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 12, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Hub Group, Inc. This meeting will be held in the Maple Room at
the DoubleTree Guest Suites, 2111 Butterfield Road, Downers Grove, Illinois at
10:00 a.m. Chicago time on Tuesday, May 21, 2002.
The attached Notice of 2002 Annual Meeting of Stockholders and Proxy
Statement describe the matters to be acted upon. The Annual Report to
Stockholders on Form 10-K is also 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 2002 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 the Maple Room at the DoubleTree
Guest Suites, 2111 Butterfield Road, Downers Grove, Illinois on Tuesday, May 21,
2002, 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. 2002 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 on Form
10-K also accompanies this Notice.
The Board of Directors has fixed the close of business on March 29,
2002, 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,
DAVID C. ZEILSTRA
Vice President, Secretary and General Counsel
Lombard, Illinois
April 12, 2002
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 2002 Annual Meeting of
Stockholders of the Company to be held on Tuesday, May 21, 2002, 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 12, 2002.
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 29, 2002 (the "Record Date"), are entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, the Company had
7,046,250 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 and 741,800 shares of
Class A Common Stock. Consequently, the Yeager family controls approximately 69%
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 2002 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 20, 2003 nor later
than March 22, 2003. 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 YEARS
NAME AGE AND OTHER INFORMATION
Phillip C. Yeager 74 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,
President - Field Operations.
David P. Yeager 49 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 and the brother of
Mark A. Yeager.
Thomas L. Hardin 56 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.
Mr. Hardin is the former Chairman of the
Intermodal Association of North America.
3
Gary D. Eppen 65 Gary D. Eppen has served as a director of the
Company since February 1996. Currently retired,
Mr. Eppen is formerly the Ralph and Dorothy
Keller Distinguished Service Professor of
Operations Management and Deputy Dean for
part-time programs in the Graduate School of
Business at The University of Chicago. 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 63 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 47 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 a Director and President and Chief
Operating Officer of Molex. Mr. Slark is a
fellow of the British Institute of Management and
received a Masters in Business Administration
degree from the London Business School in 1993,
a Post-Graduate Diploma in Management Studies
from Portmouth University 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, 2001, the full Board of Directors met four
times, the Audit Committee met twice and the Compensation Committee met twice.
During 2001, 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, 1997 Long-Term Incentive
Plan and 1999 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 30, 2002, 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)........................................... 135,825 662,296 10.3%
David P. Yeager(3)(5)............................................. 317,975 662,296 12.7%
Thomas L. Hardin(6)............................................... 59,000 -- *
Donald G. Maltby(7)............................................... 10,000 -- *
Richard M. Rogan(8).............................................. 21,000 -- *
Mark A. Yeager(3)(9).............................................. 337,175 662,296 12.9%
Gary D. Eppen(10)................................................. 21,000 -- *
Charles R. Reaves(10)............................................. 20,000 -- *
Martin P. Slark(11)............................................... 20,000 -- *
All directors and executive officers as a group (12 persons)(12) . 987,236 662,296 20.7%
Debra A. Jensen(3)(13)............................................ 71,825 662,296 9.5%
T. Rowe Price Associates, Inc.(14)................................ 703,000 -- 9.1%
Tweedy, Browne Company LLC(15).................................... 718,844 -- 9.3%
Dimensional Fund Advisors, Inc.(16)............................... 472,000 -- 6.1%
Capital Group International, Inc./ Capital Guardian Trust
Company(17)..................................................... 700,300 -- 9.1%
Liberty Wanger Asset Management, L.P./ WAM Acquisition,
GP, Inc./Liberty Acorn Trust(18)................................ 1,403,300 -- 18.2%
Select Equity Group, Inc./George S. Loening(19)................... 461,496 -- 6.0%
- ---------------------------
* 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.
(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 9, 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.
5
(4) Includes 563,934 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 54,000
shares of Class A Common Stock issuable upon exercise of options.
(5) Includes 46,794 shares of Class B Common Stock owned by the Laura C.
Yeager 1994 GST Trust, 46,794 shares of Class B Common Stock owned by
the Matthew D. Yeager 1994 GST Trust and 46,794 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 419,127 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 39,000 shares of Class A Common Stock issuable upon exercise
of options.
(6) Includes 39,000 shares of Class A Common Stock issuable upon exercise
of options.
(7) Includes 10,000 shares of Class A Common Stock issuable upon exercise
of options.
(8) Includes 21,000 shares of Class A Common Stock issuable upon exercise
of options.
(9) Includes 43,758 shares of Class A Common Stock and 36,794 shares of
Class B Common Stock owned by the Alexander B. Yeager 1994 GST Trust
and 43,758 shares of Class A Common Stock 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 501,914 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 28,000 shares of Class A Common Stock issuable upon exercise
of options.
(10) Includes 20,000 shares of Class A Common Stock issuable upon exercise
of options.
(11) Includes 16,000 shares of Class A Common Stock issuable upon exercise
of options.
(12) Includes 277,000 shares of Class A Common Stock issuable upon exercise
of options.
(13) Includes 25,000 shares of Class B Common Stock owned by the Elizabeth
A. Jensen 1994 GST Trust and 25,000 shares of Class B Common Stock
owned by the Patrick R. Jensen 1994 GST Trust and 501,913 shares of
Class B Common Stock as to which Debra Jensen may be deemed to have
shared voting discretion pursuant to the Yeager Family Stockholder
Agreement. See Note 3. Debra Jensen is the daughter of Phillip C.
Yeager.
(14) T. Rowe Price Associates, Inc. ("Price") filed a Schedule 13G with the
Commission indicating beneficial ownership of shares of Class A Common
Stock. According to the Schedule 13G, Price has sole dispositive power
with respect to all 703,000 shares of Class A Common Stock beneficially
owned and sole voting power with respect to 309,500 shares of Class A
Common Stock beneficially owned. These securities are owned by various
individual and institutional investors which Price serves as investment
advisor with power to direct investments and/or sole power to vote the
securities. For purposes of the Exchange Act, Price is deemed the
beneficial owner of such securities; however, Price expressly disclaims
that it is, in fact, the beneficial owner of such securities. The
number of shares beneficially owned by Price is indicated as of
February 14, 2002. The address of Price is 100 E. Pratt Street,
Baltimore, MD 21202.
(15) Tweedy, Browne Company LLC ("TBC") filed a Schedule 13G with the
Commission indicating beneficial ownership of shares of Class A Common
Stock. According to the Schedule 13G, TBC has sole dispositive power
with respect to all 718,844 shares of Class A Common Stock beneficially
owned and sole voting power with respect to 717,244 shares of Class A
Common Stock beneficially owned. The number of shares beneficially
owned by TBC is indicated as of January 28, 2002. The address of TBC is
350 Park Avenue, New York, NY 10022.
(16) Dimensional Fund Advisors, Inc. ("Dimensional") filed a Schedule 13G
with the Commission indicating beneficial ownership of shares of Class
A Common Stock. According to the Schedule 13G, Dimensional has sole
dispositive power and sole voting power with respect to all 472,000
shares of Class A Common Stock beneficially owned. The number of shares
beneficially owned by Dimensional is indicated as of January 30, 2002.
The address of Dimensional is 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401.
(17) Capital Group International, Inc. and Capital Guardian Trust Company
(collectively, "Capital") filed a Schedule 13G with the Commission
indicating beneficial ownership of shares of Class A Common Stock.
Capital has sole dispositive power with respect to all 700,300 shares
of Class A Common Stock beneficially owned and sole voting power with
respect to 625,290 shares of Class A Common Stock beneficially owned.
The number of shares beneficially owned by Capital is indicated as of
February 11, 2002. The address of Capital is 11100 Santa Monica
Boulevard, Los Angeles, CA 90025.
6
(18) Liberty Wanger Asset Management, L.P., WAM Acquisition GP, Inc.
(collectively "Wanger") and Liberty Acorn 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 1,403,300 shares of Class A Common Stock beneficially owned. Acorn
has shared dispositive power with respect to 1,105,000 shares of Class
A Common Stock beneficially owned and has shared voting power with
respect to 1,105,000 shares of Class A Common Stock beneficially owned.
The number of shares beneficially owned by Wanger and Acorn are
indicated as of February 14, 2002. The address of Wanger and Acorn is
227 West Monroe Street, Suite 3000, Chicago, IL 60606.
(19) Select Equity Group, Inc. and George S. Loening (collective "Select
Equity") filed a Schedule 13G with the Commission indicating beneficial
ownership of shares of Class A Common Stock. According to the Schedule
13G, Select Equity has solve voting power and sole dispositive power
with respect to all 461,496 shares of Class A Common Stock beneficially
owned. The number of shares beneficially owned by Select Equity are
indicated as of February 14, 2002. The address of Select Equity is 380
Lafayette Street, 6th Floor, New York, NY, 10003.
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 2001 fiscal year all applicable
Section 16(a) filing requirements were complied with by the officers, directors,
and greater than ten-percent beneficial owners except that Mr. Maltby was late
in filing one transaction on one Form 4.
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, 1999, December 31, 2000 and December 31, 2001 paid or awarded
to those persons who were, at December 31, 2001: (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 2001 539,123 -- 13,726(1) -- 5,184(2)
Vice Chairman and 2000 463,068 -- 9,266(1) -- 5,322(2)
Chief Executive Officer 1999 364,000 500,000 3,438(1) -- 5,035(2)
Thomas L. Hardin 2001 316,418 100,000 22,939(1) -- 5,184(2)
President and 2000 301,350 170,625 17,747(1) -- 5,322(2)
Chief Operating Officer 1999 287,000 325,000 6,982(1) -- 5,035(2)
Mark A. Yeager 2001 242,550 100,000 11,355(1) -- 5,184(2)
President-Field Operations 2000 231,000 126,000 8,428(1) -- 5,322(2)
1999 208,500 210,000 2,805(1) 7,500 5,035(2)
Donald G. Maltby 2001 262,500 75,000 1,240(1) -- 5,184(2)
President - Hub Online 2000 224,303 263,412 520(1) 19,000 5,322(2)
1999 145,572 292,843 -- 6,000 5,035(2)
Richard M. Rogan 2001 242,500 60,000 2,044(1) -- 5,184(2)
Executive Vice President 2000 231,000 85,200 989(1) -- 5,322(2)
Marketing 1999 215,000 200,000 -- 5,000 5,035(2)
- ------------------
(1) Represents above market earnings on deferred compensation.
(2) Represents the Company's matching contribution to the Company's Section
401(k) deferred compensation plan of $5,100 in 2001, $5,200 in 2000 and
$4,900 in 1999, 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 $84 during 2001, $122 during 2000 and
$135 during 1999.
8
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information concerning options exercised by
the Named Executive Officers during the fiscal year ended December 31, 2001, and
the value at December 31, 2001, of unexercised options.
NUMBER OF SHARES OF
CLASS A COMMON STOCK VALUE ($) OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-
SHARES OPTIONS AT MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2001 DECEMBER 31, 2001
ON ---------------------- -------------------
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------- ---------- ------------ ---------------------- -------------------
David P. Yeager.................. 0 0 38,000/2,000 0/0
Thomas L. Hardin................. 0 0 38,000/2,000 0/0
Mark A. Yeager................... 0 0 28,000/4,500 0/0
Donald G. Maltby................. 0 0 6,200/18,800 0/0
Richard M. Rogan................. 0 0 20,000/5,000 0/0
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received $24,000 for
serving as a director during 2001. 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. All of these options have now vested for each
director. On December 10, 1999, Messrs. Eppen, Reaves and Slark each received
additional options to purchase 12,000 shares of Class A Common Stock exercisable
at $18.75 per share. These options vest ratably over a three-year period.
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 October 1999, 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 2001. The Compensation Committee intends to have a third party periodically
conduct an independent study of compensation practices in the transportation
industry to update the Company's benchmark of competitive compensation ranges
for senior executives.
The 2001 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.
9
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.
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 2001, no non-qualified stock options were
granted to the Company's executive officers.
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 2001. 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 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
2001. Mr. Yeager's base salary was based on overall performance of the Company,
on relative levels of compensation for CEOs within the benchmark companies in
the transportation industry and on individual performance related to strategic
objectives. Mr. Yeager's incentive compensation was based on achievement of
goals relating to the Company's earnings per share target.
For 2001, the Compensation Committee decided to increase Mr. Yeager's
salary and reduce his bonus potential to reflect market practices. In 1999, Mr.
Yeager was paid $864,000, with $364,000 in the form of salary and $500,000 in
the form of bonus. For 2000, the Compensation Committee approved a package
allowing Mr.Yeager to earn $907,200, or five percent more than 1999, with
10
$463,068 in the form of salary and $444,132 in the form of bonus if the Company
met its goals for the year. For 2001, the Compensation Committee approved a
package allowing Mr. Yeager to earn $952,561, or five percent more than 2000,
with $539,123 in the form of salary and $413,438 in the form of bonus if the
Company met its goals for the year.
Mr. Yeager was paid his salary of $539,123 during 2001 but received no
bonus because the Company did not meet its earnings per share goal.
COMPENSATION COMMITTEE,
Gary D. Eppen
Charles R. Reaves
Martin P. Slark
AUDIT COMMITTEE REPORT
Each member of the Audit Committee is independent of the Company and its
management, as required of audit committee members by the National Association
of Securities Dealers listing standards. In June 2000, the Audit Committee
adopted and the Board approved a written charter. The charter specifies the
scope of the Audit Committee's responsibilities and how it carriers out those
responsibilities.
The Audit Committee has reviewed and discussed the Company's quarterly
and annual audited financial statements with management and with Arthur Andersen
LLP, the Company's independent public accountants. The Company has also
discussed with Arthur Andersen LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
amended, by the Auditing Standards Board of the American Institute of Certified
Public Accountants. The Audit Committee has also received from Arthur Andersen
LLP the written disclosures required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, by the Independence
Standards Board, regarding their independence. The Audit Committee has discussed
with Arthur Andersen LLP their independence and considered whether the provision
of non-audit services referred to under "Independent Public Accountants" on page
19 is compatible with maintaining their independence. Based on the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the December 31, 2001 audited financial statements be included in
the Company's Annual Report on Form 10-K for 2001.
AUDIT 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 12/31/99 12/31/00 12/31/01
------- -------- -------- -------- -------- -------- --------
Hub Group, Inc. 100 191 212 138 142 64 75
Nasdaq Stock Market 100 119 146 206 382 230 182
Nasdaq Trucking & Transp. 100 103 132 119 114 103 122
12
APPROVAL OF 2002 LONG-TERM INCENTIVE PLAN
A proposal will be presented at the Annual Meeting to approve the Hub
Group, Inc. 2002 Long-Term Incentive Plan (the "Plan"). The Plan was adopted by
the Board of Directors of Hub Group effective as of April 4, 2002, subject to
shareholder approval.
GENERAL DESCRIPTION
The purpose of the Plan is 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 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) 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 under the
Plan or a prior plan) who is not an employee of Hub Group or a related company
(an "Eligible Director") shall receive an automatic award of 12,000
non-qualified stock options under the Plan and thereby become a participant in
the Plan. Eligible Directors who have been granted an automatic award under a
prior plan which was outstanding on April 4, 2002, will receive an automatic
grant of 12,000 non-qualified stock options under the Plan as of the date the
prior award vests (provided the Eligible Director's service has not terminated
at that time). 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. Any shares of Hub Group common stock covered by an
award that expires, is forfeited or is terminated for any reason without
issuance of the shares may again become subject to awards under the Plan. 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.
13
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
any one participant during any one fiscal year of the Company may not exceed
50,000. The number of shares of Hub Group common stock which may be issued under
the Plan with respect to awards, other than options and SARs, which are intended
to be "performance based compensation" (as that term is used in section 162(m)
of the Code) granted to any one participant during any one fiscal year of the
Company may not exceed 50,000. If such awards are denominated in cash value, no
more than $500,000 may be subject to such awards granted to any one participant
during any one fiscal year of the Company. 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. At the discretion of the Committee, an award under the
Plan may be settled through cash payments, the delivery of Hub Group common
stock, the granting of replacement awards, or any combination of the foregoing.
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.
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 and 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 are eligible to
become participants in the Plan. As of February 28, 2002, there were
approximately 1540 employees of the Company and related companies. 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
14
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 a purchase 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.
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 a
comparable provision under any other Hub Group plan or any plan of a related
company. Generally, a Director may not receive more than one Eligible Director
Award. Eligible Directors who have been granted an automatic award under a prior
plan which is outstanding on April 4, 2002, however, will receive an automatic
grant of an option to purchase 12,000 shares of Hub Group Common Stock as of the
date the prior awards vests (provided the Eligible Director's service has not
terminated at that time).
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.
15
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.
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.
16
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.
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.
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CERTAIN TRANSACTIONS
Mr. David P. Yeager is the owner of 20% of the Class A membership
interest of SmartOffices Services, LLC ("SmartOffices"). SmartOffices is in the
business of selling office supplies to various companies. The Company spent
$334,200 buying various office supplies from SmartOffices in 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has not yet selected its independent accountant
for 2002. Representatives of the Company's current independent accountants,
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.
AUDIT FEES
Fees billed to the Company by Arthur Andersen LLP for the most recent
fiscal year for professional services rendered for the audit of the Company's
annual financial statements and the review of the financial statements including
in its quarterly reports were $412,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed to the Company by Arthur Andersen LLP for the
most recent fiscal year for professional services rendered for financial
information systems design and implementation.
ALL OTHER FEES
Fees billed to the Company by Arthur Andersen LLP for the most recent
fiscal year for professional services rendered for all other services were
$187,000.
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 13, 2002, 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.
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The Company anticipates that its next annual meeting of stockholders
will be held in May 2003. 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
20, 2003 nor later than March 22, 2003. 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,
DAVID C. ZEILSTRA
Vice President, Secretary and General Counsel
Lombard, Illinois
April 12, 2002
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.
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