Exhibit 10.3

 

ABC/DTC/ABF

 Long-Term (3-Year) Incentive Compensation Plan

 

Pursuant to the Arkansas Best Corporation (“ABC” or “Company”) 2005 Ownership
Incentive Plan, the Compensation Committee of the Arkansas Best Corporation
Board of Directors (the “Compensation Committee”) has adopted the “Long-Term
Incentive Compensation Plan” (the “Plan”) and has determined that the Plan will
include the following components for the three-year period beginning 1/1/[      
] and ending 12/31/[       ]:

 

ROCE Component

50% weighting

Total Shareholder Return (“TSR”) Component

50% weighting

 

The ROCE Component weighting and TSR Component weighting are determined by the
Compensation Committee for each Measurement Period.

 

I.          Defined Terms

 

Base Salary. Base Salary for participants other than Executive Officers is
defined as total base salary paid, while an eligible participant in the Plan,
for the Measurement Period divided by the number of months in the Measurement
Period multiplied by twelve. Base Salary is not reduced by any voluntary salary
reductions or any salary reduction contributions made to any salary reduction
plan, defined contribution plan or other deferred compensation plans of the
Company, but does not include any payments under the Plan, any stock option or
other type of equity plan, or any other bonuses, incentive pay or special
awards.

 

Base Salary for Executive Officers.  Base Salary for Executive Officers
(Executive Officer for this purpose is defined as an employee who, as of the
last day of the applicable Plan Year, is covered by the compensation limitations
of Code Section 162(m) or the regulations issued thereunder)  is defined as
total base salary paid, while an eligible participant in the Plan, for the
Measurement Period divided by the number of months in the Measurement Period
multiplied by twelve, but in no event shall the Base Salary for an Executive
Officer exceed the monthly base salary for the Executive Officer as most
recently approved by the Compensation Committee as of the end of the day on
which the Plan is approved for the Measurement Period, multiplied by twelve,
multiplied by 200%.  Base Salary is not reduced by any voluntary salary
reductions or any salary reduction contributions made to any salary reduction
plan, defined contribution plan or other deferred compensation plans of the
Company, but does not include any payments under the Plan, any stock option or
other type of equity plan, or any other bonuses, incentive pay or special
awards.

 

Cause.  Cause shall mean (i) Participant’s gross misconduct or fraud in the
performance of Participant’s duties to the Company or any Subsidiary;
(ii) Participant’s conviction or guilty plea or pleas of nolo contendere with
respect to any felony or act of moral turpitude; (iii) Participant’s engaging in
any material act of theft or material misappropriation of Company or any
Subsidiary’s property, or (iv) Participant’s material breach of the Company’s
Code of Conduct, as such Code may be revised from time to time.

 

Disability.  Disability shall mean a condition under which the Participant
either (A) is unable to engage in any substantial gainful activity by reason of
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve months, or (B) is, by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected
to last for a continuous period of not less than three months under an accident
or health plan covering employees of the Company or any Subsidiary.

 

Good Reason. Good Reason shall mean (i) any material adverse diminution in
Participant’s title, duties, or responsibilities; (ii) any reduction in
Participant’s base salary or employee benefits (including reducing Participant’s

 

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level of participation or bonus award opportunity in the Company’s or a
Subsidiary’s incentive compensation plans) or (iii) a relocation of
Participant’s principal place of employment by more than 50 miles without the
prior consent of Participant.

 

Measurement Period.  The Measurement Period is 1/1/[       ] to 12/31/[       ].

 

Retirement.  Retirement shall mean Participant’s retirement from active
employment at or after age 65 or retirement from the Company or Subsidiary at or
after age 55, so long as the Participant has, as of the date of such retirement,
at least 10 years of service with the Company or any Subsidiary.

 

II. Participants

 

Participants in the Plan (who are not active participants in ABC or a
Subsidiary’s Supplemental Benefit Plan or Deferred Salary Agreement program or
who selected Option 1 for their 12/31/2009 SBP Freeze election) are listed in
Appendix C and certain employees may be specifically included or excluded by the
Compensation Committee.

 

An employee may not become a Participant after the end of the 12th month of the
Measurement Period.

 

If an Eligible Participant in the Plan also participates in the Arkansas Best
Corporation 2012 Change in Control Plan, the terms of the Arkansas Best
Corporation 2012 Change in Control Plan shall govern.

 

III. Corporate Performance Metrics

 

ROCE Component: The Individual Award Opportunities provided by the ROCE
Component are based on (a) achieving certain levels of performance for ABC’s
consolidated Return on Capital Employed (“ROCE”) and (b) your Target Payout
Factor.  The formula below illustrates how your incentive is computed:

 

Your Incentive Payment = [Performance Factor Earned x Your Target Payout Factor
x Your Base Salary x the ROCE Component Weighting].

 

If your job position changes during the Measurement Period, your Incentive
Payment will be prorated based on the Base Salary you receive while you are in
an eligible Job Position listed in the Plan, the applicable Performance Factor
Earned and Your Target Payout Factor. If you die, are Disabled or Retire as
provided for under Section IV of the ROCE Component, your Incentive Payment will
be prorated based on the Base Salary you receive from the beginning of the
Measurement Period until the applicable date of death, Disability or retirement
date.

 

A.      Performance Factor Earned. Performance Factor Earned is shown in
Appendix A and depends on the ROCE achieved by ABC for the Measurement Period.

 

B.      Target Payout Factor. Your Target Payout Factor is a percentage of your
Base Salary.  The Target Payout Factors are listed in Appendix C.

 

TSR Component: The Individual Award Opportunities provided by the TSR Component
are based on (a) the percentile rank of the Company’s Compounded Annual Growth
Rate (“CAGR”) of Total Shareholder Return relative to the Peer Companies over
the Measurement Period and (b) your Target Payout Factor.  At the end of the
Measurement Period, the percentile rank of the Company’s CAGR Total Shareholder
Return will be calculated. Any Peer Company that is no longer publicly traded
shall be excluded from this calculation. The formula below illustrates how this
portion of your incentive is computed:

 

Your Incentive Payment = [Performance Factor Earned x Your Target Payout Factor
x Your Base Salary x TSR Component Weighting].

 

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If your job position changes during the Measurement Period, your Incentive
Payment will be prorated based on the Base Salary you receive while you are in
an eligible Job Position listed in the Plan, the applicable Performance Factor
Earned and Your Target Payout Factor. If you die, are Disabled or Retire as
provided for under Section IV of the TSR Component, your Incentive Payment will
be prorated based on the Base Salary you receive from the beginning of the
Measurement Period until your date of death, Disability or retirement date.

 

A.      Performance Factor Earned.  The Performance Factor Earned is shown in
Appendix B and depends on the Company’s Compounded Annual Growth Rate of Total
Shareholder Return over the Measurement Period as compared to the Peer
Companies.

 

B.      Target Payout Factor. Your Target Payout Factor is a percentage of your
Base Salary. The percentage varies for each level of management within the
Company.  The Target Payout Factors are listed in Appendix C.

 

If the performance result falls between two rows on Appendix A or Appendix B,
interpolation is used to determine the factor used in the computation of the
incentive.

 

In no event will the Target Payout Factor used to calculate the incentive amount
exceed the maximum factor of 85% provided in Appendix C.

 

The Compensation Committee has established maximum incentive amounts based on a
maximum Performance Factor Earned of 200% for the TSR Component and 300% for the
ROCE Component subject to the applicable weighting for each component as
provided in Appendix A and Appendix B.

 

The terms of the Long-Term Incentive Compensation Plan — ROCE Component and the
Long-Term Incentive Compensation Plan — TSR Component are incorporated into the
Plan.

 

IV. Payment of Award

 

Payment will be made as soon as practicable following the end of the Measurement
Period,  and in any event, no later than 2 ½ months after the end of the
Measurement Period.

 

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V. 2005 Ownership Incentive Plan

 

Defined terms in this Plan shall have the same meaning as in the 2005 Ownership
Incentive Plan, except where the context otherwise requires.

 

No term or provision in this Plan may conflict with any term or provision of the
2005 Ownership Incentive Plan. It is specifically intended that the Plan, ROCE
Component and TSR Component be an “Award Agreement” and the incentives paid
hereunder be an “Award” under the terms of the 2005 Ownership Incentive Plan.

 

VI. Discretionary Adjustments

 

Prior to a Change In Control, the Compensation Committee may reduce any
Participant’s Final Award if the Compensation Committee determines, in its sole
discretion, that events have occurred or facts have become known which would
make a reduction appropriate and equitable.

 

VI. Effect of Termination of Employment; Change in Control

 

(a)         General. Except as provided in subparts (b) or (c), upon a
termination of Participant’s employment with the Company or any Subsidiary for
any reason prior to the completion of the Measurement Period, the Participant
shall not be entitled to any Incentive Payment under the Plan.

 

(b)         Death; Disability; Retirement.  Upon termination of Participant’s
employment with the Company or any Subsidiary by reason of Participant’s death,
Disability or Retirement (as defined in the Plan), Participant’s Incentive
Payment shall be prorated based on the period of participation in the Plan,
provided that Participant’s Incentive Payment shall be computed and paid in the
normal course of business after the end of the Measurement Period. Provided,
however, an employee must have completed at least 12 months of the Measurement
Period to be entitled to a Incentive Payment under this Section IV(b).

 

(c)          Change in Control. Upon the occurrence of a Change in Control,
Participant shall be entitled to immediate payment of the greater of the
following:

 

(A)                 The amount computed under the Plan based on 100% of the
Participant’s “Target Payout Factor” in Appendix C using the date of the Change
in Control as the end of the Measurement Period, or

 

(B)                 The amount computed under the Plan based on the actual
percentage of Performance Factor Earned in Appendix A and Appendix B, calculated
as if the Measurement Period ended on the date of the Change in Control and
using the Company share price as of the date of the Change in Control to
calculate TSR rather than the 60-day average price for the ending of the
Measurement Period.

 

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ABC/DTC/ABF

LTIP - ROCE Component

 

The Compensation Committee of the Arkansas Best Corporation Board of Directors
has adopted this ROCE Component of the Plan (“ROCE Component”), including the
following Individual Award Opportunities, Performance Measures and Participants
for Arkansas Best Corporation and its subsidiaries for the three-year period
beginning 1/1/[       ] and ending 12/31/[       ].

 

I. Performance Measure

 

ROCE for ABC is calculated as the following ratio for the Measurement Period:

 

Net Income + After-tax Effect of Interest Expense + After-tax Effect of Imputed
Interest Expense + After-tax Effect of Amortization of intangibles and
depreciation of the June 15, 2012 cost of Intrans software related to purchase
of Panther — After-tax Effect of Income from Cash and Short-term Investments
Attributable to the reduction in Average Debt

Average Equity + Average Debt + Average Imputed Debt

 

Divided by 3

 

“Net Income” for the ROCE calculation is consolidated net income for the
Measurement Period determined in accordance with Generally Accepted Accounting
Principles after taking into account the Section II Required Adjustments.

 

“Interest Expense” for the ROCE calculation is (i) interest on all long and
short-term indebtedness and other interest bearing obligations and (ii) deferred
financing cost amortization and other financing costs, including letters of
credit fees for the Measurement Period, reduced by the amount of interest
expense on debt not included in Average Debt as defined below.

 

“Imputed Interest Expense” consists of the interest attributable to Average
Imputed Debt assuming an interest rate of 7.5% for the Measurement Period.

 

“Average Equity” is the average of the beginning of the Measurement Period and
the end of the Measurement Period stockholder’s equity.

 

“Average Debt” is the average of the beginning of the Measurement Period and the
end of the Measurement Period current and long-term debt, with beginning of the
Measurement Period and end of the Measurement Period current and long-term debt
reduced by the respective amount of the beginning of the Measurement Period and
end of the Measurement Period total of unrestricted cash, cash equivalents and
short-term investments, and limited to a reduction of debt to zero.

 

“Average Imputed Debt” consists of the average of the beginning of the
Measurement Period and the end of the Measurement Period present value of all
payments determined using an interest rate of 7.5% on operating leases of
revenue equipment with an initial term of more than two years.

 

“Amortization of intangibles and depreciation of the June 15, 2012 cost of
Intrans software related to purchase of Panther” consists of the amortization
and depreciation expense attributable to the June 15, 2012 allocated value of
Panther intangible assets and Intrans software and includes any impairment
charge related to those assets.

 

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“Income from Cash and Short-term Investments Attributable to the reduction in
Average Debt” consists of income earned on the amount by which Average Debt is
reduced at the average interest rate earned in cash and short-term investments
for the measurement period.

 

II. Required Adjustments

 

The following adjustments shall be made when calculating ROCE:

 

(i)

add back the after-tax total long-term incentive compensation accruals during
the Measurement Period for any Long-term Incentive Compensation Plan for
nonunion employees of ABC and any of its Subsidiaries when determining Net
Income;

(ii)

add back after-tax direct third party expenses associated with an acquisition by
ABC or any of its Subsidiaries, to the extent the items were added back under
the [      ], [      ] and [      ] ABC and any of its Subsidiaries Annual
Incentive Compensation Plans;

(iii)

exclude the operating results (all revenue and expenses) for any business
acquired between the beginning of the Measurement Period and the end of the
Measurement Period from the calculation of Net Income in the numerator of the
ratio for the period from the acquisition date to the next
December 31st (operating results of acquired businesses are included thereafter)
and exclude any Acquisition Debt attributable to the business acquired (either
directly held by the business or incurred to acquire the business) included in
the denominator based on the weighted average of the Acquisition Debt for the
period for which operating results are excluded from the numerator.

(iv)

exclude decreases in Net Income resulting directly from reorganization and
restructuring programs for which amounts are publicly disclosed;

(v)

exclude increases or decreases in Net Income resulting from an extraordinary,
unusual or non-recurring item as described in the Accounting Standards
Codification topic(s) that replaced or were formerly known as Accounting
Principles Board Opinion No. 30, as amended or superseded;

(vi)

exclude increases or decreases in Net Income resulting from any change in
accounting principle as defined in the Accounting Standards Codification
topic(s) that replaced or were formerly known as Financial Accounting Standards
Board (“FASB”) Statement 154, as amended or superseded;

(vii)

exclude the effect on ROCE of changes to net income, equity and debt as a result
of any change in accounting principle as defined in the Accounting Standards
Codification topic(s) that replaced or were formerly known as Accounting
Principles Board Opinion No. 30, as amended or superseded;

(viii)

exclude any loss from a discontinued operation as described in the Accounting
Standards Codification topic(s) that replaced or were formerly known as FASB
144, as amended or superseded;

(ix)

exclude the effect of changes in federal income tax law or regulations affecting
reported results during the Measurement Period including increases or decreases
in tax rates or the addition or elimination of tax credits. A change for this
purpose will be as compared to the laws and regulations in effect on January 1,
[     ], without consideration of any retroactive changes in tax law that affect
January 1, [     ] tax law;

(x)

exclude goodwill impairment charges; and

(xi)

exclude settlement accounting charges incurred that relate to the qualified
defined benefit pension plan.

 

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ABC/DTC/ABF

 

LTIP - TSR Component

 

The Compensation Committee of the Arkansas Best Corporation Board of Directors
has adopted this Total Shareholder Return Component of the Total Plan (“TSR
Component”), including the following Individual Award Opportunities, Performance
Measures, and Participants for Arkansas Best Corporation and its subsidiaries
for the three-year period beginning 1/1/[       ] and ending 12/31/[       ].

 

I. Performance Measure

 

Total Shareholder Return. (“TSR”). Total Shareholder Return with respect to the
Company and each Peer Company equals the annualized rate of return reflecting
price appreciation between the beginning 60-day average share price (ending
December 31 of the year immediately prior to the beginning of the Measurement
Period) and the ending 60-day average share price (ending December 31 of the
final year of the Measurement Period), adjusted for dividends paid and the
compounding effect of dividends paid on reinvested dividends (the calculation
assumes that all dividends paid are reinvested). Any Peer Company that is no
longer publicly traded shall be excluded from this calculation.

 

Compounded Annual Growth Rate (“CAGR”). Compounded Annual Growth Rate converts
the total return into a value that indicates what the return was on an annual
basis for the 3 year period.

 

Peer Companies. The Peer Companies are the following publicly traded companies:

 

·                              Con-Way, Inc.

·                              Echo Global Logistics, Inc.

·                              Forward Air Corp.

·                              Hub Group Inc.

·                              JB Hunt Transport Services, Inc.

·                              Landstar System Inc.

·                              Old Dominion Freight Line, Inc.

·                              Roadrunner Transportation Systems, Inc.

·                              SAIA, Inc.

·                              Swift Transportation Corporation

·                              Werner Enterprises

·                              XPO Logistics, Inc.

·                              YRC Worldwide, Inc.

 

II. Adjustments

 

In the event that there is any change in the common stock of the Company or the
Peer Companies as the result of any stock dividend on, dividend of or stock
split or stock combination of, or any like change in, stock of the same class or
in the event of any change in the capital structure of the Company or the Peer
Companies all share amounts and the TSR calculation will be adjusted
appropriately.

 

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Appendix A

 

[       ]-[       ] LTIP — ROCE Component

 

 

 

Three-Year Average Return on Capital 
Employed
(“ROCE”)

 

Performance Factor Earned

 

 

Less than 3%

 

0%

Threshold

 

3%

 

30%

 

 

4%

 

40%

 

 

5%

 

50%

 

 

6%

 

60%

 

 

7%

 

70%

 

 

8%

 

80%

 

 

9%

 

90%

Target

 

10%

 

100%

 

 

11%

 

140%

 

 

12%

 

180%

 

 

13%

 

220%

 

 

14%

 

260%

Maximum

 

15%

 

300%

 

 

Greater than 15%

 

300%

 

ROCE Component Weighting: 50%

 

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Appendix B

 

[       ]-[       ] LTIP — TSR Component

 

 

 

Percentile ranking of the Company’s 
Compounded Annual Growth Rate TSR 
relative to Peer Companies over the 
Measurement Period

 

Performance Factor Earned

 

 

Below 25th Percentile

 

0%

Threshold

 

25th Percentile

 

25%

Target

 

50th Percentile

 

100%

Maximum

 

75th Percentile

 

200%

 

 

Above 75th Percentile

 

200%

 

TSR Component Weighting: 50%

 

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Appendix C

 

LTIP Target Payout Factors

 

Participants/Job Title

 

Target Payout Factor

ABC — President & CEO

 

[   ]%

ABF Freight — President & CEO

ABF Logistics — President

 

[   ]%

ABC SVP — Tax & Chief Audit Executive

ABC SVP — CFO & CIO

ABC SVP — Enterprise Customer Solutions

 

[   ]%

ABC VP — General Counsel & Corporate Secretary

 

[   ]%

ABC VP — Controller

ABC VP — Economic Analysis

ABC VP — Human Resources

ABF VPs

DTC President

 

[   ]%

 

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