Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Appointment of New Chief Financial Officer
On June 21, 2023, the Company's Board of Directors appointed Benjamin M. Burns,
age 45, as Executive Vice President and Chief Financial Officer, effective
immediately, to fill the position created by the departure of Jeffrey L. Tate
from such position, as disclosed below. Mr. Burns will serve at the pleasure of
the Board and will function as the Company's principal financial officer.
Mr. Burns previously served the Company as Executive Vice President-Business
Support Services since February 2023. He previously served as Senior Vice
President-Business Support Services since 2022, Vice President, Business Support
Services from 2019 to 2022, Vice President, Treasurer from 2017 to 2019 and Vice
President, Internal Audit/Due Diligence from 2012 to 2017. Mr. Burns served the
Company in various other auditing capacities since 2003. Mr. Burns holds a
bachelor's degree in accounting and an MBA from Pittsburg State University. In
addition, he is a Certified Public Accountant and a Certified Fraud Examiner.
On June 21, 2023, the Human Resources and Compensation Committee of the Board
(the "Committee") approved the compensation to be awarded to Mr. Burns as CFO as
follows:
(i) Mr. Burns' annual base salary will be increased from $350,000 to $500,000,
effective June 26, 2023.
(ii) As an executive officer, Mr. Burns already participates in the Company's
Key Officers Incentive Plan (the "KOIP"). His annual incentive target in the
Plan, as a percentage of his base salary ("Target Percentage"), was increased
from 50% to 80%. Mr. Burns will participate as a corporate participant under the
2023 Award Formula under the Plan, and his payout will be based on the Company's
achievement of earnings before interest, taxes, depreciation, and amortization
("EBITDA") (65% relative weight) and Cash Flow (35% relative weight). Mr. Burns'
increased Target Percentage will be prorated for the number of days remaining in
the 2023 calendar year performance period following the effective date of his
appointment. For a description of the 2023 Key Officers Incentive Plan Award
Formula , reference is made to the award formula which is attached as Exhibit
10.1 to the Company's Form 8-K filed March 10, 2023, and is incorporated herein
by reference.
(iii) Mr. Burns' long-term incentive ("LTI") award multiple for 2024 was
increased from 80% to 200%. The executive's base salary is multiplied by the LTI
award multiple to calculate a target monetary value of annual equity grants
which include sixty percent (60%) performance stock units ("PSUs") and forty
percent (40%) restricted stock units ("RSUs"). These awards are anticipated to
be approved at the same time as the other executive officers' LTI awards at the
Committee's February 2024 meeting.
All other components of Mr. Burns' compensation remained unchanged.
As previously disclosed in the Company's proxy statement filed March 23, 2023,
employees related to Mr. Burns had total compensation (consisting of salary and
annual incentive earned in 2022, as well as the grant date fair value of equity
awards issued in 2022) in excess of the $120,000 related person transaction
threshold. Rebecca Burns, Staff VP-Record to Report Business Processes, the
spouse of Mr. Burns, had 2022 total compensation of $180,327; and Ashley Hiatt,
Staff VP-Segment Reporting, the sister-in-law of Mr. Burns, had 2022 total
compensation of $164,479. Subject to continued employment, it is expected that
compensation for Ms. Hiatt will be substantially similar for 2023 and will
exceed the $120,000 threshold. The compensation received by Ms. Hiatt is
consistent with the amounts paid to other employees in similar roles. Ms. Burns
has resigned her position with the Company, effective June 20, 2023, and her
compensation for 2023, calculated consistently with the 2022 compensation
referenced above, did not exceed the $120,000 related person transaction
threshold. There are no family relationships between Mr. Burns and any director
or executive officer of the Company. There is no arrangement or understanding
between Mr. Burns and any other person pursuant to which Mr. Burns was appointed
as Chief Financial Officer of the Company.
Mr. Burns has previously entered into a Severance Benefit Agreement dated
February 22, 2023, which is attached hereto as Exhibit 10.2 and incorporated
herein by reference. Also, Mr. Burns previously entered into an
Indemnification Agreement with the Company, dated February 28, 2022, the
form of which was filed as Exhibit 10.11 to the Company's Form 10-K filed
March 28, 2002, and which is incorporated herein by reference.
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The Company's updated Summary Sheet of Executive Cash Compensation is
attached hereto as Exhibit 10.4.
Departure of Former Chief Financial Officer and Mutual Separation Agreement
On June 21, 2023, the Company's Board of Directors terminated without cause
Jeffrey L. Tate as the Company's Executive Vice President and Chief Financial
Officer, effective immediately. As such, Mr. Tate will no longer serve as the
Company's principal financial officer. Mr. Tate served as CFO since his
appointment in 2019. Mr. Tate's termination was not as a result of any
disagreement with the Company, its management, the Board, or any committees
thereof on any matter related to the Company's operations, policies, internal
controls, or financial practices, reporting or performance.
In connection with Mr. Tate's termination without cause, the Company and
Mr. Tate entered into a Mutual Separation Agreement, dated June 21, 2023 (the
"Agreement") . Under the terms of the Agreement, which were approved by the
Committee, the Company will provide Mr. Tate a separation package consisting of
the following:
(a) A cash payment to Mr. Tate of $418,000 less tax withholdings, to be paid
within 30 days of the execution of the Agreement, which represents
Mr. Tate's former annual base salary of $627,000 minus the Company's
payment of the first installment of legal fees paid on behalf of Mr. Tate
to his attorney of $209,000.
(b) A cash payment equal to one-half of the 2023 incentive bonus that
Mr. Tate would have received under the KOIP had he remained employed
through December 31, 2023, to be paid, less tax withholdings, after the
2023 results are determined. Mr. Tate's target incentive bonus is 80% of
his former annual base salary of $627,000, provided, however, that actual
results may be higher or lower depending on the final 2023 performance
results.
(c) A cash payment to Mr. Tate, on or around March 1, 2024, of $225,811, less
tax withholdings, which represents the current value of Mr. Tate's
unvested restricted stock units of $438,811 (that would have vested in
February and March of 2024) minus the Company's payment of the second
installment of legal fees paid on behalf of Mr. Tate to his attorney of
$213,000.
(d) A cash payment of $36,602, less tax withholdings, representing the cost
of COBRA premiums for 18 months of extended medical coverage (including
any applicable spouse and eligible dependent coverage).
(e) A cash payment of $36,173, less tax withholdings, representing Mr. Tate's
accrued but unused vacation.
In consideration of these separation payments, Mr. Tate provided the Company
with a complete release of claims and an agreement to continue to comply with
certain non-competition and confidentiality covenants. Mr. Tate can revoke the
Agreement within seven days of his execution of it, which will cause the
Agreement to be null and void. If this were to occur, the Company will update
this disclosure. The foregoing is only a summary of certain terms of the Mutual
Separation Agreement and is qualified in its entirety by reference to the
Mutual Separation Agreement , which is attached hereto as Exhibit 10.5 and
incorporated herein by reference.
Amendment to Key Officers Incentive Plan
Our executive officers earn an annual cash incentive paid under the KOIP, based
on achieving certain performance objectives for the year. Under the 2023 Award
Formula for the KOIP, an executive officer is eligible to receive a cash award
calculated by multiplying the executive's annual base salary at the end of the
year by a Target Percentage set by the Committee, then applying weighted
achievement percentages for the Performance Objectives. The Performance
Objectives for 2023 are based on the Company's achievement of earnings before
interest, taxes, depreciation, and amortization ("EBITDA") (65% relative weight)
and Cash Flow, or Free Cash Flow for profit center participants (35% relative
weight).
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On June 21, 2023, the Committee amended the KOIP, effective June 21, 2023, to
provide that a participant's Target Percentage may be determined or modified at
any time within the performance period. In the event the Target Percentage is
modified, it's the Company's policy that the participant's modified Target
Percentage will be prorated for the number of days remaining in the performance
period following the Committee's approval of the change (or as of such other
date as determined by the Committee). Prior to the amendment, the Target
. . .
Item 7.01 Regulation FD Disclosure.
The Company issued a press release , dated June 22, 2023, regarding the
appointment of Benjamin M. Burns and departure of Jeffrey L. Tate as Chief
Financial Officer, which is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
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