SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HUB GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HUB GROUP, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it is
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
April 9, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Hub Group, Inc. This meeting will be held in Room 226 in the
Hamburger University building on the McDonald's Office Campus at Ronald Lane,
Oak Brook, Illinois at 10:00 a.m. Chicago time on Wednesday, May 12, 1999.
The attached Notice of 1999 Annual Meeting of Stockholders and Proxy
Statement describe the matters to be acted upon. The Annual Report to
Stockholders and Form 10-K for the 1998 fiscal year are enclosed.
We hope you will be able to attend the meeting. However, even if you
anticipate attending in person, we urge you to mark, sign, date, and return the
enclosed proxy card to ensure that your shares will be represented.
If you attend, you will, of course, be entitled to vote in person.
Sincerely,
PHILLIP C. YEAGER
Chairman
HUB GROUP, INC.
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Hub Group, Inc.:
The Annual Meeting of Stockholders of Hub Group, Inc., a Delaware
corporation (the "Company"), will be held in Room 226 in the Hamburger
University building on the McDonald's Office Campus at Ronald Lane, Oak Brook,
Illinois on Wednesday, May 12, 1999, at 10:00 a.m., Chicago time, for the
following purposes:
(1) To elect six directors of the Company to hold office until
the next annual meeting of stockholders;
(2) To approve the Hub Group, Inc. 1999 Long-Term Incentive Plan;
and
(3) To transact such other business as may properly be presented
at the Annual Meeting or any adjournment thereof.
A proxy statement with respect to the Annual Meeting accompanies and
forms a part of this Notice. The Company's Annual Report to Stockholders and
Form 10-K for the fiscal year ended December 31, 1998, also accompany this
Notice.
The Board of Directors has fixed the close of business on March 31,
1999, as the record date for determining stockholders entitled to notice of, and
to vote at, the Annual Meeting.
By order of the Board of Directors,
MARK A. YEAGER
Division President, Secretary and General Counsel
Lombard, Illinois
April 9, 1999
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
HUB GROUP, INC.
377 E. BUTTERFIELD ROAD, SUITE 700
LOMBARD, ILLINOIS 60148
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Hub Group, Inc., a Delaware corporation ("Hub
Group" or the "Company"), of proxies for use at the 1999 Annual Meeting of
Stockholders of the Company to be held on Wednesday, May 12, 1999, and any
adjournment thereof (the "Annual Meeting"). This Proxy Statement and
accompanying form of proxy are first being sent to stockholders on or about
April 9, 1999.
The Company's Class A common stock, $.01 par value (the "Class A Common
Stock"), and the Class B common stock, $.01 par value (the "Class B Common
Stock," together with the Class A Common Stock, the "Common Stock"), are the
only issued and outstanding classes of stock. Only stockholders of record at the
close of business on March 31, 1999 (the "Record Date"), are entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, the Company had
7,009,950 shares of Class A Common Stock (each a "Class A Share") and 662,296
shares of Class B Common Stock (each a "Class B Share," and collectively with
the Class A Shares, the "Shares") outstanding and entitled to vote.
VOTING RIGHTS AND PROCEDURES
Shares represented by an effective proxy given by a stockholder will be
voted as directed by the stockholder. If a properly signed proxy form is
returned to the Company and one or more proposals are not marked, it will be
voted in accordance with the recommendation of the Board of Directors on all
such proposals. A stockholder giving a proxy may revoke it at any time prior to
the voting of the proxy by giving written notice to the Secretary of the
Company, by executing a later dated proxy or by attending the Annual Meeting and
voting in person.
Each Class A Share is entitled to one (1) vote and each Class B Share
is entitled to twenty (20) votes. The holders of Shares having a majority of the
votes which could be cast by the holders of all Shares, present in person or
represented by proxy, will constitute a quorum at the Annual Meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the presence of a quorum. If a broker indicates on the
proxy that it does not have discretionary authority as to certain Shares to vote
on a particular matter, those Shares will be considered as present and entitled
to vote for purposes of determining the presence of a quorum. The Yeager family
members own all 662,296 shares of Class B Common Stock. Consequently, the Yeager
family controls approximately 65% of the voting power of the Company on all
matters presented for stockholder action. The Yeager family members are parties
to a stockholders' agreement, pursuant to which they have agreed to vote all of
their shares of Class B Common Stock in accordance with the vote of the holders
of a majority of such shares.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting and such election
inspectors will determine whether or not a quorum is present.
The Board of Directors knows of no matters to be presented at the
Annual Meeting other than those set forth in the Notice of 1999 Annual Meeting
of Stockholders enclosed herewith. However, if any other matters do come before
the meeting, it is intended that the holders of the proxies will vote thereon in
their discretion. Any such other matter will require for its approval the
affirmative vote of the holders of Shares having a majority of the votes present
in person or represented by proxy at the Annual Meeting, provided a quorum is
present, or such greater vote as may be required under the Company's Certificate
of Incorporation, the Company's By-laws or applicable law. A list of
stockholders as of the record date will be available for inspection at the
Annual Meeting and for a period of ten days prior to the Annual Meeting at the
Company's offices in Lombard.
ELECTION OF DIRECTORS
The number of directors of the Company, as determined by the Board of
Directors under Article III of the Company's By-laws, is currently six. Each
director holds office until his or her successor is elected and qualified or
until his or her earlier death, resignation, retirement, disqualification or
removal.
The nominees for whom the enclosed proxy is intended to be voted are
set forth below. Each nominee for election as director currently serves as a
director of the Company. It is not contemplated that any of these nominees will
be unavailable for election, but if such a situation should arise, the proxy
will be voted in accordance with the best judgment of the proxyholder for such
person or persons as may be designated by the Board of Directors unless the
stockholder has directed otherwise.
Directors are elected by a plurality of the votes cast at the Annual
Meeting, provided a quorum is present. The outcome of the election is not
affected by abstentions or the withholding of authority to vote in the election,
or by broker non-votes. Stockholders are not allowed to cumulate their votes in
the election of directors.
If a stockholder desires to nominate persons for election as directors
at the next Annual Meeting of Stockholders written notice of such stockholder's
intent to make such a nomination must be given and received by the Secretary of
the Company at the principal executive offices of the Company either by personal
delivery or by United States mail no earlier than February 12, 2000 nor later
than March 13, 2000. Each notice must describe the nomination in sufficient
detail for the nomination to be summarized on the agenda for the meeting and
must set forth: (i) the name and address, as it appears on the books of the
Company, of the stockholder making the nomination, (ii) a representation that
the stockholder is a holder of record of stock in the Company entitled to vote
at the annual meeting of stockholders and intends to appear in person or by
proxy at the meeting to present the nomination, (iii) a statement of the class
and number of shares beneficially owned by the stockholder, (iv) the name and
address of any person to be nominated, (v) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (vi) such other information
regarding such nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission (the "Commission"), and (vii) the consent of
such nominee to serve as a director of the Company if elected. The presiding
officer of the annual meeting of stockholders will, if the facts warrant, refuse
to acknowledge a nomination not made in compliance with the foregoing procedure,
and any such nomination not properly brought before the meeting will not be
considered.
2
NOMINEES FOR ELECTION AS DIRECTORS
BUSINESS EXPERIENCE DURING THE PAST FIVE
NAME AGE YEARS AND OTHER INFORMATION
- ------------------------ --- ---------------------------------------------
Phillip C. Yeager 71 Phillip C. Yeager has been Chairman of the
Board since October 1985. From April 1971 to
October 1985, Mr. Yeager served as President
of Hub City Terminals, Inc. ("Hub Chicago").
Mr. Yeager became involved in intermodal
transportation in 1959, five years after the
introduction of intermodal transportation in
the United States, as an employee of the
Pennsylvania and Pennsylvania Central
Railroads. He spent 19 years with the
Pennsylvania and Pennsylvania Central
Railroads, 12 of which involved intermodal
transportation. In 1991, Mr. Yeager was named
the Man of the Year by the Intermodal
Transportation Association. In 1995, he
received the Salzburg Practitioners Award
from Syracuse University in recognition of
his lifetime achievements in the
transportation industry. In October 1996,
Mr. Yeager was inducted into the Chicago Area
Entrepreneurship Hall of Fame sponsored by
the University of Illinois at Chicago. In
March 1997, he received the Presidential
Medal from Dowling College for his
achievements in transportation services. In
September 1998 he received the Silver Kingpin
award from the Intermodal Association of
North America and in February 1999 he was
named Transportation Person of the Year by
the New York Traffic Club. Mr. Yeager
graduated from the University of Cincinnati
in 1951 with a Bachelor of Arts degree in
Economics. Mr. Yeager is the father of
David P. Yeager, Vice Chairman and Chief
Executive Officer, and Mark A. Yeager,
Division President, Secretary and General
Counsel, and the father-in-law of Robert J.
Jensen, Executive Program Director -
Year 2000 Program Office.
David P. Yeager 46 David P. Yeager has served as the Company's
Vice Chairman of the Board since January 1992
and as Chief Executive Officer of the Company
since March 1995. From October 1985 through
December 1991, Mr. Yeager was President of
Hub Chicago. From 1983 to October 1985, he
served as Vice President, Marketing of Hub
Chicago. Mr. Yeager founded the St. Louis Hub
in 1980 and served as its President from 1980
to 1983. Mr. Yeager founded the Pittsburgh
Hub in 1975 and served as its President from
1975 to 1977. Mr. Yeager received a Masters
in Business Administration degree from the
University of Chicago in 1987 and a Bachelor
of Arts degree from the University of Dayton
in 1975. Mr. Yeager is the son of Phillip C.
Yeager, the brother of Mark A. Yeager and the
brother-in-law of Robert J. Jensen. Mr.
Yeager also serves as a director of SPR Inc.
Thomas L. Hardin 53 Thomas L. Hardin has served as the Company's
President since October 1985 and has served
as Chief Operating Officer and a director of
the Company since March 1995. From January
1980 to September 1985, Mr. Hardin was Vice
President-Operations and from June 1972 to
December 1979, he was General Manager of the
Company. Prior to joining the Company, Mr.
Hardin worked for the Missouri Pacific
Railroad where he held various marketing and
pricing positions. During 1996, Mr. Hardin
was Chairman of the Intermodal Association of
North America.
3
Gary D. Eppen 62 Gary D. Eppen has served as a director of the
Company since February 1996. Having served as
a Professor of Industrial Administration in
the Graduate School of Business at The
University of Chicago since 1964, Mr. Eppen
is currently the Ralph and Dorothy Keller
Distinguished Service Professor of Operations
Management and Deputy Dean for part-time
programs. He received a Ph.D. in Operations
Research from Cornell University in 1964, a
Master of Science in Industrial Engineering
from the University of Minnesota in 1960, a
Bachelor of Science from the University of
Minnesota in 1959 and an Associate in Arts
degree in Pre-Engineering from Austin Junior
College in 1956. Mr. Eppen also serves as a
director of Landauer, Inc.
Charles R. Reaves 60 Charles R. Reaves has served as a director of
the Company since February 1996. Since 1994,
Mr. Reaves has been President and Chief
Executive Officer of Reaves Enterprises,
Inc., a real estate development company.
From April 1962 until November 1994, Mr.
Reaves worked for Sears Roebuck & Company in
various positions, most recently as President
and Chief Executive Officer of Sears
Logistics Services, Inc., a transportation,
distribution and home delivery subsidiary of
Sears Roebuck & Company. Mr. Reaves received
a Bachelor of Science degree in Business
Administration from Arkansas State University
in 1961.
Martin P. Slark 44 Martin P. Slark has served as a director of
the Company since February 1996. Since 1976,
Mr. Slark has been employed by Molex
Incorporated ("Molex"), a manufacturer of
electronic, electrical and fiber optic
interconnection products and systems. Having
worked for Molex in Europe, the United States
and Asia, Mr. Slark is presently Executive
Vice President of Molex. Mr. Slark received
a Masters in Business Administration degree
from the London Business School in 1993, a
Post-Graduate Diploma in Management Studies
from the London School of Economics in 1981
and a Bachelors of Science degree in
Engineering from Reading University in 1977.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has both an Audit Committee and a Compensation
Committee. The Board of Directors does not have a Nominating Committee. During
the fiscal year ended December 31, 1998, the full Board of Directors met four
times, the Audit Committee met twice and the Compensation Committee met twice.
During 1998, all directors attended at least 75% of the meetings of the Board of
Directors and the committees thereof on which they served.
The duties of the Audit Committee are to oversee the Company's internal
control structure; review the Company's financial statements and other financial
information to be included in the Company's 10-K and annual report to
stockholders; select the independent auditors for the Company and its
subsidiaries; and review the Company's annual audit plan. The members of the
Audit Committee are Messrs. Eppen, Reaves and Slark.
The duties of the Compensation Committee are to determine the
compensation of the Company's Chief Executive Officer and to make
recommendations to the Board of Directors concerning the salaries of the
Company's other officers; to exercise the authority of the Board of Directors
concerning the Company's 1996 Long-Term Incentive Plan and 1997 Long-Term
Incentive Plan; and to advise the Board of Directors on other compensation and
benefit matters. The members of the Compensation Committee are Messrs. Eppen,
Reaves and Slark.
4
OWNERSHIP OF THE CAPITAL STOCK OF THE COMPANY
The following table sets forth information with respect to the number
of shares of Class A Common Stock and Class B Common Stock beneficially owned by
(i) each director of the Company, (ii) the executive officers of the Company
named in the table under "Compensation of Directors and Executive
Officers--Summary Compensation Table," (iii) all directors and executive
officers of the Company as a group, and (iv) based on information available to
the Company and a review of statements filed with the Commission pursuant to
Section 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), each person that owns beneficially (directly or together with
affiliates) more than 5% of the Class A Common Stock or Class B Common Stock, in
each case as of March 31, 1999, except as otherwise noted. The Company believes
that each individual or entity named has sole investment and voting power with
respect to shares of the Class A Common Stock or Class B Common Stock indicated
as beneficially owned by them, except as otherwise noted.
NUMBER (1)
-------------------------
NAME CLASS A CLASS B PERCENTAGE(2)
- ------------------------------------------------------------------ ------------ ------------ ----------------
Phillip C. Yeager(3)(4)........................................... 36,000 662,296 9.1%
David P. Yeager(3)(5)............................................. 37,300 662,296 9.1%
Thomas L. Hardin(6)............................................... 42,000 -- *
Robert J. Jensen(3)(7)............................................ 5,000 662,296 8.7%
Daniel F. Hardman(8).............................................. 10,000 -- *
John T. Donnell(9)................................................ 20,600 -- *
Mark A. Yeager(3)(10)............................................. 15,000 662,296 8.8%
Gary D. Eppen(11)................................................. 13,000 -- *
Charles R. Reaves(11)............................................. 12,000 -- *
Martin P. Slark(11)............................................... 12,000 -- *
All directors and executive officers as a group (13 persons)(12) . 233,400 662,296 11.4%
Debra A. Jensen(3)(13)............................................ 5,000 662,296 8.7%
David L. Babson and Company Incorporated(14)...................... 353,200 -- 4.6%
Strong Capital Management, Inc./Richard S. Strong (15)............ 706,600 -- 9.2%
Dimensional Fund Advisors, Inc.(16)............................... 460,500 -- 6.0%
Capital Guardian Trust Company (17)............................... 888,000 -- 11.6%
Wanger Asset Management, L.P./ Wanger Asset Management, Ltd./Acorn
Investment Trust (18)............................................. 1,438,300 -- 18.7%
- ---------------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options,
warrants, rights, or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
listed.
(2) Represents percentage of total number of outstanding shares of Class A
Common Stock and Class B Common Stock.
5
(3) The Yeager family members are parties to a stockholders' agreement (the
"Yeager Family Stockholder Agreement"), pursuant to which they have
agreed to vote all of their shares of Class B Common Stock in
accordance with the vote of the holders of a majority of such shares.
Except as provided in footnotes 5 and 10, each of the Yeager family
members disclaims beneficial ownership of the shares of Class B Common
Stock held by the other Yeager family members. The Class B Common Stock
represents approximately 65% of the total votes allocable to the Common
Stock. Members of the Yeager family own all of the Class B Common
Stock.
(4) Includes 413,934 shares of Class B Common Stock as to which Phillip C.
Yeager may be deemed to have shared voting discretion pursuant to the
Yeager Family Stockholder Agreement. See Note 3. Also includes 31,000
shares of Class A Common Stock issuable upon exercise of options.
(5) Includes 36,794 shares of Class B Common Stock owned by the Laura C.
Yeager 1994 GST Trust, 36,794 shares of Class B Common Stock owned by
the Matthew D. Yeager 1994 GST Trust and 36,794 shares of Class B
Common Stock owned by the Phillip D. Yeager 1994 GST Trust, for which
David P. Yeager serves as sole trustee and has sole investment and
voting discretion and 469,127 shares of Class B Common Stock as to
which David P. Yeager may be deemed to have shared voting discretion
pursuant to the Yeager Family Stockholder Agreement. See Note 3. Also
includes 22,000 shares of Class A Common Stock issuable upon exercise
of options.
(6) Includes 22,000 shares of Class A Common Stock issuable upon exercise
of options.
(7) Consists of the shares of Class B Common Stock owned by Debra A.
Jensen, Robert J. Jensen's wife, and of which he may be deemed to be
the beneficial owner and 551,913 shares of Class B Common Stock as to
which Robert J. Jensen may be deemed to have shared voting discretion
pursuant to the Yeager Family Stockholder Agreement. See Note 3. Also
includes 5,000 shares of Class A Common Stock issuable upon exercise of
options.
(8) Includes 9,000 shares of Class A Common Stock issuable upon exercise of
options.
(9) Includes 15,600 shares of Class A Common Stock issuable upon exercise
of options.
(10) Includes 36,794 shares of Class B Common Stock owned by the Alexander
B. Yeager 1994 GST Trust and 36,794 shares of Class B Common Stock
owned by the Samantha N. Yeager 1994 GST Trust, for which Mark A.
Yeager serves as sole trustee and has sole investment and voting
discretion and 551,914 shares of Class B Common Stock as to which Mark
A. Yeager may be deemed to have shared voting discretion pursuant to
the Yeager Family Stockholder Agreement. See Note 3. Also includes
15,000 shares of Class A Common Stock issuable upon exercise of
options.
(11) Includes 12,000 shares of Class A Common Stock issuable upon exercise
of options.
(12) Includes 181,000 shares of Class A Common Stock issuable upon exercise
of options.
(13) Debra A. Jensen is the wife of Robert J. Jensen and the daughter of
Phillip C. Yeager. Includes 5,000 shares of Class A Common Stock
issuable upon exercise of options held by Robert J. Jensen.
(14) David L. Babson and Company Incorporated ("Babson") filed a Schedule
13G with the Commission indicating beneficial ownership of shares of
Class A Common Stock. The number of shares beneficially owned by Babson
is indicated as of February 3, 1999. The address of Babson is One
Memorial Drive, Cambridge, MA 02142.
(15) Strong Capital Management, Inc. and Richard S. Strong (collectively,
"Strong") filed a Schedule 13G with the Commission indicating
beneficial ownership of shares of Class A Common Stock. According to
the Schedule 13G, (i) Strong has sole dispositive power with respect to
all 706,600 shares of Class A Common Stock beneficially owned and (ii)
Strong has sole voting power with respect to 400,625 shares of Class A
Common Stock beneficially owned and shared voting power with respect to
zero shares of Class A Common Stock beneficially owned. The number of
shares beneficially owned by Strong is indicated as of February 11,
1999. The address of Strong is 100 Heritage Reserve, Menomonee Falls,
WI 53051.
6
(16) Dimensional Fund Advisors, Inc. ("Dimensional") filed a Schedule 13G
with the Commission indicating beneficial ownership of shares of Class
A Common Stock. The number of shares beneficially owned by Dimensional
is indicated as of February 11, 1999. The address of Dimensional is
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(17) Capital Guardian Trust Company ("Guardian") filed a Schedule 13G with
the Commission indicating beneficial ownership of shares of Class A
Common Stock. The number of shares beneficially owned by Guardian is
indicated as of February 8, 1999. The address of Guardian is 11100
Santa Monica Boulevard, Los Angeles, CA 90025.
(18) Wanger Asset Management, L.P., Wanger Asset Management, Ltd.
(collectively "Wanger") and Acorn Investment Trust ("Acorn") filed a
Schedule 13G with the Commission indicating beneficial ownership of
shares of Class A Common Stock. According to the Schedule 13G, Wanger
has shared dispositive power and shared voting power with respect to
all 1,438,300 shares of Class A Common Stock beneficially owned. Acorn
(i) has shared dispositive power with respect to 1,105,000 shares of
Class A Common Stock beneficially owned and sole dispositive power with
respect to zero shares of Class A Common Stock beneficially owned and
(ii) has shared voting power with respect to 1,105,000 shares of Class
A Common Stock beneficially owned and sole voting power with respect to
zero shares of Class A Common Stock beneficially owned. The number of
shares beneficially owned by Wanger and Acorn are indicated as of
February 23, 1999. The address of Wanger and Acorn is 227 West Monroe
Street, Suite 3000, Chicago, IL 60606.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors, and greater than
ten-percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the Company's 1998 fiscal year all applicable
Section 16(a) filing requirements were complied with by the officers, directors,
and greater than ten-percent beneficial owners.
7
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the annual, long-term and
other compensation for services rendered to the Company for the fiscal years
ended December 31, 1996, December 31, 1997 and December 31, 1998 paid or awarded
to those persons who were, at December 31, 1998: (i) the Company's chief
executive officer, and (ii) the Company's four most highly compensated executive
officers other than the chief executive officer (collectively, together with the
Company's chief executive officer, the "Named Executive Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND SALARY BONUS COMPENSATION SARs COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------- ---- ---------- ---------- ------------ ------------ ------------
David P. Yeager 1998 346,500 225,250 1,113(1) 5,000 5,062(2)
Vice Chairman and 1997 330,000 411,840 -- -- 5,062(2)
Chief Executive Officer 1996 199,650 522,082 -- 35,000 4,762(2)
Thomas L. Hardin 1998 273,000 225,250 1,500(1) 5,000 5,062(2)
President and 1997 260,000 274,560 -- -- 5,062(2)
Chief Operating Officer 1996 199,650 341,711 -- 35,000 4,762(2)
Daniel F. Hardman 1998 141,905 238,196 104(1) -- 5,062(2)
President-Chicago Region 1997 125,000 258,210 -- -- 5,062(2)
1996 108,900 252,569 -- 15,000 4,762(2)
John T. Donnell 1998 210,000 144,481 -- 3,000 5,062(2)
Executive Vice President- 1997 200,000 235,000 -- -- 5,062(2)
National Accounts 1996 163,600 251,047 -- 25,000 4,762(2)
Robert J. Jensen 1998 178,500 195,000 97(1) -- 5,062(2)
Executive Program Director - 1997 170,000 242,000 -- -- 5,062(2)
Year 2000 Program Office 1996 155,500 225,500 -- 25,000 4,762(2)
- ---------------
(1) Represents above market earnings on deferred compensation in 1998.
(2) Represents the Company's matching contribution to the Company's Section
401(k) deferred compensation plan of $4,900, $4,900 and $4,600 in 1998,
1997 and 1996, respectively, and represents the value of insurance
premiums paid by the Company with respect to term life insurance for
the benefit of each Named Executive Officer equal to $162 during each
of 1998, 1997 and 1996.
8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table summarizes the grants of stock options awarded to
the Named Executive Officers during the fiscal year ended December 31, 1998,
under the Company's 1996 Long-Term Incentive Plan.
INDIVIDUAL GRANTS
------------------- POTENTIAL REALIZABLE VALUE
% OF AT ASSUMED ANNUAL RATES
OPTIONS/ TOTAL OF STOCK PRICE APPRECIATION
SARs OPTIONS/ FOR OPTION TERM (3)
GRANTED SARs EXERCISE EXPIRATION ---------------------------
NAME (#) GRANTED PRICE ($/sh)(1) DATE (2) 5%($) 10%($)
- ------------------------ ------- -------- --------------- ---------- ------- -------
David P. Yeager......... 5,000 3.1% 28.16 03/2/08 88,548 224,398
Thomas L. Hardin........ 5,000 3.1% 28.16 03/2/08 88,548 224,398
John T. Donnell......... 3,000 1.9% 28.16 03/2/08 53,129 134,639
- --------------------
(1) The exercise price equals the closing stock price on March 2, 1998
(2) The options were granted on March 2, 1998 and vest ratably over a five-year
period, expiring ten years after their grant date.
(3) The potential realizable dollar value of a grant is the product of: (a) the
difference between (i) the product of the per-share market price at the
time of the grant and the sum of 1 plus the stock appreciation rate
compounded annually over the term of the option (here, 5% and 10%), and
(ii) the per-share exercise price of the option, and (b) the number of
securities underlying the grant at fiscal year-end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information concerning options exercised by
the Named Executive Officers during the fiscal year ended December 31, 1998, and
the value at December 31, 1998, of unexercised options.
NUMBER OF SHARES OF
CLASS A COMMON STOCK VALUE ($) OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-
SHARES OPTIONS AT MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998
ON ----------------------- ---------------------
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------- -------- ------------ ----------------------- ---------------------
David P. Yeager.................. 0 0 14,000/26,000 75,250/112,875
Thomas L. Hardin................. 0 0 14,000/26,000 75,250/112,875
Daniel F. Hardman................ 0 0 6,000/9,000 32,250/48,375
John T. Donnell.................. 0 0 10,000/18,000 53,750/80,625
Robert J. Jensen................. 10,000 43,106 0/15,000 0/80,625
9
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received $18,000 for
serving as a director during 1998. Directors who are employees of the Company do
not receive additional compensation for such services. Both employee and
non-employee directors are reimbursed for their travel and other expenses
incurred in connection with attending meetings of the Board of Directors or
committees thereof. In addition, simultaneously with the closing of the initial
public offering (the "Offering") of the Company, Messrs. Eppen, Reaves and Slark
each received options to purchase 12,000 shares of Class A Common Stock
exercisable at $14.00 per share of which 8,000 shares have vested for each
director. These options vest ratably on the date of each of the three annual
meetings of stockholders occurring after the grant date.
BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee approves the policies under which
compensation is paid or awarded to the Company's executive officers. The
Compensation Committee consists of the three independent members of the Board.
In May 1996, the Board of Directors commissioned a third party to
conduct a study of the Company's compensation program. This study included a
survey of compensation practices in the transportation industry using a broad
sample of companies within the industry. This independent study was used as the
benchmark to determine competitive compensation ranges for senior executives.
The Compensation Committee implemented certain recommendations from the
independent study and, using this study, determined the compensation structure
for 1997. For 1998, the Compensation Committee used these numbers as a baseline
and provided increases to senior executives based on their performance. An
independent study of compensation practices in the transportation industry will
be conducted by a third party every two years to update the Company's benchmark
of competitive compensation ranges for senior executives.
The 1998 Compensation structure approved by the Compensation Committee
was based on the following philosophy:
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is designed to link executive
performance to long-term stockholder value, connect pay with individual
performance, maintain a compensation system that is competitive with the
industry standards and attract and retain outstanding executives.
DESCRIPTION OF COMPENSATION PROGRAMS
The Company's executive compensation program has three components--base
salary, annual incentives, and long-term incentives. Base salary and annual
incentives are primarily designed to reward current and past performance.
Long-term incentives are primarily designed to provide strong incentives for
long-term future Company growth.
BASE SALARY To attract and retain qualified executives, base salary is
determined using competitive criteria within the transportation industry. Salary
increases are based on individual performance and, to a lesser extent, trends
within the industry.
ANNUAL INCENTIVE The Company's bonus plan recognizes and rewards
executives for taking actions that build the value of the Company, generate
competitive total returns for stockholders, and provide value-added solutions
for the Company's customers. For most executive officers, bonus compensation is
based on individual performance and Company performance. The component of the
bonus based on individual performance is conditioned on the individual meeting
certain pre-determined objectives and the component of the bonus based on
Company performance is based on the Company meeting certain performance goals.
10
LONG-TERM INCENTIVES The Company's Long-Term Incentive Program serves to
reward executive performance that successfully executes the Company's long-term
business strategy and builds stockholder value. The program allows for the
awarding of options and stock appreciation rights, restricted stock and
performance units. During fiscal year 1998, non-qualified stock options were
granted to certain of the Company's executive officers. The grants were designed
to motivate each executive officer to continue the Company's growth.
SECTION 162(M) COMPENSATION COMMITTEE REPORT DISCLOSURE
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") limits the Company's deduction for compensation paid to the executive
officers named in the Summary Compensation Table to $1 million unless certain
requirements are met. The policy of the Committee with respect to section 162(m)
is to establish and maintain a compensation program which will optimize the
deductibility of compensation. In that regard, no executive officer received
compensation in excess of $1 million during fiscal year 1998. The Committee,
however, reserves the right to use its judgment, where merited by the
Committee's need to respond to changing business conditions or by an executive
officer's individual performance, to authorize compensation which may not, in a
specific case, be fully deductible to the Company.
COMPENSATION ADMINISTRATION
The Compensation Committee will follow an annual cycle to administer
each of the three components of executive compensation. The bi-annual
independent study of competitive compensation practices within the
transportation industry will continue to be used as the benchmark to determine
competitive compensation ranges for senior executives. Individual performance
and contribution to the achievement of strategic objectives will be considered
in the determination of annual compensation for each executive. The integrity of
the Company's compensation program relies on an annual performance evaluation
process.
DISCUSSION OF CEO COMPENSATION
Consistent with the Company's compensation philosophy, the Compensation
Committee approved Mr. David P. Yeager's total compensation during fiscal year
1998. Mr. Yeager's base salary was based on overall performance of the Company
and on relative levels of compensation for CEOs within the benchmark companies
in the transportation industry. During 1998, rail intermodal service
deteriorated to perhaps the lowest level in the history of the business. As a
result of this service deterioration, the Company did not meet its financial
performance goals established under the Company's annual incentive plan.
Nevertheless, the Company outperformed many of its competitors and gained market
share in the intermodal industry. The Compensation Committee based Mr. Yeager's
annual incentive on the Company's response to the service crises, including
customer retention, vendor relationships and the Company's performance relative
to competitors in the intermodal transportation industry.
The Compensation Committee approved the following compensation for
Mr. Yeager during 1998: (i) a base salary of $346,500 per year and (ii) a bonus
of $225,250.
COMPENSATION COMMITTEE,
Gary D. Eppen
Charles R. Reaves
Martin P. Slark
11
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
stockholder return on its Class A Common Stock since March 13, 1996, the date
that the Class A Common Stock began trading, with the cumulative total return of
the Nasdaq Stock Market Index and the Nasdaq Trucking and Transportation Index.
These comparisons assume the investment of $100 on March 13,1996 in each index
and in the Company's Class A Common Stock and the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
3/13/96 12/31/96 12/31/97 12/31/98
------- -------- -------- --------
Hub Group, Inc. 100 191 212 138
Nasdaq Stock Market 100 119 146 205
Nasdaq Trucking & Transp. 100 103 132 117
12
APPROVAL OF 1999 LONG-TERM INCENTIVE PLAN
A proposal will be presented at the Annual Meeting to approve the Hub
Group, Inc. 1999 Long-Term Incentive Plan (the "Plan"). The Plan was adopted by
the Board of Directors of Hub Group effective as of March 10, 1999, subject to
shareholder approval.
GENERAL DESCRIPTION
The purpose of the Plan is to (a) attract and retain key executive and
managerial employees, including those field executives who previously had an
equity interest in their local Hub operating company; (b) attract and retain the
services of experienced and knowledgeable directors; (c) motivate participating
employees by means of appropriate incentives to achieve long-range goals; (d)
provide incentive compensation opportunities that are competitive with those of
other corporations; and (e) further identify participants' interests with those
of the Company's other shareholders through compensation that is based on the
price appreciation of common stock of the Company, and thereby promote the
long-term financial interest of the Company, including the growth in value of
the Company's equity and enhancement of long-term shareholder return.
A committee (the "Committee") comprised of members of the Board of
Directors, and selected by the Board of Directors, administers the Plan.
Currently, the Compensation Committee of the Board of Directors serves as the
"Committee". The Committee determines, from time to time, from among the
employees who are key executives or managerial employees of Hub Group and its
related companies (as defined in the Plan) which have adopted the Plan those
employees who will receive awards under the Plan and thereby become participants
in the Plan. The Committee may grant to employees non-qualified stock and
incentive stock options, stock appreciation rights ("SARs"), restricted stock
and performance units, subject to the terms and conditions established by the
Committee. In addition each Director (other than a Director who has already
received an automatic award) and who is not an employee of Hub Group or a
related company (an "Eligible Director") shall receive an automatic award of
non-qualified stock options under the Plan and thereby become a participant in
the Plan. In addition to the automatic award of stock options, the Board of
Directors, after recommendation of directors who are not Eligible Directors, may
determine from among the Eligible Directors those Eligible Directors who will
receive awards of non-qualified stock options under the Plan, subject to the
terms and conditions established by the Board of Directors, and thereby become
participants in the Plan. Except for automatic and discretionary stock option
grants, an Eligible Director is not eligible to receive any other awards under
the Plan while he is an Eligible Director.
The number of shares of Hub Group common stock which may be issued or
granted under the Plan with respect to all participants shall not exceed 600,000
shares in the aggregate. The number of shares of Hub Group common stock which
may be issued under the Plan with respect to options and stock appreciation
rights awarded to a participant during any one fiscal year of the Company may
not exceed 50,000. In addition, the number of shares of Hub Group common stock
that may be issued or granted under the Plan is subject to equitable adjustment
in the event of a reorganization, recapitalization, stock dividend, stock split,
or other capital readjustment of Hub Group common stock, and is subject to the
ability to award again shares that were subject to an award but were not
delivered. The Hub Group common stock with respect to which awards may be made
under the Plan shall be shares currently authorized but unissued or currently
held or subsequently acquired by the Company as treasury shares, including
shares purchased in the open market or in private transactions.
The Plan is unlimited in duration, and in the event of Plan
termination, will remain in effect as long as any awards under it are
outstanding; provided, however, that no new award shall be made under the Plan
on a date that is more than ten years from the date that the Plan is adopted.
The Plan may be amended or terminated at any time by the Board of Directors,
without the consent of shareholders; provided, however, that no such amendment
or termination may adversely affect the rights of any participant or beneficiary
under any award made under the Plan prior to the date such amendment is adopted
by the Board of Directors.
13
The Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974, as amended.
Awards under the Plan are not transferable except as designated by the
participant by will or by the laws of descent and distribution; provided that
once the participant is in receipt of the common stock under an award and all
restrictions on the award have lapsed, then the common stock awarded is
transferable. Notwithstanding the foregoing, the Committee may permit awards to
be transferred to or for the benefit of the participant's family, subject to
such limits as the Committee may establish.
Termination provisions in the event of death or termination of
employment shall be in accordance with the restrictions and conditions contained
in the individual awards; provided, however, that if a participant's termination
of employment (or termination of service, in the case of an Eligible Director)
occurs on account of retirement, death or disability, awards may expire no later
than the one year anniversary of the termination if the participants termination
of employment (or termination of service in the case of an Eligible Director)
occurs for other reasons, awards may expire no later than 60 days after such
termination. With respect to automatic options awarded to Eligible Directors, a
participant who ceases to be a Director (and does not become an employee of Hub
Group or a related company) will have three months from the date he ceases to be
a Director to exercise any vested options, unless he ceases to be a Director by
reason of his death, disability or retirement, in which case he (or his estate)
will have twelve months to exercise any options.
The employees of the Company and related companies which have adopted
the Plan are eligible to become participants in the Plan. As of February 28,
1999, there were approximately 1337 employees of the Company and related
companies which have adopted the Plan. As of the date of this Proxy Statement no
options have been granted under the Plan, however, the Company may grant options
prior to the Annual Meeting.
STOCK OPTIONS AWARDED TO PARTICIPANTS WHO ARE EMPLOYEES
The Committee may determine the type and terms of stock options granted
pursuant to the Plan to participants who are employees, provided that such
options are either non-qualified stock options or incentive stock options
(within the meaning of Section 422 of the Code); and provided that (1) the
option price per share shall not be less than the greater of (a) the fair market
value of a share of Hub Group common stock on the date the option is granted or
(b) the par value of a share of Hub Group common stock on such date, and (2)
each option must expire not later than 10 years after the date of grant.
Generally, no option may be exercised by a participant prior to the date the
participant completes one continuous year of employment with the Company or a
related company after the date as of which the option is granted (provided that
the Committee may permit earlier exercise following the participant's
termination of employment by reason of death or disability). The exercise of any
option will result in the surrender of any SARs granted in tandem therewith.
If a participant elects to exercise an option by paying all or a
portion of the purchase price in common stock, as permitted and in accordance
with the terms of the Plan, then such participant may, in the Committee's
discretion, be issued a new option to purchase additional shares of common stock
equal to the number of shares of common stock surrendered to the Company in such
payment. Such new option shall have an exercise price equal to the fair market
value per share on the date such new option is granted, shall first be
exercisable six months from the date of grant of the new option and shall have
an expiration date on the same date as the expiration date of the original
option so exercised by payment of the purchase price in shares of common stock.
The Committee may award dividend equivalents with respect to
non-qualified stock options and, subject to the limitations of the Code, with
respect to incentive stock options. The award of dividend equivalents shall
permit the participant to earn an amount equal to the dividends payable with
respect to the number of shares of common stock subject to the option for the
period the option is outstanding and unexercised. The right to payment of such
earned dividends shall be subject to such restrictions and limitations as may be
imposed by the Committee.
14
STOCK OPTIONS AWARDED TO PARTICIPANTS WHO ARE ELIGIBLE DIRECTORS
The Board may award non-qualified stock options pursuant to the Plan to
participants who are Eligible Directors. Generally, the terms of such
non-qualified stock options are determined by the Board, subject to the same
terms and conditions described above with respect to stock options awarded to
participants who are employees.
In addition to discretionary stock option grants, each Director who is
an Eligible Director shall be granted an option to purchase 12,000 shares of Hub
Group common stock (the "Eligible Director Award") as of the first business day
immediately following the date he becomes an Eligible Director, provided that he
has not previously received an Eligible Director Award under this Plan or the
comparable award under any other Hub Group plan or any plan of a related
company. A Director may not receive more than one Eligible Director Award.
An option awarded as an Eligible Director Award is not intended to
satisfy the requirements applicable to an "incentive stock option" as described
in section 422(b) of the Code. The option price per share of an option granted
as an Eligible Director Award shall not be less than the greater of (a) the fair
market value of a share of Hub Group common stock on the date the option is
granted or (b) the par value of a share of Hub Group common stock on such date.
Generally, the option shall be first exercisable with respect to each 1/3 of the
number of shares of common stock subject to the option on the date of each of
the first, second and third annual anniversaries of the date as of which the
option is granted, respectively, but only if the participant continues to serve
as a Director until such annual anniversary (or is employed by the Company or
any related company until such anniversary). Notwithstanding the foregoing, 100%
of the option will become fully exercisable on the date the participant ceases
to be a Director if such cessation occurs by reason of the participant's death
or disability. The option will not be exercisable after the earliest to occur of
(a) the ten-year anniversary of the date on which the option was granted; (b)
the one-year anniversary of the date an Eligible Director ceases to be a
Director after attaining age 65 or as a result of death or disability; and (c)
the three-month anniversary of the date an Eligible Director ceases to be a
Director prior to age 65 for a reason other than death or disability (the
"Expiration Date"). The option will not be exercisable after the Expiration Date
applicable to that option, and all rights to purchase shares of common stock
pursuant to the option shall cease as of the option's Expiration Date. A
participant shall not be permitted to exercise the option after the participant
ceases to be a Director except to the extent that the option is exercisable
immediately prior to such cessation; provided that, if, at the time a
participant ceases to be a Director, he is employed by the Company or a related
company, then the date of his subsequent termination of employment with the
Company or a related company, rather than the date he ceases to serve as a
Director, will be used to determine whether the Expiration Date occurs prior to
the tenth anniversary of the date the option was granted.
STOCK APPRECIATION RIGHTS
The Committee may award SARs in connection with all or any portion of a
previously or contemporaneously granted option or not in connection with an
option, in such number and on such terms as the Committee may decide. If an SAR
is granted in connection with an option, then in the discretion of the
Committee, the SAR may, but need not, be granted in tandem with the option. The
SAR must expire no later than 10 years after the date of grant, or if granted in
tandem with an option, the expiration date of the related option. Generally, no
SAR may be exercised by a participant prior to the date the participant has
completed one continuous year of employment with the Company after the date as
of which the SAR is granted (provided that the Committee may permit earlier
exercise following the participant's termination of employment by death or
disability). An SAR entitles the participant to receive the amount by which the
fair market value of a specified number of shares on the exercise date exceeds a
specified price, which price shall not be less than 100% of the fair market
value of a share of Hub Group common stock at the time the SAR is granted, or if
granted in tandem with an option, the exercise price with respect to shares
under the tandem option. Such amount shall be payable in Hub Group common stock,
in cash, or in a combination thereof, as determined by the Committee. The
exercise of an SAR will result in the surrender of corresponding rights under
the tandem option.
15
The Committee may award dividend equivalents with respect to SARs. The
award of dividend equivalents shall permit the participant to earn an amount
equal to the dividends payable with respect to the number of shares of Stock
that are subject to the SARs for the period the SARs are outstanding and
unexercised. The right to payment of such earned dividends shall be subject to
such restrictions and limitations as may be imposed by the Committee.
RESTRICTED STOCK
The Committee may award to participants shares of Hub Group common
stock which are subject to certain restrictions as may be determined by the
Committee ("Restricted Stock"); provided that Restricted Stock awarded under the
Plan may not be sold, assigned, transferred, pledged or otherwise encumbered for
a period of not less than one year after the time of the grant of such shares
(the "Restricted Period"); and provided further that a participant who
terminates employment prior to the end of the Restricted Period will forfeit all
shares of Restricted Stock that remain subject to restrictions. The Committee
may, in its discretion, at any time after the date of the award of Restricted
Stock, adjust the length of the Restricted Period to account for individual
circumstances of a participant or group of participants, but in no case shall
the length of the Restricted Period be less than one year.
PERFORMANCE UNITS
The Committee may award performance units to participants under the
Plan, subject to such conditions and restrictions as may be determined by the
Committee. The award of performance units entitles the participant to receive
value for the units at the end of a performance period to the extent provided
under the award. The number of units earned, and value received for them, will
be contingent on the degree to which the performance measures established at the
time of the initial award are met.
The Committee shall designate the participants to whom performance
units are to be granted, the term of the performance period, and other terms and
conditions of the award. The Committee will compare the actual performance to
the performance measures established for the performance period and determine
the number of units to be paid and their value. Payment for units earned shall
be wholly in cash, wholly in common stock or in a combination of the two, in a
lump sum or installments, and subject to vesting requirements and such other
conditions as the Committee shall determine. The Committee will determine the
number of earned units to be paid in cash and the number to be paid in common
stock. For performance units valued when granted in shares of common stock, one
share of common stock will be paid for each unit earned, or cash will be paid
for each unit earned equal to either (a) the fair market value of a share of
common stock at the end of the performance period or (b) the value of the common
stock determined based on the average fair market value for a number of days
determined by the Committee. For performance units valued when granted in cash,
the value of each unit earned will be paid in its initial cash value, or shares
of common stock will be distributed based on the cash value of the units earned
divided by (a) the fair market value of a share of common stock at the end of
the performance period or (b) the value of a share of common stock determined
based on the average fair market value for a number of days determined by the
Committee.
If a participant's termination of employment occurs during a
performance period with respect to any performance shares granted to him, the
Committee may determine that the participant will be entitled to receive all or
any portion of the performance shares that he would otherwise receive, and may
accelerate the determination and payment of the value of such performance shares
or make such other adjustments as the Committee, in its sole discretion, deems
desirable.
16
U.S. FEDERAL INCOME TAX CONSEQUENCES
A participant who has been granted an incentive stock option will not
realize taxable income and the Company will not be entitled to a deduction at
the time of the grant or exercise of such option. If the participant makes no
disposition of shares acquired pursuant to an incentive stock option within two
years from the date of grant of such option, or within one year of the transfer
of the shares to the participant, any gain or loss realized on a subsequent
disposition of such shares will be treated as a capital gain or loss. Under such
circumstances, the Company will not be entitled to any deduction for Federal
income tax purposes. If the holding period requirements are not satisfied, the
participant will generally realize ordinary income at the time of disposition in
an amount equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise over the option price or (ii) the excess of the
amount realized upon disposition of the shares, if any, over the option price,
and the Company will be entitled to a corresponding deduction. In addition, the
participant may be required to pay an alternative minimum tax on the amount of
his tax preference items, if such tax exceeds the tax otherwise due, which
amount of minimum tax paid may be available as a credit in future years to
reduce subsequent tax liability. The exercise of an incentive stock option will
generally result in an increase to alternative minimum taxable income, the basis
on which the alternative minimum tax is computed, by the amount by which the
fair market value of the shares at the time of exercise exceeds the exercise
price.
A participant will not realize taxable income at the time of the grant
of a non-qualified option. Upon exercise, however, of such non-qualified stock
option, the participant will realize ordinary income in an amount measured by
the excess, if any, of the fair market value of the shares on the date of
exercise over the option price, and the Company will be entitled to a
corresponding deduction. Upon a subsequent disposition of such shares, the
participant will realize short-term or long-term capital gain or loss, with the
basis for computing such gain or loss equal to the option price plus the amount
of ordinary income realized upon exercise.
A participant will not realize taxable income at the time of the grant
of a stock appreciation right. Upon exercise, however, the participant will
realize ordinary income measured by the difference between the fair market value
of the common stock of the Company on the applicable date of grant and the fair
market value of such stock on the date of exercise. The Company will be entitled
to a corresponding deduction in the year of exercise.
A participant who has been granted a restricted stock award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time, assuming that the restrictions constitute
a substantial risk of forfeiture for Federal income tax purposes. Upon the
vesting of shares subject to an award, the participant will realize ordinary
income in an amount equal to the fair market value of the shares at such time,
and the Company will be entitled to a corresponding deduction. Dividends paid to
the participant during the restriction period will also be compensation income
to the participant and deductible as such by the Company. The participant may
elect to be taxed at the time of grant of a restricted stock award on the then
fair market value of the shares, in which case (i) the Company will be entitled
to a deduction at the same time and in the same amount, (ii) dividends paid to
such holder during the restriction period will be taxable as dividends to such
holder and not deductible by the Company, and (iii) there will be no further tax
consequences when the restrictions lapse. If a participant who has made such an
election subsequently forfeits the shares, he will not be entitled to any
deduction or loss. The Company, however, will be required to include as ordinary
income the lesser of the fair market value of the forfeited shares or the amount
of the deduction originally claimed with respect to the shares.
A participant who has been granted performance units will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. The participant will have compensation income at the
time of payment, and the Company will have a corresponding deduction.
17
PAYMENT OF OPTION PRICE WITH SHARES OF COMPANY COMMON STOCK
Under proposed regulations, the exercise of an incentive stock option
through the exchange of previously acquired stock will generally be treated as a
non-taxable, like-kind exchange as to the number of shares given up and the
identical number of shares received under the option. That number of shares will
take the same basis and, for capital gains purposes, the same holding period as
the shares which are given up. However, such holding period will not be credited
for purposes of the one-year holding period required for the new shares to
receive incentive stock option treatment. Shares received upon such an exchange
which are in excess of the number of shares given up will have a new holding
period and, if cash was paid in addition to the shares exchanged, a basis equal
to the amount of such cash. If a disqualifying disposition (a disposition before
the end of the applicable holding period) occurs with respect to any of the
shares received from the exchange, it will be treated as a disqualifying
disposition of the shares with the lowest basis.
If the exercise price of an incentive stock option is paid with shares
of stock of the Company acquired through a prior exercise of an incentive stock
option, gain will be realized on the shares given up (and will be taxed as
ordinary income) if those shares have not been held for the minimum holding
period (two years from the date of grant and one year from the date of
transfer), but the exchange will not affect the tax treatment, as described in
the immediately preceding paragraph, of the shares received.
The exercise of a non-qualified stock option through the delivery of
previously acquired stock will generally be treated as a non-taxable, like-kind
exchange as to the number of shares surrendered and the identical number of
shares received under the option. That number of shares will take the same basis
and, for capital gains purposes, the same holding period as the shares which are
given up. The value of the shares received upon such an exchange which are in
excess of the number given up will be taxed to the participant at the time of
the exercise as ordinary income. The excess shares will have a new holding
period for capital gains purposes and a basis equal to the value of such shares
determined at the time of exercise.
WITHHOLDING OF TAXES
The Company may deduct, from any payment under the Plan, the amount of
any tax required by law to be withheld with respect to such payment, or may
require the participant to pay such amount to the Company prior to, and as a
condition of, making such payment. The use of shares of Company common stock to
satisfy any withholding requirement will be treated, for federal income tax
purposes, as a sale of such shares for an amount equal to the fair market value
of the stock on the date when the amount of taxes to be withheld is determined.
If previously owned shares of Company common stock are delivered by a
participant to satisfy a withholding requirement, the disposition of such shares
may result in the recognition of gain or loss by the participant for tax
purposes.
LIMITATIONS ON DEDUCTIONS
The Company income tax deduction for awards under the Plan may be
unavailable if (i) the award is in excess of reasonable compensation, (ii) the
award fails to satisfy the requirements of section 162(m) of the Code that
compensation in excess of $1 million be performance-based, and (iii) the award
constitutes an excess parachute payment under section 280G of the Code.
OTHER INFORMATION
Approval of the Plan will require the affirmative vote of the holders
of shares having a majority of the votes present in person or represented by
proxy at the Annual Meeting, provided a quorum is present, with the result that
shares which abstain from voting would count as votes against the Plan and
broker non-votes would have no effect on the outcome.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
18
CERTAIN TRANSACTIONS
On April 1, 1998 the Company purchased the remaining 70% minority
interest in Hub City Houston, L.P., Hub City Dallas, L.P. and Hub City Rio
Grande, L.P. for approximately $6,152,000 in cash. Phillip C. Yeager received
approximately $426,000, David P. Yeager (including members of his immediate
family) received approximately $547,000, Thomas L. Hardin received approximately
$419,000, Mark A. Yeager (including members of his immediate family) received
approximately $515,000, Robert J. Jensen (including members of his immediate
family) received approximately $515,000 and John T. Donnell received
approximately $281,000. The purchase price paid by the Company was based upon
the option formula contained in the Amended and Restated Limited Partnership
Agreements of Hub City Houston, L.P., Hub City Dallas, L.P and Hub City Rio
Grande, L.P. The decision to exercise the options to acquire the minority
interests in Hub City Houston, L.P., Hub City Dallas, L.P. and Hub City Rio
Grande, L.P. was made by the independent members of the Company's Board of
Directors.
On April 1, 1999 the Company delivered a purchase notice pursuant to
which it purchased the remaining 70% minority interest in Hub City Alabama,
L.P., Hub City Atlanta, L.P., Hub City Boston, L.P., Hub City Canada, L.P., Hub
City Cleveland, L.P., Hub City Detroit, L.P., Hub City Florida, L.P., Hub City
Indianapolis, L.P., Hub City Kansas City, L.P., Hub City Mid-Atlantic, L.P., Hub
City New York-New Jersey, L.P., Hub City New York State, L.P., Hub City Ohio,
L.P., Hub City Philadelphia, L.P., Hub City Pittsburgh, L.P., Hub City Portland,
L.P. and Hub City St. Louis, L.P. (each a "Purchased Hub" and, collectively, the
"Purchased Hubs") for approximately $107.5 million in cash with payment to be
made by May 1, 1999. Phillip C. Yeager will receive approximately $8,745,000,
David P. Yeager (including members of his immediate family) will receive
approximately $11,437,000, Thomas L. Hardin will receive approximately
$4,822,000, Mark A. Yeager (including members of his immediate family) will
receive approximately $8,751,000, Robert J. Jensen (including members of his
immediate family) will receive approximately $9,856,000, John T. Donnell will
receive approximately $2,410,000 and Daniel F. Hardman will receive
approximately $110,000. The purchase price paid by the Company was based upon
the option formula contained in the respective Amended and Restated Limited
Partnership Agreements of each Purchased Hub. The decision to exercise the
options to acquire the minority interests in the Purchased Hubs was made by the
independent members of the Company's Board of Directors.
AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the
independent accountant of the Company. Representatives of Arthur Andersen LLP
will be present at the Annual Meeting and will be given the opportunity to make
a statement if they desire to do so. They will also be available to respond to
appropriate questions.
19
PROXY SOLICITATION EXPENSE
The expense of any proxy solicitation will be paid by the Company. In
addition to the solicitation of proxies by use of the mails, solicitation also
may be made by telephone, telegraph or personal interview by directors,
officers, and regular employees of the Company, none of whom will receive
additional compensation for any such solicitation. The Company will, upon
request, reimburse brokers, banks, and similar organizations for out-of-pocket
and reasonable clerical expenses incurred in forwarding proxy material to their
principals.
STOCKHOLDER PROPOSALS
Proposals of stockholders must be received in writing by the Secretary
of the Company at the principal executive offices of the Company no later than
December 16, 1999, in order to be considered for inclusion in the Company's
proxy statement and form of proxy relating to the next annual meeting of
stockholders.
The Company anticipates that its next annual meeting of stockholders
will be held in May 2000. If a stockholder desires to submit a proposal for
consideration at the next annual meeting of stockholders, written notice of such
stockholder's intent to make such a proposal must be given and received by the
Secretary of the Company at the principal executive offices of the Company
either by personal delivery or by United States mail no earlier than February
12, 2000 nor later than March 13, 2000. Each notice must describe the proposal
in sufficient detail for the proposal to be summarized on the agenda for the
annual meeting of stockholders and must set forth: (i) the name and address, as
it appears on the books of the Company, of the stockholder who intends to make
the proposal; (ii) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at such meeting to present such proposal; and (iii) the
class and number of shares of the Company which are beneficially owned by the
stockholder. In addition, the notice must set forth the reasons for conducting
such proposed business at the annual meeting of stockholders and any material
interest of the stockholder in such business. The presiding officer of the
annual meeting of stockholders will, if the facts warrant, refuse to acknowledge
a proposal not made in compliance with the foregoing procedure, and any such
proposal not properly brought before the annual meeting of stockholders will not
be considered.
By order of the Board of Directors,
MARK A. YEAGER
Division President, Secretary and General Counsel
Lombard, Illinois
April 9, 1999
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE EXPECTS TO BE PRESENT IN PERSON AT
THE ANNUAL MEETING, IS REQUESTED TO MARK, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. A STOCKHOLDER MAY
REVOKE HIS OR HER PROXY AT ANY TIME PRIOR TO VOTING.
20
HUB GROUP, INC.
1999 LONG-TERM INCENTIVE PLAN
HUB GROUP, INC.
Certificate
I, ____________, ____________ of Hub Group, Inc., having in my custody
and possession the corporate records of said corporation, do hereby certify that
attached hereto is a true and correct copy of the Hub Group, Inc. 1999 Long-Term
Incentive Plan as in effect as of _____________, 1999.
WITNESS my hand this __ day of _________ , 1999.
____________________
As Aforesaid
TABLE OF CONTENTS
SECTION 1.....................................................................1
GENERAL...............................................................1
1.1 Purpose ...................................................1
1.2 Defined Terms...............................................1
1.3 Participation...............................................1
1.4 Operation and Administration................................2
SECTION 2.....................................................................2
OPTIONS...............................................................2
2.1 Definition..................................................2
2.2 Eligibility.................................................2
2.3 Price ...................................................2
2.4 Exercise ...................................................3
2.5 Post-Exercise Limitations...................................3
2.6 Expiration Date.............................................4
2.7 Reload of Option. ..........................................4
2.8 Dividend Equivalents........................................4
SECTION 3.....................................................................5
STOCK APPRECIATION RIGHTS.............................................5
3.1 Definition..................................................5
3.2 Eligibility.................................................5
3.3 Exercise ...................................................5
3.4 Settlement of Award.........................................5
3.5 Post-Exercise Limitations...................................6
3.6 Expiration Date.............................................6
3.7 Dividend Equivalents........................................6
SECTION 4.....................................................................6
RESTRICTED STOCK......................................................6
4.1 Definition..................................................6
4.2 Eligibility.................................................6
4.3 Terms and Conditions of Awards..............................7
SECTION 5.....................................................................8
PERFORMANCE UNITS.....................................................8
5.1 Definition.................................................8
5.2 Eligibility.................................................8
5.3 Terms and Conditions of Awards..............................8
i
5.4 Payment ...................................................8
5.5 Termination during Performance Period.......................8
SECTION 6.....................................................................9
DIRECTORS AUTOMATIC OPTION GRANT......................................9
6.1 Definition..................................................9
6.2 Participation...............................................9
6.3 Price ...................................................9
6.4 Exercise ..................................................10
6.5 Expiration Date............................................10
SECTION 7....................................................................10
OPERATION AND ADMINISTRATION.........................................10
7.1 Effective Date.............................................10
7.2 Shares Subject to Plan.....................................11
7.3 Individual Limits on Awards................................11
7.4 Adjustments to Shares......................................11
7.5 Limit on Distribution......................................13
7.6 Liability for Cash Payments................................14
7.7 Performance-Based Compensation.............................14
7.8 Withholding................................................14
7.9 Transferability............................................14
7.10 Administration............................................15
7.11 Notices ..................................................15
7.12 Form and Time of Elections................................15
7.13 Agreement With Company....................................15
7.14 Limitation of Implied Rights..............................15
7.15 Benefits Under Qualified Retirement Plans.................16
7.16 Evidence..................................................16
7.17 Action by Employers.......................................16
7.18 Gender and Number.........................................16
7.19 Defined Terms.............................................16
SECTION 8....................................................................18
COMMITTEE............................................................18
8.1 Selection of Committee.....................................18
8.2 Powers of Committee........................................19
8.3 Delegation by Committee....................................19
8.4 Information to be Furnished to Committee...................20
8.5 Liability and Indemnification of Committee.................20
SECTION 9....................................................................20
ii
CHANGE IN CONTROL....................................................20
9.1 Acceleration of Awards......................................20
9.2 Definition of Change in Control.............................21
SECTION 10...................................................................21
AMENDMENT AND TERMINATION............................................21
iii
HUB GROUP, INC.
1999 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1 Purpose. The Hub Group, Inc. 1999 Long-Term Incentive Plan (the
"Plan") has been established by Hub Group, Inc. (the "Company") to:
(a) attract and retain key executive and managerial employees;
(b) attract and retain the services of experienced and knowledgeable
directors;
(c) motivate participating employees, by means of appropriate incentives,
to achieve long-range goals;
(d) provide incentive compensation opportunities that are competitive with
those of other corporations; and
(e) further identify Participants' interests with those of the Company's
other shareholders through compensation that is based on the Company's
common stock;
and thereby promote the long-term financial interest of the Company and the
Related Companies, including the growth in value of the Company's equity and
enhancement of long-term shareholder return.
1.2 Defined Terms. Capitalized terms used herein which are not
otherwise defined in the Plan shall have the meaning set forth in subsection
7.19 hereof.
1.3 Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
employees of the Employers who are key executives or managerial employees, those
persons who will be granted one or more Awards under the Plan, and thereby
become "Participants" in the Plan. Subject to the terms and conditions of the
Plan, the Board, after recommendation of the Directors who are not Eligible
Directors, shall determine and designate, from time to time, from among the
Eligible Directors of the Company those Eligible Directors who will be granted
Options under the Plan, and thereby become "Participants" in the Plan. In the
discretion of the Committee, and subject to the terms of the Plan, a Participant
may be granted any Award permitted under the provisions of the Plan, and more
than one Award may be granted to a Participant; provided, however, that
Participants who are Eligible Directors may only be granted Options under
Sections 2 and 6 of the Plan and the right to receive an Option under Section 6
shall be subject to the limitations of that Section. Except as otherwise
provided by the Committee (or the Board with respect to an Award to an Eligible
Director) and consented to by the Participant, or except as otherwise provided
in the Plan, an Award under the Plan shall not affect any previous Award under
the Plan or an award under any other plan maintained by the Company or the
Related Companies.
1.4 Operation and Administration. The operation and administration of
the Plan, including the Awards made under the Plan, shall be subject to the
provisions of Section 7.
SECTION 2
OPTIONS
2.1 Definitions. The grant of an Option under this Section 2 entitles
the Participant to purchase shares of Stock at a price fixed at the time the
Option is granted, or at a price determined under a method established at the
time the Option is granted, subject to the terms of this Section 2. Options
granted under this Section 2 may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined in the discretion of the Committee;
provided, however, that any Option granted to an Eligible Director shall be a
Non-Qualified Stock Option.
2.2 Eligibility. The Committee (or the Board in the case of Options
granted to Eligible Directors) shall designate the Participants to whom Options
are to be granted under this Section 2 and shall determine the number of shares
of Stock to be subject to each such Option. Consistent with the requirements of
section 422 of the Code, to the extent that the aggregate fair market value of
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any individual during any calendar year (under all plans of the
Company and all Related Companies) exceeds $100,000, such options shall be
treated as Non-Qualified Stock Options.
2.3 Price. The determination and payment of the purchase price of a
share of Stock under each Option granted under this Section 2 shall be subject
to the following:
(a) The purchase price shall be established by the Committee (or the Board
in the case of Options granted to Eligible Directors) or shall be
determined by a method established by the Committee (or the Board in
the case of Options granted to Eligible Directors) at the time the
Option is granted; provided, however, that in no event shall such price
be less than the greater of (i) 100% of the Fair Market Value of a
share of Stock as of the date on which the Option is granted; or (ii)
the par value of a share of Stock on such date.
(b) Subject to the following provisions of this subsection 2.3, the full
purchase price of each share of Stock purchased upon the exercise of
2
any Option shall be paid at the time of such exercise and, as soon as
practicable thereafter, a certificate representing the shares so
purchased shall be delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or in shares of Stock
(valued at Fair Market Value as of the day of exercise), or in any
combination thereof, as determined by the Committee (or the Board in
the case of Options granted to Eligible Directors).
(d) A Participant may elect to pay the purchase price upon the exercise of
an Option through the following cashless exercise procedures: The
Participant shall notify the Corporate Secretary of the intent to
exercise. Written instructions will then be prepared and delivered to
the Company and the broker indicating the Participant's cashless
election and instructing the Company to deliver to the broker the
Common Stock issuable upon exercise. The exercise of the Option will
be executed on the same day that the broker is able to sell the stock.
The broker will then withhold from the proceeds of the sale and deliver
to the Company an amount, in cash, equal to the Option exercise price.
An additional amount for federal and state tax withholdings, not to
exceed the statutory minimum required tax withholding, may also be
withheld and delivered to the Company at the Participant's election.
2.4 Exercise. Except as otherwise expressly provided in the Plan, an
Option granted under this Section 2 shall be exercisable in accordance with the
following terms of this subsection 2.4:
(a) The terms and conditions relating to exercise of an Option shall be
established by the Committee (or the Board in the case of Options
granted to Eligible Directors), and may include, without limitation,
conditions relating to completion of a specified period of service or
achievement of performance standards prior to exercise of the Option.
(b) No Option may be exercised by a Participant: (i) prior to the date on
which the Participant completes one continuous year of employment with
the Company or any Related Company or one continuous year of service as
an Eligible Director, as applicable, after the date as of which the
Option is granted (provided, however, that the Committee (or the Board
in the case of Options granted to Eligible Directors) may permit
earlier exercise following the Participant's Date of Termination or
Termination of Service, as applicable, by reason of death or
Disability); or (ii) after the Expiration Date applicable to that
Option.
(c) The exercise of an Option will result in the surrender of the
corresponding rights under a tandem Stock Appreciation Right, if any.
2.5 Post-Exercise Limitations. The Committee (or the Board in the case
of Options granted to Eligible Directors), in its discretion, may impose such
3
restrictions on shares of Stock acquired pursuant to the exercise of an Option
granted under this Section 2 (including stock acquired pursuant to the exercise
of a tandem Stock Appreciation Right) as it determines to be desirable,
including, without limitation, restrictions relating to disposition of the
shares and forfeiture restrictions based on service, performance and such other
factors as the Committee (or the Board in the case of Options granted to
Eligible Directors) determines to be appropriate.
2.6 Expiration Date. The "Expiration Date" with respect to an Option
granted under this Section 2 means the date established as the Expiration Date
by the Committee (or the Board in the case of Options granted to Eligible
Directors) at the time of the grant; provided, however, that the Expiration Date
with respect to any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Participant's Date of Termination or Termination of Service, as
applicable, occurs by reason of Retirement, death or Disability, the
one-year anniversary of such Date of Termination or Termination of
Service; or
(c) if the Participant's Date of Termination or Termination of Service, as
applicable, occurs for reasons other than Retirement, death or
Disability, the 60-day period following such Date of Termination or
Termination of Service.
2.7 Reload of Option. In the event the Participant exercises an Option
granted under this Section 2 and pays all or a portion of the purchase price in
Common Stock, in the manner permitted by subsection 2.3, such Participant may,
in the Committee's discretion (or the Board's discretion in the case of Options
granted to Eligible Directors), be issued a new Option to purchase additional
shares of Stock equal to the number of shares of Stock surrendered to the
Company in such payment. Such new Option shall have an exercise price equal to
the Fair Market Value per share on the date such new Option is granted, shall
first be exercisable six months from the date of grant of the new Option and
shall have an Expiration Date on the same date as the Expiration Date of the
original Option so exercised by payment of the purchase price in shares of
Stock.
2.8 Dividend Equivalents. The Committee (or the Board in the case of
Options granted to Eligible Directors) may award Dividend Equivalents with
respect to Options. The award of Dividend Equivalents shall permit the
Participant to earn an amount equal to the dividends payable with respect to the
number of shares of Stock subject to the Option for the period the Option is
outstanding and unexercised. The right to payment of such earned dividends shall
be subject to such restrictions and limitations as may be imposed by the
Committee (or the Board in the case of Options granted to Eligible Directors).
4
SECTION 3
STOCK APPRECIATION RIGHTS
3.1 Definition. Subject to the terms of this Section 3, a "Stock
Appreciation Right" granted under the Plan entitles the Participant to receive,
in cash or Stock (as determined in accordance with subsection 3.4), value equal
to all or a portion of the excess of: (a) the Fair Market Value of a specified
number of shares of Stock at the time of exercise; over (b) a specified price
which shall not be less than 100% of the Fair Market Value of the Stock at the
time the Stock Appreciation Right is granted, or, if granted in tandem with an
Option, the exercise price with respect to shares under the tandem Option.
3.2 Eligibility. Subject to the provisions of the Plan, the Committee
shall designate the Participants to whom Stock Appreciation Rights are to be
granted under the Plan, shall determine the exercise price or a method by which
the price shall be established with respect to each such Stock Appreciation
Right, and shall determine the number of shares of Stock on which each Stock
Appreciation Right is based. A Stock Appreciation Right may be granted in
connection with all or any portion of a previously or contemporaneously granted
Option or not in connection with an Option. If a Stock Appreciation Right is
granted in connection with an Option, then, in the discretion of the Committee,
the Stock Appreciation Right may, but need not be granted in tandem with the
Option.
3.3 Exercise. The exercise of Stock Appreciation Rights shall be
subject to the following:
(a) If a Stock Appreciation Right is not in tandem with an Option, then the
Stock Appreciation Right shall be exercisable in accordance with the
terms established by the Committee in connection with such rights;
provided, however, that except as otherwise expressly provided in the
Plan, no Stock Appreciation Right may be exercised by a Participant
(i) prior to the date on which he completes one continuous year of
employment with the Company or any Related Company after the date as of
which the Stock Appreciation Right is granted (provided, however, that
the Committee may permit earlier exercise following the Participant's
Date of Termination by reason of death or Disability); or (ii) after
the Expiration Date applicable to that Stock Appreciation Right.
(b) If a Stock Appreciation Right is in tandem with an Option, then the
Stock Appreciation Right shall be exercisable at the time the tandem
Option is exercisable. The exercise of a Stock Appreciation Right will
result in the surrender of the corresponding rights under the tandem
Option.
3.4 Settlement of Award. Upon the exercise of a Stock Appreciation
Right, the value to be distributed to the Participant, in accordance with
5
subsection 3.1, shall be distributed in shares of Stock (valued at their Fair
Market Value at the time of exercise), in cash, or in a combination thereof, in
the discretion of the Committee.
3.5 Post-Exercise Limitations. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the exercise of
a Stock Appreciation Right as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance and such other factors as the
Committee determines to be appropriate.
3.6 Expiration Date. If a Stock Appreciation Right is in tandem with an
Option, then the "Expiration Date" for the Stock Appreciation Right shall be the
Expiration Date for the related Option. If a Stock Appreciation Right is not in
tandem with an Option, then the "Expiration Date" for the Stock Appreciation
Right shall be the date established as the Expiration Date by the Committee;
provided, however, that subject to the following provisions of this subsection
3.6, the Expiration Date with respect to any Stock Appreciation Right shall not
be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Stock Appreciation
Right is granted;
(b) if the Participant's Date of Termination occurs by reason of
Retirement, death or Disability, the one-year anniversary of such Date
of Termination.
(c) if the Participant's Date of Termination occurs by reason other than
Retirement, death, or Disability, 60 days after such Date of
Termination.
3.7 Dividend Equivalents. The Committee may award Dividend Equivalents
with respect to Stock Appreciation Rights. The award of Dividend Equivalents
shall permit the Participant to earn an amount equal to the dividends payable
with respect to the number of shares of Stock that are subject to the Stock
Appreciation Rights for the period the Stock Appreciation Rights are outstanding
and unexercised. The right to payment of such earned dividends shall be subject
to such restrictions and limitations as may be imposed by the Committee.
SECTION 4
RESTRICTED STOCK
4.1 Definition. Subject to the terms of this Section 4, Awards of
"Restricted Stock" under the Plan are grants of Stock to Participants, the
vesting of which is subject to such conditions as may be established by the
Committee.
4.2 Eligibility. The Committee shall designate the Participants to whom
Restricted Stock is to be granted, and the number of shares of Stock that are
subject to each such Award.
6
4.3 Terms and Conditions of Awards. Shares of Restricted Stock granted
to Participants under the Plan shall be subject to the following terms and
conditions:
(a) Restricted Stock granted to Participants may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as hereinafter
provided, for a period of not less than one year after the time of the
grant of such Stock (the "Restricted Period"). Except for such
restrictions, the Participant as owner of such shares shall have all
the rights of a shareholder, including but not limited to the right to
vote such shares and, except as otherwise provided by the Committee,
the right to receive all dividends paid on such shares. The Committee
may, in its discretion, at any time after the date of the award of
Restricted Stock, adjust the length of the Restricted Period to account
for individual circumstances of a Participant or group of Participants,
but in no case shall the length of the Restricted Period be less than
one year.
(b) Except as otherwise determined by the Committee, a Participant whose
Date of Termination occurs prior to the end of the Restricted Period
for any reason shall forfeit all shares of Restricted Stock remaining
subject to any outstanding Restricted Stock Award.
(c) The Committee may, in its discretion, condition the vesting of shares
of Restricted Stock on the achievement of performance goals.
(d) Each certificate issued in respect of shares of Restricted Stock
granted under the Plan shall be registered in the name of the
Participant and, at the discretion of the Committee, each such
certificate may be deposited in a bank designated by the Committee.
Each such certificate shall bear the following (or a similar) legend:
"THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE HUB GROUP,
INC. 1999 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED
INTO BETWEEN THE REGISTERED OWNER AND HUB GROUP, INC. A COPY
OF SUCH PLAN AND AGREEMENT IS ON FILE IN THE OFFICE OF THE
SECRETARY OF HUB GROUP, INC., 377 EAST BUTTERFIELD ROAD, SUITE
700, LOMBARD, ILLINOIS 60148."
(e) Subject to the limitations of the Plan and the Award of Restricted
Stock, at the end of the Restricted Period for Restricted Stock, such
Restricted Stock will be transferred free of all restrictions to a
Participant (or his or her legal representative, beneficiary or heir).
7
SECTION 5
PERFORMANCE UNITS
5.1 Definition. Subject to the terms of this Section 5, the Award of
"Performance Units" under the Plan entitles the Participant to receive value for
the units at the end of a Performance Period to the extent provided under the
Award. The number of units earned, and value received for them, will be
contingent on the degree to which the performance measures established at the
time of the initial Award are met.
5.2 Eligibility. The Committee shall designate the Participants to whom
Performance Units are to be granted, and the number of units to be the subject
to each such Award.
5.3 Terms and Conditions of Awards. For each Participant, the Committee
will determine the number of units granted; the value of units, which may be
stated either in cash or in shares of Stock; the performance measures used for
determining whether the Performance Units are earned; the Performance Period
during which the performance measures will apply; the relationship between the
level of achievement of the performance measures and the degree to which
Performance Units are earned; whether, during or after the Performance Period,
any revision to the performance measures or Performance Period should be made to
reflect significant events or changes that occur during the Performance Period;
and the number of earned Performance Units that will be paid in cash and/or
shares of Stock.
5.4 Payment. The Committee will compare the actual performance to the
performance measures established for the Performance Period and determine the
number of units to be paid and their value. Payment for units earned shall be
wholly in cash, wholly in Stock or in a combination of the two, in a lump sum or
installments, and subject to vesting requirements and such other conditions as
the Committee shall determine. The Committee will determine the number of earned
units to be paid in cash and the number to be paid in Stock. For Performance
Units valued when granted in shares of Stock, one share of Stock will be paid
for each unit earned, or cash will be paid for each unit earned equal to either
(a) the Fair Market Value of a share of Stock at the end of the Performance
Period or (b) the value of the Stock determined based on the average Fair Market
Value for a number of days determined by the Committee. For Performance Units
valued when granted in cash, the value of each unit earned will be paid in its
initial cash value, or shares of Stock will be distributed based on the cash
value of the units earned divided by (a) the Fair Market Value of a share of
Stock at the end of the Performance Period or (b) the value of a share of Stock
determined based on the average Fair Market Value for a number of days
determined by the Committee.
5.5 Termination during Performance Period. If a Participant's Date of
Termination occurs during a Performance Period with respect to any Performance
Shares granted to him, the Committee may determine that the Participant will be
8
entitled to receive all or any portion of the Performance Shares that he would
otherwise receive, and may accelerate the determination and payment of the value
of such Performance Shares or make such other adjustments as the Committee, in
its sole discretion, deems desirable.
SECTION 6
DIRECTORS AUTOMATIC OPTION GRANT
6.1 Definition. The grant of an Option under this Section 6 entitles
the Participant to purchase shares of Stock at a price fixed at the time the
Option is granted. An Option granted under this Section 6 shall not affect any
Award previously granted under the Plan or an award under any other plan
maintained by the Company or the Related Companies. An Option granted under this
Section 6 shall be a Non-Qualified Stock Option.
6.2 Participation. As of the first business day immediately following
the date on which a person first becomes an Eligible Director, such person shall
be granted an Option to purchase 12,000 shares of Stock (as adjusted pursuant to
subsection 7.4), provided such Eligible Director has not previously received an
Award under this Section 6 or a comparable provision of any Prior Plan or any
other plan of the Company or a Related Company.
6.3 Price. The determination and payment of the purchase price of a
share of Stock under each Option granted pursuant to this Section 6 shall be
subject to the following:
(a) The purchase price shall be the greater of (a) 100% of the Fair Market
Value of a share of Stock as of the date on which such Option is
granted; or (b) the par value of a share of such Stock on such date.
(b) The full purchase price of each share of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise and,
as soon as practicable thereafter, a certificate representing the
shares so purchased shall be delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or in shares of Stock
(valued at Fair Market Value as of the day of exercise), or in any
combination thereof.
(d) A Participant may elect to pay the purchase price upon the exercise of
an Option granted pursuant to this Section 6 through the following
cashless exercise procedures: The Participant shall notify the
Corporate Secretary of the intent to exercise. Written instructions
will then be prepared and delivered to the Company and the broker
indicating the Participant's cashless election and instructing the
Company to deliver to the broker the Common Stock issuable upon
exercise. The exercise of the Option will be executed on the same day
that the broker is able to sell the stock. The broker will then
9
withhold from the proceeds of the sale and deliver to the Company an
amount, in cash, equal to the Option exercise price. An additional
amount for federal and state tax withholdings, not to exceed the
statutory minimum required tax withholding, may also be withheld and
delivered to the Company at the Participant's election.
6.4 Exercise. An Option granted under this Section 6 shall be first
exercisable with respect to each 1/3 of the number of shares of Stock subject to
the Option on the date of each of the first, second and third annual
anniversaries of the date as of which the Option is granted, respectively, but
only if the Participant continues to serve as a Director until such annual
anniversary (or is employed by the Company or any Related Company until such
anniversary). Notwithstanding the foregoing, 100% of an Option granted to a
Participant under this Section 6 will become fully exercisable on the date the
Participant ceases to be a Director if such cessation occurs by reason of the
Participant's death or Disability. An Option granted under this Section 6 will
not be exercisable after the Expiration Date applicable to that Option, and all
rights to purchase shares of Stock pursuant to the Option shall cease as of the
Option's Expiration Date.
6.5 Expiration Date. The "Expiration Date" with respect to an Option
granted under this Section 6 means the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Participant's Termination of Service occurs by reason of death,
Disability or Retirement, the one-year anniversary of his Termination
of Service; and
(c) if the Participant's Termination of Service occurs for reasons other
than Retirement, death or Disability, the three-month anniversary of
his Termination of Service.
A Participant shall not be permitted to exercise an Option granted under this
Section 6 after the Participant's Termination of Service except to the extent
that the Option is exercisable immediately prior to such cessation. For purposes
of this subsection 6.5, if, at the time of a Participant's Termination of
Service, he is employed by the Company or a Related Company, then the Expiration
Date of the Participant's Option under this subsection 6.5 shall be determined
by substituting, in paragraphs 6.5(b) and (c), the Participant's Date of
Termination.
SECTION 7
OPERATION AND ADMINISTRATION
7.1 Effective Date. The Plan was adopted by the Board effective March
10, 1999 (the "Effective Date"). The Plan shall be unlimited in duration and, in
the event of Plan termination, shall remain in effect as long as any Awards
10
under it are outstanding; provided, however, that no Awards may be granted under
the Plan on a date that is more than ten years from the date the Plan is
adopted.
7.2 Shares Subject to Plan. The shares of Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by the Company as treasury
shares, including shares purchased in the open market or in private
transactions. Subject to the provisions of subsection 7.4, the number of shares
of Stock which may be issued with respect to Awards under the Plan shall not
exceed 600,000 shares in the aggregate. Except as otherwise provided herein, any
shares subject to an Award which for any reason expires or is terminated without
issuance of shares (whether or not cash or other consideration is paid to a
Participant in respect of such shares) shall again be available under the Plan.
7.3 Individual Limits on Awards. Notwithstanding any other provision of
the Plan to the contrary, no Participant shall receive any Award of an Option or
a Stock Appreciation Right under the Plan to the extent that the sum of:
(a) the number of shares of Stock subject to such Award;
(b) the number of shares of Stock subject to all other prior Awards of
Options and Stock Appreciation Rights under the Plan within the
one-year Company fiscal year period that includes the date of the
Award; and
(c) the number of shares of Stock subject to all other prior stock options
and stock appreciation rights granted to the Participant under other
plans or arrangements of the Company and Related Companies within the
one-year Company fiscal year period that includes the date of the
Award;
would exceed the Participant's Individual Limit under the Plan. Subject to the
provisions of subsection 7.4, the determination made under the foregoing
provisions of this subsection 7.3 shall be based on the shares subject to the
awards at the time of grant, regardless of when the awards become exercisable.
Subject to the provisions of subsection 7.4, a Participant's "Individual Limit"
shall be 50,000 shares of Stock.
7.4 Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation of shares
of Stock or other capital readjustment, payment of stock dividend,
stock split, combination of shares or recapitalization or other
increase or reduction of the number of shares of Stock outstanding
without receiving compensation therefor in money, services or property,
then the Committee shall adjust (i) the number of shares of Stock
available under the Plan; (ii) the number of shares available under any
individual or other limits; (iii) the number of shares of Stock subject
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to outstanding Awards and the number of shares of Stock subject to
future automatic grant as provided in Section 6; and (iv) the per-share
price under any outstanding Award and the per-share purchase price
under any future automatic grant as provided in Section 6 to the extent
that the Participant is required to pay a purchase price per share with
respect to the Award.
(b) If the Company is reorganized, merged or consolidated or is party to a
plan of exchange with another corporation, pursuant to which
reorganization, merger, consolidation or plan of exchange the
shareholders of the Company receive any shares of stock or other
securities or property, or the Company shall distribute securities of
another corporation to its shareholders, there shall be substituted for
the shares subject to outstanding Awards an appropriate number of
shares of each class of stock or amount of other securities or property
which were distributed to the shareholders of the Company in respect of
such shares, subject to the following:
(i) If the Committee determines that the substitution
described in accordance with the foregoing provisions of
this paragraph (b) would not be fully consistent with the
purposes of the Plan or the purposes of the outstanding
Awards under the Plan, the Committee may make such other
adjustments to the Awards to the extent that the
Committee determines such adjustments are consistent with
the purposes of the Plan and of the affected Awards.
(ii) All or any of the Awards may be canceled by the Committee
on or immediately prior to the effective date of the
applicable transaction, but only if the Committee gives
reasonable advance notice of the cancellation to each
affected Participant, and only if either: (A) the
Participant is permitted to exercise the Award for a
reasonable period prior to the effective date of the
cancellation; or (B) the Participant receives payment
or other benefits that the Committee determines to be
reasonable compensation for the value of the canceled
Awards.
(iii) Upon the occurrence of a reorganization of the Company or
any other event described in this paragraph (b), any
successor to the Company shall be substituted for the
Company to the extent that the Company and the successor
agree to such substitution.
(c) Upon (or, in the discretion of the Committee, immediately prior to) the
sale to (or exchange with) a third party unrelated to the Company of
all or substantially all of the assets of the Company, all Awards shall
be canceled. If Awards are canceled under this paragraph (c) then, with
respect to any affected Participant, either:
12
(i) the Participant shall be provided with reasonable advance
notice of the cancellation, and the Participant shall be
permitted to exercise the Award for a reasonable period
prior to the effective date of the cancellation; or
(ii) the Participant shall receive payment or other benefits
that the Committee determines to be reasonable
compensation for the value of the canceled Awards.
The foregoing provisions of this paragraph (c) shall also apply to the
sale of all or substantially all of the assets of the Company to a
related party, if the Committee determines such application is
appropriate.
(d) In determining what action, if any, is necessary or appropriate under
the foregoing provisions of this subsection 7.4, the Committee shall
act in a manner that it determines to be consistent with the purposes
of the Plan and of the affected Awards and, where applicable or
otherwise appropriate, in a manner that it determines to be necessary
to preserve the benefits and potential benefits of the affected Awards
for the Participants and the Employers.
(e) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Company or its shareholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or
its business, any merger or consolidation of the Company, any issue of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's Stock or the rights thereof, the dissolution or
liquidation of the Company, any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(f) Except as expressly provided by the terms of this Plan, the issue by
the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, for cash or property or for labor or
services, either upon direct sale, upon the exercise of rights or
warrants to subscribe therefor or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to Awards then outstanding hereunder.
(g) Awards under the Plan are subject to adjustment under this subsection
7.4 only during the period in which they are considered to be
outstanding under the Plan, with the determination of whether an Award
is outstanding to be made by the Committee.
7.5 Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
13
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity.
(b) In the case of a Participant who is subject to Section 16(a) and 16(b)
of the Securities Exchange Act of 1934, the Committee may, at any time,
add such conditions and limitations to any Award to such Participant,
or any feature of any such Award, as the Committee, in its sole
discretion, deems necessary or desirable to comply with Section 16(a)
or 16(b) and the rules and regulations thereunder or to obtain any
exemption therefrom.
7.6 Liability for Cash Payments. Subject to the provisions of this
Section 7, an Employer shall be liable for payment of cash due under the Plan
with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Employer by the Participant. Any
disputes relating to liability of Employers for cash payments shall be resolved
by the Committee.
7.7 Performance-Based Compensation. To the extent that the Committee
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", as
that term is used in Code section 162(m)(4)(C), it may, at or prior to the time
an Award is granted, take such steps and impose such restrictions with respect
to such Award as it determines to be necessary to satisfy such requirements,
including without limitation:
(a) The establishment of performance goals that must be satisfied prior to
the payment or distribution of benefits under such Awards.
(b) The submission of such Awards and performance goals to the Company's
shareholders for approval and making the receipt of benefits under such
Awards contingent on receipt of such approval.
(c) Providing that no payment or distribution be made under such Awards
unless the Committee certifies that the goals and the applicable terms
of the Plan and Agreement reflecting the Awards have been satisfied.
To the extent that the Committee determines that the foregoing requirements
relating to Performance-Based Compensation do not apply to Awards under the Plan
because the Awards constitute Options or Stock Appreciation Rights, the
Committee may, at the time the Award is granted, conform the Awards to
alternative methods of satisfying the requirements applicable to
Performance-Based Compensation.
14
7.8 Withholding. All Awards and other payments under the Plan are
subject to withholding of all applicable taxes, which withholding obligations
may be satisfied, with the consent of the Committee, through the surrender of
shares of Stock which the Participant already owns, or to which a Participant is
otherwise entitled under the Plan; provided, however, that withholding through
the surrender of shares may not exceed the amount necessary to satisfy the
statutory minimum required tax withholding,.
7.9 Transferability. Awards under the Plan are not transferable except
as designated by the Participant by will or by the laws of descent and
distribution. To the extent that the Participant who receives an Award under the
Plan has the right to exercise such Award, the Award may be exercised during the
lifetime of the Participant only by the Participant. Notwithstanding the
foregoing provisions of this subsection 7.9, the Committee may permit awards
under the Plan to be transferred to or for the benefit of the Participant's
family, subject to such limits as the Committee may establish.
7.10 Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in the Committee in accordance
with Section 8.
7.11 Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
its principal executive offices. The Committee may, by advance written notice to
affected persons, revise such notice procedure from time to time. Any notice
required under the Plan (other than a notice of election) may be waived by the
person entitled to notice.
7.12 Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
7.13 Agreement With Company. At the time of an Award to a Participant
under the Plan, the Committee will require a Participant to enter into an
agreement ("Agreement") with the Company in a form specified by the Committee,
evidencing the Award under the Plan, agreeing to the terms and conditions of the
Plan and agreeing to such additional terms and conditions, not inconsistent with
the Plan, as the Committee may, in its sole discretion, prescribe.
7.14 Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of
the Employers whatsoever, including, without limitation, any specific
15
funds, assets, or other property which the Employers, in their sole
discretion, may set aside in anticipation of a liability under the
Plan. A Participant shall have only a contractual right to the
amounts, if any, payable under the Plan, unsecured by any assets of the
Employers. Nothing contained in the Plan shall constitute a guarantee
by any of the Employers that the assets of the Employers shall be
sufficient to pay any benefits to any person.
(b) Neither the Plan nor Awards granted under the Plan shall confer any
right upon a Participant to continue as an employee or Director for any
period of time or give any Participant any right or claim to any
benefit under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Subject to the provisions of
Section 4 (relating to Restricted Stock Awards), no Award under the
Plan shall confer upon the holder thereof any right as a shareholder of
the Company prior to the date on which he fulfills all service
requirements and other conditions for receipt of shares of Stock under
the Plan.
7.15 Benefits Under Qualified Retirement Plans. Awards to a Participant
(including the grant and the receipt of benefits) under the Plan shall be
disregarded for purposes of determining the Participant's benefits under any
Qualified Retirement Plan.
7.16 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
7.17 Action by Employers. Any action required or permitted to be taken
by any Employer shall be by resolution of its board of directors, or by action
of one or more members of the board (including a committee of the board) who are
duly authorized to act for the board, or by a duly authorized officer of the
Employer.
7.18 Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
7.19 Defined Terms. For purposes of the Plan, the terms listed below
shall be defined as follows:
(a) Award. The term "Award" shall mean any award or benefit granted to any
Participant under the Plan, including, without limitation, the grant of
Options, Stock Appreciation Rights, Restricted Stock, Performance
Units, and Dividend Equivalents.
(b) Board. The term "Board" shall mean the Board of Directors of the
Company.
16
(c) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(d) Committee. The term "Committee" means the committee designated in
accordance with Section 8 to administer the Plan.
(e) Date of Termination. A Participant's "Date of Termination" shall be the
date that his employment with all Employers and Related Companies
terminates for any reason; provided that a Date of Termination shall
not be deemed to occur by reason of a transfer of the Participant
between the Company and a Related Company (including an Employer) or
between two Related Companies (including Employers); and further
provided that a Participant's employment shall not be considered
terminated while the Participant is on a leave of absence from an
Employer or a Related Company approved by the Participant's employer.
(f) Director. The term "Director" means a member of the Board of Directors
of the Company.
(g) Disability. A Participant shall be considered to have a "Disability"
during the period in which he is unable, by reason of a medically
determinable physical or mental impairment, to engage in any
substantial gainful activity, which condition, in the opinion of a
physician selected by the Committee, is expected to have a duration of
not less than 120 days.
(h) Eligible Director. Each Director who is not an employee of the Company
or any Related Company.
(i) Employer. The Company and each Related Company which, with the consent
of the Company, adopts the Plan for the benefit of its eligible
employees are referred to collectively as the "Employers" and
individually as an "Employer".
(j) Exchange Act. The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) Fair Market Value. The "Fair Market Value" of a share of Stock of the
Company as of any date shall be the closing market composite price for
such Stock as reported for the NASDAQ Stock Exchange on that date or,
if Stock is not traded on that date, on the next preceding date on
which Stock was traded.
(l) Incentive Stock Option. An Option that is intended to satisfy the
requirements applicable to an "incentive stock option" described in
section 422(b) of the Code.
17
(m) Non-Qualified Option. An Option that is not intended to be an
"incentive stock option" as that term is described in section 422(b) of
the Code.
(n) Option. The term "Option" shall mean any Incentive Stock Option or
Non-Qualified Stock Option granted under the Plan.
(o) Performance-Based Compensation. The term "Performance-Based
Compensation" shall have the meaning ascribed to it in section
162(m)(4)(C) of the Code.
(p) Prior Plans. The term "Prior Plans" means the Hub Group, Inc. 1997
Long-Term Incentive Plan and the Hub Group, Inc. 1996 Long-Term
Incentive Plan.
(q) Qualified Retirement Plan. The term "Qualified Retirement Plan" means
any plan of the Company or a Related Company that is intended to be
qualified under section 401(a) of the Internal Revenue Code of 1986, as
amended.
(r) Related Companies. The term "Related Company" means (i) any
corporation, partnership, joint venture or other entity during any
period in which it owns, directly or indirectly, at least thirty
percent of the voting power of all classes of stock of the Company (or
successor to the Company) entitled to vote; and (ii) any corporation,
partnership, joint venture or other entity during any period in which
either:
(A) it is effectively controlled by; or
(B) at least a thirty percent of its voting or profits
interest is owned, directly or indirectly, by;
the Company, any entity that is a successor to the Company or any
entity that is a Related Company by reason of clause (i) next above.
(s) Retirement. "Retirement" in the case of a Participant who is not an
Eligible Director shall mean the occurrence of the Participant's Date
of Termination for reasons other than death or Disability on or after
the date on which the Participant (i) attains age 55, or (ii) attains
age 50 and has completed at least 10 continuous years of service with
the Company and the Related Companies. "Retirement" in the case of a
Participant who is an Eligible Director shall mean the occurrence of
the Eligible Director's Termination of Service on or after his
attainment of age 65 for reasons other than death or Disability.
(t) SEC. "SEC" shall mean the Securities and Exchange Commission.
(u) Stock. The term "Stock" shall mean shares of common stock of the
Company.
18
(v) Termination of Service. The term "Termination of Service" shall mean
the date on which an individual ceases to be a Director.
SECTION 8
COMMITTEE
8.1 Selection of Committee. The Committee shall be selected by the
Board, and shall consist of not less than two members of the Board, or such
greater number as may be required for compliance with SEC Rule 16b-3 or the
requirements of section 162(m) of the Code and regulations thereunder.
8.2 Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have
authority and discretion to select employees to receive Awards, to
determine the time or times of receipt, to determine the types of
Awards and the number of shares covered by the Awards, to establish the
terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and to cancel or suspend Awards. In making
such Award determinations, the Committee may take into account the
nature of services rendered by the respective employee, his present and
potential contribution to the Company's success and such other factors
as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have
authority and discretion to determine the extent to which Awards under
the Plan will be structured to conform to the requirements applicable
to Performance-Based Compensation as described in Code section 162(m),
and to take such action, establish such procedures, and impose such
restrictions at the time such Awards are granted as the Committee
determines to be necessary or appropriate to conform to such
requirements.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any
agreements made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the
administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.
19
(e) Except as otherwise expressly provided in the Plan, where the Committee
is authorized to make a determination with respect to any Award, such
determination shall be made at the time the Award is made, except that
the Committee may reserve the authority to have such determination made
by the Committee in the future (but only if such reservation is made at
the time the Award is granted and is expressly stated in the Agreement
reflecting the Award).
8.3 Delegation by Committee. Except to the extent prohibited by the
provisions of Rule 16b-3, the rules relating to Performance-Based Compensation,
applicable state law, the applicable rules of any stock exchange, or any other
applicable rules, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it. Any such allocation or delegation may be revoked by the
Committee at any time.
8.4 Information to be Furnished to Committee. The Employers and Related
Companies shall furnish the Committee with such data and information as may be
required for it to discharge its duties. The records of the Employers and
Related Companies as to an employee's or Participant's employment, termination
of employment, leave of absence, reemployment and compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
8.5 Liability and Indemnification of Committee. No member or authorized
delegate of the Committee shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his own fraud or willful misconduct; nor shall the Employers be liable to any
person for any such action unless attributable to fraud or willful misconduct on
the part of a director or employee of the Employers. The Committee, the
individual members thereof, and persons acting as the authorized delegates of
the Committee under the Plan, shall be indemnified by the Employers against any
and all liabilities, losses, costs and expenses (including legal fees and
expenses) of whatsoever kind and nature which may be imposed on, incurred by or
asserted against the Committee or its members or authorized delegates by reason
of the performance of a Committee function if the Committee or its members or
authorized delegates did not act dishonestly or in willful violation of the law
or regulation under which such liability, loss, cost or expense arises. This
indemnification shall not duplicate but may supplement any coverage available
under any applicable insurance.
SECTION 9
CHANGE IN CONTROL
20
9.1 Acceleration of Awards. Subject to the provisions of subsection 7.4
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the Award Agreement reflecting the applicable Award, upon the occurrence
of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with SARs)
shall become fully exercisable.
(b) All outstanding SARs (regardless of whether in tandem with Options)
shall become fully exercisable.
(c) All Restricted Stock and Performance Units shall become fully vested.
9.2 Definition of Change in Control. For purposes of the Plan, the term
"Change in Control" means a change in the beneficial ownership of the Company's
voting stock or a change in the composition of the Board which occurs as
follows:
(a) Any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act is or becomes a beneficial owner, directly or indirectly,
of stock of the Company representing 30 percent or more of the total
voting power of the Company's then outstanding stock.
(b) A tender offer (for which a filing has been made with the SEC which
purports to comply with the requirements of Section 14(d) of the
Exchange Act and the corresponding SEC rules) is made for the stock of
the Company, which has not been negotiated and approved by the Board.
In case of a tender offer described in this paragraph (b), the Change
in Control will be deemed to have occurred upon the first to occur of
(i) any time during the offer when the person (using the definition in
(a) above) making the offer owns or has accepted for payment stock of
the Company with 25 percent or more of the total voting power of the
Company's stock, or (ii) three business days before the offer is to
terminate unless the offer is withdrawn first, if the person making the
offer could own, by the terms of the offer plus any shares owned by
this person, stock with 50 percent or more of the total voting power of
the Company's stock when the offer terminates.
(c) Individuals who were the Board's nominees for election as directors of
the Company immediately prior to a meeting of the shareholders of the
Company involving a contest for the election of directors shall not
constitute a majority of the Board following the election.
SECTION 10
AMENDMENT AND TERMINATION
21
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 7.4 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the date
such amendment is adopted by the Board.
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