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:
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[X]
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Preliminary
Proxy Statement
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[
]
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[
]
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Definitive
Proxy Statement
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[
]
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Definitive
Additional Materials
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[
]
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Soliciting
Material under Section 240.14a-12
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HUB
GROUP, INC.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required
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[
]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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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):
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4)
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Proposed
maximum aggregate value of
transaction:
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5)
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Total fee paid: |
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[
]
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Fee
paid previously with preliminary
materials
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[
] 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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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March
[
], 2007
Dear
Stockholder:
You
are
cordially invited to attend the 2007 Annual Meeting of Stockholders of Hub
Group, Inc. This meeting will be held at Hamburger University on the McDonald’s
campus at 2715 Jorie Boulevard, Oak Brook, Illinois at 10:00 a.m. Chicago time
on Monday, May 7, 2007.
The
attached Notice of 2007 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 2007 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 at Hamburger University on the McDonald’s campus at
2715 Jorie Boulevard, Oak Brook, Illinois on Monday, May 7, 2007, 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 an amendment to the Company’s Certificate of Incorporation to
increase the authorized shares of capital stock;
|
| (3) |
To
approve the amendment and restatement of the Company’s 2002 Long-Term
Incentive Plan;
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| (4) |
To
approve the 2006 Performance-Based Awards made under the 2002 Long-Term
Incentive Plan; and
|
| (5) |
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 [ ], 2007, 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
Downers
Grove, Illinois
March
[
], 2007
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.
3050
HIGHLAND PARKWAY, SUITE 100
DOWNERS
GROVE, ILLINOIS 60515
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 2007 Annual Meeting of Stockholders of the
Company to be held on Monday, May 7, 2007, and any adjournment thereof (the
“Annual Meeting”). This Proxy Statement and accompanying form of proxy are first
being sent to stockholders on or about March [ ], 2007.
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 [ ], 2007 (the “Record Date”), are entitled to notice of and
to vote at the Annual Meeting. As of the Record Date, the Company had [ ] 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
approximately eighty (80) votes. The holders of Shares having a majority of
the
votes that 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. As of February
28,
2007, the Yeager family members own all 662,296 shares of Class B Common Stock
and 980,158 shares of Class A Common Stock. Consequently, the Yeager family
controls approximately 59% 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.
Election
inspectors appointed for the meeting will tabulate votes cast by proxy or in
person at the Annual 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 2007 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
Downers Grove.
1
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. Abstentions, withholding of authority to vote in the
election, or broker non-votes will not affect the outcome of the election.
Stockholders are not allowed to cumulate their votes in the election of
directors.
Nominees
for Election as Directors
|
Name
|
Age
|
Business
Experience During the Past Five Years and
Other Information
|
|
Phillip
C. Yeager
|
79
|
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, the Intermodal Transportation
Association named Mr. Yeager the Man of the Year. 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 the New York Traffic Club named him Transportation
Person of
the Year. In June 2006, Mr. Yeager was awarded an honorary Doctor
of
Public Service degree from the University of Denver in recognition
of his
achievements in the intermodal industry. In December 2006, the
Containerization and Intermodal Institute presented Mr. Yeager with
their
2006 Connie Award in recognition of his contributions to the industry.
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
and Mark A. Yeager.
|
|
David
P. Yeager
|
54
|
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.
|
2
|
Mark
A. Yeager
|
42
|
Mark
A. Yeager has been the Company’s President since January 2005 and has been
the Chief Operating Officer and a director since May 2004. From July
1999
through December 2004, Mr. Yeager was President-Field Operations.
From
November 1997 through June 1999 Mr. Yeager was Division President,
Secretary and General Counsel. From March 1995 to November 1997,
Mr.
Yeager was Vice President, Secretary and General Counsel. From May
1992 to
March 1995, Mr. Yeager served as the Company’s Vice President-Quality.
Prior to joining the Company in 1992, Mr. Yeager was an associate
at the
law firm of Grippo & Elden from January 1991 through May 1992 and an
associate at the law firm of Sidley & Austin from May 1989 through
January 1991. Mr. Yeager received a Juris Doctor degree from Georgetown
University in 1989 and a Bachelor of Arts degree from Indiana University
in 1986. Mr. Yeager is the son of Phillip C. Yeager and the brother
of
David P. Yeager.
|
|
Gary
D. Eppen
|
70
|
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.
|
|
Charles
R. Reaves
|
68
|
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
|
52
|
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
publicly traded 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
Vice
Chairman and Chief Executive Officer of Molex. Mr. Slark is a companion
of
the British Institute of Management and received a Masters in Business
Administration degree from the University of East London in 1993
and a
Post-Graduate Diploma in Management Studies from Portmouth University
in
1981.
|
The
Board of Directors recommends that the stockholders vote FOR the election of
each nominee for director named above.
3
MEETINGS
AND COMMITTEES OF THE BOARD
The
Board
of Directors has an Audit Committee, a Compensation Committee and a Nominating
and Governance Committee. During the fiscal year ended December 31, 2006, the
full Board of Directors met four times, the Audit Committee met eight times,
the
Compensation Committee met four times and the Nominating and Governance
Committee met once. During 2006, all directors attended at least 75% of the
meetings of the Board of Directors and the committees thereof on which they
served. The Company encourages each member of the Board of Directors to attend
each annual meeting of shareholders. All directors attended the Company’s 2006
annual meeting of shareholders held on May 11, 2006.
Audit
Committee
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 Audit Committee has
a
written charter which is available on the Company’s website at www.hubgroup.com.
The
Committee annually reviews and assess the adequacy of the Charter.
The
Board
of Directors has determined that Messrs. Eppen, Reaves and Slark are
“independent” as that term is defined by Nasdaq. The Board of Directors has
determined that the Audit Committee does not have an “audit committee financial
expert” as that term is defined in the Securities and Exchange Commission
regulations. However, the Board of Directors has determined that all of the
members of the Audit Committee are able to read and understand fundamental
financial statements within the meaning of the Nasdaq Audit Committee
requirements and that at least one of its members has the financial
sophistication required by Nasdaq. The Board of Directors has determined that
by
satisfying the requirements of the Nasdaq listing standards with a member of
the
Audit Committee that has the requisite “financial sophistication”
qualifications, the Audit Committee has the financial expertise necessary to
fulfill the duties and the obligations of the Audit Committee. The Board of
Directors has concluded that the appointment of an “audit committee financial
expert” is not necessary at this time.
Compensation
Committee
The
Compensation Committee is responsible for providing assistance to the Board
in
the discharge of its responsibilities relating to compensation and development
of the Company’s Chief Executive Officer and other executive officers. In
addition, the Compensation Committee reviews, adopts, terminates, amends or
recommends to the Board the adoption, termination or amendment of equity-based
employee plans, incentive compensation plans and employee benefit plans, as
further described in the Compensation Committee Charter. The Compensation
Committee may use a compensation consultant to assist in the evaluation of
Chief
Executive Officer or executive officer compensation. The Compensation Committee
has the sole authority to retain and terminate any compensation consultant
and
to approve the consultant’s fees and other retention terms. The members of the
Compensation Committee are Messrs. Eppen, Reaves and Slark. Each member of
the
Compensation Committee is independent in accordance with the applicable
corporate governance listing standards of the Nasdaq Stock Market. The
Compensation Committee has a written charter which is available on the Company’s
website at www.hubgroup.com.
The
Committee annually reviews and assess the adequacy of the Charter.
Nominating
and Governance Committee
The
duties of the Nominating and Governance Committee are to identify individuals
qualified to become Board members and nominate the director nominees for the
next annual meeting of shareholders, assist the Board with succession planning
and develop and recommend to the Board the corporate governance guidelines
applicable to the Company. The members of the Nominating and Governance
Committee are Messrs. Eppen, Reaves and Slark. Each member of the Nominating
and
Governance Committee is independent in accordance with the applicable corporate
governance listing standards of the Nasdaq Stock Market. The Nominating and
Governance Committee has a written charter which is available on the Company’s
website at www.hubgroup.com.
The
Committee annually reviews and assess the adequacy of the Charter.
4
Nominations
of Directors
Directors
may be nominated by the Board of Directors or by shareholders in accordance
with
the Bylaws of the Company. As a matter of course, the Nominating and Governance
Committee will review the qualifications of various persons to determine whether
they might make good candidates for consideration for membership on the Board
of
Directors. The Nominating and Governance Committee will review all proposed
nominees for the Board of Directors, including those proposed by shareholders,
in accordance with the mandate contained in its charter. This will include
a
review of the person’s judgment, experience, independence, understanding of the
Company’s business or other related industries and such other factors as the
Nominating and Governance Committee determines are relevant in light of the
needs of the Board of Directors and the Company. The Nominating and Governance
Committee will select qualified candidates and review its recommendations with
the Board of Directors, which will decide whether to invite the candidate to
be
a nominee for election to the Board of Directors.
The
Company has not paid a fee to any third party to identify or assist in
identifying or evaluating potential nominees. Each nominee for election as
a
director is standing for reelection.
For
a
shareholder to submit a candidate for consideration by the Nominating and
Governance Committee, a shareholder must notify the Company’s Secretary. In
addition, the Bylaws permit shareholders to nominate directors at a shareholder
meeting. 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 3050 Highland Parkway, Suite 100, Downers Grove, IL 60515, either
by
personal delivery or by United States mail within the time period set forth
below under “Stockholder Proposals.” 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.
Controlled
Company
The
Board
of Directors has determined that the Company is a “controlled company” as that
term is defined by Nasdaq since the Yeager family, pursuant to their ownership
of all Class B Common Stock, control 57% of the voting power of the Company
as
of February 28, 2007. Pursuant to the Yeager Family Stockholder Agreement,
the
Yeager family members 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.
Code
of Ethics
The
Company has adopted a Code of Business Conduct and Ethics that applies to all
employees. The Company’s Code of Business Conduct and Ethics may be found on the
Company’s website, www.hubgroup.com.
Communicating
with the Board
Shareholders
may communicate directly with the Board of Directors. All communications should
be directed to the Company’s Secretary at the address set forth above and should
prominently indicate on the outside of the envelope that it is intended for
the
Board of Directors or for non-management directors. Each communication intended
for the Board of Directors and received by the Secretary which is not otherwise
commercial in nature will be forwarded to the specified party following its
clearance through normal security procedures.
5
Review
of Related Party Transactions
The
Company does not employ specific procedures for the review, approval or
ratification of related party transactions involving directors, nominees for
directors, executive officers and their immediate family members, but considers
such transactions on a case-by-case basis as they arise.
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
February 28, 2007, 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)(5)
|
322,339
|
662,296
|
2.5%
|
|
David
P. Yeager(3)(6)
|
288,707
|
662,296
|
2.4%
|
|
Mark
A. Yeager(3)(7)
|
477,112
|
662,296
|
2.9%
|
|
Thomas
M. White(8)
|
47,649
|
--
|
*
|
|
David
L. Marsh(9)
|
52,048
|
--
|
*
|
|
Donald
G. Maltby(10)
|
36,260
|
--
|
*
|
|
Gary
D. Eppen(11)
|
43,661
|
--
|
*
|
|
Charles
R. Reaves(12)
|
157,621
|
--
|
*
|
|
Martin
P. Slark(13)
|
83,482
|
--
|
*
|
|
All
directors and executive officers (15 people) (14)
|
1,859,364
|
662,296
|
6.3%
|
|
Debra
A. Jensen(3)(15)
|
--
|
662,296
|
1.7%
|
|
FMR
Corp. (16)
|
2,232,283
|
--
|
5.6%
|
|
Friess
Associates LLC (17)
|
2,071,000
|
--
|
5.2%
|
|
Barclays
(18)
|
2,908,840
|
--
|
7.3%
|
_________________________
*
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 6 and 7, 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
57% of
the total votes allocable to the Common Stock. Members of the Yeager
family own all of the Class B Common
Stock.
|
6
|
(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 108,000 shares of
Class A
Common Stock issuable upon exercise of
options.
|
| (5) |
Includes
2,000 shares of Class A Common Stock held by his wife. Mr. Yeager
disclaims beneficial ownership of these
shares.
|
| (6) |
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 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. Includes 34,486 shares of restricted
stock.
|
|
(7)
|
Includes
41,826 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 41,826
shares of
Class A Common Stock and 36,794 shares of Class B Common Stock owned
by
the Samantha N. Yeager 1994 GST Trust and 19,632 shares of Class
A Common
Stock owned by the Mark A. Yeager Perpetual 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 33,421
shares of restricted stock.
|
|
(8)
|
Includes
28,539 shares of restricted stock.
|
|
(9)
|
Includes
21,636 shares of restricted stock.
|
| (10) |
Includes
16,710 shares of restricted stock.
|
| (11) |
Includes
7,457 shares of restricted stock. 7,084 shares are held in the Gary
D.
Eppen Trust dated April 22, 1996.
|
| (12) |
Includes
96,000 shares of Class A Common Stock issuable upon exercise of options
and 7,457 shares of restricted
stock.
|
| (13) |
Includes
48,000 shares of Class A Common Stock issuable upon exercise of options
and 7,457 shares of restricted stock.
|
| (14) |
Includes
325,800 shares of Class A Common Stock issuable upon exercise of
options
and 261,595 shares of restricted
stock.
|
|
(15)
|
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.
|
7
|
(16)
|
FMR
Corp. (“FMR”) filed an amendment to a Schedule 13G with the Commission
indicating beneficial ownership of shares of Class A Common Stock.
According to the Schedule 13G, FMR has sole dispositive power with
respect
to all 2,232,283 shares of Class A Common Stock beneficially owned
and
sole voting power with respect to 789,786 shares of Class A Common
Stock
beneficially owned. These securities are owned by various individual
and
institutional investors, which FMR serves as investment advisor with
power
to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Exchange Act, FMR is
deemed
the beneficial owner of such securities; however, FMR expressly disclaims
that it is, in fact, the beneficial owner of such securities. The
number
of shares beneficially owned by FMR is indicated as of February 14,
2007.
The address of FMR is 82 Devonshire Street, Boston, MA 02109.
|
|
(17)
|
Friess
Associates LLC (“Friess”)
filed a Schedule 13G with the Commission indicating beneficial ownership
of shares of Class A Common Stock. According to the Schedule 13G,
Friess
has sole voting and sole dispositive power with respect to all 2,071,000
shares of Class A Common Stock. The number of shares beneficially
owned by
Friess is indicated as of February 15, 2007. The address of Friess
is 115
E. Snow King, Jackson, WY 83001.
|
|
(18)
|
Barclays
Global
Investors, NA, Barclays Global Fund Advisors, Barclays Global Investors,
Ltd., Barclays Global Investors Japan Trust and Banking Company Limited,
and Barclays Global Investors Japan Limited (collectively “Barclays”)
filed a Schedule 13G with the Commission indicating beneficial ownership
of shares of Class A Common Stock. According to the Schedule 13G,
Barclays
has sole dispositive power with respect to all 2,908,840 shares of
Class A
Common Stock beneficially owned and sole voting power with respect
to
2,788,204 shares of Class A Common Stock beneficially owned. Barclays
has
indicated that the shares reported held by Barclays are held in trust
accounts for the economic benefit of the beneficiaries of those accounts.
The number of shares beneficially owned by Barclays is indicated
as of
January 31, 2007. The address of the business office of Barclays
Global
Investors, NA is 45 Fremont Street, San Francisco, CA
94105.
|
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 2006 fiscal year all applicable Section 16(a)
filing requirements were complied with by the officers, directors, and greater
than ten-percent beneficial owners. However, the Company learned during 2006
that Mr. Phillip Yeager was late in filing a Form 4 reporting a gift to charity
of 1,000 shares made on June 8, 2005.
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation
Discussion and Analysis
Overview
of Compensation Program
Our
Compensation Committee has the responsibility for determining the compensation
that is paid or awarded to our Company’s executive officers. Our Compensation
Committee consists of the three independent members of the Board. Our
Compensation Committee ensures that the total compensation paid to our Section
16, or executive officers, is fair, reasonable and competitive and drives
behavior that increases shareholder value over the long-term.
8
Compensation
Philosophy and Objectives
Our
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 industry standards and attract
and
retain outstanding executives. We seek to incent our executives through both
short term and long term awards, with a goal of superior Company performance.
Our ultimate objective is to improve stockholder value.
Our
Compensation Committee evaluates both performance and compensation to ensure
that our Company maintains its ability to attract and retain superior employees
in key positions and that compensation provided to key employees remains
competitive relative to the compensation paid to similarly situated executives
of our peer companies. To that end, our Compensation Committee believes
executive compensation packages provided to our executives should include both
cash and stock-based compensation that reward performance as measured against
pre-established goals.
Role
of Executive Officers in Compensation Decisions
Our
Compensation Committee, with input and recommendations from our Chief Executive
Officer and President, makes all compensation decisions for the executive
officers and approves recommendations of equity awards to all executive officers
of the Company. The Chief Executive Officer and President annually review the
performance of the executive officers. The conclusions reached and
recommendations based on these reviews, including salary adjustments and annual
stock and cash award amounts, are presented to the Compensation Committee.
Our
Compensation Committee can exercise its discretion in modifying any recommended
adjustments of stock or cash awards to executives.
Setting
Executive Compensation
Based
on the
foregoing objectives, our Compensation Committee has structured the Company’s
annual and long-term incentive-based cash and non-cash executive compensation
to
motivate executives to achieve the business goals set by the Company and reward
the executives for achieving such goals.
Compensation
Consultant. To
help
the Company achieve its compensation objectives, our Compensation Committee
engaged Hay Group, Inc. as its independent compensation consultant for 2006.
The
consultant’s role is to advise our Compensation Committee on all executive
compensation matters. The consultant assists by providing relevant market data
and evaluating the total compensation system relative to the compensation
systems employed by comparable companies in the transportation industry and
the
overall U.S. industrial market. The consultant also provides an additional
measure of assurance that the Company’s executive compensation program is a
reasonable and appropriate means to achieve our objectives. Our Compensation
Committee reviews the performance and level of service provided by its
independent compensation consultant on an annual basis.
Market
Benchmarking. A
benchmark group of publicly-traded companies in the transportation industry
is
used annually by our Compensation Committee to ensure that Hub Group’s
compensation programs offer competitive total compensation opportunities and
reflect best practices in compensation plan design. In 2006, the companies
comprising the “Compensation Peer Group” were:
CH
Robinson Worldwide, Inc.
EGL,
Inc.
Expeditors
International of Washington, Inc.
Forward
Air Corp.
J.B.
Hunt
Transport Services, Inc.
Landstar
System, Inc.
Pacer
International, Inc.
Swift
Transportation Co., Inc.
UTI
Worldwide, Inc.
Werner
Enterprises, Inc.
9
In
addition, information on annual base salary increases and compensation data
for
the U.S. general industrial markets is provided by our Compensation Committee’s
independent compensation consultant.
The
Company’s CEO develops pay recommendations for the Company’s executives based on
(i) the aforementioned market data, (ii) each executive’s individual performance
and functional responsibilities as determined by the CEO and President; and
(iii) Company performance, both financial and non-financial. Our Compensation
Committee reviews and approves these pay recommendations with the advice of
its
independent compensation consultant. Our Compensation Committee also sets the
base salary and incentive opportunities for the Company’s CEO based on (i) the
aforementioned market data, (ii) the CEO’s individual performance and
responsibilities and (iii) Company performance, both financial and
non-financial.
Our
Compensation Committee generally seeks to set the base salary for
executive officers at the 50th
percentile of compensation paid to similarly situated executives of the
companies comprising the Compensation Peer Group. Variations to this objective
do occur as dictated by the experience level of the individual, personal
performance and market factors.
There
is
no pre-established policy or target for the allocation between either cash
and
non-cash or short-term and long-term incentive compensation. Rather, our
Compensation Committee reviews information provided by Hay Group, Inc. to
determine the appropriate level and mix of incentive compensation. Pay for
such
incentive compensation is awarded as a result of the performance of the Company
or the individual, depending on the type of award, compared to pre-established
goals.
2006
Executive Compensation Components
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 provided to our
executive officers. The base salary is determined based on position and
responsibility using competitive criteria within the transportation industry.
During its review of base salaries for the executives, our Compensation
Committee primarily considers (i) market data provided by our outside
consultants, (ii) an internal review of the executive’s compensation, both
individually and relative to other officers and (iii) individual performance
of
the executive. Salary levels are typically reviewed annually as part of our
annual performance review process as well as upon a promotion or other change
in
job responsibilities. Increases are based on increases in the cost of living,
individual performance and, to a lesser extent, trends within the industry.
Annual
Cash Incentive.
The
Company’s annual cash incentive recognizes and rewards executives for taking
actions that build the value of the Company and generate competitive total
returns for stockholders. Our annual cash incentive is determined with the
assistance of the third party survey data referred to above and the value of
the
target award is generally set at 60% of the executive’s annual base salary. This
incentive is based solely on earnings per share (“EPS”) for our Chief Executive
Officer and President. For our other executive officers, this incentive is
based
on a combination of EPS (60%) and on individual performance compared against
certain pre-determined personal goals (40%). The personal goals vary by officer.
For 2006, the personal goals for officers responsible for each of our service
lines were generally tied to specific operational objectives for the service
line managed by the executive. For our other executives, the personal goals
were
generally tied to specific objectives within their area of responsibility.
The
personal goals are generally set at a level that are believed to be achievable
with superior personal performance.
Each
year
our Compensation Committee sets an EPS target for our Company. Once the year
is
completed, Hub Group’s earnings per share are compared against the EPS target.
If we meet the EPS target we pay the EPS portion of the award. If we do not
meet
our EPS target we do not pay any cash incentive related to EPS or we pay a
reduced incentive based on a sliding scale. Our sliding scale goes down to
zero
and for 2006 started at our 2005 EPS. In the same way, our executives can earn,
also on a sliding scale, up to twice their EPS target incentive if we
substantially exceed our EPS target. For example, Mr. David Yeager’s target
incentive was $334,874 for 2006. However, since our EPS was substantially above
our EPS target, Mr. Yeager earned 200% of his target incentive or $669,748.
For
2006, all executives received twice the target amount for the EPS part of their
incentive due to our Company substantially exceeding the EPS target.
10
For
2006,
Mr. White, Mr. Marsh and Mr. Maltby each received all of the annual cash
incentive based on personal performance as they each met or exceeded their
personal goals. Our Compensation Committee also granted Mr. Marsh an extra
$50,000 of annual cash incentive due to his outstanding performance managing
his
service line. All cash compensation is approved by our Compensation Committee
before it is paid to our executive officers.
Long-Term
Equity Incentives.
The
Company’s Long-Term Equity 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. The Long-Term
Equity Incentive Program encourages participants to focus on long-term Company
performance and provides an opportunity for executive officers and certain
designated key employees to increase their ownership stake in the Company
through grants of the Company’s Class A Common Stock. The Company maintains the
Hub Group, Inc. 1996 Long-Term Incentive Plan, 1997 Long-Term Incentive Plan,
1999 Long-Term Incentive Plan and the Hub Group, Inc. 2002 Long-Term Incentive
Plan.
For the last few years, the Company has made an annual grant of restricted stock to its executive officers with a three year vesting period. The size of this grant was determined with the help of our outside compensation consultant and was generally designed to be competitive with the Compensation Peer Group. In October 2005, our Compensation Committee discussed the proposed restricted stock grants which would be part of the 2006 executive compensation package. After considering these grants, our Compensation Committee approved the grants in late December 2005. Starting with this December 2005 grant, our Compensation Committee agreed to keep the number of shares generally fixed for three years so that executives, like shareholders, will be directly impacted by changes in our stock price. For the 2007 compensation package and future years, our Compensation Committee decided to make the annual restricted stock grants in early January rather than in late December.
In
conducting the compensation review at the end of 2005, our outside consultants
and our Compensation Committee discussed the need for a substantial long-term
incentive grant to motivate superior long-term performance. After discussing
this issue for some time, on May 22, 2006, our Compensation Committee granted
performance units to certain of our executive officers. In order for these
performance units to be earned and converted to restricted stock on a one for
one basis, Hub Group’s operating income for 2006, 2007 and 2008 must meet a
specified performance target (the “Performance Target”). No restricted stock
will be awarded and the performance units will be canceled and forfeited should
we fail to meet the Performance Target. If our Performance Target is met, but
not exceeded by a predetermined amount (the “Predetermined Amount”), the
performance units will be earned, but our Compensation Committee will have
the
right to reduce to less than 100% the percentage of performance units earned.
If
our operating income exceeds the Performance Target by the Predetermined Amount
or more, then the performance units will be fully earned and not subject to
a
downward adjustment. Should the executive officers receive restricted stock
under this program, this restricted stock will be granted in early 2009 and
then
vests ratably as of the first business day of January in each of 2010, 2011
and
2012 provided the officer remains an employee of Hub Group on each of these
vesting dates. At the time the performance units were granted, our Compensation
Committee set the Performance Target at a level that exceeded the expected
performance of the Company by a substantial amount and therefore at the time
of
grant the likelihood of achieving the Performance Target was not high. The
performance units are designed to incent and reward the management team for
achieving superior operating income growth over this three year period.
Our
Compensation Committee has delegated to our Chief Executive Officer the ability
to grant $500,000 of restricted stock to non-executive officers each year.
Our
Chief Executive Officer grants this stock from time to time to new hires or
in
connection with a promotion or outstanding performance by current employees.
The
Company has not granted any stock options since 2003 and does not currently
have
plans to issue additional options.
Perquisites
and
Other Compensation
Our
Company provides executive officers with perquisites and other personal benefits
that the Company and our Compensation Committee believe are reasonable and
consistent with its overall compensation program to better enable the Company
to
attract and retain superior employees for key positions. Our Compensation
Committee periodically reviews the levels of perquisites and other personal
benefits provided to named executive officers.
11
The
perquisites we provided in 2006 are as follows. All of our named executive
officers participated in our 401(k) plan and received matching funds up to
the
federally allowed maximum match. We maintain $50,000 of life insurance on all
of
our executive officers. The Company maintains a deferred compensation plan
and
provides a matching contribution to participants. The Company also makes
available to its executive officers an annual physical at a local hospital.
The
Company allows personal use of its fractional airplane interests by certain
executive officers. Personal use of our aircraft interest requires approval
by
the Chief Executive Officer. Our executives must reimburse the Company for
their
personal use of our aircraft interest at the Standard Industry Fare Level plus
either 20% or 30% depending on the aircraft.
Retirement
and Other Benefits
Pension
Benefits
We
do not
provide pension arrangements or subsidized post-retirement health coverage
for
our executives or employees.
Non-Qualified
Deferred Compensation
Our
executive
officers, in addition to certain other key managerial employees, are entitled
to
participate in the Hub Group, Inc. Non-Qualified Deferred Compensation Plan.
Pursuant to this plan, eligible employees can defer certain compensation on
a
pre-tax basis. The Hub Group, Inc. Non-Qualified Deferred Compensation Plan
is
discussed in further detail under the heading “Nonqualified Deferred
Compensation” on page 19.
Other
Post-Employment Payments
All
of
our executive officers are employees-at-will and as such do not have employment
contracts with us. Certain payments will be made upon a change of control or
the
retirement of our executive officers. These payments are discussed in further
detail under “Potential Payouts upon Termination or Change of Control” on page
21.
Ownership
Guidelines
To
directly
align the interests of executive officers with the interests of the
stockholders, in the fall of 2006 our Board adopted a policy that requires
each
executive officer to maintain a minimum ownership interest in the Company.
Each
executive officer must own Company stock with a value of at least two times
their base annual salary. Each executive officer has five years to meet this
requirement. Until they do, executive officers must retain a minimum of 25%
of
the stock granted to them in any one year. Our independent Directors have also
agreed to maintain stock valued at twice their annual retainer.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
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 our Compensation Committee with respect to section 162(m) is
to
establish and maintain a compensation program which will optimize the
deductibility of compensation. Our Compensation Committee, however, reserves
the
right to use its judgment, where merited by our Compensation 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. For 2006, the amount of base salary in excess
of $1 million for the named executive officers was not deductible for federal
income tax purposes.
Section
274(e) of the Code limits the Company's deduction for expenses allocated to
certain personal use of its fractional airplane interests. For 2006, such
expenses not reimbursed to the Company were not deductible for federal income
tax purposes.
12
Nonqualified
Deferred Compensation
On
October 22, 2004, the American Jobs Creation Act of 2004 was signed into law,
changing the tax rules applicable to nonqualified deferred compensation
arrangements. While the final regulations have not become effective yet, the
Company believes it is operating in good faith compliance with the statutory
provisions which were effective January 1, 2005. A more detailed discussion
of
the Company’s nonqualified deferred compensation arrangements is provided on
page 19 under the heading “Nonqualified Deferred Compensation”.
Accounting
for Stock-Based Compensation
Beginning
on January 1, 2006, the Company began accounting for stock-based payments in
accordance with the requirements of FASB Statement No. 123(R). Prior to January
1, 2006, the Company accounted for its stock-based compensation plans under
the
recognition and measurement provisions of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations, as permitted by
Statement of Financial Accounting Standard (SFAS) No. 123 "Accounting for
Stock-Based Compensation."
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 year ended
December 31, 2006 paid or awarded to those persons who were, at December 31,
2006: (i) the Company’s chief executive officer, (ii) the Company’s chief
financial officer and (iii) the Company’s three most highly compensated
executive officers other than the chief executive officer and chief financial
officer (collectively, together with the Company’s chief executive officer and
chief financial officer, the “Named Executive Officers”).
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensa-tion(2)
($)
|
Change
in Pension Value and Nonquali-fied Deferred Compensation
Earnings(3)
($)
|
All
Other Compensation ($)
|
Total
($)
|
|||||||||||||||||||
|
David
P. Yeager Vice Chairman and Chief Executive Officer
|
2006
|
|
|
558,123
|
|
|
--
|
|
|
219,351
|
|
|
--
|
|
|
669,748
|
|
|
43,204
|
|
|
115,392(4)(5)
|
|
|
1,605,818
|
|||
|
Mark
A. Yeager President and Chief Operating Officer
|
2006
|
|
|
387,853
|
|
|
--
|
|
|
216,217
|
|
|
--
|
|
|
465,424
|
|
|
31,840
|
|
|
47,228(5)(6)
|
|
|
1,148,562
|
|
||
|
Thomas
M. White Sr. Vice President, Treasurer and Chief Financial
Officer
|
2006
|
|
|
349,211
|
|
|
--
|
|
|
181,762
|
|
|
--
|
|
|
335,243
|
|
|
2,210
|
|
|
25,870(5)(7)
|
|
|
894,296
|
|||
|
David
L. Marsh Executive Vice President -Highway
|
2006
|
|
|
270,375
|
|
|
--
|
|
|
136,115
|
|
|
--
|
|
|
309,560
|
|
|
6,449
|
|
|
19,937(8)
|
|
|
742,436
|
|||
|
Donald
G. Maltby Executive Vice President -Logistics
|
2006
|
|
|
265,225
|
|
|
--
|
|
|
122,226
|
|
|
--
|
|
|
254,616
|
|
|
2,669
|
|
|
22,480(9)
|
|
|
667,216
|
|||
(1)
Consists of amounts expensed in 2006 in accordance with FASB Statement No.
123(R) with respect to restricted stock awards made by our Company to our
executives in 2003, 2004 and 2005 each with a vesting period of three
years.
13
(2)
In
addition to salary, our Compensation Committee provides an annual cash
incentive. Our annual cash incentive is determined with the assistance of third
party survey data and the value of the target award is generally set at 60%
of
the executive’s annual salary. This incentive is based solely on earnings per
share (“EPS”) for our Chief Executive Officer and President. For our other
executive officers, this incentive is based on a combination of EPS (60%) and
on
individual performance compared against certain predetermined personal goals
(40%). Each year our Compensation Committee sets an EPS target for our Company.
Once the year is completed, Hub Group’s EPS is compared against the EPS target.
If we meet the EPS target we pay the target incentive. If we do not meet our
EPS
target we do not pay any cash incentive related to EPS or we pay a reduced
incentive based on a sliding scale. Our sliding scale goes down to zero and
for
2006 started at our 2005 EPS. In the same way, our executives can earn up to
twice their EPS target incentive if we substantially exceed our EPS target.
For
example, Mr. David Yeager’s target incentive was $334,874 for 2006. However,
since our EPS was substantially above our EPS target, Mr. Yeager earned 200%
of
his target incentive or $669,748. All executives received twice the target
amount for the EPS part of their incentive due to our Company substantially
exceeding the EPS target. Mr. White, Mr. Marsh and Mr. Maltby each received
all
of the annual cash incentive based on personal performance as they each met
or
exceeded their personal goals. Mr. Marsh also received an extra $50,000 of
annual cash incentive due to his outstanding performance managing his service
line. All cash compensation is approved by the Compensation Committee before
it
is paid to our executive officers.
(3)
Represents above market earnings on deferred compensation.
(4)
Represents our Company’s matching contribution to the Section 401(k) plan of
$6,600, the value of insurance premiums paid by the Company for term life
insurance equal to $48, the vested match made to Mr. Yeager’s account in our
original Deferred Compensation Plan equal to $16,174, the match made to Mr.
Yeager’s account in our current Deferred Compensation Plan equal to $16,744,
which match has not yet vested and will not vest until January 1, 2008, and
the
value of an executive physical equal to $2,582. Also represents Mr. Yeager’s
personal use of our Company’s fractional airplane interests equal to $73,244.
(5)
Personal use of our aircraft requires approval by the Chief Executive Officer.
Our executives must reimburse the Company for their personal use of our aircraft
interest at the Standard Industry Fare Level plus either 20% or 30% depending
on
the aircraft. We value the personal use of our aircraft interests as the
difference between the amount paid by the executive to the Company for use
of
the plane and the aggregate incremental cost of using the plane. The incremental
cost includes the hourly flight fee, all fuel charges, overnight fees, on-board
catering, landing fees, parking fees, certain taxes and passenger ground
transportation. We do not include in incremental costs the fixed costs that
do
not change based on personal usage, such as monthly management fees or the
purchase or lease costs of our fractional interest in aircraft.
(6)
Represents our Company’s matching contribution to the Section 401(k) plan of
$6,600, the value of insurance premiums paid by the Company for term life
insurance equal to $48, the vested match made to Mr. Yeager’s account in our
original Deferred Compensation Plan equal to $7,277 and the match made to Mr.
Yeager’s account in our current Deferred Compensation Plan equal to $11,636,
which match has not yet vested and will not vest until January 1, 2008. Also
represents Mr. Yeager’s personal use of our Company’s fractional airplane
interests equal to $21,667.
(7)
Represents our Company’s matching contribution to the Section 401(k) plan of
$6,600, the value of insurance premiums paid by the Company for term life
insurance equal to $48 and the match made to Mr. White’s account in our current
Deferred Compensation Plan equal to $10,476, which match has not yet vested
and
will not vest until January 1, 2008. Also represents Mr. White’s personal use of
our Company’s fractional airplane interests equal to $8,746.
(8)
Represents our Company’s matching contribution to the Section 401(k) plan of
$6,600, the value of insurance premiums paid by the Company for term life
insurance equal to $48, the vested match made to Mr. Marsh’s account in our
original Deferred Compensation Plan equal to $3,783, the match made to Mr.
Marsh’s account in our current Deferred Compensation Plan equal to $8,111, which
match has not yet vested and will not vest until January 1, 2008, and the value
of an executive physical equal to $1,395.
(9)
Represents our Company’s matching contribution to the Section 401(k) plan of
$6,600, the value of insurance premiums paid by the Company for term life
insurance equal to $48, the vested match made to Mr. Maltby’s account in our
original Deferred Compensation Plan equal to $7,875 and the match made to Mr.
Maltby’s account in our current Deferred Compensation Plan equal to $7,957,
which match has not yet vested and will not vest until January 1, 2008.
14
GRANTS
OF PLAN-BASED AWARDS
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under Non-Equity Incentive Plan
Awards(1)
|
Estimated
Future Payouts Under Equity Incentive Plan
Awards(2)
|
All
Other Stock Awards: Number of Shares of Stock or
Units
(#)
|
All
Other Option Awards: Number of Securities Underlying
Options
(#)
|
Exercise
or Base Price of Option Awards
($/Sh)
|
Grant
Date Fair Value of Stock and Option Award
($) (2)
|
||||
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
||||||
|
David
P. Yeager
|
5/22/2006
|
--
|
--
|
--
|
--
|
77,420
|
--
|
--
|
--
|
--
|
1,800,015
|
|
Mark
A. Yeager
|
5/22/2006
|
--
|
--
|
--
|
--
|
64,516
|
--
|
--
|
--
|
--
|
1,499,997
|
|
Thomas
M. White
|
5/22/2006
|
--
|
--
|
--
|
--
|
64,516
|
--
|
--
|
--
|
--
|
1,499,997
|
|
David
L. Marsh
|
5/22/2006
|
--
|
--
|
--
|
--
|
43,010
|
--
|
--
|
--
|
--
|
999,983
|
|
Donald
G. Maltby
|
5/22/2006
|
--
|
--
|
--
|
--
|
43,010
|
--
|
--
|
--
|
--
|
999,983
|
(1)
We do
not have any multi-year non-equity incentive plan awards. Our non-equity
incentive plan award is made on an annual basis based on a single year’s
performance. Please see Footnote 2 to the Summary Compensation Table
for a
description of this plan.
(2)
On
May 22, 2006, our Compensation Committee granted performance units to certain
of
our executive officers. In order for these performance units to be earned and
converted to restricted stock on a one for one basis, Hub Group’s operating
income for 2006, 2007 and 2008 must meet a specified performance target (the
“Performance Target”). No restricted stock will be awarded and the performance
units will be canceled and forfeited should we fail to meet the Performance
Target. If our Performance Target is met, but not exceeded by a predetermined
amount (the “Predetermined Amount”), the performance units will be earned, but
our Compensation Committee will have the right to reduce to less than 100%
the
percentage of performance units earned. If our operating income exceeds the
Performance Target by the Predetermined Amount or more, then the performance
units will be fully earned and not subject to a downward adjustment. Should
the
executive officers receive restricted stock under this program, this restricted
stock will be granted in early 2009 and then vests ratably as of the first
business day of January in each of 2010, 2011 and 2012 provided the officer
remains an employee of Hub Group on each of these vesting dates. At the time
the
performance units were granted, the Compensation Committee set the Performance
Target at a level that exceeded the expected performance of the Company by
a
substantial amount and therefore at the time of grant the likelihood of
achieving the Performance Target was not high. The performance units are
designed to incent and reward the management team for achieving superior
operating income growth over this three year period. See
Footnote 8 to our financial statements for a discussion of how we valued these
awards.
15
Narrative
Description for Summary Compensation and Grants of Plan-Based Awards
Tables
As
part
of the annual compensation package, our Compensation Committee grants restricted
stock to our executive officers. These awards are generally based on merit
and
third party survey data.
In
December 2005, our Compensation Committee granted restricted stock to our
executive officers that vests over three years. Mr. David Yeager received 20,692
restricted shares with a value on the date of grant of $350,005, Mr. Mark Yeager
received 17,736 restricted shares with a value on the date of grant of $300,004,
Mr. White received 14,780 restricted shares with a value on the date of grant
of
$250,004, Mr. Marsh received 11,824 restricted shares with a value on the date
of grant of $200,003 and Mr. Matlby received 8,868 restricted shares with a
value on the date of grant of $150,002. Although granted in late 2005, this
restricted stock was part of each executive’s 2006 compensation package. Going
forward, our Compensation Committee has elected to make its annual grants of
restricted stock in early January rather than late December. The Compensation
Committee agreed to keep the number of shares generally fixed for three years
so
that executives, like shareholders, will be directly impacted by changes in
our
stock price.
These
restricted shares are entitled to dividends to the same extent as ordinary
shares, but the dividends are restricted to the same extent as the underlying
security. Once the restricted stock vests, any dividends paid on that stock
also
vest.
We
do not
have employment agreements with our executive officers.
16
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2006
|
Option
Awards
|
Stock
Awards
|
||||||||
|
Name
|
Number
of
Securities
Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not
Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)
|
|
David
P. Yeager
|
--
|
--
|
--
|
--
|
--
|
13,794
(1)
|
380,025
|
77,420
(4)
|
2,132,921
|
|
Mark
A. Yeager
|
--
|
--
|
--
|
--
|
--
|
3,861 (3)
11,824
(1)
|
106,371
325,751
|
64,516
(4)
|
1,777,416
|
|
Thomas
M. White
|
--
|
--
|
--
|
--
|
--
|
1,332
(2)
2,574
(3)
9,853
(1)
|
36,697
70,914
271,450
|
64,516
(4)
|
1,777,416
|
|
David
L. Marsh
|
800
28,600
|
--
--
|
--
--
|
2.70
1.82
|
02/09/2011
10/29/2012
|
1,930
(3)
7,882
(1)
|
53,172
217,149
|
43,010
(4)
|
1,184,926
|
|
Donald
G. Maltby
|
--
|
--
|
--
|
--
|
--
|
1,930
(3)
5,912
(1)
|
53,172
162,876
|
43,010
(4)
|
1,184,926
|
(1)
Restricted stock remaining from a grant made on December 21, 2005 that vests
ratably annually on the date of grant over three years.
(2)
Restricted stock remaining from a grant made on May 13, 2004 that vests ratably
annually on the date of grant over three years.
(3)
Restricted stock remaining from a grant made on December 30, 2004 that vests
ratably annually on the date of grant over three years.
(4)
See
Footnote 2 to the Grants of Plan-Based Awards Table for an explanation of this
item.
17
OPTION
EXERCISES AND STOCK VESTED
|
Option
Awards
|
Stock
Awards
|
||||||||||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
|||||||||
|
David
P. Yeager
|
300,000
|
6,227,127
|
50,632
|
1,380,346
|
|||||||||
|
Mark
A. Yeager
|
214,000
|
4,577,769
|
37,973
|
1,035,900
|
|||||||||
|
Thomas
M. White
|
55,000
|
1,111,470
|
31,835
|
863,652
|
|||||||||
|
David
L. Marsh
|
--
|
--
|
17,806
|
495,987
|
|||||||||
|
Donald
G. Maltby
|
50,000
|
953,451
|
16,820
|
469,404
|
|||||||||
18
NONQUALIFIED
DEFERRED COMPENSATION
Original
Deferred Compensation Plan
|
Name
|
Executive
Contributions in Last FY
($)
|
Registrant
Contributions in Last FY
($)
|
Aggregate
Earnings in Last FY
($)(1)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at
Last
FYE
($)(2)
|
|||||||||||
|
David
P. Yeager
|
--
|
|
|
--
|
|
|
100,475
|
|
|
--
|
|
|
1,027,108
|
|
||
|
Mark
A. Yeager
|
|
|
--
|
|
|
--
|
|
|
74,047
|
|
|
--
|
|
|
746,952
|
|
|
Thomas
M. White
|
|
|
--
|
|
|
--
|
|
|
5,139
|
|
|
--
|
|
|
61,910
|
|
|
David
L. Marsh
|
|
|
--
|
|
|
--
|
|
|
14,998
|
|
|
--
|
|
|
161,715
|
|
|
Donald
G. Maltby
|
|
|
--
|
|
|
--
|
|
|
6,207
|
|
|
--
|
|
|
117,193
|
|
(1)
That
portion of the interest that is above market is included in Change in Pension
Value and Nonqualified Deferred Compensation Earnings in the Summary
Compensation Table. A portion of the earnings is interest earned on a matching
contribution that has not yet vested and is subject to forfeiture. The amount
of
interest reported that is subject to forfeiture is $4,508 for Mr. David Yeager,
$2,656 for Mr. Mark Yeager, $1,620 for Mr. White, $1,606 for Mr. Marsh and
$1,645 for Mr. Maltby.
(2)
Prior
to 2006 we did not track the portion of the aggregate balance that was
previously reported as compensation in the Summary Compensation Table. The
amount of compensation in the aggregate balance that was reported as
compensation in the 2006 Summary Compensation Table is $59,378 for Mr. David
Yeager, $39,117 for Mr. Mark Yeager, $2,210 for Mr. White, $10,232 for Mr.
Marsh
and $10,544 for Mr. Maltby.
19
Current
Deferred Compensation Plan
|
Name
|
Executive
Contributions in Last FY
($)(1)
|
Registrant
Contributions in Last FY
($)(2)
|
Aggregate
Earnings in Last FY
($)(3)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at
Last
FYE
($)(4)
|
|||||||||||
|
David
P. Yeager
|
|
111,624
|
|
16,744
|
30,830
|
--
|
275,354
|
|||||||||
|
Mark
A. Yeager
|
|
58,178
|
11,636
|
17,762
|
--
|
208,101
|
||||||||||
|
Thomas
M. White
|
34,921
|
10,476
|
10,409
|
--
|
97,193
|
|||||||||||
|
David
L. Marsh
|
40,556
|
8,111
|
10,822
|
--
|
100,711
|
|||||||||||
|
Donald
G. Maltby
|
15,914
|
7,957
|
5,290
|
--
|
56,901
|
|||||||||||
(1)
Executive contributions are included in Salary in the Summary Compensation
Table.
(2)
Our
Company contributions are a match made subject to a cliff vesting requirement
as
more fully explained below. Our Company contributions are included in All Other
Compensation in the Summary Compensation Table.
(3)
None
of these earnings are included in the Summary Compensation Table as these are
earnings on investments made in various commonly available investment
vehicles.
(4)
Prior
to 2006 we did not track the portion of the aggregate balance that was
previously reported as compensation in the Summary Compensation Table. The
amount of compensation in the aggregate balance that was reported as
compensation in the 2006 Summary Compensation Table is $128,368 for Mr. David
Yeager, $69,814 for Mr. Mark Yeager, $45,397 for Mr. White, $48,667 for Mr.
Marsh and $23,871 for Mr. Maltby.
We
maintain two non-qualified deferred compensation plans. Our Compensation
Committee adopted our first plan with an effective date of January 1, 2000
(“Original Plan”). We allowed a select group and management and highly
compensated employees to make contributions to our Original Plan through 2004.
Our Compensation Committee adopted a new non-qualified deferred compensation
plan effective January 1, 2005 (“Current Plan”). We allowed a select group of
management and highly compensated employees to make contributions to our Current
Plan beginning in 2005.
Our
Original Plan is not funded and provides for a fixed rate of return on our
employees’ deferrals and any match by our Company. We provided participants with
a fixed rate of return of 10% for contributions made in 2000 and 2001 and 8%
for
contributions made in 2002, 2003 and 2004. Participating employees could
contribute up to 15% of their cash compensation under the Original Plan. The
Original Plan also included a match by our Company. The match is equal to 50%
of
the first 6% of contributions to the plan with a maximum match equivalent to
3%
of base salary. The match is subject to a five year cliff vest measured from
the
date of the contribution. For example, if the employee made a contribution
in
2000, the match vested if the employee was still employed on January 1, 2005.
Subject to certain exceptions, we also pay interest on the match at the same
rate as the interest paid on the employees’ contribution. The interest on the
match is subject to forfeiture if the underlying match is forfeited and vests
when our match vests. Any deferral, including the match and all interest, made
under the Original Plan will be paid out upon the earlier of (i) the termination
of such employee’s employment or (ii) the payout date originally selected by the
employee.
Our
Current
Plan is funded and does not provide for a fixed rate of return. Each
participating employee selects from a range of investment options. We then
provide an investment return equal to the return from the selected investment
options. The investment options which may be selected by the participating
employees track commonly available investment vehicles, including mutual funds,
bond funds and money market funds. Participating employees can contribute up
to
50% of their salary and up to 100% of their annual cash incentive under the
Current Plan.
20
The
Current
Plan also includes a match by our Company. The match is equal to 50% of the
first 6% of contributions to the plan with a maximum match equivalent to 3%
of
base salary. Each annual match vests once the employee achieves three years
of
service, however, all employees’ years of service were reset to zero as of
January 1, 2005 for purposes of this match. For example, an employee who was
hired on January 1, 1990 would be deemed to have zero years of service on
January 1, 2005 for purposes of the Current Plan. If the employee participated
in the Current Plan in 2005, 2006 and 2007 his Company match for the all three
years would vest on January 1, 2008. The Company match, if vested, and earnings
thereon, is paid out seven months after separation from service in either a
lump
sum or over a period of up to ten years, at the employee’s election. The
employee’s contributions, and earnings thereon, are paid out upon separation
from service or at a predetermined date and may be paid out in a lump sum or
over a period of up to ten years. The match is subject to forfeiture if the
participant leaves the Company and goes to work for a competitor.
Potential
Payouts Upon Termination or Change of Control
David
P. Yeager, Vice Chairman and CEO
Change
of Control
Mr.
Yeager has been granted performance units and various awards of restricted
stock
under our Long-Term Incentive Plans. Pursuant to his award agreements, this
restricted stock vests upon a change of control and these performance units
will
be fully earned and the corresponding restricted stock will be granted and
immediately vest upon a change of control. As of December 31, 2006, Mr. Yeager
owned 77,420 performance units and 13,794 shares of restricted stock. Assuming
the triggering event took place on the last business day of 2006, the value
of
the performance units and restricted stock would be $2,512,946.
Mr.
Yeager is a participant in both of our deferred compensation plans. Our Original
Plan provides for the vesting of the Company match and any interest thereon
upon
a change of control. Our Current Plan provides for the vesting of the Company
match and any earnings thereon upon a change of control. Assuming a change
of
control as defined under these plans occurred on December 31, 2006, a total
of
$74,642 worth of Company matching contributions and interest or earnings thereon
would have vested.
Retirement
Upon
retirement, which is defined as the termination of employment on or after the
age of 55, Mr. Yeager would be entitled to immediate vesting of any non-vested
employer match and interest thereon under our Original Deferred Compensation
Plan. As of December 31, 2006, Mr. Yeager was 53 years old and therefore does
not at this time qualify for this benefit.
Mark
A. Yeager, President and COO
Change
of Control
Mr.
Yeager has been granted performance units and various awards of restricted
stock
under our Long-Term Incentive Plans. Pursuant to his award agreements, this
restricted stock vests upon a change of control and these performance units
will
be fully earned and the corresponding restricted stock will be granted and
immediately vest upon a change of control. As of December 31, 2006, Mr. Yeager
owned 64,516 performance units and 15,685 shares of restricted stock. Assuming
the triggering event took place on the last business day of 2006, the value
of
the performance units and restricted stock would be $2,209,538.
Mr.
Yeager is a participant in both of our deferred compensation plans. Our Original
Plan provides for the vesting of the Company match and any interest thereon
upon
a change of control. Our Current Plan provides for the vesting of the Company
match and any earnings thereon upon a change of control. Assuming a change
of
control as defined under these plans occurred on December 31, 2006, a total
of
$45,189 worth of Company matching contributions and interest or earnings thereon
would have vested.
21
Retirement
Upon
retirement, which is defined as the termination of employment on or after the
age of 55, Mr. Yeager would be entitled to immediate vesting of any non-vested
employer match and interest thereon under our Original Deferred Compensation
Plan. As of December 31, 2006, Mr. Yeager was 42 years old and therefore does
not at this time qualify for this benefit.
Thomas
M. White, Sr. Vice President, Treasurer and CFO
Mr.
White
is a party to an arrangement with our Company pursuant to which he will be
paid
one-year of base salary if (i) his employment is terminated within 12 months
following a change in control or (ii) his position is eliminated within 12
months following a change in control and a like position is not offered within
our Company. A change of control is deemed to occur for these purposes when
there has been a change to the majority voting position in the Company. Assuming
the triggering events set forth above took place on December 31, 2006, Mr.
White
would have received a cash payment of $349,211.
Change
of Control
Mr.
White
has been granted performance units and various awards of restricted stock under
our Long-Term Incentive Plans. Pursuant to his award agreements, this restricted
stock vests upon a change of control and these performance units will be fully
earned and the corresponding restricted stock will be granted and immediately
vest upon a change of control. As of December 31, 2006, Mr. White owned 64,516
performance units and 13,759 shares of restricted stock. Assuming the triggering
event took place on the last business day of 2006, the value of the performance
units and restricted stock would be $2,156,477.
Mr.
White
is a participant in both of our deferred compensation plans. Our Original Plan
provides for the vesting of the Company match and any interest thereon upon
a
change of control. Our Current Plan provides for the vesting of the Company
match and any earnings thereon upon a change of control. Assuming a change
of
control as defined under these plans occurred on December 31, 2006, a total
of
$31,671 worth of Company matching contributions and interest or earnings thereon
would have vested.
Retirement
Upon
retirement, which is defined as the termination of employment on or after the
age of 55, Mr. White would be entitled to immediate vesting of any non-vested
employer match and interest thereon under our Original Deferred Compensation
Plan. As of December 31, 2006, Mr. White was 49 years old and therefore does
not
at this time qualify for this benefit.
David
L. Marsh, Executive Vice President-Highway
Change
of Control
Mr.
Marsh
has been granted performance units and various awards of restricted stock under
our Long-Term Incentive Plans. Pursuant to his award agreements, this restricted
stock vests upon a change of control and these performance units will be fully
earned and the corresponding restricted stock will be granted and immediately
vest upon a change of control. As of December 31, 2006, Mr. Marsh owned 43,010
performance units and 9,812 shares of restricted stock. Assuming the triggering
event took place on the last business day of 2006, the value of the performance
units and restricted stock would be $1,455,247.
Mr.
Marsh
is a participant in both of our deferred compensation plans. Our Original Plan
provides for the vesting of the Company match and any interest thereon upon
a
change of control. Our Current Plan provides for the vesting of the Company
match and any earnings thereon upon a change of control. Assuming a change
of
control as defined under these plans occurred on December 31, 2006, a total
of
$29,032 worth of Company matching contributions and interest or earnings thereon
would have vested.
22
Retirement
Upon
retirement, which is defined as the termination of employment on or after the
age of 55, Mr. Marsh would be entitled to immediate vesting of any non-vested
employer match and interest thereon under our Original Deferred Compensation
Plan. As of December 31, 2006, Mr. Marsh was 39 years old and therefore does
not
at this time qualify for this benefit.
Donald G. Maltby, Executive Vice President-Logistics
Change
of Control
Mr.
Maltby has been granted performance units and various awards of restricted
stock
under our Long-Term Incentive Plans. Pursuant to his award agreements, this
restricted stock vests upon a change of control and these performance units
will
be fully earned and the corresponding restricted stock will be granted and
immediately vest upon a change of control. As of December 31, 2006, Mr. Maltby
owned 43,010 performance units and 7,842 shares of restricted stock. Assuming
the triggering event took place on the last business day of 2006, the value
of
the performance units and restricted stock would be $1,400,974.
Mr.
Maltby is a participant in both of our deferred compensation plans. Our Original
Plan provides for the vesting of the Company match and any interest thereon
upon
a change of control. Our Current Plan provides for the vesting of the Company
match and any earnings thereon upon a change of control. Assuming a change
of
control as defined under these plans occurred on December 31, 2006, a total
of
$29,545 worth of Company matching contributions and interest or earnings thereon
would have vested.
Retirement
Upon
retirement, which is defined as the termination of employment on or after the
age of 55, Mr. Maltby would be entitled to immediate vesting of any non-vested
employer match and interest thereon under our Original Deferred Compensation
Plan. As of December 31, 2006, Mr. Maltby was 52 years old and therefore does
not at this time qualify for this benefit.
Definition
of “Change of Control”
For
purposes of the foregoing discussion, a change of control under the Original
Deferred Compensation Plan is defined as a change in the ownership or effective
control of the Company, or a substantial portion of the Company’s assets as
defined in section 409A of the Internal Revenue Code of 1986, as amended from
time to time. Under all other plans described above a change of control is
defined for these purposes as 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: (i) Any "person" (as such term is used in Section 13(d) and 14(d)(2)
of the Exchange Act) who is not as of the date of this grant but later 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; or (ii) 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, the change in control will be deemed to have
occurred upon the first to occur of (A) any time during the offer when the
person (using the definition in (i) 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 (B) 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; or (iii) 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.
23
DIRECTOR
COMPENSATION
The
following table sets forth a summary of the compensation for services rendered
to the Company for the fiscal year ended December 31, 2006 for the Company’s
independent directors.
|
Name
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||
|
Gary
D. Eppen
|
50,000
|
|
|
58,231
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
1,388(1)
|
|
|
109,619
|
|||
|
Charles
R. Reaves
|
50,000
|
|
|
58,231
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
108,231
|
|
||
|
Martin
P. Slark
|
50,000
|
|
|
58,231
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
108,231
|
|||
(1)
Mr.
Eppen contributed to our Deferred Compensation Plan in 2006 and received a
match
of $1,388 for 2006. This match is subject to the plan’s vesting requirements and
will not be fully vested until January 1, 2008.
Mr.
Eppen
has no options, 1,544 shares of restricted stock remaining from a grant made
on
December 30, 2004 that vests ratably over three years and 2,365 shares of
restricted stock remaining from a grant made on December 21, 2005 that vests
ratably over three years. Mr. Slark has 48,000 exercisable options and 1,544
shares of restricted stock remaining from a grant made on December 30, 2004
that
vests ratably over three years and 2,365 shares of restricted stock remaining
from a grant made on December 21, 2005 that vests ratably over three years.
Mr.
Reaves has 96,000 exercisable options and 1,544 shares of restricted stock
remaining from a grant made on December 30, 2004 that vests ratably over three
years and 2,365 shares of restricted stock remaining from a grant made on
December 21, 2005 that vests ratably over three years.
Directors
who are not employees of the Company received $50,000 for serving as a director
during 2006. 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 connection with their 2006 compensation package, on December 21,
2005, Messrs. Eppen, Reaves and Slark each received a grant of 3,548 shares
of
restricted Class A Common Stock. This restricted stock vests ratably over a
three-year period.
Compensation
Committee Report
This
report is submitted by the Compensation
Committee
of the Board of Directors.
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis prepared by management and has recommended
to the Board that it be included in this Proxy Statement.
COMPENSATION
COMMITTEE
Gary
D.
Eppen
Charles
R.
Reaves
Martin
P. Slark,
Chairman
24
Audit
Committee Report
The
Audit
Committee has reviewed and discussed the Company’s quarterly and annual audited
financial statements with management and with Ernst & Young, LLP, the
Company’s independent public accountants. The Company has also discussed with
Ernst & Young 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 Ernst & Young LLP
the written disclosures required by Independence Standards Board Standard No.
1,
Independence Discussions with Audit Committees, regarding their independence.
The Audit Committee has discussed with Ernst & Young LLP their independence
and considered whether the provision of non-audit services referred to under
“Independent Public Accountants” on page 37 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,
2006
audited financial statements be included in the Company’s Annual Report on Form
10-K for 2006.
AUDIT
COMMITTEE
Gary
D. Eppen,
Chairman
Charles
R.
Reaves
Martin
P. Slark
25
PROPOSAL
#1: AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES
OF
CAPITAL STOCK
On
February 22, 2007, the Company’s Board of Directors unanimously approved,
subject to stockholder approval, an amendment to the Company’s Certificate of
Incorporation to increase the number of authorized shares of the Company’s
capital stock and voted to authorize the submission of the amendment to the
Company’s stockholder’s at the Annual Meeting.
The
Company’s Certificate of Incorporation currently authorizes the issuance of a
total of 50,000,000 shares of stock, consisting of 47,337,700 shares of Class
A
Common Stock, par value $0.01 per share, 662,300 shares of Class B Common Stock,
par value $0.01 per share, and 2,000,000 shares of Preferred Stock, par value
$0.01 per share. The proposed amendment would increase the total number of
authorized shares of capital stock to 100,000,000 shares and would increase
the
number of authorized shares of Class A Common Stock to 97,337,700
shares.
As
of
March [__], 2007, [_____________] shares of Class A Common Stock, 662,296 shares
of Class B Common Stock and no shares of Preferred Stock were outstanding.
As of
February 27, 2007, 700,907 shares of Class A Common Stock are reserved for
issuance pursuant to the Company’s 1999 and 2002 Long-Term Incentive
Plans.
The
full
text of the proposed amendment is set forth in Appendix A to this Proxy
Statement. The newly authorized shares of Class A Common Stock will constitute
additional shares of the existing Class A Common Stock and, if and when issued,
will have the same rights and privileges as the shares of Class A Common Stock
currently authorized. The number of authorized shares of Class B Common Stock
and Preferred Stock would not be affected. This amendment and the creation
of
additional shares of authorized shares of Class A Common Stock will not alter
the current number of issued shares.
The
increase in the number of authorized but unissued shares of Class A Common
Stock
would enable the Company, without further stockholder approval, to issue shares
from time to time as may be required for various purposes, such as, business
and
asset acquisitions, stock splits and dividends, present and future employee
benefit programs, raising additional capital for ongoing operations and other
corporate purposes.
There
are
currently no plans, arrangements, commitments or understandings for the issuance
of the additional shares of Common Stock which are proposed to be authorized,
except pursuant to the Company’s 1999 and 2002 Long-Term Incentive Plan and its
amended and restated 2002 Long-Term Incentive Plan that shareholders are being
asked to approve at this Annual Meeting.
Anti-Takeover
Effects of the Proposed Amendment
The
proposed increase in the authorized number of shares of Class A Common Stock
could have a number of effects on the Company's stockholders depending upon
the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase in the authorized number of shares of Class A
Common Stock and the subsequent issuance of such shares could have the effect
of
delaying or preventing a change of control of the Company without further action
by the stockholders. Shares of authorized and unissued Class A Common Stock
could (within the limits imposed by applicable law) be issued in one or more
transactions that would make a change of control of the Company more difficult,
and therefore less likely. The additional authorized shares could be used to
discourage persons from attempting to gain control of the Company, by diluting
the voting power of shares then outstanding or increasing the voting power
of
persons who would support the Board of Directors in a potential takeover
scenario.
In
addition, the increased shares authorized by the proposed amendment could permit
the Board of Directors to issue Class A Common Stock to persons supportive
of
management's position. Such persons might then be in a position to vote to
prevent or delay a proposed business combination that is deemed unacceptable
to
the Board of Directors, although perceived to be desirable by some stockholders.
Any such issuance could provide management with a means to block any vote that
might be used to effect a business combination in accordance with the
Certificate of Incorporation. Similarly, the issuance of additional shares
to
certain persons allied with the Company's management could have the effect
of
making it more difficult to remove the Company's current management by diluting
the stock ownership or voting rights of persons seeking to cause such
removal.
26
The
Board
of Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented with the intent
that it be utilized as a type of anti-takeover device.
Additional
Effects of the Issuance of Shares of Class A Common Stock
Stockholders
should recognize that an issuance of additional Class A Common Stock will
generally have the effect of diluting the earnings per share and book value
per
share of outstanding shares of Class A Common Stock and the equity and voting
rights of holders of shares of Class A Common Stock and Class B Common Stock.
The issuance of shares of Class A Common Stock as a stock dividend will result
in an increase in the number of votes per share of Class B Common Stock so
that
the Class B Common Stockholders maintain their relative percentage voting power
that existed prior to the stock dividend.
Recommendation
of the Board of Directors
The
Board
of Directors has unanimously approved the proposed amendment and has determined
that the increase in authorized Class A Common Stock is in the best interests
of
the Company and its stockholders.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSED
AMENDMENT.
The
affirmative vote of the holders of a majority of the outstanding shares of
Class
A Common Stock and Class B Common Stock, voting together as a class, is required
to approve the proposed amendment. Any shares not voted (whether by abstention
or broker non-votes) will have the effect of a vote against the proposed
amendment.
27
PROPOSAL
#2: APPROVAL OF AMENDED AND RESTATED 2002 LONG-TERM INCENTIVE
PLAN
(As
Amended and Restated effective May 7, 2007)
Introduction
Hub
Group’s shareholders are asked to approve an amendment and restatement of the
Hub
Group, Inc. 2002 Long-Term Incentive Plan (the “Plan”). The
Plan
was first adopted by the Board of Directors of Hub Group (the “Board of
Directors”) effective
as of April 4, 2002, subject to shareholder approval, which was subsequently
received. The Plan was amended and restated, effective December 3, 2003, and
was
subsequently approved by the Company’s shareholders. On
February 22, 2007, the Board of Directors approved the amendment and restatement
of the Plan (the “Amendment and Restatement”), to be effective as of May 7,
2007, subject to shareholder approval. The Amendment and Restatement will
increase the number of shares available for issuance under the Plan by 1,000,000
shares (“Additional Shares”) of common stock of the Company, which shares shall
be in addition to the 4,400,000 shares previously reserved.
1
As
of
February 27, 2007, there are approximately 652,586 shares remaining for issuance
under the Plan prior to approval of the Amendment and Restatement. The approval
of the Amendment and Restatement will bring the total number of shares remaining
available for issuance under the Plan to approximately 1,652,586 shares. The
Plan is unlimited in duration and will remain in effect as long as any awards
are outstanding. However, no awards may be granted under the Plan more than
ten
years from the date the Plan was adopted. The Amendment and Restatement will
extend the ten-year period during which awards may be granted under the Plan
to
the tenth anniversary of the Amendment and Restatement effective date, which
tenth anniversary is May 7, 2017. The Amendment and Restatement will also
increase the total cash value of awards, other than options and stock
appreciation rights, intended to be “performance-based compensation” (as
described below) that may be granted to any one individual during a fiscal
year.
The Amendment and Restatement will modify the Plan as follows:
| · |
Section
6.2(b) will be modified to change the number of shares of common
stock
from 4,400,000 to 5,400,000.
|
| · |
Section
6.1 will be modified to extend the period during which awards may
be
granted under the Plan to the tenth anniversary of the Amendment
and
Restatement effective date, which tenth anniversary is May 7, 2017.
|
| · |
Section
6.2(e)(ii) will be modified to change from $5,000,000 to $10,000,000,
the
limit on performance-based awards, other than options and stock
appreciation rights, denominated in cash value that may be granted
to any
one individual during a fiscal year.
|
A
summary
of the material terms of the Plan as amended and restated is contained below.
This summary should be read with and is subject to the specific provisions
of
the Plan. The full text of the Plan is attached as Appendix B to this 2007
Proxy
Statement of the Company. All provisions of the Plan remain in effect, with
the
only material amendment being the Amendment and Restatement described above
to
reflect the Additional Shares.
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.
1
When the
Plan was last approved by the Company’s shareholders, the total number of shares
reserved under the Plan was 1,100,000. Since that time, the Board of Directors
approved a two-for-one stock split that was paid on May 11, 2005, and a
two-for-one stock split that was paid on June 6, 2006. Shares and share limits
under the Plan have been adjusted in accordance with Section 6.3 of the Plan
to
reflect such splits. As adjusted, the number of shares reserved under the Plan
prior to the Amendment and Restatement is 4,400,000.
28
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) or non-employee Directors of the Company (“Eligible
Directors”), those employees or Directors 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. Based upon the recommendation
of
Directors who are not Eligible Directors, the Board may grant to Eligible
Directors non-qualified stock options, SARs, restricted stock award and
performance units.
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 5,400,000 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.
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 1,000,000.
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 1,000,000. If such awards are denominated in cash value,
no more than $10,000,000 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 Amendment and Restatement effective date, which date is May
7,
2017. 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 participant’s 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.
The
employees of the Company and related companies are eligible to become
participants in the Plan. As of December 31, 2006, there were approximately
1,513 employees of the Company and related companies. As of February 27, 2007,
2,218,000 options and 1,095,902 shares of Restricted Stock have been granted
under the Plan of which 118,000 options and 42,030 shares of Restricted Stock
have been cancelled and such shares are again available for future
issuance.
29
Equity
Compensation Plan Information
The
following chart contains certain information regarding the Company’s Long-Term
Incentive Plans (including the Plan and the Company’s 1999 Long Term Incentive
Plan) as of February 27, 2007, prior to the proposed amendment.
|
Plan
Category
|
Number
of securities
to
be issued
upon
exercise of
outstanding
options,
warrants
and rights (a)2
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in column (a))3
|
|
Equity
compensation
plans
approved by
security
holders
|
754,596
|
$2.24
|
700,907
|
|
Equity
compensation
plans
not approved
by
security holders
|
--
|
--
|
--
|
|
Total
|
754,596
|
$2.24
|
700,907
|
Stock
Options
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 (or
service in the case of a director) or 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.
2 This
represents securities to be issued upon exercise of stock options. We have
no
outstanding warrants or stock appreciation rights. This does not include
any
securities to be issued if the 593,542 performance units granted in 2006
are
earned.
3 The
number of securities reserved for future issuance under equity compensation
plans has been reduced by 593,542 shares of Restricted Stock in connection
with
the performance units granted in 2006 that will be delivered upon successful
achievement of certain performance goals. To the extent that those shares
of
Restricted Stock are not delivered because the award is forfeited or cancelled,
such shares shall not be deemed to have been delivered for purposes of
determining the securities remaining available for future issuance and shall
be
available for future grant.
30
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.
The
Board of Directors 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 of Directors, subject to
the
same terms and conditions described above with respect to stock options awarded
to participants who are employees.
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.
Eligible
Directors may also be granted SARs under the Plan under the terms and conditions
described above.
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
generally 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 the length of
the
Restricted Period shall generally not be less than one year.
Eligible
Directors may also be granted Restricted Stock under the Plan under the terms
and conditions described above.
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.
31
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.
Eligible
Directors may also be granted performance units under the Plan under the terms
and conditions described above.
Performance-Based
Compensation
Under
section 162(m) of the Code, an income tax deduction will generally be
unavailable for annual compensation in excess of $1 million paid to any of
the
five most highly compensated officers of a public corporation. However, amounts
that constitute “performance-based compensation” are not counted toward the $1
million limit. It is expected that options and SARs granted under the Plan
will
generally satisfy the requirements for “performance-based compensation.” The
Committee may designate whether any awards other than options and SARs being
granted to any participant are intended to be “performance-based compensation”
as that term is used in section 162(m) of the Code. Any such awards designated
as intended to be “performance-based compensation” will be conditioned on
achieving one or more performance measures, to the extent required by section
162(m) of the Code. The performance measures that may be used by the Committee
for such awards will be based on any one or more of the following:
|
· earnings
before income taxes (“EBIT”)
|
· return
on assets (“ROA”)
|
|
· earnings
before income taxes, depreciation and amortization
(“EBITDA”)
|
· increase
in revenue, operating or net cash flows
|
|
· earnings
per share (“EPS”)
|
· cash
flow return on investment
|
|
· return
on investment (“ROI”)
|
· total
shareholder return
|
|
· return
on invested capital (“ROIC”)
|
· market
share
|
|
· return
on equity (“ROE”)
|
· net
operating income
|
|
· return
on invested capital
|
· operating
income
|
|
· debt
reload reduction
|
· net
income
|
|
· economic
value added
|
· expense
management
|
|
· objectives
meeting specific cost targets
|
· stock
price and strategic business objectives
|
|
· goals
relating to acquisitions or divestitures
|
· business
expansion goals
|
Performance
goals may be based on the performance of the Company as a whole or any business
unit of the Company and may be measured relative to a peer group index. Partial
achievement of the performance goals may result in a payment or vesting
corresponding to the degree of achievement. In establishing any performance
goals, the Committee may include or exclude special items identified in the
Company’s quarterly or annual earnings releases.
32
U.S.
Federal Income Tax Consequences
Under
present Federal income tax law, awards under the Plan will have the following
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.
Payment
of Option Price with Shares of Company Common Stock
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
33
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’s income tax deduction for awards under the Plan may be unavailable if
(i) the award is deemed to be 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, or (iii) the award
constitutes an excess parachute payment under section 280G of the
Code.
Tax
Advice
The
preceding discussion is based on Federal tax laws and regulations presently
in
effect, which are subject to change, and the discussion does not purport to
be a
complete description of the Federal income tax aspects of the Plan. A
participant may also be subject to state and local taxes in connection with
the
grant of awards under the Plan. The Company suggests that participants consult
with their individual tax advisors to determine the applicability of the tax
rules to the awards granted to them in their personal
circumstances.
Other
Information
Approval
of the Plan, as amended and restated, 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.
34
PROPOSAL
#3: APPROVAL OF 2006 PERFORMANCE-BASED AWARDS UNDER
2002
LONG-TERM INCENTIVE PLAN
(As
Amended and Restated Effective December 3, 2003)
Introduction
Hub
Group’s shareholders are asked to approve certain grants of performance units
that were made under the Plan in 2006 and that are intended to constitute
performance-based compensation.
2006
Grant of Performance Units
On
May 22,
2006, the Compensation Committee of the Board of Directors of the Hub Group
granted certain of the Company’s officers performance units under the Plan as
amended and restated effective December 3, 2003. The performance units entitle
the recipients to receive Restricted Stock contingent upon the achievement
of
certain Company performance based on operating income. One share of Restricted
Stock will be issued for each performance unit earned. In order for these
performance units to be earned and converted to Restricted Stock on a one for
one basis, Hub Group’s operating income for 2006, 2007 and 2008 must meet a
specified performance target (the “Performance Target”). No Restricted Stock
will be awarded and the performance units will be cancelled and forfeited should
the Company fail to meet the specified Performance Target. In addition, if
the
shareholders do not approve the granting of these awards, the performance units
will be cancelled and forfeited.
If the
Performance Target is met, but not exceeded by a pre-determined amount (the
“Predetermined Amount”), the performance units will be earned but the
Compensation Committee will have the right to reduce to less than 100% the
percentage of performance units earned. If the operating income exceeds the
Performance Target by the Predetermined Amount or more, then the performance
units will be fully earned and not subject to a downward adjustment.
Should
the participants receive Restricted Stock under this program, this Restricted
Stock will be granted in early 2009 and then will vest ratably as of the first
business day of January in each of 2010, 2011 and 2012 provided the participant
remains an employee of the Company on each of such vesting dates. In the event
of the death or disability (as defined in the Plan) of a participant during
the
period beginning May 1, 2006 and ending December 31, 2008 (the “Performance
Cycle”), the performance unit opportunity will be prorated. The prorated amount
will be based on a fraction, the numerator of which is the number of full months
of employment completed during the Performance Cycle to the date of death or
disability and the denominator of which is the number of months during the
Performance Cycle. To the extent performance units are earned and Restricted
Stock awards are granted, the prorated portion of the performance units
opportunity will be earned and the Restricted Stock award made at that time.
In
the event of a change of control (as defined in the Plan) during the Performance
Cycle, the performance units will become fully earned.
Except
as provided above for termination of employment due to death or disability
during the Performance Cycle, the entire performance unit opportunity will
be
forfeited and/or cancelled on the date the participant ceases to be an employee
of the Company and/or its subsidiaries prior to the end of the Performance
Cycle. Performance units do not represent actual shares. Consequently, no voting
rights arise upon the participant’s receipt of performance units. Cash
dividends, if any, that would have been paid on earned performance units if
they
were issued and outstanding shares, will be accumulated and paid in cash,
without interest, at the time and to the extent the Restricted Stock, if any,
issued with respect to such performance units vest.
David P.
Yeager received 77,420 performance units, Mark A. Yeager received 64,516
performance units, Thomas M. White received 64,516 performance units, David
L.
Marsh received 43,010 performance units and Donald G. Maltby received 43,010
performance units.
A total
of 12 participants received a grant of performance units. The total number
of
performance units awarded to the 12 participants is 593,542, having a value
on
the date of grant of $13.8 million. The Company recorded no salary expense
related to the performance units in 2006. The maximum amount that would be
recorded as salary expense over the remaining 60 month period is $13.8 million.
35
The
following table shows the number of performance units granted and the dollar
value as of the date of grant for each of the listed executive officers, the
executive officers as a group, the non-executive directors as a group and the
non-executive officer employees as a group.
|
NEW
PLAN BENEFITS
|
|||||||
|
2002
Amended and Restated Long Term Incentive Plan
|
|||||||
|
Name
and Position
|
Dollar
Value($)
|
|
Number
of Performance Units
|
||||
|
Listed
Executive Officers
|
|||||||
|
David
P. Yeager
|
1,800,015
|
77,420
|
|||||
|
Mark
A. Yeager
|
1,499,997
|
64,516
|
|||||
|
Thomas
M. White
|
1,499,997
|
64,516
|
|||||
|
David
L. Marsh
|
999,983
|
43,010
|
|||||
|
Donald G. Maltby
|
999,983
|
43,010
|
|||||
|
Executive
Group
|
5,999,895
|
258,060
|
|||||
|
Non-Executive
Director Group
|
--
|
--
|
|||||
|
Non-Executive
Officer Employee Group
|
999,983
|
43,010
|
|||||
Other
Information
Approval
of the foregoing 2006 performance-based awards 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 awards and broker non-votes would have no effect on the
outcome.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
36
INDEPENDENT
PUBLIC ACCOUNTANTS
The
Audit
Committee has selected Ernst & Young LLP as the independent accountant of
the Company. Representatives of Ernst & Young 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.
The
fees
billed by Ernst & Young in 2005 and 2006 for services provided to us were as
follows:
|
2005
|
2006
|
||||||
|
Audit
Fees (1)
|
$
|
729,700
|
$
|
1,079,300
|
|||
|
Audit-Related
Fees (2)
|
163,400
|
102,800
|
|||||
|
Tax
Fees (3)
|
6,700
|
40,000
|
|||||
|
All
Other Fees (4)
|
--
|
--
|
|||||
|
TOTAL
|
$
|
899,800
|
$
|
1,222,100
|
|||
(1) “Audit
Fees” are the aggregate fees billed by Ernst & Young for professional
services rendered for the audit of the Company’s annual financial statements for
the years ended December 31, 2006 and December 31, 2005, the audit of the
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2006 and December 31, 2005, the reviews of the financial statements
included in the Company’s quarterly reports on Form 10-Q during 2006 and 2005,
and consultation with respect to various accounting and financial reporting
matters during 2006 and 2005.
(2) “Audit-related
fees” include fees billed for assurance and related services that are reasonably
related to the performance of the audit and not included in the “audit fees”
described above. The 2006 Audit-related fees include audit services performed
in
connection with a potential acquisition. The 2005 Audit-related fees include
due
diligence procedures performed in connection with the Company’s acquisition of
Comtrak, Inc. (“Comtrak”).
(3) “Tax
Fees” are fees billed by Ernst & Young in 2006 for review of Comtrak’s state
and local filing requirements and in 2005 for tax advice.
(4) “All
Other Fees” are fees billed by Ernst & Young in 2006 or 2005 that are not
included in the above classifications.
The
Audit
Committee must pre-approve any audit or any permissible non-audit services
to be
provided by the Company’s independent auditors, and has established pre-approval
policies and procedures for such services. Permissible non-audit services are
those allowed under the regulations of the Securities and Exchange Commission.
The Audit Committee may approve, at the beginning of each year, certain specific
categories of permissible non-audit services within an aggregated budgeted
dollar limit. The Audit Committee must approve on a project-by-project basis
any
permissible non-audit services that do not fall within a pre-approved category,
or pre-approved permissible non-audit services that exceed the previously
approved fees. All services provided by Ernst & Young during 2006 were
approved by the Audit Committee and were permissible under applicable laws
and
regulations and will continue to be pre-approved by the Audit Committee.
37
PROXY
SOLICITATION EXPENSE
The
Company will pay the expense of any proxy solicitation. In addition to the
solicitation of proxies by use of the mail, 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 November [ ],
2007,
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 2008. 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 [10], 2008 nor later
than March [12], 2008. 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
Downers
Grove, Illinois
March
[
], 2007
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.
38
APPENDIX
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
HUB
GROUP, INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST:
That the Board of Directors of said corporation at a duly called meeting of
its
members adopted the resolutions proposing and declaring advisable the following
amendment to the Certificate of Incorporation of this corporation:
RESOLVED
that the Certificate of Incorporation of Hub Group, Inc. be amended by changing
Article FOURTH, Section 1 thereof so that, as amended, said Article and Section
shall be and read as follows:
“Section
1. Authorized
Stock.
The
total number of shares of capital stock which the corporation shall have
authority to issue is 100,000,000 consisting of 97,337,700 shares of Class
A
Common Stock with a par value of $ .01 per share (“Class A Common Stock”),
662,300 shares of Class B Common Stock with a par value of $ .01 per share
(“Class B Common Stock”) and 2,000,000 shares of Preferred Stock with a par
value of $ .01 per share (“Preferred Stock”). The number of authorized shares of
any class of stock of the Corporation may be increased or decreased by the
affirmative vote of the holders of a majority of the votes of the Corporation
entitled to be cast, voting together as a single class.”
SECOND:
That
the
foregoing amendment of the Certificate of Incorporation of the Corporation
has
been duly adopted in accordance with Section 242 of the GCL.
IN
WITNESS WHEREOF, said Hub Group, Inc. has caused this certificate to be signed
by its Chief Executive Officer this ___ day of ______, 2007.
HUB
GROUP,
INC.
By:_____________________
Name:
David P.
Yeager
Title:
Chief
Executive Officer
A-1
APPENDIX
B
HUB
GROUP, INC.
2002
LONG-TERM INCENTIVE PLAN
(As
Amended and Restated Effective as of May 7, 2007)
B-1
HUB
GROUP, INC.
2002
LONG-TERM INCENTIVE PLAN
(As
Amended and Restated Effective as of May 7, 2007)
SECTION
1
GENERAL
1.1 Purpose.
The Hub
Group, Inc. 2002 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 to 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 6.18 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 Employer 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 one or more Awards 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. 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 or Award Agreement,
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 6.
B-2
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;
and
provided further that, an Incentive Stock Option may be granted only to
employees of the Company and its Affiliates.
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
Affiliates of the Company) 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 any Option
shall be paid at the time of such exercise (except that, in the case
of a
cashless exercise arrangement described in paragraph 2.3(d), payment
may
be made as soon as practicable after the 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 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 purchase 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 provided in the Plan or by the Committee, 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-3
| (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 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,
60 days 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 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 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 that is 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 Dividend Equivalents 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).
B-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 purchase 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 exercise 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 at the time of grant; provided, however,
that
except as otherwise expressly provided in the Plan or in the Award
Agreement, 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 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.
|
B-5
| (c) |
if
the Participant’s Date of Termination occurs by reason other than
Retirement, death, or Disability, 60 days following 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 Equivalents 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.
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) |
Except
as otherwise determined by the Committee, 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.
|
| (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. 2002 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., 3050
Highland Parkway, Suite 100, Downers Grove, IL 60515.”
| (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).
|
B-6
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 Performance
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 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
OPERATION
AND ADMINISTRATION
6.1 Effective
Date.
The
Plan was adopted by the Board effective April 4, 2002 (the “Effective Date”) and
was subsequently approved by the shareholders of the Company. The Plan was
amended and restated, effective December 3, 2003, and was subsequently approved
by the shareholders of the Company. Subject to the approval of the shareholders
of the Company, the Plan was amended and restated, effective May 7, 2007 (the
“Amendment and Restatement 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 under it are outstanding; provided, however, that no Awards may
be
granted under the Plan after the tenth anniversary of the Amendment and
Restatement Effective Date.
Any
Awards which are granted prior to approval by the Company’s shareholders of the
amendments effective May 7, 2007, where such Awards would otherwise not have
been permissible absent approval by the shareholders of such amendments, shall
be contingent on such shareholders’ approval and in the event the amended and
restated Plan is not so approved, such Awards shall be void and without
effect.
B-7
6.2 Shares
Subject to Plan and Other Limitations.
The
shares of Stock for which Awards may be granted under the Plan shall be subject
to the following:
| (a) |
The
shares of Stock with respect to which Awards may be made under the
Plan
shall be shares of Stock currently authorized but unissued or currently
held or, to the extent permitted by applicable law, subsequently
acquired
by the Company as treasury shares, including shares of Stock purchased
in
the open market or in private transactions.
|
| (b) |
Subject
to the provisions of subsection 6.3, the number of shares of Stock
which
may be issued with respect to Awards under the Plan shall not
exceed 5,400,000 shares
in the aggregate (as adjusted for stock splits through May 7, 2007).
|
| (c) |
To
the extent provided by the Committee (or the Board in the case of
any
Option granted to an Eligible Director pursuant to Section 2), any
Award
may be settled in cash rather than shares of Stock. To the extent
any
shares of Stock covered by an Award are not delivered to a Participant
or
beneficiary because the Award expires, is forfeited or is canceled,
or
because the shares of Stock are not delivered because the Award is
settled
in cash or used to satisfy the applicable tax withholding obligation,
such
shares of Stock shall not be deemed to have been delivered for purposes
of
determining the maximum number of shares of Stock available for delivery
under the Plan.
|
| (d) |
If
the exercise price of any Option granted under the Plan is satisfied
by
tendering shares of Stock to the Company (by either actual delivery
or by
attestation), only the number of shares of Stock issued net of the
shares
of Stock tendered shall be deemed delivered for purposes of determining
the maximum number of shares of Stock available for delivery under
the
Plan.
|
| (e) |
Subject
to paragraph 6.3, the following additional maximums are imposed under
the
Plan:
|
| (i) |
The
maximum number of shares of Stock that may be covered by Awards granted
to
any one employee pursuant to Section 2 (relating to Options) and
Section 3
(relating to Stock Appreciation Rights) during any one-year Company
fiscal
year period shall not exceed 1,000,000 shares of Stock, reduced by
the sum
of (A) 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
(B)
the number of shares of Stock subject to all other prior stock options
and
stock appreciation rights granted to the employee under other plans
or
arrangements of the Employer within the one-year Company fiscal year
period that includes the date of the
Award.
|
| (ii) |
In
the case of Awards, other than Options and Stock Appreciation Rights,
granted under the Plan, which Awards are intended to be “performance-based
compensation” (as that term is used for purposes of Code section 162(m)),
no more than 1,000,000 shares of Stock and, if such Awards are denominated
in cash value, no more than $10,000,000, may be subject to such Awards
granted to any one individual during any one-year Company fiscal
year
period that includes the date of the Award. If, after shares have
been
earned, the delivery is deferred, any additional shares attributable
to
dividends or other amounts attributable to earnings during the deferral
period shall be disregarded.
|
| (iii) |
If
an Option is in tandem with a Stock Appreciation Right, such that
the
exercise of the Option or Stock Appreciation Right with respect to
a share
of Stock cancels the tandem Stock Appreciation Right or Option,
respectively, with respect to such share, the tandem Option and Stock
Appreciation Rights with respect to each share of Stock shall be
counted
as covering only one share of Stock for purposes of applying the
limitations of this Section 6.2.
|
| (iv) |
Subject
to the provisions of subsection 6.3, the determination made under
the
foregoing provisions of this paragraph (e) shall be based on the
shares
subject to the Awards at the time of grant, regardless of when the
Awards
become exercisable.
|
B-8
6.3 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 to outstanding Awards;
and
(iv) the per-share price under any outstanding Award 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:
|
| (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 6.3, 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
Employer.
|
B-9
| (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 issuance 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 6.3
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.
|
6.4 Limit
on Distribution.
Distribution of shares of Stock or other amounts under the Plan shall be subject
to the following:
| (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.
|
6.5 Settlement
of Awards.
Except
as otherwise provided in the Plan or in an Award Agreement, the obligation
to
make payments and distributions with respect to Awards may be satisfied through
cash payments, the delivery of shares of Stock, the granting of replacement
Awards, or any combination thereof as the Committee (or the Board in the case
of
any Option granted to an Eligible Director pursuant to Section 2) shall
determine. Satisfaction of any such obligations under an Award may be subject
to
such conditions, restrictions and contingencies as the Committee (or the Board
in the case of any Option granted to an Eligible Director pursuant to Section
2)
shall determine. The Committee (or the Board in the case of any Option granted
to an Eligible Director pursuant to Section 2) may permit or require the
deferral of any Award payment, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of interest
or dividend equivalents, and may include converting such credits into deferred
Stock equivalents.
6.6 Liability
for Cash Payments.
Subject
to the provisions of this Section 6, a Participant’s employer shall be liable
for payment of cash due under the Plan with respect to such 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 an employers
for cash payments shall be resolved by the Committee.
6.7 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:
B-10
| (a) |
The
establishment of Performance Goals that must be satisfied prior to
the
payment or distribution of benefits under such Awards. The “Performance
Goals” that may be used by the Committee for such Awards shall be based
on
any one or more of the following, as selected by the Committee: earnings
(e.g., earnings before income taxes, or “EBIT”; earnings before income
taxes, depreciation and amortization, or “EBITDA”; earnings per share, or
“EPS”), financial return ratios (e.g., return on investment, or “ROI”;
return on invested capital, or “ROIC”; return on equity, or “ROE”; return
on assets, or “ROA”), increase in revenue, operating or net cash flows,
cash flow return on investment, total shareholder return, market
share,
net operating income, operating income or net income, debt load reduction,
expense management, economic value added, stock price and strategic
business objectives, consisting of one or more objectives based on
meeting
specific cost targets, business expansion goals and goals relating
to
acquisitions or divestitures. Performance Goals may be based on the
performance of the Company as a whole or any business unit of the
Company
and may be measured relative to a peer group or an index. Partial
achievement of the Performance Goals may result in a payment or vesting
corresponding to the degree of achievement. In establishing any
Performance Goals, the Committee may include or exclude special items
as
identified in the Company’s quarterly or annual earnings
releases.
|
| (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.
6.8 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.
6.9 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
6.9, 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.
6.10 Administration.
The
authority to control and manage the operation and administration of the Plan
shall be vested in the Committee in accordance with Section 7.
6.11 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.
6.12 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.
B-11
6.13 Agreement
With Company.
At the
time of an Award to a Participant under the Plan, the Committee may require
a
Participant to enter into an Award 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.
6.14 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 Employer
whatsoever, including, without limitation, any specific funds, assets,
or
other property which the Company or any Related Company, 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 Employer.
Nothing
contained in the Plan shall constitute a guarantee by the Company
or any
Related Company that the assets of the Employer shall be sufficient
to pay
any benefits to any person.
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| (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.
|
6.15 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.
6.16 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.
6.17 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.
6.18 Defined
Terms.
For
purposes of the Plan, the terms listed below shall be defined as
follows:
| (a) |
Affiliate.
The term “Affiliate” means any entity which is a parent corporation (as
defined in section 424(e) of the Code) or a subsidiary corporation (as
defined in section 424(f) of the
Code).
|
| (b) |
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.
|
| (c) |
Award
Agreement.
“Award Agreement” shall mean an agreement evidencing the grant of an Award
hereunder as described in Section
6.13.
|
| (d) |
Board.
The term “Board” shall mean the Board of Directors of the
Company.
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| (e) |
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.
|
| (f) |
Committee.
The term “Committee” means the committee designated in accordance with
Section 7 to administer the Plan.
|
B-12
| (g) |
Date
of Termination.
A
Participant’s “Date of Termination” shall be the date that his employment
with the Employer 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 or between
two
Related Companies; and further provided that a Participant’s employment
shall not be considered terminated while the Participant is on a
leave of
absence from the Employer approved by the Participant’s
employer.
|
| (h) |
Director.
The term “Director” means a member of the Board of Directors of the
Company.
|
| (i) |
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.
|
| (j) |
Eligible
Director.
Each Director who is not an employee of the Company or any Related
Company.
|
| (k) |
Employer.
The Company and all Related
Companies.
|
| (l) |
Exchange
Act.
The term “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
|
| (m) |
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.
|
| (n) |
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.
|
| (o) |
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.
|
| (p) |
Option.
The term “Option” shall mean any Incentive Stock Option or Non-Qualified
Stock Option granted under the
Plan.
|
| (q) |
Performance-Based
Compensation.
The term “Performance-Based Compensation” shall have the meaning ascribed
to it in section 162(m)(4)(C) of the
Code.
|
| (r) |
Prior
Plans.
The term “Prior Plans” means the Hub Group, Inc. 1997 Long-Term Incentive
Plan, the Hub Group, Inc. 1996 Long-Term Incentive Plan, and the
Hub Group
1999 Long-Term Incentive Plan.
|
| (s) |
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.
|
| (t) |
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
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.
B-13
| (u) |
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
Employer.
“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.
|
| (v) |
SEC.
“SEC” shall mean the Securities and Exchange
Commission.
|
| (w) |
Stock.
The term “Stock” shall mean shares of common stock of the
Company.
|
| (x) |
Termination
of Service.
The term “Termination of Service” shall mean the date on which an
individual ceases to be a Director.
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SECTION
7
COMMITTEE
7.1 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 and the requirements of section 162(m) of the Code and
regulations thereunder.
7.2 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 conclusively
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.
|
| (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).
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B-14
7.3 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.
7.4 Information
to be Furnished to Committee.
The
Employer shall furnish the Committee with such data and information as may
be
required for it to discharge its duties. The records of the Employer 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.
7.5 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
Employer 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
Employer. The Committee, the individual members thereof, and persons acting
as
the authorized delegates of the Committee under the Plan, shall be indemnified
by the Employer 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
8
CHANGE
IN CONTROL
8.1 Acceleration
of Awards.
Subject
to the provisions of subsection 6.3 (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.
|
8.2 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.
|
B-15
| (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
9
AMENDMENT
AND TERMINATION
The
Board
may, at any time, amend or terminate the Plan, provided that, subject to
subsection 6.3 (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.
B-16
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THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
WILL BE
VOTED “FOR” THE PROPOSALS.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
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Mark
Here
for
Address
Change
or
Comments
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o
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PLEASE
SEE REVERSE SIDE
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|||
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The
Board of Directors recommends a vote FOR the listed
nominees.
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||||||||||||
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FOR
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WITHHELD
FOR
ALL
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|
|
The
Board of Directors recommends a vote FOR the following
proposal.
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FOR
|
AGAINST
|
ABSTAIN
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|||
|
1.
|
Election
of Directors
|
o
|
o
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2.
|
Approval
of the Amendment to the Certificate of Incorporation to increase
authorized shares of Class A Common Stock.
|
o
|
o
|
o
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||
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Nominees:
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||||||||||
|
|
01
Phillip C. Yeager
02
David P. Yeager
03
Mark A. Yeager
04
Gary D. Eppen
05
Charles R. Reaves
06
Martin P. Slark
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|
|
|
|
The
Board of Directors recommends a vote FOR the following
proposal.
|
FOR
|
AGAINST
|
ABSTAIN
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|||
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3.
|
Approval
of the amendment and restatement of the 2002 Long- Term Incentive
Plan.
|
o
|
o
|
o
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||||||||
|
The
Board of Directors recommends a vote FOR the following
proposal.
|
FOR
|
AGAINST
|
ABSTAIN
|
|||||||||
|
4.
|
Approval
of 2006 performance-based awards under the 2002 Long-Term Incentive
Plan.
|
o
|
o
|
o
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||||||||
|
Withheld
for the nominees you list below: (Write that nominee’s name in the space
provided below.)
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||||||||
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The
undersigned hereby acknowledges receipt of the Proxy Statement
and Form
10-K.
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|||||||||
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Signature
_____________________________________________ Signature
_____________________________________________ Date
______________
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NOTE:
Please sign exactly as name appears hereon. Joint owners should each
sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as
such.
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|
Ù
FOLD AND DETACH HERE Ù
|
HUB
GROUP, INC.
This
Proxy is solicited on behalf of the Board of Directors
for
the Annual Meeting of Stockholders to be held on May 7,
2007
The
undersigned appoints Phillip C. Yeager, David P. Yeager and Mark A. Yeager,
or
any of them, proxies for the undersigned, each with full power of substitution,
to attend the Annual Meeting of Stockholders of Hub Group, Inc., to be held
on
May 7, 2007 at 10:00 a.m., Chicago time, and at any adjournments or
postponements of the Annual Meeting, and to vote as specified in this Proxy
all
of the Class A Common Stock of the Company which the undersigned would be
entitled to vote if personally present. This Proxy when properly executed will
be voted in accordance with your indicated directions. If no direction is made,
this Proxy will be voted FOR the election of each of the nominees for the Board
of Directors, FOR the approval of the Amendment to the Certificate of
Incorporation to increase the number of authorized shares of Class A Common
Stock, FOR the approval of the amendment and restatement of the 2002 Long-Term
Incentive Plan, and FOR the approval of 2006 performance-based awards under
the
2002 Long-Term Incentive Plan.
The
Board
of Directors recommends a vote FOR the election of each of the nominees for
the
Board of Directors, FOR the approval of the Amendment to the Certificate of
Incorporation to increase the number of authorized shares of Class A Common
Stock, FOR the approval of the amendment and restatement of the 2002 Long-Term
Incentive Plan, and FOR the approval of 2006 performance-based awards under
the
2002 Long-Term Incentive Plan.
YOUR
VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND
RETURN
IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued
and to be signed on reverse side.)
|
Address
Change/Comments (Mark
the corresponding box on the reverse side)
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|
Ù
FOLD AND DETACH HERE Ù
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