name |
| Plan Name |
| Credited Service |
| Accumulated Benefit |
| Last Fiscal Year |
|
| Plan Name |
| Service |
| Accumulated Benefit |
| Fiscal Year |
|
|
|
| (#) |
| ($) |
| ($) |
|
|
|
| (#) |
| ($) |
| ($) |
Judy R. McReynolds(1) |
| ABC Pension Plan(3) |
| 16.0 |
| $ 277,458 |
| $ – |
|
| Pension Plan(2) |
| 16.0 |
| $ 306,421 |
| $ – |
|
| ABC Supplemental Benefit Plan |
| 10.7 |
| 331,933 |
| – |
|
| Supplemental Benefit Plan |
| 10.7 |
| 353,879 |
| – |
|
| ABC Deferred Salary Agreement |
| 10.7 |
| 93,365 |
| – |
|
| Deferred Salary Agreement |
| 10.7 |
| 104,905 |
| – |
Roy M. Slagle(2) |
| ABC Pension Plan(3) |
| 36.9 |
| 1,051,750 |
| – |
| ||||||||
Jim A. Ingram |
| Pension Plan(2) |
| 23.4 |
| 364,441 |
| – | |||||||||
Timothy D. Thorne |
| Pension Plan(2) |
| 23.3 |
| 363,133 |
| – | |||||||||
J. Lavon Morton(3) |
| Pension Plan(2)
|
| 16.5 |
| 399,300 |
| – | |||||||||
|
| ABC Supplemental Benefit Plan |
| 33.4 |
| 2,793,308 |
| – |
|
| Supplemental Benefit Plan |
| 13.1 |
| 1,234,821 |
| – |
|
| ABC Deferred Salary Agreement |
| 33.4 |
| 406,925 |
| – |
|
| Deferred Salary Agreement |
| 13.1 |
| 233,110 |
| – |
|
|
|
|
|
|
|
|
|
| ||||||||
James W. Keenan |
| ABC Pension Plan(3) |
| 28.7 |
| 616,052 |
| – |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Jim A. Ingram |
| ABC Pension Plan(3) |
| 23.4 |
| 324,200 |
| – |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
Michael E. Newcity |
| ABC Pension Plan(3) |
| 19.9 |
| 210,414 |
| – |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
David R. Cobb(4) |
|
|
| – |
| – |
| – | |||||||||
(1) Ms. McReynolds elected to cease participation in the SBP and DSA and the benefits were frozen effective January 31, 2008. Number of Years of Credited Service for the SBP and DSA was frozen based on her service as of the January 31, 2008 freeze date.
(2)The Pension Plan was amended to freeze final average pay and years of credited service effective July 1, 2013. Number of Years of Credited Service for the Pension Plan is frozen based on the Named Executive Officer’s service as of the July 1, 2013 freeze date. See “Compensation Discussion & Analysis – Components of Compensation – Retirement and Other Benefits” for additional information.
(3) The SBP and DSA benefits were frozen effective December 31, 2009 for allthe remaining eligible participants, including Mr. Slagle.Morton. Number of Years of Credited Service for the SBP and DSA is frozen based on the Named Executive Officer’s service as of the December 31, 2009 freeze date. See “Compensation Discussion & Analysis —– Components of Compensation —– Retirement and Other Benefits” for additional information.
(3) The Pension Plan(4)Mr. Cobb was amended effective July 1, 2013 to freeze final average pay and years of credited service. Number of Years of Credited Service forhired after the Pension, Plan is frozen based on the Named Executive Officer’s service as of the July 1, 2013 freeze date. See “Compensation Discussion & Analysis — Components of Compensation — RetirementSBP and Other Benefits” for additional information.DSA were closed to new entrants.
The actuarial present value of the accumulated benefits disclosed above is determined using the same assumptions as used by the Company for financial reporting purposes except the payment date is assumed to be age 60 for the Pension Plan and SBP rather than age 65. Such assumptions are discussed in Note JI to the Company’s consolidated financial statements in the 20132015 Annual Report on Form 10-K. The earliest date a benefit can be paid with no benefit reduction under the Pension Plan and SBP is age 60. The payment date is assumed to be age 65 for the DSA, which is the earliest date a benefit can be paid with no benefit reduction.
Pension Plan.Plan (frozen). The Pension Plan is a tax-qualified defined benefit plan that covers certain nonunion employees, including thecertain Named Executive Officers. Benefits are based upon a participant’s years of service and the highest average monthly earnings for sixty (60) consecutive months referred to as final average pay (“FAP”) and expressed in terms of annual compensation. As of the July 1, 2013 Pension Plan freeze date, the FAP for the Named Executive Officers without regard to IRC limitations was: Ms. McReynolds, $555,178; Mr. Slagle, $493,371; Mr. Keenan, $333,110; Mr. Ingram, $304,137; Mr. Thorne, $205,844; and Mr. Newcity, $223,239.Morton, $411,513. Mr. Cobb is not eligible for participation in the Pension Plan. Eligible earnings generally include salary and annual incentive payments and are subject to the IRC annual compensation limitation. For 2013, when the pension plan was frozen, the annual IRC limitation was $255,000. Pension Plan benefits are also subject to certain other limitations in the IRC. Benefits are paid from the Arkansas BestArcBest Pension Trust. Participants may elect a lump sum or annuity payment. Payment from the Pension Plan is made upon normal retirement, early retirement, termination, death or disability as defined and more fully described in “Potential Payments Uponupon Termination or Change in Control.”
Normal retirement (age 65 or older) benefits under the Pension Plan are calculated as a lump sum equal to:
10% x FAP x years of service + after-tax employee contributions (if any)
After-tax contributions to the Pension Plan were only allowed prior to July 1, 1988.
Early retirement eligible participants (age 55 with 10 years of service) are subject to a benefit reduction of 5% for each year he or she retires prior to age 60.
No new participants were permitted in the Pension Plan after December 2005. The Pension Plan was amended to freeze the compensation and years of credited service of active participants as of July 1, 2013.
Supplemental Benefit Plan.Plan (frozen). The SBP supplements benefits under the Pension Plan. The SBP was designed to replace benefit reductions (i) from various IRC limits and (ii) from reductions in the rate of benefit accruals from the Company’s 1985 pension formula. The SBP takes into account all eligible earnings under the Pension Plan without regard to IRC limitations. Participation in the SBP was generally limited to officers of the Company or ABF Freight, including certain Named Executive Officers. Upon termination of employment, benefits are paid in a lump sum as soon as administratively feasible. Certain benefits must be delayed for six months for key employees as required by Section 409A of the IRC. Benefits are paid from the general assets of the Company.
Benefits under the SBP are calculated as an annuity and then converted to a lump sum. The Pension Plan benefit is then subtracted from the resulting lump sum to determine the SBP benefit.
The annuity formula for the ABCArcBest Supplemental Benefit Plan is:
1% x $400 x years of service + 2.0% x (FAP—$400) x years of service
The annuity formula for ABF employees under the ABC Supplemental Benefit Plan is:
.75% x $400 x years of service + 1.75% x (FAP—(FAP–$400) x years of service
Early retirement eligible participants (age 55 with 10 years of service) are subject to a benefit reduction of 6% per year for each year he or she retires prior to age 60.
No new participants were permitted in the SBP after December 2005, and caps have been placed on the maximum benefits payable. Benefit accruals in the SBP were frozen for all remaining participants effective December 31, 2009.
Mr. Slagle met the early retirement criteria under the Pension PlanMessrs. Ingram, Thorne and SBP as of December 31, 2013. Messrs. Keenan, Newcity and IngramCobb are not eligible for participation in the SBP.
Deferred Salary Agreements.Agreements (frozen). The Company and ABF Freight have unfunded, noncontributory DSAs with certain of their officers, including certain Named Executive Officers. No DSA has been entered into since December 2005, and neither the Company nor ABF Freight intends to enter into these agreements in the future. Mr. NewcityMessrs. Ingram, Thorne and Mr. IngramCobb are not eligible to participate in the DSA program. For the existing DSAs, upon normal retirement (age 65), death or disability as defined in “Potential Payments upon Termination or Change in Control,” the DSA benefit is equal to 35% of the participant’s final monthly base salary paid monthly for 120 months. Upon termination of employment prior to age 65, the monthly benefit is equal to the participant’s years of service (with a maximum of 25 years) times 3% times 35% of the participant’s final monthly base salary. Benefit payments commence in the month following termination, except to the extent a portion of the benefit must be delayed for six months for key employees as required by Section 409A of the IRC. DSA benefits are paid from the general assets of the Company.
The DSAs provide that in the event of a change in control of the Company, as defined in “Potential Payments upon Termination or Change in Control,” followed by the officer’s termination within 36 months for pre-2005 deferred salary accruals or within 24 months for post-2004 deferral salary accruals all benefits become 100% vested. The DSA benefit will be paid as a lump sum within fifteen days, with the 120 monthly installments discounted at 6.22% as provided in the DSA, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC. DSA benefits will be reduced to the extent required to avoid being classified as excess parachute payments under Section 280G of the IRC. Other than during a 36-month period following a change in control of the Company for benefits accrued and vested prior to 2005 or during a 24-month period following a change in control of the Company for benefits accrued and vested after 2004, any unpaid DSA benefit is subject to forfeiture if the participant is discharged for wrongful conduct injurious to the Company, or if, following the date of termination, the participant discloses confidential information relating to the Company to unauthorized persons or becomes employed or renders services to a competitor of the Company.
The Company has a practice of not granting extra years of credited service under any of its benefit plans.
This table shows the Named Executive Officers’ deferred compensation activity during fiscal year 20132015 with respect to outstanding vested RSUs and the VSP. While Named Executive Officers are eligible to participate in the VSP, no Named Executive Officers made deferrals to the VSP in 2013 or have a balance in2015 and Mr. Morton is the only Named Executive Officer who has made deferrals into the VSP as of December 31, 2013.in prior years.
Name |
| Executive |
| Registrant |
| Aggregate |
| Aggregate |
| Aggregate |
|
|
|
| Executive |
| Registrant |
| Aggregate |
| Aggregate |
| Aggregate | |||||
Judy R. McReynolds |
| $ – |
| $ – |
| $ – |
| $ – |
| $ – |
|
|
|
| $ | – |
| $ | – |
| $ | – |
| $ | – |
| $ | – |
Roy M. Slagle |
| – |
| – |
| 511,562 |
| – |
| 714,024 |
| |||||||||||||||||
James W. Keenan |
| – |
| – |
| – |
| – |
| – |
| |||||||||||||||||
Jim A. Ingram |
| – |
| – |
| – |
| – |
| – |
|
|
|
| – |
| – |
| – |
| – |
| – | |||||
Michael E. Newcity |
| – |
| – |
| – |
| – |
| – |
| |||||||||||||||||
Timothy D. Thorne |
|
|
| – |
| – |
| – |
| – |
| – | ||||||||||||||||
J. Lavon Morton |
| RSUs |
| – |
| – |
| (849,320) |
| – |
| 727,260 | ||||||||||||||||
|
| VSP |
| – |
| – |
| (5,437) |
| – |
| 134,145 | ||||||||||||||||
David R. Cobb |
|
|
| – |
| – |
| – |
| – |
| – | ||||||||||||||||
(1)The earnings amount represents an estimate of annual earnings with respect to vested but unpaid RSUs and is based on the difference in closing market price of the Common Stock of $9.55$46.37 as of December 31, 20122014 and $33.68$21.39 as of December 31, 2013,2015, multiplied by the number of vested RSUs as of December 31, 20132015 described in footnote (4) below. For Mr. Morton, the only Named Executive Officer who participates in the VSP, this amount also includes a loss of $5,437 in the VSP during 2015.
(2)Includes the value associated with 25,80034,000 vested RSUs for Mr. Slagle.Morton. The value is based on the closing market price of the Common Stock of $33.68$21.39 on December 31, 2013.2015. RSUs that vested during 20132015 are reported in the “2013“2015 Option Exercises and Stock Vested” table.
(3)For Mr. Morton, this amount also includes his balance in the VSP in the amount of $134,145. Mr. Morton is the only Named Executive Officer with a balance in the VSP.
(4) Amounts previously reported in the “Summary Compensation TableTable” with respect to RSUs in prior years (2008-2012)(2010-2014) are set forth in the table below. To the extent those previously-awarded RSUs have become vested but remain unpaid, the value associated with those RSUs as of December 31, 20132015 (calculated as described in footnote (2) above) is reported in the “Aggregate Balance at Last Fiscal Year End” column above. The grant date fair value of RSUs awarded in 20132015 is reported in the “Stock Awards” column of the “2013 Summary“Summary Compensation Table.”
| |||
|
| ||
|
| ||
|
| ||
|
| ||
|
|
|
| Morton | |
2011 RSU Grant Date Fair Value |
| $ | 180,800 |
2012 RSU Grant Date Fair Value |
| 132,030 | |
2013 RSU Grant Date Fair Value |
| 180,576 | |
2014 RSU Grant Date Fair Value |
| 180,720 | |
Total |
| $ | 674,126 |
VSP.VSP. Eligible participants in the VSP include certain officers of the Company and its subsidiaries, including the Named Executive Officers. The VSP is a nonqualified plan created to offset the IRC limitations on contributions by highly compensated employees to the Company’s 401(k) plan. The VSP allows participants to annually defer from 1% to 75% of each of their base salary and incentive compensation that is paid in cash. The Company match was suspended effective January 1, 2010. Prior to 2010, the Company made matching contributions to the VSP equal to 15% of the participant’s VSP contributions made, up to an annual maximum match of $15,000. The Company match generally vests five years from the year in which the deferral occurs. Accelerated vesting of the Company match occurs upon termination, death, disability, attaining age 60 or a change in control of the Company. See “Potential Payments upon Termination or Change in Control” for additional information.
Participants can selectchoose investments from a select group of mutual funds that are generally the same options available under the Company’s 401(k) plan. Although no assets may actually be invested, the participant’s benefit value is based on the gains/losses of the investments they choose. No above-market or preferential earnings are paid under the VSP. Participants may change their investment options at any time by submitting a change form to the plan administrator. The table below shows the funds available in the VSP and the annual return of each for the calendar year ended December 31, 2013:2015:
Fund |
|
| ||
|
|
| ||
Fidelity Retirement Money Market Fund |
|
|
| 0.02% |
Vanguard Total Bond Index Institutional Shares |
| 0.41% | ||
|
| -0.05% | ||
|
|
| ||
|
| -1.69% | ||
Templeton Global Bond A |
|
| -4.03% | |
|
|
| -3.35% | |
Fidelity Fund |
|
|
| 3.35% |
Dodge & Cox Stock Fund |
|
| -4.49% | |
Fidelity Low-Priced Stock Fund |
|
| -0.56% | |
Fidelity Spartan Extended Market Index Fund |
|
| -3.35% | |
Fidelity Spartan 500 Index Fund |
|
|
| 1.31% |
T Rowe Blue Chip |
|
| 10.86% | |
Harbor International Fund |
|
| -3.82% | |
Fidelity Spartan International Index Fund |
|
| -0.87% | |
Vanguard Target Retirement Income Fund |
|
| -0.17% | |
Vanguard Target Retirement 2010 Fund |
|
| -0.20% | |
Vanguard Target Retirement 2015 Fund |
|
| -0.46% | |
Vanguard Target Retirement 2020 Fund |
|
| -0.68% | |
Vanguard Target Retirement 2025 Fund |
|
| -0.85% | |
Vanguard Target Retirement 2030 Fund |
|
| -1.03% | |
Vanguard Target Retirement 2035 Fund |
|
| -1.26% | |
Vanguard Target Retirement 2040 Fund |
|
| -1.59% | |
Vanguard Target Retirement 2045 Fund |
|
| -1.57% | |
Vanguard Target Retirement 2050 Fund |
|
| -1.58% | |
Vanguard Target Retirement 2055 Fund |
|
| -1.72% | |
Vanguard Target Retirement 2060 Fund |
|
| ||
-1.68% |
As required by Section 409A of the IRC, elections to defer salary must be made prior to the end of the year preceding the year the salary was earned. Elections to defer incentive payments under the VSP must be made no later than six months prior to the end of the designated performance period.
Withdrawal elections must be made in conjunction with the deferral election. A participant’s withdrawal election must specify a payment date, which may be (i) a specified date at least one year following the election date described in the preceding paragraph, (ii) the participant’s separation date or (iii) a specified anniversary of the participant’s separation. A participant may elect to receive a distribution in a lump sum or in installments. In some circumstances, a participant will be required to receive a lump sum payment. Post-2004 deferrals payable upon a participant’s separation from service will be delayed six months if the participant constitutesis a specified employee under Section 409A of the IRC. Changes to withdrawal elections for post-2004 deferrals must be made at least 12 months prior to the initial elected payment date and must defer the new initial payment date at least five years. Changes to withdrawal elections for pre-2005 deferrals must be filed at least 12 months prior to the initial elected payment date, and the newly elected payment date must be at least 12 months from the date the change election was filed. For pre-2005 deferrals, participants are eligible for an in-service withdrawal of their vested balance. If such a withdrawal is requested, an amount equal to 10% of the withdrawn amount is forfeited and participation in the plan is suspended until the first enrollment period following the one-year anniversary of the withdrawal. There are no in-service withdrawals allowed for post-2004 deferrals, except hardship withdrawals available to participants in order to satisfy a severe financial hardship plus the amounts anticipated to pay taxes on the withdrawal amount. The term “severe financial hardship” generally means an unforeseeable event resulting from a sudden and unexpected illness
or accident experienced by the participant or his or her dependents and/or the loss of property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the participant’s control.
If a participant takes a hardship withdrawal, the participant’s participation in the plan will be suspended until the first enrollment period following the one-year anniversary of the withdrawal.
Pre-2005 deferrals are defined as employee contributions and Company match that were deferred prior to and vested as of December 31, 2004.
Post-2004 deferrals are defined as employee contributions and Company match that were deferred after December 31, 2004 or Company match that was not vested as of December 31, 2004.
In the event of a change in control of the Company, as defined in the VSP, all contributions, Company match and earnings on each will be distributed as a lump sum as soon as administratively possible, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC.
RSUsRSUs.. The vesting and settlement terms applicable to RSUs are described previously in the “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table —– Stock Awards under the 2005 Ownership Incentive Plan” section and in footnote (2)(1) to the “Outstanding Equity Awards at 20132015 Fiscal Year-End” table. As described therein, participants who reach early retirement eligibility (age 55 with 10 years of service) vest in a pro rata number of RSUs based on the number of whole months since the award grant date, if a minimum of 12 months have elapsed since the award grant date. The remaining shares subject to the RSUs will continue to vest with respect to 1/60 of the total number of shares subject to the award each month through the participant’s actual early retirement date. Settlementuntil settlement of such vested RSUs will occur on the earlier of the fifth anniversary of the award date or the date a participant experiences a qualifying termination from employment with the Company, except where payment must be delayed for six months for key employees as required by Section 409A of the IRC.
The Company does not have any employment contracts or severance arrangements with the Chiefany Named Executive Officer that provide for payments in connection with a termination of employment or with any other Named Executive Officera change in control other than the applicable termination provisions contained within the various arrangements discussed elsewhere in this proxy statement.Proxy Statement.
The termination and change in control provisions existing as of December 31, 20132015 are described and quantified below. All payments are assumed to be made in accordance with the six-month delay for key employees as required by Section 409A of the IRC where applicable.
Payments Made upon Termination. Regardless of the manner in which a Named Executive Officer’s employment with the Company terminates, the officer is entitled to receive compensation and other benefits earned during the term of his or her employment, including the following:
· Accrued vacation (see the table on page 5556 for values);
· Earned but not yet paid amounts under the 2015 annual incentive plan and 2013-2015 cash long-term incentive compensation plan;
·Monthly DSA benefit earned as of the termination date (see the “2013“2015 Pension Benefits” section for lump sum value as of December 31, 2013)2015);
· Company match account under VSP becomes 100% vested (see the “2013 Non-Qualified Deferred Compensation” section for values);
·Executive medical coverage, if the officer is already eligible for early retirement (age 55 with 10 years of service) at the time of termination, with the officer responsible for paying a monthly premium amount equal to the current COBRA rate until age 60. All retirees are responsible for paying a reduced monthly premium after age 60 (see the table on page 55 for values);
·Pension Plan benefits earned as of the Pension Plan freeze date (see “2013“2015 Pension Benefits” for values); and
· SBP earned as of the SBP freeze date (see “2013“2015 Pension Benefits” for values).
Payments Made Uponupon Early Retirement. In the event of a Named Executive Officer’s termination due to his or her early retirement, the officer will be entitled to the following, in addition to the items identified in “Payments Made upon Termination.” Early retirement is generally defined as termination of employment after reaching at least age 55 with 10 years of service.
· Vesting of a pro rata number of RSUs based on the number of whole months elapsed since the award date if there has elapsed a minimum of 12 months since the award date (see the table on page 5556 for values);
· Executive medical coverage, with the retired officer responsible for paying a monthly premium amount equal to the then current COBRA rate until age 60. All retirees are responsible for paying a reduced monthly premium after age 60 (see the table on page 5556 for values); and
· A pro rata benefit under the cash long-term incentive compensation plan and under the annual incentive plan based on the number of months of participationbase salary received while a participant in the applicable measurement period and actual performance results for the full performance period, if he or she has completed a minimum of (a) 12 months in the measurement period under the cash long-term incentive compensation plan or (b) 90 days in the measurement period under the annual incentive plan (seeplan. Any pro rata payment earned will not be paid until the “Summaryend of the measurement period for the plan. (See the “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” section for 2013additional information on annual incentive plan payments and cash long-term incentive compensation payments, if any)awards).
Payments Made Uponupon Normal Retirement, Death or Disability. In the event of a Named Executive Officer’s termination due to his or her normal retirement, death or disability, the officer will be entitled to the following, in addition to the items identified in “Payments Made upon Termination.” Under the Company’s plans, normal retirement is generally defined as termination of employment on or after attaining age 65 and disability is generally determined to have occurred if the participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months.
· Immediate vesting of all unvested RSUs (see the table on page 5556 for values of RSUs related to accelerated vesting);
· Executive medical coverage, with the retired officer responsible for paying a reduced monthly premium after age 65 (see table on page 5556 for values);
· 100% vesting in the DSA benefit which is paid monthly over 120 months (see table on page 5556 for the value, if any, related to the Named Executive Officers); and
· A pro rata benefit under the cash long-term incentive compensation plan and under the annual incentive plan based on the number of months of participationbase salary received while a participant in the applicable measurement period and actual performance results for the full performance period, if he or she has completed a minimum of (a) 12 months in the measurement period under the compensation cash long-term incentive compensation plan or (b) 90 days in the measurement period under the Annual Incentive Plan (seePlan. Any pro rata payment earned will not be paid until the “Summaryend of the measurement period for the plan. (See the “Narrative Disclosure to Summary Compensation Table”Table and Grants of Plan-Based Awards Table – Non-Equity Incentive Compensation” section for additional information on annual incentive plan paymentsawards and cash long-term incentive compensation payments, if any)awards).
Payments Made Uponupon Termination After a Change in Control. In the event of a Named Executive Officer’s termination following a change in control of the Company, the Named Executive Officer will be entitled to the following:following, in addition to the items identified in “Payments Made upon Termination”:
· If termination of the Named Executive Officer occurs within 24 months of the change in control for “Good Reason” or without “Cause” (as such terms are defined in the RSU agreements for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later), RSUs become fully vested as of the termination date and will be distributed as soon as administratively possible (see the table on page 56 for RSU values related to accelerated vesting);
Company match account· Any amounts that have been earned but not paid under VSPthe annual incentive plan based on the base salary received while a participant in the applicable measurement period and actual performance results through the termination date (see the “Summary Compensation Table” section for annual incentive plan payments);
· If termination of the Named Executive Officer occurs within 36 months of the change in control for benefits accrued and vested prior to 2005 and within 24 months of the change in control for benefits
accrued and vested after 2004, the officer becomes 100% vested in the DSA benefit and the VSP account balancebenefit is paiddistributed as a lump sum (see “2013 Non-Qualified Deferred Compensation”the “2015 Pension Benefits” section for values); and
· For the 2011-2013 cash long-term incentive compensation plan, a benefit, based on the number of months of participation in the applicable measurement period equal to the greater of 100% of officer’s target incentive opportunity or the actual awardAny amounts that have been earned during the measurement period. Under the terms of their agreement to switch from the SBP and DSA to the cash long-term incentive compensation plan, upon a change in control, Ms. McReynolds and Mr. Slagle will receive a change in control benefitbut not paid under the cash long-term incentive compensation plan equal tobased on the cash long-term incentive compensation planbase salary earned and the number of months while a participant in the applicable measurement period and actual performance results through the termination date; and
· If termination of the Named Executive Officer occurs within 24 months of the change in control benefitfor “Good Reason” or without “Cause” (as such terms are defined in excessthe 2012 Change in Control Plan), he or she is entitled to (i) a lump sum cash payment equal to 24 months of the DSA changethen current premium to elect continuation of coverage under the medical and dental plans of the Company for the coverage in control benefit, if any (seeeffect for the tableofficer immediately prior to the date of termination; and (ii) a lump sum cash payment equal to either (A) with respect to Ms. McReynolds, two times her base salary in effect on page 55the date of termination plus two times her average annual cash incentive earned during the three years prior to the year in which the date of termination occurs, or (B) for the other Named Executive Officers, one times the executive’s base salary in effect on the date of termination plus one times his average annual cash long-term incentive compensation plan values, if any).earned during the three years prior to the year in which the date of termination occurs.
“Change in Control” under the Company’s plans is generally defined as the earliest date on which any of the following events shall occur: (i) the approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the approval by stockholders of the Company of a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii) any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended)Act) becoming the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company’s then outstanding voting securities; or (iv) the replacement of a majority of the Board during a 12-month period by Directors whose appointment or election is not endorsed by a majority of the Directors serving immediately before the date of the appointment or election. Notwithstanding any other provision of the plans to the contrary, with respect to post-2004 deferrals or earnings under any deferred compensation plan, distributions shall only be made upon the occurrence of Change in Control that qualifies as either a “change in the ownership” of the Company, a “change in effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company, in each case, as defined under Section 409A of the IRC.
Payments Made upon Termination After a Change in Control. In the event of a Named Executive Officer’s termination following a change in control of the Company, the Named Executive Officer will be entitled to the following, in addition to the items identified in “Payments Made upon Termination”:
·If termination of the Named Executive Officer occurs within 24 months of the change in control for “Good Reason” or without “Cause” as defined in the RSU agreements for awards prior to January 1, 2012 and as defined in the 2012 Change in Control Plan for awards January 1, 2012 and later, RSUs become fully vested as of the termination date and will be distributed as soon as administratively possible (see the table on page 55 for RSU values related to accelerated vesting);
·A pro rata benefit under the Annual Incentive Plan based on the number of months of participation in the applicable measurement period equal to the actual award earned during the measurement period (see the “Summary Compensation Table” for Annual Incentive Plan payments); and
·If termination of the Named Executive Officer occurs within 36 months of the change in control for benefits accrued and vested prior to 2005 and within 24 months of the change in control for benefits accrued and vested after 2004, the officer becomes 100% vested in the DSA benefit and the benefit is distributed as a lump sum (see the “2013 Pension Benefits” section for values);
·For the 2012-2014 and 2013-2015 cash long-term incentive compensation plan, a pro rata benefit, based on the number of months of participation in the applicable measurement period equal to the greater of 100% of officer’s target incentive opportunity or the actual award earned during the measurement period; and
·If termination of the Named Executive Officer occurs within 24 months of the change in control for “Good Reason” or without “Cause” as defined in the 2012 Change in Control Plan, he or she is entitled to (i) a lump sum cash payment equal to (A) 24 months of the then current premium to elect continuation of coverage under the medical and dental plans of the Company for the coverage in effect for the officer immediately prior to the date of termination; and (B) with respect to Ms. McReynolds, two times her base salary in effect on the date of termination plus two times her average annual cash incentive earned during the three years prior to the year in which the date of termination occurs, and (C) for the remaining Named Executive Officers, one times the executive’s base salary in effect on the date of termination plus one times his average annual cash incentive earned during the three years prior to the year in which the date of termination occurs.
“Good Reason” under the Company’s arrangements is generally defined as (i) any material and adverse reduction in the Named Executive Officer’s title, duties or responsibilities; (ii) a material reduction in the Named Executive Officer’s base salary or employee benefits (including reducing the Named Executive Officer’s level of participation or award opportunity in the Company’s incentive compensation plans); or (iii) a relocation of the Named Executive Officer’s principal place of employment by more than 50 miles without the prior consent of the Named Executive Officer.
“Cause” under the Company’s arrangements is generally defined as the (i) Named Executive Officer’s gross misconduct or fraud in the performance of a Named Executive Officer’s duties to the Company or any subsidiary; (ii) Named Executive Officer’s conviction or guilty plea or plea of no contest with respect to any felony or act of moral turpitude; (iii) Named Executive Officer engaging in any material act of theft or material misappropriation of Company or any third party’s property; or (iv) Named Executive Officer’s breach of the Company’s Code of Conduct as such code may be revised from time to time.
The 2012 Change in Control Plan provides that, unless outstanding equity awards are assumed by the successor and/or replaced by the successor with substitute awards of approximately equal value, in the event any equity awards are outstanding immediately prior to a change in control, such awards will become fully vested, settled and paid upon the occurrence of a change in control (with any performance-based awards being vested, settled and paid at the actual performance level). If the equity awards are replaced by the successor company and the Named Executive Officer is terminated within 24 months of the change in control, he/she shall become vested as of the termination date in any unvested equity awards.
If amounts payable to a Named Executive Officer under the 2012 Change in Control Plan (or pursuant to any other arrangement or agreement with the Company) exceed the amount allowed under section 280G of the IRC and would be subject to the excise tax imposed by section 4999 of the IRC, then, prior to the making of any payments to a Named Executive Officer, the 2012 Change in Control Plan provides that a best-net calculation will be made comparing (i) the before income tax net benefit to the Named Executive Officer of the payments after payment of the excise tax to (ii) the before income tax net benefit to the Named Executive Officer if the payments are reduced to the extent necessary to avoid being subject to the excise tax.tax (the “Best Net Calculation”). If the amount calculated under (i) is less than the amount calculated under (ii) in the preceding sentence, then the payments will be reduced to the extent necessary to avoid being subject to the excise tax.
Restrictive Covenants.Covenants; Clawback. Under the DSA, no unpaid benefit will be paid if the Named Executive Officer is discharged for wrongful conduct injurious to the Company, if the Named Executive Officer discloses confidential information relating to the Company or if the Named Executive Officer becomes employed or renders service to any competitor of the Company. Under the cash long-term incentive compensation plan and RSU award agreements, if the Compensation Committee determines that the recipient has committed an “Act of Misconduct,” as defined in the 2005 Ownership Incentive Plan, the Committee may suspend the recipient’s rights to vest in any RSU or cash long-term incentive compensation plan awards outstanding and may provide that the recipient will forfeit any vested but not yet paid awards. The Executive Medical Policy provides that coverage will be forfeited if the Named Executive Officer becomes an employee or consultant of, or has an ownership interest in any competitor of the Company. Under the 2012 Change in Control Plan, the Named Executive Officer is prohibited from solicitation of customers, clients and employees of the Company for a 12-month period following the termination and may not communicate or divulge any confidential information, knowledge or data to any one at any time or the Committee may reduce or offset the benefits under the plan.
The Company also has a policy for the “clawback” of any bonus or incentive compensation awarded to any officer, including a Named Executive Officer, whose misconduct contributed to the Company being required to restate its financial statements. Under the terms of the policy, the Board may require reimbursement of any bonus or incentive compensation awarded and effect the cancellation of unvested RSU awards previously granted to the Named Executive Officer under certain scenarios, which are described in the CD&A“Compensation Discussion & Analysis” in this proxy statement.Proxy Statement.
An “Act of Misconduct” has been committed under the Company’s arrangements if the Committee, the Chief Executive Officer, or any other person designated by the Committee determines a Named Executive Officer has committed an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any subsidiary, breach of fiduciary duty, violation of Company ethics policy or Code of Conduct, deliberate disregard of Company or subsidiary policies, or if a participant makes an unauthorized disclosure of any Company or subsidiary trade secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any subsidiary, breaches any intellectual property or assignment of inventions covenant, engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or subsidiary customer to breach a contract with the Company or any subsidiary or to cease doing business with the Company or any subsidiary or induces any principal for whom the Company or any subsidiary acts as agent to terminate such agency relationship.
Quantification of Potential Payments upon Termination or Change-in-Control
The following table reflects compensation potentially payable to each Named Executive Officer under various employment termination and other scenarios based on the arrangements existing as of December 31, 2013.2015. The amounts shown belowin the following table assume that a change in control occurred and/or each Named Executive Officer terminated employment with the Company effective December 31, 2013,2015, and estimate the value that could be realized by each Named Executive Officer as a result of each specified triggering event.event; however, the amounts shown below do not take into account any Best Net Calculation and resulting reduction that may occur pursuant to the provisions of the 2012 Change in Control Plan.
See “2013“2015 Pension Benefits” for benefits payable under the Pension Plan, SBP and SBP.DSA. Benefits payable under the VSP and with respect to vested RSUs are quantified in the “2013 Non-Qualified Deferred Compensation” table. Annual incentive compensation award payments are set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”
Name |
| Benefit |
| General |
| Early |
| Normal |
| Death |
| Disability |
| Change in |
|
Termination |
|
Judy R. McReynolds |
| RSUs(1) |
| $ – |
| $1,035,020 |
| $2,216,144 |
| $2,216,144 |
| $2,216,144 |
| $ – |
| $2,216,144 |
|
|
| Executive Medical(2) |
| – |
| 453,210 |
| 214,206 |
| 352,756 |
| 664,526 |
| – |
| – |
|
|
| Accrued Vacation(3) |
| 44,231 |
| 44,231 |
| 44,231 |
| 44,231 |
| 44,231 |
| – |
| 44,231 |
|
|
| DSA(4) |
| – |
| – |
| – |
| – |
| – |
| – |
| 442,576 |
|
|
| C-LTIP(5) |
| – |
| 427,901 |
| 427,901 |
| 427,901 |
| 427,901 |
| – |
| 342,686 |
|
|
| Annual Incentive Plan(6) |
| – |
| – |
| – |
| – |
| – |
| – |
| – |
|
|
| Cash Severance(7) |
| – |
| – |
| – |
| – |
| – |
| – |
| 1,668,434 |
|
|
| Medical Premiums(8) |
| – |
| – |
| – |
| – |
| – |
| – |
| 37,032 |
|
|
| Total(9) |
| 44,231 |
| 1,960,362 |
| 2,902,482 |
| 3,041,032 |
| 3,352,802 |
| – |
| 4,751,103 |
|
Roy M. Slagle(10) |
| RSUs(1) |
| – |
| – |
| 794,839 |
| 794,839 |
| 794,839 |
| – |
| 794,839 |
|
|
| Executive Medical(2) |
| 440,086 |
| 440,086 |
| 276,503 |
| 361,426 |
| 539,660 |
| – |
| – |
|
|
| Accrued Vacation(3) |
| 36,058 |
| 36,058 |
| 36,058 |
| 36,058 |
| 36,058 |
| – |
| 36,058 |
|
|
| DSA(4) |
| – |
| – |
| – |
| – |
| – |
| – |
| 174,475 |
|
|
| C-LTIP(5) |
| 246,234 |
| 246,234 |
| 246,234 |
| 246,234 |
| 246,234 |
| – |
| 265,066 |
|
|
| Annual Incentive Plan(6) |
| – |
| – |
| – |
| – |
| – |
| – |
| – |
|
|
| Cash Severance(7) |
| – |
| – |
| – |
| – |
| – |
| – |
| 469,702 |
|
|
| Medical Premiums(8) |
| – |
| – |
| – |
| – |
| – |
| – |
| 27,120 |
|
|
| Total(9) |
| 722,378 |
| 722,378 |
| 1,353,634 |
| 1,438,557 |
| 1,616,791 |
| – |
| 1,767,260 |
|
James W. Keenan |
| RSUs(1) |
| – |
| 615,199 |
| 1,242,792 |
| 1,242,792 |
| 1,242,792 |
| – |
| 1,242,792 |
|
|
| Executive Medical(2) |
| – |
| 441,236 |
| 276,503 |
| 290,184 |
| 545,959 |
| – |
| – |
|
|
| Accrued Vacation(3) |
| 28,269 |
| 28,269 |
| 28,269 |
| 28,269 |
| 28,269 |
| – |
| 28,269 |
|
|
| C-LTIP(5) |
| – |
| 180,178 |
| 180,178 |
| 180,178 |
| 180,178 |
| 101,092 |
| 216,948 |
|
|
| Annual Incentive Plan(6) |
| – |
| – |
| – |
| – |
| – |
| – |
| – |
|
|
| Cash Severance(7) |
| – |
| – |
| – |
| – |
| – |
| – |
| 349,617 |
|
|
| Medical Premiums(8) |
| – |
| – |
| – |
| – |
| – |
| – |
| 27,120 |
|
|
| Total(9) |
| 28,269 |
| 1,264,882 |
| 1,727,742 |
| 1,741,423 |
| 1,997,198 |
| 101,092 |
| 1,864,746 |
|
Jim A. Ingram |
| RSUs(1) |
| – |
| 615,199 |
| 1,266,368 |
| 1,266,368 |
| 1,266,368 |
| – |
| 1,266,368 |
|
|
| Executive Medical(2) |
| – |
| 506,079 |
| 276,503 |
| 452,255 |
| 852,818 |
| – |
| – |
|
|
| Accrued Vacation(3) |
| 31,250 |
| 31,250 |
| 31,250 |
| 31,250 |
| 31,250 |
| – |
| 31,250 |
|
|
| C-LTIP(5) |
| – |
| 194,140 |
| 194,140 |
| 194,140 |
| 194,140 |
| 106,213 |
| 232,985 |
|
|
| Annual Incentive Plan(6) |
| – |
| – |
| – |
| – |
| – |
| – |
| – |
|
|
| Cash Severance(7) |
| – |
| – |
| – |
| – |
| – |
| – |
| 387,785 |
|
|
| Medical Premiums(8) |
| – |
| – |
| – |
| – |
| – |
| – |
| 36,528 |
|
|
| Total(9) |
| 31,250 |
| 1,346,668 |
| 1,768,261 |
| 1,944,013 |
| 2,344,576 |
| 106,213 |
| 1,954,916 |
|
Michael E. Newcity |
| RSUs(1) |
| – |
| 437,335 |
| 1,050,816 |
| 1,050,816 |
| 1,050,816 |
| – |
| 1,050,816 |
|
|
| Executive Medical(2) |
| – |
| 506,079 |
| 276,503 |
| 433,956 |
| 867,314 |
| – |
| – |
|
|
| Accrued Vacation(3) |
| 28,269 |
| 28,269 |
| 28,269 |
| 28,269 |
| 28,269 |
| – |
| 28,269 |
|
|
| C-LTIP(5) |
| – |
| 159,082 |
| 159,082 |
| 159,082 |
| 159,082 |
| 88,888 |
| 190,516 |
|
|
| Annual Incentive Plan(6) |
| – |
| – |
| – |
| – |
| – |
| – |
| – |
|
|
| Cash Severance(7) |
| – |
| – |
| – |
| – |
| – |
| – |
| 349,082 |
|
|
| Medical Premiums(8) |
| – |
| – |
| – |
| – |
| – |
| – |
| 36,528 |
|
|
| Total(9) |
| 28,269 |
| 1,130,765 |
| 1,514,670 |
| 1,672,123 |
| 2,105,481 |
| 88,888 |
| 1,655,211 |
|
(1) The RSU value is calculated using a per share price of $33.68, which is the closing market price of the Common Stock on December 31, 2013 multiplied by the number of the Named Executive Officer’s RSUs vesting as a result of the applicable triggering event. Benefits payable with respect to previously vested RSUs are quantified in the “2013“2015 Non-Qualified Deferred Compensation” table.
(2) The executive medical value is based on the accumulated benefit obligation for the Named Executive Officer as of December 31, 2013, using the same assumptions as used by the Company for financial reporting purposes except the Named Executive Officer’s actual age at December 31, 2013 for the applicable triggering events.
Name | Benefit | General | Early | Normal | Death | Disability | Termination |
Judy R. McReynolds(10) | RSUs(1) | $ – | N/A | N/A | $1,426,713 | $1,426,713 | $1,426,713 |
| Executive Medical(2) | – | N/A | N/A | 383,951 | 731,882 | – |
| Accrued Vacation(3) | 50,769 | N/A | N/A | 50,769 | 50,769 | 50,769 |
| DSA(4) | – | N/A | N/A | – | – | 442,576 |
| C-LTIP(5) | 659,026 | N/A | N/A | 942,864 | 942,864 | 500,288 |
| Annual Incentive Plan(6) | 350,944 | N/A | N/A | 350,944 | 350,944 | 350,944 |
| Cash Severance(7) | – | N/A | N/A | – | – | 2,408,822 |
| Medical Premiums(8) | – | N/A | N/A | – | – | 39,840 |
| Total(9) | 1,060,739 | N/A | N/A | 3,155,241 | 3,503,172 | 5,219,952 |
Jim A. Ingram(11) | RSUs(1) | – | N/A | N/A | 744,372 | 744,372 | 744,372 |
| Executive Medical(2) | – | N/A | N/A | 499,898 | 940,753 | – |
| Accrued Vacation(3) | 34,135 | N/A | N/A | 34,135 | 34,135 | 34,135 |
| C-LTIP(5) | 309,926 | N/A | N/A | 440,031 | 440,031 | 440,031 |
| Annual Incentive Plan(6) | 122,485 | N/A | N/A | 122,485 | 122,485 | 122,485 |
| Cash Severance(7) | – | N/A | N/A | – | – | 531,586 |
| Medical Premiums(8) | – | N/A | N/A | – | – | 39,840 |
| Total(9) | 466,546 | N/A | N/A | 1,840,921 | 2,281,776 | 1,912,449 |
Timothy D. Thorne(12) | RSUs(1) | – | N/A | N/A | 524,055 | 524,055 | 524,055 |
| Executive Medical(2) | – | N/A | N/A | 398,621 | 732,929 | – |
| Accrued Vacation(3) | 38,462 | N/A | N/A | 38,462 | 38,462 | 38,462 |
| C-LTIP(5) | 211,368 | N/A | N/A | 308,075 | 308,075 | 308,075 |
| Annual Incentive Plan(6) | 143,277 | N/A | N/A | 143,277 | 143,277 | 143,277 |
| Cash Severance(7) | – | N/A | N/A | – | – | 515,258 |
| Medical Premiums(8) | – | N/A | N/A | – | – | 39,840 |
| Total(9) | 393,107 | N/A | N/A | 1,412,490 | 1,746,798 | 1,568,967 |
J. Lavon Morton(13) | RSUs(1) | N/A | N/A | – | – | – | – |
| Executive Medical(2) | N/A | N/A | 479,367 | 418,469 | 574,182 | – |
| Accrued Vacation(3) | N/A | N/A | 26,154 | 26,154 | 26,154 | 26,154 |
| DSA(4) | N/A | N/A | – | – | – | 355,189 |
| C-LTIP(5) | N/A | N/A | 394,290 | 394,290 | 394,290 | 39,101 |
| Annual Incentive Plan(6) | N/A | N/A | 108,145 | 108,145 | 108,145 | 108,145 |
| Cash Severance(7) | N/A | N/A | – | – | – | 485,374 |
| Medical Premiums(8) | N/A | N/A | – | – | – | 39,216 |
| Total(9) | N/A | N/A | 1,007,956 | 947,058 | 1,102,771 | 1,053,179 |
David R. Cobb(14) | RSUs(1) | – | N/A | N/A | 641,700 | 641,700 | 641,700 |
| Executive Medical(2) | – | N/A | N/A | 479,159 | 883,265 | – |
| Accrued Vacation(3) | 18,173 | N/A | N/A | 18,173 | 18,173 | 18,173 |
| C-LTIP(5) | 191,604 | N/A | N/A | 279,730 | 279,730 | 279,730 |
| Annual Incentive Plan(6) | 83,625 | N/A | N/A | 83,625 | 83,625 | 83,625 |
| Cash Severance(7) | – | N/A | N/A | – | – | 413,481 |
| Medical Premiums(8) | – | N/A | N/A | – | – | 39,840 |
| Total(9) | 293,402 | N/A | N/A | 1,502,387 | 1,906,493 | 1,476,549 |
(3) The accrued vacation value is based on the Named Executive Officer’s actual earned weeks of vacation and base salary rate as of December 31, 2013.
(1) | The RSU value is calculated using a per share price of $21.39, which is the closing market price of the Common Stock on December 31, 2015 multiplied by the number of the Named Executive Officer’s RSUs vesting as a result of the applicable triggering event. Benefits payable with respect to previously vested RSUs are quantified in the “2015 Non-Qualified Deferred Compensation” table. |
(2) | The executive medical value is based on the accumulated benefit obligation for the Named Executive Officer as of December 31, 2015, using the same assumptions as used by the Company for financial reporting purposes except the Named Executive Officer’s actual age at December 31, 2015 for the applicable triggering events. |
(3) | The accrued vacation value is based on the Named Executive Officer’s actual earned weeks of vacation and base salary rate as of December 31, 2015. |
(4)
| The DSA value is equal to the accelerated benefit value as a result of the applicable triggering event. This value is based on the difference in the present value of the 120 monthly payments assuming the applicable triggering event occurred on December 31, 2015 less the actual DSA benefit accrued as of December 31, 2015. An interest rate of 6% was used to value the stream of payments upon normal retirement, death or disability. An interest rate of 6.22% was used to value the stream of payments upon a change in control as provided under the terms of the DSA. See “2015 Pension Benefits” for current DSA values. |
(5) | The cash long-term incentive compensation plan value is the pro rata benefit accrued under the cash long-term incentive compensation plan calculated based on performance as of December 31, 2015. Amounts shown in the “General Termination” column represents amounts fully earned but unpaid as of December 31, 2015. For cash long-term incentive compensation plan participants with a frozen DSA, the cash long-term incentive compensation plan change in control value is equal to the cash long-term incentive compensation plan change in control value in excess of the DSA change in control value, if any. |
(6) | The annual incentive plan is equal to the annual incentive amount paid to each Named Executive Officer for 2015 since all such amounts were earned as of December 31, 2015 (reported in the “Summary Compensation Table”). |
(7) | The cash severance payment value is a lump sum cash payment equal to (A) with respect to Ms. McReynolds, two times her base salary in effect on the date of termination plus two times her average annual cash incentive earned during the three years prior to the year in which the date of termination occurs or (B) for the remaining Named Executive Officers, one times the executive’s base salary in effect on the date of termination plus one times his average annual cash incentive earned during the three years prior to the year in which the date of termination occurs. See “Payments Made upon Termination after a Change in Control” for additional information. |
(8) | The medical premium is a lump sum payment equal to 24 months of the then current premium to elect continuation of coverage under the medical and dental plans of the Company for the coverage in effect for the officer immediately prior to the date of termination. See “Payments Made upon Termination after a Change in Control” for additional information. |
(9) | Totals represent aggregate amounts reflected in the table payable upon each termination or change in control event as indicated above. These totals do not include benefits payable under the Pension Plan, DSA (upon death, disability or normal retirement) or SBP (reported in “2015 Pension Benefits”) or under the VSP or with respect to previously vested RSU awards (reported in the “2015 Non-Qualified Deferred Compensation” table) except to the extent a change in control creates an additional benefit above what was reported in either table. |
(10) | Ms. McReynolds, age 53, is not eligible for early or normal retirement as of December 31, 2015; therefore, no value is reported in those columns. |
(11) | Mr. Ingram, age 48, is not eligible for early or normal retirement as of December 31, 2015; therefore, no value is reported in those columns. |
(12) | Mr. Thorne, age 53, is not eligible for early or normal retirement as of December 31, 2015; therefore, no value is reported in those columns. |
(13) | Mr. Morton, age 65, qualifies for normal retirement (age 65) as of December 31, 2015. As such, termination circumstances which absent such qualification would result in payment for “General Termination,” now will generally be classified as normal retirement. As a result, no amounts are listed for Mr. Morton under “General Termination” or “Early Retirement.” Mr. Morton is eligible for a prorated award under the 2014-2016 and 2015-2017 cash long-term incentive compensation plans; however, the incentive cannot be determined until the end of the three-year performance period. The estimated value is based on performance as of December 31, 2015. |
(14) | Mr. Cobb, age 49, is not eligible for early or normal retirement as of December 31, 2015; therefore, no value is reported in those columns. |
SECItem 404 of Regulation S-K Item 404of the Securities Act of 1933, as amended, requires that the Company disclose certain “related person transactions” with the Company’s Directors and executive officers, among others. For additional information regarding the Company’s policies and procedures for review, approval and ratification of such related person transactions, see the Audit Committee section under “Governance of the Company.”
Steven L. Spinner, who joined the Board in July 2011, is the President and Chief Executive Officer and a director of United Natural Foods, Inc. (“UNFI”). In 2013,2015, UNFI made ordinary course of business payments to ABF, the largest subsidiary of the Company,ArcBest carrier subsidiaries in the amount of $916,134$938,682 for freight services.
Kathleen D. McElligott, who has been on the Board since July 2015, is Executive Vice President and Chief Information Officer and Chief Technology Officer of McKesson Corporation. Prior to McKesson, she had been Chief Information Officer and Vice President, Information Technology at Emerson Electric Co. from February 2010 until July 2015. ArcBest carrier revenues in 2015 from Emerson and McKesson were approximately $325,703 and $6,071,945, respectively.
Stephen Young, Director–Warehousing for ABF Logistics, is the son of Robert A. Young III, the Chairman of the Board. In 2015, Stephen Young received a total of $137,957 in compensation and participated in benefit plans generally available to the Company’s employees.
The Company has entered into the following agreements in prior years:
Indemnification Agreements. The Company has entered into indemnification agreements with the members of its Board. Under these agreements, the Company is obligated to indemnify its Directors to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys’ fees, judgments and settlement amounts incurred by them in any action or proceeding arising out of their services as a Director. The Company believes that these agreements are helpful in attracting and retaining qualified Directors. The Company’s Restated Certificate of Incorporation, as amended, and ThirdFourth Amended and Restated Bylaws also provide for indemnification of the Company’s officers and Directors to the fullest extent permitted by the Delaware General Corporation Law.
Stockholders’ Agreement. Pursuant to the terms of the Stockholders’ Agreement entered into in 1988 between the Company and Robert A. Young III, the Company has agreed that it will offer Mr. Young the right to include shares of the Common Stock he owns in certain registration statements filed by the Company (the “Piggy-back Rights”). Mr. Young is the Company’s Chairman of the Board and until his retirement in January 2006 was the Company’s Chief Executive Officer.
Under the Stockholders’ Agreement, the Company will indemnify Mr. Young for securities law liabilities in connection with any such offering, other than liabilities resulting from information furnished in writing by Mr. Young. The Company is obligated to pay all expenses incurred in connection with the registration of Mr. Young’s shares of Common Stock in connection with the Piggy-back Rights, excluding underwriters’ discounts and commissions.
The Company’s executive officers, Directors and persons who own more than 10% of a registered class of the Company’s equity securities are required by Section 16(a) of the Securities Exchange Act of 1934 to file reports of ownership and changes of ownership with the SEC. The SEC’s rules require such person to furnish the Company with copies of all Section 16(a) reports that are filed on their behalf. Based on a review of the reports submitted to the Company, the Company believes that the applicable Section 16(a) reporting requirements were complied with for all transactions which occurred in 2013.2015.
The Company has not received any information from 10% stockholders indicating that they have not complied with filing requirements.
The Audit Committee of the Board is comprised solely of Messrs. Allardyceindependent directors, as defined by the SEC and SpinnerNASDAQ, and Ms. Stipp.it operates under a written charter approved by the Board. The composition of the Audit Committee, the attributes of its members and its responsibilities, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Nominating/Corporate Governance Committee has reviewed the status of each of the members and determined that each member of the Audit Committee meets applicable SEC and NASDAQ independence standards forand financial literacy requirements that apply to Audit Committee members. Mr. Allardyce and Ms. Stipp are Board-designated Audit Committee Financial Experts as defined under applicable SEC and NASDAQ rules. A copy of the Audit Committee’s current charter can be found in the Investor Relations, Governance Charters section of the Company’s website (www.arcb.com/investor-relations/governance-charters/audit-committee-charter/).
TheAs part of its specific responsibilities, the Audit Committee overseesoversaw the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the systems of internal controls. In fulfilling itsour oversight responsibilities the Audit Committee reviewed and discussedrelated to the audited consolidated financial statements in the Company’s 20132015 Annual Report on Form 10-K, with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee alsowe reviewed and discussed with management, the assessment and reportamong other things:
· | the Company’s audited consolidated financial statements for 2015 and recommended to the Board they be included in the Company’s Annual Report on Form 10-K; |
· | the representations of management that those consolidated financial statements were prepared in accordance with generally accepted accounting principles; |
· | the quality and acceptability of the accounting principles; |
· | the reasonableness of significant accounting judgments and critical accounting policies and estimates; |
· | the clarity of disclosures in the consolidated financial statements; |
· | the adequacy and effectiveness of the Company’s financial reporting procedures, including disclosure controls and procedures; |
· | the adequacy and effectiveness of the Company’s internal controls over financial reporting, including the report of management’s assessment on the effectiveness of internal controls over financial reporting, which was performed by management using the 2013 framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission. |
The Audit Committee is also responsible for the appointment, as well as the termination, compensation, evaluation and oversight of Ernst & Young, LLP (“EY”), the Company’s independent registered public accounting firm, including review of the firm’s qualifications and independence. EY is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and expressing an opinion on the effectiveness of the Company’s internal controlcontrols over financial reporting, which was performed by management using the 1992 criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission. The Audit Committeereporting. EY is also reviewed and discussed with the Company’s independent registered public accounting firm (the “Accounting Firm”) its attestation report on the Company’s internal control over financial reporting.
The Audit Committee reviewed and discussed with the Accounting Firm, which is responsible for expressing an opinion on the conformity of thosethe audited consolidated financial statements with generally accepted accounting principles, the Accounting Firm’sprinciples. We reviewed and discussed with EY its judgments as to the quality, not just the acceptability, of the Company’s accounting principles, reasonableness of significant accounting judgments, and critical accounting policies and estimates, and such other matters as are required to be discussed with the Audit Committee by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public
Company Accounting Oversight.Oversight Board (“PCAOB”). In addition, the Audit Committee haswe received the written disclosures and the letter from the Accounting FirmEY as required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the Accounting Firm’sEY’s communications with the Audit Committee concerning independence and has discussed with the Accounting FirmEY its independence from management and the Company, including the matters in the written disclosures, anddisclosures. We considered the compatibility of nonauditnon-audit services performed by EY and determined the non-audit services to be compatible with the Accounting Firm’sEY’s independence.
The Audit CommitteeWe discussed with the Company’s internal auditors and the Accounting FirmEY the overall scope and plans for their respective audits. The Audit Committee meetsmet with the internal auditors and the Accounting Firm,EY, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. Additionally, we reviewed the performance, responsibilities, and staffing of the Company’s internal auditors. We also oversaw compliance with the Company’s receipt, retention and treatment of complaints regarding accounting, internal accounting controls, auditing and other federal securities law matters, including confidential and anonymous submissions of these complaints. Furthermore, we met with members of management to discuss the results of the Company’s legal and ethical compliance programs.
The Audit Committee provided oversight of the Company’s risk management policies and processes and we reviewed and discussed with members of senior management significant risks identified by management in various areas of the Company, including financial statements, systems and reporting, legal, compliance, ethics, information technology, data security, cybersecurity, and related party transactions.
In reliance on the reviews and discussions referred to above, and the receipt of unqualified opinions from EY dated February 26, 2016, with respect to the consolidated financial statements of the Company as of and for the year ended December 31, 2015, and with respect to the effectiveness of the Company’s internal controls over financial reporting, the Audit Committee recommended to the Board (and the Board has approved) that the audited consolidated financial statements be included in the Company’s 20132015 Annual Report on Form 10-K for filing with the SEC.
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The Audit Committee Charter, adopted by the Board for the Audit Committee on April 19, 2000 and most recently revised on January 26, 2011, is posted in the Corporate Governance section of the Company Website, www.arkbest.com.Fred A. Allardyce, Chair
William M. Legg
Kathleen D. McElligott
Steven L. Spinner
Janice E. Stipp
Proposal II. Ratification of Appointment of
The Board of Directors recommends a vote “FOR” Proposal II.
The firm of Ernst & Young LLP (“EY”) served as the independent registered public accounting firm for the Company for the fiscal year ended December 31, 2013.2015. The Audit Committee has appointed that firmEY to continue in that capacity for fiscal year 2014,2016, subject to the Audit Committee’s approval of an engagement agreement and related service fees,fees. EY has served as the Company’s independent auditor since 1972. The Audit Committee and recommendsthe Board believe it is in the best interests of the Company and its stockholders to retain EY as the Company’s independent auditor for fiscal year 2016, and recommend that a resolution be presented to the stockholders at the 20142016 Annual Meeting to ratify that appointment.
The Audit Committee has ultimate authority and responsibility for the appointment, termination, compensation, evaluation and oversight of the Company’s independent auditor, including review of EY’s qualifications and independence. The Audit Committee’s oversight includes regular private sessions with EY, discussions with EY regarding the scope of its audit, an annual evaluation of whether to engage EY, and direct involvement in the transition of the new lead engagement partner in connection with the regulatory five-year rotation of that position. As part of the annual review, the Audit Committee considers, among other things:
· | the quality and efficiency of the current and historical services provided by EY; |
· | EY’s capability and expertise in handling the breadth and complexity of the Company’s operations; |
· | the quality and candor of EY’s communications with the Audit Committee; |
· | external data on EY’s audit quality and performance, including recent PCAOB reports; |
· | EY’s independence from the Company; |
· | the appropriateness of EY’s fees; |
· | EY’s tenure as the Company’s independent auditor, including the benefits of the extensive institutional knowledge EY has gained through the years and the controls and processes in place to help ensure EY’s continued independence; and |
· | the costs associated with onboarding a new independent auditor due to training and lost efficiencies. |
The submission of this proposal for approval by stockholders is not legally required, but the Board and the Audit Committee believe the submission provides an opportunity for stockholders through their vote to communicate with the Board and the Audit Committee about an important aspect of corporate governance. In the event the stockholders fail to ratify the appointment of Ernst & Young LLP,EY, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Company and its stockholders. Representatives of Ernst & Young LLPEY will attend the 20142016 Annual Meeting. They will have the opportunity to make a statement and respond to appropriate questions from stockholders.
In connection with the audit of the 20132015 consolidated financial statements, the Company entered into an engagement agreement with Ernst & Young LLPEY that sets forth the terms by which Ernst & Young LLPEY will perform audit services for the Company. That agreement is subject to alternative dispute resolution (ADR) procedures agreed upon by the parties. ADR procedures are used in lieu of litigation with the goal of resolving disputes in a more expeditious and cost effective manner. They do not limit the damage claims that could be asserted by either party.
The following is a summary of the fees billed to the Company by Ernst & Young LLPEY for professional services rendered for the fiscal years ended December 31, 20132015 and December 31, 2012:2014:
Fee Category |
| 2013 Fees |
| 2012 Fees |
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Audit Fees |
| $ 910,000 |
| $ 1,055,000 |
|
Audit-Related Fees |
| – |
| – |
|
Tax Fees |
| 28,781 |
| 33,658 |
|
All Other Fees |
| 2,500 |
| 2,500 |
|
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|
|
|
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Total Fees |
| $ 941,281 |
| $ 1,091,158 |
|
Fee Category |
| 2015 Fees(1) |
| 2014 Fees(2) |
|
Audit Fees |
| $ 1,340,000 |
| $ 1,199,500 |
|
Audit-Related Fees |
| – |
| – |
|
Tax Fees |
| 20,589 |
| 15,110 |
|
All Other Fees |
| 2,500 |
| 2,500 |
|
Total Fees |
| $ 1,363,089 |
| $ 1,217,110 |
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(1) | Audit Fees include actual and expected billings for fees and expenses related to the 2015 financial statement audit. |
(2) | Fees reported for 2014 were updated from the prior year to include billings received after filing the proxy statement for our 2015 Annual Meeting of Stockholders. |
Audit Fees. Consists of fees billed for professional services rendered for the integrated audit of the Company’s consolidated financial statements and internal control over financial reporting and quarterly reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by the Accounting FirmEY in connection with statutory and regulatory filings or engagements. These services also include accounting consultations related to the impact of changes in rules or standards. 2012 includes additional audit fees related to the acquisition of Panther Expedited Services, Inc.
Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.”
Tax Fees. Consists of fees billed for professional services for tax compliance and tax consulting. These services include assistance regarding federal, state and international tax compliance. 2012 includes additional tax fees related to Panther Expedited Services, Inc.
All Other FeesFees.. Consists of fees for online technical accounting research materials.
Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
The Audit Committee, under the responsibilities and duties outlined in its charter, is to pre-approve all audit and non-audit services provided by the Accounting Firm.EY. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The Accounting FirmEY and management are required to periodically report to the Audit Committee regarding the extent of services provided by the Accounting FirmEY in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
The Audit Committee, or the Audit Committee Chair under authority of the Audit Committee, pre-approved 100% of the Company’s 20122014 and 20132015 audit fees, audit-related fees, tax fees and all other fees.
The Board recommends a vote “FOR” Proposal III.
At the 2011 Annual Meeting, stockholders voted in favor of the Board’s recommendation to hold a non-binding advisory vote on the compensation of the Company’s Named Executive Officers (the “Say on Pay Vote”) on an annual basis (“Frequency Vote”), and since the 2011 Annual Meeting, the Company has held annual non-binding Say on Pay Votes.
The non-binding Say on Pay Vote is not intended to address any specific item of compensation, but rather the overall compensation of the Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. To that end, and in accordance with the Frequency Vote recommendation of the stockholders and the Board’s decision that the Company will hold future Say on Pay Votes on an annual basis until the next Frequency Vote is conducted, the Board has submitted the following resolution to be voted on by our stockholders at the 20142016 Annual Meeting:
RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Proxy Statement for Arkansas BestArcBest Corporation’s 20142016 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion & Analysis, the Summary Compensation Table and the other related tables and narrative disclosure.
The Board recognizes that executive compensation is an important matter for our stockholders. As described in detail in the “Compensation Discussion & Analysis” (“CD&A”) section of this proxy statement,Proxy Statement, the Compensation Committee is responsible for establishing, implementing and monitoring adherence with our executive compensation policy. One of the objectives of the Compensation Committee is that the total compensation paid to our executive officers is fair, reasonable and competitive. In particular, the Compensation Committee believes executive officer compensation should provide competitive base salaries and benefits to attract and retain superior employees and provide short- and long-term incentive compensation to incentivize executive officers to attain and to reward executive officers for attaining established financial goals that are consistent with increasing stockholder value. We aim to foster a pay-for-performance culture with a substantial portion of total compensation being tied to and varying with our financial, operating and strategic performance. The Compensation Committee has a strong focus on paying for performance, with targeted incentive compensation for our Named Executive Officers averaging 45% of their total compensation on an annualized basis. In addition, the Compensation Committee seeks to align executives’ long-term interests with the interests of our stockholders with awards of RSUs. It is always the intention of the Compensation Committee that our executive officers be compensated competitively and consistently with our strategy, sound corporate governance principles and stockholder interests and concerns.
As described in the CD&A, we believe our compensation program is effective, appropriate and strongly aligned with the long-term interests of our stockholders and that the total compensation package provided to the Named Executive Officers (including potential payouts upon a termination or change of control) are reasonable and not excessive. As you consider this Proposal III, we encourage you to carefully review the CD&A“Compensation Discussion & Analysis” and “Executive Compensation” sections of this Proxy Statement for a detailed discussion of our executive compensation program, including the more detailed information about our compensation philosophy and objectives and the past compensation of the Named Executive Officers.
As an advisory vote, Proposal III is not binding on the Board or the Compensation Committee, will not overrule any decisions made by the Board or the Compensation Committee or require the Board or the Compensation Committee to take any action. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our stockholders and intend to consider the outcome of the vote when making future compensation decisions for executive officers. In particular, to the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this proxy statement,Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are appropriate in the future to address those concerns.
The Board recommends that stockholders vote “FOR” the approval of the compensation of the Named Executive Officers, as disclosed in this proxy statement.Proxy Statement.
Proposal IV. ApprovalTo Approve the Material Plan Terms of the Second Amendment toExecutive Officer Annual Incentive Compensation Plan, as Amended, for Purposes of Complying with the2005 Ownership Incentive Plan Requirements of Section 162(m) of the IRC
The Board recommends a vote “FOR” Proposal IV.
Background and Purpose of the Proposal
The Company’sExecutive Officer Annual Incentive Compensation Plan is intended to enhance the link between pay and performance by providing eligible employees with the opportunity to receive cash awards based on the achievement of pre-established performance goals. The Executive Officer Annual Incentive Compensation Plan was originally approved by the Board of Directors originally adopted the Arkansas Best Corporation 2005 Ownership Incentive Plan (the “2005 Plan”) on February 24, 2005, and the Company’s stockholders originally approvedat the Company’s 2005 Plan on April 20, 2005. At the 2010 Annual Meeting of Stockholders, stockholders approvedStockholders. The Executive Officer Annual Incentive Compensation Plan, as amended by the First Amendment to the 2005Executive Officer Annual Incentive Compensation Plan which(the “First Amendment”), was approved by ourthe Board on February 18,and the Company’s stockholders at the Company’s 2010 to increase the number of shares of common stock that the Company may issue under the 2005 Plan by 700,000 shares, from 1,500,000 shares to 2,200,000 shares. At the 2014 Annual Meeting of Stockholders, stockholders will be asked to approveStockholders. The Executive Officer Annual Incentive Compensation Plan, as amended by the Second Amendment to the 2005Executive Officer Annual Incentive Compensation Plan which(the “Second Amendment”), was approved by ourthe Board on February 24, 2014. Ifand the Company’s stockholders at the Company’s 2015 Annual Meeting of Stockholders.
The Compensation Committee approved the Third Amendment to the Executive Officer Incentive Compensation Plan, as the plan is renamed by the Third Amendment, (the “Third Amendment”), effective as of the date of the 2016 Annual Meeting of Stockholders and subject to the approval of the Company’s stockholders. The Company is asking in this Proposal IV that stockholders approve the material terms of the Executive Officer Incentive Compensation Plan, as amended by the First Amendment, the Second Amendment, and the Third Amendment (the “ICP”), so that awards granted under the ICP that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the IRC (“Section 162(m)”) may be fully deductible by the Company and its subsidiaries. While the Company believes it is important to have the flexibility to grant fully deductible awards as a general matter, the Company reserves the right to pay compensation to its executives that is not fully deductible.
The ICP is intended to qualify for exemption from the deduction limitations of Section 162(m) by providing “performance-based compensation” to “covered employees” within the meaning of Section 162(m). Under Section 162(m), the federal income tax deductibility of compensation paid to the Company’s Chief Executive Officer and three other most highly compensated officers (other than the Company’s Chief Executive Officer or Chief Financial Officer) determined pursuant to the executive compensation disclosure rules under the Exchange Act (“Covered Employees”) may be limited to the extent such compensation exceeds $1,000,000 in any taxable year. However, the Company may deduct compensation paid to its Covered Employees in excess of that amount if it qualifies as “performance-based compensation” as defined in Section 162(m). In addition to certain other requirements, in order for awards under the ICP to constitute “performance-based compensation,” the material terms of the ICP must be disclosed to and approved by the Company’s stockholders atin the meeting,event that the Second Amendment will become effective immediately.material terms of the ICP are amended.
SummaryUnder the Section 162(m) regulations, the material terms of the Second AmendmentICP are (i) the maximum amount of compensation that may be paid to the 2005 Plan
The use of stock-based awardsa participant under the 2005 Plan continuesICP in any fiscal year, (ii) the employees eligible to be a key element of the Company’sreceive compensation program. The purpose of the Second Amendment is to (i) increase the number of shares of common stock that the Company may issue under the 2005 Plan by 900,000 shares, from 2,200,000 shares to 3,100,000 sharesICP, and (ii) extend(iii) the term of the Amended 2005 Plan by changing the final datebusiness criteria on which awards may be granted under the Amended 2005 Plan from April 20, 2015 to December 31, 2019. Ofperformance goals are based. The ICP allows the 2,200,000 shares currently authorized for issuance under the 2005 Plan, a total of 610,517 shares have been issued as of February 24, 2014 upon the lapse of restrictions on grants of restricted stock or upon the settlement of restricted stock units. As of February 24, 2014, under the 2005 Plan, a total of 1,443,459 shares remained subject to unsettled restricted stock units. No other equity awards are outstanding under the 2005 Plan as of such date. As of February 24, 2014, no shares remained subject to outstanding stock options under any Company plan, including the 2005 Plan, the Company’s 2002 Stock Option Plan, 1992 Stock Option Plan or Nonqualified Stock Option Plan.
Compensation Committee to exclude the impact of certain events from the formula used to calculate performance under the plan if such exclusion is identified in connection with the establishment of the ICP performance goals. One of the events that the ICP, as amended by the First Amendment and the Second Amendment, permitted to be excluded was an extraordinary, unusual or nonrecurring item, as defined by reference to a section of the accounting literature that is now no longer applicable. The 2005Compensation Committee wishes to retain the flexibility to exclude the impact of extraordinary, unusual or nonrecurring items from performance goal calculations. With this goal in mind, the Third Amendment modifies the method of identifying an extraordinary, unusual or nonrecurring item. As such, the Third Amendment may be viewed as a material amendment to the ICP performance goals. The Third Amendment also includes modifications to the ICP intended to allow the Compensation Committee to grant cash awards with multi-year performance periods (rather than just annual performance periods) under the ICP. Finally, the Third Amendment removes the provision of the ICP addressing payments in the event of a change in control in order to eliminate any inconsistency with the Company’s 2012 Change in Control Plan, iswhich provides for double (rather than single) trigger vesting in the event of a broad-based planchange in control. The terms of the Company’s 2012 Change in Control Plan will continue to govern awards granted to our Named Executive Officers under whichthe ICP in the event of a change in control, as described in more detail in the section of the Compensation Discussion & Analysis above entitled “Employment Agreements and Change in Control Provisions” as well as the section entitled “Potential Payments upon Termination or Change in Control.” The Company intends that awards under the ICP continue to qualify for exemption from the deduction limitations of Section 162(m). Accordingly, the Company grants awardsis asking stockholders to its current and prospective employees, including officers, and its directors. The Company continues to believe that its long-term interests are best advanced by aligningapprove the interests of its nonemployee directors and key employees with the interests of its stockholders. Therefore, to attract, retain and motivate nonemployee directors, officers and key management employees of exceptional abilities and, in recognitionmaterial terms of the significant contributionsICP, including the terms of the Third Amendment, for Section 162(m) purposes so that awards under the ICP that are intended to qualify as “performance-based compensation” within the long-term performance and growthmeaning of Section 162(m) may be fully deductible by the Company and its subsidiaries made by these individuals,subsidiaries.
The material terms of the BoardICP for Section 162(m) purposes that the stockholders are being asked to approve are disclosed below as follows: (i) the maximum amount of Directors has adoptedcompensation, which is described in the Second Amendmentsection entitled “Summary of the ICP – Limitations on Awards,” (ii) the eligible employees, which are described in the section entitled “Summary of the ICP – Eligibility to Participate,” and (iii) the business criteria, which are described in the section entitled “Summary of the ICP – Performance Measures,” and potential adjustments to the 2005 Plan, subject to stockholder approval. Approvalbusiness criteria, which are described in the sections entitled “Summary of the Second Amendment will permit the Company to continue to use stock-based compensation to align stockholderICP – Setting Performance Goals” and employee interests and to motivate employees and others providing services to the Company or any subsidiary. While the Board“– Adjustment of Directors is cognizant of the potential dilutive effect of compensatory stock awards, it also recognizes the significant motivational and performance benefits that are achieved from making such awards.
Awards.” Assuming the presence of a quorum, the affirmative voteapproval of athe majority of the shares present, in person or by proxy, to vote at the 2014 Annual Meeting of Stockholdersvotes cast is necessary for approval of the Second Amendmentmaterial terms of the ICP for Section 162(m) purposes so that awards under the ICP that are intended to qualify as “performance-based compensation” within the 2005 Plan.meaning of Section 162(m) may be fully deductible by the Company and its subsidiaries.
Consequences of Failing to Approve the Proposal
Failure of the Company’s stockholders to approve this Proposalproposal will not affect the rights of existing award holders under the 2005 PlanICP or under any previously granted awards under the 2005 Plan; however,ICP. However, if this proposal is not approved, no future awards will be made under the ICP, and the Company maywill be required to reevaluate its compensation structure since adequate sharescompensation paid to Covered Employees in future years may not be available for grant indeductible by the future.Company or its subsidiaries to the extent it exceeds $1,000,000.
Summary of the Amended 2005 PlanICP
The followingA summary of the 2005 Plan, as amended byprincipal features of the First Amendment and the Second Amendment (the “Amended 2005 Plan”)ICP is provided below but does not purport to be a complete description of all of the provisions of the Amended 2005 Plan andICP. The summary below should be read in conjunction with, and is qualified in its entirety by reference to, the completefull text of (i) the 2005 Plan, which was filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on April 22, 2005, (ii)ICP, the First Amendment which was filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K on February 23, 2011 and (iii) the Second Amendment, each of which is attached to this Proxy Statement as Appendix A, and (ii) the Third Amendment, which, is attached to this proxy statementProxy Statement as Appendix A. The Amended 2005 Plan gives the Compensation Committee the ability to award stock options, stock appreciation rights (“SARs”), restricted stock (“Restricted Stock Awards”), restricted stock units (“Restricted Stock Units”) and performance award units, with vesting and other award provisions that provide effective incentives to Company employees and nonemployee directors and alignment of stockholder, management and director interests. Unless earlier terminated by actionB.
Purposes of the Company’s Board of Directors, the Amended 2005 Plan will terminate on December 31, 2019. Awards granted prior to the termination dateICP. The purposes of the Amended 2005 Plan will continue to be effective in accordance with their termsICP are to: (i) retain and conditions.
Persons Who May Participate. Any member ofattract qualified individuals by rewarding those practices which enhance the Board of Directors, who is not a current employee of the Company or one of its subsidiaries, and any current or prospective officer or employeefinancial performance of the Company and its subsidiaries, is eligibleare considered key to receive an award under the Amended 2005 Plan. OnlyCompany’s success; (ii) encourage teamwork among individuals who are employeesin various segments of the Company or one of its corporate subsidiaries are eligibleCompany; (iii) reward performance with pay that varies in relation to receive Incentive Options (defined below). The Compensation Committee determines in its discretion which eligible persons will receive awards under the Amended 2005 Plan. As of February 24, 2014, approximately 108 employees and 8 nonemployee directors were eligible to participate in the existing 2005 Plan.
Shares Subject to the Amended 2005 Plan. Subject to stockholder approval of the Second Amendment to the 2005 Plan and the adjustments described below, the total aggregate number of shares of the Company’s common stock that may be subject to awards under the Amended 2005 Plan, since the inception of the 2005 Plan, is 3,100,000. The shares issued pursuant to awards under the Amended 2005 Plan may be authorized and unissued shares or shares that the Company reacquired, including shares purchased in the open market. The number of shares considered issued under the Amended 2005 Plan equals the number of shares actually issued upon exercise or settlement of an award. Shares under the Amended 2005 Plan that (i) were subject to awards that were canceled, forfeited or settled in cash (rather than shares), or (ii) are delivered or deemed delivered to the Company in payment or satisfaction of the purchase price, exercise price or tax withholding obligation resulting from an award will be deemed returned to the pool of shares reserved for issuance under the Amended 2005 Plan and will be available for issuance pursuant to additional awards granted under the Amended 2005 Plan.
No participant may be granted awards under the Amended 2005 Plan covering more than 100,000 shares in any one calendar year, subject to certain anti-dilution and other adjustments. For the portion of any performance award units granted in any one calendar year to any participant that are denominated in dollars and are intended to qualify as “performance-based compensation” under Section 162(m), the maximum amount payable for the performance period is $2,000,000 times the number of years in the performance period. The maximum aggregate number of shares that may be issued pursuant to the exercise of Incentive Options granted under the Amended 2005 Plan is 2,200,000, subject to certain anti-dilution and other adjustments.
Administration. The Amended 2005 Plan will be administered by the Compensation Committee of the Board of Directors or another committee of two or more directors established by the Board of Directors from time to time. Under NASDAQ rules, members of the Compensation Committee are required to satisfy the NASDAQ’s standards for independence, subject to certain narrow exceptions. The Compensation Committee may delegate various functions to subcommittees or certain officers of the Company. Subject to the provisions of the Amended 2005 Plan, the Compensation Committee has the power to: (i) prescribe, amend and rescind rules and regulations relating to the Amended 2005 Plan and to define terms not otherwise defined therein, (ii) determine which persons are eligible to participate and to receive awards under the Amended 2005 Plan and the timing of any such awards, (iii) grant awards to participants and determine the terms and conditions thereof, including the number of shares subject to awards and the exercise or purchase price of such shares and the circumstances under which awards become exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events (including a change in control), or other factors, (iv) establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any award, (v) prescribe and amend the terms of the agreements or other documents evidencing awards made under the Amended 2005 Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by participants under the Amended 2005 Plan, (vi) determine whether, and the extent to which adjustmentsthe pre-established goals are required as a result of any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend (other than regular, quarterly cash dividends), (vii) interpretachieved; and construe(iv) ensure that the Amended 2005 Plan, any rules and regulationscompensation paid under the Amended 2005 Plan and the terms and conditions of any award granted thereunder, and to make exceptions to any such provisions in good faith andthis ICP can qualify for the benefit“performance-based compensation” exemption of the Company and (viii) make all other determinations deemed necessary or advisable for the administration of the Amended 2005 Plan.
Awards under the Amended 2005 Plan
Stock Options. Options granted under the Amended 2005 Plan may be either incentive stock options qualifying under Section 422 of the IRC (“Incentive Option”) or options which are not intended to qualify as incentive stock options (“Nonstatutory Option”)162(m). Under the terms of the Amended 2005 Plan, the exercise price for stock options must be equal to or greater than the fair market value of the Company’s common stock on the date of grant (and, in the case of an Incentive Option granted to a participant who owns stock possessing more than 10% of the combined voting power of all classes of stock of the Company, must be equal to or greater than 110% of the fair market value of the Company’s common stock on the date of grant). Stock options granted under the terms of the Amended 2005 Plan will not become exercisable earlier than one year from the date of grant (except upon a change in control or termination of employment due to death, disability or retirement), and options may be for a term of no more than 10 years (five years, in the case of an Incentive Option granted to a participant owning more than 10% of the Company’s voting power). Otherwise, the Compensation Committee has discretion to determine the number of shares subject to an option (subject to the Amended 2005 Plan’s stated limits), the vesting, expiration and forfeiture provisions for options, the restrictions on transferability of an option, and any other terms and conditions otherwise consistent with the Amended 2005 Plan. The exercise price of an option may be paid through various means acceptable to the Compensation Committee, including in cash or, to the extent allowed by the Compensation Committee, by delivering previously owned shares, by withholding shares deliverable upon the exercise of the option or by delivering to the Company the proceeds of shares of the Company’s stock issuable under an option. Other than in connection with a change in the Company’s capitalization, the Amended 2005 Plan prohibits repricing stock options without stockholder approval.
Stock Appreciation RightsAdministration. A stock appreciation right,The ICP is administered by a committee (the “ICP Committee”) of two or SAR, providesmore directors appointed by the rightBoard to administer the ICP. All members of the ICP Committee will be “outside directors” under Section 162(m). Subject to the monetary equivalentterms of the increaseICP, the ICP Committee has authority (i) to select employees to participate in the valueICP; (ii) to determine the size, terms and conditions of a specified numberawards under the ICP; (iii) to construe and interpret the ICP; and (iv) to make all other determinations which may be necessary or advisable for ICP administration. The Board has appointed the Compensation Committee to administer the ICP. All determinations of the Company’s shares overICP Committee shall be final, binding and conclusive upon all parties.
Eligibility to Participate. Each employee of the Company and its subsidiaries who, as of the last day of the applicable fiscal year of the Company, is a specified period of timeCovered Employee (“Executive Officer”) will be eligible and will participate in the ICP for the fiscal year. No later than 90 days after the rightend of each fiscal year, the ICP Committee will identify and certify each employee who is granted. SARs may be paid in stock, cash or a combination thereof. SARs may be granted either in tandeman Executive Officer for the fiscal year just ended.
Limitations on Awards. The ICP provides that that the maximum payout with or as a component of other awards granted under the Amended 2005 Plan or not in conjunction with other awards and may, but need not, relaterespect to a specific option. SARs are generally subjectan award payable to the same terms and limitations as options or, when granted tandem to other awards, to the same terms as those other awards. Other thanany one Executive Officer in connection with a changeperformance in any one performance period shall not exceed $3,000,000 times the number of years in the Company’s capitalization, SARs cannotperformance period. Section 162(m) requires the ICP to include an individual award limit with respect to any performance period. This limit is not intended to suggest that the amount of compensation payable to any Executive Officer will be repriced without stockholder approval.the maximum set forth in the ICP.
Restricted Stock and Restricted Stock UnitsAwards under the ICP. A Restricted Stock Award is an award of shares, and Restricted Stock Units are an award of units denominated in shares and payable in shares or For each fiscal year, the ICP Committee may grant cash in each case,awards under the grant, issuance, retention and/or vesting of which is subjectICP to such performance and other conditions as are specified by the Compensation Committee. The Compensation Committee has discretionExecutive Officers pursuant to determine the terms of any Restricted Stockthe ICP.
Establishment of Individual Award Opportunities. Not later than 90 days after the beginning of each fiscal year, the ICP Committee will adopt one or Restricted Stock Unit award, including the number of shares subject to such award (subject to the Amended 2005 Plan’s stated limits), the price (if any) paid for shares subject to a Restricted Stock Award or Restricted Stock Units, and the minimum period over which a Restricted Stock Award or Restricted Stock Units may vest or be settled, which must cover at least a three-year period (except in the event of a change in control or upon the participant’s death, disability or retirement) or, if the grant, issuance, vesting or retention of the award is contingent upon satisfaction of amore performance criteria, ameasures, establish written performance period of at least one year. Unless otherwise determined by the Compensation Committee, participants holding shares subject to a Restricted Stock Award may exercise full voting rightsgoals with respect to the shares during the restriction periodeach selected performance measure and will be entitled to receive all dividend and other distributions with respect to the shares, subject to any requirement imposed by the Compensation Committee that such dividend or distribution amounts be reinvested in additional shares subject to a Restricted Stock Award or remain subject to the same restrictions as the Restricted Stock Award. Holders of Restricted Stock Units will be entitled to receive dividend equivalents only to the extent provided by the Compensation Committee.
Performance Award Units. The Amended 2005 Plan authorizes the grant of performance award units, pursuant to which participants are awarded bonus opportunities that are paid contingent upon the achievement of performance criteria specified by the Compensation Committee. The Compensation Committee has discretion to determine the terms of any performanceindividual award unit, includingopportunities for each Executive Officer that fiscal year. For example, for a particular fiscal year, the maximum amount payable (subject to the Amended 2005 Plan’s stated limits), the performance period (which is generally at least one year), the performance criteria (which may be based on financial performance and/or personal performance evaluations) and level of achievement versus these criteria, the timing of any payment, restrictions on a performance award unit prior to actual payment, forfeiture provisions and any other terms and conditions consistent with the Amended 2005 Plan. The CompensationICP Committee may specifyselect the percentage of the target performance award unit that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) using “qualifying performance criteria” described below. Performance award units are payable in cash or shares of common stock as determined by the Compensation Committee. Notwithstanding satisfaction of any performance goals, the number of shares issued under or the amount paid under an award may, to the extent specified in the award agreement, be reduced by the Compensation Committee on the basis of such further considerations as the Compensation Committee in its sole discretion shall determine.
Qualifying Performance Criteria. Qualifying performance criteria will be any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured either quarterly, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous year’s results or to a designated comparison group, in each case as specified by the Compensation Committee in the award: (i) pretax income, (ii) net income, (iii) earnings per share, (iv) revenues, (v) expenses, (vi) return on assets, (vii) return on equity, (viii)Company’s return on capital employed (ix)as a performance measure, establish various levels of Company return on investment, (x)capital employed as performance goals and link each such performance goal to an individual award opportunity (i.e., how much cash compensation an Executive Officer is eligible to earn). The ICP Committee will set a target award for each Executive Officer each fiscal year and may establish ranges of attainment of the performance goals that correspond to various levels of individual award opportunities. The performance measures, performance goals and individual award opportunities may vary among Executive Officers and from year to year.
Performance Measures. The ICP provides that the performance measures that may serve as determinants of an Executive Officer’s individual award opportunities are limited to (1) earnings per share; (2) revenues; (3) cash flow; (4) operating cash flow; (5) cash flow return; (6) return on net assets; (7) return on assets; (8) return on investment; (9) return on capital employed; (10) return on equity; (11) economic value added; (12) operating profit margin; (13) contribution margin; (14) net income; (15) net income per share; (16) pretax earnings or income; (17) pretax earnings before interest, depreciation and amortization; (18) pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items; (19) total stockholder return; (20) debt; (21) market share; (22) expenses; (23) net profit margin, (xi)margin; (24) capitalization; (25) change in the fair market value of Common Stock; (26) operating profit margin, (xii) operating cash flow, (xiii) total shareholder return, (xiv) capitalization, (xv) liquidity, (xvi)income; (27) liquidity; (28) results of customer satisfaction surveys and (xvii) safety or productivity improvement. The Compensationimprovement; and (29) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the ICP Committee, including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. For purposes of clarity, such performance goals may be determined solely by reference to the performance of the Company, its subsidiaries, or a division or unit of the Company or its subsidiaries, or based upon comparisons of any of the performance measures relative to other companies.
Setting Performance Goals. In establishing a performance goal, the ICP Committee may appropriately adjust any evaluationexclude the impact of performance under a qualifying performance criteria to exclude any of the following events that occurs during a performance period: (a)or occurrences which the ICP Committee determines should appropriately be excluded: (i) any amounts accrued by the Company or its subsidiaries pursuant to management bonus plans or cash profit sharing plans and related employer payroll taxes for the fiscal year; (ii) any discretionary or matching contributions made to the savings and deferred profit-sharing plan or deferred compensation plan for the fiscal year; (iii) asset write-downs, (b)write-downs; (iv) litigation, claims, judgments or settlements, (c)settlements; (v) the effect of changes in tax law or other such laws or regulations affecting reported results, (d) any amounts accrued by the Company or its subsidiaries under any incentive or cash profit-sharing plans and related employer payroll taxes, (e)results; (vi) accruals for reorganization and restructuring programs, (f)programs; (vii) any extraordinary, unusual or nonrecurring items as determined by the Committee in its discretion, provided such item is described, at the time the performance goal is established, in a manner that is objectively determinable; (viii) any
unusual or nonrecurring items as described in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) topic(s) that replaced or were formerly known as Accounting Principles Board (“APB”) Opinion No. 30, as amended or superseded, (g) any changes in accounting principle as defined in the ASCAccounting Standards Codification topic(s) that replaced or were formerly known as FASB Statement 154, as amended or superseded, (h)superseded; (ix) any loss from a discontinued operation as described in the ASCAccounting Standards Codification topic(s) as of December 31, 2013 that replaced or were formerly known as FASB Statement 144, as amended or superseded, (i)superseded; (x) goodwill impairment charges, (j)charges; (xi) operating results for any business acquired during the plan year and (k)performance period; (xii) third party expenses associated with any acquisition by the Company or any subsidiary.subsidiary; and (xiii) settlement accounting charges incurred that relate to qualified defined benefit pension plans.
TransferabilityAdjustment of Awards. To the extent it would not adversely impact the ability of an award under the ICP to qualify as “performance-based compensation,” in the event of any change in the Company’s capitalization, such as a stock split, or a corporate transaction, such as a merger or consolidation, or any reorganization or liquidation of the Company, the Company may, in its sole discretion, equitably adjust the performance measures, performance goals and individual award opportunities to prevent dilution or enlargement of rights.
Unless otherwise provided forPayment of Final Awards. An Executive Officer’s final award will be based on (i) the Executive Officer’s target award, (ii) the potential individual award opportunities established by the CompensationICP Committee, awardsand (iii) the actual performance of the Company in relation to the pre-established performance goals. Following the completion of each fiscal year, the ICP Committee will certify in writing whether the performance goals were satisfied. Executive Officers will not receive any payout under the Amended 2005 PlanICP when the minimum performance goals are generally only transferable (i) bynot met. As soon as practicable after the end of the fiscal year, but in any event no later than March 15 of the year following such fiscal year, final awards will be computed for each Executive Officer and will, subject to applicable withholding requirements, be paid in a recipient’s last will and testament andlump sum in cash. The ICP Committee may not exercise discretion to increase the actual award earned during a fiscal year by the applicable lawsExecutive Officer (“Final Award”), except to the extent that counsel advises the ICP Committee that Section 162(m) will not adversely affect the deductibility for federal income tax purposes of descentany amount paid under the ICP by permitting greater discretion or flexibility with respect to award opportunities for Executive Officers, then the ICP Committee may, in its sole discretion, apply such greater discretion or flexibility.
Subject to the terms of the VSP, a participant may defer the receipt of all or some of his award. In addition, if all or any portion of a participant’s award is not deductible by the Company or its subsidiaries under Section 162(m), the ICP Committee shall require that payment of the nondeductible portion of such award be deferred until the earlier of the Executive Officer’s death, disability, a change in control, or 185 days after termination of the Executive Officer’s employment. The ICP Committee will determine rates of interest on such deferred amounts.
Termination of Employment. An Executive Officer must generally be employed on the date of payment in order to receive cash payment in settlement of his award. However, if an Executive Officer is terminated prior to that date due to death, disability or retirement, the officer will still receive payment of his or her final award, provided, in the case of retirement, the Executive Officer was a participant in the ICP for at least 90 days during the fiscal year. In the event of the Executive Officer’s termination for any other reason, the ICP Committee has the discretion to pay a prorated award to the Executive Officer.
Amendment and distribution, (ii) pursuantTermination. The Board or the ICP Committee may modify, amend, suspend or terminate the ICP at any time. No such modification, amendment, suspension or termination may, without a participant’s consent, reduce the participant’s right to a domestic relations orderpayment or (iii)distribution under the ICP to immediate family members or trusts or partnerships solely forwhich he is entitled. Certain material amendments to the benefit of the Participant’s immediate family members. Incentive OptionsICP are transferable only as provided in (i) above.subject to stockholder approval.
Tax Withholding. A participant must satisfy any applicable federal, state, local or foreign tax withholding obligations that arise due to an award made under the Amended 2005 Plan, and the Compensation Committee will not be required to issue any shares or make any payment until the participant satisfies those obligations in a manner satisfactory to the Company. The Compensation Committee may permit tax withholding obligations to be satisfied by having the Company withhold a portion of the shares that would otherwise be issued to the participant under an award or by allowing the participant to tender previously acquired shares.
Corporate Events. In the event that the number of shares of common stock shall be increased or decreased through reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend (other than regular, quarterly cash dividends) or otherwise, the Compensation Committee may, in its discretion, adjust the number and kind of shares available for issuance under the Amended 2005 Plan, the number and kind of shares subject to outstanding awards and the exercise price of awards and the number and kind of shares subject to the various limitations under the Amended 2005 Plan. The Compensation Committee has the authority to determine the effect, if any, that a change in control (as defined in the Amended 2005 Plan) or termination of employment following a change in control would have on outstanding awards under the Plan.
Amendments. The Board of Directors may terminate, amend or discontinue the Amended 2005 Plan and the Compensation Committee may amend or alter any agreement or other document evidencing an award made under the Amended 2005 Plan, provided that no action may be taken by the Board of Directors (except those described earlier in the “Corporate Events” section above) without the approval of the stockholders to: (i) increase the maximum number of shares that may be issued under the Amended 2005 Plan, (ii) permit granting of options at less than fair market value, (iii) reduce the exercise price of outstanding options, (iv) extend the term of the Amended 2005 Plan, (v) change the class of individuals eligible for the Amended 2005 Plan, (vi) otherwise amend the Amended 2005 Plan in any manner requiring stockholder approval by law or under the NASDAQ National Market listing requirements or (vii) increase the individual annual award limitations. In addition, no amendment of the Amended 2005 Plan or any award granted thereunder may impair the rights of any award holder without his or her consent (unless the Compensation Committee determines prior to any change in control that the amendment or alteration is required or advisable in certain situations).
Federal Income Tax Consequences
The following discussion is for general information only and is intended to summarize briefly the U.S. federal tax consequences to participants arising from participation in the Amended 2005 Plan.ICP. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of participants in the Amended 2005 PlanICP may vary depending on theeach participant’s particular situation and may, therefore, may be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state or local tax consequences. Participants are advised to consult with a tax advisor concerning the specific tax consequences of participating in the ICP.
Incentive Options; Nonstatutory Options; SARsCash Awards. Participants will not realize taxable income upon the grant of a Nonstatutory Option or an SAR. Upon the exercise of a Nonstatutory Option or SAR, a participant An Executive Officer will recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of (i) the amount of cash and the fair market value of the common stock received, over (ii) the exercise price (if any) paid therefore. A participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of an SAR, or pursuant to the cash exercise of a Nonstatutory Option, that equals the fair market value of such shares on
the date of exercise. Subject to the discussion under “Federal Income Tax Consequences – Tax Code Limitations on Deductibility” below, the Company or its subsidiary (as applicable) will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules.
Participants eligible to receive an Incentive Option will not recognize taxable income on the grant of an Incentive Option. Upon the exercise of an Incentive Option, a participant will not recognize taxable income, although the excess of the fair market value of the shares of common stock received upon exercise of the Incentive Option (“ISO Stock”) over the exercise price will increase the alternative minimum taxable income of the participant, which may cause such participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an Incentive Option would be allowed as a credit against the participant’s regular tax liability in a later year to the extent the participant’s regular tax liability is in excess of the alternative minimum tax for that year.
Upon the disposition of ISO Stock that has been held for the requisite holding period (generally, at least two years from the date of grant and more than one year from the date of exercise of the Incentive Option), a participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the participant for the ISO Stock. However, if a participant disposes of ISO Stock that has not been held for the requisite holding period (a “Disqualifying Disposition”), the participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Stock at the time of exercise of the Incentive Option (or, if less, the amount realized in the case of an arm’s-length disposition to an unrelated party) exceeds the exercise price paid by the participant for such ISO Stock. A participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Stock on the exercise date. If the exercise price paid for the ISO Stock exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss.
Generally, the Company will not be entitled to any federal income tax deduction upon the grant or exercise of an Incentive Option, unless a participant makes a Disqualifying Disposition of the ISO Stock. If a participant makes a Disqualifying Disposition, the Company will then, subject to the discussion below under “Federal Income Tax Consequences – Tax Code Limitations on Deductibility,” be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a participant under the rules described in the preceding paragraph.
Under current rulings, if a participant transfers previously held shares of common stock (other than ISO Stock that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of a Nonstatutory Option or Incentive Option, no additional gain will be recognized on the transfer of such previously held shares in satisfaction of the Nonstatutory Option or Incentive Option exercise price (although a participant would still recognize ordinary compensation income upon exercise of an Nonstatutory Option in the manner described above). Moreover, that number of shares of common stock received upon exercise which equals the number of shares of previously held common stock surrendered therefore in satisfaction of the Nonstatutory Option or Incentive Option exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains holding period of the previously held shares of common stock surrendered in satisfaction of the Nonstatutory Option or Incentive Option exercise price. Any additional shares of common stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the participant, plus the amount of compensation income recognized by the participant under the rules described above.
The Amended 2005 Plan allows the Compensation Committee to permit the transfer of awards in limited circumstances. See “Summary of the Amended 2005 Plan – Transferability.” For income and gift tax purposes, certain transfers of Nonstatutory Options and SARs generally should be treated as completed gifts, subject to gift taxation.
The IRS has not provided formal guidance on the income tax consequences of a transfer of Nonstatutory Options (other than in the context of divorce) or SARs. However, the IRS has informally indicated that after a transfer of stock options (other than in the context of divorce pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and FICA/FUTA taxes will be collectible at the time the transferee exercises the stock options.
In addition, if a participant transfers a vested Nonstatutory Option to another person and retains no interest in or power over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the gift is to a grandchild or later generation) equals the value of the Nonstatutory Option at the time of the gift. The value of the Nonstatutory Option may be affected by several factors, including the difference between the exercise price and the fair market value of the stock, the potential for future appreciation or depreciation of the stock, the time period of the Nonstatutory Option and the illiquidity of the Nonstatutory Option. The transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of $14,000 (for 2014) per donee, (ii) the transferor’s lifetime exclusion or (iii) the marital or charitable deduction rules. The gifted Nonstatutory Option will not be included in the participant’s gross estate for purposes of the federal estate tax or the generation-skipping transfer tax.
This favorable tax treatment for vested Nonstatutory Options has not been extended to unvested Nonstatutory Options. Whether such consequences apply to unvested Nonstatutory Options is uncertain, and the gift tax implications of such a transfer are a risk the transferor will bear upon such a disposition. The IRS has not specifically addressed the tax consequences of a transfer of SARs.
Restricted Stock Awards; Restricted Stock Units; Cash Awards. A participant will recognize ordinary compensation income upon receipt of cash pursuant to a cashan award or, if earlier, at the time the cash is otherwise made available for the participantExecutive Officer to draw upon. A participant will not have taxable income at the time of grant of a stock award in the form of Restricted Stock Units denominated in common stock, but rather, will generally recognize ordinary compensation income at the time he/she receives cash or common stock in settlement of the Restricted Stock Units in an amount equal to the cash or the fair market value of the common stock received. In general, a participant will recognize ordinary compensation income as a result of the receipt of common stock pursuant to a Restricted Stock Award in an amount equal to the fair market value of the common stock when such stock is received; provided that, if the stock is not transferable and is subject to a substantial risk of forfeiture when received, a participant will recognize ordinary compensation income in an amount equal to the fair market value of the common stock (i) when the common stock first becomes transferable or is no longer subject to a substantial risk of forfeiture, in cases where a participant does not make a valid election under section 83(b) of the IRC or (ii) when the common stock is received, in cases where a participant makes a valid election under section 83(b) of the IRC.
A participant will be subject to withholding for federal, and generally for state and local, income taxes at the time he/shehe recognizes income under the rules described above with respect to common stock or cash received. Dividends that are received by a participant prior to the time that the common stock is taxed to the participant under the rules described in the preceding paragraph are taxed as additional compensation, not as dividend income. The tax basis in the common stock received by a participant will equal the amount recognized by him/her as compensation income under the rules described in the preceding paragraph, and the participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse.
Subject to the discussion immediately below, the Company or one66
Tax Code Limitations on Deductibility. In order for For the amounts described above to be deductible by the Company (or by its subsidiaries), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
The Company’s ability (or(and the ability of one of its subsidiaries, as applicable)subsidiaries) to obtain a deduction for future payments under the Amended 2005 PlanICP could also be limited by the golden parachute payment rules of Section 280G of the IRC, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.
employer corporation. Finally, the Company’s ability (or(and the ability of one of its subsidiaries, as applicable)subsidiaries) to obtain a deduction for amounts paid under the Amended 2005 PlanICP could be limited by Section 162(m) of the IRC,, which limits the deductibility, for federal income tax purposes, of compensation paid to Covered Employees of a publicly traded corporation to $1,000,000 with respect to any such officer during any taxable year of the corporation. However, an exception applies to this limitation in the case of certain performance-based compensation. In order to exempt performance-based compensation from the $1,000,000 deductibility limitation, the grant or vesting of the award relating to the compensation must be based on the satisfaction of one or more performance goals as selected by the
Compensation Committee. Performance-based awards intended to comply with Section 162(m) may not be granted in a given period if such awards relate to shares of common stock which exceed a specified limitation or, alternatively, the performance-based awards may not result in compensation, for a participant, in a given period which exceeds a specified limitation. If the Amended 2005 Plan is approved at the 2014 Annual Meeting of Stockholders, a participant who receives an award or awards intended to satisfy the performance-based exception to the $1,000,000 deductibility limitation may not receive performance-based awards relating to more than 100,000 shares of common stock or, with respect to awards not related to shares of common stock, $2,000,000, in any given fiscal year. Although the Amended 2005 PlanICP has been drafted with the intent to satisfy the requirements for the performance-based compensation“performance-based compensation” exception to this $1,000,000 deduction limit with respect to awards under the ICP to Covered Employees, the Company may determine that it is in its best interestsinterest not to satisfy the requirements for the exception. See “Summary of the Amended 2005 Plan – Awards under the Amended 2005 Plan – Performance Award Units” and “Summary of the Amended 2005 Plan – Awards under the Amended 2005 Plan – Qualifying Performance Criteria.”
Application of Section 409A of the IRC. Section 409A of the IRC (“Section 409A”) imposes an additional 20% tax and interest on an individual receiving nonqualified deferred compensation under a plan that fails to satisfy certain requirements. For purposes of Section 409A, “nonqualified deferred compensation” includes certain performance award programs. Generally speaking, Section 409A does not apply to incentive awards that are paid at the time the award vests. Awards made pursuant to the ICP are designed with the intent that they be exempt from the application of Section 409A.
The above summary relates to U.S. federal income tax consequences only and applies to U.S. citizens and foreign persons who are U.S. residents for U.S. federal income tax purposes.
New PlanICP Benefits
A summary of the material features of the Amended 2005 Plan, including the class of persons eligible to participate therein and the number of persons in such class, is included above under the title “Summary of Amended 2005 Plan.”
The future awards, if any, that will be made to eligible personsExecutive Officers under the Amended 2005 PlanICP are subject to the discretion of the CompensationICP Committee and are dependent on the attainment of performance goals, and thus the Company cannot currently determine the benefits or number of shares subject to awardsamounts that may be granted or paid to its Executive Officers in the future to its executive officers, employees and directors under the Amended 2005 Plan.ICP. Therefore, the New Plan Benefits Tabletable is not provided.
The Company did make its annual equity awards under the 2005 Plan for 2013 in November 2013 to the Named Executive Officers, nonemployee directors, and to its other eligible employees. The grants to the Named Executive Officers are reflected in the “2013 Grants of Plan-Based Awards” table that can be found on page 42 of this proxy statement. The 2013 grant to the nonemployee directors is reflected in footnote 2 to the Director Compensation Table. On February 24, 2014, the closing price of the Company’s common stock was $33.40 per share. As of February 24, 2014, no stock options have been granted under the 2005 Plan. The 2013 grants do not qualify as performance-based compensation under Section 162(m) and could be non-deductible in whole or in part at the date in which such deduction would otherwise be available to the Company.
Vote Required and Board Recommendation
Approval of the Second Amendment to the 2005 Plan, which (i) increases the number of shares available for future issuances under the 2005 Plan by 900,000 shares to an aggregate of 3,100,000 total shares and (ii) extends the termmaterial terms of the Amended 2005 Plan by changing the final date on which awards may be granted under the Amended 2005 Plan from April 20, 2015 to December 31, 2019,ICP for Section 162(m) purposes requires the affirmative voteapproval of the holders of a majority of the total number of shares of common stock present in person or by proxy and entitled to vote on the matter.votes cast. For these purposes, abstentions and broker non-votes are not treated as entitled to vote.votes cast. See “Voting Shares – Other Matters” on page 6.4. Unless marked to the contrary, proxies received will be voted FOR approval. The Board of Directors believes strongly that the approval of the Second Amendment to the 2005 Plan is essential to the Company’s continued success. For the reasons stated above, the stockholders are being asked to approve this Proposal.
Proposal V. Approval of Material Plan Terms of the 2005 Ownership
Incentive Plan, As Amended, for Purposes of Complying with the
Requirements of Section 162(m) of the Internal Revenue Code
The Board recommends a vote “FOR” Proposal V.
Background and Purpose of the Proposal
In addition to the Second Amendment to the 2005 Plan, the Board of Directors is also requesting that stockholders reapprove the material terms of the Amended 2005 Plan so that certain designated awards under the Amended 2005 Plan qualify for exemption from the deduction limitations of IRC Section 162(m). As discussed in Proposal IV above, under Section 162(m), the federal income tax deductibility of compensation paid to the Company’s Chief Executive Officer and three other most highly compensated officers (other than the Company’s Chief Executive Officer or Chief Financial Officer) determined pursuant to the executive compensation disclosure rules under the Securities Exchange Act of 1934 (“Covered Employees”) may be limited to the extent such compensation exceeds $1,000,000 in any taxable year. However, the Company may deduct compensation paid to its Covered Employees in excess of that amount if it qualifies as “performance-based compensation” as defined in Section 162(m). In addition to certain other requirements, in order for awards under the Amended 2005 Plan to constitute “performance-based compensation,” the material terms of the Amended 2005 Plan must be disclosed to and approved by the Company’s stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which stockholders previously approved the 2005 Plan, or at the time of a material amendment to the plan, whichever occurs first. Because the Company is seeking stockholder approval in Proposal IV of a material amendment to the plan, we are also seeking this separate stockholder approval for purposes of Section 162(m).
Under the Section 162(m) regulations, the material terms of the Amended 2005 Plan are (i) the maximum amount of compensation that may be paid to a participant under the Amended 2005 Plan in any fiscal year, (ii) the employees eligible to receive compensation under the Amended 2005 Plan and (iii) the business criteria on which the performance goals are based. The Company intends that awards under the Amended 2005 Plan continue to qualify for exemption from the deduction limitations of Section 162(m). Accordingly, the Company is asking its stockholders to reapprove the material terms of the Amended 2005 Plan for Section 162(m) purposes so that awards under the Amended 2005 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) will be fully deductible by the Company. The material terms of the Amended 2005 Plan are disclosed above in Proposal IV as follows: (i) the maximum amount of compensation is described in “Summary of the Amended 2005 Plan – Shares Subject to the Amended 2005 Plan,” (ii) the eligible employees are described in “Summary of the Amended 2005 Plan – Persons Who May Participate” and (iii) the business criteria are described in “Summary of the Amended 2005 Plan – Awards under the Amended 2005 Plan – Qualifying Performance Criteria.”
Consequences of Failing to Approve the Proposal
Failure of the Company’s stockholders to approve this Proposal will not affect the rights of existing award holders under the Amended 2005 Plan or under any previously granted awards under the Amended 2005 Plan. However, if this Proposal is not approved, the Company does not plan to make any future performance based awards to Covered Employees under the Amended 2005 Plan, and the Company will be required to reevaluate its compensation structure since compensation paid to Covered Employees in future years may not be deductible by the Company to the extent it exceeds $1,000,000.
Vote Required and Board Recommendation
Approval of the material terms of the Amended 2005 Plan for Section 162(m) purposes requires the affirmative vote of the holders of a majority of the total number of shares of common stock present in person or by proxy and entitled to vote on the matter. For these purposes, broker non-votes are not treated as entitled to vote. See “Voting Shares – Other Matters” on page 6. Unless marked to the contrary, proxies received will be voted FOR approval. The Board of Directors believes strongly that the approval of the material terms of the Amended 2005 PlanICP for purposes of Section 162(m) arepurposes is essential to the Company’s continued success. For the reasons stated above, the stockholders are being asked to approve this Proposal.proposal.
The Board does not know of any matters that will be presented for action at the 20142016 Annual Meeting other than those described above and matters incident to the conduct of the meeting. If, however, any other matters not presently known to management should come before the 20142016 Annual Meeting, it is intended that the shares represented by the accompanying proxy will be voted on such matters in accordance with the discretion of the holders of such proxy.
Proxies may be solicited by Directors, officers or employees of the Company or its subsidiaries in person, by telephone, telegram or other means. However, no payment will be made to any of them for their solicitation activities. The costs of solicitation, including the standard charges and expenses of banks, brokerage houses, other institutions, nominees and fiduciaries for preparing, assembling and forwarding proxy materials to and obtaining proxies from beneficial owners of shares held of record by such persons, will be borne by the Company.
Arkansas BestArcBest Corporation stockholders may communicate with the Board, or any individual member of the Board, by sending the communication as follows:
Board of Directors (or Individual Member’s Name)
c/o Corporate Secretary
Arkansas BestArcBest Corporation
P.O. Box 10048
Fort Smith, AR 72917-0048
Communications addressed to the Board will be sent to the Chairman of the Board.
All communications to the Board, or an individual member, will be opened and reviewed by the Corporate Secretary prior to forwarding to the Board or individual member of the Board. This review will facilitate a timely review of any matters contained in the communication if, for any reason, the Board member is unavailable to timely review the communication.
To permit the Company and its stockholders to deal with stockholder proposals in an informed and orderly manner, the Company’s bylaws establish an advance notice procedure. Pursuant to the Company’s bylaws, for a proposal that is not intended to be included in the Company’s proxy statement to be properly and timely submitted as business to come before the 20152017 Annual Meeting, the stockholder must submit a written notice (“stockholder notice”) that must be received by the Corporate Secretary of the Company at the address abovepreviously shown not less than 90 days nor more than 120 days prior to the first anniversary of the 20142016 Annual Meeting. In the event that the date of the 20152017 Annual Meeting is more than 30 days before or more than 60 days after the anniversary date of the 20142016 Annual Meeting, to be timely received, the proposal must be received by the Corporate Secretary of the Company not less than 100 days nor more than 120 days prior to the date of the 20152017 Annual Meeting, and in the event that the first public announcement of the date of the 20152017 Annual Meeting is less than 100 days prior to the date of such meeting, the proposal must be received by the Corporate Secretary of the Company by the 10th day following the date of the public announcement. Such stockholder notices must set forth as to each matter the stockholder proposes to bring before the Annual Meeting, with certain information specified in the bylaws including, among other things: (1) as to the stockholder giving the notice and each Stockholder Associated Person (a) the name and address, including business address and telephone number, of such persons, (b) the class and number of shares of the Company which are owned beneficially and of record by such persons, (c) any option, warrant or other derivative security owned by such persons, (d) any agreement pursuant to which such persons have the right to vote any shares of the Company, (e) any other information relating to such persons required to be disclosed in a proxy statement in connection with the solicitation of proxies for the proposal and (f) a description of all material agreements and understandings between such persons and any other person in connection with the proposal of such business by the stockholder; (2) a brief description of the business desired to be brought before the meeting, including the exact text of any proposal to be presented for adoption; and (3) the reasons for conducting such business at the meeting. “Stockholder Associated Person” of any stockholder means (i) any beneficial owner of shares of stock of the corporation on whose behalf any proposal or nomination is made by such stockholder; (ii) any affiliates or associates of such stockholder or any beneficial owner described in the foregoing clause (i); and (iii) each other person with whom any of the persons described in the foregoing clauses (i) and (ii) either is acting in concert with respect to the corporation or has any agreement, arrangement or understanding (whether written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy given to such person in response to a public proxy solicitation made generally by such person to all stockholders entitled to vote at any meeting) or disposing of any capital stock of the corporation or to cooperate in obtaining, changing or influencing the control of the corporation (except independent financial, legal and other advisors acting in the ordinary course of their respective businesses). For information regarding the required information in the stockholder notice, contact the Corporate Secretary’s office at info@arkbest.cominfo@arcb.com or 479-785-6000.
Notwithstanding the above provisions, pursuant to Rule 14a-8 under the Securities Exchange Act, of 1934, any stockholder who wishes to submit a proposal for inclusion in the Company’s proxy statement and proxy relating to the 20152017 Annual Meeting must deliver such proposal to the Company no later than the close of business on November 19, 2014.21, 2016. Proposals should be addressed to Corporate Secretary, Arkansas BestArcBest Corporation, P.O. Box 10048, Fort Smith, AR 72917-0048. In order to prevent controversy about the date of receipt of a proposal, which must be no later than the close of business on November 19, 2014,21, 2016, the Company strongly recommends that any stockholder wishing to present a proposal submit the proposal by certified mail, return receipt requested.
Upon written request, the Company will provide stockholders with a copy of its 20132015 Annual Report on Form 10-K filed with the SEC (including financial statements and schedules thereto), without charge. Written requests should be directed to: David Humphrey, Vice President–Investor Relations, Arkansas BestArcBest Corporation, P.O. Box 10048, Fort Smith, Arkansas 72917-0048.
Certain stockholders sharing an address may have received only one copy of this Proxy Statement and the 20132015 Annual Report on Form 10-K. The Company will promptly deliver, upon oral or written request, a separate copy of thethis Proxy Statement and the 20132015 Annual Report on Form 10-K to a stockholder at a shared address to which only a single copy of such documents was delivered. Separate copies may be requested by contacting your broker, bank or other holder of record or by contacting the Company at the following address or telephone number:
Arkansas BestArcBest Corporation
Attention: Vice President–Investor Relations
P.O. Box 10048
Fort Smith, Arkansas 72917-0048
Telephone: 479-785-6000
If you want to receive separate copies of the Company’s Annual Report on Form 10-K and Proxy Statementproxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you can make these requests through the following sources:
Stockholders of record should contact the Company’s Corporate Secretary in writing at Arkansas BestArcBest Corporation, P.O. Box 10048, Fort Smith, Arkansas 72917-0048 or by telephone at 479-785-6000.
Stockholders who are beneficial owners should contact their bank, broker or other nominee record holder or contact Broadridge in writing at Broadridge, Attention: Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or by telephone at 800-542-1061.
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Your vote is important. Whether or not you plan to attend the meeting, we hope you will vote promptly: by Internet, by telephone or by signing, dating and returning the enclosed proxy card. |
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| MICHAEL R. JOHNS | |||
Date: | Secretary |
ARKANSAS BEST CORPORATION
EXECUTIVE OFFICER
ANNUAL INCENTIVE COMPENSATION PLAN
As Established Effective January 1, 2005
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1ESTABLISHMENT OF THE PLAN
Arkansas Best Corporation, a Delaware corporation, hereby establishes an annual incentive compensation plan to be known as the “Executive Officer Annual Incentive Compensation Plan” (the “Plan”), as set forth in this document. The Plan permits annual cash awards to Executive Officers of the Company and Subsidiaries, based on the achievement of pre-established performance goals. The Plan shall become effective as of January 1, 2005 (the “Effective Date”) and shall remain in effect until terminated as provided in Section 11 herein.
1.2PURPOSE
The purposes of the Plan are to: (a) retain and attract qualified individuals by rewarding those practices which enhance the financial performance of the Company; (b) encourage teamwork among Executive Officers in various segments of the Company; (c) reward performance with pay that varies in relation to the extent to which the pre-established goals are achieved; and (d) ensure that the compensation paid under this Plan qualifies for the “performance based compensation” exemption under Code Section 162(m).
SECTION 2. DEFINITIONS
The following terms shall have the meanings set forth below whenever used in this document and, when the defined meaning is intended, the term is capitalized:
2.1 “ABC” means Arkansas Best Corporation.
2.2 “BASE SALARY” means, as to any specific Plan Year, an Executive Officer’s base salary paid in the fiscal year for which the annual incentive is earned. Base salary shall not be reduced by any voluntary salary reductions or any salary reduction contributions made to any salary reduction plan, defined contribution plan or other deferred compensation plans of the Company.
2.3 “BOARD” OR “BOARD OF DIRECTORS” means the ABC Board of Directors.
2.4 “CHANGE IN CONTROL” means, unless the Committee or the Board provides otherwise, the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding Shares (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions will not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction that constitutes a Merger of Equals as defined in subsection (iii) of this Section 2(d).
(ii) In any 12-month period, the individuals who, as of the beginning of the 12-month period, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the
ProposedAppendix A
directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors.
(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless such Business Combination constitutes a Merger of Equals. A Business Combination will constitute a “Merger of Equals” if, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Resulting Corporation”) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Resulting Corporation and its affiliates or any employee benefit plan [or related trust] of the Resulting Corporation and its affiliates) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding shares of common stock of the Resulting Corporation or the combined voting power of the then outstanding voting securities of the Resulting Corporation except to the extent that such ownership existed with respect to the Company prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the Resulting Corporation (the “Resulting Board”) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or
(iv) The sale or other disposition of all or substantially all of the assets of the Company to any Person, other than a transfer to (A) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company or (B) any corporation pursuant to a transaction that constitutes a Merger of Equals as defined in subsection (iii) of this Section 2(d).
(v) A complete liquidation or dissolution of the Company.
Notwithstanding anything herein to the contrary, in no event shall amounts in respect of Awards that, as determined by the Committee in its sole discretion, provide for the deferral of compensation, be distributed upon a Change in Control prior to the occurrence of either a “change in the ownership or effective control” of the Company or in the “ownership of a substantial portion of the assets” of the Company within the meanings ascribed to such terms in Treasury Department regulations or other guidance issued under Section 409A of the Code.”
2.5 “CODE” means the Internal Revenue Code of 1986, as amended.
2.6 “COMMITTEE” means a committee of two (2) or more individuals, all of whom shall be “outside directors” within the meaning of the regulations under Code Section 162(m), appointed by the Board to administer the Plan, pursuant to Section 3 herein.
2.7 “COMPANY” means Arkansas Best Corporation, a Delaware corporation, (including, as appropriate, any and all Subsidiaries) and any successor thereto.
2.8 “DISABILITY” means a physical or mental condition resulting from bodily injury, disease or mental disorder, which constitutes a disability under the terms of the Company’s Short Term Disability Policy.
2.9 “EFFECTIVE DATE” means the date the Plan becomes effective, as set forth in Section 1.1 herein.
2.10 “EMPLOYEE” means a full-time, salaried employee of the Company or a Subsidiary.
2.11 “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
SecondAppendix A
2.12 “EXECUTIVE OFFICER” means an Employee who, as of the last day of the applicable Plan Year, is covered by the compensation limitations of Code Section 162(m) or the regulations issued thereunder.
2.13 “FINAL AWARD” means the actual award earned during a Plan Year by an Executive Officer.
2.14 “INDIVIDUAL AWARD OPPORTUNITY” means the various levels of incentive award compensation which an Executive Officer may earn under the Plan including Target Incentive Awards, as established by the Committee pursuant to Section 5.
2.15 “PLAN YEAR” means the Company’s fiscal year.
2.16 “RETIREMENT” means termination from active employment with the Company and its Subsidiaries (a) at or after age 55 and with at least ten (10) years of service with the Company and its Subsidiaries, or (b) at or after age 65.
2.17 “SUBSIDIARY” means any corporation in which ABC, or a Subsidiary of ABC, owns fifty percent (50%) or more of the total combined voting power of all classes of stock.
2.18 “TARGET INCENTIVE AWARD” means the award that may be paid to an Executive Officer when “targeted” performance results, as established by the Committee, are attained.
SECTION 3. ADMINISTRATION
3.1 THE COMMITTEE. The Compensation Committee of the Board shall initially administer the Plan. Subject to the terms of this Plan, the Board may appoint a successor Committee to administer the Plan. The members of the Committee shall be appointed by, serve at the discretion of, and must be independent members of the Board.
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions herein, the Committee shall have full power to certify after the end of each Plan Year the Employees who qualify as Executive Officers; determine the size and types of performance measurements and goals, Individual Award Opportunities and Target Incentive Awards; determine the terms and conditions of Individual Award Opportunities in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and amend the terms and conditions of any outstanding Individual Award Opportunities to the extent such terms and conditions are within the sole discretion of the Committee as provided in Section 11 herein. Further, the Committee shall make all other determinations that may be necessary for the administration of the Plan. To the extent permitted by Section 162(m) and its regulations, the Committee may, from time-to-time, delegate some or all of its authority hereunder.
3.3 DECISIONS BINDING. All determinations and decisions of the Committee in the administration of the Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all parties.
SECTION 4. ELIGIBILITY AND PARTICIPATION
Each Employee who is an Executive Officer shall be eligible and shall participate in the Plan for each Plan Year in which he is an Executive Officer. No later than ninety (90) days after the end of each Plan Year, the Committee shall identify and certify each Employee who is an Executive Officer for the Plan Year just ended.
SECTION 5. AWARD DETERMINATION
5.1 PERFORMANCE MEASURES AND PERFORMANCE GOALS. No later than ninety (90) days after the beginning of each Plan Year, the Committee shall select performance measures and shall establish in writing performance goals for that Plan Year. Except as provided in Section 5.7 herein, performance measures which may serve as determinants of Executive Officers’ Individual Award Opportunities shall be limited to the Company’s pretax income, net income, earnings per share, revenues, expenses, return on assets, return on equity, return on capital employed, return on investment, net profit margin, operating profit margin, operating cash flow, total shareholder return, capitalization, liquidity, results of customer satisfaction surveys and safety or productivity improvement. Performance goals may be determined solely by reference to the performance of ABC, a Subsidiary,
Appendix A
or a division or unit of either of the foregoing, or based upon comparisons of any of the performance measures relative to other companies. For each Plan Year, the Committee may establish ranges of attainment of the performance goals which will correspond to various levels of Individual Award Opportunities. Each range may include levels of performance above and below the one hundred percent (100%) performance level at which a greater or lesser percent of the Target Incentive Award may be earned.
In establishing or adjusting a performance goal, the Committee may exclude the impact of any of the following events or occurrences which the Committee determines should appropriately be excluded: (a) any amounts accrued by the Company or its Subsidiaries pursuant to management bonus plans or cash profit sharing plans and related employer payroll taxes for the fiscal year; (b) any discretionary or matching contributions made to the savings and deferred profit-sharing plan or deferred compensation plan for the fiscal year; (c) asset write-downs, (d) litigation, claims, judgments or settlements, (e) the effect of changes in tax law or other such laws or regulations affecting reported results, (f) accruals for reorganization and restructuring programs, (g) any extraordinary, unusual or nonrecurring items as described in Accounting Principles Board (“APB”) Opinion No. 30, (h) any change in accounting principle as defined in APB No. 20 and (i) any loss from a discontinued operation as described in Financial Accounting Standards No. 144.
Notwithstanding any other provision of this Plan, and only to the extent it would not eliminate the ability of the Individual Award Opportunities held by Executive Officers to qualify for the “performance based compensation” exception under Code Section 162(m), in the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368), or any partial or complete liquidation of the Company, such adjustment may be made in the Individual Award Opportunities and/or the performance measures or performance goals related to then-current performance periods, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.
5.2 INDIVIDUAL AWARD OPPORTUNITIES. No later than ninety (90) days after the beginning of each Plan Year, the Committee shall establish, in writing, Individual Award Opportunities which correspond to various levels of achievement of the pre-established performance goals. The established Individual Award Opportunities may vary in relation to the job classification of each Participant or among Participants in the same job classification and be established as a function of each Executive Officer’s Base Salary or such other criteria as the Committee may select. In the event an Executive Officer changes job levels during a Plan Year, the Participant’s Individual Award Opportunity may be adjusted to reflect the amount of time at each job level during the Plan Year.
5.3 COMPUTATION OF FINAL AWARDS. Each Executive Officer’s Final Award shall be based on: (a) the Executive Officer’s Target Incentive Award; (b) the potential Final Awards corresponding to various levels of achievement of the pre-established performance goals, as established by the Committee; and (c) Company or Subsidiary performance in relation to the pre-established performance goals.
5.4 FINAL AWARD LIMIT. The Committee may establish guidelines governing the maximum Final Awards that may be earned by Executive Officers (either in the aggregate, by Employee class, or among individual Executive Officers) in each Plan Year. The guidelines may be expressed as a percentage of companywide goals of financial measures, or such other measures as the Committee shall from time to time determine; provided, however, that the maximum payout with respect to a Final Award payable to any one Executive Officer in connection with performance in any one Plan Year shall not exceed $2,000,000.
5.5 NO MID-YEAR CHANGE IN AWARD OPPORTUNITIES. Except as provided in Sections 5.1 and 5.7 herein, each Executive Officer’s Final Award shall be based exclusively on the Individual Award Opportunity levels established by the Committee pursuant to Section 5.2 above.
5.6 NONADJUSTMENT AND CERTIFICATION OF PERFORMANCE GOALS. Except as provided in Sections 5.1 and 5.7, performance goals shall not be changed following their establishment, and Executive Officers shall not receive any payout under this Plan when the minimum performance goals are not met or exceeded. Following the completion of each Plan Year, if the performance goals were met, the Committee shall certify in writing prior to payment of Final Awards that the corresponding performance goals for such Plan Year were satisfied.
5.7 POSSIBLE MODIFICATIONS. If, on the advice of the Company’s counsel, the Committee determines that Code Section 162(m) and the regulations thereunder will not adversely affect the deductibility for federal income tax purposes of any amount paid under the Plan by permitting greater discretion and/or flexibility with respect to
Appendix A
performance measures, performance goals, or Individual Award Opportunities granted to Executive Officers, then the Committee may, in its sole discretion, apply such greater discretion and/or flexibility to such performance measures, performance goals or Individual Award Opportunities as is consistent with such advice and the terms of this Plan. In addition, in the event that changes are made to Code Section 162(m) or the regulations thereunder to permit greater flexibility with respect to any Individual Award Opportunities under the Plan, the Committee may exercise such greater flexibility consistent with the terms of the Plan and to the extent of such changes.
SECTION 6. PAYMENT OF FINAL AWARDS
6.1 FORM AND TIMING OF PAYMENT. Unless a deferral election is made by an Executive Officer pursuant to Section 6.2 herein, or deferral of all or a portion of an Executive Officer’s Final Award is required by Section 6.3, each Executive Officer’s Final Award shall be earned and paid in cash, in one lump sum, as soon as the Final Award’s calculation is completed and the written certification of the Committee in Section 5.6 hereof has been issued. Except as provided in Section 7, an Executive Officer must be employed by the Company or a Subsidiary on the date of payment to receive a Final Award.
6.2 VOLUNTARY DEFERRAL OF FINAL AWARD PAYOUTS. An Executive Officer may defer receipt of some or all payments otherwise due under the Plan pursuant to the terms of the Company’s Voluntary Savings Plan (“VSP”).
6.3 DEFERRAL OF FINAL AWARD PAYOUTS. In the event that all or a portion of an Executive Officer’s Final Award is not deductible by the Company due to limits contained in Code Section 162(m) or any successor Code Section, the Committee shall require that payment of the nondeductible portion of such Final Award shall be deferred until the earlier of the Executive Officer’s death, disability, a Change in Control, or 185 days after termination of employment. The Committee, in a manner consistent with the requirements of Code Sections 162(m) and the regulations thereunder, shall determine rates of interest on such deferred amounts.
6.4 UNSECURED INTEREST. No Executive Officer or any other party claiming an interest in amounts earned under the Plan shall have any interest whatsoever in any specific asset of the Company or any Subsidiary. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.
SECTION 7. TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT. In the event an Executive Officer’s employment is terminated by reason of death, Disability, or Retirement, the Final Award is to be paid as soon as its calculation is completed and the written certification of the Committee in Section 5.6 hereof has been issued following the end of the Plan Year in which employment termination occurs. In the case of an Executive Officer’s Disability, the employment termination shall be deemed to have occurred on the date that the Committee determines the definition of Disability to have been satisfied. An Executive Officer must have been a Participant in the Plan during the Plan Year for not less than the ninety (90) days prior to his Retirement.
7.2 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event an Executive Officer’s employment is terminated for any reason other than death, Disability, or Retirement (of which the Committee shall be the sole judge), the Executive Officer’s opportunity to receive a Final Award shall be forfeited. The Committee, in its sole discretion, may pay a prorated award for the portion of the Plan Year that the Executive Officer was employed by the Company, computed as determined by the Committee.
Appendix A
SECTION 8. RIGHTS OF PARTICIPANTS
8.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Executive Officer’s or other Employee’s employment at any time, nor confer upon any Executive Officer or other Employee any right to continue in the employ of the Company.
8.2 NONTRANSFERABILITY. No right or interest of any Executive Officer or other Employee in the Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law or otherwise, including, but not limited to, execution, levy, garnishment, attachment, pledge, and bankruptcy.
SECTION 9. BENEFICIARY DESIGNATION
Each Executive Officer may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Executive Officer, shall be in a form prescribed by the Committee, and will be effective only when filed by the Executive Officer in writing with the Committee during his or her lifetime. Beneficiary designations filed with respect to predecessor plans prior to the adoption of this Plan shall be effective with respect to this Plan. In the absence of any such designation, benefits remaining unpaid at the Executive Officer’s death shall be paid to the Executive Officer’s estate.
SECTION 10. CHANGE IN CONTROL
In the event of a Change in Control, each Executive Officer shall receive a pro rata payment of the greater of his or her Target Incentive Award or Final Award for the Plan Year during which such Change in Control occurs. In such circumstances, the Committee shall determine the Final Award based upon performance during the Plan Year until the date of the Change in Control and shall determine the Executive Officer’s base salary as of a date on or before the Change in Control. Such proration shall be determined as a function of the number of days within the Plan Year prior to the effective date of the Change in Control, in relation to three hundred sixty-five (365). Such amount shall be paid in cash to each Executive Officer as soon as the final calculation is completed, but in any event within forty-five (45) days after the effective date of the Change in Control.
Notwithstanding anything in the foregoing to the contrary, if any of the payments provided for in this Plan, together with any other payments which Executive Officer has the right to receive from the Company, would constitute an “excess parachute payment” (as defined in Code Section 280G(b)(3)), the payments pursuant to this Plan and/or other plans or agreements shall be reduced to the largest amount and/or paid at such time as will result in no portion of such payments being subject to the excise tax imposed by Code Section 4999.
SECTION 11. AMENDMENTS
The Committee, or the Board, may at any time and without notice, modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely; provided, however, that no such modification, amendment, suspension, or termination may, without the consent of an Executive Officer (or his or her beneficiary in the case of the death of the Executive Officer), reduce the right of an Executive Officer to a payment or distribution hereunder to which he or she is entitled at the time such actions are taken. Provided, further, that certain material amendments to the Plan shall be subject to shareholder approval pursuant to Code Section 162(m).
SECTION 12. MISCELLANEOUS
12.1 GOVERNING LAW. The Plan, and all agreements hereunder, shall be governed by and construed in accordance with the laws of the state of Arkansas, and shall be construed in a manner consistent with Code Section 162(m) of the Code.
12.2 WITHHOLDING TAXES. The Company shall have the right to deduct from all payments under the Plan any foreign, federal, state, or local income or other taxes required by law to be withheld with respect to such payments. Before payment of any Final Award may be deferred under Section 6, the Company may require that the Executive
Appendix A
Officer pay or agree to withholding for any foreign, federal, state or local income or other taxes which may be imposed on any amount deferred.
12.3 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
12.4 SUCCESSORS. All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
12.5 SHAREHOLDER APPROVAL. No Final Award shall be paid to any Executive Officer unless and until the material terms of the Plan have been approved by the shareholders of the Company in accordance with Code Section 162(m).
12.6 APPLICABILITY OF PLAN. The provisions of this Plan shall apply only to Executive Officers. In the event of any inconsistencies between this Plan and the provisions of any other bonus or incentive plan that might pertain to Executive Officers, the provisions of this Plan shall control.
Appendix A
First Amendment to the
Arkansas Best Corporation
2005 OwnershipExecutive Officer Annual Incentive Compensation Plan
THIS SECONDFIRST AMENDMENT (the “Second“First Amendment”) to the Arkansas Best Corporation 2005 OwnershipExecutive Officer Annual Incentive Compensation Plan, as amended from time to time (the “Plan”), is effective April 23, 2014January 1, 2010 (the “Effective Date”), and is made by Arkansas Best Corporation (the “Company”).
W I T N E S S E T H:
WHEREAS, the Company previously adopted the Plan, under which the Company is authorized to grant equity-based incentiveannual cash awards to certain employees and service providersexecutive officers of the Company;Company and its subsidiaries, based on the achievement of pre-established performance goals;
WHEREAS, the Company’s board of directors (the “Board”) has determined that it is desirable to submit for approval to the stockholders of the Company, at the Company’s 2010 Annual Meeting of Stockholders, the material terms of the Plan, including the employees eligible to participate therein, the maximum compensation payable under the Plan and the business criteria that may be used for setting performance goals under the Plan, for purposes of satisfying the “performance-based compensation” exemption under section 162(m) of the IRC of 1986, as amended (the “Code”), which requires the material terms of the Plan to be disclosed to and approved by the Company’s stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders previously approved the Plan;
WHEREAS, in connection with such approval, the Board has determined that it is desirable to amend the Plan, effective as of the Effective Date and subject to approval by the stockholdersapproval of the Company,Company’s stockholders, to (i) increase the maximum numberamount of shares for which Awardscompensation that may be grantedpaid to each participant under the Plan in any one year with respect to awards intended to constitute “performance-based compensation” within the meaning of section 162(m) of the Code, (ii) add certain adjustment provisions applicable to the performance criteria under the Plan and (ii) extend the term of(iii) make certain clarifying changes to the Plan; and
WHEREAS, Section 1911 of the Plan provides that the Board or the committee appointed by the Board to administer the Plan may amend the Plan from time to time under certain circumstances, including to increase the maximum number of shares for which awards may be granted under the Plan and to extend the term of the Plan, subject to approval by the Company’s stockholders in the case of certain material amendments pursuant to section 162(m) of the Code.
NOW, THEREFORE, the Plan shall be amended as of the Effective Date, subject to approval by the Company’s stockholders, as set forth below:
1.The second paragraph of Section 5.1 of the Plan shall be deleted in its entirety and replaced with the following:
In establishing or adjusting a performance goal, the Committee may exclude the impact of any of the following events or occurrences which the Committee determines should appropriately be excluded: (a) any amounts accrued by the Company or its Subsidiaries pursuant to management bonus plans or cash profit sharing plans and related employer payroll taxes for the fiscal year; (b) any discretionary or matching contributions made to the savings and deferred profit-sharing plan or deferred compensation plan for the fiscal year; (c) asset write-downs; (d) litigation, claims, judgments or settlements; (e) the effect of changes in tax law or other such laws or regulations affecting reported results; (f) accruals for reorganization and restructuring programs; (g) any extraordinary, unusual or nonrecurring items as described in the Accounting Standards Codification topic(s) that replaced or were formerly known as Accounting Principles Board (“APB”) Opinion No. 30, as the same may be amended or superseded from time to time; (h) any change in accounting principle as defined in the Accounting Standards Codification topic(s) that replaced or were formerly known as Financial Accounting Standards Board (“FASB”) Statement 154, as the same may be amended or superseded from time to time; (i) any loss from a discontinued operation as described in the Accounting Standards Codification topic(s) that replaced or were formerly known as FASB Statement 144, as the same may be amended or
Appendix A
superseded from time to time; (j) goodwill impairment charges; (k) operating results for any business acquired during the Plan Year; and (l) third party expenses associated with any acquisition by the Company or any Subsidiary.
2.Section 5.4 of the Plan shall be deleted in its entirety and replaced with the following:
5.4FINAL AWARD LIMIT. The Committee may establish guidelines governing the maximum Final Award that may be earned by Executive Officers (either in the aggregate, by Employee class, or among individual Executive Officers) in each Plan Year. The guidelines may be expressed as a percentage of companywide goals of financial measures, or such other measures as the Committee shall from time to time determine; provided, however, that the maximum payout with respect to a Final Award payable to any one Executive Officer in connection with performance in any one Plan Year shall not exceed $3,000,000.
3.Section 6.1 of the Plan shall be deleted in its entirety and replaced with the following:
6.1FORM AND TIMING OF PAYMENT. Unless a deferral election is made by an Executive Officer pursuant to Section 6.2 herein, or deferral of all or a portion of an Executive Officer’s Final Award is required by Section 6.3, each Executive Officer’s Final Award shall be earned and paid in cash, in one lump sum, as soon as the Final Award’s calculation is completed and the written certification of the Committee in Section 5.6 hereof has been issued, but in no event later than March 15 of the calendar year following the Plan Year to which such Final Award relates. Except as provided in Section 7, an Executive Officer must be employed by the Company or a Subsidiary on the date of payment to receive a Final Award.
4.The first paragraph of Section 10 of the Plan shall be deleted in its entirety and replaced with the following:
In the event of a Change in Control, each Executive Officer shall receive a pro rata payment of the greater of his or her Target Incentive Award or Final Award for the Plan Year during which such Change in Control occurs. In such circumstances, the Committee shall determine the Final Award based upon performance during the Plan Year until the date of the Change in Control. Such proration shall be determined based on the Base Salary received by the Executive Officer during the Plan Year as of the effective date of the Change in Control. Such amount shall be paid in cash to each Executive Officer as soon as the final calculation is completed, but in any event within forty-five (45) days after the effective date of the Change in Control.
Appendix A
Second Amendment to the
ArcBest Corporation
Executive Officer Annual Incentive Compensation Plan
THIS SECOND AMENDMENT (the “Second Amendment”) to the Arkansas Best Corporation Executive Officer Annual Incentive Compensation Plan, as amended from time to time and renamed the ArcBest Corporation Executive Officer Annual Incentive Compensation Plan pursuant to this Second Amendment (the “Plan”), is effective May 1, 2015 (the “Effective Date”), and is made by ArcBest Corporation (the “Company”).
W I T N E S S E T H:
WHEREAS, the Company previously adopted the Plan, under which the Company is authorized to grant annual cash awards to executive officers of the Company and its subsidiaries, based on the achievement of pre-established performance goals;
WHEREAS, compensation committee (the “Committee”) of the board of directors (the “Board”) of the Company has determined that it is desirable to submit for approval to the stockholders of the Company.Company, at the Company’s 2015 Annual Meeting of Stockholders, the material terms of the Plan, including the employees eligible to participate therein, the maximum compensation payable under the Plan and the business criteria that may be used for setting performance goals under the Plan, for purposes of satisfying the “performance-based compensation” exemption under section 162(m) of the IRC of 1986, as amended (the “Code”), which requires the material terms of the Plan to be disclosed to and approved by the Company’s stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders previously approved the Plan;
WHEREAS, in connection with such approval, the Committee has determined that it is desirable to amend the Plan, effective as of the Effective Date and subject to the approval of the Company’s stockholders, to (i) clarify the definition of “Base Salary,” (ii) add additional business criteria that may be used for setting performance goals under the Plan, (iii) add certain adjustment provisions applicable to the performance criteria under the Plan, and (iv) change the name of the Plan from the “Arkansas Best Corporation Executive Officer Annual Incentive Compensation Plan” to the “ArcBest Corporation Executive Officer Annual Incentive Compensation Plan” and to delete all other references in the Plan to “Arkansas Best Corporation” and replace them with references to “ArcBest Corporation,” in both cases to reflect the Company’s 2014 name change; and
WHEREAS, Section 11 of the Plan provides that the Board or the Committee may amend the Plan from time to time under certain circumstances, subject to approval by the Company’s stockholders in the case of certain material amendments pursuant to section 162(m) of the Code.
NOW, THEREFORE, the Plan shall be amended as of the Effective Date, subject to approval by the Company’s stockholders, as set forth below:
1. Section 6(a)2.2 of the Plan shall be deleted in its entirety and replaced with the following:
(a)Aggregate Limits. The maximum aggregate number of Shares issuable pursuant2.2 “BASE SALARY” means, as to all Awards, since inceptionany specific Plan year, an Executive Officer’s base salary earned in the fiscal year for which the annual incentive is earned. Base salary shall not be reduced by any voluntary salary reductions or any salary reduction contributions made to any salary reduction plan, defined contribution plan or other deferred compensation plans of the Plan, is 3,100,000. The aggregate number of Shares available for grant under this Plan and the number of Shares subject to outstanding Awards will be subject to adjustment as provided in Section 13. The Shares issued pursuant to Awards granted under this Plan may be authorized and unissued shares or shares that the Company reacquired, including shares purchased in the open market.Company.
2. The first and second paragraph of Section 55.1 of the Plan shall be deleted in their entirety and replaced with the following:
5.1 PERFORMANCE MEASURES AND PERFORMANCE GOALS. No later than ninety (90) days after the beginning of each Plan Year, the Committee shall select performance measures and shall establish in writing performance goals for that Plan year. Except as provided in Section 5.7 herein, performance measures which may serve as determinants of Executive Officers’ Individual Award Opportunities shall be limited to (1) earnings per share; (2) revenues; (3) cash flow; (4) operating cash flow; (5) cash flow return; (6) return on net assets; (7) return on assets; (8) return
Appendix A
on investment; (9) return on capital employed; (10) return on equity; (11) economic value added; (12) operating profit margin; (13) contribution margin; (14) net income; (15) net income per share; (16) pretax earnings or income; (17) pretax earnings before interest, depreciation and amortization; (18) pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items; (19) total stockholder return; (20) debt; (21) market share; (22) expenses; (23) net profit margin; (24) capitalization; (25) change in the fair market value of common stock; (26) operating income; (27) liquidity; (28) results of customer satisfaction surveys and safety or productivity improvement and (29) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. For purposes of clarity, such performance goals may be determined solely by reference to the performance of the Company, a Subsidiary, or a division or unit of either of the foregoing, or based upon comparisons of any of the performance measures relative to other companies. For each Plan Year, the Committee may establish ranges of attainment of the performance goals which will correspond to various levels of Individual Award Opportunities. Each range may include levels of performance above and below the one hundred percent (100%) performance level at which a greater or lesser percent of the Target Incentive Award may be earned.
In establishing or adjusting a performance goal, the Committee may exclude the impact of any of the following events or occurrences which the Committee determines should appropriately be excluded: (i) any amounts accrued by the Company or its Subsidiaries pursuant to management bonus plans or cash profit sharing plans and related employer payroll taxes for the fiscal year; (ii) any discretionary or matching contributions made to the savings and deferred profit-sharing plan or deferred compensation plan for the fiscal year; (iii) asset write-downs; (iv) litigation, claims, judgments or settlements; (v) the effect of changes in tax law or other such laws or regulations affecting reported results; (vi) accruals for reorganization and restructuring programs; (vii) any extraordinary, unusual or nonrecurring items as described in the Accounting Standards Codification topic(s) that replaced or were formerly known as Accounting Principles Board (“APB”) Opinion No. 30, as amended or superseded; (viii) any changes in accounting principle as defined in the Accounting Standards Codification topic(s) that replaced or were formerly known as Financial Accounting Standards Board (“FASB”) Statement 154, as amended or superseded; (ix) any loss from a discontinued operation as described in the Accounting Standards Codification topic(s) that replaced or were formerly known as FASB Statement 144, as amended or superseded; (x) goodwill impairment charges; (xi) operating results for any business acquired during the plan year; (xii) third party expenses associated with any acquisition by the Company or any Subsidiary; and (xiii) settlement accounting charges incurred that relate to qualified defined benefit pension plans.
3.The name of the Plan shall be changed from the “Arkansas Best Corporation Executive Officer Annual Incentive Compensation Plan” to the “ArcBest Corporation Executive Officer Annual Incentive Compensation Plan” and all other references in the Plan to “Arkansas Best Corporation” shall be deleted and replaced with references to “ArcBest Corporation.”
Third Amendment to the
ArcBest Corporation
Executive Officer Incentive Compensation Plan
THIS THIRD AMENDMENT (the “Third Amendment”) to the ArcBest Corporation Executive Officer Annual Incentive Compensation Plan, as amended from time to time and renamed the ArcBest Corporation Executive Officer Incentive Compensation Plan pursuant to this Third Amendment (the “Plan”), is effective April 26, 2016 (the “Effective Date”), and is made by ArcBest Corporation (the “Company”).
W I T N E S S E T H:
WHEREAS, the Company previously adopted the Plan, under which the Company is authorized to grant annual cash awards to executive officers of the Company and its subsidiaries, based on the achievement of pre-established performance goals;
WHEREAS, the Plan allows for certain items to be excluded from the calculation of the performance goals thereunder if such exclusions are established at the time the performance goals are established;
WHEREAS, one of the items that may be excluded from the performance goal calculation is an extraordinary, unusual or nonrecurring expense, which is currently defined by reference to a section of the accounting literature that is no longer applicable;
WHEREAS, the compensation committee (the “Committee”) of the board of directors (the “Board”) of the Company and the Board wish to retain the flexibility to exclude extraordinary, unusual or nonrecurring expense from the calculation of the performance goals under the Plan and, as such, have determined that it is desirable to amend the Plan, effective as of the Effective Date and subject to the approval of the Company’s stockholders, to modify the method of identifying an extraordinary, unusual or nonrecurring item under the Plan;
WHEREAS the Committee and the Board wish to have the flexibility to grant cash incentive awards under the Plan with multi-year performance periods;
WHEREAS, the Committee has determined that it is desirable to submit for approval to the stockholders of the Company, at the Company’s 2016 Annual Meeting of Stockholders, the material terms of the Plan, including the employees eligible to participate therein, the maximum compensation payable under the Plan and the business criteria that may be used for setting performance goals under the Plan, for purposes of satisfying the “performance-based compensation” exemption under section 162(m) of the IRC of 1986, as amended (the “Code”), which requires the material terms of the Plan to be disclosed to and approved by the Company’s stockholders in connection with a material amendment to the Plan; and
WHEREAS, Section 11 of the Plan provides that the Board or the Committee may amend the Plan from time to time under certain circumstances, subject to approval by the Company’s stockholders in the case of certain material amendments pursuant to section 162(m) of the Code.
NOW, THEREFORE, the Plan shall be amended as of the Effective Date, subject to approval by the Company’s stockholders, as set forth below:
1.Section 2.15 of the Plan shall be deleted in its entirety and replaced with the following:
The Company’s Board adopted this Plan2.15 “PERFORMANCE PERIOD” a performance period of up to ten years, as of February 24, 2005. The Plan became effective on April 20, 2005 (the “Effective Date”), upon approvalspecified by the Company’s stockholders. Awards may be granted underCommittee.
2.All references to “Plan Year” in the Plan until December 31, 2019, at which time the Plan will terminate. Notwithstanding the foregoing, the Board may terminate the Plan at any time. Terminationshall be deleted and replaced with references to “Performance Period.”
3.The second paragraph of Section 5.1 of the Plan (including termination upon expirationshall be deleted in its entirety and replaced with the following:
NOW, THEREFOREAppendix B
,In establishing a performance goal, the Committee may exclude the impact of any of the following events or occurrences which the Committee determines should appropriately be it furtherexcluded: (i) any amounts accrued by the Company or its Subsidiaries pursuant to management bonus plans or cash profit sharing plans and related employer payroll taxes for the fiscal year; (ii) any discretionary or matching contributions made to the savings and deferred profit-sharing plan or deferred compensation plan for the fiscal year; (iii) asset write-downs; (iv) litigation, claims, judgments or settlements; (v) the effect of changes in tax law or other such laws or regulations affecting reported results; (vi) accruals for reorganization and restructuring programs; (vii) any extraordinary, unusual or nonrecurring items as determined by the Committee in its discretion, provided such item is described, at the time the performance goal is established, in a manner that exceptis objectively determinable; (viii) any changes in accounting principle as set forth above,defined in the Accounting Standards Codification topic(s) that replaced or were formerly known as Financial Accounting Standards Board (“FASB”) Statement 154, as amended or superseded; (ix) any loss from a discontinued operation as described in the Accounting Standards Codification topic(s) that replaced or were formerly known as FASB Statement 144, as amended or superseded; (x) goodwill impairment charges; (xi) operating results for any business acquired during the Performance Period; (xii) third party expenses associated with any acquisition by the Company or any Subsidiary; and (xiii) settlement accounting charges incurred that relate to qualified defined benefit pension plans.
4.Section 5.4 of the Plan shall continue to readbe deleted in its current state.entirety and replaced with the following:
IN WITNESS WHEREOF5.4,FINAL AWARD LIMIT. The Committee may establish guidelines governing the Company has causedmaximum Final Award that may be earned by Executive Officers (either in the executionaggregate, by Employee class, or among individual Executive Officers) in each Performance Period. The guidelines may be expressed as a percentage of this Second Amendment by its duly authorized officer, effectivecompanywide goals of financial measures, or such other measures as the Committee shall from time to time determine; provided, however, that the maximum payout with respect to a Final Award payable to any one Executive Officer in connection with performance in any one Performance Period shall not exceed $3,000,000 times the number of years in the Performance Period.
5.Section 10 of the Effective DatePlan and subjectall references thereto shall be deleted entirety from the Plan and the section numbering of all subsequent sections and all references to approvalthose sections, shall be adjusted accordingly, such that (i) Section 11 of the Company’s stockholders.Plan shall now be Section 10 of the Plan and all prior references to Section 11 of the Plan shall be changed to references to Section 10 of the Plan and (ii) Section 12 of the Plan shall now be Section 11 of the Plan and all prior references to Section 12 of the Plan shall be changed to references to Section 11 of the Plan.
6.The name of the Plan shall be changed from the “ArcBest Corporation Executive Officer Annual Incentive Compensation Plan” to the “ArcBest Corporation Executive Officer Incentive Compensation Plan” and any references in the Plan to the “ArcBest Corporation Executive Officer Annual Incentive Compensation Plan” shall be deleted and replaced with references to the “ArcBest Corporation Executive Officer Incentive Compensation Plan.” |
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Shareowner Services P.O. Box 64945 St. Paul, MN 55164-0945 Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Q INTERNET/MOBILE – www.proxypush.com/arcb Use the Internet to vote your proxy until 11:59 p.m. (CT) on April 25, 2016. if PHONE – 1-866-883-3382 Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on April 25, 2016. MAIL – Mark, sign and date your proxy card and [8) return it in the postage-paid envelope provided. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Voting Instruction Card. The Board of Directors Recommends a Vote FOR all of the nominees listed in Proposal I and FOR Proposals II, III and IV. I. Election of 01 John W. Alden Directors: 02 Fred A. Allardyce 05 Kathleen D. McElligott 06 Judy R. McReynolds 08 Craig E. Philip 09 Steven L. Spinner 10 Janice E. Stipp Vote FOR all nominees Vote WITHHELD from all nominees 03 Stephen E. Gorman 07 John H. Morris 04 William M. Legg (except as marked) (Instructions: To WITHHOLD authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.) II. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016. III. To approve, on an advisory basis, the compensation of the Company’s named executive officers. IV. To approve the material plan terms of the Executive Officer Annual Incentive For Against Abstain For Against Abstain Compensation Plan, as amended, for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended. For Against Abstain THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ALL OF THE NOMINEES LISTED IN PROPOSAL I AND FOR PROPOSALS II, III and IV. Date Address Change? Mark box, sign, and indicate changes below: Signature(s) in Box Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, adminis-trators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy.
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ArcBest Corporation® ANNUAL MEETING OF STOCKHOLDERS Tuesday, April 26, 2016 8:00 a.m. CDT 3801 Old Greenwood Road Fort Smith, Arkansas 72903 ArcBest Corporation 3801 Old Greenwood Road Fort Smith, Arkansas 72903 proxy This proxy is solicited by the Board of Directors for use at the Annual Meeting on April 26, 2016. Each of Michael R. Johns and Judy R. McReynolds, with the power of substitution and revocation, is hereby authorized to represent the undersigned, with all powers which the undersigned would possess if personally present, to vote all shares the undersigned is entitled to vote at the Annual Meeting of Stockholders of ArcBest Corporation to be held at 3801 Old Greenwood Road, Fort Smith, Arkansas 72903, at 8:00 a.m. CDT on Tuesday, April 26, 2016, and at any adjournments or postponements of that meeting, as set forth below, and in their discretion upon any other business that may properly come before the meeting. You are encouraged to specify your vote by marking the appropriate box ON THE REVERSE SIDE but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendations, which are FOR all of the nominees listed in Proposal I and FOR Proposals II, III and IV. The proxies cannot vote your shares unless you sign and return this card. Any Proxy may be revoked at any time prior to the voting thereof. Any Proxy, when properly granted, will be voted in the manner directed and will authorize the proxies to take any action in their discretion upon other matters that may properly come before the meeting. If no direction is made, your Proxy will be voted in accordance with the recommendations of the Board of Directors. See reverse for voting instructions.
