Exhibit 10.4

 

ArcBest

 Long-Term (3-Year) Incentive Compensation Plan

 

Pursuant to the ArcBest Corporation (“ArcBest” or “Company”) 2005 Ownership Incentive Plan, the Compensation Committee of the ArcBest 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 earned plus any amount earned in 2014, but paid in 2015, 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 earned plus any amount earned in 2014, but paid in 2015, 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

 











 

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/[       ].

 

Qualified Termination.  Qualified Termination shall mean, within 24 full calendar months after a Change in Control, as defined in the 2005 Ownership Incentive Plan, a participant’s Separation from Service by the Company (or an Affiliate of the Company) without Cause (and not as a result of the Participant’s death or Disability), or by the Participant for Good Reason.

 

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 ArcBest 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 ArcBest Corporation 2012 Change in Control Plan, the terms of the ArcBest 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 ArcBest’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 ArcBest 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

 

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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].

 

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 1⁄2 months after the end of the Measurement Period.

 

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.

 

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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 Qualified Termination following 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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LTIP - ROCE Component

 

The Compensation Committee of the ArcBest 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 ArcBest Corporation and its subsidiaries for the three-year period beginning 1/1/[     ]and ending 12/31/[     ].

 

I. Performance Measure

 

ROCE for ArcBest 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 Avg. 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 purchase accounting allocated value of Panther intangible assets and Intrans software and includes any writedown or 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 ArcBest and any of its Subsidiaries when determining Net Income;

(ii)                add back after-tax direct third party expenses associated with an acquisition by ArcBest or any of its Subsidiaries, to the extent the items were added back under the[     ], [     ] and [     ] ArcBest 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) as they existed at December 31, 2013 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) as they existed at December 31, 2013, 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 after-tax settlement accounting charges incurred that relate to the qualified defined benefit pension plan.

 

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LTIP - TSR Component

 

The Compensation Committee of the ArcBest 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 ArcBest 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:

 

	
Company Name
    	
 
    	
Ticker
    
	
Con-way   Inc.
    	
 
    	
CNW
    
	
Echo   Global Logistics, Inc.
    	
 
    	
ECHO
    
	
Forward   Air Corporation
    	
 
    	
FWRD
    
	
Hub   Group, Inc.
    	
 
    	
HUBG
    
	
JB   Hunt Transport Services, Inc.
    	
 
    	
JBHT
    
	
Landstar   System, Inc.
    	
 
    	
LSTR
    
	
Old   Dominion Freight Line, Inc.
    	
 
    	
ODFL
    
	
Roadrunner   Transportation Systems, Inc.
    	
 
    	
RRTS
    
	
Saia, Inc.
    	
 
    	
SAIA
    
	
Swift   Transportation Company
    	
 
    	
SWFT
    
	
Werner   Enterprises, Inc.
    	
 
    	
WERN
    
	
XPO   Logistics, Inc.
    	
 
    	
XPO
    
	
YRC   Worldwide Inc.
    	
 
    	
YRCW
    


 

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 5%
    	
 
    	
0
    	
%
    
	
Threshold
    	
 
    	
5%
    	
 
    	
50
    	
%
    
	
Target
    	
 
    	
10%
    	
 
    	
100
    	
%
    
	
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
    
	
ArcBest   — President & CEO
    	
 
    	
[ ]%
    
	
 
    	
 
    	
 
    
	
ABF   Freight — President

ABF   Logistics — President
    	
 
    	
[ ]%
    
	
 
    	
 
    	
 
    
	
AB   Tech — President and ArcBest SVP — CINO

ArcBest   SVP — Risk & Chief Audit Executive

ABF   Freight SVP - Operations
    	
 
    	
[ ]%
    
	
 
    	
 
    	
 
    
	
ArcBest   VP — CFO

ArcBest   VP — General Counsel & Corporate Secretary

ArcBest   VP — Enterprise Customer Solutions
    	
 
    	
[ ]%
    
	
 
    	
 
    	
 
    
	
ArcBest   VP — Controller

ArcBest   VP — Business Insight & Analytics

ArcBest   VP — Human Resources

AB   Tech VP — Business Insight & Analytics

AB   Tech VP — Chief Technology Officer

AB   Tech VP — Technology R&D

ABF   Logistics VP 

ABF   Freight VP — Admin and Treasurer

ABF   Freight VP — Corporate Sales

ABF   Freight VP — Industrial Relations

ABF   Freight VP — Linehaul Operations

ABF   Freight VP — Maintenance

ABF   Freight VP — Sales

ABF   Freight VP — Terminal Operations

ABF   Freight VP — Yield Management
    	
 
    	
[ ]%
    
	
 
    	
 
    	
 
    
	
ArcBest   VP — Marketing and Corporate Communications, CMO

ArcBest   VP — Strategy
    	
 
    	
[ ]%
    


 

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