●
| Align
attract and retain qualified management; align the interests of management with those of shareholders to drive continuing increases in shareholder value; align management’s compensation with the achievement of the Company’s annual and long-term performance goals; reward excellent corporate performance; and recognize individual and team achievements. 27 | | | Shyft Group // 2022 Proxy Statement |
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2021 Highlights 2021 was another challenging year for the economy and our business primarily due to the ongoing and simultaneous impacts of the COVID-19 pandemic, labor shortages, and supply chain disruptions. These challenges were beyond the control of management, but they did not impede our employees from stepping up to achieve another year of outstanding performance for our shareholders. Management responded to the ongoing crisis by continuing to maintain a focus on the health and safety protocols for our employees as well as expeditiously making critical business decisions to ensure business continuity. These actions resulted in minimal impact to our employees and ensured we stayed on track with our strategic initiatives. Our teams demonstrated their strength, character, and compassion during another challenging year. During 2021, we achieved the following results: Exceeded Expectations in a Difficult Period | ○ | Despite the broad, industry-wide challenges, the Shyft team delivered record financial results and strong returns for our shareholders. Our financial highlights include $108.1 million of Adjusted EBITDA, up 41.5% year-over-year on revenue of $991.8 million. |
| ○ | We generated strong cash flow, allowing us to pay down all of our revolving debt during the year. Additionally, we amended and restated our credit facility in 2021, providing us ample liquidity to invest in growth going forward. |
| ○ | Our results drove a share price increase of more than 73% in 2021, in turn increasing our market cap to $1.7 billion, a $700 million increase in shareholder value. |
Proactively Managed the Fight Against COVID-19 | ○ | The Shyft Group kept all plants operational during the second year of the pandemic with a relentless focus on employee safety which allowed us to deliver essential products and services to our customers and the markets and communities they serve. |
Achieved Strong Organic Growth | ○ | We continued to see strong demand for our products as consolidated backlog at December 31, 2021, totaled $963.6 million, up $484.9 million, or 101.3%, compared to $478.7 million at December 31, 2020. |
Positioned for growth in the EV space | ○ | Announced plans in June 2021 to develop our new electric delivery vehicle on our proprietary purpose built chassis – and unveiled the prototype in March 2022. |
Strengthened the Team Through Management Changes | ○ | In 2021,Joshua Sherbin joined the Company as the Chief Legal Officer and Chief Compliance Officer and Carrie Wright joined the Company as the Chief Marketing and Communications Officer. These additions reflect our continued focus on attracting top talent to drive continuous improvement and growth. |
Expanded Our Product Offering | ○ | We launched our Velocity product, which went into production late in the first quarter of 2021, and contributed to our significant growth. |
| ○ | We realized new product opportunities, including orders for grocery delivery vehicles and the launch of a Ford Transit BEV pilot program. |
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Outperformed the Industry and Peers | ○ | With respect to Total Shareholder Return (“TSR”) for the 3-year period ending December 31, 2021, the Company performed at the 100th percentile of the Dow Jones U.S. Commercial Vehicles and Truck Index (the “Dow Jones Commercial Vehicle Index”). |
Linked Pay with Performance | ○ | In 2019, the Company granted Performance Share Units to executives based on achievement of 3-year growth in cumulative GAAP net income and TSR. This was consistent with the Committee’s continued focus on aligning pay with performance. The measurement period was January 1, 2019, through December 31, 2021. As discussed in the Long-Term Equity Incentive Awards section below, the management team realized 200% achievement of these goals over that 3-year period. |
The Company’s Board of Directors believes its executive compensation approach and practices contribute to the Company’s success in enhancing shareholder value and driving long-term growth and profitability, as discussed in this CD&A. 29 | | | Shyft Group // 2022 Proxy Statement |
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Compensation Best Practices The Committee is firmly committed to implementing an executive compensation program that aligns management and shareholder interests, encourages executives to drive sustainable shareholder value creation, mitigates risk, attracts top talent, and helps retain key people. A summary of what we do and do not do in that regard follows: | | | Pay for Performance We tie pay to performance. The majority of NEO pay is not guaranteed, but is generally conditioned upon the achievement of predetermined financial goals related to corporate performance. | | | | Mitigate Undue Risk Our compensation practices are designed to discourage excessive risk-taking as related to performance and payout under our compensation programs. | | | | Reasonable Executive Severance and Change-of-Control Benefits Our post-employment and change-of-control severance benefits are designed to be consistent with competitive market practice.
| | | | Share Ownership Guidelines Our guidelines for share ownership align executives’ interests with those of shareholders to encourage achievement of continuing increases in shareholder value;our shareholders. Each NEO has exceeded this share ownership requirement. | | | | Regular Review of Share Utilization We evaluate share utilization by reviewing the dilutive impact of equity compensation on our shareholders and the aggregate shares awarded annually as a percentage of total outstanding shares. | ●
| Align management’s
| | Clawback Policy We have a policy to recoup incentive compensation awards (1) if made to an executive as the result of a material financial restatement attributable to the executive’s misconduct or (2) in the case of certain misconduct. | | | | Review Tally Sheets The Committee reviews tally sheets for our NEOs to ensure they have a clear understanding of the impact of various decisions, including possible payments under various termination scenarios prior to making annual executive compensation decisions. | | | | Double Trigger Change-of-Control Severance Benefits Our Management Severance Plan provides for payment of cash severance and accelerated vesting of equity awards after a change-of-control only if an executive experiences a qualifying termination of employment within a limited period following the change-of-control. | | | | Independent Compensation Consulting Firm The Committee benefits from its utilization of an independent compensation consulting firm which provides no other services to the Company. |
| | | No Excise Tax Gross-Ups Upon Change-of-Control We do not provide for excise tax gross-ups on change-of-control payments. | | | | No Repricing Underwater Stock Options or Stock Appreciation Rights Without Shareholder Approval We do not permit underwater stock options or stock appreciation rights to be repriced without shareholder approval. | | | | No Hedging Transactions, Short Sales or Pledging Our policies prohibit all employees, including NEOs, and directors from engaging in hedging or short sales with respect to the achievementCompany’s stock and executives from pledging Company stock. | | | | No Excessive Perquisites for Executives We provide only limited perquisites.
| | | | No Guaranty on Incentive Payouts No guaranteed minimum payout of Spartan Motors’ annual andor long-term performance goals; | | | ●
| Reward excellent corporate performance; and
| | | ●
| Recognize individual and team initiatives and achievements.
awards.
|
The Human Resources and Compensation Committee sets management compensation at levels the committee believes are competitive with other companies in Spartan Motors’ industry.
What We Do
30 | What We Don’t Do
|  | Link executive pay to Company performance through our annual and long-term incentive plans
|  | No single-trigger change-in-control provisions
| | | | | | Balance among short- and long-term incentives, cash and equity, and fixed and variable pay
| | No hedging by executives or directors of equity holdings
| | | | | | Compare executive compensation and Company performance to relevant peer group companies
| | No aspect of the pay policies or practices pose material adverse risk to the Company
| | | | | | Require executives to meet minimum stock ownership requirements
| | | | | | | | Maintain a compensation clawback policy to recapture unearned incentive pay
| | | | | | | | Provide only limited perquisites
| | Shyft Group // 2022 Proxy Statement |
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Summary of Key Compensation Decisions and Outcomes for 2021 The key compensation decisions the Committee made for 2021 are summarized below and discussed in greater detail in the remainder of this CD&A. Base Salary Adjustments The Committee approved base salary increases for all NEOs in 2021 to better align their pay with market median per our compensation philosophy and to recognize individual performance. Annual Incentive Compensation Program For fiscal year 2021, the annual incentive compensation program (“AIC”) for Messrs. Adams, Douyard, and Heavin was subject to the following performance metrics and weightings to evaluate and determine final payouts for the year: Company Adjusted EBITDA: 65%, Company free cash flow: 15%, and individual management business objectives (“MBO”): 20%. Based on performance, the 2021 AIC payouts for Messrs. Adams and Douyard were earned at 148% of target and Mr. Heavin’s was earned at 138% of target. For fiscal year 2021, the AIC for Messrs. Guillaume and Heminover was subject to the following performance measures and weightings to evaluate and determine final payouts for the year: Company Adjusted EBITDA: 40%, Company free cash flow: 10%, segment Adjusted EBITDA 30%, and individual MBOs: 20%. Based on the performance of the Company, our Fleet Vehicles and Services segment and Mr. Heminover’s MBO performance, his 2021 AIC payout was earned at 144% of target. Based on the performance of the Company, our Specialty Vehicles segment and Mr. Guillaume’s MBO performance, his 2021 AIC payout was earned at 126% of target. Long-Term Incentive Compensation Program In 2021, the Committee granted performance share units (“PSUs”) and service-based restricted share units (“RSUs”) to the NEOs. For each NEO, the total long-term incentive (“LTI”) target award value was allocated 70% to PSUs and 30% to RSUs. All awards earned will be settled in shares. Specifically: In March 2021, the Committee approved an annual LTI award of RSUs and PSUs to the NEOs. The RSUs vest in three equal installments on the first three anniversaries of the grant date of the award. The PSUs are subject to a performance period of 36 months and cliff vesting at the end of the performance period following Committee approval. These PSU awards are subject to TSR and cumulative GAAP net income performance measures, as further described below. In addition to the 2021 annual LTI award, as previously disclosed in the Company’s proxy statement for its 2021 annual meeting of shareholders, the Committee approved the following equity awards: Each of the NEOs received a one-time special grant of RSUs in recognition of their performance in response to the COVID-19 pandemic, labor shortages, and supply chain disruptions. The RSUs were granted to each NEO on March 30, 2021 and vest ratably over a three-year period. Mr. Heminover received a special equity award of 12,000 RSUs on March 30, 2021, which cliff vests on the third anniversary of the award subject to his continued employment. This award was given to recognize the increasing importance of the Fleet Vehicles and Services segment to the overall performance of the Company, the scope of Mr. Heminover’s responsibilities, and the retention of his services. 31 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | COMPENSATION COMMITTEE | |
Say-on-Pay Vote and Shareholder Engagement The advisory vote on executive compensation was conducted at our annual meeting of shareholders in 2019,2021, based on the disclosure of our executive compensation in the proxy statement for that meeting. Of the shares of common stock represented at that meeting in person or by proxy approximatelythat participated in the advisory vote, over 91% of the shares voted to approve the resolution. Our Board considered the results of this vote to be supportive of the Company’s compensation policies and programs and did not make any changes to such policies and programs as a result of such vote. The Company takes meaningful measures to engage with its shareholders, including through attendance at multiple investor conferences throughout the year and regular phone calls, in-person meetings, and other communications, including periodic investor/analyst day events. Although the COVID-19 pandemic required many of our shareholder interactions in 2021 to be conducted virtually, the Company increased its shareholder interactions in 2021 over prior years, including participating in a virtual investor/analyst day event to stay well-connected with large shareholders.shareholders and their concerns. The Company works to be responsive to all shareholder inquiries raised withto the Company’s management and/or Board of DirectorsCompany in an effort to fully engage with shareholders and address anyrespond to shareholder concerns. Compensation Framework
Pay Mix
ExecutiveThe mix of target total direct compensation consists(base salary, target annual incentive awards, and target long-term incentive awards) for 2021 was structured to deliver the approximate proportions set forth below of both cash and equity and is comprised of the following elements, each of which is described below:
●
| Base salary;
| ●
| Annual cash incentive bonus; and
| ●
| Long-term equity-based compensation.
|
Each component of executive compensation is designed to accomplish one or more of the five compensation objectives described above. The total compensation for executives is structured so that a majorityto our Chief Executive Officer and the other NEOs (on average) if target levels of the total earnings potential is derived from performance-based incentives to encourage management to adopt an ownership mentality and take appropriate risks.performance are achieved. The elements of the executive compensation program are described in detail below. In 2019, 78% of our CEO’s target pay was performance-based and between 54% and 61% (depending on the executive) of our other named executives’ target pay was performance-based.
Component
| Objective
| Annual Incentive
Compensation
| Achievement of financial and nonfinancial objectives for which the named executives have individual and collective responsibility.
| Long-Term Incentive
Compensation
| Achievement, over a multi-year period, of financial and nonfinancial objectives critical to the performance of the Company's business plans and strategies. Achievement, over a three-year period, of the Company's cumulative performance metrics to align executive and shareholder interests.
| Base Salary,
Retirement Programs,
Benefits and Perquisites
| Differentiate base salary based on individual responsibility and performance. Provide benefits that reflect the competitive practices of the industry and provide limited and specific perquisites.
|
Mix of Target Pay Elements
for CEO
| 
|
The Human Resources and Compensation Committee believes that the percentage of an executive’s total compensation that is “at risk” should increase as the executive’s responsibilities and ability to influence profits increase. For this reason, the percentage of an executive officers’officer’s potential compensation that is based uponon bonuses and stock planequity awards is larger relative to other employees.
32 | | | Shyft Group // 2022 Proxy Statement |
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Elements of Compensation The Spartan Motors, Inc.2021 Leadership Team Compensation Plan (the “LTC Plan”) sets forth the framework for compensation of the Company’s executive officers and other key employees, including each of the named executives shown in the tables below.NEOs. The LTC Plan is intended to provide management with incentives to drive strategies and investments that maximize shareholder value, utilizeuse financial measurements consistent with the market’s evaluation of Spartan Motors’the Company’s performance, and communicate Spartan Motors’the Company’s financial objectives in a clear and quantifiable manner. Total compensation is targeted at the median of comparablethe market data.and our peer group. The Human Resources and Compensation Committee is responsible for annually reviewing the provisions of the LTC Plan and reviewing all payouts under the plan.In 2019, following a recommendation by the Human Resources and Compensation Committee, the Board of Directors modified the LTC Plan. resulting payouts.
A summary of the primary features of the LTC Plan as modified in 2019 areis as follows: | Base Salary | | | Cash | | | • | | | Benchmark: Peer group median | | | • | | | Attract and retain qualified executives | | | | | | | | | | | | | | | | | | | | | | | Annual cashIncentive Compensation (AIC) | The 2019 annual cash incentive retained the same performance metrics and weightings as in 2018:
Corporate Officers:
| | Cash | | | Annual cash incentive metricsbonuses are capped at 200% of target and are based on achieving the following performance metrics: | | | • | | | Drive profitability, growth, and progress against strategy | | | | | | | Corporate Officers: Metrics for 20192021 were weighted as follows: | | | • | | | Individual MBO goals set to motivate executives to deliver on certain goals and objectives specific to their areas of responsibility | | | | | | 1. | Company-wide | | | | • | | | Company Adjusted EBITDA: 65% | | | | 2. | | | | | | • | | | Company Free cash flow:Cash Flow: 15% | | | | 3. | | | | | | • | | | MBO Goals: 20%
| | | | | | | | | | | | | | Business Unit | | | | Segment Presidents: Annual cash incentive metrics Metrics for 20192021 were weighted as follows: | | | | | | | | | | | | | | | | • | | | Company Adjusted EBITDA: 40% | | | | | | | | | | 1. | Company-wide | | | | | • | | | Company Free Cash Flow: 10% | | | | | | | | | | | | | | | | • | | | Segment Adjusted EBITDA: 65%30% | | | | | | | | | | 2. | Individual business unit Adjusted EBITDA: | | | | | • | | | MBO Goals: 20% | | | | | | | | | | 3. | Pre-determined operational and strategic objectives: 15% | | | | | | | | | | | | | | | | | | Long-Term Incentive Compensation (LTIC) | | Long-term
equity-based
compensation
| To ensure executive pay aligns with performance and facilitates long-term
| Performance Share Units (PSU) | | | | | | 70% LTIC weighting | | | • | | | Focus executives on shareholder value creation performance share units (PSUs) were added as an equity incentive in 2019: | | | | 1.• | PSUs providing a target number of shares will be issued at the end of a three-year performance period: 70% | | | 2. | RSUs with three-year ratable vesting: 30% | | | | | PSUs are capped at 200% of target and are based on achieving the following performance metrics: | | | • | | | Relative TSR closely aligns our executive level measurement system with the experience of shareholders | | | | • | | | Three-year TSR relative to the Dow Jones Commercial Vehicle Index: 60% | | | • | | | Net income is a key indicator of profitability and company performance | | | | 1.• | | | Three-year cumulative GAAP net income: 40% | | | | 2. | Three-year relative TSR: 60% | | Restricted Stock Units (RSU) | | | | | | 30% LTIC weighting | | | • | | | Retention, ownership, and full alignment with shareholder interests | | | | | | | • | | | Awards vest ratably over three years | |
33 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | COMPENSATION COMMITTEE | |
The Human Resources and Compensation Committee periodically engages independent third-party consultants to provide data and analysis regarding the compensation of executives at our peer group companies and at companies with whom we compete for talent. The Human Resources and Compensation Committee uses this data to design and implement competitive compensation programs. Independent consultants engaged With the assistance of its third-party consultant, Mercer, the Committee has established a group of peer companies that are: in similar industries in which the Company competes for executive talent and capital, including auto parts and equipment, automobile manufacturers, construction machinery and heavy trucks, electronic manufacturing services, and industrial machinery; and of similar size (as primarily measured by annual revenue), within a range of approximately one-third to three times the Human Resources and CompensationCompany’s revenue that results in a median revenue close to that of the Company’s. The Company’s 2021 peer group used for this purpose consisted of (1): | | Alamo Group, Inc. | | | Enerpac Tool Group Corporation | | | REV Group, Inc. | | | | Altra Industrial Motion Corporation | | | ESCO Technologies, Inc. | | | Shiloh Industries, Inc. | | | | Astec Industries, Inc. | | | Federal Signal Corporation | | | Standard Motor Products | | | | Blue Bird Corporation | | | LCI Industries, Inc. | | | The Manitowoc Company, Inc. | | | | Columbus McKinnon Corporation | | | Lindsay Corporation | | | Wabash National Corporation | | | | Commercial Vehicle Group, Inc. | | | Lydall Corporation | | | | | | | Douglas Dynamics, Inc. | | | Miller Industries, Inc. | | | | |
(1)
| Since this analysis was completed, the following companies were removed from the Peer Group: Lydall Corporation due to merger and Shiloh Industries, Inc. due to it being acquired. |
In late 2020, the Committee do not answer to management.In 2018, the committee engaged Mercer to benchmarkupdate the benchmarking analysis that reviewed total direct compensation (consisting of base salary, target bonus, opportunity, and the value of long-term incentive grants) of the named executivesNEOs at the median of the peer group, with the intention that the total direct compensation of these named executives would be set at amounts that are in the market median range. In performing this analysis,review, Mercer conducted benchmarking analysis of the named executives’NEO’s compensation, including base salaries, long-and short-termshort- and long-term incentives, and severance practices, utilizingusing information from proxy disclosures and published surveys. A peer group was selected consisting of companies that are:
| ●
| In similar industries in which Spartan Motors competes for executive talent and capital, including auto parts and equipment, automobile manufacturers, construction machinery and heavy trucks, electronic manufacturing services, and industrial machinery; and
|
| ●
| Of similar size (as primarily measured by annual revenue), within a range of approximately one-third to three times Spartan Motors’ revenue that results in a median revenue close to Spartan Motors’.
|
Market median total direct compensation information in the study reflects the pay for an executive with a median level of experience. The list of identified peer companies in this survey include:
● | Alamo Group, Inc.
| ● | LCI Industries, Inc.
| ● | Altra Industrial Motion Corp. | ● | Methode Electronics, Inc. | ● | Blue Bird Corporation | ● | Miller Industries, Inc. | ● | Columbus McKinnon Corporation | ● | Shiloh Industries, Inc. | ● | Commercial Vehicle Group, Inc. | ● | Standard Motor Products | ● | Douglas Dynamics, Inc. | ● | The Manitowoc Company, Inc. | ● | ESCO Technologies, Inc. | ● | Wabash National Corporation | ● | Federal Signal Corp. | ● | Winnebago Industries |
In 2019, the Human Resources and Compensation Committee after review with its executive compensation consultant, made the following changes to the peer group: Methode Electronics, Inc. was removed fromconsidered the peer group due to somewhat limiteddata when making compensation decisions in 2021. The NEO compensation levels generally reflect the Committee’s views on general business similarities to Spartan Motors,conditions, each NEO’s tenure in the applicable role, and Astec Industries, Inc. and REV Group Inc. were added as compensation peers due to similarities to Spartan Motors in termsthe importance of size, complexity, and industry. The revised peer group was utilized for compensation benchmarking conducted in late 2019.
The Human Resources and Compensation Committee used this benchmarking data from 2018 to establish the amount and form of compensation for the Company’s named executives effective in 2019. Mercer updated its benchmarking analysis in late 2019, which was used to aid the committee in setting total compensation for the named executives for 2020.
placing higher value on performance-based compensation. Neither Mercer nor any of its affiliates provided any additional services during 2021 to the Company or any of its affiliates during 2019 for which it received fees in excess of $120,000.(beyond those described above).Base Salary Base salary is a fundamental component of the Company’s compensation system,program, and overall competitive salary levels are necessary to attract and retain well-qualified executives. The Human Resources and Compensation Committee determines recommended compensation for executive officers by evaluating the responsibilities of the position, the experience of the individual, theCompany performance, of Spartan Motors, the performance of the individual, the competitive marketplace for similar management talent, and other relevant factors. The committeeCommittee does not give specific weight to any particular factor. Using these same factors, the committee may recommend base salary adjustments on a periodic basis to maintain the desired levels of base salaries for Spartan Motors’ executives. 34 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | COMPENSATION COMMITTEE | |
As noted above, Mercer was engaged in 2018late 2020 to benchmark the salaries of the executive officers of Spartan Motors.Company’s NEOs. The Human Resources and Compensation Committee made recommendations for 20192021 base salaries consistent with this competitive benchmarking process. For 2019,2021, the Company increasedimplemented the base salaries assalary adjustments shown below. Basebelow in April 2021. | | Daryl Adams | | | $735,000 | | | $800,000 | | | 8.8% | | | | Jonathan Douyard | | | $425,000 | | | $437,800 | | | 3.0% | | | | Stephen Guillaume | | | $336,000 | | | $346,100 | | | 3.0% | | | | Todd Heavin | | | $385,000 | | | $396,600 | | | 3.0% | | | | Chad Heminover | | | $380,000 | | | $400,000 | | | 5.3% | |
These base salary adjustments are generally implemented in April of the applicable year.Named Executive Officer | Base Salary - April 2018 | Base Salary - April 2019 | % Change from Prior Year | Daryl M. Adams, President and CEO | $678,300 | $700,000 | 3.2% | | | | | | Frederick J. Sohm, CFO | $326,400 | $375,000 | 14.9% | | | | | | Thomas C. Schultz, Chief Administrative Officer | $292,740 | $320,000 | 9.3% | | | | | | Stephen K. Guillaume, President - Specialty Chassis and Vehicles | $246,477 | $305,000 | 23.7% | | | | | | Chad M. Heminover, President - Fleet Vehicles and Services | $250,000 | $294,000(1) | 17.6% |
(1)
| Mr. Heminover’s base salary was increased again in November 2019 to $330,000, for an aggregate 32.0% increase over his 2018 base salary.
|
The base salary changes summarized in the table above servedintended to provide greater alignment of executive total compensation levels with Spartan Motors’the Company’s stated compensation philosophy of targeting athe market median range.
The Board of Directors may increase the base salaries of our executive officers from time to time, and such increases may be made at any time (i.e., not just in conjunction with the Board’s customary annual performance and compensation review or as the result of the completion of a benchmarking analysis).
median. Annual Cash Incentive Compensation Awards The LTC Plan provides an opportunity for our named executivesNEOs to earn an annual cashAIC bonus based upon achievement ofagainst key metrics that reflect the top priorities for business performance based on key metrics.performance. The LTC Plan requires management to annually review the metrics and weightings based upon current business conditions and to obtain approval of the proposed framework from the Human Resources and Compensation Committee. Each participant’s annualAIC bonus is determined by multiplying (1) his or her target bonus percentage (which is determined separately for different categories of employees) by (2) a Bonus Multiplier (described below) by (3) the participant’s annual salary.as follows:
The target bonus percentage is a percentage of the participant’s salary. The LTC Plan establishes the target bonus percentage at 150% of base salary for our CEO, 70% of base salary for our CFO, and 60% of base salary for each of our other named executives. AlthoughNEOs. In 2021, the LTC Plan givesCommittee increased the Human Resources and Compensation Committee the discretion to change theCFO’s target bonus percentage for any executive for any particular year, the committee did not exercise this discretion for 2019.from 60% to 70% based on its assessment of Mercer’s benchmarking review. The Bonus MultiplierAIC bonus achievement multiplier is a fraction or multiple of the target bonus percentage. For example, achievement of bonus metrics at exactly theirthe target amounts would result in a Bonus Multiplierbonus multiplier of 1.0X. The threshold (minimum) Bonus Multiplierbonus multiplier is 0.5X and the maximum Bonus Multiplierbonus multiplier is 2.0X. Annually,At the end of each year, based on a proposal by management,management’s recommendations, the Human Resources and Compensation Committee will evaluate and establish, based uponevaluates performance against the current keypre-established metrics to determine the incremental improvements required to attain an incremental Bonus Multiplier. The final Bonus Multiplier for a year may be a fractional value based upon prorating results within the target matrix.bonus achievement multiplier. 35 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | COMPENSATION COMMITTEE | |
The annual cash incentiveAIC award opportunities and results for our named executivesNEOs for 20192021 were as follows: Annual Cash Incentive Award Opportunity as a % of Base Salary | Executive | Threshold | Target | Maximum | Actual | Daryl M. Adams, President and CEO | 75% | 150% | 300% | 270% | Frederick J. Sohm, CFO | 30% | 60% | 120% | 108% | Thomas C. Schultz, Chief Administrative Officer | 30% | 60% | 120% | 108% | Stephen K. Guillaume, President - Specialty Chassis and Vehicles | 30% | 60% | 120% | 108% | Chad M. Heminover, President - Fleet Vehicles and Services | 30% | 60% | 120% | 108% |
| | Daryl Adams | | | 75% | | | 150% | | | 300% | | | 222% | | | | Jonathan Douyard | | | 35% | | | 70% | | | 140% | | | 104% | | | | Stephen Guillaume | | | 30% | | | 60% | | | 120% | | | 76% | | | | Todd Heavin | | | 30% | | | 60% | | | 120% | | | 83% | | | | Chad Heminover | | | 30% | | | 60% | | | 120% | | | 86% | |
The LTC Plan prohibits an annual cashAIC bonus to our named executivesNEOs for any year in which Spartan Motorsthe Company incurs a net loss. However, the Board of Directors retains the right to make adjustments or grant discretionary bonuses thatas it deems appropriate. The Board did not grant any discretionary cash bonuses for 2019 performance.in 2021. At the discretion of the Human Resources and Compensation Committee, any cashAIC bonus payable under the LTC Plan may be paid in the form of the Company’s common stock. All cash incentiveAIC bonuses for 20192021 were paid in cash. Executives subject to the LTC Plan for a partial year are eligible for annual incentive bonuses on a prorated basis.basis, unless otherwise approved by the Committee. 20192021 Annual Cash Incentive CompensationFor 2019,2021, the tables below show the performance metrics and targets established for our named executivesNEOs to earn an annual cash incentiveAIC bonus pursuant tounder the LTC Plan. The Human Resources and Compensation Committee selected Company-wide adjustedCompany Adjusted EBITDA as the key metric (65% weighting) for all of our named executivesNEOs because it is viewed as the primary indicator of the performance and strength of our business on a long-term basis. For similar reasons, the adjustedAdjusted EBITDA of a business unitsegment is used as a metric for the leader of that business unit.segment. Free cash flow is used as a metric for our corporate officersNEOs because of its relationship to the Company’s profitability. For each executive, the annual cash incentiveAIC bonus is also based, in part, on MBOs, specific objectives established for that executive’s near-term performance. The 2019 performance targets were set for these awards and the payouts were determined prior to the recent events associated with the COVID-19 crisis. 36 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | COMPENSATION COMMITTEE | |
Corporate Officer Incentive Plan Metrics (Messrs. (Messrs. Adams, Sohm,Douyard, and Schultz)Heavin):
| | | Performance Criteria for Payouts at ($ in 000s): | | | | | | | | | | | | | | | | | | Metric | | Min. (50% payout) | | | Target
(100% payout) | | | Max. (200% payout) | | | Actual Performance | | | Actual Payout % | | | Weight | | | Weighted % | | Company-wide Adjusted EBITDA(1) | | $ | 31,800 | | | $ | 39,600 | | | $ | 47,500 | | | $ | 64,045 | | | | 200 | % | | | 65 | % | | | 130 | % | Free Cash Flow (1) | | $ | 5,799 | | | $ | 7,249 | | | $ | 8,699 | | | $ | 24,139 | | | | 200 | % | | | 15 | % | | | 30 | % | MBO Goals Achievement | | | 0 | % | | | 100 | % | | | 200 | % | | | 100 | % | | | 100 | % | | | 20 | % | | | 20 | % | | | | | | | | | | | | | | | | | | | | Total Multiplier | | | | 180 | % |
| | Company Adjusted EBITDA(1) | | | $81,998 | | | $102,497 | | | $122,996 | | | $108,066 | | | 127% | | | 65% | | | 83% | | | | Company Free Cash Flow(1) | | | $32,560 | | | $40,700 | | | $48,840 | | | $51,007 | | | 200% | | | 15% | | | 30% | | | | Financial Objectives Factor | | | 113% | | | | For Messrs. Adams and Douyard: MBO Goals Achievement(2) | | | 0% | | | 100% | | | 200% | | | 175% | | | 175% | | | 20% | | | 35% | | | | Total Financial and MBO Multiplier | | | 148% | | | | For Mr. Heavin: MBO Goals Achievement(3) | | | 0% | | | 100% | | | 200% | | | 125% | | | 125% | | | 20% | | | 25% | | | | Total Financial and MBO Multiplier | | | 138% | |
(1)
| See GAAP reconciliation in Appendix A. |
Specialty Chassis and Vehicles Business Unit Incentive Plan Metrics
(Mr. Guillaume):
| | | Performance Criteria for Payouts at ($ in 000s): | | | | | | | | | | | | | | | | | | Metric | | Min. (50% payout) | | | Target
(100% payout) | | | Max. (200% payout) | | | Actual Performance | | | Actual Payout % | | | Weight | | | Weighted % | | Company-wide Adjusted EBITDA(1) | | $ | 31,800 | | | $ | 39,600 | | | $ | 47,500 | | | $ | 64,045 | | | | 200 | % | | | 65 | % | | | 130 | % | Segment Adjusted EBITDA (1) (2) | | $ | 15,514 | | | $ | 19,329 | | | $ | 23,270 | | | $ | 20,716 | | | | 140 | % | | | 20 | % | | | 30 | % | Business unit operational and strategic plan | | | 0 | % | | | 100 | % | | | 200 | % | | | 140 | % | | | 140 | % | | | 15 | % | | | 20 | % | | | | | | | | | | | | | | | | | | | | Total Multiplier | | | | 180 | % |
(1)
| See GAAP reconciliation Appendix A also reflects certain additional adjustments that were made to the Adjusted EBITDA reported by the Company in Appendix A.
| | | (2)
| See Note 18, Business Segments in the Notes to Consolidated Financial Statements of ourits Annual Report on Form 10-K filed with the SEC on March 16, 2020.
February 24, 2022 (the “2021 Form 10-K”), for purposes of calculating the NEOs annual cash incentive compensation for 2021. |
(2)
| The Committee recognized the contributions Messrs. Adams and Douyard made in 2021 with a 175% multiple of their MBO metric. |
Mr. Adams was recognized for his role in guiding our strong and consistent financial performance in fiscal 2021. Under his disciplined management of our business, we continued to deploy capital in an effective manner including with the formation of Shyft Innovations, our dedicated corporate mobility research and development team focused initially on introducing a Class 3 purpose built EV chassis. In addition, Mr. Adams’ executive leadership positioned the Company to deliver shareholder return of more than 73% in 2021. Mr. Douyard was recognized for his leadership of the Company’s 2021 financial performance. His leadership also facilitated continued success in developing a strong financial team, implementing process improvements, and enhancing our internal control environment. (3)
| The Committee recognized Mr. Heavin’s contributions in 2021 with a 125% multiple of his MBO metric. During 2021, Mr. Heavin provided leadership in setting up our Velocity® F2 manufacturing facilities and the continued standardization of Shyft manufacturing. Mr. Heavin was also instrumental in the deployment of capital expenditures that drove improvements in our manufacturing locations. |
Fleet Vehicles and Services Business UnitSegment Unit Incentive Plan Metrics (Mr. (Mr. Heminover):
| | | Performance Criteria for Payouts at ($ in 000s): | | | | | | | | | | | | | | | | | | Metric | | Min. (50% payout) | | | Target
(100% payout) | | | Max. (200% payout) | | | Actual Performance | | | Actual Payout % | | | Weight | | | Weighted % | | Company-wide Adjusted EBITDA(1) | | $ | 31,800 | | | $ | 39,600 | | | $ | 47,500 | | | $ | 64,045 | | | | 200 | % | | | 65 | % | | | 130 | % | Segment Adjusted EBITDA (1) (2) | | $ | 29,920 | | | $ | 37,400 | | | $ | 44,880 | | | $ | 60,663 | | | | 200 | % | | | 20 | % | | | 40 | % | Business unit operational and strategic plan | | | 0 | % | | | 100 | % | | | 200 | % | | | 67 | % | | | 67 | % | | | 15 | % | | | 10 | % | | | | | | | | | | | | | | | | | | | | Total Multiplier | | | | 180 | % |
| | Company Adjusted EBITDA(1) | | | $81,998 | | | $102,497 | | | $122,996 | | | $108,066 | | | 127% | | | 40% | | | 51% | | | | Company Free Cash Flow | | | $32,560 | | | $40,700 | | | $48,840 | | | $51,007 | | | 200% | | | 10% | | | 20% | | | | Segment Adjusted EBITDA(1)(2) | | | $88,012 | | | $110,015 | | | $132,018 | | | $117,712 | | | 135% | | | 30% | | | 41% | | | | MBO Goals Achievement(3) | | | 0% | | | 100% | | | 200% | | | 160% | | | 160% | | | 20% | | | 32% | | | | Total Financial and MBO Multiplier | | | 144% | |
(1)
| See GAAP reconciliation in Appendix A. Appendix A also reflects certain additional adjustments that were made to the Adjusted EBITDA reported by the Company in its 2021 Form 10-K, for purposes of calculating the NEO’s annual cash incentive compensation for 2021. |
(2)
| | (2)
| See Note 18,17, Business Segments in the Notes to Consolidated Financial Statements of our Annual Report2021 Form 10-K. Segment Adjusted EBITDA used above is adjusted to reflect actual timing of the segment reorganization versus the full year recast required within our 2021 Form 10-K. |
(3)
| The Committee recognized Mr. Heminover’s contributions in 2021 with a 160% multiple of his MBO metric primarily due to his role in the 2021 financial performance of the FVS business and disciplined focus on innovation, including the introduction of key products such as the Velocity® F2, a Class 2 walk-in van, and the Velocity® M3 walk-in van. |
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Specialty Vehicles Segment Incentive Plan Metrics (Mr. Guillaume): | | Company Adjusted EBITDA(1) | | | $81,988 | | | $102,497 | | | $122,996 | | | $108,066 | | | 127% | | | 40% | | | 51% | | | | Company Free Cash Flow | | | $32,560 | | | $40,700 | | | $48,840 | | | $51,007 | | | 200% | | | 10% | | | 20% | | | | Segment Adjusted EBITDA(1)(2) | | | $28,488 | | | $35,610 | | | $42,732 | | | $35,230 | | | 99% | | | 30% | | | 30% | | | | MBO Goals Achievement(3) | | | 0% | | | 100% | | | 200% | | | 125% | | | 125% | | | 20% | | | 25% | | | | Total Financial and MBO Multiplier
| | | 126% | |
(1)
| See GAAP reconciliation in Appendix A. Appendix A also reflects certain additional adjustments that were made to the Adjusted EBITDA reported in our 2021 Form 10-K, filedfor purposes of calculating the NEOs’ annual cash incentive compensation for 2021. |
(2)
| See Note 17, Business Segments in the Notes to Consolidated Financial Statements in our 2021 Form 10-K. Segment Adjusted EBITDA used above is adjusted to reflect actual timing of the segment reorganization versus the full year recast required within our 2021 Form 10-K. |
(3)
| The Committee recognized Mr. Guillaume’s contributions in 2021 with a 125% multiple of his MBO metric primarily based on his role in the SEC on March 16, 2020.2021 financial performance of the Specialty Vehicle business and his success in assuming leadership of our Montebello, California truck body operation and Strobes-R-Us brand in Florida. |
2020 Annual Cash Incentive Compensation
No changes were made to the annual cash incentive compensation framework described above for 2020. Cash incentive awards for 2020 will be based upon the same key metrics for the named executives as were used for 2019, including both financial and non-financial metrics, and weightings for each metric will be the same as they were for 2019.
Long-Term Equity Incentive Awards Spartan Motors’
The Company’s equity compensation plans are designed to encourage long-term investment in Spartan Motorsthe Company by participating executives and employees, more closely align executive and shareholder interests, and reward executive officers and other employees for building shareholder value. The Human Resources and Compensation Committee believes stock ownership by management and other employees is beneficial to all Spartan MotorsCompany stakeholders. See the minimum stock ownership requirements for executive officers under “Risk Mitigation - Director and Executive StockShare Ownership Requirements” below. Spartan Motors
The Company currently has the ability to grant equity-based compensation to its named executivesNEOs pursuant to the 2016 Stock Incentive Plan, of 2016.as amended (the “2016 Stock Plan”). The Human Resources and Compensation Committee administers all aspects of the plan.Starting in 2019, long-term2016 Stock Plan.
Long-term equity incentives for named executives willNEOs include (1) athe grant of restricted stock units (“RSUs”)RSUs with time-based vesting, and (2) athe grant of performance share units (“PSUs”),PSUs, which are payable in shares of Spartan common stock, subject to the achievement of certain performance metrics over a cumulative three-year period. Prior to 2019, the Company’s practice was to grant all long-term equity compensation to named executives in the form of restricted stock with the number of shares granted based on the achievement of various metrics established by the Company. In consultation with its executive compensation consultant, the committee determined that utilizingThe Committee believes using a combination of PSUs and RSUs would further enhanceenhances alignment of executive compensation with shareholder value creation and achievement of key business objectives.objectives while focusing participants on long term performance and strategic decision making. As such, starting in 2019, 30% of a named executive’san NEO’s target long-term incentive compensation (“LTIC”) award will be made inis comprised of RSUs and the other 70% ofis awarded in PSUs. The greater proportion allocated to PSUs reflects the LTIC award will be made in the form of PSUs.Committee’s emphasis on performance-based rather than time-based equity compensation. These awards are described in more detail below. Each named executive’sNEO’s target LTIC award for a particular year will beis based on a percentage of his or herthe executive’s annual base salary. The LTC Plan establishes the target LTIC award at 200%235% of base salary for our CEO,CEO; 125% of base salary for our CFO; 100% of base salary for our CFO, 90%COO and the President of our Fleet Vehicles and Services segment; and 75% of base salary for our CAO, and 60% of base salary for eachthe President of our other named executives. AlthoughSpecialty Vehicles segment. Based on the LTC Plan givesbenchmarking analysis completed in late 2020, the Human Resources and Compensation Committee the discretion to changeincreased the target LTIC awardawards for anyour CEO (from 225% to 235%), our CFO (from 100% to 125%), and the President of our Specialty Vehicles segment (from 70% to 75%). These decisions are consistent with our compensation philosophy described above to align executive for any particular year,pay with the committee did not exercise this discretion for 2019. market median. Restricted StockShare Units (RSUs) The LTC Plan provides that 30% of the value of each executive’s annual LTIC award towill be madegranted in the form of RSUs will be equal to 30% of the executive’s target LTIC award for that year.RSUs. The award is generally to be made on March 30 of each year (or, if March 30 is not athe last business day on the immediately preceding business day),of March, with the number of RSUs to be issued determined by usinggranted based on the average of the closing stock price over the preceding 30 calendar days. The RSUs vest ratably over a three-year period, subject to any exceptions set forth in the applicable award agreement reflecting the grant of such RSUs.agreement. 38 | | | Shyft Group // 2022 Proxy Statement |
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Performance Share Units (PSUs) The portion of each annual LTIC award to be made in the form of PSUs is designed to reward the named executivesNEOs based upon achievement of cumulative financial performance over a three-year period (with cliff vesting to occur at the end of such three-year performance period) starting with the performance year in which the annual LTIC award is granted. ThisFor grants made in 2021, two cumulative financial performance metrics apply: 60% of the value of the PSUs is measuredbased on the Company’s TSR over the three-year performance period relative to the Dow Jones Commercial Vehicle Index; and 40% of the value of the PSUs is based on the Company’s cumulative GAAP net income over the three-year performance period. For this purpose, net income is calculated in accordance with GAAP, subject to such adjustments as may be approved by two metrics: | ●
| 60% of the value of the PSUs will be dependent on Spartan’s Total Shareholder Return (TSR) over the three-year performance period relative to the Dow Jones U.S. Commercial Vehicles and Truck Index (the “Index”); and
|
| ●
| 40% of the value of the PSUs will be dependent on Spartan’s cumulative net income over the three-year performance period. For this purpose, net income is to be calculated in accordance with GAAP, but subject to such adjustments as may be approved by the Human Resources and Compensation Committee.
|
the Committee. The LTC Plan provides that the number of PSUs earned with respect to a three-year performance period is to be determined as follows: Achievement of TSR over the performance period relative to the Dow Jones Commercial Vehicle Index (60% weighting): Percentile Rank Compared to Index | | | Payout as Percentage of Target | | | Less than 25th percentile
| | | 0% | | | 25th percentile (Threshold) | | | 50% (0X) | | | 50th percentile (Target) | | | 100% (1X) | | | 75th percentile (Maximum) | | | 200% (2X) | |
With respect to both the Company’s stock and the stock of each company in the Dow Jones Commercial Vehicle Index, the TSR performance will be calculated (a) using a 20-trading day average of the stock price ending on the first day and last day of the performance period, and (b) assuming all dividends declared during the performance period are reinvested at the closing price on the applicable ex-dividend date. Achievement between the stated percentages will be interpolated on a straight-line basis. Achievement of cumulative GAAP net income over the performance period (40% weighting): CumulativeGAAP Net Income
| | | Payout as Percentage of Target | | | Less than $47,082,000 (threshold)$119,500,000
| | | 0% | | $47,082,000 (threshold = 70% of target)
| $119,500,000 (threshold) | | | 50% (0X) | | $67,260,000 (target)
| $170,700,000 (target) | | | 100% (1X) | | $80,712,000 (maximum = 120% of target)
| $204,800,000 (maximum) | | | 200% (2X) | |
Achievement between the stated dollar amounts will be interpolated on a straight-line basis. At the end of the three-year performance period, the executive maywill be issued shares of the Company’s common stock in settlement of the PSUs, if earned, with the number of shares calculated based on the Company’s TSR over the three-year performance period relative to the Dow Jones Commercial Vehicle Index and the Company’s cumulative GAAP net income over the three-year performance period. The aggregate number of shares actually granted to the executiveearned may be between 0% and 200% of the number of PSUs granted.
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TABLE OF CONTENTS 2019| | | | | COMPENSATION COMMITTEE | |
2021 Long-Term Equity Incentive Compensation For 2019,2021, our named executivesNEOs were granted the following annual LTIC awards: Executive | Target LTIC Award for 2019 | Number of RSUs Granted (30% of Target LTIC Award) | No. of PSUs Granted (70% of Target LTIC Award) | Daryl M. Adams, President and CEO | $1,400,000 (200% of base salary) | 47,836 | | 111,617 | | Frederick J. Sohm, CFO | $ 375,000 (100% of base salary) | 12,813 | | 29,898 | | Thomas C. Schultz, Chief Administrative Officer | $ 288,000 (90% of base salary) | 9,841 | | 22,961 | | Stephen K. Guillaume, President - Specialty Chassis and Vehicles | $ 183,000 (60% of base salary) | 6,253 | | 14,590 | | Chad M. Heminover, President - Fleet Vehicles and Services | $ 176,400 (60% of base salary) | 6,027 | | 14,064 | |
| | Daryl Adams | | | $1,880,000
(235% of base salary) | | | 15,452 | | | 36,055 | | | | Jonathan Douyard | | | $547,250
(125% of base salary) | | | 4,498 | | | 10,495 | | | | Stephen Guillaume | | | $259,575
(75% of base salary) | | | 2,134 | | | 4,978 | | | | Todd Heavin | | | $396,600
(100% of base salary) | | | 3,260 | | | 7,606 | | | | Chad Heminover | | | $400,000
(100% of base salary) | | | 3,288 | | | 7,672 | |
All of these RSUs and PSUs were granted on April 15, 2019March 30, 2021 and were calculated using the average stock price of Spartan Motors’the Company’s common stock over the preceding 30 calendar days, which was $8.78$36.50 per share. All of the The RSUs granted in 20192021 will vest ratably over a three-year period.
All of the The PSUs granted in 20192021 will be earned (or forfeited) based on the Company’s performance over the three yearthree-year period from January 1, 2021 through December 31, 2023, based on the metrics described above.
Results of 2019 Grant of PSUs for 2019 - 2021 Performance Period The following information describes the performance goals for the PSU awards made in 2019 (the “2019 PSU Award”), the results relative to such performance goals, and the shares awarded pursuant to the 2019 PSU Award. The PSU awards made to the participating NEOs in 2019 consisted of 60% that could be earned based on the achievement of the Company’s TSR percentile rank relative to the Dow Jones Commercial Vehicle Index, and 40% that could be earned based on cumulative GAAP net income performance, in each case based on the performance period January 1, 2019 through December 31, 2021,2021. Overall achievement could vary from 0% of the target award to 200% of the target award (assuming maximum performance), with no portion of the award earned with respect to a metric if performance fell below the threshold level for that metric. The TSR and cumulative GAAP net income performance levels, achieved results, and resulting percentage of target award achieved for the 2019 PSU Awards are summarized in the following tables. If performance was above the threshold level for either metric but between two performance levels shown in the applicable table, the payout percentage was determined based on the metrics described above.straight-line interpolation. TSR performance matrix (60% weighting): | | Less than 25th percentile
| | | 0% | | | | 25th percentile (Threshold) | | | 50% | | | | 50th percentile (Target) | | | 100% | | | | 75th percentile (Maximum) | | | 200% | |
40 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS 2020 Long -Term Equity Incentive Compensation
No changes were made to the long-term equity incentive compensation framework described above for 2020. RSUs and PSUs were granted to each of the named executives on March 30, 2020. The RSUs will vest ratably over a three year period, and the PSUs will be earned based on the same metrics described above (TSR compared to the Index and cumulative
| | | | | COMPENSATION COMMITTEE | |
Cumulative GAAP net income) overincome matrix (40% weighting) | | Less than $47,100,000
| | | 0% | | | | $47,100,000 (Threshold) | | | 50% | | | | $67,300,000 (Target) | | | 100% | | | | $80,700,000 (Maximum) | | | 200% | |
Over the three-year performance period, achievement under the 2019 PSU Awards was as follows: | | TSR | | | TSR = 591%,
100th Percentile | | | 200% | | | 60% | | | 120% | | | | Cumulative GAAP net income(1) | | | Achieved
$137million | | | 200% | | | 40% | | | 80% | | | | Total Payout
| | | 200% | |
(1)
| The Board approved an adjustment to cumulative GAAP net income for asset impairments, accelerated depreciation, and loss on sale of certain discontinued operations. Without the approved adjustment, cumulative GAAP net income would still have reached 200% attainment. Operating results of discontinued operations are included in the measurement. |
Shares earned by the executives as a result of 2020 through 2022.the achievement mentioned above for the 2019 PSU Awards are as follows: | | Daryl Adams | | | 111,617 | | | 223,234 | | | | Jonathan Douyard | | | N/A(1) | | | — | | | | Stephen Guillaume | | | 14,590 | | | 29,180 | | | | Todd Heavin | | | N/A(1) | | | — | | | | Chad Heminover | | | 14,064 | | | 28,128 | |
(1)
| Messrs. Douyard and Heavin were not employed at the time of this grant in 2019. |
Human Resources and Compensation Committee Processes and Procedures The Human Resources and Compensation Committee of the Board of Directors develops and recommends to the Board of Directors Spartan Motors’the Company’s executive compensation policies. The Human Resources and Compensation Committee also administers Spartan Motors’the Company’s executive compensation program and recommends for approval to the Board of Directors the compensation to be paid to the Chief Executive OfficerCEO and other executive officers. The Human Resources and Compensation Committee is made up of independent directors, none of whom is a current or former employee of Spartan Motors.the Company. The Company’s CAOChief Human Resources Officer (CHRO) serves as a coordinator of the Human Resources and Compensationat Committee meetings but does not participate in any decisions regarding executive or Board compensation. The Company’s CEO, CFO, and CFOChief Legal Officer (CLO) participate only to assist in the process of determining the compensation for executives other than themselves and to provide information to the committeeCommittee regarding Company performance, operations, strategies, and other information requested by the committee.Committee. Other than the CEO, the CAOCFO, CLO and the CFO,CHRO, none of the Company’s named executivesexecutive officers participate in any discussions of the discussions with the Human Resources and Compensation Committee. 41 | | | Shyft Group // 2022 Proxy Statement |
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The Human Resources and Compensation Committee’s written charter provides that the Committee will review and make recommendations regarding the compensation of executive officers. The Committee’s policy is to conduct benchmarking of officer’sexecutive officers’ salaries at least once every two years. Executive compensation decisions must be approved by a majority of the independent members of the Board of Directors. Board. Personal Benefits and Perquisites We believe that compensation in the form of perquisites and personal benefits does not provide transparency for shareholders or serve our compensation philosophy. Consequently, such benefits play a very minor roleTherefore, the Company offers limited perquisites in our compensation program.the form of executive physicals, additional life and disability insurance, occasional spousal travel and reimbursement of the CEO’s club membership dues. The limited perquisites and personal benefits we do provide are disclosed in the Summary Compensation Table below and detailed in footnote 4 to that table. Severance Benefits
We maintain a Management Severance Plan for the primary purpose of providing certain severance benefits to a select group of our key management employees designated by our Human Resources and Compensation Committee. All of our named executives have been designated for participation in this Management Severance Plan.
Pursuant to the Management Severance Plan, a participant who is terminated by the Company without cause (as defined in the Management Severance Plan) is entitled to receive the following severance benefits:
| ●
| The participant will be entitled to continue to receive his or her base salary (at the rate in effect immediately prior to qualifying termination or, if greater, the rate in effect at any time within 180 days prior to the qualifying termination) for a period of 18 months following termination for our CEO and a period of 12 months for our other named executives.
|
| ●
| If the threshold is satisfied for annual incentive cash bonus eligibility under the LTC Plan for the fiscal year in which the qualifying termination occurs, the severance benefit will include a pro rata portion of the target incentive bonus for that year (based on the number of complete calendar months that have elapsed in that year prior to the qualifying termination). Any such pro rata bonus will be calculated and paid following completion of the performance year in question.
|
| ●
| If the executive enrolls in COBRA, then during the applicable salary continuation period (18 months for our CEO and 12 months for our other named executives), the Company will pay a portion of the executive’s COBRA premiums equal to the portion of such premiums (if any) the Company would have paid with respect to the executive had he or she continued employment with the Company.
|
| ●
| All outstanding unvested shares of restricted stock and RSUs will be fully vested as of the date of termination. PSUs that are outstanding at the date of termination will generally be settled (i.e., and shares of common stock issued to the executive) at the time the PSU would have otherwise been settled in accordance with its terms, following completion of the relevant performance period and subject to the achievement of the performance conditions for such PSUs, but with the executive only receiving a pro rata portion of the shares he or she would have otherwise received (based on the number of complete calendar months that have elapsed in that year prior to the qualifying termination).
|
| ●
| The executive will be entitled to receive reasonable outplacement services during the applicable salary continuation period (18 months for our CEO and 12 months for our other named executives), up to a maximum of $10,000 per year.
|
Notwithstanding the foregoing, if the employment of a named executive is terminated by the Company for cause (as determined by the Human Resources and Compensation Committee) or by the executive for “good reason” following a “change in control” of the Company, as each of those terms is defined in our Stock Incentive Plan, then the severance benefit payable to our CEO is equal to twice his annual salary plus the target annual incentive cash award (without proration), and the severance benefit payable to our other named executives is equal to their annual salary plus the target annual incentive cash award (without proration).
An executive’s receipt of these severance benefits is conditioned on the participant executing a release of claims in favor of the Company and complying with certain non-competition, non-solicitation, confidentiality, and other provisions in favor of the Company for the applicable salary continuation period (18 months for our CEO and 12 months for our other named executives).
This summary of the Management Severance Plan is subject in its entirety to the actual provisions of the plan.
Retirement and Other Benefits We do not provide a defined benefit pension plan to our named executives,NEOs, although we do provide a defined contribution plan (401(k) plan). In addition, we provide a Supplemental Executive Retirement Plan (SERP) , which as part of a compensation package to attract and retain executives. The SERP is a non-qualified defined contribution plan that allows our executives to defer compensation and provides for certain matching contributions by the Company.Company in addition to those provided under the Company’s qualified retirement plans. The Company offers this additional program for the potential to enhance total executive pay so that it remains competitive in the market. The SERP is described in more detail under “Non-Qualified Deferred Compensation” below. Our typical practice when hiring a new executive is to set forth the principal terms of their employment in an employment offer letter. These employment letters often commit us to provide certain benefits to these executives, including upon their termination of employment. Those commitments are described in this proxy statement.
We believe our compensation policies and programs are designed in a manner such that they do not create incentives or risks that are reasonably likely to result in a material adverse effect on the Company. These policies and programs are designed to balance our executive compensation among appropriate short- and longer-term incentives and create the appropriate mix of fixed compensation as well as compensation that is contingent on the achievement of objectives, we believe will enhance shareholder value. In addition, we have several policies and practices in place designed to mitigate risks associated with our executive compensation practices, including:
Director and Executive StockShare Ownership Requirements Our Board members and executives are required to attain ownership of our common stock, within five years of being named to their position, at least equal to the following minimums: | | • | | ● | | Non-employee directors: | | | 5 times annual cash Board retainer | | ● | CEO:• | | | CEO: | | | 5 times annual base salary | | ● | • | | | All other named executives: | | | 3 times annual base salary | |
Shares owned directly by Board members or executives, shares owned through a 401(k) plan or IRA, unvested restricted shares or restricted share unitsRSUs that are subject to time-based vesting, shares previously owned by executives but placed in irrevocable trusts for family members or in revocable trusts, and shares determined to have actually been earned and issuable pursuant to outstanding performance share units (PSUs)PSUs awarded to the director or executive are counted toward these ownership requirements. Unexercised options, unexercised stock appreciation rights, and shares underlying PSUs (except to the limited extent described in the preceding sentence) are not counted toward the ownership requirements. Clawback Provision
Our LTC Plan contains a provision stating that compensation awarded under As of December 31, 2021, all of the plan will be retractedNEOs and directors were in compliance with the share ownership guidelines then applicable to the extent a grant was made to an executive as the result of a material misrepresentation.them.
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Anti-Hedging Policy We consider it inappropriate for any of our
The Company’s anti-hedging policy prohibits employees, including NEOs, and directors or executive officers to hedge or monetize transactions to lock in the value of his or her ownership of Spartan stock. These transactions potentially allow the holder to own our stock without the full risks of ownership. Our Corporate Governance Principles prohibit our directors and executive officers from engaging in any transaction with respectthat is designed to any of our securities the purpose of which is to hedge against or offset any decrease in the market value of our securities.
stock, including transactions in puts, calls, prepaid variable forward contracts, equity swaps, collars and exchange funds. This policy includes stock held directly or indirectly by a director or executive officer, as well as any stock granted to a director or executive officer by the Company as part of the compensation of a director or executive officer. The policy also prohibits our employees, including our NEOs, and directors from engaging in short sales related to the common stock. Under the policy, directors and executive officers are prohibited from pledging shares of the Company’s stock. Pricing of Equity Awards The price used to determine the number of restricted sharesRSUs granted to our executives is generally an average of the closing share price for the 30 calendar days prior to the grant date. We do not “backdate” any equity-based awards. The Board of Directors is committed to maintaining the integrity of our compensation philosophy and programs. As part of this commitment, Spartan Motorsthe Company believes that the disclosure of material nonpublic information should never be manipulated for the purpose of enriching compensation awards. We do not time the release of public information to affect the value of share basedshare-based awards, and we do not time the grant of share basedshare-based awards to take advantage of the disclosure of information. Clawback Provision The Committee has implemented a recoupment (or clawback) policy subjecting incentive compensation and grants under the Company’s equity compensation plans to executive officers to potential recoupment. The Board has the authority to trigger recoupment in the event of (1) a material financial restatement or manipulation of a financial measure on which compensation is based and where the employee’s intentional misconduct contributed to the restatement or manipulation and, but for such misconduct, a lesser amount of compensation would have been paid, or (2) certain misconduct by the executive. The Committee will reevaluate and, if necessary, revise the Company’s recoupment policy to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act once the rules implementing the recoupment requirements have been finalized by the SEC.
43 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS Summary Compensation Table | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | | Salary ($) | | | Bonus(1) ($) | | | Stock Awards(2) ($) | | | Non-Equity Incentive Plan Compen- sation(3) ($) | | | All Other Compen- sation(4) ($) | | | Total ($) | | Daryl M. Adams | 2019 | | $ | 703,460 | (5) | | $ | - | | | $ | 1,749,581 | | | $ | 1,890,000 | | | $ | 52,780 | | | $ | 4,395,821 | | President and CEO | 2018 | | | 674,719 | | | | - | | | | 915,705 | | | | 472,303 | | | | 65,654 | | | | 2,128,381 | | | | 2017 | | | 665,000 | | | | - | | | | 1,197,000 | | | | 1,064,000 | | | | 48,030 | | | | 2,974,030 | | Frederick J. Sohm | 2019 | | | 360,981 | | | | - | | | | 468,644 | | | | 405,000 | | | | 25,254 | | | | 1,259,879 | | CFO | 2018 | | | 257,355 | | | | - | | | | 176,256 | | | | 85,680 | | | | 27,830 | | | | 547,121 | | | | 2017 | | | 315,000 | | | | - | | | | 230,400 | | | | 307,200 | | | | 21,296 | | | | 873,896 | | Thomas C. Schultz | 2019 | | | 312,136 | | | | - | | | | 359,918 | | | | 345,600 | | | | 32,181 | | | | 1,049,835 | | CAO | 2018 | | | 291,194 | | | | - | | | | 158,080 | | | | 122,951 | | | | 30,220 | | | | 602,445 | | | | 2017 | | | 285,250 | | | | - | | | | 206,640 | | | | 275,520 | | | | 106,728 | | | | 874,138 | | Stephen K. Guillaume | 2019 | | | 288,118 | | | | - | | | | 228,697 | | | | 329,400 | | | | 25,808 | | | | 872,023 | | President, Specialty | 2018 | | | 245,426 | | | | - | | | | 133,098 | | | | 200,463 | | | | 21,037 | | | | 600,024 | | Chassis and Vehicles | 2017 | | | 240,057 | | | | - | | | | 173,984 | | | | 217,480 | | | | 8,497 | | | | 640,018 | | Chad M. Heminover(6) | 2019 | | | 286,154 | | | | - | | | | 220,446 | | | | 317,520 | | | | 48,843 | | | | 872,963 | | President, Fleet | 2018 | | | 240,385 | | | | - | | | | 135,000 | | | | 101,538 | | | | 40,766 | | | | 517,689 | | Vehicles and Services | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Daryl Adams
President and Chief Executive Officer | | | 2021 | | | $782,500 | | | $2,554,773 | | | $1,776,000 | | | $34,654 | | | $5,147,927 | | | | 2020 | | | 710,500 | | | 1,978,913 | | | 1,764,000 | | | 42,354 | | | 4,495,767 | | | | 2019 | | | 703,460 | | | 1,749,581 | | | 1,890,000 | | | 52,780 | | | 4,395,821 | | | | Jonathan Douyard
Chief Financial Officer | | | 2021 | | | 434,354 | | | 730,236 | | | 453,561 | | | 16,019 | | | 1,634,170 | | | | 2020 | | | 322,673 | | | 753,377 | | | 408,000 | | | 423,184 | | | 1,907,234 | | | | Stephen Guillaume
President,
Specialty Vehicles | | | 2021 | | | 343,547 | | | 403,539 | | | 261,652 | | | 16,831 | | | 1,025,569 | | | | 2020 | | | 317,450 | | | 281,452 | | | 241,920 | | | 28,764 | | | 869,586 | | | | 2019 | | | 288,118 | | | 228,697 | | | 329,400 | | | 25,808 | | | 872,023 | | | | Todd Heavin
Chief Operating Officer | | | 2021 | | | 393,477 | | | 538,326 | | | 328,385 | | | 37,350 | | | 1,297,538 | | | | 2020 | | | 364,000 | | | 1,064,369 | | | 369,600 | | | 22,752 | | | 1,820,721 | | | | Chad Heminover
President, Fleet
Vehicles and Services | | | 2021 | | | 394,615 | | | 983,214 | | | 345,600 | | | 12,059 | | | 1,735,488 | | | | 2020 | | | 351,700 | | | 454,724 | | | 364,800 | | | 28,488 | | | 1,199,712 | | | | 2019 | | | 286,154 | | | 220,446 | | | 317,520 | | | 48,843 | | | 872,963 | |
(1)
| This column will disclose any one-time discretionary cash bonuses earned and expensed by2021 salary amounts reflect the Company intotal base wages paid to each NEO during the respective year.
|
(2)
| | (2)
| Amounts shown in this column represent the aggregate grant date fair value of stock awards noted in the Grants of Plan-Based Awards table below. The fair values were determined in accordance with the FASB ASC Topic 718, “Stock Compensation.” For information regarding valuation assumptions for the 20192021 awards, see Note 1514 – Stock Based Compensation to the Consolidated Financial Statements for the year ended December 31, 2019.2021. Assuming the highest level of performance is achieved for the PSUs granted in 2019,2021, the grant date fair values of all stock awards granted in 20192021 would have been $3,069,116be $4,319,810 for Mr. Adams, $822,099$1,244,009 for Mr. Sohm, $631,364Douyard, $910,679 for Mr. Schultz, $401,180Heavin, $1,358,785 for Mr. Guillaume,Heminover, and $386,708$647,236 for Mr. Heminover.Guillaume. |
(3)
| | (3)
| Amounts shown in this column represent the annual cash incentive bonuses paid to our named executives pursuant toNEOs under our LTC Plan, as described above. |
| | (4)
| The 2019 amounts reported in this column consist of the following: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 401(k) Matching Contri- bution | | | SERP Matching Contri- bution | | | Dividends Paid on Restricted Stock | | | Health, Life, and LTD Insurance | | | Relocation Payments | | | Country Club Dues Paid | | | Total | | | | Name | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Daryl M. Adams | | $ | 9,500 | | | $ | - | | | $ | 20,584 | | | $ | 13,816 | | | $ | - | | | $ | 8,880 | | | $ | 52,780 | | | | Frederick J. Sohm | | | 9,481 | | | | 997 | | | | 3,574 | | | | 11,202 | | | | - | | | | - | | | | 25,254 | | | | Thomas C. Schultz | | | 6,014 | | | | - | | | | 9,919 | | | | 16,248 | | | | - | | | | - | | | | 32,181 | | | | Stephen K. Guillaume | | | 5,817 | | | | - | | | | 3,186 | | | | 16,805 | | | | - | | | | - | | | | 25,808 | | | | Chad M. Heminover | | | 5,279 | | | | - | | | | 1,347 | | | | 15,479 | | | | 26,738 | | | | - | | | | 48,843 | |
| | Daryl Adams | | | $8,990 | | | $1,429 | | | $11,029 | | | $13,206 | | | $34,654 | | | | Jonathan Douyard | | | 9,750 | | | — | | | 3,065 | | | 3,204 | | | 16,019 | | | | Stephen Guillaume | | | 8,186 | | | 208 | | | 6,400 | | | 2,037 | | | 16,831 | | | | Todd Heavin | | | 9,750 | | | — | | | 27,600 | | | — | | | 37,350 | | | | Chad Heminover | | | 7,704 | | | 203 | | | 760 | | | 3,392 | | | 12,059 | |
(5)
(a)
| For Mr. Adams’ salaryAdams, these costs include $9,611 for 2019 includes an additional payment of $11,253.85 made on February 15, 2019 as base salarya club membership and $3,595 for 2018, which was inadvertently not paid in 2018 because of a delay in implementing his 2018 salary increase. | | | | | (6)
| Mr.spousal travel. For Messrs. Douyard, Heminover joined the company as Vice President of Operations and Business Development – Fleet Vehicles and Services in December 2017, and was promoted to President of Fleet Vehicles and Services in May 2018.
| Guillaume, these amounts are for spousal travel. |
44 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
Grants of Plan-Based Awards During 2019 2021 The following table provides information concerning each grant of a plan-based award made to the named executivesNEOs in the last completed fiscal year. Grants of Plan-Based Awards | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | | Grant Date Fair Value of Stock and Option Awards(4) | | | | Grant | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | | | | | | | | | Name | Date | | ($) | | | ($) | | | ($) | | | (#) | | | (#) | | | (#) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Daryl M. Adams | 4/15/19 | | $ | 525,000 | | | $ | 1,050,000 | | | $ | 2,100,000 | | | | - | | | | - | | | | - | | | | - | | | $ | - | | | | 4/15/19 | | | - | | | | - | | | | - | | | | 55,809 | | | | 111,617 | | | | 223,234 | | | | | | | | 1,319,535 | | | | 4/15/19 | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | 47,836 | | | | 430,046 | | Frederick J. Sohm | 4/15/19 | | | 112,500 | | | | 225,000 | | | | 450,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4/15/19 | | | - | | | | - | | | | - | | | | 14,949 | | | | 29,898 | | | | 59,796 | | | | - | | | | 353,455 | | | | 4/15/19 | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | 12,813 | | | | 115,189 | | Thomas C. Schultz | 4/15/19 | | | 96,000 | | | | 192,000 | | | | 384,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4/15/19 | | | - | | | | - | | | | - | | | | 11,481 | | | | 22,961 | | | | 45,922 | | | | - | | | | 271,447 | | | | 4/15/19 | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | 9,841 | | | | 88,471 | | Stephen K. Guillaume | 4/15/19 | | | 91,500 | | | | 183,000 | | | | 366,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4/15/19 | | | - | | | | - | | | | - | | | | 7,295 | | | | 14,590 | | | | 29,180 | | | | - | | | | 172,483 | | | | 4/15/19 | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | 6,253 | | | | 56,214 | | Chad M. Heminover | 4/15/19 | | | 88,200 | | | | 176,400 | | | | 352,800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4/15/19 | | | - | | | | - | | | | - | | | | 7,032 | | | | 14,064 | | | | 28,128 | | | | - | | | | 166,263 | | | | 4/15/19 | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | 6,027 | | | | 54,183 | |
| | | | | AIC | | | | | | $600,000 | | | $1,200,000 | | | $2,400,000 | | | — | | | — | | | — | | | — | | | — | | | | Daryl Adams | | | PSUs | | | 3/30/21 | | | — | | | — | | | — | | | 18,028 | | | 36,055 | | | 72,110 | | | — | | | $1,765,036 | | | | | | | RSUs | | | 3/30/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 21,507 | | | 789,737 | | | | | | | AIC | | | | | | 153,230 | | | 306,460 | | | 612,920 | | | — | | | — | | | — | | | — | | | — | | | | Jonathan Douyard | | | PSUs | | | 3/30/21 | | | — | | | — | | | — | | | 5,248 | | | 10,495 | | | 20,990 | | | — | | | 513,772 | | | | | | | RSUs | | | 3/30/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,895 | | | 216,464 | | | | | | | AIC | | | | | | 103,830 | | | 207,660 | | | 415,320 | | | — | | | — | | | — | | | — | | | — | | | | Stephen Guillaume | | | PSUs | | | 3/30/21 | | | — | | | — | | | — | | | 2,489 | | | 4,978 | | | 9,956 | | | — | | | 243,697 | | | | | | | RSUs | | | 3/30/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,353 | | | 159,842 | | | | | | | AIC | | | | | | 118,980 | | | 237,960 | | | 475,920 | | | — | | | — | | | — | | | — | | | — | | | | Todd Heavin | | | PSUs | | | 3/30/21 | | | — | | | — | | | — | | | 3,803 | | | 7,606 | | | 15,212 | | | — | | | 372,352 | | | | | | | RSUs | | | 3/30/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,520 | | | 165,974 | | | | | | | AIC | | | | | | 120,000 | | | 240,000 | | | 480,000 | | | — | | | — | | | — | | | — | | | — | | | | Chad Heminover | | | PSUs | | | 3/30/21 | | | — | | | — | | | — | | | 3,836 | | | 7,672 | | | 15,344 | | | — | | | 375,571 | | | | | | | RSUs | | | 3/30/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 16,548 | | | 607,643 | |
(1)
| The amounts reported in these three columns relate to the annual cash incentive awards granted to the executives in April 2019March 2021 pursuant to our LTC Plan. These awards were payable based on various objectives to be achieved during 2019,2021, as discussed under “Compensation Discussion and Analysis – Annual Cash Incentive Awards” above. In March 2020,2022, the actual amounts payable to the executives pursuant to these awards were determined and paid as reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. |
(2)
| | (2)
| The amounts reported in these three columns reflect the grant of PSUs in 20192021 pursuant to our LTC Plan. The PSUs represent shares of the Company’s common stock and are issuable to executives following the three-year performance period of 20192021 - 20212023 based on the Company’s TSR relative to the Dow Jones Commercial Vehicle Index and cumulative GAAP net income over such performance period, as discussed under “Compensation Discussion and Analysis – Long-Term Equity Incentive Awards” above. Each threshold amount assumes an LTIC multiple of 0.5X; each target amount assumes an LTIC multiple of 1.0X; and each maximum amount represents the maximum number of shares issuable pursuant to the PSUs granted, which for 20192021 was a multiple of 2.0X. |
(3)
| | (3)
| These are the RSUs granted to each executive on April 15, 2019,March 30, 2021, as discussed under “Compensation Discussion and Analysis – Long-Term Equity Incentive Awards” above. All such RSUs vest ratably over a three-year period. period, with the exception that Mr. Heminover also received a grant of 12,000 RSUs listed in this column that vests on the third anniversary of the award. |
(4)
| | (4)
| Amounts reported in this column represent the aggregate grant date fair value of the equity-based awards (PSUs and RSUs) and were computed in accordance with FASB ASC Topic 718. |
The Company paid the compensation set forth in the Summary Compensation Table and the Grants of Plan Based Awards table pursuant to the philosophy, procedures, and practices set forthas described in the “Compensation Discussion and Analysis” section above. 45 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
Outstanding Equity Awards at December 31, 2019 2021 The following table provides information concerning certain outstanding equity awards as of December 31, 2019.2021. Outstanding Equity Awards at Fiscal Year-End | | Stock Awards | | | Name | | Number of Shares or Units of Stock That Have Not Vested(1) (#) | | | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(3) (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) ($) | | | | | | | | | | | | | | | | | | | | Daryl M. Adams | | | 253,673 | | | $ | 4,586,408 | | | | 111,617 | | | $ | 2,018,035 | | Frederick J. Sohm | | | 48,558 | | | | 877,929 | | | | 29,898 | | | | 540,556 | | Thomas C. Schultz | | | 57,612 | | | | 1,041,625 | | | | 22,961 | | | | 415,135 | | Stephen K. Guillaume | | | 38,108 | | | | 688,993 | | | | 14,590 | | | | 263,787 | | Chad M. Heminover | | | 19,498 | | | | 352,524 | | | | 14,064 | | | | 254,277 | |
| | Daryl Adams | | | 83,445 | | | $4,099,653 | | | 246,248 | | | $11,887,102 | | | | Jonathan Douyard | | | 26,150 | | | 1,284,750 | | | 65,252 | | | 1,706,039 | | | | Stephen Guillaume | | | 13,038 | | | 640,557 | | | 34,783 | | | 1,620,160 | | | | Todd Heavin | | | 24,666 | | | 1,211,841 | | | 113,078 | | | 2,852,488 | | | | Chad Heminover | | | 27,449 | | | 1,348,569 | | | 55,603 | | | 2,132,242 | |
(1)
| This column reports the total number of shares of restricted stock and shares of stock underlying outstanding RSUs that have not vested as of December 31, 2019.2021. Vesting dates for these outstanding awards are as follows: |
| | Daryl Adams | | | 19,056 | | | 20,638 | | | 15,945 | | | 20,637 | | | 7,169 | | | | Jonathan Douyard | | | — | | | 12,093 | | | — | | | 12,092 | | | 1,965 | | | | Stephen Guillaume | | | 2,770 | | | 3,367 | | | 2,084 | | | 3,366 | | | 1,451 | | | | Todd Heavin | | | — | | | 11,579 | | | — | | | 11,580 | | | 1,507 | | | | Chad Heminover | | | 2,702 | | | 4,611 | | | 2,009 | | | 4,611 | | | 13,516 | |
Named Executed Officer
(2)
| Vesting Dates
| Daryl M. Adams
| 132,416 shares on 3/30/2020
15,946 shares on 4/15/2020
54,365 shares on 3/30/2021
| 15,945 shares on 4/15/2021
19,056 shares on 3/30/2022
15,945 shares on 4/15/2022
| Frederick J. Sohm
| 24,365 shares on 3/30/2020
4,271 shares on 4/15/2020
9,088 shares on 3/30/2021
| 4,271 shares on 4/15/2021
2,292 shares on 3/30/2022
4,271 shares on 4/15/2022
| Thomas C. Schultz
| 35,097 shares on 3/30/2020
3,281 shares on 4/15/2020
9,384 shares on 3/30/2021
| 3,280 shares on 4/15/2021
3,290 shares on 3/30/2022
3,280 shares on 4/15/2022
| Stephen K. Guillaume
| 21,184 shares on 3/30/2020
2,085 shares on 4/15/2020
7,901 shares on 3/30/2021
| 2,084 shares on 4/15/2021
2,770 shares on 3/30/2022
2,084 shares on 4/15/2022
| Chad M. Heminover
| 5,384 shares on 3/30/2020
2,009 shares on 4/15/2020
5,385 shares on 3/30/2021
| 2,009 shares on 4/15/2021
2,702 shares on 3/30/2022
2,009 shares on 4/15/2022
|
(2)
| The market value of each equity awardunvested shares is determined by multiplying the closing market price of Spartan Motors’the Company’s common stock as of December 31, 20192021 ($18.08)49.13) by the number of shares underlying each award. unvested shares. |
(3)
| | | (3)
| This column reports the number of shares underlying unearned PSUs, assuming performance at target levels. The actualPSUs. |
In calculating the number of performance shares and their value, we compare the Company’s performance through 2021 under each outstanding performance share grant against the threshold, target, and maximum performance levels for the grant and report in this column the applicable potential or forecasted payout amount. If the performance is between levels, we report the potential payout at the next highest level. | | Daryl Adams | | | 188,560 | | | 57,688 | | | | Jonathan Douyard | | | 48,460 | | | 16,792 | | | | Stephen Guillaume | | | 26,818 | | | 7,965 | | | | Todd Heavin | | | 100,908 | | | 12,170 | | | | Chad Heminover | | | 43,328 | | | 12,275 | |
(a)
| For the shares that will be earned can range from 0%vest on 12/31/2022, the PSUs subject to 200% of the target amount, as determined after the end of thecumulative GAAP net income and TSR performance period based on the levelmetrics are forecast and shown at which the applicable performance goals have been achieved. The vesting date for all unearned PSUs shown in this column is December 31, 2021, the last day of the three-year performance period. | maximum. |
(b)
| For the shares that vest on 12/31/2023, the PSUs subject to the cumulative net GAAP income performance metric are forecast and shown at target. The PSUs subject to the TSR performance metric are forecast and shown at maximum. |
46 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
Stock Vested in 2019 2021 The following table provides information concerning the vesting of restricted stock during 20192021 for each of the named executives. | | Stock Awards | | Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting(1) ($) | Daryl M. Adams | | 163,502 | | | $ 1,443,723 | | Frederick J. Sohm | | 51,256 | | | 452,590 | | Thomas C. Schultz | | 50,131 | | | 442,657 | | Stephen K. Guillaume | | 26,274 | | | 231,999 | | Chad M. Heminover | | 2,684 | | | 23,700 | |
| | Daryl Adams | | | 83,779 | | | $3,073,407 | | | | Jonathan Douyard | | | 10,129 | | | 371,937 | | | | Todd Heavin | | | 10,075 | | | 369,954 | | | | Chad Heminover | | | 10.489 | | | 384,390 | | | | Stephen Guillaume | | | 11,901 | | | 436,253 | |
(1)
| The amounts in this column are determined by multiplying the number of shares of stock vesting by the market value of the underlying shares on the vesting date (or, if the vesting date is not a trading day, the trading day immediately preceding the vesting date). |
Non-Qualified Deferred Compensation
The following table provides information concerning non-qualified deferred compensation for 2019. This table should be read in conjunction with the narrative discussion that follows the table.
Non-Qualified Deferred Compensation | | | | | | | | | | | | | | | | | | Name | Plan | | Executive Contributions In Last FY ($) | | | Registrant Contributions In Last FY(1) ($) | | | Aggregate Earnings In Last FY(2) ($) | | | Aggregate Withdrawals/ Distributions In Last FY ($) | | | Aggregate Balance At Last FYE ($) | | Daryl M. Adams | SERP | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | Frederick J. Sohm | SERP | | | 32,488 | | | | 997 | | | | 19,266 | | | | - | | | | 110,052 | | Thomas C. Schultz | SERP | | | - | | | | - | | | | - | | | | - | | | | - | | Stephen K. Guillaume | SERP | | | - | | | | - | | | | - | | | | - | | | | - | | Chad M. Heminover | SERP | | | - | | | | - | | | | - | | | | - | | | | - | |
(1)
| Participant contributions to the SERP are matched by the Company at the discretion of the Board of Directors and included in the “All Other Compensation” column in the Summary Compensation Table above.
| | | (2)
| Earnings on the SERP are determined by investment choices made by the SERP participants from options determined by the Company. The investment choices consist of specified mutual funds (primarily those offered by Fidelity Investments).
|
The Company maintains a Supplemental Executive Retirement Plan (the “SERP”) is, a non-qualified defined contribution plan administered by the Human Resources and Compensation Committee, that allows eligible participants to defer compensation and incentive amounts and provides for discretionary matching and profit-sharing type contributions by the Company. The SERP is operated much like the Company’s 401(k) plan, but participation is limited to a select group of employees determined by the Board of Directors. The SERP is a funded plan, however, the participants are merely general creditors of the Company. The SERP’s assets are subject to the claims of other creditors of the Company in some circumstances. In 2021, none of the NEOs participated in the SERP. The SERP allows participants to defer up to 25% of their base salary and up to 50% of their cash bonuses each year. At the beginning of each plan year, the Human Resources and Compensation Committee may elect to match all or a specified portion of each participant’s contribution for that year. The Human Resources and Compensation Committee will generally provide that each participant will receive a matching contribution equal to the matching contribution that the participant would have received under the Company’s 401(k) plan but for limitations imposed by the Code.federal tax law. In addition, the Human Resources and Compensation Committee may, in its discretion, make an additional matching contribution and/or a profit-sharing type contribution to the SERP each year. Contributions to the SERP are transferred to an irrevocable rabbi trust where each participant has a bookkeeping account in histheir name. Earnings on each participant’s SERP balance are determined by the investment election of the participants. The investment options available to participants consist primarily of mutual funds offered by Fidelity Investments. All participants are always fully vested in their elective deferrals, and such deferrals will be distributed upon termination of employment, death, disability, or a change in control of the Company. Amounts are also distributable upon an unforeseeable emergency. Matching and profit-sharing contributions contributed by the Company will vest at a rate of 20% per year over a five-year period and may be distributed upon the later of attainment of age 60 and termination of employment, or upon earlier death, disability, or change in control of the Company. Any unvested matching or profit-sharing contributions will become fully vested if a participant retires upon reaching age 60, dies, or becomes disabled. Matching contributions and profit-sharing contributions may be forfeited if the participant enters into competition with the Company, divulges confidential information about the Company, or induces Company employees to leave their employment to compete with the Company. Distributions from the SERP may be made in a lump sum or in an installment plan not to exceed 10 years (at the election of the participant). 47 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
Severance Benefits 34We maintain a Management Severance Plan (“Severance Plan”) for the primary purpose of providing certain severance benefits to a select group of our key management employees designated by our Committee. All of our NEOs participate in the Severance Plan.
Under the Severance Plan, a participant who is terminated by the Company without cause (as defined in the Severance Plan) is entitled to receive the following severance benefits:
Potential Payments Upon TerminationBase salary continuation (at the rate in effect immediately prior to qualifying termination or, Change-in-Control
The following table summarizesif greater, the payments and benefits payablerate in effect at any time within 180 days prior to the Company’s named executives uponqualifying termination) for a period of 18 months following termination for our CEO and a period of employment12 months for the other NEOs.
If the threshold is satisfied for annual incentive cash bonus eligibility under the LTC Plan for the fiscal year in connection with eachwhich the qualifying termination occurs, the severance benefit will include a pro rata portion of the triggering events set forthtarget incentive bonus for that year (based on the number of complete calendar months that have elapsed in that year prior to the table below, assuming,qualifying termination). Any such pro rata bonus will be calculated and paid following completion of the performance year in each situation,question. If the executive enrolls in COBRA, then during the applicable salary continuation period (18 months for our CEO and 12 months for the other NEOs), the Company will pay a portion of the executive’s COBRA premiums equal to the portion of such premiums (if any) the Company would have paid with respect to the executive had employment with the Company continued. All outstanding unvested shares of restricted stock and RSUs will be fully vested as of the date of termination. PSUs that are outstanding at the triggering event took place on December 31, 2019. The closing market pricedate of Spartan Motorstermination will generally be settled (i.e., shares of common stock was $18.08 asissued to the executive) at the time the PSU would have otherwise been settled in accordance with its terms, following completion of December 31, 2019. The summary provided below isthe relevant performance period and subject to the actual provisionsachievement of the performance conditions for such PSUs, but with the executive receiving only a pro rata portion of the shares the executive would have otherwise received (based on the number of complete calendar months that have elapsed in the performance period prior to the qualifying termination). The executive will be entitled to receive reasonable outplacement services during the applicable salary continuation period (18 months for our CEO and 12 months for the other NEOs), up to a maximum of $10,000 per year. Notwithstanding the foregoing, if the employment of an NEO is terminated by the Company without cause (as determined by the Committee) or by the executive for “good reason” following a “change in control” of the Company, as each applicable plan.Triggering Eventof those terms is defined in our 2016 Stock Plan, then the severance benefit payable to our CEO is equal to twice his annual salary plus the target annual incentive cash award (without proration), and Payments/Benefits
| | | | | | | | | | | | | | Termination of Employment – Change in Control | | | Termination of Employment - Disability | | | Termination of Employment - Without Cause | | Daryl M. Adams | | | | | | | | | | | | | Early vesting of equity awards(1) | | $ | 5,114,202 | | | $ | 5,114,202 | | | $ | 5,114,202 | | Severance(2) | | | 1,400,000 | | | | 1,065,000 | | | | 1,065,000 | | Annual cash incentive bonus(3) | | | 2,100,000 | | | | 1,050,000 | | | | 1,050,000 | | SERP Plan(4) | | | - | | | | - | | | | - | | Total | | $ | 8,614,202 | | | $ | 7,229,202 | | | $ | 7,229,202 | | | | | | | | | | | | | | | | Frederick J. Sohm | | | | | | | | | | | | | Early vesting of equity awards(1) | | $ | 1,019,305 | | | $ | 1,019,305 | | | $ | 1,019,305 | | Severance(2) | | | 375,000 | | | | 385,000 | | | | 385,000 | | Annual cash incentive bonus(3) | | | 225,000 | | | | 225,000 | | | | 225,000 | | SERP Plan(4) | | | 110,052 | | | | 110,052 | | | | 110,052 | | Total | | $ | 1,729,357 | | | $ | 1,739,357 | | | $ | 1,739,357 | | | | | | | | | | | | | | | Thomas C. Schultz | | | | | | | | | | | | | Early vesting of equity awards(1) | | $ | 1,150,199 | | | $ | 1,150,199 | | | $ | 1,150,199 | | Severance(2) | | | 320,000 | | | | 330,000 | | | | 330,000 | | Annual cash incentive bonus(3) | | | 192,000 | | | | 192,000 | | | | 192,000 | | SERP Plan(4) | | | - | | | | - | | | | - | | Total | | $ | 1,662,199 | | | $ | 1,672,199 | | | $ | 1,672,199 | | | | | | | | | | | | | | | | Stephen K. Guillaume | | | | | | | | | | | | | Early vesting of equity awards(1) | | $ | 757,983 | | | $ | 757,983 | | | $ | 757,983 | | Severance(2) | | | 305,000 | | | | 315,000 | | | | 315,000 | | Annual cash incentive bonus(3) | | | 183,000 | | | | 183,000 | | | | 183,000 | | SERP Plan(4) | | | - | | | | - | | | | - | | Total | | $ | 1,245,983 | | | $ | 1,255,983 | | | $ | 1,255,983 | | | | | | | | | | | | | | | Chad M. Heminover | | | | | | | | | | | | | Early vesting of equity awards(1) | | $ | 419,027 | | | $ | 419,027 | | | $ | 419,027 | | Severance(2) | | | 330,000 | | | | 340,000 | | | | 340,000 | | Annual cash incentive bonus(3) | | | 176,400 | | | | 176,400 | | | | 176,400 | | SERP Plan(4) | | | - | | | | - | | | | - | | Total | | $ | 925,427 | | | $ | 935,427 | | | $ | 935,427 | |
(1)
| Upon a named executive’s termination without cause, our Management Severance Plan generally provides for (a) accelerated vesting of all unvested shares of restricted stock and all unvested RSUs held by the named executive and (b) pro rata vesting (based on full calendar months prior to termination) of PSUs held by the named executive, paid at end of the performance period based on actual performance. See “Severance Benefits” above for more information.
| | | (2)
| Pursuant to our Management Severance Plan, upon termination of employment without cause (other than in connection with a change in control of the Company), each named executive would be eligible to receive a severance benefit consisting of a continuation of his base salary, reimbursement for reasonable outplacement services (up to $10,000 per year), and Company-paid COBRA premiums for a period of 18 months for our CEO and 12 months for each other named executive. Upon termination of employment without cause or for good reason in connection with a change in control of the Company, our LTC Plan provides that our named executives will generally be eligible to receive severance equal to a multiple of the executive's annual salary (2X for our CEO and 1X for the other named executives), which severance would be payable in bi-weekly installments. In addition, the Company would be required to pay COBRA premiums for a period of 18 months for our CEO and 12 months for each other named executive.
| | | (3)
| Pursuant to our Management Severance Plan, upon termination of employment without cause (other than in connection with a change in control of the Company), each named executive’s severance benefit would include a prorated portion (based on the number of full calendar months that have elapsed in the performance year prior to termination) of the target annual cash incentive bonus otherwise payable for that performance year, assuming the threshold performance level is met. Upon termination of employment without cause or for good reason in connection with a change in control of the Company, our LTC Plan provides that our named executives’ severance benefits will include a multiple of the executive's target annual incentive cash bonus for that performance year (2X for our CEO and 1X for the other named executives), which benefit would be payable in bi-weekly installments with the executive’s salary continuation described in footnote (2) above.
| | | (4)
| Amounts reflect accumulated balance, earnings to date on the balance, and Company contributions for the SERP.
|
As described under “Severance Benefits” above, anAn executive’s receipt of these severance benefits pursuant to our Management Severance Plan is conditioned on the participant executing a release of claims in favor of the Company and complying with certain non-competition, non-solicitation, confidentiality, and other provisions in favor of the Company for the applicable salary continuation period (18 months for our CEO and 12 months for ourthe other named executives)NEOs).
In addition
This summary of the Severance Plan is subject in its entirety to the actual provisions of the plan. Potential Payments Upon Termination or Change-in-Control The following table summarizes the payments and benefits described above, our LTC Plan provides for a prorated paymentpayable to the Company’s NEOs upon termination of employment in connection with each of the annual cash incentive bonus actually earned for a performance year if a named executive has a “qualifying retirement” duringtriggering events set forth in the performance year,table below, assuming, in each situation, that the triggering event took place on December 31, 2021. The closing market price of The Company’s common stock was $49.13 on December 31, 2021. The summary provided below is subject to the actual provisions of each applicable plan. Upon voluntary resignation, no payments are due to any NEO in the table below. 48 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
Triggering Events, Payments and our form equity award agreements generally provide that unvested equity awards are not forfeited in event of a “qualifying retirement.” However, a “qualifying retirement” can only occur after the named executive has reached age 62 (with at least five years of continuous employment with the Company), and none of our named executivesBenefits | | Daryl Adams
| | | | | | | | | | | | | | | | Vesting of equity awards | | | $7,778,098 | | | $7,778,098 | | | $ | | | $10,503,011 | | | | Severance | | | 1,600,000 | | | 1,200,000 | | | | | | — | | | | Annual incentive cash | | | 2,400,000 | | | 1,200,000 | | | | | | 1,776,000 | | | | COBRA & Outplacement | | | 47,830 | | | 47,830 | | | | | | — | | | | Total | | | $ 11,825,928 | | | $ 10,225,928 | | | $ — | | | $12,279,011 | | | | | | | | | | | | | | | | | | | | Jonathan Douyard
| | | | | | | | | | | | | | | | Vesting of equity awards | | | $2,250,236 | | | $2,250,236 | | | $ | | | $2,990,789 | | | | Severance | | | 437,800 | | | 437,800 | | | | | | — | | | | Annual incentive cash | | | 306,460 | | | 306,460 | | | | | | 453,561 | | | | COBRA & Outplacement | | | 34,495 | | | 34,495 | | | | | | — | | | | Total | | | $ 3,028,991 | | | $ 3,028,991 | | | $ — | | | $3,444,350 | | | | | | | | | | | | | | | | | | | | Stephen Guillaume
| | | | | | | | | | | | | | | | Vesting of equity awards | | | $1,079,746 | | | $1,079,746 | | | $ | | | $1,299,341 | | | | Severance | | | 346,100 | | | 346,100 | | | | | | — | | | | Annual incentive cash | | | 207,660 | | | 207,660 | | | | | | 261,697 | | | | COBRA & Outplacement | | | 36,486 | | | 36,486 | | | | | | — | | | | Total | | | $ 1,669,992 | | | $ 1,669,992 | | | $ — | | | $1,561,038 | | | | | | | | | | | | | | | | | | | | Todd Heavin
| | | | | | | | | | | | | | | | Vesting of equity awards | | | $2,988,938 | | | $2,988,938 | | | $ | | | $4,064,328 | | | | Severance | | | 396,600 | | | 396,600 | | | | | | — | | | | Annual incentive cash | | | 237,960 | | | 237,960 | | | | | | 328,385 | | | | COBRA & Outplacement | | | 27,185 | | | 27,185 | | | | | | — | | | | Total | | | $ 3,650,683 | | | $ 3,650,683 | | | $ — | | | $4,392,713 | | | | | | | | | | | | | | | | | | | | Chad Heminover
| | | | | | | | | | | | | | | | Vesting of equity awards | | | $2,183,779 | | | $2,183,779 | | | $ | | | $2,789,847 | | | | Severance | | | 400,000 | | | 400,000 | | | | | | — | | | | Annual incentive cash | | | 240,000 | | | 240,000 | | | | | | 345,600 | | | | COBRA & Outplacement | | | 34,495 | | | 34,495 | | | | | | — | | | | Total | | | $ 2,858,274 | | | $ 2,858,274 | | | $ — | | | $3,135,447 | |
(1)
| In the event of a “qualified retirement” during the performance year (defined as the NEO reaching age 62 and 5 years of continuous service with the Company), our LTC Plan provides for a prorated payment of the annual cash incentive bonus actually earned for a performance year and our equity award agreements generally provide that unvested equity awards are not forfeited. However, none of our NEOs had reached age 62 as of December 31, 2021 and so would not meet the requirements for a qualified retirement. |
(2)
| In the event of an NEO’s termination due to death or disability, per the terms of the LTCP and the 2016 Stock Plan, the NEO would be entitled to receive accelerated vesting of all outstanding unvested shares of restricted stock and RSUs and all unvested PSUs at target, and a pro rata portion of the target incentive bonus for that year (based on the number of complete calendar months that have elapsed in that year prior to the qualifying termination). Any such pro rata bonus will be calculated and paid following completion of the performance year in question. |
49 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Summary Compensation Table | |
CEO Pay Ratio As required by SEC rules, we are providing the following information to explain the relationship between the annual total compensation of Mr. Adams, who served as the President and CEO in 2021, and the annual total compensation of the median employee of the Company, excluding our CEO. As of December 31, 2019.CEO Pay Ratio
Spartan Motors’ policy2021, the Company employed approximately 3,250 employees, all located within the United States. The Company’s philosophy is to pay our employees competitively and equitably with similar positions in the applicable labor marketmarkets by providing a combination of competitive base pay, incentives, and other benefits. We benchmark our compensation levels by position and adjust compensation to matchalign with the applicable labor market. By doing so, we believe weit allows us to maintain a high quality and stable workforce.
We are disclosing the following pay ratio, which compares
To identify, and determine the annual total compensation of, the median employee, we used the following methodology: The Company selected December 31, 2021 as the determination date for identifying the median employee for purposes of this pay ratio disclosure. We examined the annual compensation paid to each of our employees (including full-time and part-time and contract employees, employed directly by Spartan, but excluding contract employees employed through a third party) other than Mr. Adams (our President and CEO) and the annual total compensation of Mr. Adams.We identified our median employee using the following methodology, consistent with SEC rules:
We first examined the annual compensation paid to each of our full-time and part-time employees as well as contract employees directly employed by Spartan, that were employed as of December 31, 2019,2021. This consisted of a total of 2,660approximately 3,250 employees (excluding Mr. Adams), all located within the United States.
The annual compensation used for this analysis included each element of compensation listed in the Summary Compensation Table below, along withabove, as well as employer contributions toward benefits such as health insurance that are available on an equal basis to all employees. employees (which are not required to be included in the Summary Compensation Table). We annualized the total compensation for any employee who was not employed for all of 2019. We did not annualize the compensation for contract employees employed directly by Spartan who were not employed for all of 2019.2021. We did not make any other adjustments to any employee’s compensation or exclude any employees for this analysis. We then ranked all of our employees (except for Mr. Adams) in terms of total compensation from highest to lowest and identified the employee that ranked as the median (1,330 on the list of 2,660 employees).median. Following this methodology, the components of our pay ratio disclosure for 20192021 were reasonably estimated as follows: The annual total compensation of the median employee was $43,273. The annual total compensation of our CEO, Mr. Adams, was $5,163,910. The ratio of our CEO’s compensation to the compensation of the median employee was 119:1. ●
50 | The median of the total annual compensation of all of our employees other than Mr. Adams was $54,178.
| ●
| The total compensation of Mr. Adams was $4,084,399 (including benefits available on an equal basis to all employees that are not required to be included in compensation disclosed in the summary compensation table).
| ●
| The ratio of Mr. Adams’ compensation to the compensation of the median employee was 75:1.
Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS Compensation of Directors
Compensation for the Board of Directors is established by the full Board based on input from external compensation experts. Decisions regarding Spartan Motors’the Company’s non-employee director compensation program are informed by market practice data gathered from the same peer group companies utilized for executive compensation benchmarking. The following table provides information concerning the compensation ofpaid to the directors for Spartan’sthe Company’s last completed fiscal year. | | | | | | | | | | | Name(1) | | Fees Earned or Paid in Cash ($) | | | Stock Awards(2) ($) | | | Total ($) | | James A. Sharman | | $ | 100,000 | | | $ | 280,019 | | | $ | 380,019 | | Thomas R. Clevinger | | | 50,000 | | | | 170,005 | | | | 220,005 | | Richard F. Dauch | | | 50,000 | | | | 170,005 | | | | 220,005 | | Angela K. Freeman(3) | | | 25,000 | | | | 56,915 | | | | 81,915 | | Ronald E. Harbour | | | 51,250 | | | | 170,005 | | | | 221,255 | | Paul A. Mascarenas | | | 67,500 | | | | 170,005 | | | | 237,505 | | Dominic A. Romeo | | | 60,000 | | | | 170,005 | | | | 230,005 | | Andrew M. Rooke | | | 50,000 | | | | 170,005 | | | | 220,005 | | Jeri Isbell(4) | | | 13,750 | | | | 70,007 | | | | 83,757 | |
| | James Sharman, Chair | | | $110,000 | | | $142,314 | | | $252,314 | | | | Daryl Adams(1) | | | — | | | — | | | — | | | | Thomas Clevinger | | | 60,000 | | | 101,627 | | | 161,627 | | | | Richard Dauch(3) | | | 56,739 | | | 101,627 | | | 158,366 | | | | Michael Dinkins | | | 67,500 | | | 101,627 | | | 169,127 | | | | Carl Esposito(4) | | | — | | | — | | | — | | | | Angela Freeman | | | 70,000 | | | 101,627 | | | 171,627 | | | | Ronald Harbour | | | 60,000 | | | 101,627 | | | 161,627 | | | | Paul Mascarenas(5) | | | 70,000 | | | 101,627 | | | 171,627 | | | | Terri Pizzuto(6) | | | 45,000 | | | 101,627 | | | 146,627 | | | | Mark Rourke(7) | | | 45,000 | | | 101,627 | | | 146,627 | |
(1)
| Mr. Adams received no additional compensation for his service as a director. All compensation paid to Mr. Adams as president and CEO is reported in the Summary Compensation Table above. |
(2)
| | (2)
| Amounts shown in this column represent the aggregate grant date fair value of the stock awards granted during 2019.2021. As of December 31, 2019,2021, each independent director had outstanding the following aggregate number of unvested stock awards: |
Name
| James Sharman, Chair | Outstanding
Stock Awards
- # of shares
| | 3,837 | | James A. Sharman
| Thomas Clevinger | 31,340
| | 2,740 | | Thomas R. Clevinger
| Richard Dauch(3) | 19,014
| | — | | Richard F. Dauch
| Michael Dinkins | 19,014
| | 2,740 | | Angela K. Freeman
| Carl Esposito(4) | 6,345
| | — | | Ronald E. Harbour
| Angela Freeman | 19,014
| | 2,740 | | Paul A. Mascarenas
| Ronald Harbour | 19,014
| | 2,740 | | Dominic A. Romeo
| Paul Mascarenas | 19,014
| | 2,740 | | Andrew M. Rooke
| Terri Pizzuto | 19,014
| | 4,137 | | | | Mark Rourke | | | 4,137 | |
(3)
(3)
| Ms. FreemanMr. Dauch resigned from the Board on July 26, 2021.
|
(4)
| As Mr. Esposito joined the Board on August 5, 2019.March 14, 2022, he did not receive any compensation in 2021. |
(5)
| As Mr. Mascarenas elected to receive 33% of his cash retainer in stock under the terms of the Directors’ Stock Purchase Plan (discussed below), he received $22,993 of fees earned in the form of stock. |
(4)
(6)
| Ms. Isbell resigned fromPizzuto joined the Board effective April 10, 2019. on January 4, 2021. |
(7)
| Mr. Rourke joined the Board on January 4, 2021. |
51 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Compensation of Directors | |
In 2019,2021, each non-employee director other than the ChairmanChair of the Board received an annual retainer of $50,000.$60,000. The ChairmanChair of the Board received an annual retainer of $100,000.$110,000. Each of the chairs of the Human Resources and Compensation Committee the Audit Committee, and the NominatingGovernance and Corporate GovernanceSustainability Committee received an additional annual feeretainer of $10,000.For 2020, the only changes to the cash fees to be paid to our non-employee directors are (1) the additional fee payable to$10,000 while the chair of the Audit Committee has been increased from $10,000 to $15,000, and (2) thereceived an additional annual retainer payable to each director has been increased from $50,000 to $60,000. These changes were made to align with the benchmark compensation survey conducted by Mercer. All cash fees paid to our directors are paid quarterly in arrears.
of $15,000.Equity-Based Compensation Historically, the Company’s practice was to grant each non-employee director shares of the Company’s common stock in March of each year with a value of $70,000, except the Chairman of the Board, who was granted shares with a value of $140,000. These shares were considered to have been granted for past service of the directors (i.e., in arrears).
Effective with the annual shareholder meeting held in 2019, this practice was discontinued. Instead, non-employee
Non-employee directors serving on the Board on the date of the annual meeting (other than any directors retiring from the Board on that date) will beare awarded restricted stock units (RSUs)RSUs with a value of $100,000, except that the Board Chair receives RSUs with a value of the RSUs granted to the Chairman of the Board will be $140,000. The number of RSUs to be granted is to be calculated using the stock price on the trading day immediately preceding the grant date. All RSUs vest in full on the one-year anniversary of the grant date. These RSUs are considered to be granted for future service of the directors ( i.e., in advance). As a result, non-employee directors who join the Board after the annual meeting will receive a prorated grant of RSUs based on the number of weeks served prior to the next annual meeting. As a result of this change in practice in 2019, non-employee directors received two equity-based grants in 2019: a grant of shares in March pursuant to the historical practice and a grant of RSUs in May pursuant to the new practice. In 2020 and future years (until this compensation framework is changed), non-employee directors will only receive the grant of RSUs on the date of the annual meeting.
Directors’ Stock Purchase Plan Directors are also eligible to participate in the Spartan Motors, Inc.Company’s Directors’ Stock Purchase Plan. This plan provides that non-employee directors of Spartan Motors may elect to receive at least 25% and up to 100% of their “director’s fees” in the form of Spartan Motorsthe Company’s common stock. The term “director’s“Director’s fees” means the amount of income payable to a non-employee director for his or hertheir service as a director of Spartan Motors,the Company, including payments for attendance at meetings of Spartan Motors’ Board of Directors or meetings of committees of the Board, and any retainer fee paid to such persons as members of the Board.Board or any committee. A non-employee director who elects to receive Spartan Motors common stock in lieu of some or all of his or hertheir director’s fees will, on or shortly after each “applicable date,” receive a number of shares of common stock (rounded down to the nearest whole share) determined by dividing (1) the dollar amount of the director’s fees payable to him or herthe director on the applicable date that he or she has elected to receive in common stock by (2) the market value of common stock on the applicable date. The term “applicable date” means any date on which a director’s fee is payable to the participant. To date, noIn 2021, a total of 640 shares have beenof our common stock were issued underto directors pursuant to this plan.
52 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | Compensation of Directors | |
Compensation Committee Report
The Human Resources and Compensation Committee has reviewed and discussed with management the information provided under the heading “Compensation Discussion and Analysis” above. Based on this review and discussion, the Human Resources and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Spartan’sShyft’s annual report on Form 10-K and in this proxy statement. Respectfully submitted, Paul A. Mascarenas, Chair
Richard F. Dauch
Angela K. Freeman
Ronald E. Harbour
Compensation Committee Interlocks and Insider Participation
Paul Mascarenas (Chair), Richard Dauch,
Angela Freeman, Chair
Ronald Harbor, and Jeri Isbell served as membersHarbour
Paul Mascarenas
Mark Rourke 53 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS The following table sets forth information with respect to the beneficial ownership of the Human Resources and Compensation Committee during 2019. None of these individuals were, during 2019, an officer or employee of Spartan Motors, formerly an officer of Spartan Motors, or had any relationship requiring disclosure under the standards described in “Transactions with Related Persons” below. During 2019, none of Spartan’s executive officers servedcommon stock as a member of a compensation committee (or Board committee performing a similar function) for another entity or as a director of another entity whose executive officer served on the Human Resources and Compensation Committee of Spartan’s Board of Directors.Transactions with Related Persons
The Spartan Motors Code of Ethics and Compliance, available for viewing at the Company’s website at www.spartanmotors.com, requires all officers and employees who may have a potential or apparent conflict of interest to immediately notify the Chief Compliance Officer and requires all directors who may have a potential or apparent conflict of interest to immediately notify the remaining members of the Board of Directors. The Company expects its directors, officers and employeesRecord Date by:
Each person known by us to act and make decisions that are in the Company’s best interests and encourages them to avoid situations which present a conflict between the Company’s interests and theirbeneficially own personal interests. The directors, officers and employees are prohibited from taking any action that makes it difficult to perform his or her Company work objectively and effectively, or that cloud or interfere with that person’s judgment in the course of his or her job for the Company.Additionally, it is the Company’s policy that the Audit Committee of the Board of Directors reviews all material transactions involving the Company and any related person. Generally speaking, a “related person” is any director (or nominee for director) or executive officer of the Company, any beneficial owner of more than 5% of the Company’s common stock, or any immediate family member of anyCommon Stock;
Each of the foregoing. To assist in identifying related person transactions, each yearCompany’s directors and director nominees; Each of the Company requires itsNEOs; and All of the Company’s directors and executive officers as a group. The percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to complete questionnaires identifying any transactionsbe a beneficial owner of a security if that person has or shares (1) voting power, which includes the power to vote or to direct the voting of the security, (2) investment power, which includes the power to dispose of or to direct the disposition of the security, or (3) rights to acquire common stock that are currently exercisable or convertible, or will become exercisable or convertible within 60 days of the Record Date. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned. As of the Record Date, the Company had 35,022,947 shares outstanding. | | abrdn plc(1)
1 George Street, Edinburgh, United Kingdom, EH2 2LL | | | 3,119,679 | | | 8.90% | | | | BlackRock, Inc.(2)
55 East 52nd Street, New York, NY 10055 | | | 2,288,814 | | | 6.53% | | | | The Rayburn Group(3)
1526 Ute Blvd., Suite 209, Room 6, Park City, Utah 84068 | | | 1,930,000 | | | 5.51% | | | | Daryl Adams | | | 412,153 | | | 1.18% | | | | Thomas Clevinger | | | 36,957 | | | * | | | | Michael Dinkins | | | 4,480 | | | * | | | | Jonathan Douyard | | | 18,944 | | | * | | | | Carl Esposito | | | — | | | * | | | | Angela Freeman | | | 15,228 | | | * | | | | Stephen Guillaume | | | 63,017 | | | * | | | | Ronald. Harbour | | | 26,230 | | | * | | | | Todd Heavin | | | 17,250 | | | * | | | | Chad Heminover | | | 37,959 | | | * | | | | Paul Mascarenas | | | 44,630 | | | * | | | | Terri Pizzuto | | | 4,137 | | | * | | | | Mark Rourke | | | 4,137 | | | * | | | | James Sharman | | | 107,258 | | | * | | | | Other executive officers (1 person) | | | — | | | * | | | | All directors and executive officers as a group (15 persons) | | | 792,380 | | | 2.26% | |
(1)
| Information contained in the columns above and this footnote is based on a report on Schedule 13G filed with the SEC on January 28, 2022 by abrdn pls (“abrdn”). abrdn had shared voting power with respect to 3,039,484 shares of common stock and shared dispositive power with respect to 3,119,679 shares of common stock. |
(2)
| Information contained in the columns above and this footnote is based on a report on Schedule 13G filed with the SEC on February 1. 2022 by BlackRock, Inc (“BlackRock”). BlackRock had sole voting power and sole dispositive power with respect to 2,288,814 shares of common stock. |
(3)
| Information contained in the columns above and this footnote is based on a report on Schedule 13G filed with the SEC on December 4, 2015 by The Rayburn Group (“Rayburn”). Rayburn had sole voting power and sole dispositive power with respect to 1,930,000 shares of common stock. Rayburn also disclosed an additional 70,000 shares of common stock (in addition to the those disclosed in the column above) owned by Alexander C. McAree, the portfolio manager for Rayburn. |
54 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act (“Section 16”) requires our directors, each “officer” within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act (“Section 16 Officers”) and persons who beneficially own more than 10% of a registered class of our equity securities to file with the CompanySEC initial reports of beneficial ownership and reports of changes in whichbeneficial ownership of any of our equity securities. To our knowledge, based solely on a review of reports on Forms 3, 4 and 5 and amendments thereto filed electronically with the officer or director or their family members have an interest. Additionally, material undertakingsSEC and written representations from certain reporting persons that no other reports were required, we believe all of our directors and Section 16 Officers made all filings required under Section 16 during 2021 on a timely basis, except that, due to administrative error, on September 8, 2021, one Form 4 report for Mr. Harbour reporting a stock sale, was filed late. In addition, shares withheld by the Company are reviewed by management, with a view,on March 29, 2021 to satisfy tax withholding obligations incident upon the vesting of shares previously granted to Messrs. Adams, Guillaume, Heminover, and Roney were inadvertently not reported until after the applicable due date. 55 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS What is the purpose of the Annual Meeting? During the Annual Meeting, holders of the Company’s Common Stock will act upon the matters outlined in part,the accompanying notice of Annual Meeting, including: to identify if a related person is involved. Generally speaking, a “material transaction” is any transaction, arrangement, or relationship (or serieselect three directors to serve until the annual meeting in 2025; to ratify the appointment of similar transactions, arrangements, or relationships) involving more than $120,000 in whichDeloitte as the Company participates and a “related person” has a direct or indirect material interest, as determined pursuant to applicable SEC rules. The Audit Committee intendsCompany’s independent registered public accounting firm for the fiscal year ending December 31, 2022; to approve, only those related person transactions that are inon a non-binding advisory basis, the best interestscompensation paid to the Company’s NEOs; and to transact such other business as may properly come before the meeting. In addition, management will report on the performance of the Company and itswill respond to appropriate questions submitted by shareholders (or not inconsistent withbefore the best interestsstart of the Company or its shareholders).Material transactions betweenAnnual Meeting.
How will the Company conduct the Annual Meeting? As permitted by Michigan law and another companyour bylaws, we will conduct the Annual Meeting via webcast. In preparation for whichthe virtual Annual Meeting (i) we will implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting is a shareholder or proxy holder, (ii) we will implement reasonable measures to provide shareholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to shareholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) we will maintain a record of any votes or other action taken by shareholders or proxy holders at the meeting. During the Q&A session of the meeting, we will answer appropriate questions submitted before the start of the Annual Meeting related person servesto the business of the Annual Meeting, as an officertime permits. How do I attend and participate during the virtual Annual Meeting? Our completely virtual Annual Meeting will be conducted on the internet via live webcast. You will be able to participate in the Annual Meeting online during the meeting by visiting www.virtualshareholdermeeting.com/SHYF2022. You also will be able to vote your shares electronically at the Annual Meeting. All shareholders of record as of March 21, 2022 (the “Record Date”), or directortheir duly appointed proxies, may participate in the Annual Meeting. To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting webcast will begin promptly at 10:00 a.m., Eastern Time, on May 18, 2022. We encourage you to access the meeting prior to the start time. Online access will begin at 9:45 a.m., Eastern Time, on May 18, 2022. How do I submit questions before the virtual Annual Meeting? Shareholders may submit questions before the Annual Meeting. If you wish to submit a question, you may do so by logging into the virtual meeting platform at www.virtualshareholdermeeting.com/SHYF2022, typing your question into the “Ask a Question” field, and clicking “Submit.” Please submit any questions before the start time of the meeting. We reserve the right to edit profanity or other inappropriate language and to exclude questions irrelevant to the business of the Corporation or to the business of the Annual Meeting relating to or that may take into account material, nonpublic information, or relating to pending or threatened litigation, derogatory in nature or related to a personal grievance. Also, if we receive substantially similar questions, then we may group such questions together and provide a single response to avoid repetition. Questions regarding topics that are not disclosed if the transaction is one where the ratespertinent to meeting matters or charges involved are determined by competitive bid.Applying the standards discussed above, there have been no material transactions since the beginning of 2019, nor are there any currently proposed material transactions, between the Company and anycompany business will not be answered.
Appropriate questions related person.Proposal: Amendment to Articles of Incorporation to Change Name of Spartan Motors, Inc.
On February 1, 2020, the Company sold its emergency response (ER) business unit. As part of that sale, the Company sold its rights to the “Spartan Motors” name,business of the Annual Meeting will be answered during the Annual Meeting, subject to a licensetime constraints. Any such questions that cannot be answered during the Annual Meeting due to use the “Spartan” name in the Company’s RV business,time constraints will be posted and committed to request that its shareholders approve an amendment to the Company’s Articles of Incorporation to legally change the name of the Company.
In light of that commitment, the Board of Directors has approved an amendment to Article I of the Spartan Motors, Inc. Articles of Incorporation (the “Articles”) to change our corporate name from “Spartan Motors, Inc.” to “The Shyft Group, Inc.” The Board of Directors believes it is in the best interests of our Company and its shareholders to approve and adopt this amendment to the Articles to change the name of the Company.
The Board of Directors proposes to the shareholders of the Company to amend Article I of the Articles to change the name of the Company to “The Shyft Group, Inc.” If approved, the amendment will become effective upon the filing of the amendment with the State of Michigan, which will occuranswered at www.theshyftgroup.com as soon as reasonably practicable followingpractical after the Annual Meeting.
56 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS What if I have technical difficulties during the virtual Annual Meeting? Technical support, including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHYF2022 beginning at 9:45 a.m., Eastern Time, on May 18, 2022 through the conclusion of the Annual Meeting. Why didn’t I receive a paper copy of this proxy statement? We have chosen to distribute our proxy materials by sending our shareholders a Notice of Internet Availability of Proxy Materials that explains how to access our proxy materials and vote online. Many other companies have transitioned to this more contemporary way of distributing annual meeting materials, often called “electronic proxy” or “Notice and Access.” This “Notice and Access” process expedites our shareholders’ receipt of shareholders.these materials, lowers the costs of proxy solicitation, and reduces the environmental impact of our annual meeting. What if I would like to receive a paper copy of this proxy statement? If you received a notice and would like us to send you a printed copy of our proxy materials, please follow the instructions included in your notice to request a copy. Who is entitled to vote? The Board of Directors proposes to amend Article ICompany’s common stock constitutes the only voting stock of the Articles so that it reads as follows:“The nameCompany. As of the corporation is:Record Date, there were no outstanding shares of preferred stock of the Company. Only record holders of common stock at the close of business on the Record Date are entitled to receive notice of the Annual Meeting and to vote those shares of common stock that they held on the Record Date. Each outstanding share of common stock is entitled to one vote on each matter to be voted upon at the Annual Meeting. To participate in the Annual Meeting, you will need the 16-digit control number on your Notice of Internet Availability of Proxy Materials, your proxy card or on the instructions that accompanied your proxy materials. We encourage you to access the Annual Meeting before the start time of 10:00 a.m., Eastern Time, on May 18, 2022. Please allow ample time for online check-in, which will begin at 9:45 a.m., Eastern Time, on May 18, 2022.
What constitutes a quorum? For business to be conducted at the Annual Meeting, a quorum must be present. The Shyft Group, Inc.”Ifpresence at the name change becomes effective,Annual Meeting, in person or by proxy, of the rights of shareholders with respect to their shares will not change. The name change will not affect the validity or transferability of any currently outstanding stock. Any new stock issued after the name change will bear the name “The Shyft Group, Inc.” If the shareholders do not approve this amendment, no amendment to our Articles will be made, and the Company's name will remain as Spartan Motors, Inc.
Required Vote
The affirmative vote of holders of a majority of the shares of common stock issued and outstanding sharesand entitled to vote on the Record Date will constitute a quorum for all purposes. As of the Record Date, 35,022,947 shares of common stock were issued and outstanding and entitled to vote. Broker non-votes and proxies marked with abstentions or instructions to withhold votes will be counted as present in determining whether there is a quorum.
What is the difference between holding shares as a shareholder of record and being a beneficial owner? Shareholders of Record. If, at the annualclose of business on the Record Date, your shares are registered directly in your name with the Company’s transfer agent, American Stock & Transfer, you are considered the shareholder of record with respect to those shares, and these proxy materials (including a proxy card) are being sent directly to you by the Company. As a shareholder of record, you have the right to grant your voting proxy directly to the Company via the proxy card or to vote electronically during the Annual Meeting. 57 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS Beneficial Owners. If, at the close of business on the Record Date, your shares were not issued directly in your name, but were held in a stock brokerage account or by a bank, trustee or other nominee, you are considered the beneficial owner of shares, and these proxy materials (which should also include a voting instruction card) are being forwarded to you by your broker, trustee, bank or nominee who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, trustee, bank or nominee on how to vote the shares in your account and are also invited to attend the Annual Meeting. However, since you are not the shareholder of record, you may not vote these shares during the Annual Meeting unless you request and obtain a proxy from your broker, trustee, bank or nominee. Your broker, trustee, bank or nominee should provide you with a voting instruction card for you to use in directing the broker, trustee, bank or nominee on how to vote your shares. How do I vote? Shareholders of Record. If you complete and properly sign the proxy card and return it to the Company, it will be voted as you direct. You may also vote via telephone or internet (as indicated on your proxy card). If you attend the virtual Annual Meeting, you may vote online during the Annual Meeting. Beneficial Owners. If you complete and properly sign the voting instruction card and return it to your broker, trustee, bank or other nominee, it will be voted as you direct. You may also vote via telephone or internet (as indicated on your voting instruction card). If you want to vote your shares electronically during the Annual Meeting, you must request and obtain a proxy from such broker, trustee, bank or other nominee confirming that you beneficially own such shares and giving you the power to vote such shares. Can I change my vote after I return my proxy card or voting instruction card? Shareholders of Record. You may change your vote at any time before the proxy is exercised by filing with the Corporate Secretary of the Company, at 41280 Bridge Street, Novi, Michigan 48375, either written notice revoking the proxy or a properly signed proxy that is dated later than the proxy card. If you attend the Annual Meeting online, the individuals named as proxy holders in the proxy card will nevertheless have authority to vote your shares in accordance with your instructions on the proxy card unless you properly file such notice or new proxy. Beneficial Owners. If you hold your shares through a bank, trustee, broker or other nominee, you should contact such person to submit new voting instructions prior to the time such voting instructions are exercised. How will my shares be voted? Shareholders of Record. All shares represented by the proxies mailed to shareholders will be voted electronically during the Annual Meeting in accordance with instructions given by the shareholders. Where no instructions are given, the shares will be voted (1) for the election of the Board of Directors’ nominees for three directors, (2) for the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for the year ending December 31, 2022 and (3) for the approval, on a non-binding advisory basis, the compensation paid to the Company’s NEOs. Beneficial Owners. The brokers, banks or nominees holding shares for beneficial owners must vote those shares as instructed, and if no instructions from the beneficial owner are received on a matter deemed to be non-routine, they may not vote the shares on that matter. Under applicable law, a broker, bank or nominee has the discretion to vote on routine matters, such as Proposal 2, but does not have discretion to vote with respect to non-routine matters, such as Proposals 1 or 3. Common stock subject to broker non-votes will be considered present at the meeting for purposes of shareholdersdetermining whether there is a quorum. Broker non-votes will have no effect in determining the outcome of the vote on Proposals 1 or 3. Because Proposal 2 is a “routine” matter for which a broker, bank, or nominee has the discretion to vote, the Company does not expect any broker non-votes on Proposal 2. . In order to avoid a broker non-vote of your shares on this proposal, you must send voting instructions to your bank, broker or nominee. 58 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS What are the Board’s recommendations? The Board recommends a vote: Proposal 1— FOR the election of the nominated slate of directors. Proposal 2 — FOR the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. Proposal 3 — FOR the approval, on a non-binding advisory basis, of the compensation paid to the Company’s NEOs. What vote is required to approve each item? Proposal 1 - Election of Directors. The three nominees who receive the proposed amendmentmost votes cast at the Annual Meeting will be elected as directors, provided a quorum of at least a majority of the outstanding shares of the Company’s common stock is represented at the meeting. However, we have adopted a majority vote standard that is applicable in uncontested director elections. This means that the plurality standard will determine whether a director nominee is elected, but our majority vote standard will further require that the number of votes cast “for” a director must exceed the number of votes “withheld” from that director or the director must submit their offer of resignation for consideration by the Board. See “Majority Vote Standard” above for more details. A proxy card marked “Withhold” or “For All Except” with respect to our Articles. As a result, in counting votes on this proposal, abstentionsthe election of one or more directors will not be voted with respect to the director or directors indicated. Abstentions and broker non-votes will affect the outcome of the election.Your Board of Directors recommends that you vote FORthe approval of the amendment to our Articles of Incorporation.
Proposal: Amendment to Stock Incentive Plan to Authorize the Issuance of Additional Shares
In 2016, the Board of Directors adopted, and our shareholders approved, the Spartan Motors, Inc. Stock Incentive Plan. The Stock Incentive Plan, provides for the grant of a variety of equity-based awards, described in more detail below, sucheach be counted as stock options, including incentive stock options as defined in Section 422 of the Internal Revenue Code, as amended (the “Code”), stock appreciation rights, restricted stock, performance shares, and other stock-based awards.
The Stock Incentive Plan is intended to promote the long-term success of the Company for the benefit of our shareholders through stock-based compensation, by aligning the personal interests of plan participants with those of our shareholders. The Stock Incentive Plan is designed to allow selected participants to participate financially in our future, as well as to enable us to attract, retain, and reward those individuals.
As of March 23, 2020, there were 1,356,196 shares of common stock available for the grant of future awards under the Stock Incentive Plan. Our Board of Directors has approved an amendment to the plan, subject to shareholder approval, to make an additional 1,500,000 shares available for issuance under the plan. At the annual meeting of shareholders, our shareholders are being asked to consider and approve this amendment. The following paragraphs summarize the material features of the Stock Incentive Plan. The full text of the plan, as amended by the amendment approved by our Board of Directors and being submitted for approval by the shareholders, is included as Appendix B to this proxy statement.
Description of the Stock Incentive Plan
The Stock Incentive Plan is administered by the Human Resources and Compensation Committee of the Board. The Human Resources and Compensation Committee (the “Committee”) determines, subject to the terms of the plan, the persons receiving incentive awards, the nature and amount of incentive awards granted to each person (subject to the limits specified in the plan), the time of each grant, the terms and duration of each grant, and all other determinations necessary or advisable for administration of the plan. The Committee may amend the terms of incentive awards granted under the plan from time to time in any manner, subject to the limitations specified in the plan.
Awards may be granted under the plan to participants for no cash consideration or for such minimum consideration as determined by the Committee. The Plan is not qualified under Section 401(a) of the Code and is not subject to the Employee Retirement Income Security Act of 1974 (ERISA). The plan is drafted to comply with Section 409A of the Code, which imposes specific rules on the timing and payment of deferred compensation.
Pursuant to the provisions of the plan, no awards may be granted under the plan after its expiration on May 25, 2026.
Authorized Shares
As originally adopted, the Stock Incentive Plan provided that 2,800,000 shares of Spartan Motors common stock would be available for awards under the plan. If the proposed amendment is approved, and subject to certain anti-dilution and other adjustments set forth in the plan, the maximum number of shares that may be issued under the plan would be increased by 1,500,000 shares to 4,300,000 shares. Shares of common stock authorized under the plan could be either unissued shares, shares issued and repurchased by Spartan Motors (including shares purchased on the open market), shares issued and otherwise reacquired by Spartan Motors, or shares otherwise held by Spartan Motors. Shares subject to incentive awards that are canceled, surrendered, modified, exchanged for substitute incentive awards, or that expire or terminate would remain available under the plan.
Eligible Participants
Persons eligible to receive awards pursuant to the Stock Incentive Plan include directors, corporate officers, divisional officers, and key employees of the Company or any of its subsidiaries who the Committee determines are eligible to participate in the plan. We anticipate the persons who will receive awards under the plan, as amended, will be non-employee directors of Spartan Motors (currently eight persons) and executive officers (currently six persons), and other eligible employees (currently approximately 25 additional persons) of Spartan Motors and its subsidiaries. Additional individuals may become directors, officers, or employees in the future and could participate in the plan. Directors, nominees for director, officers, and employees of Spartan Motors and its subsidiaries may be considered to have an interest in the plan because they may receive awards under it.
Types of Awards
The following types of awards may be granted under the Stock Incentive Plan:
An “Option” is a contractual right to purchase a number of shares at a price determined at the date the option is granted. The exercise price included in both incentive stock options and nonqualified stock options must equal at least 100% of the fair market value of the stock at the date of the grant.
A “Stock Appreciation Right” is an award of the right to receive stock or cash of an equivalent value in an amount equal to the difference between the price specified in the stock appreciation right and the prevailing market price of our common stock at the time of exercise. Stock appreciation rights may be granted in tandem with options.
“Restricted Stock” and “Restricted Stock Units” (RSUs) are awards of common stock granted to a participant for no or nominal consideration. Title to the shares passes to the participant at the time of that grant; however, the ability to sell or otherwise dispose of the shares is subject to restrictions and conditions determined by the Committee.
“Performance Share Units” (PSUs) are an award of the right to receive stock or cash of an equivalent value at the end of the specified performance period upon the attainment of specified performance goals.
Material Federal Income Tax Consequences
The following summarizes the material consequences of the grant and acquisition of awards under the Stock Incentive Plan for federal income tax purposes, based on our understanding of existing federal income tax laws. This summary is necessarily general in nature and does not purport to be complete. Also, state and local income tax consequences are not discussed and may vary from locality to locality.
Incentive Stock Options.Under current federal income tax laws, an option holder does not recognize income and Spartan Motors does not receive a deduction at the time an incentive stock option is granted or at the time the incentive stock option is exercised. However, the difference between the market value of the common stock subject to the incentive stock option and the exercise price is a tax preference itempresent for purposes of calculating alternative minimum tax. Upondetermining the sale or other dispositionpresence of a quorum, but will have no effect on the election of directors.
Proposal 2 - Ratification of the common stock acquired pursuant to an incentive stock option, as long as (i) the option holder held the stock for at least one year after the exerciseAppointment of the stock option and at least two years after the grant of the stock option, and (ii) the stock option is exercised not later than three months after termination of employment (one year in the event of disability), the option holder's basis equals the exercise price and the option holder pays tax on the difference between the sale proceeds and the exercise price as capital gain. Spartan Motors receives no deduction for federal income tax purposes under these circumstances. Special rules apply when an option holder dies.If an option holder fails to meet any of the conditions described above relating to holding periods and exercises following termination of employment, he or she generally recognizes compensation taxed as ordinary income equal to the difference between (1) the lesser of (a) the fair market value of the common stock acquired pursuant to the stock option at the time of exercise or (b) the amount realized on the sale or disposition and (2) the exercise price paid for the stock. Spartan Motors then receives a corresponding deduction for federal income tax purposes, except to the extent that the deduction limits of Section 162(m) of the Code apply. Additional gains, if any, recognized by the option holder result in the recognition of short- or long-term capital gain.
Nonqualified Stock Options.Federal income tax laws provide different rules for nonqualified stock options - those options that do not meet the Code's definition of an incentive stock option. Under current federal income tax laws, an option holder does not recognize any income and Spartan Motors does not receive a deduction when a nonqualified stock option is granted. If a nonqualified option is exercised, the option holder recognizes compensation income equal to the difference between the exercise price paid and the market value of the stock acquired upon exercise (on the date of exercise). Spartan Motors receives a corresponding deduction for federal income tax purposes, except to the extent that the deduction limits of Section 162(m) of the Code apply. The option holder's tax basis in the shares acquired is the exercise price paid plus the amount of compensation income recognized. Sale of the stock after exercise results in recognition of short-term or long-term capital gain (or loss).
Stock Appreciation Rights . Upon the grant of a stock appreciation right, the participant realizes no taxable income, and the Company receives no deduction. Upon the exercise of the stock appreciation right, the value of the shares and/or cash received is generally taxable to the participant as ordinary income. The Company receives a deduction of an equal amount in the same year the participant recognized income.
Independent Registered Public Accounting Firm. Restricted Stock and Restricted Stock Units. Generally, under current federal income tax laws a participant does not recognize income upon the award of restricted stock or restricted stock units. However, a participant is required to recognize compensation income at the time the award vests (when the restrictions lapse) equal to the difference between the fair market value of the stock at vesting and the amount paid for the stock (if any). At the time the participant recognizes compensation income, the Company is entitled to a corresponding deduction for federal income tax purposes, except to the extent that the deduction limits of Section 162(m) of the Code apply. If restricted stock or restricted stock units are forfeited by a participant, the participant does not recognize income with respect to the forfeited award and the Company would not receive a corresponding deduction. Prior to the vesting and lapse of restrictions, dividends paid on shares subject to awards of restricted stock and restricted stock units are reported as compensation income to the participant and the Company receives a corresponding deduction, except to the extent that the deduction limits of Section 162(m) of the Code apply.
A participant may, within 30 days after the date of an award of restricted stock (but not an award of restricted stock units), elect to report compensation income for the tax year in which the restricted stock is awarded. If the participant makes this election, the amount of compensation income is equal to the difference between the fair market value of the restricted stock at the time of the award and the amount paid for the stock (if any). Any later appreciation in the value of the restricted stock is treated as capital gain and recognized only upon the sale of the stock subject to the award of restricted stock. Dividends received after such an election are taxable as dividends and not treated as additional compensation income. If, however, restricted stock is forfeited after the participant makes such an election, the participant is not allowed any deduction for the amount that he or she earlier reported as income. Upon the sale of shares subject to the restricted stock award, a participant recognizes capital gain (or loss) in the amount of the difference between the sale price and the participant's basis in the stock.
Performance Shares. Participants are not taxed upon the grant of performance shares. Upon receipt of the underlying shares or cash, a participant is taxed at ordinary income tax rates (subject to withholding) on the amount of cash received and/or the current fair market value of stock received, and the Company is entitled to a corresponding deduction. The participant’s basis in any performance shares received is equal to the amount of ordinary income on which he or she was taxed and, upon subsequent disposition, any gain or loss will be capital gain or loss.
Registration of Shares
The shares currently authorized for issuance under the Stock Incentive Plan have been registered pursuant to the Securities Act of 1933. If the shareholders approve the proposed amendment to increase the number of shares available for issuance pursuant to the plan, the Company intends to also register such additional shares pursuant to the Securities Act of 1933 before any such additional shares are granted or issued pursuant to the plan.
Termination or Amendment of Plan
The Board of Directors may terminate the Stock Incentive Plan at any time and may from time to time amend the plan as it considers proper and in the best interests of Spartan Motors, provided that no amendment may impair any outstanding incentive award without the consent of the participant, except according to the terms of the plan or the incentive award. In addition, no such amendment may be made without the approval of shareholders of Spartan Motors if it would (i) reduce the exercise price of outstanding stock options or the base price of outstanding stock appreciation rights, (ii) increase the individual annual maximum award limit, or (iii) otherwise amend the Stock Incentive Plan in any manner requiring shareholder approval by law or under Nasdaq listing requirements or rules.
Subject to certain limitations, the Committee could amend or modify the terms of any outstanding award in any manner not prohibited by the plan. However, incentive awards issued under the plan could not be repriced, replaced, regranted through cancellation, or modified without shareholder approval if the effect would be to reduce the exercise price or base price of such incentive awards to the same participants.
Effects of a Change in Control of Spartan Motors
Upon the occurrence of a “change in control" of Spartan Motors (as defined in the plan), if the Company or the Company’s successor does not assume the obligations under the plan or replace outstanding awards with awards having substantially the same intrinsic value, all outstanding stock options and stock appreciation rights would become immediately exercisable in full and would remain exercisable in accordance with their terms. All other outstanding incentive awards under the plan would immediately become fully vested, exercisable, and nonforfeitable.
Equity Compensation Plan Information
The following table provides information about our equity compensation plans regarding the number of securities to be issued under these plans upon the exercise of outstanding options, the weighted-average exercise prices of options outstanding under these plans, and the number of securities available for future issuance as of December 31, 2019.
| | | | | | | | | | | | Number of securities to be
issued upon exercise of
outstanding options,
warrants, and rights
| | | 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)
| | Plan Category | | (a)
| | | (b)
| | | (c)
| | Equity compensation plans approved by security holders(1)
| | | -- | | | | N/A | | | | 1,356,196 | | Equity compensation plans not approved by security holders(2)
| | | -- | | | | N/A | | | | 56,250 | | Total:
| | | -- | | | | N/A | | | | 1,412,446 | |
(1)
| Consists of the Spartan Motors, Inc. Stock Incentive Plan of 2016, as currently in effect.
| | | (2)
| Consists of the Spartan Motors, Inc. Directors’ Stock Purchase Plan. This plan provides that non-employee directors of the Company may elect to receive at least 25% and up to 100% of their “director’s fees” in the form of the Company’s common stock. The term “director’s fees” means the amount of income payable to a non-employee director for his or her service as a director of the Company, including payments for attendance at meetings of the Company’s Board of Directors or meetings of committees of the board, and any retainer fee paid to such persons as members of the board. A non-employee director who elects to receive Company common stock in lieu of some or all of his or her director’s fees will, on or shortly after each “applicable date,” receive a number of shares of common stock (rounded down to the nearest whole share) determined by dividing (1) the dollar amount of the director’s fees payable to him or her on the applicable date that he or she has elected to receive in common stock by (2) the market value of common stock on the applicable date. The term “applicable date” means any date on which a director’s fee is payable to the participant. To date, no shares have been issued under this plan.
| | | (3)
| Each of the plans reflected in the above table contains customary anti-dilution provisions that are applicable in the event of a stock split or certain other changes in the Company’s capitalization. In addition, the Stock Incentive Plan provides that if a stock option is canceled, surrendered, modified, expires or is terminated during the term of the plan but before the exercise of the option, the shares subject to the option will be available for other awards under the plan.
|
The numbers of shares reflected in column (c) in the table above with respect to the Stock Incentive Plan of 2016 (1,356,196 shares) represent new shares that may be granted by the Company under the plan, as currently in effect, as of December 31, 2019, and not shares issuable upon the exercise of an existing option, warrant or right nor does it include any additional shares to be added to the plan pursuant to the amendment being proposed for shareholder approval.
Required Vote
The affirmative vote of a majority of the Company’sshares of common stock voted at the annual meeting will be necessary to ratify the Audit Committee’s appointment of shareholders, by person or by proxy,Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, provided that a quorum is required to approve the proposed amendment to the Plan.present. In counting votes on this proposal, abstentions and broker non-votes will be counted as not voted and therefore will not affect the outcome of the election. Your Board of Directors recommends that you vote FORthe approvalthis proposal. Although shareholder ratification of the amendment to our Stock Incentive Plan.
Proposal: Advisory Vote to Approve Executive Compensation
Our “Compensation Discussionappointment is not required by law and Analysis” above describes, among other things, our executive compensation policies and practices. Federal law requires that our shareholders be given an opportunity to express their approval of the compensation of our executives, as disclosed in this proxy statement. The shareholder vote is not binding on our Board of Directors or the Company, and may not be construed as overruling any decision made by our Board or the Company or as creating or implying any change in the fiduciary duties owed by our Board. However, our Board of Directors values the views of shareholders and intends toAudit Committee will take the outcomeappointment under advisement if such appointment is not so ratified.
Proposal 3 - Approval, on a Non-binding Advisory Basis, of this shareholder advisory vote into consideration when making future executive compensation decisions.Therefore, at the annual meeting of shareholders, our shareholders will be given an opportunityCompensation Paid to vote, on an advisory (non-binding) basis,the Company’s NEOs.
The proposal to approve the compensation of our named executivesNEOs, as discloseddescribed in this proxy statement, under “Executive Compensation – Compensation Discussion and Analysis,”is an advisory vote only. The Company will disclose the compensation tables, and the narrative discussion following the compensation tables. Thisresults of this vote, proposal is commonly known as a “say-on-pay” proposal and gives our shareholders the opportunity to endorse or not endorse our executive pay program. This votebut is not intendedrequired to address any specific itemtake action based upon the outcome of ourthis vote. However, the Human Resources and Compensation Committee of the Board intends to consider the outcome of the vote when considering future executive compensation but rather the overall compensation of our named executives and the policies and practices described in this proxy statement. You are encouraged to read the full details of our executive compensation program, including our primary objectives in setting executive pay, under “Executive Compensation” above.The Company evaluates the compensation of its executives at least once each year to assess whether our compensation policies and programs are achieving their primary objectives and are competitive with other companies in our industry. Based on its most recent evaluation, our Board of Directors believes our executive compensation programs achieve these objectives, including aligning the interests of our management with those of our shareholders, and are therefore worthy of shareholder support.arrangements. In determining how to votecounting votes on this proposal, we believeabstentions and broker non-votes will be counted as not voted and therefore will not affect the outcome of this proposal.
What will happen if other matters are raised at the meeting? If any other matter is properly submitted to the shareholders should considerat the following:Annual Meeting, its adoption will generally require the affirmative vote of a majority of the shares of common stock outstanding on the Record Date that is present or represented at the Annual Meeting. The Board does not propose to conduct any business at the Annual Meeting other than as stated above. ●
59 | Independent Compensation Committee. All members of our Human Resources and Compensation Committee are independent directors. Meetings of this committee include executive sessions in which management is not present.
| | | | ●
| Performance-Based Compensation. Our Human Resources and Compensation Committee intends to set our executive officers’ base salaries at median market rates for comparable companies. Total compensation for executives is structured so that a majority of the total earnings potential is derived from performance-based incentives. The Company believes that this structure allows its executives the opportunity to receive overall compensation that is above median market rates, provided that performance objectives are met or exceeded.
| | | ●
| Restricted Stock Units. A portion of our executives’ compensation is paid in the form of RSUs that vest ratably over a three-year period. We believe these awards align the executives’ interests with longer term shareholder returns and also serve to retain the services of executives.
| | | ●
| Performance Share Units. Starting in 2019, a significant percentage (70%) of each named executive’s annual long-term equity incentive award is made in the form of PSUs, which may result in the issuance of Spartan common stock to the executives following a three-year performance period, based on the achievement of certain performance goals, on a cumulative basis, over that three-year period. We believe PSUs better align the executives’ long-term incentives with the interests of our shareholders.
Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS For these reasons, our BoardHow do I find out the voting results? Preliminary voting results will be announced at the Annual Meeting and final voting results will be published by the Company in a Current Report on Form 8-K. How may I obtain an additional copy of Directors recommendsthe proxy materials? If you share an address with another shareholder, you may receive only one set of proxy materials unless you have provided contrary instructions. If you wish to receive a separate set of proxy materials now or in the future, please request the additional copy by contacting The Shyft Group, Inc, Attention: Investor Relations, 41280 Bridge Street, Novi, Michigan 48375, Telephone 517-543-6400, or by email to shyftlegal@theshyftgroup.com. Additionally, if you have been receiving multiple sets of proxy materials and wish to receive only one set of proxy materials, please contact the Company’s Investor Relations department in the manner provided above. What does it mean if I receive more than one proxy card or voting instruction card? If you receive more than one proxy card or voting instruction card, it means that you vote FORhave multiple accounts with banks, trustees, brokers, other nominees and/or the adoptionCompany’s transfer agent. Please sign and deliver each proxy card and voting instruction card that you receive to ensure that all of your shares will be voted. We recommend that you contact your nominee and/or the Company’s transfer agent, as appropriate, to consolidate as many accounts as possible under the same name and address. Who pays for the solicitation of proxies? The accompanying proxy is being solicited by the Company’s Board. The Company will bear the cost of soliciting the proxies. Officers and other management employees of the following resolution:“RESOLVED, thatCompany will receive no additional compensation for the shareholderssolicitation of Spartan Motors, Inc. approve,proxies and may use mail, e-mail, personal interview and/or telephone.
How can I access the Company’s proxy materials and Annual Report on an advisory basis,Form 10-K? The Financial Information subsection under “Investors” on the compensationCompany’s website, www.theshyftgroup.com, provides access, free of charge, to SEC reports as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the SEC, including proxy materials, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports. The Company has posted printable and searchable 2021 proxy materials to the Company’s website at www.theshyftgroup.com. A copy of the Company’s named executive officers, as disclosed pursuant to the rules of the Securities and Exchange Commission, in the Compensation Discussion and Analysis, compensation tables, and related narrative discussion set forth in the Company’s proxy statement for its 2020 Annual Meeting of Shareholders.”Audit Committee Report
The Audit Committee of the Spartan Motors Board of Directors has reviewed Spartan Motors’ audited financial statements for the year ended December 31, 2019, and has discussed those financial statements with Spartan Motors’ management.
The Audit Committee has also discussed with Spartan Motors’ independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC.
In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and letter required by the applicable requirements of the PCAOB regarding the accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed this independence with the independent registered public accounting firm.
After and in reliance upon the reviews and discussions described above, the Audit Committee recommended to Spartan Motors’ Board of Directors that the audited financial statements for the year ended December 31, 2019 be included in Spartan Motors’ annual report on Form 10-K for the year ended December 31, 2019.
Respectfully submitted,
Dominic A. Romeo, Chair
Thomas R. Clevinger
Andrew M. Rooke
Proposal: Ratification of Appointment of Independent Auditors
Subject2021, as filed with the SEC, will be sent to any shareholder, without charge, upon written request sent to the ratificationCompany’s executive offices at The Shyft Group, Inc., Attention: Investor Relations, 41280 Bridge Street , Novi, Michigan 48375 or by email to shyftlegal@theshyftgroup.com.
The references to the website addresses of the Company and SEC in this proxy statement are not intended to function as a hyperlink and, except as specified herein, the information contained on such websites is not part of this proxy statement. Is a registered list of shareholders Spartan Motors’ Audit Committee has appointed BDO USA, LLP as the Company’s independent registered public accounting firm for its 2020 fiscal year. Representatives of BDO USA, LLP are expected to participate in the annual meetingavailable? The names of shareholders will haveof record entitled to vote electronically at the opportunity to make a statement if they desire to do so and are expected toAnnual Meeting will be available to respondshareholders entitled to appropriate questions from shareholders.Your Board of Directors recommends that you vote FOR ratification ofat the appointment of BDO USA, LLP.
Independent Auditor Fees
All fees paid to BDO USA, LLP for services performed in 2019 and 2018, were approved pursuant to Spartan Motors’ Audit Committee Pre-Approval Policy described above under “Audit Committee” above. A summary of the fees billed by BDO USA, LLP for each of the last two calendar years follows.
| | | | | | | | | | | 2019 | | | 2018 | | Audit Fees(1) | | $ | 990,912 | | | $ | 586,450 | | Audit-Related Fees(2) | | | - | | | | 60,000 | | Tax Fees(3) | | | 173,377 | | | | 159,981 | | All Other Fees(4) | | | - | | | | - | |
(1)
| Represents the aggregate fees billed for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Form 10-Q, and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
| | | (2)
| Represents the aggregate fees billed by the principal accountant for due diligence (transaction advisory) services.
| | | (3)
| Represents the aggregate fees for professional services rendered by the principal accountant for tax compliance.
| | | (4)
| Represents the aggregate fees for professional services rendered by the principal accountant for analysis related to acquisition due diligence activities.
|
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires Spartan Motors’ directors, executive officers, and persons who beneficially own more than 10% of the outstanding shares of common stock to file reports of ownership and changes in ownership of shares of common stock with the Securities and Exchange Commission. Based solelymeeting on May 18, 2022 at the Company’s review of such reports filed withheadquarters and during the Securitiesmeeting, at www.virtualshareholdersmeeting.com/SHYF2022.
60 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS How and Exchange Commission and written representations from certain reporting persons that no reports on Form 5 were required for those personswhen may I submit a shareholder proposal or director nomination for the 2019 fiscal year, the Company believes that its directors and executive officers complied with all applicable Section 16(a) filing requirements during 2019, except that the reports on Form 4 for the RSUs granted to each non-employee director on May 22, 2019 were inadvertently filed after the applicable due date.Shareholder Proposals
Shareholder proposals intended to be presented at the annual meeting of shareholders in the year 2021 and that2023 Annual Meeting?
For a shareholder would like to have included in the proxy statement and form of proxy relating to that meeting must be received by Spartan Motors for consideration not later than December 11, 2020proposal to be considered for inclusion in the Company’s proxy statement and form of proxy relating to that meeting.for the 2023 Annual Meeting, the Corporate Secretary must receive the written proposal at the Company’s principal executive offices no later than December 6, 2022. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of shareholdersshareholder proposals in company-sponsored proxy materials. Proposals should be madeaddressed to The Shyft Group, Inc. Chief Legal Officer, 41280 Bridge Street, Novi Michigan 48375. Any shareholder proposal must set forth (a) a brief description of the matter the shareholder desires to present for shareholder action, (b) the name and record address of the shareholder proposing the matter for shareholder action (c) the number of shares of the Company’s stock that are beneficially owned by the shareholder;, (d) any material interest of the shareholder in accordance with Rule 14a-8the matter proposed for shareholder action, and (e) any additional information that is required to be provided by the shareholder pursuant to Regulation 14A under the Securities Exchange Act of 1934. All other proposals of shareholders that are intendedand the Company’s bylaws. For a shareholder director nomination to be presentedconsidered for inclusion in the Company’s proxy statement for the 2023 Annual Meeting, the Corporate Secretary must receive written notice of the shareholder’s intent to make a nomination or nominations at the Company’s principal executive offices no later than December 6, 2022. A shareholder who intends to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act, which notice must be postmarked or transmitted electronically to the Company at its principal executive office no later than 60 calendar days prior to the anniversary date of the immediately preceding annual meeting of shareholders. However, if the date of the annual meeting in the year 2021is changed by more than 30 calendar days from such anniversary, then notice must be receivedprovided by Spartan Motors notthe later of 60 calendar days prior to the date of the annual meeting or the 10th calendar day following the day on which public announcement of the date of the annual meeting is first made by the Company. Accordingly, for the 2023 Annual Meeting, the Company must receive such notice no later than December 11, 2020 or they will be considered untimely.March 19, 2023. 61 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS Solicitation of Proxies
We will initially solicit proxies by mail. In addition, directors, officers, and employees of Spartan Motors and its subsidiaries may solicit proxies by telephone or facsimile or in person without additional compensation. Proxies may be solicited by nominees and other fiduciaries that may mail materials to or otherwise communicate with the beneficial owners of shares held by them. Spartan Motors will bear all costs of the preparation and solicitation of proxies, including the charges and expenses of brokerage firms, banks, trustees, or other nominees for forwarding proxy material to beneficial owners.
Important Notice Regarding Delivery of Shareholder Documents.
We are pleased to take advantage of Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide you with the information you need while lowering the costs of printing and delivery and reducing the environmental impact of the Annual Meeting. Shareholders may request a paper copy of this proxy statement and the 2019 annual report to shareholders by:
Internet: www.proxyvote.com
Telephone: 1-800-579-1639
E-mail: sendmaterial@proxyvote.com
Spartan Motors’annual report to the Securities and Exchange Commission on Form 10-K, including financial statements and financial statement schedules, will be provided to you without charge upon written request.Please direct your requests toMr. Roney at the address above. In addition, Spartan Motors’annual report to the Securities and Exchange Commission on Form 10-K is available on Spartan Motors’website atwww.spartanmotors.cominthe“Investor Relations”section.
BY ORDER OF THE BOARD OF DIRECTORS
Ryan L. Roney
Secretary
Novi, Michigan
April 10, 2020
Appendix A
This proxy statement contains adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and free cash flow, which are non-GAAP financial measures.measures that were used in determining annual incentive compensation for our named executives. Adjusted EBITDA is calculated by excluding items that we believe to be infrequent or not indicative of our continuingunderlying operating performance.performance, as well as certain non-cash expenses. For the periods covered by this proxy statement, such items include restructuring and other related charges, acquisition related expenses and adjustments, and non-cash stock-based compensation expenses.expenses, loss from liquidation of JV, and non-recurring professional fees. Free cash flow is calculated as operating cash flow less capital expenditures. Adjusted EBITDA and free cash flow are used for purposes of determining annual incentive compensation for our management team.The following table reconciles Income from continuing operations to Adjusted EBITDA for 2019.2021. | | Income from continuing operations | | | $69,974 | | | | Less: Net income attributable to non-controlling interests | | | (1,230) | | | | Add: | | | | | | | Interest expense | | | 414 | | | | Income tax expense | | | 14,506 | | | | Depreciation & Amortization expense | | | 11,356 | | | | EBITDA | | | 95,020 | | | | Restructuring and other related charges | | | 505 | | | | Acquisition related expenses and adjustments | | | 1,585 | | | | Non-cash stock-based compensation expense | | | 8,745 | | | | Loss from liquidation of JV | | | 643 | | | | Non-recurring professional fees | | | 1,568 | | | | Adjusted EBITDA for annual cash incentive compensation | | | $108,066 | |
A-1 | | | Shyft Group // 2022 Proxy Statement |
TABLE OF CONTENTS | | | | | | | | 2019 | | Income from continuing operations | | $ | 36,790 | | Less: Net income attributable to non-controlling interests | | | (140 | ) | Add: | | | | | Interest expense | | | 1,839 | | Income tax | | | 10,355 | | Depreciation & Amortization | | | 6,073 | | EBITDA | | | 54,917 | | Restructuring and other related charges | | | 316 | | Acquisition related expenses and adjustments | | | 3,531 | | Non-cash stock-based compensation expense | | | 5,281 | | Adjusted EBITDA | | $ | 64,045 | |
The following table reconciles the Netnet increase in cash and cash equivalents to free cash flow for 2019.2021. | | Operating Activities
| | | | | | | Net income | | | $70,155 | | | | Depreciation & amortization | | | 11,356 | | | | Non-cash stock based compensation expense | | | 8,745 | | | | (Gain) on disposal of assets | | | (110) | | | | Deferred income taxes | | | 880 | | | | Change in working capital | | | (17,017) | | | | Net cash provided by operating activities | | | 74,009 (A) | | | | Capital expenditures | | | (23,002) (B) | | | | Proceeds from sale of property, plant and equipment | | | 22 | | | | Acquisition of businesses, net of cash acquired | | | 904 | | | | Proceeds from long-term debt | | | 45,000 | | | | Payments on long-term debt | | | (67,400) | | | | Payments of debt issuance costs | | | (1,360) | | | | Payment of dividends | | | (3,551) | | | | Purchase and retirement of common stock | | | (3,348) | | | | Exercise and vesting of stock incentive awards | | | (2,949) | | | | Purchase of non-controlling interest | | | (2,162) | | | | Net increase in cash and cash equivalents | | | $16,163 | | | | Free cash flow (A+B) | | | $51,007 | |
A-2 | | | Shyft Group // 2022 Proxy Statement |
Operating Activities | | | | | | Net loss | | $ | (12,426 | ) | | Depreciation & amortization | | | 11,180 | | | Impairment of goodwill and intangible assets | | | 13,856 | | | Impairment of assets held for sale | | | 39,275 | | | Accruals for warranty | | | 12,671 | | | Deferred income taxes | | | (18,225 | ) | | Other non-cash charges | | | 5,267 | | | Change in working capital | | | (17,417 | ) | | Net cash provided by operating activities | | | 34,181 | | (A) | Capital expenditures | | | (10,042 | ) | (B) | Acquisition of business, net of cash acquired | | | (88,938 | ) | | Proceeds from long-term debt | | | 92,000 | | | Payments on long-term debt | | | (30,175 | ) | | Dividends | | | (3,572 | ) | | Other | | | (1,544 | ) | | Net increase in cash and cash equivalents | | $ | (8,090 | ) | | Free cash flow (A+B) | | $ | 24,139 | | |
TABLE OF CONTENTS A-1
Appendix B
Stock Incentive Plan (as amended)
SPARTAN MOTORS, INC.
STOCK INCENTIVE PLAN OF 2016
Effective May 25, 2016
As proposed to be amended by First Amendment to Stock Incentive Plan
TABLE OF CONTENTS Section 1
| Establishment of Plan; Purpose of Plan
| B-1
| | 1.1
| Establishment of Plan
| B-1
| | 1.2
| Purpose of Plan
| B-1
| | 1.3
| Replacement of Prior Plans
| B-1
| | | | | | | | | Section 2
| Definitions
| B-1
| | | | | Section 3
| Administration
| B-3
| | 3.1
| Power and Authority
| B-3
| | 3.2
| Grants or Awards to Participants
| B-4
| | 3.3
| Incentive Award Agreement
| B-4
| | 3.4
| Vesting and Term
| B-4
| | 3.5
| Amendments or Modifications of Awards
| B-4
| | 3.6
| Indemnification of Committee Members
| B-4
| | | | | Section 4
| Shares Subject to the Plan
| B-5
| | 4.1
| Number of Shares
| B-5
| | 4.2
| Limitation Upon Incentive Awards
| B-5
| | 4.3
| Adjustments
| B-5
| | | | | Section 5
| Stock Options
| B-6
| | 5.1
| Grant
| B-6
| | 5.2
| Stock Option Price
| B-6
| | 5.3
| Medium and Time of Payment
| B-6
| | 5.4
| Stock Options Granted to 10% Shareholders
| B-6
| | 5.5
| Limits on Exercisability
| B-6
| | 5.6
| Restrictions on Transferability
| B-7
| | 5.7
| Termination of Employment, Directorship or Officer Status
| | | | | | Section 6
| Stock Appreciation Rights
| B-7
| | 6.1
| Grant
| B-7
| | 6.2
| Exercise; Payment
| B-7
| | | | Section 7
| Restricted Stock and Restricted Stock Units
| B-8
| | 7.1
| Grant
| B-8
| | 7.2
| Termination of Employment, Directorship or Officer Status
| B-8
| | 7.3
| Restrictions on Transferability
| B-9
| | 7.4
| Legending of Restricted Stock
| B-9
| | 7.5
| Rights as a Shareholder
| B-9
| | 7.6
| Voting Rights
| B-9
|
B-1
Section 8
| Performance-Based Awards
| B-10
| | 8.1
| Designation of Awards
| B-10
| | 8.2
| Compliance with Code Section 162(m)
| B-10
| | 8.3
| Performance Measures
| B-10
| | | | | Section 9
| Change in Control
| B-10
| | 9.1
| Change in Control
| B-10
| | 9.2
| Acceleration of Vesting to Prevent Loss of Value
| B-10
| | 9.3
| Acceleration of Vesting Upon Certain Loss of Employment
| B-11
| | | | Section 10
| General Provisions
| B-11
| | 10.1
| No Rights to Awards
| B-11
| | 10.2
| Withholding
| B-11
| | 10.3
| Compliance with Laws; Listing and Registration of Shares
| B-11 | | 10.4
| No Limit on Other Compensation Arrangements
| B-11
| | 10.5
| No Right to Employment
| B-11
| | 10.6
| No Liability of Company
| B-12
| | 10.7
| Suspension of Rights under Incentive Awards
| B-12
| | 10.8
| Governing Law
| B-12
| | 10.9
| Severability
| B-12
| | | | | Section 11
| Termination and Amendment
| B-12
| | 11.1
| Termination; Amendment | B-12
| | 11.2
| Restriction | B-12
| | | | | Section 12
| Effective Date and Duration of the Plan
| B-12
|
SPARTAN MOTORS, INC.
STOCK INCENTIVE PLAN OF 2016
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan.The Company hereby establishes the STOCK INCENTIVE PLAN OF 2016 (the “Plan”) for its directors, corporate, divisional and Subsidiary officers and other key employees. The Plan permits the grant and award of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock Awards.
1.2 Purpose of Plan.The purpose of the Plan is to provide directors, officers and other key employees of the Company, its divisions and its Subsidiaries with an increased incentive to contribute to the long-term performance and growth of the Company and its Subsidiaries, to join the interests of directors, officers and other key employees with the interests of the Company’s shareholders through the opportunity for increased stock ownership and to attract and retain directors, officers and other key employees. The Plan is further intended to provide flexibility to the Company in structuring long-term incentive compensation to best promote the foregoing objectives. Within that context, it is intended that most awards of Stock Options under the Plan are to provide performance-based compensation under Section 162(m) of the Code and the Plan shall be interpreted, administered and amended if necessary to achieve that purpose.
1.3Replacement of Prior Plans. This Plan is intended to replace each of the Prior Plans (defined below), each of which shall be automatically terminated, replaced, and superseded by this Plan on the effective date of this Plan. Notwithstanding the foregoing, any awards granted pursuant to any Prior Plan shall remain in effect pursuant to their respective terms.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning plainly is required by the context:
2.1 “Agreement” means the written or electronic agreement containing the terms and conditions applicable to each Award granted under the Plan. An Agreement is subject to the terms and conditions of the Plan.
2.2 “Act” means the Securities Exchange Act of 1934, as amended.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Change in Control,” unless otherwise defined in an Incentive Award, means (a) the failure of the Continuing Directors at any time to constitute at least a majority of the members of the Board; (b) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of 35% or more of the outstanding Common Stock or the combined voting power of the Company’s outstanding securities entitled to vote generally in the election of directors; (c) the consummation by the Company of a reorganization, merger or consolidation, unless with or into a Permitted Successor; or (d) the consummation by the Company of the sale or disposition of all or substantially all of the assets of the Company, other than to a Permitted Successor.
2.5 “Code” means the Internal Revenue Code of 1986, as amended.
2.6 “Committee” means the Human Resources and Compensation Committee of the Board or such other committee as the Board may designate from time to time. The Committee shall consist of at least 2 members of the Board and all of its members shall be Non-Employee Directors and “outside directors” as defined in the regulations issued under Section 162(m) of the Code.
2.7 “Common Stock” means the Common Stock, $.01 par value, of the Company.
2.8 “Company” means Spartan Motors, Inc., a Michigan corporation, and its successors and assigns.
2.9“Competition” means participation, directly or indirectly, in the ownership, management, financing or control of any business that is the same as or similar to the present or future businesses of the Company or any Subsidiary. Such participation may be by way of employment, consulting services, directorship or officership. Ownership of less than 3% of the shares of any corporation whose shares are traded publicly on any national or regional stock exchange or over the counter shall not be deemed Competition.
2.10 “Continuing Directors” mean the individuals constituting the Board as of the date this Plan was adopted and any subsequent directors whose election or nomination for election by the Company’s shareholders was approved by a vote of three-quarters (3/4) of the individuals who are then Continuing Directors, but specifically excluding any individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
2.11 “Disability” means: (a) a Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) a Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of Company.
2.12 “Employee Benefit Plan” means any plan or program established by the Company or a Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.13 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the beneficial owner of 10% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or other securities pursuant to the terms of an Employee Benefit Plan.
2.14 “Full Value Award” means an Incentive Award other than an Option or Stock Appreciation Right.
2.15 “Good Reason” means, for purposes of Section 10, any material diminution of the Participant’s position, authority, duties or responsibilities (including the assignment of duties materially inconsistent with the Participants position or a material increase in the time Participant is required by the Company or its successor to travel), any reduction in salary or in the Participant’s aggregate bonus and incentive opportunities, any material reduction in the aggregate value of the Participant’s employee benefits (including retirement, welfare and fringe benefits), or relocation to a principal work site that is more than 40 miles from the Participant’s principal work site immediately prior to the Change in Control.
2.16 “Incentive Award” means the award or grant of a Stock Option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit to a Participant pursuant to the Plan.
2.17 “Market Value” shall equal the closing price of Common Stock reported on Nasdaq on the date of grant, exercise or vesting, as applicable, or if Nasdaq is closed on that date, the last preceding date on which Nasdaq was open for trading and on which shares of Common Stock were traded. If the Common Stock is not listed on Nasdaq, the Market Value shall be determined by any means deemed fair and reasonable by the Committee, which determination shall be final and binding on all parties.
2.18 “Mature Shares” means shares of Common Stock that a Participant has owned for at least six months and that meet any other holding requirements established by the Committee for the shares to be used for attestation.
2.19 “Nasdaq” means The Nasdaq Stock Market LLC, or if the Common Stock is not listed for trading on the on the Nasdaq Stock Market LLC on the date in question, then such other United States-based stock exchange or quotation system on which the Common Stock may be traded or quoted on the date in question.
2.20 “Non-Employee Directors” shall mean individuals who qualify as such within the meaning of Rule 16b-3 under the Exchange Act (or any successor definition thereto).
2.21 “Participant” means a director, corporate officer, divisional officer or any key employee of the Company, its divisions or its Subsidiaries who the Committee determines is eligible to participate in the Plan and who is designated to be granted an Incentive Award under the Plan.
2.22 “Performance-Based Compensation” means an Award to a person who is, or is determined by the Committee to likely become, a “covered employee” (as defined in Section 162(m)(3) of the Code) and that is intended to constitute “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code.
2.23 “Permitted Successor” means a company that, immediately following the consummation of a transaction specified in clauses (c) and (d) of the definition of “Change in Control” above, satisfies each of the following criteria: (a) 50% or more of the outstanding common stock of the company and the combined voting power of the outstanding securities of the company entitled to vote generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the beneficial owners of the outstanding Common Stock and outstanding securities entitled to vote generally in the election of directors (respectively) immediately prior to the applicable transaction; (b) no Person other than an Excluded Holder beneficially owns, directly or indirectly, 10% or more of the outstanding common stock of the company or the combined voting power of the outstanding securities of the company entitled to vote generally in the election of directors (for these purposes the term Excluded Holder shall include the company, any subsidiary of the company and any employee benefit plan of the company or any such subsidiary or any trust holding common stock or other securities of the company pursuant to the terms of any such employee benefit plan); and (c) at least a majority of the board of directors of the company is comprised of Continuing Directors.
2.24 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.25 “Prior Plan” means each of (a) the Spartan Motors, Inc. 2005 Stock Incentive Plan, (b) the Spartan Motors, Inc. 2007 Stock Incentive Plan, and (c) the Spartan Motors, Inc. 2012 Stock Incentive Plan.
2.26 “Restricted Period” means the period of time during which Restricted Stock or Restricted Stock Units awarded under the Plan are subject to the risk of forfeiture, restrictions on transfer and other restrictions and/or conditions pursuant to Section 7. The Restricted Period may differ among Participants and may have different expiration dates with respect to shares of Common Stock covered by the same Incentive Award.
2.27 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 7 of the Plan.
2.28 “Restricted Stock Unit” means the right, as described in Section 7, to receive an amount, payable in either cash or shares of Common Stock, equal to the value of a specified number of shares of Common Stock.
2.29 “Stock Appreciation Right” or “SAR” means a right awarded to a Participant pursuant to Section 6 of the Plan, which shall entitle the Participant to receive cash, Common Stock, other property or a combination thereof, as determined by the Committee, having a value on the date the SAR is exercised equal to the excess of (a) the Market Value of a share of Common Stock at the time of exercise over (b) the base price of the right, as established by the Committee on the date the award is granted (provided that such base price is not lower than the Market Value as of the date of grant).
2.30 “Stock Option” means the right to purchase Common Stock at a stated price for a specified period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.31 “Subsidiary” means any corporation or other entity of which 50% or more of the outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled by the Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. The Committee may delegate record keeping, calculation, payment and other ministerial administrative functions to individuals designated by the Committee, who may be officers or employees of the Company or its Subsidiaries. Except as limited in this Plan or as may be necessary to ensure that this Plan provides performance-based compensation under Section 162(m) of the Code, the Committee shall have all of the express and implied powers and duties set forth in the Bylaws of the Company and this Plan, shall have full power and authority to interpret the provisions of the Plan and Incentive Awards granted under the Plan and shall have full power and authority to supervise the administration of the Plan and Incentive Awards granted under the Plan and to make all other determinations and do all things considered necessary or advisable for the administration of the Plan. All determinations, interpretations and selections made by the Committee regarding the Plan shall be final and conclusive. The Committee shall hold its meetings at such times and places as it considers advisable. Action may be taken by a written instrument signed by all of the members of the Committee and any action so taken shall be fully as effective as if it had been taken at a meeting duly called and held. The Committee shall make such rules and regulations for the conduct of its business as it considers advisable.
3.2 Grants or Awards to Participants. In accordance with and subject to the provisions of the Plan, the Committee shall have the authority to determine all provisions of Incentive Awards as the Committee may consider necessary or desirable and as are consistent with the terms of the Plan, including, without limitation, the following: (a) the persons who shall be selected as Participants; (b) the nature and, subject to the limitations set forth in the Plan, extent of the Incentive Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise or purchase price, the manner in which an Incentive Award will vest or become exercisable and the form of payment for the Incentive Award); (c) the time or times when Incentive Awards will be granted; (d) the duration of each Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of Incentive Awards may be subject.
3.3 Incentive Award Agreement. Each Incentive Award shall be evidenced by an Agreement containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall from time to time determine.
3.4 Vesting and Term. The Committee may determine, in its sole discretion, vesting conditions for Incentive Awards, subject to the following limitations:
(a) An Incentive Award that vests as the result of the passage of time and continued service by the Participant shall be subject to a vesting period of not less than one year from the date of the applicable grant; and
(b) An Incentive Award that is subject to the satisfaction of performance goals over a performance period shall be subject to a performance period of not less than one year.
The minimum vesting periods specified in clauses (a) and (b) above will not apply: (i) to Incentive Awards made in payment of or exchange for other earned compensation (including performance-based Incentive Awards); (ii) upon a Change in Control under the provisions set forth in Section 9; (iii) to termination of service due to death or Disability; and (iv) to Incentive Awards involving an aggregate number of shares not in excess of 5% of the number of shares available for Incentive Awards under Section 4.1.
3.5 Amendments or Modifications of Awards.Subject to Section 11, the Committee shall have the authority to amend or modify the terms of any outstanding Incentive Award in any manner, provided that the amended or modified terms are not prohibited by the Plan as then in effect, including, without limitation, the authority to: (a) modify the number of shares or other terms and conditions of an Incentive Award, provided that any increase in the number of shares of an Incentive Award other than pursuant to Section 4.3 shall be considered to be a new grant with respect to such additional shares for purposes of Code Section 409A and such new grant shall be made at Market Value on the date of the grant; (b) extend the term of an Incentive Award to a date that is no later than the earlier of the latest date upon which the Incentive Award could have expired by its terms under any circumstances or the 10th anniversary of the date of grant (for purposes of clarity, as permitted under Section 409A of the Code, if the term of a Stock Option is extended at a time when the Stock Option exercise price equals or exceeds the Market Value, it will not be an extension of the term of the Stock Option, but instead will be treated as a modification of the Stock Option and a new Stock Option will be treated as having been granted); (c) accelerate the exercisability or vesting or otherwise terminate, waive or modify any restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding Incentive Award; and (e) to the extent not previously exercised or vested, authorize the grant of new Incentive Awards in substitution for surrendered Incentive Awards, provided, however, that such grant of new Incentive Awards shall be considered a new grant for purposes of Code Section 409A and such new grant shall be made at Market Value on the date of the grant; provided, that Incentive Awards issued under the Plan may not be repriced, replaced, regranted through cancellation or modified without shareholder approval if the effect of such repricing, replacement, regrant or modification would be to reduce the exercise price or base price of such Incentive Awards to the same Participants; further provided, that no amendment or modification will alter the Plan in such a way as to cause it to be governed by Code Section 409A.
3.6 Indemnification of Committee Members. Neither any member nor former member of the Committee nor any individual to whom authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the administration and implementation of the Plan. Each person who is or shall have been a member of the Committee shall be indemnified and held harmless by the Company from and against any cost, liability or expense imposed or incurred in connection with such person’s or the Committee’s taking or failing to take any action under the Plan. Each such person shall be justified in relying on information furnished in connection with the Plan’s administration by any appropriate person or persons.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 of the Plan, the total number of shares of Common Stock available for Incentive Awards under the Plan shall be four million three hundred thousand (4,300,000) shares1 of Common Stock; plus shares subject to Incentive Awards that are canceled, surrendered, modified, exchanged for substitute Incentive Awards or expire or terminate prior to the exercise or vesting of the Incentive Award in full and shares that are surrendered to the Company in connection with the exercise or vesting of an Incentive Award, whether previously owned or otherwise subject to such Incentive Award. Such shares shall be authorized and may be either unissued shares, shares issued and repurchased by the Company (including shares purchased on the open market), shares issued and otherwise reacquired by the Company and shares otherwise held by the Company.
4.2 Limitation Upon Incentive Awards. No Participant shall be granted, during any calendar year, Incentive Awards with respect to more than 500,000 shares of Common Stock, subject to adjustment as provided in Section 4.3 of the Plan, but only to the extent that such adjustment will not affect the status of any Incentive Award theretofore issued or that may thereafter be issued as “performance-based compensation” under Section 162(m) of the Code. A purpose of this Section 4.2 is to ensure that the Plan may provide performance-based compensation under Section 162(m) of the Code and this Section 4.2 shall be interpreted, administered and amended if necessary to achieve that purpose. However, the Company is not obligated to structure Incentive Awards to ensure that the awards qualify as “performance-based compensation” under Section 162(m) of the Code.
4.3 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock outstanding changes by reason of a stock dividend, stock split, recapitalization or other general distribution of Common Stock or other securities to holders of Common Stock, the Committee shall provide that the number and kind of securities subject to Incentive Awards and reserved for issuance under the Plan and the limitation provided in Section 4.2, together with applicable exercise prices and base prices, as well as the number and kind of securities available for issuance under the Plan, shall be adjusted in an equitable manner. No fractional shares shall be issued pursuant to the Plan and any fractional shares resulting from such adjustments shall be eliminated from the respective Incentive Awards.
(b) Other Actions Affecting Common Stock. If there occurs, other than as described in the preceding subsection, any merger, business combination, recapitalization, reclassification, subdivision or combination approved by the Board that would result in the Persons who were shareholders of the Company immediately prior to the effective time of any such transaction owning or holding, in lieu of or in addition to shares of Common Stock, other securities, money and/or property (or the right to receive other securities, money and/or property) immediately after the effective time of such transaction, then the outstanding Incentive Awards (including exercise prices and base prices) and reserves for Incentive Awards under this Plan shall be adjusted in such manner as the Committee determines shall be appropriate under the circumstances. It is intended that in the event of any such transaction, Incentive Awards under this Plan shall entitle the holder of each Incentive Award to receive (upon exercise in the case of Stock Options and SARs), in lieu of or in addition to shares of Common Stock, any other securities, money and/or property receivable upon consummation of any such transaction by holders of Common Stock with respect to each share of Common Stock outstanding immediately prior to the effective time of such transaction; upon any such adjustment, holders of Incentive Awards under this Plan shall have only the right to receive in lieu of or in addition to shares of Common Stock such other securities, money and/or other property as provided by the adjustment. If the agreement, resolution or other document approved by the Board to effect any such transaction provides for the adjustment of Incentive Awards under the Plan in connection with such transaction, then the adjustment provisions contained in such agreement, resolution or other document shall be final and conclusive, so long as they are in compliance with Code Section 409A.
1 Increased by proposed First Amendment to Stock Incentive Plan.
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan. No Participant shall have any rights as a shareholder with respect to any shares of stock subject to Stock Options granted hereunder until said shares have been issued. Stock Options shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. In addition, the Committee may vary, among Participants and among Stock Options granted to the same Participant, any and all of the terms and conditions of the Stock Options granted under the Plan. Subject to the limitation imposed by Section 4.2 of the Plan, the Committee shall have complete discretion in determining the number of Stock Options granted to each Participant. The Committee may designate whether or not a Stock Option is to be considered an incentive stock option as defined in Section 422(b) of the Code; provided, that the number of shares of Common Stock that may be designated as subject to incentive stock options for any given Participant shall be limited to that number of shares that become exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its Subsidiaries) and have an aggregate Market Value less than or equal to $100,000 (or such other amount as may be set forth in the Code) and all shares subject to an Incentive Award that have a Market Value in excess of such aggregate amount shall automatically be subject to Stock Options that are not incentive stock options. Stock Options granted to directors who are not employees of the Company or its Subsidiaries shall not be treated as incentive stock options under Section 422(b) of the Code.
5.2 Stock Option Price. The per share Stock Option exercise price shall be determined by the Committee, but shall be a price that is equal to or greater than 100% of the Market Value on the date of grant. The date of grant of a Stock Option shall be the date the Stock Option is authorized by the Committee or a future date specified by the Committee as the date for issuing the Stock Option.
5.3 Medium and Time of Payment. The exercise price for each share purchased pursuant to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or provides in the applicable stock option agreement or grant, in Mature Shares or other consideration substantially equivalent to cash. To the extent any such amendment would not cause a Stock Option to become subject to Code Section 409A, the time and terms of payment may be amended with the consent of a Participant before or after exercise of a Stock Option. The Committee may implement a program for the broker-assisted cashless exercise of Stock Options.
5.4 Stock Options Granted to 10% Shareholders. No Stock Option granted to any Participant who at the time of such grant owns, together with stock attributed to such Participant under Section 424(d) of the Code, more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries may be designated as an incentive stock option, unless such Stock Option provides an exercise price equal to at least 110% of the Market Value on the date of grant and the exercise of the Stock Option after the expiration of five years from the date of grant of the Stock Option is prohibited by its terms.
5.5 Limits on Exercisability.Except as set forth in Section 5.4, Stock Options shall be exercisable for such periods, not to exceed 10 years from the date of grant, as may be fixed by the Committee. At the time of exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must represent to the Company that the shares are being acquired for investment and not with a view to the distribution thereof. The Committee may in its discretion require a Participant to continue the Participant’s service with the Company and its Subsidiaries for a certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed vesting provisions.
5.6 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits (before or after the option grant) or unless the stock option agreement or grant provides otherwise, Stock Options granted under the Plan may not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or hypothecated except by will or the laws of descent and distribution, and, as a condition to any transfer permitted by the Committee or the terms of the stock option agreement or grant, the transferee must execute a written agreement permitting the Company to withhold from the shares subject to the Stock Option a number of shares having a Market Value at least equal to the amount of any federal, state or local withholding or other taxes associated with or resulting from the exercise of a Stock Option. All provisions of a Stock Option that are determined with reference to the Participant, including without limitation those that refer to the Participant’s employment with the Company or its Subsidiaries, shall continue to be determined with reference to the Participant after any transfer of a Stock Option.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the Committee deems advisable, including, without limitation, holding periods or further transfer restrictions, forfeiture or “claw-back” provisions, and restrictions under applicable federal or state securities laws.
5.7 Termination of Employment, Directorship or Officer Status.Unless the Committee otherwise consents or permits (before or after the option grant) or unless the stock option agreement or grant provides otherwise:
(a) General. If a Participant ceases to be a director of the Company or ceases to be employed by or an officer of the Company or one of its Subsidiaries for any reason other than the Participant’s death, Disability or termination for cause (which are addressed below in Sections 5.7(b), (c) and (d), respectively), the Participant may exercise his or her Stock Options in accordance with their terms for a period of three months after such termination of employment, directorship or officer status, but only to the extent the Participant was entitled to exercise the Stock Options on the date of termination unless the Committee otherwise consents or the terms of the stock option agreement provide otherwise, and not beyond the original terms of the Stock Options. For purposes of the Plan, the following shall not be considered a termination of employment, or, where applicable, directorship or officer status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military service or for any other purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided that the employee’s right to re-employment is guaranteed by statute, contract or written policy of the Company; (iv) a termination of employment with continued service as an officer or director; or (v) a termination of a directorship with continued service as an employee or officer. For purposes of the Plan, termination of employment shall be considered to occur on the date on which the employee is no longer obligated to perform services for the Company or any of its Subsidiaries and the employee’s right to re-employment is not guaranteed by statute, contract or written policy of the Company, regardless of whether the employee continues to receive compensation from the Company or any of its Subsidiaries after such date.
(b) Death. If a Participant dies either while a director of the Company or an employee or officer of the Company or one of its Subsidiaries or after the termination of employment or directorship other than for cause (termination for cause is addressed below in Section 5.7(d)), all of the Stock Options issued to such Participant shall become exercisable upon the Participant’s death in accordance with their terms by the personal representative of such Participant or other successor to the interest of the Participant.
(c) Disability.If a Participant ceases to be a director of the Company or ceases to be an employee or officer of the Company or one of its Subsidiaries due to the Participant’s Disability, the Participant may exercise all of his or her Stock Options in accordance with their terms.
(d) Termination for Cause.Notwithstanding anything to the contrary in this Section 5.7, if a Participant is terminated for cause, the Participant shall have no further right to exercise any Stock Options previously granted. For purposes of the Plan, the Committee or officers designated by the Committee shall have absolute discretion to determine whether a termination is for cause.
(f) Additional Provisions in Stock Option Agreements. The Committee may, in its sole discretion, provide by resolution or by including provisions in any stock option agreement entered into with a Participant that the Participant shall have no further right to exercise any Stock Options after termination of employment or directorship if the Committee determines the Participant has entered into Competition with the Company.
SECTION 6
Stock Appreciation Rights
6.1 Grant. A Participant may be granted one or more Stock Appreciation Rights under the Plan and such SARs will be subject to such terms and conditions, consistent with the other provisions of the Plan, as will be determined by the Committee in its sole discretion. A SAR may relate to a particular Stock Option and may be granted simultaneously with or subsequent to the Stock Option to which it relates. Except to the extent otherwise modified in the grant, (i) SARs not related to a Stock Option shall be granted subject to the same terms and conditions applicable to Stock Options as set forth in Section 5, and (ii) all SARs related to Stock Options granted under the Plan shall be granted subject to the same restrictions and conditions and shall have the same vesting, exercisability, forfeiture and termination provisions as the Stock Options to which they relate. SARs may be subject to additional restrictions and conditions. The per-share base price for exercise or settlement of SARs shall be determined by the Committee, but shall be a price that is equal to or greater than the Market Value of such shares on the date of the grant.
6.2 Exercise; Payment. To the extent granted in tandem with a Stock Option, SARs may be exercised only when a related Stock Option could be exercised and only when the Market Value of the stock subject to the Stock Option exceeds the exercise price of the Stock Option. Unless the Committee decides otherwise (in its sole discretion), SARs will only be paid in cash or in shares of Common Stock. Other than as adjusted pursuant to Section 4.3, the base price of SARs may not be reduced without shareholder approval (including canceling previously awarded SARs and regranting them with a lower base price).
SECTION 7
Restricted Stock and Restricted Stock Units
7.1 Grant. Subject to the limitations set forth in Sections 4.1 and 4.2 of the Plan, Restricted Stock and Restricted Stock Units may be granted to Participants under the Plan. Shares of Restricted Stock are shares of Common Stock the retention, vesting and/or transferability of which is subject, during specified periods of time, to such conditions (including continued employment or performance conditions) and terms as the Committee deems appropriate. Restricted Stock Units are Incentive Awards denominated in units of Common Stock under which the issuance of shares of Common Stock is subject to such conditions (including continued employment or performance conditions) and terms as the Committee deems appropriate. For purposes of determining the number of shares available under the Plan, each Restricted Stock Unit shall count as the number of shares of Common Stock subject to the Restricted Stock Unit. Unless determined otherwise by the Committee, each Restricted Stock Unit will be equal to one share of Common Stock and will entitle a Participant to either shares of Common Stock or an amount of cash determined with reference to the value of shares of Common Stock. To the extent determined by the Committee, Restricted Stock and Restricted Stock Units may be satisfied or settled in Common Stock, cash or a combination thereof. Restricted Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but shall be consistent with the terms of the Plan. Subject to the requirements of applicable law, the Committee shall determine the price, if any, at which awards of Restricted Stock or Restricted Stock Units, or shares of Common Stock issuable under Restricted Stock Unit awards, shall be sold or awarded to a Participant, which may vary from time to time and among Participants.
7.2 Termination of Employment, Directorship or Officer Status.Unless the Committee otherwise consents or permits (before or after the grant of Restricted Stock or Restricted Stock Units):
(a) General.In the event of termination of employment, directorship or officer status during the Restricted Period for any reason other than death, Disability, termination for cause (which are addressed below in Sections 7.2(b), (c) and (d), respectively), or termination following a Change in Control (which is addressed in Section 9), each Restricted Stock and Restricted Stock Unit award still subject in full or in part to restrictions at the date of such termination shall automatically be forfeited and returned to the Company. For purposes of the Plan, the following shall not be considered a termination of employment, or, where applicable, directorship or officer status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military service or for any other purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days duly authorized in writing by the Company, provided that the employee’s right to re-employment is guaranteed by statute, contract or written policy of the Company; (iv) a termination of employment with continued service as an officer or director; or (v) a termination of a directorship with continued service as an employee or officer. For purposes of the Plan, termination of employment shall be considered to occur on the date on which the employee is no longer obligated to perform services for the Company or any of its Subsidiaries and the employee’s right to re-employment is not guaranteed by statute, contract or written policy of the Company, regardless of whether the employee continues to receive compensation from the Company or any of its Subsidiaries after such date.
(b) Death. If a Participant dies either while a director of the Company or an employee or officer of the Company or one of its Subsidiaries or after the termination of employment or directorship other than for cause (termination for cause is addressed below in Section 7.2(d)) but during the time when the Participant holds Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of death, the Participant’s Restricted Stock and Restricted Stock Units subject to a Restricted Period shall immediately become vested and the Participant’s ownership (or that of his successor in interest) of such Restricted Stock and Restricted Stock Units shall not be affected by the Participant’s death.
(c) Disability.If a Participant ceases to be a director of the Company or ceases to be an employee or officer of the Company or one of its Subsidiaries due to the Participant’s Disability, the Participant’s Restricted Stock and Restricted Stock Units subject to a Restricted Period shall immediately become vested and the Participant’s ownership of such Restricted Stock and Restricted Stock Units shall not be affected by such Disability.
(d) Termination for Cause.Notwithstanding anything to the contrary in this Section 7.2, if a Participant’s employment or directorship is terminated for cause, the Participant shall have no further right to receive any Restricted Stock or Restricted Stock Units and all Restricted Stock and Restricted Stock Units still subject to restrictions at the date of such termination shall automatically be forfeited and returned to the Company. For purposes of the Plan, the Committee or officers designated by the Committee shall have absolute discretion to determine whether a termination is for cause.
7.3 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits or unless the terms of the restricted stock or restricted stock unit agreement or grant provide otherwise: (i) shares of Restricted Stock and interests in Restricted Stock Units shall not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or hypothecated during the Restricted Period except by will or the laws of descent and distribution; and (ii) all rights with respect to Restricted Stock and Restricted Stock Units granted to a Participant under the Plan shall be exercisable during the Participant’s lifetime only by such Participant, his or her guardian or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of Common Stock subject to Restricted Stock and Restricted Stock Unit awards under the Plan as the Committee considers advisable, including, without limitation, holding periods or further transfer restrictions, forfeiture or “claw-back” provisions, and restrictions under applicable federal or state securities laws.
7.4 Legending of Restricted Stock. In addition to any other legend that may be set forth on a Participant’s share certificate, any certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under the Spartan Motors, Inc. Stock Incentive Plan of 2016 (the “Plan”). This certificate is held subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented by this certificate except in compliance with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company.
The Committee may require that certificates representing shares of Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been satisfied or lapsed.
7.5 Rights as a Shareholder. A Participant shall have all dividend, liquidation and other rights with respect to Restricted Stock held by such Participant as if the Participant held unrestricted Common Stock; provided, that the unvested portion of any award of Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture imposed pursuant to this Section 7 and the terms and conditions set forth in the Participant’s restricted stock agreement. Unless the Committee otherwise determines or unless the terms of the applicable restricted stock unit agreement or grant provide otherwise, a Participant shall have all dividend and liquidation rights with respect to shares of Common Stock subject to awards of Restricted Stock Units held by such Participant as if the Participant held unrestricted Common Stock. Unless the Committee determines otherwise or unless the terms of the applicable restricted stock or restricted stock unit agreement or grant provide otherwise, any noncash dividends or distributions paid with respect to shares of unvested Restricted Stock and shares of Common Stock subject to unvested Restricted Stock Units shall be subject to the same restrictions and vesting schedule as the shares to which such dividends or distributions relate. Any dividend payment with respect to Restricted Stock and Restricted Stock Units shall be made no later than the end of the calendar year in which the dividends are paid to shareholders, or, if later, the 15th day of the third month following the date the dividends are paid to shareholders.
7.6 Voting Rights. Unless otherwise determined by the Committee, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the Restricted Period. Participants shall have no voting rights with respect to shares of Common Stock underlying Restricted Stock Units unless and until such shares are reflected as issued and outstanding shares on the Company’s stock ledger.
SECTION 8
Performance-Based Awards
8.1 Designation of Awards. A Full Value Award granted to a Participant who is, or is likely to be, a “covered employee” for purposes of Code Section 162(m) as of the end of the tax year in which the Company would ordinarily claim a tax deduction in connection with such Incentive Award, must comply with the provisions of this Section 8 if such Incentive Award is intended by the Committee to constitute Performance-Based Compensation.
8.2 Compliance with Code Section 162(m). If an Incentive Award is subject to this Section 8, then the determination of the amount of shares to be granted or the lapsing of restrictions thereon and the distribution of cash, shares or other property pursuant thereto, as applicable, shall be subject to the achievement over the applicable performance period of one or more performance goals based on one or more of the performance measures specified in Section 8.3. The Committee will select the applicable performance measure(s) and specify the performance goal(s) based on those performance measures for any performance period, specify in terms of an objective formula or standard the method for calculating the grant to be made or the amount payable to a Participant if the performance goal(s) are satisfied, and certify the degree to which applicable performance goals have been satisfied and any grant to be made or amount payable in connection with an Incentive Award subject to this Section 8, all within the time periods prescribed by and consistent with the other requirements of Code Section 162(m). In specifying the performance goals applicable to any performance period, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance measures on which the performance goals are based, which may include adjustments that would cause such measures to be considered “non-GAAP financial measures” within the meaning of Rule 101 under Regulation G promulgated by the Securities and Exchange Commission. The Committee may also adjust performance measures for a performance period to the extent permitted by Code Section 162(m) in connection with an event described in Section 4.3 to prevent the dilution or enlargement of a Participant’s rights with respect to Performance-Based Compensation. The Committee may adjust downward, but not upward, any grant to be made or any amount determined to be otherwise payable in connection with such an Incentive Award. The Committee may also provide that the achievement of specified performance goals in connection with an Incentive Award subject to this Section 8 may be waived upon the death or Disability of the Participant or under any other circumstance with respect to which the existence of such possible waiver will not cause the Incentive Award to fail to qualify as “performance-based compensation” under Code Section 162(m).
8.3Performance Measures. For purposes of any Full Value Award considered Performance-Based Compensation subject to this Section 8, the performance measures to be utilized shall be limited to one or a combination of two or more of the following performance criteria: net sales; total revenue; gross margin rate; selling, general and administrative expense rate; earnings before interest, taxes, depreciation and amortization; operating income; earnings before interest and taxes; earnings before taxes; net earnings; earnings per share; total shareholder return; return on equity; return on sales; return on assets; return on invested capital; economic value added; cash conversion cycle; operating cash flow; free cash flow; working capital; debt leverage; and total net cash. Any performance goal based on one of the foregoing performance measures utilized may be expressed in absolute amounts, on a per share basis, as a growth rate or change from preceding periods, or as a comparison to the performance of specified companies or other external measures, and may relate to one or any combination of corporate, group, unit, division, Subsidiary or individual performance.
SECTION 9
Change in Control
9.1 Change in Control. The following provisions shall apply to outstanding Incentive Awards in the event of a Change in Control.
9.2 Acceleration of Vesting to Prevent Loss of Value. If the Company is the surviving entity and an outstanding Incentive Award is not adjusted as necessary to preserve the intrinsic value of the Incentive Award, or if the Company’s successor does not irrevocably assume the Company’s obligations under this Plan or replace the Incentive Awards with awards having substantially the same intrinsic value and having terms and conditions no less favorable to the Participant than those applicable to the Incentive Awards immediately prior to the Change in Control, then, immediately prior to the Change in Control and without any action by the Committee or the Board, each such outstanding Incentive Award granted under the Plan shall become immediately vested and, if applicable, exercisable in full.
9.3 Acceleration of Vesting upon Certain Loss of Employment.
(a) Stock Options and Stock Appreciation Rights. In the event of a Change in Control in which the Participant’s outstanding Stock Options or Stock Appreciation Rights granted under the Plan are assumed or replaced as provided in Section 9.2, such Stock Options and Stock Appreciation Rights shall become immediately exercisable in full for a remaining term extending until the original expiration date of the applicable Stock Option or Stock Appreciation Right grant if, following the Change in Control, the Participant’s employment (i) is terminated by the Company or a Subsidiary without cause; or (ii) is terminated by the Participant for Good Reason. For purposes of the Plan, the Committee or officers designated by the Committee shall have absolute discretion to determine whether a termination is for cause.
(b) Restricted Stock and Restricted Stock Units. In the event of a Change in Control in which the Participant’s outstanding Restricted Stock and Restricted Stock Units granted under the Plan are assumed or replaced as provided in Section 9.2, such Restricted Stock and Restricted Stock Units granted under the Plan will vest if, following the Change in Control, the Participant’s employment (i) is terminated by the Company or a Subsidiary without cause; or (ii) is terminated by the Participant for Good Reason. For purposes of the Plan, the Committee or officers designated by the Committee shall have absolute discretion to determine whether a termination is for cause.
SECTION 10
General Provisions
10.1 No Rights to Awards.No Participant or other person shall have any claim to be granted any Incentive Award under the Plan and there is no obligation of uniformity of treatment of Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and conditions of Incentive Awards of the same type and the determination of the Committee to grant a waiver or modification of any Incentive Award and the terms and conditions thereof need not be the same with respect to each Participant or the same Participant.
10.2 Withholding.The Company or a Subsidiary shall be entitled to: (a) withhold and deduct from future wages of a Participant (or from other amounts that may be due and owing to a Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state, local and foreign withholding and employment-related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an incentive stock option; or (b) require a Participant promptly to remit the amount of such withholding to the Company before taking any action with respect to an Incentive Award. Unless the Committee determines otherwise, withholding may be satisfied (but only to the extent required to satisfy the minimum amount required to be withheld by law or regulation) by withholding Common Stock to be received upon exercise or vesting of an Incentive Award or by delivery to the Company of previously owned Common Stock. The Company may establish such rules and procedures concerning timing of any withholding election as it deems appropriate.
10.3 Compliance with Laws; Listing and Registration of Shares.All Incentive Awards granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be subject to all applicable laws, rules and regulations, and to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of such Incentive Award or the issuance or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or the restrictions on such Incentive Award shall not lapse, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
10.4 No Limit on Other Compensation Arrangements.Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, including the grant of stock options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.
10.5 No Right to Employment.The grant of an Incentive Award shall not be construed as giving a Participant the right to be retained in the employ or directorship of the Company or any Subsidiary. The Company or any Subsidiary may at any time dismiss a Participant from employment and a directorship may be terminated consistent with the Company’s Restated Articles of Incorporation and Bylaws, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any written agreement with a Participant.
10.6 No Liability of Company. The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or any other person as to: (a) the non-issuance or sale of Common Stock as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; (b) any tax consequence to any Participant or other person due to the receipt, exercise or settlement of any Incentive Award granted hereunder; and (c) any provision of law or legal restriction that prohibits or restricts the transfer of shares of Common Stock issued pursuant to any Incentive Award.
10.7 Suspension of Rights under Incentive Awards. The Company, by written notice to a Participant, may suspend a Participant’s and any transferee’s rights under any Incentive Award for a period not to exceed 60 days while the termination for cause of that Participant’s employment or directorship with the Company and its Subsidiaries is under consideration; provided, however, that if such suspension causes an extension of the term of the Incentive Award, such extension shall comply with Section 3.3(b) of the Plan.
10.8 Governing Law.The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable federal law.
10.9 Severability.In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included, unless such construction would cause the Plan to fail in its essential purposes.
SECTION 11
Termination and Amendment
11.1 Termination; Amendment. The Board may terminate the Plan at any time or may from time to time amend or alter the Plan or any aspect of it as it considers proper and in the best interests of the Company, provided that no such amendment may be made, without the approval of shareholders of the Company, that would: (i) reduce the exercise price at which Stock Options, or the base price at which Stock Appreciation Rights, may be granted below the prices provided for in Sections 5.2 and 6.1, respectively; (ii) reduce the exercise price of outstanding Stock Options or the base price of outstanding Stock Appreciation Rights; (iii) increase the individual maximum limits in Section 4.2; or (iv) otherwise amend the Plan in any manner requiring shareholder approval by law or under Nasdaq listing requirements or other applicable Nasdaq rules. The Committee may alter or amend an award agreement and/or Incentive Award previously granted under the Plan to the extent it determines that such action is appropriate. In no event, however, may the exercise price of Stock Options or the base price of Stock Appreciation Rights be reduced below the Market Value on the date of the grant.
11.2 Restriction. Notwithstanding anything to the contrary in Section 11.1, no such amendment or alteration to the Plan or to any previously granted award agreement or Incentive Award shall be made which would impair the rights of the holder of the Incentive Award, without such holder’s consent, provided that no such consent shall be required if the Committee determines in its sole discretion and prior to the date of any Change in Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Incentive Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard.
SECTION 12
Effective Date and Duration of the Plan
This Plan shall take effect May 25, 2016, subject to approval by the shareholders at the 2016 Annual Meeting of Shareholders or any adjournment thereof or at a Special Meeting of Shareholders. Unless earlier terminated by the Board of Directors, no Incentive Award shall be granted under the Plan after May 25, 2026.
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