DEF 14A of Marten Transport LTD
Filed Mar 15, 2024 · FY20230001437749-24-007948
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Proposal 1
Proposal 1
Nomination
Nomination Our Amended and Restated Bylaws provide that the Board shall have at least one member, or a different number of members as may be determined by the Board of Directors or the stockholders. The Nominating/Corporate Governance Committee has recommended to our Board of Directors that the eight persons listed below be nominated for election at the Annual Meeting and our Board has nominated the eight persons listed below. If elected, the individuals will serve until the next Annual Meeting of Stockholders or until their successors are duly elected and qualified. Each of the nominees are members of the present Board of Directors, and each was elected at last year’s Annual Meeting of Stockholders. The Board recommends a vote FOR the election of each of the nominees listed below. The eight nominees for election as directors at the Annual Meeting who receive the greatest number of votes cast will be elected as directors. If, before the Annual Meeting, the Board learns that any nominee will be unable to serve because of death, incapacity or other unexpected occurrence, the proxies that would have been voted for the nominee will be voted for a substitute nominee recommended by the Nominating/Corporate Governance Committee and selected by the Board. The proxies may also, at the Board’s discretion, be voted for the remaining nominees. The Board believes that all nominees will be able to serve at the time of the Annual Meeting. No arrangements or understandings exist between any nominee and any other person under which such nominee was selected.
Information about Nominees
Information about Nominees The following chart and paragraphs provide information as of the date of this proxy statement about each nominee. The information presented includes information each director has given us about his or her age as of February 14, 2024, all positions currently held, principal occupation and business experience for the past five years, and the names of other publicly-held companies of which such director currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our director nominees display personal and professional integrity; broad-based business acumen; a high level of understanding of our business and the transportation industry; strategic thinking and a willingness to share ideas; and have a diversity of experiences, expertise and background.
Information about Nominees
| Name of Nominee | Age | Principal Occupation | Director Since | | Randolph L. Marten | 71 | Our Executive Chairman of the Board | 1980 | | Larry B. Hagness | 74 | Chief Executive Officer of Durand Builders Service, Inc. Durand, Wisconsin | 1991 | | Thomas J. Winkel | 81 | Management Consultant Pewaukee, Wisconsin | 1994 | | Jerry M. Bauer | 71 | Chairman of the Board and Chief Executive Officer of Bauer Built, Inc. Durand, Wisconsin | 1997 | | Robert L. Demorest | 78 | Business Consultant and Retired President, Chief Executive Officer and Chairman of the Board of MOCON, Inc. Minneapolis, Minnesota | 2007 | | Ronald R. Booth | 73 | Retired Partner, KPMG LLP Dellwood, Minnesota | 2015 | | Kathleen P. Iverson | 67 | Retired President, Chief Executive Officer and Chairman of the Board of CyberOptics Corporation Chanhassen, Minnesota | 2020 | | Patricia L. Jones | 61 | Founder and Chief Executive Officer of Culture Circus LLC Minneapolis, Minnesota | 2023 |
Other Information about Nominees
Other Information about Nominees Randolph L. Marten has been a full-time employee of ours since 1974. Mr. Marten has been a Director since October 1980 and our Executive Chairman of the Board since May 2021. Mr. Marten also served as our Chairman of the Board from August 1993 to May 2021, our Chief Executive Officer from January 2005 to May 2021, our President from June 1986 to June 2008, our Chief Operating Officer from June 1986 to August 1998 and as a Vice President from October 1980 to June 1986. We believe Mr. Marten’s qualifications to sit on our Board of Directors include his four decades of experience in the trucking industry, including 43 years as an executive officer. Larry B. Hagness has been a Director since July 1991. Mr. Hagness has been the Chief Executive Officer of Durand Builders Service, Inc., a retail lumber/home center outlet and general contractor, since 2016 and served as the President of Durand Builders Service, Inc. from 1978 to 2016. Mr. Hagness is the principal stockholder of Durand Builders Service, Inc. Mr. Hagness was an officer and owner of Main Street Graphics, a commercial printing company, from 1985 through 2014, and also served on the Board of Directors of Chippewa Valley Technical College from 2007 through 2013. We believe Mr. Hagness’s qualifications to sit on our Board of Directors include his management experience with Durand Builders Service, Inc. and his years of experience as our director. Thomas J. Winkel has been a Director since April 1994. Since 1994, Mr. Winkel has been a management and financial consultant and private investor. From 1990 to 1994, Mr. Winkel was the majority owner, Chairman of the Board, Chief Executive Officer and President of Road Rescue, Inc., a manufacturer of emergency response vehicles. Mr. Winkel is a retired certified public accountant having served in various professional capacities over a 23-year career with a national accounting firm, including as a partner from 1977 to 1990. Mr. Winkel has also served on the National Board of Directors of the Alzheimer’s Association from 2007 through 2016, and served as a director of Featherlite, Inc., a manufacturer of specialty trailers and luxury motorcoaches, from 1994 through 2006 upon the sale of Featherlite. We believe Mr. Winkel’s qualifications to sit on our Board of Directors include his experience as a CEO and President of a manufacturer of specialty vehicles and his prior experience as a board member and committee chairman of a publicly-traded manufacturing company combined with his extensive financial and accounting experience as an audit partner in a national accounting firm. Jerry M. Bauer has been a Director since January 1997. Mr. Bauer has been the Chief Executive Officer of Bauer Built, Inc. since 1976 and the Chairman of the Board since 1980. Bauer Built is a distributor of new and retreaded tires and related products and services throughout the Midwest. Mr. Bauer also serves on the Board of Directors of ABM Equipment, Hopkins, Minnesota since 2021. Mr. Bauer served on the Board of Directors of Security Financial Bank, Durand, Wisconsin from 1992 through 2022, on the Board of Directors of Mason Companies, Inc., Chippewa Falls, Wisconsin from 1999 through 2008 and on the Board of Directors of Spectrum Aeromed, Fargo, North Dakota from 2019 to 2021. We believe Mr. Bauer’s qualifications to sit on our Board include his operational experience as the Chairman of the Board and Chief Executive Officer of a company that specializes in tires, an important component for a trucking company, combined with his board experience. Robert L. Demorest has been a Director since December 2007. Mr. Demorest served as the President, Chief Executive Officer and Chairman of the Board of MOCON, Inc., a publicly traded company that provides consulting services and designs, manufactures, markets and services measurement and analytical instruments primarily for food, beverage and pharmaceutical companies world-wide, from 2000 to 2017, at which time he retired. Prior to that time, Mr. Demorest had been President of MOCON, Inc. for more than five years. Mr. Demorest is now a business consultant to global companies, and we believe Mr. Demorest’s qualifications to sit on our Board of Directors include his years of experience as a Chief Executive Officer leading a world-wide, publicly-traded organization. Ronald R. Booth has been a Director since December 2015. Mr. Booth was employed by KPMG LLP, an international public accounting firm, where he worked from 1973 until his retirement in 2009 and where he served as an audit partner beginning in 1984. During his 36-year tenure with KPMG, Mr. Booth provided audit and business advisory services to clients in various industries, including the manufacturing, retail, distribution and transportation industries. Mr. Booth holds a B.S. in Accounting from Iowa State University. Mr. Booth also served as treasurer and a director for Habitat for Humanity of Minnesota, a not-for-profit organization, from 2009 through 2015. We believe Mr. Booth’s qualifications to sit on our Board of Directors include his extensive financial and accounting experience as an audit partner in a national accounting firm. Kathleen P. Iverson has been a Director since March 2020. Ms. Iverson retired in 2016 from her position as a part-time Chief Executive Officer of Black Hills IP, a provider of IP, paralegal and trademark services, since 2014. Ms. Iverson served on the Board of Directors of Nortech Systems Incorporated, an electronic manufacturing services company listed on the NASDAQ Capital Market exchange, from 2015 until 2021. She previously served on the Board of Directors of MOCON, Inc. from 2014 until 2017 and Speed Commerce Inc. from 2008 until 2014. Ms. Iverson served as President, Chief Executive Officer and Chairman of the Board of CyberOptics Corporation, a designer and manufacturer of optical process control sensors and measurement inspection systems used in the electronic assembly and semiconductor industries, from 2003 until her retirement in 2014. Ms. Iverson held a variety of positions with CyberOptics beginning in 1998; she was a director from 1998 through 2014. We believe Ms. Iverson’s qualifications to sit on our Board of Directors include her experience as a President, Chief Executive Officer and Chairman of the Board of a publicly traded manufacturing company, combined with her board experience. Patricia L. Jones has been a Director since March 2023. Ms. Jones is the founder of Culture Circus LLC, a management consulting firm, and has been its Chief Executive Officer since 2019 and has served as SVP HR for the National Marrow Donor Program since 2020. Ms. Jones was Chief Administrative Officer of TCF Financial Corporation from 2017 until 2019. Ms. Jones previously held executive positions at Arctic Cat Inc., Lifetouch Inc., Allina Health, H.B. Fuller Company and Northwest Airlines, Inc. Ms. Jones currently serves on the Board of Directors of Royal Neighbors of America where she is the chair of the governance committee and is a member of the investment committee. We believe Ms. Jones’ qualifications to sit on our Board of Directors include her extensive executive level experience and her background in human resources and corporate governance.
Director Compensation
Director Compensation We do not pay fees to directors who are our full-time employees, nor do we reimburse them for out-of-pocket expenses of attending Board or committee meetings. No changes to annual retainers or meeting fees were made effective May 2, 2023. Effective May 1, 2022, we pay each non-employee director an annual retainer of $45,000, a fee of $1,500 for each Board meeting attended, a fee of $750 for each committee meeting attended and reimburse them for out-of-pocket expenses of attending meetings. We also pay our lead independent director an additional annual retainer of $15,000, the Chair of our Audit Committee an additional annual retainer of $15,000, the Chair of our Compensation Committee an additional annual retainer of $10,000 and the Chair of our Nominating/Corporate Governance Committee an additional annual retainer of $10,000. The directors did not receive any other cash compensation for services as directors in 2023. In each of 2023 and 2022, each non-employee director received a grant of 3,000 shares of our common stock upon re-election to the Board. In 2021, each non-employee director received a grant of 2,500 shares of our common stock. In February 2010, we entered into an indemnification agreement with each of our then-current directors. Under each indemnification agreement, we agree to indemnify the director against liability arising out of performance of their duties to us and to advance expenses, if the requisite standards of conduct are met. The agreement also contains procedural mechanisms and presumptions applicable to any dispute as to whether such standards of conduct are satisfied. In February 2016, March 2020 and March 2023, we also entered into indemnification agreements containing similar terms with Mr. Booth, Ms. Iverson and Ms. Jones, respectively. The following table provides summary information concerning the compensation of each individual who served as a director of our Company during the fiscal year ended December 31, 2023, other than Randolph L. Marten, our Executive Chairman of the Board, whose compensation is set forth below under the heading “Compensation and Other Benefits.”
Director Compensation
| Name | Fees Earned or Paid in Cash | Stock Awards (8) | Total | | Thomas J. Winkel | $77,250(1) | $61,470 | $138,720 | | Ronald R. Booth | 77,250(2) | 61,470 | 138,720 | | Robert L. Demorest | 72,250(3) | 61,470 | 133,720 | | Kathleen P. Iverson | 72,250(4) | 61,470 | 133,720 | | Larry B. Hagness | 60,000(5) | 61,470 | 121,470 | | Jerry M. Bauer | 60,000(6) | 61,470 | 121,470 | | Patricia L. Jones | 46,125(7) | 61,470 | 107,595 |
Director Compensation
| (1) Fees paid consist of $45,000 as an annual retainer, $15,000 for services as the lead independent director and $17,250 for attending 17 Board and committee meetings. |
Director Compensation
| (2) Fees paid consist of $45,000 as an annual retainer, $15,000 for services as the Audit Committee Chair and $17,250 for attending 17 Board and committee meetings. |
Director Compensation
| (3) Fees paid consist of $45,000 as an annual retainer, $10,000 for services as the Nominating/Corporate Governance Committee Chair and $17,250 for attending 17 Board and committee meetings. |
Director Compensation
| (4) Fees paid consist of $45,000 as an annual retainer, $10,000 for services as the Compensation Committee Chair and $17,250 for attending 17 Board and committee meetings. |
Director Compensation
| (5) Fees paid consist of $45,000 as an annual retainer and $15,000 for attending 14 Board and committee meetings. | | (6) Fees paid consist of $45,000 as an annual retainer and $15,000 for attending 14 Board and committee meetings. | | (7) Fees paid consist of $35,625 as an annual retainer and $10,500 for attending 10 Board and committee meetings. |
Director Compensation
| (8) This column reflects the aggregate grant date fair value of 3,000 shares of our common stock granted in 2023 to Mr. Winkel, Mr. Booth, Mr. Demorest, Ms. Iverson, Mr. Hagness, Mr. Bauer and Ms. Jones. The dollar amount for each of the seven directors reflects the compensation cost of the 3,000 shares granted on May 2, 2023 based on the closing market price of our common stock of $20.49 per share on that date. |
Director Compensation
| Note | No current director had any options outstanding as of December 31, 2023. |
Compensation Objectives and Philosophy
| ● | attract, motivate, retain and reward executive officers and other key employees who are likely to contribute to our long-term success; |
Compensation Objectives and Philosophy
| ● | We seek to align the interests of our executives with the interests of our stockholders through the use of long-term, equity-based incentive compensation, primarily in the form of performance unit awards and stock options. |
Setting Executive Compensation
Setting Executive Compensation In determining the amount of compensation to pay our named executive officers, the Compensation Committee considers factors such as: the executive’s position within the Company and the level of responsibility; skills and experiences required by the executive’s position; the executive’s experience and qualifications; our ability to replace such individual and the overall competitive environment for executive talent; the attainment of or failure to attain our objectives and the difficulty in achieving such desired objectives; individual performance of the executive as measured by the impact of such performance on the attainment of our objectives; our performance in various economic environments; current and historical compensation levels; the executive’s length of service; the Compensation Committee’s view of internal equity and consistency; and other considerations it deems relevant. In analyzing some of these factors, the Compensation Committee from time-to-time reviews competitive compensation data gathered in comparative surveys, as well as publicly available comparable public company information. In 2022, 2020 and 2017, the Compensation Committee engaged Grant Thornton LLP to conduct an overall benchmarking analysis of our executive compensation program, including a competitive assessment of the base salaries, short-term and long-term incentives, benefits and perquisites paid to our executive officers and to review the equity holdings of our executive officers in comparison to similar executives of other companies in our industry sector. The Compensation Committee continues to use the approach and methodology from a similar review a number of years ago, along with the use of other appropriate published data, to assist it in determining the amount of base salary, annual incentive compensation, total compensation and the form and amount of long-term equity-based incentive compensation to pay our named executive officers. The Compensation Committee believes the information from Grant Thornton LLP’s analysis not only confirmed our approach to structuring our compensation programs but will also be valuable in assisting in the determination of compensation on an ongoing basis. Our executive compensation program as a whole and each individual element of the program is designed to be competitive in order to attract, motivate and retain executives necessary to the achievement of our Company objectives. We generally target total compensation and each element of total compensation within a reasonable range of our competitive market. In connection with the compensation consulting firm’s analysis of our executive compensation program, we define our industry sector as a peer group of five truckload carriers with approximately $1 billion to approximately $7 billion in revenue. We continue to include these companies in our peer group based on their current business profiles being similar to ours and because we believe we compete with these or similar companies for executive talent and for stockholder investments. The companies in our peer group consist of the following:
Executive Compensation Components
| ● | annual incentive compensation; |
Base Salary Compensation
Base Salary Compensation We provide a base salary for our named executive officers, which, unlike some of the other elements of our executive compensation program, is not subject to performance risk. We recognize the need for most executives to receive at least a portion of their total compensation in the form of a guaranteed base salary that is paid in cash regularly throughout the year to support a reasonable standard of living. We initially fix base salaries for our executives at a level we believe enables us to hire and retain them in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business objectives. We also take into account the base compensation paid by companies in our peer group. The Compensation Committee reviews base salaries for our named executive officers each year beginning in April and generally approves any increases at its May meeting held in conjunction with our Annual Meeting of Stockholders. Any increases in base salaries are typically effective in April of that year. This decision is made in May because the Compensation Committee takes the results of the first quarter of each fiscal year into consideration when deciding whether to increase base salaries. In determining the amount of base salaries for our named executive officers, the Compensation Committee strives to target base salaries within the range of salaries for executives in similar positions and with similar responsibilities at companies in our current peer group. The Compensation Committee’s determinations regarding the base salaries of our named executive officers are also based on a number of other factors, including: the executive’s position within the Company and the level of responsibility; the skills and experience required by the executive’s position; the executive’s experience and qualifications; our ability to replace such individual and the overall competitive environment for executive talent; the executive’s current base salary; the executive’s length of service; the executive’s past performance and the impact of such performance on the attainment of our objectives; competitive compensation data; the Compensation Committee’s view of internal equity and consistency; and other considerations it deems relevant. Following these factors, we typically increase base salaries for executive officers modestly from year to year consistent with our general philosophy of favoring variable, performance-based compensation. In particular, the Compensation Committee’s determination of base salary for each of the named executive officers included an emphasis on the following factors: • Mr. Marten’s leadership role as our Executive Chairman of the Board, length of service with the Company, in-depth knowledge of the trucking industry, position based on competitive compensation data and relative level of responsibility when compared to other executive officers; • Mr. Kohl’s experience and qualifications, including his operational experience in, and in-depth knowledge of, the trucking industry, position based on competitive compensation data and relative level of responsibility as Chief Executive Officer when compared to other executive officers; • Mr. Hinnendael’s experience and qualifications, including his financial expertise and in-depth knowledge of the trucking industry, position based on competitive compensation data and relative level of responsibility as Executive Vice President and Chief Financial Officer when compared to other executive officers; • Mr. Petit’s experience and qualifications, including his operational experience in, and in-depth knowledge of, the trucking industry, position based on competitive compensation data and relative level of responsibility as President when compared to other executive officers; • Mr. Phillips’ experience and qualifications, including his operational experience in, and in-depth knowledge of, the trucking industry, position based on competitive compensation data and relative level of responsibility as Executive Vice President and Chief Operating Officer when compared to other executive officers; and • Mr. Baier’s experience and qualifications, including his technology expertise and in-depth knowledge of the trucking industry, position based on competitive compensation data and relative level of responsibility as Executive Vice President and Chief Technology Officer when compared to other executive officers. Annual salary rates for the named executive officers are as follows:
Annual Incentive Compensation
Annual Incentive Compensation Second Amended and Restated Executive Officer Performance Incentive Plan In March 2011, the Compensation Committee adopted the Executive Officer Performance Incentive Plan. The Executive Officer Performance Incentive Plan provided for cash bonuses in varying percentages of annual base compensation to the executive officers selected by the Compensation Committee if the diluted net income per share in the award year was 110% or more of the diluted net income per share in the prior year. The award was an amount equal to the percentage increase in the award year’s diluted net income per share over the prior year’s diluted net income per share multiplied by the executive officer’s base salary in the calendar year in which the bonus award was calculated. The award year’s diluted net income per share was our diluted net income per share, determined in accordance with generally accepted accounting principles, prior to accounting for the aggregate value of vesting performance unit awards, the aggregate value of the cash bonus awards under the plan and the related tax effects for the award year. The prior year’s diluted net income per share was our diluted net income per share, as reported in our audited financial statements, for the prior year. The Compensation Committee was given the discretion to adjust the diluted net income per share for the award year and the prior year to account for extraordinary items affecting the diluted net income per share. The Compensation Committee makes an annual determination of the executive officer participants in the Executive Officer Performance Incentive Plan. In February 2012, the Compensation Committee recommended, and our Board of Directors approved, an amendment effective January 1, 2012 to the Executive Officer Performance Incentive Plan which established a bonus pool calculated as the percentage increase in diluted net income per share as previously defined multiplied by the aggregate base salary for all executive officers. The Compensation Committee makes an annual determination of the executive officer participants in the plan and, at the end of each year, based on the recommendation of the Chief Executive Officer for all officers other than the Chief Executive Officer, the allocation of the bonus pool among the participants. In December 2015, the Compensation Committee recommended, and our Board of Directors approved and adopted, the Amended and Restated Executive Officer Performance Incentive Plan effective January 1, 2016, which leaves the terms of the original plan unchanged, except that the bonus pool is based upon the percentage change in net income instead of diluted net income per share. In August 2017, the Compensation Committee recommended, and our Board of Directors approved and adopted, the Second Amended and Restated Executive Officer Performance Incentive Plan effective January 1, 2017. The Second Amended and Restated Executive Officer Performance Incentive Plan leaves the terms of the original plan, as amended, unchanged, except that the bonus pool will be established based upon the percentage change in award year net income being at least 105% of an established net income goal, which is our net income for the prior year, or such other net income goal selected by the Compensation Committee. Award year net income continues to be defined as our net income determined in accordance with generally accepted accounting principles prior to accounting for the aggregate value of vesting performance unit awards, the aggregate value of the cash bonus awards under the plan, and the related tax effects for the award year. In addition, to the extent the percentage change in award year net income equals or exceeds 105% of the established net income goal, the size of the bonus pool will be determined by a multiplier related to the amount of such increase that results in the aggregate available bonus pool being between 5% and 100% of the aggregate base salary for executive officers. For 2021, the available bonus pool under the Second Amended and Restated Executive Officer Performance Incentive Plan was equal to 64.5% of the aggregate annual base salary of the executive officers based on our percentage increase in net income from 2020 to 2021, including the adjustments to 2021 earnings for the after-tax aggregate value of vesting performance unit awards and cash bonus awards. Our executive officers other than Mr. Petit were each awarded a cash bonus in the amount of 64.5% of annual base salary. Mr. Petit was awarded a cash bonus in the amount of 61.6% of annual base salary, which was comprised of 64.5% of his base salary after his appointment as an officer in addition to 59.8% of his base salary prior to his appointment. Additionally, Mr. Petit was awarded a bonus of $12,625 previous to his appointment in lieu of an annual raise. For 2022, the available bonus pool under the Second Amended and Restated Executive Officer Performance Incentive Plan was equal to 82.8% of the aggregate annual base salary of the executive officers based on our percentage increase in net income from 2021 to 2022, including the adjustments to 2022 earnings for the after-tax aggregate value of vesting performance unit awards and cash bonus awards. Our executive officers were each awarded a cash bonus in the amount of 82.8% of annual base salary. For 2023, no cash bonuses were awarded to our executive officers because the 2023 net income was not 105% or more of the 2022 net income, including the adjustments to 2023 earnings for the after-tax aggregate value of vesting performance unit awards.
Equity-based Compensation
Equity-based Compensation The third component of our executive compensation program consists of equity-based compensation. We award stock options and performance unit awards to align the interests of our executive officers and key personnel with our stockholders and to increase our long-term value. Through deferred vesting, this component of our compensation program creates an incentive for individuals to remain with us and promote our long-term goals. We generally grant an option to purchase shares of common stock, along with performance unit awards, to our key personnel who are not executive officers based primarily upon the individual’s actual and/or potential contribution and our financial performance. To date, all stock options have been granted at fair market value. Pursuant to our 2015 Equity Incentive Plan and our 2005 Stock Incentive Plan, our named executive officers, as well as other employees, are eligible to receive equity compensation awards, including stock options and restricted stock awards, stock appreciation rights, performance unit awards and stock bonuses. For more information concerning the terms of these plans, we refer you to “Compensation and Other Benefits-Grants of Plan-based Awards.” Currently, we provide named executive officers with performance unit awards. Stock options and performance unit awards become valuable as our common stock price increases and the holder remains employed during the period required for the option or unit award to “vest,” and, in the case of performance unit awards, our overall Company performance objectives are satisfied. This provides an incentive for the holder to remain employed by us. In addition, these agreements link a portion of an employee’s compensation to stockholders’ interests by providing an incentive to achieve corporate goals and increase the market price of our stock. In May 2021, the Compensation Committee recommended, and our Board of Directors approved, the granting of performance unit awards under our 2015 Equity Incentive Plan to our current named executive officers totaling 70,400 share units. This was our twelfth grant of such awards. The unit awards will vest and become the right to receive a number of shares of common stock equal to a total vesting percentage multiplied by the number of units subject to such award. For purposes of the award, the vesting percentage is equal to the percentage increase, if any, in our net income for the year being measured over the prior year, as reflected in our audited financial statements for each such year, plus ten percentage points. The amount of unit awards within each of the grants to the named executive officers was tied to the level of each executive officer’s base compensation. All vested awards are to be paid to the named executive officers immediately upon vesting. For additional information concerning the terms of outstanding awards, we refer you to “Compensation and Other Benefits-Grants of Plan-based Awards.” In May 2022, the Compensation Committee recommended, and our Board of Directors approved, the granting of performance unit awards under our 2015 Equity Incentive Plan to our current named executive officers totaling 60,900 share units. The terms of these awards are similar to the awards granted in 2021. In May 2023, the Compensation Committee recommended, and our Board of Directors approved, the granting of performance unit awards under our 2015 Equity Incentive Plan to our current named executive officers and to Mr. Phillips and Mr. Baier, who were subsequently appointed as named executive officers in 2023, totaling 57,044 share units. The terms of these awards are similar to the awards granted in 2021. The long-term incentive compensation information for our named executive officers during 2023, 2022 and 2021 is included in the Summary Compensation Table on page 27. Additional information on long-term incentive awards is shown in the Outstanding Equity Awards at Fiscal Year-end Table on page 32.
Change in Control and Post-termination Severance Arrangements
Change in Control and Post-termination Severance Arrangements Our 2015 Equity Incentive Plan provides and, previously, our 2005 Stock Incentive Plan provided, that in the event a change in control occurs, then, if approved by the Compensation Committee in its sole discretion either at the time of the grant of the incentive award or at any time after such grant, all options and stock appreciation rights will become immediately exercisable in full and will remain exercisable for the remainder of their terms, all outstanding restricted stock awards will become immediately fully vested and non-forfeitable, and all outstanding performance unit awards and stock bonuses will vest or continue to vest in accordance with their agreement. Using discretionary authority under the plan, our Compensation Committee approved Non-Statutory Stock Option Agreements which provide that such options become immediately exercisable in full in the event of a change in control with respect to options that have been outstanding for at least six months. Our Performance Unit Award Agreements become immediately vested in full upon a change in control if the grantee’s employment with us is terminated other than for death, cause or the grantee terminating their employment for good reason, on or before the last day of the 24th month after the change in control. In addition, the Compensation Committee in its sole discretion may determine that some or all participants holding outstanding options will receive cash in an amount equal to the excess of the fair market value of such shares immediately prior to the effective date of such change in control over the exercise price per share of the options (or, in the event that there is no excess, that such options will be terminated), and that some or all participants holding performance unit awards will receive, with respect to some or all of the shares subject to the performance unit awards, cash in an amount equal to the fair market value of such shares immediately prior to the effective date of such change in control. Using discretionary authority under the plan, our Compensation Committee approved a form of Non-Statutory Stock Option Agreement and a form of Performance Unit Award Agreement that allows such cash payments for all outstanding option and unit award shares for all participants. In March 2006, the Compensation Committee approved the execution of Change in Control Severance Agreements with each then-current named executive officer pursuant to which we agreed to provide certain benefits to these executives if they are terminated in connection with a change in control. These Change in Control Severance Agreements were effective upon execution and continue until the termination of the executive’s employment or until we terminate the agreement upon fifteen months prior written notice. In August 2007, our Board of Directors approved Amended and Restated Change in Control Severance Agreements for Mr. Marten and Mr. Hinnendael. The Amended and Restated Change in Control Severance Agreements made changes to the Change in Control Severance Agreements previously entered into with these officers, in order to comply with final regulations published by the Internal Revenue Service under an exception to Section 409A of the Internal Revenue Code of 1986, as amended, and there were no changes to the economic terms of the Change in Control Severance Agreements. The Board of Directors also approved a Change in Control Severance Agreement containing similar terms with Mr. Kohl effective in June 2008 in connection with his appointment as President. In December 2008, we made a technical amendment to the Amended and Restated Change in Control Severance Agreements with Mr. Marten and Mr. Hinnendael, and to the Change in Control Severance Agreement with Mr. Kohl. The Board of Directors also approved Change in Control Severance Agreements containing similar terms with Mr. Petit, Mr. Baier and Mr. Phillips effective in August 2021, August 2023 and December 2023, respectively, in connection with their appointments as executive officers. Under these agreements, these executive officers are entitled to certain benefits if they are terminated either within 24 months of the effective date of a change in control or before the effective date of the change in control if the termination was either a condition to the change in control or was at the request or insistence of a person related to the change in control. These executives will not be considered “terminated” for purposes of these agreements if they die or are terminated for cause. They will, however, be considered “terminated” if they voluntarily leave our employ for “good reason.” Upon a termination in connection with a change in control, these executives will be entitled to receive a lump sum cash payment of 100% of their base salary (except for Mr. Marten, who will receive 200% of his base salary), plus one times the executive’s highest bonus in the preceding three calendar years (except for Mr. Marten, who will receive two times such amount). In addition, these executives will receive welfare benefits for a period of twelve months (except for Mr. Marten, who will receive such benefits for twenty-four months). These arrangements, including the quantification of the payment and benefits provided under these arrangements, are described in more detail elsewhere in this Proxy Statement under the heading “Compensation and Other Benefits—Potential Payments Upon Termination or Change in Control.” Prior to March 2011, if an executive was subject to excise tax in connection with our payments under a Change in Control Severance Agreement, we would have made an additional excise tax gross-up payment to the executive equal to the excise tax as a result of the payments under the Change in Control Severance Agreement, including any excise tax as a result of the gross-up payment. In March 2011, due to changing compensation and governance practices, we amended our Change in Control Severance Agreements with our executive officers to provide for no excise tax gross-up. In order for our named executive officers to receive any other payments or benefits as a result of a change in control of our Company, there must be a termination event, such as a termination of the executive’s employment by our successor without cause or a termination of the executive’s employment by the executive for good reason. The termination of the executive’s employment by the executive without good reason will not give rise to additional payments or benefits either in a change in control situation or otherwise. Thus, these additional payments and benefits will not just be triggered by a change in control, but will also require a termination event described above, and thus are known as “double trigger” change in control arrangements. We believe that the change in control protections provided in the agreements described above are relevant and an important part of our executive compensation program. We believe that these arrangements mitigate some of the risk that exists for executives working in a company our size, where there is a meaningful likelihood that such company may be acquired. These arrangements are intended to attract and retain qualified executives who may have employment alternatives that may appear to them, in light of a possible change in control, to be less risky absent these arrangements. We also believe similar protections are typically provided by other companies, including companies with which we compete for executive talent, and thus believe we must continue to offer such protections in order to be competitive.
Change in Control and Post-termination Severance Arrangements
Except for our Change in Control Severance Agreements and award agreements under our 2015 Equity Incentive Plan and our 2005 Stock Incentive Plan, our named executive officers are not party to any employment or severance agreements and are not entitled to any particular severance benefit upon their involuntary termination of employment by the Company. The Compensation Committee may, however, provide severance on a case-by-case basis in its discretion.
Total Compensation Mix
| | Total Compensation Mix (Base Salary, Annual Cash Incentives and Equity Incentives) | | | | | | | | % of Total Compensation that is: | | % of Performance-Based Total Compensation that is: | | % of Total Compensation that is: | | | | Performance- Based (1) | Not Performance- Based (2) | Annual (3) | Long-Term (4) | Cash- Based (5) | Equity- Based (6) | | Randolph L. Marten | 30.4% | 69.6% | —% | 100.0% | 69.6% | 30.4% | | Timothy M. Kohl | 30.4% | 69.6% | —% | 100.0% | 69.6% | 30.4% | | James J. Hinnendael | 30.3% | 69.7% | —% | 100.0% | 69.7% | 30.3% | | Douglas P. Petit | 30.3% | 69.7% | —% | 100.0% | 69.7% | 30.3% | | Adam D. Phillips | 16.1% | 83.9% | —% | 100.0% | 83.9% | 16.1% | | Randall J. Baier | 17.3% | 82.7% | —% | 100.0% | 82.7% | 17.3% |
Total Compensation Mix
| (1) The sum of annual cash incentives and long-term equity incentives divided by total compensation. |
Total Compensation Mix
| (3) Annual performance-based cash and equity incentives divided by the sum of annual performance-based cash and equity incentives and long-term performance-based equity incentives. |
Total Compensation Mix
| (4) Long-term performance-based equity incentives divided by the sum of annual performance-based cash and equity incentives and long-term performance-based equity incentives. |
Total Compensation Mix
| (5) The sum of base salary, annual cash incentives and all other compensation divided by total compensation. |
Total Compensation Mix
| (6) Long-term equity incentives divided by total compensation. |
Summary Compensation Table
Summary Compensation Table The table below provides information relating to compensation for fiscal years 2023, 2022 and 2021 for our Chief Executive Officer (Principal Executive Officer), Executive Vice President and Chief Financial Officer (Principal Financial Officer) and our other executive officers. The executives named in this table are referred to in this Proxy Statement as our named executive officers. The details of our named executive officers’ compensation are discussed in detail in the Compensation Discussion and Analysis beginning on page 16.
Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (2) | All Other Compen- sation (3) | Total | | Randolph L. Marten | 2023 | $811,077 | $— | $359,169 | $— | $9,402 | $1,179,648 | | Executive Chairman | 2022 | 776,998 | 643,354 | 373,333 | — | 8,877 | 1,802,562 | | | 2021 | 735,060 | 474,114 | 416,605 | — | 7,452 | 1,633,231 | | Timothy M. Kohl | 2023 | 744,654 | — | 329,746 | — | 8,836 | 1,083,236 | | Chief Executive Officer | 2022 | 713,423 | 590,714 | 342,756 | — | 8,877 | 1,655,770 | | (Principal Executive Officer) | 2021 | 637,165 | 410,971 | 362,737 | — | 6,425 | 1,417,298 | | James J. Hinnendael | 2023 | 408,538 | — | 180,906 | — | 8,220 | 597,664 | | Executive Vice President and | 2022 | 391,346 | 324,034 | 188,068 | — | 7,695 | 911,143 | | Chief Financial Officer | 2021 | 358,376 | 231,153 | 209,709 | — | 7,380 | 806,618 | | (Principal Financial Officer) | | | | | | | | | Douglas P. Petit | 2023 | 397,539 | — | 176,071 | — | 8,220 | 581,830 | | President | 2022 | 380,635 | 315,166 | 182,909 | — | 7,538 | 886,248 | | | 2021 | 285,577 | 188,606 | 34,720 | 13,320 | 30,100 | 552,323 | | Adam D. Phillips (4) | 2023 | 288,860 | — | 61,470 | — | 31,547 | 381,877 | | Executive Vice President and | | | | | | | | | Chief Operating Officer | | | | | | | | | Randall J. Baier (5) | 2023 | 266,576 | — | 61,470 | — | 27,554 | 355,600 | | Executive Vice President and | | | | | | | | | Chief Technology Officer | | | | | | | |
Summary Compensation Table
| (1) This column reflects the aggregate grant date fair value of performance unit awards granted to each named executive officer in 2023, 2022 and 2021 calculated in accordance with FASB ASC 718, Compensation-Stock Compensation and based on the closing market price on the date of grant. The awards reported in this column are also disclosed in the Grants of Plan-based Awards table on page 29. |
Summary Compensation Table
| (2) This column reflects the aggregate grant date fair value of a stock option award granted to Mr. Petit in 2021 calculated in accordance with FASB ASC 718, Compensation-Stock Compensation and using the Black-Scholes option pricing model. See note 10 of “Notes to Consolidated Financial Statements” for a discussion of the assumptions made by us in determining the grant date fair value of the award. The award reported in this column is also disclosed in the Grants of Plan-based Awards table on page 29. |
Summary Compensation Table
| (3) Included in this column are the following items: |
Summary Compensation Table
| | Year | Life Insurance Premiums | 401(k) Match (a) | PTO Payout | | Randolph L. Marten | 2023 | $2,472 | $6,930 | $— | | | 2022 | 2,472 | 6,405 | — | | | 2021 | 2,210 | 5,242 | — | | Timothy M. Kohl | 2023 | 2,472 | 6,364 | — | | | 2022 | 2,472 | 6,405 | — | | | 2021 | 2,472 | 3,953 | — | | James J. Hinnendael | 2023 | 1,290 | 6,930 | — | | | 2022 | 1,290 | 6,405 | — | | | 2021 | 1,290 | 6,090 | — | | Douglas P. Petit | 2023 | 1,290 | 6,930 | — | | | 2022 | 1,290 | 6,248 | — | | | 2021 | 690 | 5,131 | 24,279 | | Adam D. Phillips (4) | 2023 | 450 | 4,559 | 26,538 | | Randall J. Baier (5) | 2023 | 690 | 5,598 | 21,266 |
Summary Compensation Table
| (a) We sponsor a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code. Employees, including executive officers, are eligible for the plan after three months of service. Participants are able to contribute up to the limit set by law, which in 2023 was $22,500 for participants less than age 50 and $30,000 for participants age 50 and above. We contribute 35% of each participant’s contribution, up to a total of 6% contributed. Our contribution vests at the rate of 20% per year for the first through fifth years of service. In addition, we may make elective contributions as determined by our Board of Directors. No elective contributions were made in 2023, 2022 or 2021. |
Summary Compensation Table
| (4) Mr. Phillips was appointed as our Executive Vice President and Chief Operating Officer on December 13, 2023 and became a named executive officer on the same date. |
Summary Compensation Table
| (5) Mr. Baier was appointed as our Executive Vice President and Chief Technology Officer on August 15, 2023 and became a named executive officer on the same date. |
Chief Executive Officer Pay Ratio
Chief Executive Officer Pay Ratio As a result of the rules under the Dodd-Frank Act, the SEC requires annual disclosure of the Chief Executive Officer to median employee pay ratio. We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance stockholder value. We are committed to internal pay equity, and the Compensation Committee will monitor the relationship between the pay of our executive officers and the pay of our non-executive employees. Our Chief Executive Officer to median employee pay ratio was calculated in accordance with Item 402(u) of Regulation S-K, which requires the determination of the median employee once every three years. We identified the median employee by examining the 2023 total cash compensation for all individuals, excluding our Chief Executive Officer, who were employed by us on December 31, 2023, the last day of our 2023 fiscal year. We included all United States employees, whether employed on a full-time, part-time or seasonal basis, and excluded each of our employees located outside of the United States as such employees account for less than five percent of all of our employees. We did not make any assumptions, adjustments or estimates with respect to total cash compensation, except we did annualize the compensation for any full-time and part-time employees (other than seasonal employees) that were not employed by us for all of 2023. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately 2% of our employees receive annual equity awards. After identifying the median employee based on total cash compensation, we calculated annual total compensation for such employee for 2023 using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table in this proxy statement. Mr. Kohl, our Chief Executive Officer, had 2023 annual total compensation of $1,083,236 as reflected in the Summary Compensation Table included in this proxy statement. Our median employee’s annual total compensation for 2023 was $75,540. As a result, we estimate that Mr. Kohl’s 2023 annual total compensation was approximately 14 times that of our median employee. The chief executive officer pay ratio for the companies in our peer group noted on page 18 averaged 59 times for 2022.
Grants of Plan-based Awards
Grants of Plan-based Awards The table below provides information regarding grants of plan-based awards to each of our named executive officers under our 2015 Equity Incentive Plan in 2023. Our named executive officers were not granted any plan-based awards under our other plans in 2023.
Grants of Plan-based Awards
| | | Estimated Future Payouts Under Non-equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | | | Grant | | | | | | | Grant Date Fair Value of | | Name | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock Awards (3) | | Randolph L. Marten | N/A | $40,900 | $— | $818,000 | — | — | — | $— | | | May 2, 2023 | — | — | — | — | — | 17,529 | 359,169 | | Timothy M. Kohl | N/A | 37,550 | — | 751,000 | — | — | — | — | | | May 2, 2023 | — | — | — | — | — | 16,093 | 329,746 | | James J. Hinnendael | N/A | 20,600 | — | 412,000 | — | — | — | — | | | May 2, 2023 | — | — | — | — | — | 8,829 | 180,906 | | Douglas P. Petit | N/A | 20,050 | — | 401,000 | — | — | — | — | | | May 2, 2023 | — | — | — | — | — | 8,593 | 176,071 | | Adam D. Phillips | N/A | 15,500 | — | 310,000 | — | — | — | — | | | May 2, 2023 | — | — | — | — | — | 3,000 | 61,470 | | Randall J. Baier | N/A | 15,000 | — | 300,000 | — | — | — | — | | | May 2, 2023 | — | — | — | — | — | 3,000 | 61,470 |
Grants of Plan-based Awards
| (1) Represents potential performance-based non-equity awards under our Second Amended and Restated Executive Officer Performance Incentive Plan, which is described in greater detail in “Compensation Discussion and Analysis.” The plan provides for a cash bonus to be distributed to the executive officers which is calculated as an allocation of a bonus pool that is based on the percentage increase in the award year net income over the net income goal selected by the Compensation Committee, multiplied by the aggregate base salary for all executive officers, subject to the increase being at least 5%. Therefore, we calculated the threshold for each executive officer as current annual base salary multiplied by 5% assuming equal allocation of the bonus pool on a percentage basis. The maximum award amount under the plan is 100% of the aggregate base salary for all executive officers. Therefore, we calculated the maximum for each executive officer as current annual base salary multiplied by 100% assuming equal allocation of the bonus pool on a percentage basis. There is no target award amount under the plan. |
Grants of Plan-based Awards
| (2) These performance unit awards granted in 2023 will vest and become the right to receive a number of shares of common stock equal to a total vesting percentage multiplied by the number of units subject to such award. For purposes of the award, the vesting percentage is equal to the percentage increase, if any, in our net income for the year being measured over the prior year, as reflected in our audited financial statements for each such year, plus ten percentage points. All payments will be made in shares of our common stock. All vested performance unit award shares will be paid to the named executive officers immediately upon vesting. |
Grants of Plan-based Awards
| (3) The grant date fair value of the awards is calculated in accordance with FASB ASC 718, Compensation-Stock Compensation and is based on the closing market price on the date of grant. |
Grants of Plan-based Awards
Second Amended and Restated Executive Officer Performance Incentive Plan The material terms of our Second Amended and Restated Executive Officer Performance Incentive Plan is described in the Compensation Discussion and Analysis beginning on page ‐‐16. 2015 Equity Incentive Plan Under the terms of our 2015 Equity Incentive Plan, which was adopted by our Board of Directors in March 2015 subject to approval by our stockholders, which occurred in May 2015, each of our named executive officers, as well as other employees and any subsidiary employees (including officers and directors who are also employees), are eligible to receive incentive awards. To date, only stock options and performance unit awards have been granted under the plan. The plan contains an overall limit on the number of shares of our common stock that may be issued, as well as individual and other grant limits, which are subject to change in our corporate structure or shares. The exercise price of an option may not be less than 100% of the fair market value of a share of our common stock on the option grant date (or, if the option is an incentive stock option, 110% if the participant beneficially owns more than 10% of our outstanding stock). Under the plan, “fair market value” means the closing sale price of a share of our common stock on the grant date as reported on the NASDAQ Global Select Market. The aggregate fair market value of shares of common stock with respect to which incentive stock options may become exercisable by a participant for the first time during any calendar year may not exceed $100,000. Any incentive stock options in excess of this amount will be treated as non-statutory options. Options may be exercised in whole or in installments, as determined by the Board or its committee, and may impose conditions or restrictions to the exercisability of an option, including that the participant remain continuously employed by us or a subsidiary for a certain period. An option may not remain exercisable after 10 years from its date of grant (or, if the option is an incentive stock option, five years from its date of grant if the participant beneficially owns more than 10% of our outstanding stock). A performance unit award is an award of a right to receive the fair market value of shares of common stock payable in shares of our common stock granted to a participant where vesting is contingent upon achievement of performance criteria or other objectives during a specified period. Shares of common stock that are issued under the plan or that are subject to outstanding incentive awards reduce the number of shares remaining available under the plan, but any shares of common stock subject to an incentive award that lapses, expires, is forfeited or for any reason terminates unexercised or unvested and any shares of common stock that are subject to an incentive award that is settled or paid in cash or any other form other than shares of common stock will automatically again become available for issuance under the plan. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in our corporate structure or shares, appropriate adjustment will be made to:
Grants of Plan-based Awards
| ● | the number and kind of securities available for issuance under the plan; and |
Grants of Plan-based Awards
| ● | in order to prevent dilution or enlargement of the rights of participants, the number, kind and, where applicable, the exercise price of securities subject to outstanding incentive awards. |
Grants of Plan-based Awards
Accordingly, as a result of our three-for-two stock split effected in the form of a 50% stock dividend on August 13, 2020, the number of shares reserved for issuance under all outstanding options and performance unit awards and shares held within our Deferred Compensation Plan were increased by 50%. The plan is administered by our Compensation Committee, which has the authority to determine all necessary or desirable provisions of incentive awards, including the eligible recipients who will be granted one or more incentive awards under the plan, the nature and extent of the incentive awards to be made to each participant, the time or times when incentive awards will be granted, the duration of each incentive award and payment or vesting restrictions and other conditions. The Compensation Committee has the authority to pay the economic value of any incentive award in the form of common stock and may amend or modify the terms of outstanding incentive awards (except for any prohibited “re-pricing” of options, discussed below) so long as the amended or modified terms are permitted under the plan and any affected participant has consented to the amendment or modification. The Board may suspend or terminate the plan or any portion of the plan at any time and may amend the plan from time to time to conform incentive awards to any change in applicable laws or regulations or in any other respect that the Board may deem to be in our best interests. However, no amendments to the plan will be effective without stockholder approval if it is required under Section 422 of the Internal Revenue Code, Section 162(m) of the Internal Revenue Code or the rules of the NASDAQ Global Select Market, or if the amendment seeks to modify the prohibitions on underwater option re-pricing discussed above. Termination, suspension or amendment of the plan will not adversely affect any outstanding incentive award without the consent of the affected participant, except for adjustments in the event of changes in capitalization or a “change in control,” discussed below. In general, no right or interest in any incentive award may be assigned or transferred by a participant except by will or the laws of descent and distribution or subjected to any lien or encumbrance. However, the Board or its committee may permit a participant to transfer all or a portion of a non-statutory stock option, other than for value, to certain family members or related family trusts, foundations or partnerships. Any permitted transferee of a non-statutory stock option will remain subject to all the terms and conditions of the incentive award applicable to the participant. The 2015 Equity Incentive Plan replaced our 2005 Stock Incentive Plan, which expired by its terms in May 2015. As of December 31, 2023, there were no remaining shares reserved for issuance under options or performance unit awards issued within the 2005 Plan.
Outstanding Equity Awards at Fiscal Year-end
Outstanding Equity Awards at Fiscal Year-end The following table provides information regarding outstanding equity incentive plan awards for each of our named executive officers that remained outstanding at December 31, 2023.
Outstanding Equity Awards at Fiscal Year-end
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Units That Have Not Vested (1) | Equity Incentive Plan Awards: Market Value of Unearned Units That Have Not Vested (2) | | Randolph L. Marten | — | — | $— | — | 32,265 | $676,918 | | Timothy M. Kohl | — | — | — | — | 29,172 | 612,037 | | James J. Hinnendael | — | — | — | — | 16,219 | 340,272 | | Douglas P. Petit | 4,500(3) | — | 10.867 | August 15, 2024 | 13,639 | 286,150 | | | 4,500(3) | — | 15.167 | August 14, 2025 | | | | | 1,200(3) | 1,800 | 17.360 | May 4, 2028 | | | | Adam D. Phillips | 4,500(4) | — | 10.867 | August 15, 2024 | 4,924 | 103,306 | | | 4,500(4) | — | 15.167 | August 14, 2025 | | | | | 1,200(4) | 1,800 | 17.360 | May 4, 2028 | | | | | 1,200(4) | 1,800 | 16.930 | December 15, 2028 | | | | Randall J. Baier | 4,500(5) | — | 15.167 | August 14, 2025 | 4,924 | 103,306 | | | 1,200(5) | 1,800 | 17.360 | May 4, 2028 | | | | | 1,200(5) | 1,800 | 16.930 | December 15, 2028 | | |
Outstanding Equity Awards at Fiscal Year-end
| (1) All performance unit award shares granted in 2019 through 2023 that vested as of December 31, 2023 were paid to each executive officer in March 2024. This number considers such shares vested in 2023. |
Outstanding Equity Awards at Fiscal Year-end
| (2) Market value has been determined based on the closing market price of our common stock of $20.98 per share on December 29, 2023. |
Outstanding Equity Awards at Fiscal Year-end
| (3) These stock option awards were granted on August 15, 2017, August 14, 2018 and May 4, 2021, respectively, and vest, on a cumulative basis, in five installments of 20% on each of the first five anniversaries of each option grant date. |
Outstanding Equity Awards at Fiscal Year-end
| (4) These stock option awards were granted on August 15, 2017, August 14, 2018, May 4, 2021 and December 15, 2021, respectively, and vest, on a cumulative basis, in five installments of 20% on each of the first five anniversaries of each option grant date. |
Outstanding Equity Awards at Fiscal Year-end
| (5) These stock option awards were granted on August 14, 2018, May 4, 2021 and December 15, 2021, respectively, and vest, on a cumulative basis, in five installments of 20% on each of the first five anniversaries of each option grant date. |
Option Exercise and Stock Vested – 2023
Option Exercise and Stock Vested – 2023 The following table provides information regarding the exercise of stock options for our named executive officers with exercises during 2023 on an aggregated basis.
Option Exercise and Stock Vested – 2023
| | Option Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | | Randall J. Baier | 3,000 | $34,167 |
Option Exercise and Stock Vested – 2023
The following table provides information regarding performance unit awards held by our named executive officers that vested during 2023.
Option Exercise and Stock Vested – 2023
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (1) | Value Realized on Vesting (2) | | Randolph L. Marten | 9,589 | $201,169 | | Timothy M. Kohl | 8,069 | 169,290 | | James J. Hinnendael | 4,669 | 97,956 | | Douglas P. Petit | 2,684 | 56,310 | | Adam D. Phillips | 1,400 | 29,372 | | Randall J. Baier | 1,400 | 29,372 |
Option Exercise and Stock Vested – 2023
| (1) This number reflects vesting in 2023 of each named executive officer’s unit awards, solely comprised of a service vesting component of 10%. All payments were made in shares of common stock. All performance unit award shares granted in 2019 through 2023 that vested as of December 31, 2023 were paid to each named executive officer in March 2024. |
Option Exercise and Stock Vested – 2023
| (2) The value realized on vesting has been determined based on the closing market price of our common stock which was $20.98 per share on December 29, 2023. |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation In August 2010, our Board of Directors approved and adopted the Marten Transport, Ltd. Deferred Compensation Plan. The deferred compensation plan was an unfunded, nonqualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis. Under the terms of the plan, each participant was eligible to defer portions of their base pay, annual bonus or receipt of common stock otherwise payable under a vested performance unit award. Each participant could have elected a fixed distribution date for the participant’s deferral account other than certain required performance unit award deferrals credited to the discretionary account, which were to be distributed after the later of the date of the participant’s termination of employment or the date the participant attains age 62. Upon termination of a participant’s employment with us, the plan required a lump-sum distribution of the deferral account, excluding the required performance unit award deferrals, unless the participant had elected an installment distribution. Upon a participant’s death, the plan provided that a participant’s distributions accelerate and be paid in a lump sum to the participant’s beneficiary. We had the ability to terminate the plan and accelerate distributions to participants, but only to the extent and at the times permitted under Section 409A of the Internal Revenue Code of 1986, as amended. We had the ability to terminate the plan and accelerate distributions upon a change in control, which was not a payment event under the plan. In conjunction with the approval of the plan, our Board of Directors also adopted an amendment to the Marten Transport, Ltd. 2005 Stock Incentive Plan that allowed for deferral of receipt of income from a performance unit award under the plan. On May 5, 2020, our Compensation Committee and Board of Directors approved the termination of our deferred compensation plan. The termination was effective May 5, 2021. All remaining shares of our common stock within the plan were distributed by March 1, 2022.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control All of our named executive officers are employed “at will” and, other than as described below, are not entitled to any severance or other payments under any agreement, contract, plan or arrangement upon their termination of employment without cause or otherwise. We have entered into agreements with our named executive officers that require us to provide compensation to them in the event of termination of their employment without cause in connection with or within a certain period of time after a “change in control” of our Company. Under these agreements, these executive officers are entitled to certain benefits if they are terminated either within 24 months of the effective date of a change in control or before the effective date of the change in control if the termination was either a condition to the change in control or was at the request or insistence of a person related to the change in control. These executives will not be considered “terminated” for purposes of these agreements if they die or are terminated for cause. They will, however, be considered “terminated” if they voluntarily leave Marten’s employ for “good reason.” Upon a termination in connection with a change in control, the named executive officers will be entitled to receive a lump sum cash payment of 100% of their base salary, except for Mr. Marten, who will receive 200% of his base salary, plus one times the executive’s highest bonus in the preceding three calendar years, except for Mr. Marten, who will receive two times such amount. In addition, these executives will receive welfare benefits for a period of twelve months, except for Mr. Marten, who will receive such benefits for twenty-four months. Our 2015 Equity Incentive Plan and 2005 Stock Incentive Plan provide that in the event a change in control occurs, then, if approved by the Committee in its sole discretion either at the time of the grant of the incentive award or at any time after such grant, all options and stock appreciation rights will become immediately exercisable in full and will remain exercisable for the remainder of their terms; all outstanding restricted stock awards will become immediately fully vested and non-forfeitable; and all outstanding performance unit awards and stock bonuses will vest or continue to vest in accordance with their agreement. Using discretionary authority under the plans, our Compensation Committee approved Non-Statutory Stock Option Agreements which provide that such options become immediately exercisable in full in the event of a change in control with respect to options that have been outstanding for at least six months. Our Performance Unit Award Agreements become immediately vested in full upon a change in control if the grantee’s employment with us is terminated other than for death, cause or the grantee terminating their employment for good reason, on or before the last day of the 24th month after the change in control. In addition, the Committee in its sole discretion may determine that some or all participants holding outstanding options will receive cash in an amount equal to the excess of the fair market value of such shares immediately prior to the effective date of such change in control over the exercise price per share of the options (or, in the event that there is no excess, that such options will be terminated), and that some or all participants holding performance unit awards will receive, with respect to some or all of the shares subject to the performance unit awards, cash in an amount equal to the fair market value of such shares immediately prior to the effective date of such change in control. Using discretionary authority under the plans, our Compensation Committee approved a form of Non-Statutory Stock Option Agreement and a form of Performance Unit Award Agreement that allows such cash payments for all outstanding option and unit award shares for all participants. For purposes of the 2015 Equity Incentive Plan and 2005 Stock Incentive Plan, a “Change in Control” generally occurs if:
Potential Payments upon Termination or Change in Control
| ● | all or substantially all of our assets are sold, leased, exchanged or transferred to any successor; |
Potential Payments upon Termination or Change in Control
| ● | our stockholders approve any plan or proposal to liquidate or dissolve us; |
Potential Payments upon Termination or Change in Control
| ● | we are a party to a merger or consolidation that results in our stockholders beneficially owning securities representing less than 50% of the combined voting power ordinarily having the right to vote at elections of directors of the surviving corporation (regardless of any approval by the continuity directors); or |
Potential Payments upon Termination or Change in Control
| ● | any successor, other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or Randolph L. Marten or Christine K. Marten or their affiliates, becomes the beneficial owner of more than 50% of our outstanding securities ordinarily having the right to vote at elections of directors. |
Potential Payments upon Termination or Change in Control
If a named executive officer’s employment or other service with the Company and all its subsidiaries terminates for any reason other than death, disability or retirement, or a change in control occurs, all rights of the named executive officer under our 2015 Equity Incentive Plan and 2005 Stock Incentive Plan and our stock option agreements granted thereunder will immediately terminate without notice of any kind, and the stock option will no longer be exercisable. However, if such termination is due to any reason other than termination by the Company or its subsidiaries for cause, the option will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination. Cause means (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any of its subsidiaries, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the named executive officer’s overall duties, or (iv) any material breach of any confidentiality or non-compete agreement entered into with the Company or any of its subsidiaries. In no event will an option be exercisable after the tenth anniversary of its grant date. If a named executive officer’s employment or other service with the Company and all its subsidiaries terminates for any reason, other than in the event a change in control occurs, all award units granted under performance unit award agreements that have not vested on or by such date will be terminated and forfeited. Potential Payments to Named Executive Officers. The following table describes the payments that each of our named executive officers would have received if a change in control of the Company occurred on December 31, 2023 in connection with a termination of their employment on December 31, 2023:
Potential Payments upon Termination or Change in Control
| Name | Executive Benefits and Payments | Payment | | Randolph L. Marten | Lump Sum Payment Based on Two Times Base Salary | $1,636,000 | | | Two Times Highest Bonus in Three Preceding Years | 1,286,708 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 676,918 | | | Welfare Benefits (2) | 8,769 | | | Total | $3,608,395 | | Timothy M. Kohl | Lump Sum Payment Based on Base Salary | $751,000 | | | Highest Bonus in Three Preceding Years | 590,714 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 612,037 | | | Welfare Benefits (2) | 8,244 | | | Total | $1,961,995 | | James J. Hinnendael | Lump Sum Payment Based on Base Salary | $412,000 | | | Highest Bonus in Three Preceding Years | 324,034 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 340,272 | | | Welfare Benefits (2) | 135 | | | Total | $1,076,441 | | Douglas P. Petit | Lump Sum Payment Based on Base Salary | $401,000 | | | Highest Bonus in Three Preceding Years | 315,166 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 286,150 | | | Welfare Benefits (2) | 14,603 | | | Acceleration of Vesting of Unvested Stock Options (3) | 6,516 | | | Total | $1,023,435 | | Adam D. Phillips | Lump Sum Payment Based on Base Salary | $310,000 | | | Highest Bonus in Three Preceding Years | 191,341 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 103,306 | | | Welfare Benefits (2) | 14,514 | | | Acceleration of Vesting of Unvested Stock Options (3) | 13,806 | | | Total | $632,967 | | Randall J. Baier | Lump Sum Payment Based on Base Salary | $300,000 | | | Highest Bonus in Three Preceding Years | 182,387 | | | Acceleration of Vesting of Unvested Performance Unit Awards (1) | 103,306 | | | Welfare Benefits (2) | 15,034 | | | Acceleration of Vesting of Unvested Stock Options (3) | 13,806 | | | Total | $614,533 |
Potential Payments upon Termination or Change in Control
| (1) Each of the presented named executive officer’s outstanding performance unit awards would have automatically accelerated and become immediately vested in full upon a change in control if we terminate the grantee’s employment within 24 months of the change in control. The value of the automatic acceleration of the vesting of unvested performance unit awards held by a named executive officer is based on the market price of the shares of our common stock underlying the unvested performance unit awards held by such officer as of December 31, 2023, which is based on the closing market price of our common stock on December 29, 2023, which was $20.98 per share. The value of the automatic acceleration and vesting of the unvested performance unit awards relates to awards granted on May 5, 2020, May 4, 2021, May 3, 2022 and May 2, 2023 to each named officer. | | (2) The value of the welfare benefits is based on the named executive officer’s estimated cost for medical insurance along with the named executive officer’s cost for life insurance premiums. |
Potential Payments upon Termination or Change in Control
| (3) Mr. Petit’s, Mr. Phillips’ and Mr. Baier’s outstanding option awards would have automatically accelerated and become immediately exercisable in full upon a change in control if they were held for six or more months, and these options were held for such a period as of December 31, 2023. The value of the automatic acceleration of the vesting of unvested stock options held by named executive officers is based on the difference between: (i) the market price of the shares of our common stock underlying the unvested stock options held by such officers as of December 31, 2023, which is based on the closing market price of our common stock on December 29, 2023, which was $20.98 per share, and (ii) the exercise price of the options, as adjusted for any stock splits. The value of the automatic acceleration and vesting of the unvested stock options relates to the option shares granted on May 4, 2021 and December 15, 2021. |
Pay Versus Performance
Pay Versus Performance
Pay Versus Performance
| | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for First PEO (1) | Summary Compensation Table Total for Second PEO (1) | Compensation Actually Paid to First PEO (1) (3) (4) | Compensation Actually Paid to Second PEO (1) (3) (4) | Average Summary Compensation Table Total for non-PEO NEOs (2) | Average Compensation Actually Paid to non-PEO NEOs (2) (3) (4) | Total Stockholder Return | Peer Group Total Stockholder Return (5) | Net Income (In Thousands) | Percentage Change in Net Income | | 2023 | N/A | $1,083,236 | N/A | $1,134,119 | $619,324 | $654,398 | $172.64 | $230.66 | $70,373 | (36.2)% | | 2022 | N/A | 1,655,770 | N/A | 1,755,304 | 1,199,984 | 1,282,556 | 160.90 | 174.38 | 110,354 | 29.2% | | 2021 | $1,633,231 | 1,417,298 | $1,649,360 | 1,428,059 | 710,165 | 706,983 | 137.88 | 213.21 | 85,428 | 22.9% | | 2020 | 1,153,987 | N/A | 1,598,750 | N/A | 631,430 | 898,133 | 128.47 | 131.82 | 69,500 | 13.8% |
Pay Versus Performance
| (1) Randolph L. Marten served as our Chief Executive Officer until May 2021, at which time Timothy M. Kohl was promoted to the position. |
Pay Versus Performance
| (2) The amounts for 2023 are the average compensation for Mr. Marten, James J. Hinnendael, Douglas P. Petit, Adam D. Phillips and Randall J. Baier; for 2022 are the average compensation for Mr. Marten, Mr. Hinnendael and Mr. Petit; for 2021 are for Mr. Hinnendael, John H. Turner and Mr. Petit; and, for 2020 are for Mr. Kohl, Mr. Hinnendael and Mr. Turner. |
Pay Versus Performance
| (3) Compensation actually paid is computed for each year as the total compensation in our Summary Compensation Table beginning on page 27, less the aggregate grant date fair value of performance unit awards and stock option awards included in the table – with the following added to the calculated compensation: (a) the fair value of such awards granted during each year as of the end of the year for outstanding and unvested awards; (b) the change in the fair value of such awards granted in prior years from the end of the prior year to the fair value as of the vesting date for vested awards or to the end of the year for outstanding and unvested awards; and (c) for 2021 and 2020, dividends paid on shares in certain officers’ accounts within our deferred compensation plan. |
Pay Versus Performance
| (4) The assumptions used in the valuation of the performance unit awards and stock option awards for the computation of compensation actually paid do not materially differ from the methodologies used to value such awards in our financial statements calculated in accordance with FASB ASC 718, Compensation-Stock Compensation. |
Pay Versus Performance
| (5) The total stockholder return for our peer group is based on our peer group included in the comparative stock performance graph in Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities section of our Annual Report on Form 10-K for the year ended December 31, 2023. |
Pay Versus Performance
Compensation actually paid to our First PEO, Mr. Marten, increased 3.2% from 2020 to 2021. Compensation actually paid to our Second PEO, Mr. Kohl, increased 22.9% from 2021 to 2022. The larger increase from 2021 to 2022 is due, in part, to Mr. Kohl receiving a 24.1% increase in base salary effective April 2021 in connection with his appointment as Chief Executive Officer. Compensation actually paid to Mr. Kohl decreased 35.4% from 2022 to 2023. This decrease was primarily due to the 2022 cash bonus award being based on a 29.2% increase in net income, compared with no payment of a cash bonus award for 2023 given the decrease in earnings. While individual compensation for all non-PEO NEOs increased from 2020 to 2021, the change in the composition of the individuals identified as non-PEO NEOs, including the exclusion of Mr. Kohl in 2021 due to his transition to the Second PEO, led to a decrease of 21.3% in average compensation actually paid to non-PEO NEOs from 2020 to 2021. Average compensation actually paid to non-PEO NEOs increased 81.4% from 2021 to 2022. Again, this increase was materially impacted by the change in the composition of the individuals identified as non-PEO NEOs, including the inclusion of Mr. Marten in the calculation in 2022 due to his transition from First PEO in 2021 to a non-PEO NEO in 2022 while maintaining a higher compensation level. Average compensation actually paid to non-PEO NEOs decreased 49.0% from 2022 to 2023. This decrease was materially impacted by both the decrease in cash bonus awards in 2023 and the composition of the individuals identified as non-PEO NEOs, including the inclusion of Mr. Phillips and Mr. Baier in the 2023 calculation. Our net income was $69.5 million, $85.4 million, $110.4 million and $70.4 million in 2020, 2021, 2022 and 2023, respectively. This equates to a 13.8% increase in net income from 2019 to 2020, a 22.9% increase in net income from 2020 to 2021, a 29.2% increase in net income from 2021 to 2022 and a 36.2% decrease in net income from 2022 to 2023. As discussed above under the heading “Annual Compensation Components,” the primary elements of our executive compensation are base salary compensation, annual incentive compensation, equity-based compensation and executive benefits and perquisites. Our annual incentive compensation is designed to encourage and reward increases in net income on an annual basis and our equity-based compensation is designed to encourage and reward increases in net income on both an annual and long-term basis. In particular, the bonus pool for named executive officers for cash bonus awards under our Second Amended and Restated Executive Officer Performance Incentive Plan and a component of the vesting of performance unit awards under our 2015 Equity Incentive Plan are based on the percentage increase in net income over the prior year after exceeding an established percentage increase in net income goal. As a result, putting aside unique events that impacted the calculations in the table above, increases or decreases in the compensation actually paid to our PEOs and non-PEO NEOs generally move in tandem with increases or decreases to our net income, and as well, the percentage change in net income. The company-selected measurement of the percentage change in net income is the sole financial metric used by us for linking compensation actually paid to executives for performance in the most recent fiscal year. We believe that the percentage change in net income as a measure encompasses changes in both revenue and margin, which is why we believe that it alone is the most appropriate metric to evaluate our financial performance. Based on an initial fixed investment of $100 as of December 31, 2019, including reinvestment of dividends, our cumulative total stockholder returns as of December 31, 2020, 2021, 2022 and 2023 were $128.47, $137.88, $160.90 and $172.64, respectively. Our peer group cumulative total stockholder returns similarly calculated as of December 31, 2020, 2021, 2022 and 2023 were $131.82, $213.21, $174.38 and $230.66, respectively. As this shows, our total stockholder return was below the return of our peer group over the four-year period ended December 31, 2023. We believe the changes in compensation actually paid to our PEOs and non-PEO NEOs generally align with our stockholder returns.