UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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by the Registrant
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Filed
by a Party other than the Registrant
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the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14c-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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ARC DOCUMENT SOLUTIONS, INC.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box)
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it
was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
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Form,
Schedule or Registration Statement No.:
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ARC
DOCUMENT SOLUTIONS, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held April 27, 2017
To
Our Stockholders:
We
cordially invite you to attend the 2017 Annual Meeting of Stockholders of ARC Document Solutions, Inc. The annual meeting will
take place at the Diablo Country Club, at 1700 Clubhouse Road, Diablo, California 94528 on Thursday, April 27, 2017, at 9:00 a.m.
PDT. We look forward to your attendance either in person or by proxy.
The
purpose of the annual meeting is to:
1.
Elect the seven directors named in the proxy statement for the 2017 annual meeting of stockholders, each for a term of one year
or until their successors are elected and qualified;
2.
Ratify the appointment of Deloitte & Touche LLP as ARC Document Solutions, Inc.’s independent registered public accounting
firm for fiscal year 2017;
3.
Hold an advisory, non-binding vote on executive compensation;
4.
Hold an advisory, non-binding vote on the frequency of stockholder votes on executive compensation; and
5.
Transact any other business that may properly come before the annual meeting and any postponements or adjournments of the annual
meeting.
The
foregoing items of business are more fully described in the proxy statement accompanying this notice of annual meeting of stockholders.
Only stockholders of record at the close of business on February 27, 2017 will receive notice of, and be eligible to vote at,
the annual meeting or any postponements or adjournments of the annual meeting. A list of such stockholders will be available at
the annual meeting and during ordinary business hours ten days prior to the annual meeting at the principal executive offices
of ARC Document Solutions, Inc. at 1981 North Broadway, Suite 385, Walnut Creek, California 94596. If you would like to review
the stockholder list, please contact our principal executive offices at (925) 949-5100 to schedule an appointment.
A
copy of ARC Document Solutions, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, is included
with this mailing. We are sending this proxy statement and related materials to stockholders on or about March 28, 2017.
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By order of the Board of
Directors,
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D. Jeffery Grimes
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Vice President, Senior Corporate Counsel
and
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Corporate Secretary
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March 28, 2017
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Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to Be Held on April 27, 2017
This
proxy statement and our 2016 Annual Report on Form 10-K are available at
www.proxyvote.com
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YOUR
VOTE IS VERY IMPORTANT
Please
read the proxy statement and the voting instructions on the enclosed proxy card. Then,
whether or not you plan to attend the annual meeting in person, and no matter how many
shares you own, please complete, sign, date and promptly return the enclosed proxy card
in the enclosed return envelope. This will ensure that your vote is counted even if you
cannot attend the annual meeting in person. The enclosed return envelope requires no
additional postage if mailed in either the United States or Canada.
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ARC
DOCUMENT SOLUTIONS, INC.
2017
ANNUAL MEETING OF STOCKHOLDERS
PROXY
STATEMENT
TABLE
OF CONTENTS
ARC
DOCUMENT SOLUTIONS, INC.
1981
North Broadway, Suite 385
Walnut Creek, California 94596
(925) 949-5100
March 28, 2017
PROXY
STATEMENT
The
board of directors of ARC Document Solutions, Inc. is furnishing you with this proxy statement in connection with the solicitation
of proxies on its behalf for the 2017 annual meeting of stockholders. The meeting will take place at the Diablo Country Club,
at 1700 Clubhouse Road, Diablo, California 94528 on Thursday, April 27, 2017, at 9:00 a.m. PDT. In this proxy statement, we refer
to ARC Document Solutions, Inc. as the “Company”, “we”, “us”, “our” or “ARC.”
By submitting your proxy (by signing and returning the enclosed proxy card), you authorize Kumarakulasingam Suriyakumar, the Chairman
of the Board, President and Chief Executive Officer, and a director of ARC, and D. Jeffery Grimes, Vice President, Senior Corporate
Counsel and Corporate Secretary of ARC, to represent you and vote your shares at the meeting in accordance with your instructions.
They also may vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments
of the meeting.
We
are first sending this proxy statement, form of proxy and accompanying materials to stockholders on or about March 28, 2017.
YOUR
VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE AND SUBMIT YOUR PROXY CARD INCLUDED
IN THE ENCLOSED ENVELOPE.
ANNUAL
MEETING AND VOTING INFORMATION
The
board seeks your proxy for use in voting at the annual meeting or any postponements or adjournments of the meeting. The annual
meeting will be held at the Diablo Country Club, at 1700 Clubhouse Road, Diablo, California 94528 on Thursday, April 27, 2017,
at 9:00 a.m. PDT. We intend to begin mailing this proxy statement, the attached notice of annual meeting, the accompanying proxy
card and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, on or about March 28, 2017, to all holders
of our common stock entitled to vote at the meeting. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2016
does not constitute a part of the proxy solicitation materials and is not incorporated by reference into this proxy statement.
Purpose
of the Annual Meeting
At
the annual meeting, ARC stockholders will vote on the following items:
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1.
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The
election of the seven directors named in this proxy statement, each for a term of one
year or until their successors are elected and qualified;
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2.
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Ratification
of the appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm for fiscal year 2017;
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3.
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An
advisory, non-binding vote on executive compensation; and
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4.
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An
advisory, non-binding vote on the frequency of stockholder votes on executive compensation.
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Stockholders
also will transact any other business that may properly come before the meeting. Members of ARC’s management team and representatives
of Deloitte & Touche LLP, the Company’s independent registered public accounting firm for fiscal year 2016, will be
present at the meeting to respond to appropriate questions from stockholders. Representatives of Deloitte & Touche LLP will
also make a statement if they so desire.
Admission
to the Annual Meeting
All
record or beneficial owners of ARC’s common stock may attend the annual meeting in person. When you arrive at the annual
meeting, please present photo identification, such as a valid driver’s license. Beneficial owners must also provide evidence
of stock holdings, such as a recent brokerage account or bank statement showing
ownership
of ARC common stock on the record date of February 27, 2017. ARC also has invited certain ARC employees and certain agents of
the Company to attend the annual meeting.
Record
Date
The
record date for the annual meeting is February 27, 2017. Only stockholders of record at the close of business on that date are
entitled to vote at the meeting. The only class of stock entitled to be voted at the meeting is ARC’s common stock. Each
outstanding share of common stock is entitled to one vote on each matter presented for a vote at the meeting. At the close of
business on the record date, there were 46,307,515 shares of ARC common stock outstanding.
Quorum
A
quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of
the holders of a majority of the shares of ARC common stock outstanding on the record date will constitute a quorum. Proxies received
but marked as abstentions or treated as “broker non-votes” will be included in the calculation of the number of shares
considered to be present at the meeting for quorum purposes. If a quorum is not present at the scheduled time of the meeting,
the stockholders who are represented may adjourn the meeting until a quorum is present. The time and place of the adjourned meeting
will be announced at the time the adjournment is taken, and no other notice will be given.
Required
Vote
Proposal
1
The affirmative vote of a plurality of the votes cast at the meeting is required to elect the seven nominees for director
named in Proposal 1. This means that the seven nominees for director receiving the highest number of votes cast will be elected.
If you vote to abstain or withhold your vote with respect to one or more nominees, your shares will not be voted with respect
to the person or persons indicated, although they will be counted for purposes of determining whether there is a quorum.
Proposals
2, 3 and 4
Approval of Proposals 2, 3 and 4 requires the affirmative vote of a majority of the shares present at the meeting
in person or by proxy and entitled to vote assuming a quorum is present.
Routine
and Non-Routine Matters
Proposal
2 (ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2017)
is a routine matter under the New York Stock Exchange (“NYSE”) rules. A broker or other nominee may vote in its discretion
on behalf of clients that have not provided voting instructions.
Proposal
1 (election of directors), Proposal 3 (advisory vote on executive compensation) and Proposal 4 (advisory vote on frequency of
future advisory stockholder votes on executive compensation) are non-routine matters under the NYSE rules. This means that if
your shares are held by your broker or other nominee in “street name,” and you do not provide your broker or other
nominee with instructions on how to vote your shares, your broker or nominee will not be permitted to vote your shares on Proposals
1, 3 and 4. This will result in “broker non-votes.”
Voting
Shares Held in “Street Name”
If
your shares are held by a broker or other nominee, you are considered the beneficial owner of shares held in “street name.”
If your shares are held in “street name,” these proxy materials are being forwarded to you by your broker or nominee
(the record holder), along with a voting instruction card. As the beneficial owner of shares held in “street name,”
you have the right to instruct your broker or nominee how to vote your shares and your broker or nominee is required to vote your
shares in accordance with your instructions. If you do not give instructions to your broker or nominee, your broker or nominee
will nevertheless be entitled to vote your shares with respect to “routine” items, but will not be permitted to vote
your shares with respect to “non-routine” items. See the item above entitled “Routine and Non-Routine Matters”
for additional details on routine and non-routine matters.
As
the beneficial owner of shares, you are invited to attend the meeting. If you are a beneficial owner, however, you may not vote
your shares in person at the meeting unless you obtain a proxy form from the record holder of your shares.
Treatment
of Abstentions, Withhold Votes and “Broker Non-Votes”
Abstentions
and Withhold Votes
. You may vote to abstain or withhold your vote on any of the matters to be voted on at the annual meeting.
Abstentions and withhold votes will be treated as shares present for determining whether a quorum is present at the annual meeting.
Abstentions and withhold votes will have no effect on the vote to elect our directors (Proposal 1), who are elected by a plurality
of votes, but (a) will be counted as votes against the ratification of the appointment of our independent registered public accounting
firm and the proposal regarding an advisory, non-binding vote on executive compensation (Proposals 2 and 3), and (b) will not
be counted as a vote for “one year,” “two years,” or “three years” on the proposal on the
frequency of holding votes on executive compensation (Proposal 4).
“Broker
Non-Votes.”
Broker non-votes occur when a broker or other nominee is unable to vote on a “non-routine” item
because of a lack of instructions from the beneficial holder (or the holder in “street name”). Shares that are subject
to “broker non-votes” will be treated as shares present for quorum purposes, but will not be counted for or against
any particular proposal. If you do not provide your broker or nominee with instructions on how to vote your shares held in “street
name,” your broker or nominee will not be permitted to vote your shares on “non-routine” items. Under the rules
of the NYSE, Proposals 1, 3 and 4 are “non-routine” items and Proposal 2 is a “routine” item. Your broker
or nominee is not entitled to vote your shares on Proposals 1, 3 and 4 without specific instructions from you on how to vote.
Your broker or nominee is entitled, however, to vote your shares on Proposal 2 without your instructions.
If you are the beneficial
owner of ARC shares, we strongly encourage you to provide instructions to your broker regarding the voting of your shares.
Voting
Instructions
If
you properly complete and sign the accompanying proxy card and return it in the enclosed envelope, it will be voted in accordance
with your instructions. By doing so, you are authorizing the individuals listed on the proxy card to vote your shares in accordance
with your instructions. The enclosed envelope requires no additional postage if mailed in either the United States or Canada.
If
you are a record holder, and attend the meeting in person, you may deliver your completed proxy card in person at the meeting.
Additionally, we will distribute written ballots to record holders who wish to vote in person at the meeting. If you attend the
annual meeting, please bring the enclosed proxy card or proof of identification. If you are the beneficial holder of shares held
in “street name,” and you wish to vote at the meeting, you will need to obtain a proxy, executed in your favor, from
your broker or other nominee and bring it with you to the meeting.
If
your shares are held in “street name,” you may be able to vote your shares electronically by telephone or on the internet.
A large number of banks and brokerage firms participate in a program provided through Broadridge Financial Solutions, Inc. that
offers telephone and internet voting options. If your shares are held in an account at a bank or brokerage firm that participates
in such a program, you may vote those shares electronically by telephone or on the internet by following the instructions set
forth on the voting form provided to you by your record holder.
Revoking
your Proxy
If
you are the record holder of your shares, you may revoke your proxy at any time before your shares are voted and change your vote:
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by signing another proxy with a later date and delivering it prior to the annual meeting in accordance with the instructions set
forth in this proxy statement;
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by
giving written notice of your revocation to the corporate secretary of ARC prior to or
at the meeting or
by
voting in person at the meeting; or
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by
attending the annual meeting and voting in person.
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Your
attendance at the meeting itself will not revoke your proxy unless you give written notice of revocation to our corporate secretary
before your proxy is voted or you vote in person at the meeting. Any written notice of revocation, or later dated proxy, should
be delivered to:
ARC
Document Solutions, Inc.
1981
North Broadway, Suite 385
Walnut
Creek, California 94596
Attention:
D. Jeffery Grimes, Secretary
If
your shares are held in street name by a broker or other nominee, you must contact them in order to find out how to change your
vote.
Tabulating
Votes
Broadridge
Financial Solutions, Inc. will tabulate and certify the votes. In addition, Broadridge Financial Solutions, Inc. will provide
an inspector of election at the annual meeting.
Solicitation
of Proxies
ARC
is soliciting the proxies and will bear the entire cost of this solicitation, including the preparation, assembly, printing and
mailing of this proxy statement and any additional materials furnished to our stockholders. Our directors, officers and employees
may solicit votes and request proxies by telephone. Copies of solicitation materials will be furnished to banks, brokerage houses
and other agents holding shares in their names that are beneficially owned by others so that they may forward the solicitation
materials to the beneficial owners. In addition, if asked, we will reimburse these persons for their reasonable expenses in forwarding
the solicitation materials to the beneficial owners. We have asked banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of the shares they hold of record.
Other
Business
We
know of no other business that will be presented at the meeting. If any other matter properly comes before the Company’s
stockholders for a vote at the meeting, the proxy holders will vote your shares in accordance with their best judgment.
PROPOSAL
1
ELECTION OF DIRECTORS
Nominees
for Director
The
board currently consists of eight directors, seven of whom have been nominated to serve for a term of one year or until their
successors are duly elected and qualified, and one of whom, Eriberto R. Scocimara, is retiring from the board and is not standing
for re-election in 2017. Following the expiration of Mr. Scocimara’s term at the annual meeting, the board will consist
of seven directors. John G. Freeland was appointed to the board in 2016 in anticipation of Mr. Scocimara’s retirement. Our
board is not classified and thus all of our directors are elected annually.
Each
of the nominees has consented to being named in this proxy statement and has agreed to serve as a member of the board if elected.
The Company has no reason to believe that any nominee will be unable to serve. If a nominee is unable to stand for election, the
board may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected,
the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority to vote.
The
affirmative vote of a plurality of the votes cast at the meeting is required to elect the seven director nominees listed below.
This means that the seven nominees receiving the highest number of affirmative votes of the shares entitled to be voted for them
will be elected as directors.
The
following table sets forth, with respect to each nominee, his name, the year in which he first became a director of ARC, and his
age as of February 27, 2017. Each of the nominees has served continuously as a director since first becoming a director of ARC.
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Director
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Year
Elected
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Age
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Kumarakulasingam
Suriyakumar
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1998
(1)
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63
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Thomas J. Formolo
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2000
(2)
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52
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John G. Freeland
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2016
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63
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Dewitt Kerry McCluggage
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2006
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62
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James F. McNulty
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2009
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74
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Mark W. Mealy
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2005
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59
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Manuel
J. Perez de la Mesa
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2002
(3)
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59
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(1)
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Served
as an advisor of American Reprographics Holdings, L.L.C., a California limited liability
company (“Holdings”), since 1998 and as a director of the Company since October
2004. We were previously organized as Holdings and immediately prior to our initial public
offering on February 9, 2005, we reorganized as American Reprographics Company, a Delaware
corporation, and subsequently changed our name to ARC Document Solutions, Inc.
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(2)
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Served
as an advisor of Holdings since 2000 and as a director of ARC since October 2004.
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(3)
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Served
as an advisor of Holdings since 2002 and as a director of ARC since October 2004.
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The
following is a brief description of the principal occupation and business experience of each of our directors and their other
affiliations.
Kumarakulasingam
(“Suri”) Suriyakumar
has served as our President and Chief Executive Officer since June 1, 2007, and he served
as our President and Chief Operating Officer from 1991 until his appointment as Chief Executive Officer. On July 24, 2008, Mr.
Suriyakumar was appointed Chairman of our board of directors. Mr. Suriyakumar served as an advisor of Holdings from March 1998
until his appointment as a director of the Company in October 2004. Mr. Suriyakumar joined Micro Device, Inc. (our predecessor
company) in 1989. He became the Vice President of Micro Device, Inc. in 1990. Prior to joining the Company, Mr. Suriyakumar was
employed with Aitken Spence & Co. LTD, a highly diversified conglomerate and one of the five largest corporations in Sri Lanka.
Mr. Suriyakumar currently serves as Chairman of the board of directors of Mobitor, L.L.C, a privately held company. ARC’s
board believes that as a founder of the company with tremendous industry knowledge, a strong following within the company, and
demonstrated leadership skills in a variety of economic and market-driven environments, Mr. Suriyakumar possesses unmatched experience
in, and insight into, all aspects of our business, and his service on the board is invaluable to ARC.
Thomas
J. Formolo
served as an advisor of Holdings from April 2000 until his appointment as a director of the Company in October
2004. In 2013, Mr. Formolo founded New Harbor Capital, LLC, a lower middle market private equity firm focused on growth buyout,
investing into business services, health care and education companies. Since 1990, Mr. Formolo has also been employed by CHS Capital
LLC (formerly known as Code Hennessy & Simmons LLC), or CHS, and has been a partner since 1997. CHS is a private equity firm
based in Chicago, Illinois, that specializes in leveraged buyout and recapitalizations of middle market companies in partnership
with company management through its private equity funds. He has been a member of the management committee since 2001. Mr. Formolo
is currently a director of the following companies: PT Solutions Holdings LLC, New York Kids Club, Kure Pain Management, Community
Psychiatry, Certica Solutions and Wedgewood Pharmacy. The board believes that Mr. Formolo’s financial acumen, experience
in leveraged buyouts, his independent director status and the fact that our board of directors has determined that he is an “audit
committee financial expert” under SEC guidelines, given his understanding of accounting and financial reporting, make his
service to the board valuable to ARC. Mr. Formolo has a Bachelor of Business Administration in Marketing, Finance and International
Business from the University of Wisconsin-Madison and a Master of Business Administration from Northwestern University.
John
G. Freeland
was appointed a director of the Company in May 2016. From October 2007 to June 2012 Mr. Freeland served as
President and CEO, and from June 2012 to December 2012 served as Executive Vice Chairman, of Information Resources, Inc. (IRI),
a leading global provider of information, insights and decision solutions. Previously he was President Worldwide Operations for
salesforce.com, and a Managing Partner at Accenture, leading its Customer Relationship Management practice. Mr. Freeland currently
serves as director of WNS (Holdings) Limited, a publicly-traded company. The board believes that Mr. Freeland’s experience
as a principal executive officer, his service as a director of publicly-traded companies, and his direct management experience
in enterprise level, software/consulting sales have provided him with a deep understanding of business matters. His business understanding
coupled with his broad operational expertise and his status as an independent director make his service on the board valuable
to ARC. Mr. Freeland earned his Bachelor of Arts in economics and his Masters of Business Administration from Columbia University.
Dewitt
Kerry McCluggage
was appointed a director of the Company in February 2006 and lead independent director in 2007. Mr. McCluggage
currently serves as the President of Craftsman Films, Inc., which produces motion pictures and television programs, a company
he started in January 2002. An active investor in media-related companies, Mr. McCluggage previously served as a director of Content
Media Corporation, Ltd., a private UK-based, distributor of film and television products, which was publicly-traded on the AIM
market but went private in 2012. Mr. McCluggage is also an equity investor in Trifecta Entertainment, LLC, offering independent
syndication sales
and
barter advertising in the U.S. Mr. McCluggage served as President, and then in 1993, Chairman, of Paramount Television Group,
where he was responsible for overseeing all television operations from 1991 until his resignation in 2002. Prior to that, Mr.
McCluggage served as President of Universal Television from 1987 to 1991. The board believes Mr. McCluggage’s principal
executive officer experience, and his sales, marketing and operational experience has provided him with a deep understanding of
business matters. As the film/television business has undergone a transition from analog to digital production, the Board believes
his experience guiding this kind of transition is valuable to ARC, which is in the middle of a similar transition. Mr. McCluggage’s
status as an independent director also renders his service on the board valuable to the Company. Mr. McCluggage has a Bachelor
of Arts from University of Southern California and a Master of Business Administration from Harvard Business School.
James
F. McNulty
was elected as a director of the Company in March 2009. Mr. McNulty served as Chairman and Chief Executive
Officer of Parsons Company (“Parsons”), an international engineering, construction and management services firm based
in Pasadena, California until May 2008 and as Chairman of the Board of directors of Parsons until November 2008. Mr. McNulty currently
serves as a director of American States Water Company, a publicly-traded company. The board believes that Mr. McNulty’s
principal executive officer experience in the industry that is the target of our primary products and services, as well as his
service as a director of publicly-traded companies, have provided him with a deep understanding of business matters, and that
this understanding, his broad operational acumen and his status as an independent director make his service on the board valuable
to ARC. Mr. McNulty has a Bachelor of Science degree in engineering from the United States Military Academy at West Point and
master degrees from Ohio State University and the Massachusetts Institute of Technology where he was an Alfred P. Sloan Fellow.
Mark
W. Mealy
was appointed as a director of the Company in March 2005. Mr. Mealy has served as Managing Partner of Colville
Capital LLC, a private investment firm, since October 2005. Mr. Mealy also served as the Managing Director and Group Head of Mergers
and Acquisitions of Wachovia Securities, Inc., an investment banking firm, from March 2000 until October 2004. Mr. Mealy served
as the Managing Director, Mergers and Acquisitions, of First Union Securities, Inc., an investment banking firm, from April 1998
to March 2000, and as the Managing Director of Bowles Hollowell Conner & Co., an investment banking firm, from April 1989
to April 1998. Mr. Mealy is currently a director of the following companies: Motion & Flow Control Products, Inc., Kurz Industrial
Solutions, Inc., and Stored Energy Holdings, Inc. The board believes that Mr. Mealy’s financial acumen, experience in mergers
and acquisitions, his independent director status and the fact that our board of directors has determined that he is an “audit
committee financial expert” under SEC guidelines, given his understanding of accounting and financial reporting, make his
board service valuable to ARC. Mr. Mealy has Bachelor of Arts from the Woodrow Wilson School of Public and International Affairs
at Princeton University.
Manuel
J. Perez de la Mesa
served as an advisor of Holdings from July 2002 until his appointment as a director of the Company
in October 2004. Mr. Perez de la Mesa has been Chief Executive Officer of Pool Corporation, a publicly-traded wholesale distributor
of swimming pool supplies and related equipment, since May 2001 and has also been the President of Pool Corporation since February
1999. Mr. Perez de la Mesa served as Chief Operating Officer of Pool Corporation from February 1999 to May 2001. Mr. Perez de
la Mesa also serves as a director of Pool Corporation and Patriot Holdings LLC. The board believes that Mr. Mesa’s principal
executive officer experience and his service as a director of another publicly-traded company, as well as his operations and management
experience, have provided him with a deep understanding of business matters, and that this understanding, his independent director
status and the fact that our board of directors has determined that he is an “audit committee financial expert” under
SEC guidelines, given his understanding of accounting and financial reporting, make his board service valuable to ARC. Mr. Perez
de la Mesa has a Bachelor of Business Administration from Florida International University and a Master of Business Administration
from St. John’s University.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
THE ELECTION OF EACH OF THE SEVEN DIRECTOR NOMINEES LISTED ABOVE
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Appointment
of Auditors
Deloitte
& Touche LLP (“Deloitte”) was appointed as our independent registered public accounting firm for the fiscal year
ended December 31, 2016, and has audited our financial statements for the 2016 and 2015 fiscal years. The Audit Committee has
appointed Deloitte to be our independent registered public accounting firm for the fiscal year ending December 31, 2017. ARC stockholders
are asked to ratify this appointment at the 2017 annual meeting. Representatives of Deloitte will be present at the meeting to
respond to appropriate questions and to make a statement if they so desire.
Auditor
Fees
A
summary of the services provided by Deloitte, our independent registered public accounting firm for the fiscal years ended December
31, 2016 and 2015, and fees billed for such services (in thousands), is as follows:
|
|
|
2016
|
|
2015
|
|
Audit
fees
(1)
|
|
$
|
1,390
|
|
|
$
|
1,445
|
|
|
Audit
related fees
|
|
|
—
|
|
|
|
—
|
|
|
Tax
fees
|
|
|
—
|
|
|
|
—
|
|
|
All
other fees
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,395
|
|
|
$
|
1,450
|
|
|
|
(1)
|
Consists
of aggregate fees billed or expected to be billed for professional services rendered
for the audit of our annual consolidated financial statements for the fiscal years ended
December 31, 2016 and 2015, respectively, and reviews of our condensed consolidated financial
statements in the Company’s quarterly reports during the fiscal years ended December
31, 2016 and 2015, respectively.
|
Pre-Approval
of Audit and Non-Audit Services
The
Audit Committee has adopted a pre-approval policy governing the engagement of the Company’s independent registered public
accounting firm for all audit and non-audit services. The Audit Committee’s pre-approval policy provides that the Audit
Committee must pre-approve all audit services and non-audit services to be performed for the Company by its independent registered
public accounting firm prior to their engagement for such services. The Audit Committee pre-approval policy establishes pre-approved
categories of certain non-audit services that may be performed by the Company’s independent registered public accounting
firm during the fiscal year, subject to dollar limitations that may be set by the Audit Committee. Pre-approved services include
certain audit related services, tax services and various non-audit related services. The term of any pre-approval is 12 months
from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee may
delegate pre-approval authority to one or more of its members. The member(s) to whom such authority is delegated must report any
pre-approval decisions to the Audit Committee at its next meeting. One hundred percent of the services provided by Deloitte during
2016 and 2015 were approved by the Audit Committee in accordance with the pre-approval procedures described above.
Under
Company policy and/or applicable rules and regulations, the independent registered public accounting firm is prohibited from providing
the following types of services to the Company: (1) bookkeeping or other services related to the Company’s accounting records
or financial statements, (2) financial information systems design and implementation, (3) appraisal or valuation services, fairness
opinions or contribution-in-kind reports, (4) actuarial services, (5) internal audit outsourcing services, (6) management functions,
(7) human resources, (8) broker-dealer, investment advisor or investment banking services, and (9) legal services.
The
Audit Committee has sole authority to appoint ARC’s independent registered public accounting firm for fiscal year 2017 pursuant
to the terms of the Audit Committee Charter. Accordingly, stockholder approval is not required to appoint Deloitte as ARC’s
independent registered public accounting firm for fiscal year 2017. The board believes, however, that submitting the appointment
of Deloitte to the stockholders for ratification is a matter of good corporate governance. If the stockholders do not ratify the
appointment of Deloitte, the Audit Committee will review its future selection of an independent registered public accounting firm.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
RATIFICATION
OF DELOITTE & TOUCHE LLP AS ARC’S
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2017
PROPOSAL
3
ADVISORY,
NON-BINDING VOTE ON EXECUTIVE COMPENSATION
We
received a majority vote for our compensation program at our 2016 annual meeting, with approximately 97% of our stockholders who
voted at the meeting approving our compensation practices.
The
Compensation Discussion and Analysis section, beginning on page 20 of this proxy statement, describes our executive compensation
program in greater detail. In particular, stockholders should note the following goals of our executive compensation program:
|
|
●
|
To
establish compensation levels based on competitive market conditions that attract and
retain candidates for executive positions as necessary and that encourage performance
that benefits our employees, customers, and stockholders;
|
|
|
●
|
To
foster an “ownership mentality” and align the interests of our executive
officers with those of our stockholders through long-term equity awards;
|
|
|
●
|
To
recognize and reward superior performance; and
|
|
|
●
|
To
protect and preserve the domain expertise and customer relationships embodied in our
key executives.
|
The
Compensation Committee has also taken note of management’s progress in transforming ARC to a digitally-enabled document
solutions company serving the broader construction industry. In evaluating such progress, the Compensation Committee took into
consideration the particular economic and industry conditions that challenged the Company during the 2007-2009 recession and its
aftermath, especially in regard to the lack of private non-residential construction activity and commercial credit, and the substantive
changes we are currently experiencing due to the impact of technology on our primary end market.
In
fiscal year 2016, the Company focused on a reconfiguration of its business to better respond to a changing market. In spite of
revenue decline and investments in addressing its reversal, ARC returned a gross margin of nearly 33%, adjusted EBITDA of more
than $62 million, and continuing strong cash flows.
For
a description of adjusted EBITDA please refer to the “Non-GAAP Financial Measures” section starting on page 21 in
Item 7 of our 2016 Annual Report on Form 10-K, and for a calculation of adjusted EBITDA please refer to page 23 in Item 7 of our
2016 Annual Report on Form 10-K.
For
the reasons stated, we are requesting approval, in a non-binding vote, of the following resolution:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation rules of
the United States Securities and Exchange Commission (“SEC”), including in the Compensation Discussion and Analysis,
the compensation tables and the related narrative discussion contained in the Company’s 2017 Proxy Statement, is approved.”
The
stockholder vote on Proposal 3 is advisory in nature and, thus, is not binding on the Company. The Compensation Committee, however,
values the views expressed by the Company’s stockholders in their vote on this proposal and, as it did in 2016 following
ARC’s annual meeting, will consider the outcome of the vote when making future compensation decisions for the Company’s
executive officers.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
THE
APPROVAL OF THE COMPENSATION OF OUR EXECUTIVE OFFICERS
DISCLOSED
IN THE COMPENSATION DISCUSSION AND ANALYSIS AND RELATED
DISCLOSURES
IN THE 2017 PROXY STATEMENT
PROPOSAL
4
ADVISORY,
NON-BINDING VOTE ON THE FREQUENCY OF STOCKHOLDER VOTES
ON
EXECUTIVE COMPENSATION
The
Company provides its stockholders with the opportunity to cast a non-binding, advisory vote on executive compensation in accordance
with the requirements of the Dodd-Frank Act. Proposal 4 provides stockholders with the opportunity to cast a non-binding, advisory
vote on how often the Company should include advisory stockholder votes on executive compensation in its proxy materials for future
annual stockholder meetings. Under Proposal 4, stockholders may vote to have an advisory vote on executive compensation every
year, every two years or every three years.
The
Company believes that providing for an advisory vote on executive compensation every year would permit stockholders, management
and the Compensation Committee to evaluate the effectiveness of our executive compensation program on long-term Company performance.
In
considering their votes, stockholders may wish to review the information presented in connection with Proposal 3 and the Compensation
Discussion and Analysis section, beginning on page 20 of this proxy statement, which describes the Company’s executive compensation
program in greater detail.
The
stockholder vote on Proposal 4 is advisory in nature and, thus, is not binding on the Company. The Company, however, values the
views expressed by the Company’s stockholders in their vote on this proposal and will consider the outcome of the vote when
making its decision on how frequently it will conduct advisory stockholder votes on executive compensation at future annual stockholder
meetings.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
A
“ONE YEAR” FREQUENCY OF THE ADVISORY, NON-BINDING VOTE ON
EXECUTIVE
COMPENSATION
CORPORATE
GOVERNANCE PROFILE
We
are committed to good corporate governance practices. As such, we have adopted corporate governance guidelines to enhance the
effectiveness of our corporate governance practices. A copy of our Corporate Governance Guidelines can be accessed on our investor
relations website,
ir.e-arc.com
, and selecting “Corporate Governance” from the navigation menu. You can request
a printed copy of our Corporate Governance Guidelines, at no charge, by contacting Investor Relations at (925) 949-5100 or by
sending a request by mail to 1981 North Broadway, Suite 385, Walnut Creek, California 94596, Attention: David Stickney, Vice President
Corporate Communications.
Our
Corporate Governance Guidelines govern board member responsibilities, committees, compensation, access, education, management
succession, and performance evaluation, among other things. The guidelines also set forth a non-exhaustive list of director qualification
standards and the factors to be considered in making nominations to the board. While the selection of qualified directors is a
complex, subjective process that requires consideration of many factors, our Corporate Governance Guidelines provide that the
Nominating and Corporate Governance Committee will take into account the judgment, experience, skills and personal character of
any candidate, as well as the overall needs of the board, in considering board candidates. Additional information on this process
is set forth below in the section entitled “Director Qualifications.”
We
have adopted a Code of Conduct applicable to all employees, officers and directors, including our President and Chief Executive
Officer and our Chief Financial Officer, which meets the definition of a “code of ethics” set forth in Item 406 of
Regulation S-K of the Securities Exchange Act of 1934 (“Exchange Act”). A copy of our Code of Conduct can be accessed
on our investor relations website,
ir.e-arc.com
, and selecting “Corporate Governance” from the navigation menu.
We will post any amendments to the Code of Conduct, and any waivers that are required to be disclosed by the rules of either the
SEC or the NYSE, on our website.
Director
Independence
Under
our Corporate Governance Guidelines, independent directors must comprise a majority of our board. Our board has adopted independence
requirements that reflect applicable NYSE rules and evaluates the independence of our directors annually, and at other appropriate
times (e.g., in connection with a change in employment status) when a change in circumstances could potentially impact the independence
of one or more directors.
In
determining the independence of a director, the board considers whether a material relationship exists between the Company and
each director, all relevant facts and circumstances, including:
|
|
●
|
The
nature of any relationships with the Company;
|
|
|
●
|
The
significance of the relationship to the Company, the other organization and the individual
director;
|
|
|
●
|
Whether
or not the relationship is solely a business relationship in the ordinary course of the
Company’s and the other organization’s businesses, and does not afford the
director any special benefits;
|
|
|
●
|
Any
commercial, industrial, banking, consulting, legal, accounting, charitable and familial
relationships and such other criteria as the board may determine from time to time;
|
|
|
●
|
If
a proposed director serves as an executive officer, director or trustee of a tax exempt
organization, whether contributions from the Company, or any of its consolidated subsidiaries,
to such tax exempt organization in any of the last three fiscal years are less than the
greater of (i) $1 million or (ii) 2% of the consolidated gross revenues of such tax exempt
organization for its last completed fiscal year.
|
Pursuant
to our Corporate Governance Guidelines, all members of the Audit Committee must also meet the following requirements:
|
|
●
|
Audit
Committee members may not receive, directly or indirectly, any consulting, advisory or
other compensatory fees from the Company or any of its subsidiaries (other than director
fees paid for service on the Audit Committee, the board, or any other committee of the
board).
|
|
|
●
|
No
member of the Audit Committee may be an “affiliated person” (as defined under
applicable SEC rules) of the Company or any of its subsidiaries.
|
After
considering our Corporate Governance Guidelines and the NYSE independence standards, the board has determined that, in its judgment,
all of our current directors are independent, except for Mr. Suriyakumar who is our President and Chief Executive Officer. The
board also determined that all members of the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation
Committee are independent.
Director
Qualifications
Our
Nominating and Corporate Governance Committee is responsible for identifying qualified individuals who may become members of our
board of directors and recommending to the board director nominees for our annual meetings of stockholders and nominees to fill
any vacancies that may occur on the board. In the context of the selection process, the Nominating and Corporate Governance Committee
takes into consideration those factors it considers appropriate to ensure an effective board of directors that is able to fulfill
its oversight function for the Company and its stockholders. While the Nominating and Corporate Governance Committee has not established
an exhaustive list of specific minimum qualifications for board members, desired personal qualifications and attributes of directors
include mature, practical and sound judgment; independence necessary to make an unbiased evaluation of management’s performance
and effectively carry out oversight responsibility; experience as a business leader; the ability to comprehend and analyze complex
matters; strong personal and professional ethics and integrity; and a spirit of cooperation and collegiality that will enable
our directors to interact effectively.
The
board believes that each nominee named in this proxy statement possesses the characteristics described above. Our directors possess
extensive leadership experience from various industry sectors, as well as experience on other boards of directors, which, collectively,
provide an understanding of different business processes, challenges and strategies. The diverse background and experiences of
our directors (as described in the biographical information set forth under “Proposal 1 – Election of Directors”)
complement one another and provide a solid leadership framework required for the board to exercise its oversight function.
Board
Diversity
The
Company strives for diversity among its board members, management and employees. In keeping with this strategy, the primary goal
of board composition is to achieve a diverse and complementary set of background and experiences that will benefit the strategic
direction of the Company. In considering director nominees, the Nominating and Corporate Governance Committee takes into consideration
those factors it considers appropriate to address the needs and situation of the Company at the time. While the Nominating and
Corporate Governance Committee does not have a formal policy regarding diversity, in practice, the Committee carefully considers
the nominees’ differences in background, education and overall skill set in order to ensure complementary perspectives and
areas of expertise. This approach is demonstrated by the fact that our board is currently comprised of directors with diverse
professional experiences, including individuals from the construction industry, financial and services sectors and the entertainment
industry. The diverse backgrounds and experiences of our current directors are described in the biographical information included
under “Proposal 1 – Election of Directors.”
Board
Leadership Structure and Risk Oversight
Board
Leadership Structure
Our
board is currently comprised of seven independent directors and one employee director. Mr. Suriyakumar has served as our President
and Chief Executive Officer since 2007 and the chairman of our board of directors since 2008. We believe that our current board
leadership structure is appropriate for the Company because it allows for common, strong leadership, with one individual having
primary responsibility for both board-level and operational matters. This structure eliminates the potential for confusion, promotes
efficiency and provides clear leadership for the Company, which is appropriate for our company which has widespread domestic and
international operations.
Our
board has designated Mr. McCluggage, one of our independent directors, to serve as lead independent director. The lead independent
director chairs regularly-scheduled executive sessions of the independent directors without management present; serves as the
primary point of contact between members of management and the board, which facilitates communications and promotes efficiency;
and performs such other functions as the independent directors may designate from time to time.
Risk
Oversight
Senior
management is responsible for assessing and managing the Company’s exposure to risk on a day-to-day basis. Our board is
responsible for general oversight of management in its assessment and management of day-to-day risks that affect the Company.
The board fulfills its general risk oversight function periodically during board and board committee meetings. To supplement the
board’s general risk oversight function, the Audit Committee monitors the Company’s financial statements and regularly
reviews the Company’s major financial risk exposures (and the steps management has taken to mitigate such exposures) and
the Company’s internal control over financial reporting. The Audit Committee also provides general oversight to the Company’s
internal audit and compliance functions. The Compensation Committee monitors the design and implementation of the Company’s
executive compensation program, as well as compensation matters relating to certain non-executive employees.
Director
Attendance at Board and Committee Meetings
In
2016, each board member attended or participated in 92% or more of the aggregate of (i) the total number of board meetings (held
during the period for which such person has been a director) and (ii) the total number of meetings held by all board committees
on which such person served (during the periods that such person served).
Board
Meetings
Our
board of directors held four meetings in 2016.
Board
Committees
Our
board has the following committees: Audit Committee; Compensation Committee; and Nominating and Corporate Governance Committee.
Committee memberships are as follows:
|
|
|
|
|
Nominating
and
|
|
|
|
|
|
Corporate
Governance
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Committee
|
|
Eriberto
R. Scocimara
|
|
James
F. McNulty
|
|
Dewitt
Kerry McCluggage
|
|
(Chairman)
|
|
(Chairman)
|
|
(Chairman)
|
|
Thomas
J. Formolo
|
|
Thomas
J. Formolo
|
|
James
F. McNulty
|
|
Mark
W. Mealy
|
|
Dewitt
Kerry McCluggage
|
|
Mark
W. Mealy
|
|
Manuel
J. Perez de la Mesa
|
|
Manuel
J. Perez de la Mesa
|
|
Eriberto
R. Scocimara
|
Each
of our committees is governed by a charter. The charters for our committees may be found in the Corporate Governance section on
our investor relations website,
ir.e-arc.com
, and are available, at no cost, to any stockholder who requests them by contacting
Investor Relations at (925) 949-5100 or by sending a request by mail to 1981 North Broadway, Suite 385, Walnut Creek, California
94596, Attention: David Stickney, Vice President Corporate Communications.
Audit
Committee
The
functions of our Audit Committee are described in the Audit Committee Charter and include, among other things, the following:
(i) reviewing the adequacy of our internal accounting controls; (ii) reviewing the results of the independent registered public
accounting firm’s annual audit, including any significant adjustments, management judgments and estimates, new accounting
policies and disagreements with management; (iii) reviewing our audited financial statements and discussing the statements with
management; (iv) reviewing disclosures by our independent registered public accounting firm concerning relationships with the
Company and the performance of our independent registered public accounting firm and annually recommending the independent registered
public accounting firm; and (v) preparing such reports or statements as may be required by securities laws. The Audit Committee
Charter provides that the Audit Committee shall meet as often as it determines advisable but no less frequently than quarterly.
Our
board of directors has determined that all members of our Audit Committee meet the applicable tests for independence and the requirements
for financial literacy that are applicable to audit committee members under the rules and regulations of the SEC and NYSE. Our
board of directors also has determined that all members of our Audit Committee are “audit committee financial experts”
as defined by the applicable rules of the SEC and NYSE.
The
Audit Committee held five meetings in 2016.
Compensation
Committee
The
functions of the Compensation Committee are described in the Compensation Committee Charter and include, among other things, evaluating
and approving director and officer compensation, benefit and perquisite plans, and compensation policies and programs. The Committee
may form and delegate authority to subcommittees when appropriate. Members of a subcommittee may include directors of the Company,
employees of the Company, consultants or any other parties as determined by the Committee in its sole discretion.
The
board has determined that all of the members of its Compensation Committee meet the definition of independent director as established
by the NYSE for compensation committees.
The
Compensation Committee held four meetings in 2016.
Nominating
and Corporate Governance Committee
The
functions of the Nominating and Corporate Governance Committee are described in the Nominating and Corporate Governance Committee
Charter and include, among other things, identifying individuals qualified to become members of the board, selecting or recommending
to the board the nominees to stand for election as directors, developing and recommending to the board a set of corporate governance
principles and overseeing the evaluation of the board.
The
board has determined that all of the members of its Nominating and Corporate Governance Committee meet the definition of independent
director as established by the NYSE.
The
Nominating and Corporate Governance Committee held four meetings in 2016.
All
of the nominees listed under “Proposal 1 – Election of Directors” are directors standing for re-election.
Stockholder
Recommendations of Director Nominees
Our
stockholders may recommend director nominees, and the Nominating and Corporate Governance Committee will consider nominees recommended
by stockholders. We have not received any recommendations from our stockholders requesting that the board or any of its committees
consider a nominee for inclusion in the board’s slate of nominees presented in this proxy statement for our 2017 annual
meeting. A stockholder wishing to submit a director nominee recommendation for future annual meetings of stockholders must comply
with the applicable provisions of our Second Amended and Restated Bylaws, as described under the heading “Stockholder Proposals
for the 2017 Annual Meeting.” Nominees recommended by stockholders will be evaluated in the same manner as nominees recommended
by the board and the Nominating and Corporate Governance Committee will consider all relevant qualifications, as well as the needs
of the Company, in order to comply with NYSE and SEC rules.
Stockholder
Communications with Directors
Stockholders
seeking to communicate with the board should send correspondence to the attention of our corporate secretary at ARC Document Solutions,
Inc., 1981 North Broadway, Suite 385, Walnut Creek, California 94596. The corporate secretary will forward all such communications
(excluding routine advertisements and business solicitations and other communications described below) to each member of the board,
or if applicable, to the individual director(s) named in the correspondence.
ARC
reserves the right to screen materials sent to its directors for potential security risks and/or harassment purposes, and ARC
also reserves the right to verify ownership status before forwarding stockholder communications to the board and/or individual
directors.
The
corporate secretary will determine the appropriate timing for forwarding stockholder communications to the directors. The corporate
secretary will consider each communication to determine whether it should be forwarded promptly or compiled and sent with other
communications and other board materials in advance of the next scheduled board meeting.
If
a stockholder or other interested person seeks to communicate exclusively with the non-employee directors, such communication
should be sent directly to the corporate secretary who will forward any such communication directly to the Chairman of the Nominating
and Corporate Governance Committee. The corporate secretary will first consult with and receive the approval of the Chairman of
the Nominating and Corporate Governance Committee before disclosing or otherwise discussing the communication with members of
management or directors who are members of management.
DIRECTOR
COMPENSATION
Cash
Compensation
We
pay an annual cash fee of $50,000 to each of our non-employee directors, payable quarterly. In addition, non-employee directors
receive $5,000 cash per year for duties as chairman of any board committee.
Equity
Compensation
In
addition to cash fees, we grant each non-employee director a restricted stock award under our stock incentive plan for that number
of shares of our common stock having an aggregate grant date value equal to $60,000, based on the closing price of our common
stock on the NYSE on the date of grant. Grants of restricted stock to our non-employee directors are made automatically each year
on the date of our annual meeting, without any further action of our board of directors, and are intended to compensate each non-employee
director for his or her service over the coming year. Each restricted stock award granted to our non-employee directors during
each fiscal year vests 100% on the one-year anniversary of the grant date.
Reimbursements
We
reimburse our employee and non-employee directors for reasonable travel expenses relating to attendance at board meetings and
participating in director continuing education.
The
following table summarizes compensation earned by our non-employee directors during fiscal year 2016. Mr. Suriyakumar, the Chairman
of our board of directors, and our President and Chief Executive Officer, does not receive compensation for serving on our board
of directors.
Director
Compensation
For Fiscal Year Ended December 31, 2016
|
|
|
Fees Earned or
|
|
Stock
|
|
|
|
|
|
Paid in Cash
|
|
Awards
(1)(2)
|
|
Total
(3)
|
|
Director
|
|
($)
|
|
($)
|
|
($)
|
|
Thomas J. Formolo
|
|
|
50,000
|
|
|
|
60,000
|
|
|
|
110,000
|
|
|
John G. Freeland
(4)
|
|
|
25,000
|
|
|
|
60,000
|
|
|
|
85,000
|
|
|
Dewitt Kerry McCluggage
|
|
|
55,000
|
(5)
|
|
|
60,000
|
|
|
|
115,000
|
|
|
James F. McNulty
|
|
|
55,000
|
(6)
|
|
|
60,000
|
|
|
|
115,000
|
|
|
Mark W. Mealy
|
|
|
50,000
|
|
|
|
60,000
|
|
|
|
110,000
|
|
|
Manuel J. Perez de la Mesa
|
|
|
50,000
|
|
|
|
60,000
|
|
|
|
110,000
|
|
|
Eriberto R. Scocimara
|
|
|
55,000
|
(7)
|
|
|
60,000
|
|
|
|
115,000
|
|
|
|
(1)
|
Reflects restricted stock
awards granted under our 2014 Stock Incentive Plan (“2014 Plan”). One hundred percent of the shares subject to restricted
stock awards granted in 2016 vest on the one-year anniversary of the date of grant.
|
|
|
(2)
|
The amounts shown in this
column reflect the fair value at the time of grant in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 718,
Share-Based Payment
. For a description of the assumptions and
methodologies used to calculate the amounts in the table, see Note 2 of the Notes to Consolidated Financial Statements included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
|
|
|
(3)
|
The amount of total compensation
does not include amounts paid as reimbursement for reasonable travel expenses to attend board meetings and to participate in director
continuing education.
|
|
|
(4)
|
Mr. Freeland’s cash
compensation was prorated for his service beginning in May 2016.
|
|
|
(5)
|
Includes cash compensation
of $5,000 for serving as Chairman of the Nominating and Corporate Governance Committee for 2016.
|
|
|
(6)
|
Includes cash compensation
of $5,000 for serving as Chairman of the Compensation Committee for 2016.
|
|
|
(7)
|
Includes
cash compensation of $5,000 for serving as Chairman of the Audit Committee in 2016.
|
EXECUTIVE
OFFICERS
Our executive officers are
appointed by our board of directors and serve at the discretion of our board of directors. The names, ages and positions of all
of our executive officers as of February 27, 2017 are listed below:
|
Executive
|
Age
|
Position
|
|
Kumarakulasingam Suriyakumar
|
63
|
Chairman, President and Chief Executive Officer
|
|
Dilantha Wijesuriya
|
55
|
Chief Operating Officer
|
|
Rahul K. Roy
|
57
|
Chief Technology Officer
|
|
Jorge Avalos
|
41
|
Chief Financial Officer
|
The following is a brief
description of the business experience of each of our executive officers and their other affiliations. Biographical information
for Mr. Suriyakumar is provided above under “Proposal 1 – Election of Directors.”
Dilantha
Wijesuriya
joined Ford Graphics, a former division of the Company, in January 1991.
He subsequently became president of that division in 2001, and became a Company regional operations head in 2004, which position
he retained until his appointment as the Company’s Senior Vice President—National Operations in August 2008. Mr. Wijesuriya
was appointed Chief Operating Officer of the Company on February 25, 2011. Prior to his employment with the Company, Mr. Wijesuriya
was a divisional manager with Aitken Spence & Co. LTD, a highly diversified conglomerate and one of the five largest corporations
in Sri Lanka.
Rahul
K. Roy
joined Holdings as its Chief Technology Officer in September 2000. Prior to
joining the Company, Mr. Roy was the founder, President and Chief Executive Officer of MirrorPlus Technologies, Inc., which developed
software for the reprographics industry, from August 1993 until it was acquired by the Company in 1999. Mr. Roy also served as
the Chief Operating Officer of InPrint, a provider of printing, software, duplication, packaging, assembly and distribution services
to technology companies, from 1993 until it was acquired by the Company in 1999.
Jorge
Avalos
was appointed Chief Financial Officer of ARC Document Solutions in January
of 2015. From 2011 to his appointment as CFO, Mr. Avalos was Chief Accounting Officer and Vice President Finance of ARC. Mr. Avalos
joined the Company in June 2006 as the Company’s Director of Finance and became the Company’s Corporate Controller
in December 2006, and Vice President, Corporate Controller in December 2010. Prior to joining the Company Mr. Avalos was employed
with Vendare Media Group, an online network and social media company, as its controller. From September 1998 through March 2005,
Mr. Avalos was employed in a variety of audit and management roles with PricewaterhouseCoopers LLP.
AUDIT
COMMITTEE REPORT
The
following is the report of the Audit Committee with respect to the Company’s audited financial statements for the year ended
December 31, 2016. The information contained in this report shall not be deemed “soliciting material” or otherwise
considered “filed” with the SEC, and such information shall not be incorporated by reference into any future filing
under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates such information
by reference in such filing.
All of the members of the
Audit Committee are independent directors as required by the rules of the NYSE. The Audit Committee operates pursuant to a written
charter adopted by the board.
The
Audit Committee is responsible for overseeing the Company’s financial reporting process on behalf of the board. Management
of the Company has the primary responsibility for the Company’s financial reporting process, including the system of internal
controls over financial reporting. The Company’s independent registered public accounting firm is responsible for performing
an audit of the Company’s consolidated financial statements and expressing an opinion as to the conformity of such financial
statements with accounting principles generally accepted in the United States. The Audit Committee does not itself prepare financial
statements or perform audits, and its members are not auditors or certifiers of the Company’s financial statements.
In
performing its responsibilities, the Committee has reviewed and discussed with management and the independent auditors the audited
consolidated financial statements in ARC’s Annual Report on Form 10-K for the year ended December 31, 2016. The Committee
has also discussed with the independent auditors matters required to be discussed by the Statement on Auditing Standards No. 61,
as amended (Codification of Statements on Auditing Standards, AU 380), as adopted by the Public Company Accounting Oversight Board
(“PCAOB”) in Rule 3200T.
The
Committee received written disclosures and the letter from the independent auditors pursuant to the applicable requirements of
the PCAOB regarding the independent auditors’ communications with the Committee concerning independence, and the Committee
discussed with the auditors their independence.
Based
on the review and discussions described above, the Audit Committee has recommended to the board that the Company’s audited
financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC.
|
|
Eriberto R. Scocimara, Chairman
|
|
|
Thomas J. Formolo
|
|
|
Mark W. Mealy
|
|
|
Manuel J. Perez de la Mesa
|
BENEFICIAL
OWNERSHIP OF VOTING SECURITIES
The
following table sets forth information, as of February 27, 2017, regarding the beneficial ownership of our common stock by:
|
|
●
|
each person who is known
to us to own beneficially more than 5% of our common stock;
|
|
|
●
|
each of our directors,
nominees and each of our executive officers named in the Summary Compensation Table; and
|
|
|
●
|
all directors, nominees
and named executive officers as a group.
|
The
table includes all shares of common stock issuable within 60 days of February 27, 2017, upon the exercise of options or other
rights beneficially owned by the indicated stockholders on that date. Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting and investment power with respect to shares. The applicable percentage of ownership for each
stockholder is based on 46,307,515 shares of common stock outstanding as of February 27, 2017. Shares of common stock issuable
upon exercise of options and other rights beneficially owned, to the extent exercisable within sixty days of February 27, 2017,
were deemed outstanding for the purpose of computing the percentage ownership of the person holding these options and other rights,
but are not deemed outstanding for computing the percentage ownership of any other person. The information on beneficial ownership
in the table and footnotes below is based upon our records, the most recently-filed Schedules 13D or 13G and information supplied
to us. To our knowledge, except under applicable community property laws or as otherwise indicated in the footnotes to this table,
beneficial ownership is direct and the persons named in the table below have sole voting and sole investment control regarding
all shares beneficially owned.
|
|
|
Shares Beneficially
Owned
|
|
Name and Address*
of Beneficial Owner
|
|
Number
|
|
Percent
|
|
Principal Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(1)
55 East 52
nd
Street
New York, NY 10055
|
|
|
4,829,520
|
|
|
|
10.43%
|
|
Pzena Investment Management, LLC
(2)
320 Park Avenue, 8
th
Floor
New York, NY 10022
|
|
|
3,935,427
|
|
|
|
8.50%
|
|
Renaissance Technologies LLC
(3)
800 Third Avenue
New York, NY 10022
|
|
|
2,409,400
|
|
|
|
5.20%
|
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kumarakulasingam Suriyakumar
(4)(5)(6)
|
|
|
4,516,436
|
|
|
|
9.75%
|
|
|
Thomas J. Formolo
(7)(9)
|
|
|
169,113
|
|
|
|
**
|
|
|
John G. Freeland
(8)
|
|
|
14,286
|
|
|
|
**
|
|
|
James F. McNulty
(9)
|
|
|
73,046
|
|
|
|
**
|
|
|
Mark W. Mealy
(9)
|
|
|
108,662
|
|
|
|
**
|
|
|
Manuel J. Perez de la Mesa
(9)(10)
|
|
|
122,662
|
|
|
|
**
|
|
|
Dewitt Kerry McCluggage
(9)
|
|
|
30,623
|
|
|
|
**
|
|
|
Eriberto R. Scocimara
(9)
|
|
|
78,662
|
|
|
|
**
|
|
|
Rahul K. Roy
(11)
|
|
|
602,586
|
|
|
|
1.30%
|
|
|
Dilantha Wijesuriya
(12)
|
|
|
935,987
|
|
|
|
2.02%
|
|
|
Jorge Avalos
(13)
|
|
|
261,750
|
|
|
|
**
|
|
|
All directors and executive officers as a group (eleven persons)
|
|
|
6,913,813
|
|
|
|
14.93%
|
|
|
|
*
|
Except as otherwise noted,
the address of each person listed in the table is c/o ARC Document Solutions, Inc., 1981 North Broadway, Suite 385, Walnut Creek,
California 94596.
|
|
|
**
|
Less
than one percent of the outstanding shares of common stock.
|
|
|
(1)
|
This
information is based solely on an amended Schedule 13G filed by BlackRock, Inc. (“BlackRock”)
on January 12, 2017. BlackRock has sole voting power over 4,682,725 shares and sole dispositive
power over 4,829,520 shares.
|
|
|
(2)
|
This
information is based solely on an amended Schedule 13G filed by Pzena Investment Management,
LLC (“Pzena”) on February 3, 2017. Pzena has sole voting power over 3,585,481
shares and sole dispositive power over 3,935,427 shares.
|
|
|
(3)
|
This
information is based solely on a Schedule 13G filed by Renaissance Technologies LLC (“Renaissance”)
on February 14, 2017. Renaissance has sole voting power over 2,409,400 shares and sole
dispositive power over 2,409,400 shares.
|
|
|
(4)
|
(Suriyakumar)
Includes 182,465 shares of unvested restricted stock and 400,000 shares issuable upon
exercise of outstanding stock options exercisable within 60 days of February 27, 2017.
|
|
|
(5)
|
(Suriyakumar)
Includes 2,520,664 shares held by the Suriyakumar Family Trust, which includes 2,501,330
shares of common stock previously held by Micro Device, Inc. Mr. Suriyakumar and his
spouse, as trustees of the Suriyakumar Family Trust, share voting and investment power
over these shares.
|
|
|
(6)
|
(Suriyakumar)
Includes 500,000 shares held by the Shiyulli Suriyakumar 2013 Irrevocable Trust, Shiyulli
Suriyakumar, Trustee. Also includes 500,000 shares held by the Seiyonne Suriyakumar 2013
Irrevocable Trust, Seiyonne Suriyakumar Trustee. Mr. Suriyakumar and his spouse could
be deemed to have beneficial ownership of these shares but they disclaim beneficial ownership
except to the extent of their pecuniary interest therein.
|
|
|
(7)
|
(Formolo)
Includes 12,740 shares held by Danish-Italian Investors, L.P., Series A and 32,441 shares
held by the Andersen-Formolo Family Foundation. Mr. Formolo could be deemed to have beneficial
ownership of all of these shares but disclaims beneficial ownership except to the extent
of his pecuniary interest therein.
|
|
|
(8)
|
(Freeland)
Includes 14,286 shares of unvested restricted stock.
|
|
|
(9)
|
Includes
14,118 shares of unvested restricted stock.
|
|
|
(10)
|
(Perez
de la Mesa) Includes 78,544 shares held by the Perez de la Mesa Family Trust. Mr. Perez
de la Mesa and his spouse, as trustees of the Perez de la Mesa Family Trust, share voting
and investment power over the shares held by the trust.
|
|
|
(11)
|
(Roy)
Includes 91,667 shares of unvested restricted stock and 454,333 shares issuable upon
exercise of outstanding stock options exercisable within 60 days of February 27, 2017.
|
|
|
(12)
|
(Wijesuriya)
Includes 98,333 shares of unvested restricted stock, 517,272 shares issuable upon exercise
of outstanding stock options exercisable within 60 days of February 27, 2017, and 328,450
shares held by the Wijesuriya Family Trust. Mr. Wijesuriya and his spouse, as trustees
of the Wijesuriya Family Trust, share voting and investment power over the shares held
by the trust.
|
|
|
(13)
|
(Avalos)
Includes 101,667 shares of unvested restricted stock and 115,750 shares issuable upon
exercise of outstanding stock options exercisable within 60 days of February 27, 2017.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth information as of December 31, 2016 regarding all compensation plans previously approved by our security
holders and all compensation plans not previously approved by our security holders.
|
|
(a)
|
(b)
|
(c)
|
|
|
|
|
Number of Securities
|
|
|
|
|
Remaining Available
for Future
|
|
|
Number of Securities
to
|
Weighted-Average
|
Issuance Under
Equity
|
|
|
be Issued Upon
Exercise
|
Exercise Price
of
|
Compensation Plans
|
|
|
of Outstanding
Options,
|
Outstanding Options,
|
(Excluding Securities
|
|
Plan Category
|
Warrants
and Rights
|
Warrants
and Rights
|
Reflected
in Column (a))
|
|
Equity compensation plans approved by stockholders
|
|
|
|
|
●
2005 Stock
Plan
|
2,863,469
(1)
|
$5.07
|
—
|
|
●
2005 Employee
Stock Purchase Plan
|
—
|
—
|
241,081
|
|
●
2014 Plan
(2)
|
1,437,205
(3)
|
$6.17
|
1,581,265
(4)
|
|
Equity compensation plans not approved by stockholders
|
—
|
—
|
—
|
|
Total
|
4,300,674
|
|
1,822,346
|
|
|
(1)
|
Represents
outstanding options to acquire shares of common stock granted under our 2005 Stock Plan.
|
|
|
(2)
|
Includes
shares from the Company’s Predecessor Plan subject to issuance in the 2014 Plan,
as described in Section 5 of the 2014 Plan.
|
|
|
(3)
|
Represents
outstanding options to acquire shares of common stock granted under our 2014 Plan.
|
|
|
(4)
|
Of
the remaining 1,581,265 shares in the plan, 556,131 remain available as restricted shares
and stock units.
|
COMPENSATION DISCUSSION
AND ANALYSIS
OUR COMPENSATION GOVERNANCE
PRACTICES
|
●
|
We reward outstanding performance that
meets our stated performance objectives
|
|
●
|
We don’t pay performance-based awards for unmet performance
objectives
|
|
●
|
We don’t guarantee minimum performance-based awards
|
|
●
|
Our incentive plans are clear and based on metrics that are
transparent and formulas that are clearly disclosed and well understood
|
|
●
|
We cap payouts under our incentive plans to discourage excessive
risk taking by our NEOs and to reduce windfall benefits in volatile markets
|
|
●
|
Our compensation plans contain claw-back provisions
|
|
●
|
We have double-trigger change in control provisions
|
|
●
|
We have policies against hedging or pledging of our stock
|
|
●
|
Our Compensation Committee periodically retains an independent
compensation consultant
|
|
●
|
We work with a representative and relevant peer group
|
|
●
|
We hold an annual advisory vote on executive compensation
|
|
●
|
We solicit the feedback of our shareholders on our governance
and compensation practices
|
|
●
|
We adopted stock ownership guidelines for our Directors and
Named Executive Officers
|
This
compensation discussion and analysis describes the material elements of the Company’s executive compensation program for
each of the executives who served as our named executive officers (“NEOs”) during fiscal year 2016. For fiscal year
2016, our NEOs included the following officers:
|
|
●
|
Kumarakulasingam
Suriyakumar, Chairman, President, Chief Executive Officer, Director
|
|
|
●
|
Dilantha
Wijesuriya, Chief Operating Officer
|
|
|
●
|
Rahul
K. Roy, Chief Technology Officer
|
|
|
●
|
Jorge
Avalos, Chief Financial Officer
|
The Compensation Committee
of the board of directors determined the compensation of the NEOs, as described below.
Executive Summary
Our
Compensation Committee intends that our executive compensation program be appropriately aligned with the market, reflect our performance
over time, and align the interests of our NEOs with those of our stockholders.
Throughout
2016, ARC Document Solutions focused on a reconfiguration of its business to better respond to a changing market. While customers
were continuing to make the transition from analog tools to more digital platforms to manage their document workflow, the market
demonstrated a more fragmented and incremental approach to technology adoption than management anticipated. Meanwhile, the Company’s
traditional business remained a consistent driver of cash flows and profitability despite slowly diminishing demand. While guiding
to an anticipated temporary decline in 2016 annual revenues on its second quarter earnings call, ARC’s management team was
already acting decisively to reconfigure its sales team and infrastructure to address its new assessment of the market. The Company’s
sales force was segregated to create greater focus on selling new technology services and protecting print-related sales. New
sales and marketing leaders were identified, compensation plans and incentives were re-aligned and implemented, and customer-driven
“go-to-market” strategies were actively in development by the fourth quarter.
There
were four primary drivers of ARC’s year-over-year revenue declines in 2016. First, Managed Print Services revenue declined,
driven primarily by a large customer who chose not to renew their contract at the end of 2015; second, sales from traditional
construction plan printing declined consistent with the construction industry’s adoption of technology as an alternative
to the use of traditional “blueprints;” third, the company closed a large unprofitable color operation in the United
Kingdom; and fourth, ARC’s joint venture in China had a large one-time sale in 2015 that skewed the annual comparison. In
spite of the overall revenue decline, ARC returned a gross margin of nearly 33%, adjusted EBITDA of more than $62 million, and
continuing strong cash flows.
For
a calculation of adjusted EBITDA please refer to pages 22-23 in Item 7 of our 2016 Annual Report on Form 10-K. EBITDA means earnings
before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes loss on extinguishment of debt, goodwill impairment,
trade secret litigation costs, restructuring expense, and stock-based compensation expense. The adjustment of EBITDA for these
items is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is
useful to investors in assessing our financial performance.
We
offer a diversified portfolio of digital and print-based products and services, and our revenue model continues to be characterized
by contractual, recurring and predictable needs of businesses we serve all over the world, as well as our traditional project-based
services. Construction project work remains important to our business and the market for private, non-residential construction
has remained robust over the past two years. General economic forecasts for the industry remain optimistic.
2016
Response to “Say-on-Pay” Vote:
We received a 97% favorable vote from investors
during our 2016 proxy season with regard to our advisory, non-binding proposal on executive compensation (“Say-on-Pay”).
Similar
to previous annual plans, the award criteria for fiscal year 2016 includes Company performance in revenue generation, gross margin,
and adjusted earnings per share (“EPS”). A fourth opportunity for a bonus exists for each non-CEO executive in the
achievement of individually determined performance objectives.
As
a result of performance below target in 2016, our CEO received no bonus, and our non-CEO NEOs received reduced bonuses. (See “Annual
Awards” below.)
The
following sections of this proxy statement discuss and analyze the compensation awarded to, earned by, or paid to the executive
officers set forth in the Fiscal 2016 Summary Compensation Table of this proxy statement. It also discusses the principles underlying
our policies and decisions.
Compensation Committee and the Compensation
Decision-Making Process
The
Compensation Committee approves annual compensation levels and equity awards to all of our executive officers.
ARC’s
Compensation Committee annually reviews a market analysis of executive compensation plans of peer public business services companies
in similar industries and with similar financial metrics, such as revenue and market capitalization. The Committee considers the
total compensation for our executive officers relative to similarly situated executives of the companies in the compensation peer
group. Other factors also taken into consideration when determining executive officer remuneration levels include business complexity,
the experience of executive officers in roles relative to market comparisons, geographic location of executive officers, the responsibilities
of executive officers, business model transition or new business initiatives, and other factors the Committee may deem appropriate.
The companies comprising the 2016 Compensation Peer Group were as follows:
|
|
|
|
|
Barrett Business Services
|
Ennis, Inc.
|
Perficient Inc.
|
|
Blucora, Inc.
|
Heritage-Crystal Clean, Inc.
|
Resources Connection, Inc.
|
|
Casella Waste Management, Inc.
|
Intersections, Inc.
|
TRC Companies Inc.
|
|
CECO Environmental Corp.
|
McGrath Rentcorp
|
US Ecology, Inc.
|
|
CRA International Inc.
|
Multi-Color Corp.
|
VSE Corp.
|
Based
on the 2016 compensation program design, actual 2016 total NEO compensation by position was 97% of the peer group median compensation
calculated by the Compensation Committee in 2016. The total compensation of our CEO and the other NEOs relative to their peer
group median by rank is shown in the table below.
|
|
|
|
|
|
|
|
|
Executive
or Group
|
|
Peer
Group
Median
Compensation
|
|
ARC
Compensation
|
|
Percentage
of Peer
Group
Median
|
|
All NEOs
|
|
$3,858,884
|
|
$
3,792,299
|
|
98%
|
|
Non-CEO
NEOs (2nd thru 4th highest paid)
|
|
$2,216,417
|
|
$
2,560,409
|
|
116%
|
|
CEO
|
|
$1,642,467
|
|
$1,231,890
|
|
75%
|
Based
on the market analysis and a performance review of the CEO, the Compensation Committee makes a recommendation to the board of
directors on the CEO’s base salary and annual cash incentive opportunity. The CEO makes a recommendation to the Committee
for the base salaries and annual cash incentive targets for the other NEOs based on the needs and operating objectives of the
Company. The Compensation Committee and board, in executive session excluding the CEO, determine the CEO’s total compensation
program and approve the design and programs of the other NEOs.
At
various meetings held during 2016, usually conducted in executive session, the board reviews the progress against each of the
executive officers’ annual bonus targets, and in February 2017 the board of directors, reviewed and approved the NEOs annual
bonus that had been realized for 2016.
Executive Compensation
Philosophy
Our
executive compensation program is designed to attract and retain executive management talent and provide rewards to our NEOs for
achieving company-wide and functional performance that benefit our employees, customers, and stockholders.
ARC’s
program provides our executive officers with rewards for increasing revenues, improving gross margins, and increasing adjusted
EBITDA and adjusted earnings per share, while at the same time providing a clear framework for measuring and rewarding their performance.
The Compensation Committee will monitor and review best practices and make changes to our program when warranted.
We
believe the alignment between stockholder interest and executive interest is best achieved by maintaining an appropriate balance
of base salaries, performance-based awards, and equity grants to foster a company ownership mentality in our executives. This
means that a material portion of executive compensation is variable and tied to the Company’s and individual performance.
A
significant portion of our annual performance-based compensation is designed in such a way that no annual bonus can be earned
without exceeding a measurable threshold in the Company’s revenue, gross margin and adjusted earnings per share for our
non-CEO NEOs, or measurable annual growth in adjusted EBITDA for our CEO. This practice resulted in no bonus award for our CEO,
and reduced bonuses for our other NEOs in 2016.
As
a technology-enabled document solutions enterprise, we not only contend with the highly competitive talent market in San Francisco
and the Silicon Valley, but we also compete with large, well-funded printing and imaging equipment manufacturers and highly attractive
technology companies nationwide to attract and retain executive talent.
Elements of Executive
Compensation
The
table below summarizes the key fiscal 2016 compensation program elements for our named executive officers:
|
Element
|
Form
of Compensation
|
Purpose
|
|
Base Salary
|
Cash
|
Provides competitive, fixed compensation to
attract and retain executive management talent
|
|
Annual Bonus
|
Cash
|
Provides a variable financial reward for achieving
short-term corporate and individual operating goals and improvements in Company financial measurements
|
|
Equity Grants
|
Non-Qualified Stock Options and Restricted Stock
|
Encourages NEOs to build and maintain a long-term
equity ownership position in ARC to align their interests with our stockholders
|
|
Change of Control and Severance Agreements
|
Employment Agreement
|
Provides reasonable employment security and
certainty in the event of a termination due to a change of company control
|
|
Optional Participation in our Employee Stock
Purchase Plan
|
Eligibility to participate and purchase stock
at a discounted purchase price
|
Provides broad-based employee benefit available
to all ARC employees
|
|
Health, Retirement and Other Benefits
|
Eligibility to participate in benefit plans
generally available to all our employees, including health, life insurance, and disability plans, and certain perquisites
|
Benefit plans are part of a broad-based employee
benefits program; perquisites provide competitive benefits to our NEOs
|
We
believe that each element of our compensation program plays a substantial role in maximizing long-term value for our stockholders
and employees because of the significant emphasis on pay-for-performance principles. In general, more than 50% of our NEOs’
total available compensation is based on ARC’s results and the attainment of individual goals. As a result, the Compensation
Committee intends for ARC’s performance to have a significant effect on the amount of compensation realized by the executive
officers.
Each
of these elements of pay is described and analyzed in more detail below.
Compensation
Objectives
The
objectives of our executive compensation program are (i) to link executive compensation to continuous improvement in overall Company
and individual performance and an increase in stockholder value and (ii) to attract and retain executive management talent. Our
executive compensation program goals include the following:
|
|
●
|
To
establish compensation levels based on competitive market conditions that attract and
retain candidates for executive positions as necessary and that encourage performance
that benefits our employees, customers, and stockholders;
|
|
|
●
|
To
foster an “ownership mentality” and align the interests of our executive
officers with those of our stockholders through long-term equity awards;
|
|
|
●
|
To
recognize and reward superior performance; and
|
|
|
●
|
To
protect and preserve the domain expertise and customer relationships embodied in our
key executives.
|
Ultimately,
the objective of our compensation program is to both attract and retain senior executives capable of delivering long-term value
to our stockholders and employees, otherwise expressed as “pay for performance.” Our compensation policies must also
be flexible and scalable enough to offer appropriate base compensation and bonus awards to executives tasked to address value
creation in the midst of an architectural, engineering and construction (“AEC”) industry that has been fundamentally
transformed from a document management perspective.
How Pay Was Tied
to the Company’s Performance in Fiscal Year 2016
During
fiscal year 2016 we demonstrated the pay-for-performance basis of our compensation policy.
Consistent
with the Company’s pay-for-performance philosophy and defined objective standards of performance, the threshold for eligibility
of the CEO’s annual bonus was not met and he did not receive a bonus for 2016.
The
Company’s annual revenue, gross margin, and adjusted annual earnings per share performance did not exceed the threshold
amount for other NEOs to become eligible for annual incentive bonus awards for these goals, whereas the thresholds for individual
goals were achieved. Based only on the goals achieved, annual bonuses were awarded.
Base Salary
Base
salaries for our executive officers are generally established based on the scope of their respective responsibilities, taking
into account competitive market compensation paid by similar companies (as represented by the peer group analysis directed by
the Compensation Committee) for similar positions in the San Francisco Bay Area and Silicon Valley, as well as for any circumstances
unique to the Company.
The
Compensation Committee reviews the CEO’s salary every three years and reviews the non-CEO named executive officers’
salaries annually as part of its overall competitive market assessment and may make adjustments based on performance, experience,
individual role, and positioning relative to market.
Base
salaries provide executive officers with a reasonable and secure standard of living based on the executive officer’s position
within the organization and geographical location. The CEO’s salary was set in accordance with his three-year amended employment
agreement effective in 2014, and was extended for another year. The Compensation Committee makes use of “at-will”
employment agreements with all non-CEO NEOs, and conducts annual reviews of such executives’ base salaries.
In
setting the base salaries for our non-CEO NEOs, the Compensation Committee also considers the recommendations of the CEO based
upon his annual review of their performance. Although the Compensation Committee takes into account the factors and information
described above during its review and determination of the base salary for each executive officer, it uses its collective judgment
taking into account all available information, including the competitive market assessment.
President and
Chief Executive Officer
Under
Mr. Suriyakumar’s February 2014 amended and restated three-year employment agreement, his base salary was maintained at
$950,000 per year. In maintaining his annual base salary, the Compensation Committee deemed his salary as appropriate to his position
and took under consideration that (i) Mr. Suriyakumar’s base salary had been subject to temporary reductions previously,
(ii) his continuing leadership and stewardship of the Company, and (iii) as a founder of the Company he maintains a significant
equity interest relative to most CEO’s such that compensation in the form of additional equity grants is not as pertinent.
Chief
Technology Officer
Under
Mr. Roy’s June 2015 amended and restated employment agreement, his base salary was increased from $575,000 per year to $675,000
effective as of May 9, 2016 to reflect the company’s growing reliance on technology development for its future success.
Chief
Operating Officer
Under
Mr. Wijesuriya’s June 2015 amended and restated employment agreement, his base salary was maintained at $370,000 per year.
Chief
Financial Officer
Under
Mr. Avalos’ June 2015 amended and restated employment agreement, his base salary was maintained at $310,000.
Annual Awards
We
utilize annual bonuses to focus management behavior on improved short-term financial performance and the achievement of specific
annual objectives. Our annual bonuses, as opposed to our equity grants described below, are designed to reward our executive officers
for their collective and individual performance during the most recent fiscal year. We believe that the immediacy of these annual
bonuses, in contrast to equity grants vesting over a longer time period, provides a more direct reward to our executive officers
to drive the Company’s near-term financial performance and meet their respective individual objectives. We intend for our
annual bonuses to be an important factor for our executive officers, and we thus apportion a substantial percentage of their total
annual compensation to these bonuses.
At
the first board meeting of each new calendar year, typically held in late February or early March, the Compensation Committee
reviews the Company’s performance for the previous fiscal year and compares it to the associated performance targets set
by the Compensation Committee the year before.
President
and Chief Executive Officer
Mr.
Suriyakumar’s current bonus structure is based on year-over-year adjusted EBITDA growth: the greater the year-over-year
adjusted EBITDA growth, the greater the CEO’s participation in that growth.
Under
his 2014 amended and restated employment agreement, Mr. Suriyakumar is eligible to receive a bonus in an amount equal to the dollar
value resulting from the product of (a) the year-over-year dollar increase in adjusted EBITDA, and (b) the applicable “Participation
Percentage” as shown in the table below:
|
Year-over-Year
Increase in Adjusted EBITDA (%)
|
Participation
Percentage
|
|
(“Percentage
Increase”)
|
(% of Adjusted
EBITDA Increase)
|
|
Less than 2.5%
|
0%
|
|
2.5 – 4.9%
|
20.0%
|
|
5.0 – 7.4%
|
30.0%
|
|
7.5% – 9.9%
|
40.0%
|
|
10.0% or greater
|
50.0%
|
No
bonus will be awarded if the percentage increase is less than 2.5%, and no annual bonus will be awarded in excess of $4 million.
Mr. Suriyakumar’s employment agreement stipulates that the bonus is payable in cash or shares of ARC common stock, or a
mix of cash and shares, at Mr. Suriyakumar’s discretion. Any such shares associated with the annual grant will vest at the
rate of 25% each year on the first four anniversaries of the date of grant. The Compensation Committee approves the amount of
the cash bonus as well as the equity component of the bonus.
Since
the year-over-year adjusted EBITDA growth percentage was less than 2.5% in 2016, Mr. Suriyakumar was not eligible for an annual
bonus.
Other
Executive Officers
In
February 2016, the Compensation Committee determined that the NEOs (other than the President and Chief Executive Officer) would
be eligible for annual bonuses based upon pre-determined corporate goals, and it set the goals for their 2016 annual compensation.
Under
the 2016 program, non-CEO NEOs have specific award opportunities related to four performance metrics, three of which are based
on company performance, and one of which is based on individual or functional performance. The following table presents each named
executive officer’s target and maximum bonus opportunity fiscal 2016:
|
Executive
|
FY16
Target%
of Base Salary
|
FY16
Target
in Dollars
|
FY16
Maximum
Dollars per Plan
|
|
Rahul K. Roy
|
80%
|
$540,000
|
$675,000
|
|
Dilantha Wijesuriya
|
100%
|
$370,000
|
$508,750
|
|
Jorge Avalos
|
80%
|
$248,000
|
$341,000
|
In
fiscal year 2016, the award opportunities for each of our non-CEO NEOs included Company performance in revenue generation, gross
margin, and adjusted earnings per share. A fourth opportunity existed for each NEO in the achievement of individually determined
performance objectives. The portions of each bonus assigned to each target are set forth in the table below.
|
Executive
|
Annual
Revenue
|
Annual
Gross
Margin
|
Annual
Adjusted EPS
|
Individual
Objectives
|
|
Rahul K. Roy
|
25%
|
0%
|
25%
|
50%
|
|
Dilantha Wijesuriya
|
25%
|
25%
|
25%
|
25%
|
|
Jorge Avalos
|
25%
|
25%
|
25%
|
25%
|
We chose the aforementioned
performance metrics because:
|
|
●
|
Revenue,
gross margin, and adjusted EPS measures correlate strongly to stockholder value creation for ARC; are transparent to investors
and are included in our quarterly earnings releases; these measures also balance growth, efficiency, and profitability;
|
|
|
●
|
Revenue
and adjusted EPS performance targets are established based on a range of inputs, including external market economic conditions,
growth outlooks for our product and service portfolio, the competitive environment, our internal budgets, and market expectations;
and
|
|
|
●
|
Individual
performance goals align with our operational and strategic objectives, and provide opportunities for achievement within the scope
of our executives’ responsibilities.
|
For
a calculation of adjusted EPS please refer to page 24 in Item 7 of our 2016 Annual Report on Form 10-K. Adjusted EPS means earnings
per share excluding loss on extinguishment of debt, goodwill impairment, restructuring expense, trade secret litigation costs,
and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. This presentation
facilitates a meaningful comparison of our operating results for the years ended December 31, 2016, 2015 and 2014. We believe
these charges were the result of the then current macroeconomic environment, our capital restructuring, or other items which are
not indicative of our actual operating performance.
For
the revenue performance portion of the 2016 program, no bonus was awarded if fiscal year 2016 revenue was at or below $416 million.
Payouts in increments of 10% of the target bonus amount are achieved for every $500,000 of revenue above $416 million, and reach
100% of the target bonus amount if the fiscal year 2016 revenue reaches $421 million. Payouts in increments of 2.5% of the target
bonus amount are achieved for every $500,000 above $421 million and are capped at 150% of the target bonus amount, or $434 million
in annual revenue. A similar logic and identical increments are applied to each of the other Company performance goals, substituting
the gross margin percentage or adjusted EPS figure as appropriate. For the individual performance metric, the payout ranges from
0% to 100% of the target objective. While the payout for each individual performance goal can exceed 100% of its target –
thus allowing for excellent performance in one area to partially offset poor performance in another – the aggregate
amount for all four
targets cannot exceed the maximum bonus payout stipulated in our executive employment agreements.
The
following table summarizes the foregoing description of low, target and maximum performance levels and the relative payout at
each level for each of the Company’s performance objectives:
|
Description
|
Low
|
Target
|
Max
|
|
% of Base Target Bonus Amount
|
0%
|
100%
|
150%
|
|
Annual Revenue
|
$416 million
|
$421 million
|
$434 million
|
|
Annual Gross Margin
|
33.9%
|
34.2%
|
34.6%
|
|
Adjusted EPS
|
$0.30
|
$0.33
|
$0.36
|
Individual
performance goals are proposed to the Compensation Committee annually by our President and Chief Executive Officer, and the Compensation
Committee reviews and refines the objectives. The Compensation Committee also evaluates actual performance of these executive
officers with the President and Chief Executive Officer periodically throughout the year. After fiscal year end, the Compensation
Committee conducts a final review with our President and Chief Executive Officer of the performance of each of these executive
officers and approves the annual bonuses payable to them.
Separate
and apart from an annual bonus, the Compensation Committee may grant a discretionary bonus related to an objective or otherwise
based on an individual’s exceptional performance, taking into account the recommendations made by the CEO.
Achievement
of Fiscal Year 2016 Performance Metrics
In
determining the degree of achievement in each of our performance metrics for fiscal 2016, the Compensation Committee took into
account the relative success in meeting the quantitative performance measures, as well as the quantifiable and subjective elements
assigned to each executive’s individual objectives.
For
fiscal 2016, our revenue target was $421 million, our gross margin target was 34.2%, and our adjusted EPS target was $0.33. The
Compensation Committee determined that we did not achieve the low end of our target for revenue, adjusted EPS, or gross margin,
and thus no portion of the bonuses were awarded for these targets. The targets for individual performance objectives were achieved
and bonuses were awarded to our non-CEO NEOs based on these achievements.
|
|
|
|
Executive
|
2016
Actual
Bonus Paid
|
|
Rahul K. Roy
|
$270,000
|
|
Dilantha Wijesuriya
|
$92,500
|
|
Jorge Avalos
|
$62,000
|
The
individual performance achievement payout potential for Messrs. Roy, Wijesuriya, and Avalos is set forth in the table below. Their
leadership, initiative, and drive were noted and contributed to the Company’s progress throughout 2016. In rating individual
executive performance, the Compensation Committee gives weight to the recommendations of our CEO, but final decisions about the
compensation of our named executive officers are made solely by the Compensation Committee.
|
Executive
|
Individual
Performance Objective
|
|
Rahul K. Roy
|
Technology platform advances and launches
|
|
Dilantha Wijesuriya
|
Implement successful business strategies for
core business lines and restructure a subsidiary to increase profits
|
|
Jorge Avalos
|
Successful systems implementation, cash management,
and initiatives to improve profitability in underperforming regions of the organization
|
Equity Grants
We believe that equity grants provide our
executive officers, non-executive officers and other management-level employees with a strong link to our long-term performance,
create an ownership culture and closely align the interests of these employees with the interests of our stockholders. The purpose
of equity grants is to encourage a long-term view of the Company’s success and to reward achievements with respect to the
Company’s strategic goals and financial performance priorities, as well as individual performance. Grants are made at the
Compensation Committee’s discretion and are generally made once per year at fair market value at a Compensation Committee
meeting during the first half of the fiscal year. The Compensation Committee retains the right to make grants at other meetings,
e.g
., for newly hired executives.
Our executive officers are eligible to receive stock options pursuant to our 2014 Plan.
In 2016, in recognition of the Company’s new Stock Ownership Guidelines, the board, upon the recommendation of the Compensation
Committee, elected to grant restricted stock awards to our non-CEO NEOs in lieu of stock options. Separately in 2016, pursuant
to Mr. Wijesuriya’s employment agreement, the Compensation Committee made the following non-qualified stock option grant:
|
|
|
|
|
|
|
Options granted
|
|
Value of 2016
|
|
Executive
|
in 2016
|
|
Options Granted
(1)
|
|
Dilantha Wijesuriya
(2)
|
98,938
|
|
$200,000
|
|
|
(1)
|
The amounts shown in this column reflect the grant date
fair value in accordance with FASB ASC 718 to Mr. Wijesuriya. For a discussion of the assumptions used in these calculations,
see Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2016.
|
|
|
(2)
|
Stock options listed for Mr. Wijesuriya, our Chief Operating
Officer, are an annual long-term equity incentive award as a part of his employment agreement. This award is payable in the form
of an annual stock option grant valued at $200,000 (based on the Black-Scholes valuation model) at an exercise price equal to
the closing price of our common stock on the NYSE on the date of grant. The options vest at the rate of 25% each year on the first
four anniversaries of the date of grant.
|
Details regarding this stock option grant are included in the “Summary Compensation
Table” in this proxy statement.
Restricted Stock Awards
In 2016, we used restricted stock awards
in lieu of stock options as a component of our executive compensation program. We believe that grants of restricted stock rewards
exceptional performance by providing to our executive officers an opportunity for immediate ownership of our common stock, while
also providing retention value through vesting conditions. Restricted stock awards foster an ownership culture and reward our executive
officers for performing at peak levels across economic and business cycles because the value of these awards is linked to the Company’s
long-term performance. The Company determines the performance-based conditions for an award of restricted stock, and the conditions
for vesting of restricted shares, as appropriate from time to time. Grants of restricted stock in lieu of stock options also allow
our non-CEO NEOs to achieve their individual targets under our Stock Ownership Guidelines.
In 2016, the Compensation Committee
approved grants of 40,000 shares to Messrs. Roy and Avalos, and 50,000 shares to Mr. Wijesuriya in connection with their individual
roles, responsibilities, and performance. No other grants of restricted stock were awarded to our executive officers in 2016.
The
Compensation Committee has reviewed and considered other forms of long-term equity compensation in addition to stock options and
restricted stock. Considering the impact of alignment with stockholder interests, perceived value, and cash cost to the Company,
the Compensation Committee believes that granting long-term equity in the form of stock options and restricted stock that vest
over time, is the best approach for the Company.
Change of Control and Severance Arrangements
We have implemented change of control and
severance arrangements for each of our executive officers, including salary and health benefits continuation through specific post-termination
periods and accelerated vesting of restricted stock and stock options. The Company believes that implementing these types of arrangements
for our executive officers is an important retention element by providing security against arbitrary termination, and that they
are appropriate elements of competitive market compensation. Currently, Messrs. Suriyakumar, Roy, Wijesuriya and Avalos have change
of control and severance arrangements, which are described in the “Potential Payments Upon Termination or Change-in-Control”
section of this proxy statement.
Employee Stock Purchase Plan
We offer all of our employees, including
our executive officers, the opportunity to purchase our common stock through a tax-qualified employee stock purchase plan (“ESPP”).
Under our ESPP, as amended, employees may elect to purchase annually, at a 15% discount (from the closing price of our common stock
on the NYSE on the applicable date of purchase), up to the lesser of (a) 2,500 shares of our common stock, or (b) that number of
shares of our common stock having an aggregate fair market value of $25,000.
Other Compensation
Our executive officers are eligible to
participate in our health, life and disability insurance plans, and our 401(k) plan to the same extent that our other employees
are entitled to participate in such plans.
Tax Considerations
S
ection 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue
Code limits the tax deductibility of compensation paid to our CEO, and the three other most highly compensated named executive
officers employed at the end of the year (other than our CFO) to $1 million per year, unless such amounts are determined to be
performance-based compensation. Our policy with respect to Section 162(m) seeks to balance the interests of the Company in maintaining
flexible incentive plans against the possible loss of a tax deduction when taxable compensation for any of the executive officers
subject to Section 162(m) exceeds $1 million per year. While we consider the deductibility of compensation in determining our executive
compensation program, we look at other factors in making our executive compensation decisions and retain the discretion to grant
awards or pay compensation that we determine to be consistent with the goals of our executive compensation program, even if the
awards or compensation are not tax deductible.
Section 409A of the Internal Revenue Code
Section 409A of the Code requires that
“nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements
of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy
these requirements can expose employees and other service providers to accelerated income tax liabilities, additional taxes and
interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer
our compensation and benefits plans and arrangements for all of our employees and other service providers, including our named
executive officers, so that they are either exempt from, or satisfy the requirements of, Section 409A of the Code.
Section 280G of the Internal Revenue Code
Section 280G of the Code, disallows a tax
deduction with respect to excess parachute payments to certain executives of companies that undergo a change in control. In addition,
Section 4999 of the Code, imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments
are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance
payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including options and
other equity based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section
280G of the Code based on the executive’s prior compensation. In approving the compensation arrangements for our named executive
officers, the board considers all elements of the cost to the Company of providing such compensation, including the potential impact
of Section 280G of the Code. However, the board may, in its judgment, authorize compensation arrangements that could give rise
to loss of deductibility under Section 280G of the Code and the imposition of excise taxes under Section 4999 of the Code when
it believes that such arrangements are appropriate to attract and retain executive talent.
Accounting for Stock Based Compensation
We follow Financial Accounting Standards
Board Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock based compensation awards. ASC Topic 718 requires
companies to calculate the grant date “fair value” of their stock based awards using a variety of assumptions. ASC
Topic 718 also requires companies to recognize the compensation cost of their stock based awards in their income statements over
the period that an employee is required to render service in exchange for the award. Grants of equity based awards under our equity
incentive award plans will be accounted for under ASC Topic 718. The board and/or Compensation Committee will regularly consider
the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity
incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting
expenses of our equity awards with our overall executive compensation philosophy and objectives.
Recent Key Compensation Program and Other Related Changes
2017 Compensation Plan:
The Compensation
Committee approved an annual compensation plan for the non-CEO NEOs for fiscal year 2017 that was similar to the compensation plan
approved in fiscal years 2015 and 2016. As in fiscal year 2016, the annual bonus plan is based on performance against pre-determined
corporate goals for revenue, gross margin, adjusted earnings per share, and for individually determined performance objectives.
The individual performance objectives for 2017 include team management, technology platform advances, product enhancements, cash
management, and improvement of efficiency of financial reporting. The portions of the annual bonus compensation assigned to each
target are set forth in the table below.
|
|
Portion of Bonus
Assigned to Target
|
|
|
Annual
|
|
Annual Gross
|
|
Annual Adjusted
|
|
Individual
|
|
Executive
|
Revenue
|
|
Margin
|
|
EPS
|
|
Objectives
|
|
Rahul K. Roy
|
25%
|
|
0%
|
|
25%
|
|
50%
|
|
Dilantha Wijesuriya
|
25%
|
|
25%
|
|
25%
|
|
25%
|
|
Jorge Avalos
|
25%
|
|
25%
|
|
25%
|
|
25%
|
In late 2016, the Compensation Committee
requested updated information on ARC’s peer group compensation levels. In setting targets for total compensation for each
of ARC’s four highest paid executives, the Compensation Committee determined that the aggregate compensation amount was approximately
98% of the median aggregate amount of the four highest paid executives in ARC’s peer group.
Stock Ownership Guidelines:
ARC’s Nominating and Corporate Governance Committee maintains minimum stock ownership requirements for the board’s
independent directors and all Company NEOs, which include a five-year window in which such ownership should be acquired. The ownership
threshold for the board’s independent directors is three (3) times their annual retainer. The ownership threshold for our
CEO is five (5) times base salary and the threshold for our other NEOs is two (2) times base salary. Stock ownership for the purpose
of the Guidelines includes shares owned directly or indirectly; restricted shares, excluding restricted shares that remain subject
to achievement of performance goals; and excludes stock options.
Clawback Policy:
ARC maintains an executive compensation
recovery policy pursuant to which the Company will seek to recover or cancel any performance-based compensation paid to an executive
officer during the three-year period preceding the date as of which the Company is required to prepare restated financial results,
in the event of ARC’s material noncompliance with financial reporting requirements of applicable securities laws, to the
extent that such compensation exceeds the amount that would have been paid to the executive officer had it been based on the restated
results. The board of directors is authorized to administer this policy consistent with the requirements of Section 10D of the
Securities Exchange Act of 1934 and applicable rules or standards adopted by the SEC and the NYSE or such other national exchange
on which ARC’s shares may be listed.
Summary
After its review of all existing programs,
consideration of current market and competitive conditions and alignment with our overall compensation objectives and philosophy,
the Compensation Committee believes that the total proposed compensation program for our executive officers is focused on increasing
value for stockholders and enhancing the Company’s performance. The Compensation Committee believes that under the amended
and restated employment agreement with our CEO and the employment agreements for our other NEOs a significant portion of compensation
of executive officers is properly tied to stock appreciation or stockholder value through stock options, restricted stock awards
and/or annual bonus measures. The Compensation Committee believes that our executive compensation levels are comparable with compensation
programs offered by other companies with which we compete for executive talent.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the board
of directors has reviewed and discussed the “Compensation Discussion and Analysis” section of this proxy statement
with management. Based on this review and discussion, the Compensation Committee has recommended to the board of directors that
the “Compensation Discussion and Analysis” section be included in this proxy statement.
|
|
James F. McNulty, Chairman
Thomas J. Formolo
Dewitt Kerry McCluggage
Manuel J. Perez de la Mesa
|
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information
regarding the compensation earned during the fiscal year by our President and Chief Executive Officer (our principal executive
officer), our Chief Financial Officer (our principal financial officer), and our other most highly compensated executive officers
who were serving as executive officers as of December 31, 2016.
2016 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
(3)
|
|
Compensation
|
|
Earnings
|
|
Compensation
(4)
|
|
Total
|
|
Principal
Position
(1)
|
|
Year
|
|
($)
|
|
($)
(2)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Kumarakulasingam
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suriyakumar
|
|
|
2016
|
|
|
|
950,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,948
|
|
|
|
974,948
|
|
|
President & Chief
|
|
|
2015
|
|
|
|
950,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,341
|
|
|
|
975,341
|
|
|
Executive Officer
|
|
|
2014
|
|
|
|
950,000
|
|
|
|
—
|
|
|
|
845,670
|
(5)
|
|
|
—
|
|
|
|
362,430
|
(5)
|
|
|
—
|
|
|
|
23,902
|
|
|
|
2,182,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge Avalos
|
|
|
2016
|
|
|
|
310,000
|
|
|
|
—
|
|
|
|
146,000
|
(6)
|
|
|
—
|
|
|
|
62,000
|
(7)
|
|
|
—
|
|
|
|
28,655
|
|
|
|
546,665
|
|
|
Chief Financial Officer
|
|
|
2015
|
|
|
|
306,539
|
|
|
|
—
|
|
|
|
183,400
|
(8)
|
|
|
160,825
|
(9)
|
|
|
111,600
|
(10)
|
|
|
—
|
|
|
|
28,759
|
|
|
|
791,123
|
|
|
|
|
|
2014
|
|
|
|
272,846
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54,565
|
(11)
|
|
|
224,000
|
(12)
|
|
|
—
|
|
|
|
29,482
|
|
|
|
580,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rahul K. Roy
|
|
|
2016
|
|
|
|
636,538
|
|
|
|
—
|
|
|
|
146,000
|
(6)
|
|
|
—
|
|
|
|
270,000
|
(7)
|
|
|
—
|
|
|
|
24,948
|
|
|
|
1,077,486
|
|
|
Chief Technology Officer
|
|
|
2015
|
|
|
|
575,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
165,699
|
(13)
|
|
|
230,000
|
(10)
|
|
|
—
|
|
|
|
25,341
|
|
|
|
996,040
|
|
|
|
|
|
2014
|
|
|
|
575,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
363,763
|
(14)
|
|
|
460,000
|
(12)
|
|
|
—
|
|
|
|
23,989
|
|
|
|
1,422,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilantha Wijesuriya
|
|
|
2016
|
|
|
|
370,000
|
|
|
|
—
|
|
|
|
182,500
|
(15)
|
|
|
200,000
|
(16)
|
|
|
92,500
|
(7)
|
|
|
—
|
|
|
|
27,077
|
|
|
|
872,077
|
|
|
Chief Operating Officer
|
|
|
2015
|
|
|
|
370,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
424,181
|
(17)
|
|
|
166,500
|
(10)
|
|
|
—
|
|
|
|
23,289
|
|
|
|
983,970
|
|
|
|
|
|
2014
|
|
|
|
362,846
|
|
|
|
—
|
|
|
|
—
|
|
|
|
290,941
|
(18)
|
|
|
370,000
|
(12)
|
|
|
—
|
|
|
|
27,320
|
|
|
|
1,051,107
|
|
|
|
(1)
|
In addition to our principal executive officer and our
principal financial officer, our other “executive officers” (as defined in Rule 3b-7 of the Exchange Act) in 2016
were our Chief Technology Officer, Mr. Roy and our Chief Operating Officer, Mr. Wijesuriya.
|
|
|
(2)
|
Annual bonuses are reported in the “Non-Equity
Incentive Plan Compensation” column.
|
|
|
(3)
|
The amounts shown in this column reflect the fair value
at the time of grant by the Company to the executive officer in accordance with FASB ASC 718. For a discussion of the assumptions
used in these calculations, see Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2016.
|
|
|
(4)
|
The amounts in this column are set forth in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life and
|
|
|
|
|
|
Severance,
|
|
|
|
|
|
|
|
Disability
|
|
401(k)
|
|
|
|
PTO Payout,
|
|
|
|
|
|
|
|
Insurance
|
|
Company
|
|
Car
|
|
Consulting
|
|
|
|
|
|
|
|
Premiums
|
|
Match
|
|
Allowance
|
|
Income
|
|
Total
|
|
Executive
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Kumarakulasingam Suriyakumar
|
|
2016
|
|
24,948
|
|
—
|
|
—
|
|
—
|
|
24,948
|
|
|
|
2015
|
|
25,341
|
|
—
|
|
—
|
|
—
|
|
25,341
|
|
|
|
2014
|
|
23,902
|
|
—
|
|
—
|
|
—
|
|
23,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge Avalos
|
|
2016
|
|
26,532
|
|
2,133
|
|
—
|
|
—
|
|
28,665
|
|
|
|
2015
|
|
26,518
|
|
2,241
|
|
—
|
|
—
|
|
28,759
|
|
|
|
2014
|
|
25,256
|
|
2,080
|
|
2,146
|
|
—
|
|
29,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rahul K. Roy
|
|
2016
|
|
24,948
|
|
—
|
|
—
|
|
—
|
|
24,948
|
|
|
|
2015
|
|
25,341
|
|
—
|
|
—
|
|
—
|
|
25,341
|
|
|
|
2014
|
|
23,989
|
|
—
|
|
—
|
|
—
|
|
23,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilantha Wijesuriya
|
|
2016
|
|
24,948
|
|
2,129
|
|
—
|
|
—
|
|
27,077
|
|
|
|
2015
|
|
20,514
|
|
2,775
|
|
—
|
|
—
|
|
23,289
|
|
|
|
2014
|
|
19,915
|
|
2,040
|
|
5,365
|
|
—
|
|
27,320
|
|
|
(5)
|
Payment of bonus based on 2014 performance of the year-over-year
growth of our adjusted EBITDA.
|
|
|
(6)
|
On February 18, 2016, Messrs. Avalos and Roy were granted
40,000 restricted shares of our common stock under our 2014 Plan.
|
|
|
(7)
|
Payment of bonus based on his performance against his
pre-determined individual management business objectives (“MBOs”) in 2016.
|
|
|
(8)
|
On February 1, 2015, Mr. Avalos was granted 20,000 restricted
shares of our common stock under our 2014 Plan in connection with his promotion to Chief Financial Officer.
|
|
|
(9)
|
On March 19, 2015, Mr. Avalos was granted an option to
purchase 33,000 shares of our common stock under the 2014 Plan.
|
|
|
(10)
|
Payment of bonus based on his performance against his
pre-determined shared and individual MBOs in 2015.
|
|
|
(11)
|
On June 2, 2014, Mr. Avalos was granted an option to
purchase 15,000 shares of our common stock under the 2014 Plan.
|
|
|
(12)
|
Payment of bonus based on his performance against his
pre-determined shared and individual MBOs in 2014.
|
|
|
(13)
|
On March 19, 2015, Mr. Roy was granted an option to purchase
34,000 shares of our common stock under the 2014 Plan.
|
|
|
(14)
|
On June 2, 2014, Mr. Roy was granted an option to purchase
100,000 shares of our common stock under the 2014 Plan.
|
|
|
(15)
|
On February 18, 2016, Mr. Wijesuriya was granted 50,000
restricted shares of our common stock under our 2014 Plan.
|
|
|
(16)
|
On February 18, 2016, Mr. Wijesuriya was granted an option
to purchase 98,938 shares of our common stock under the 2014 Plan.
|
|
|
(17)
|
On February 11, 2015, Mr. Wijesuriya was granted an option
to purchase 40,283 shares of our common stock under the 2014 Plan. On, March 19, 2015 Mr. Wijesuriya was also granted an option
to purchase 46,000 shares of our common stock under the 2014 Plan.
|
|
|
(18)
|
On February 13, 2014, Mr. Wijesuriya was granted an option
to purchase 47,630 shares of our common stock under the 2014 Plan. On, June 02, 2014 Mr. Wijesuriya was also granted an option
to purchase 25,000 shares of our common stock under the 2014 Plan.
|
Grants of Plan-Based Awards for 2016
The following plan-based equity awards were granted
to our executive officers during 2016.
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
Stock
|
All Other
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
Awards;
|
Option
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
Number
|
Awards:
|
Exercise
|
Value of
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
of
|
Number of
|
or Base
|
Stock
|
|
|
|
under Non-Equity Incentive
|
|
under Equity Incentive
Plan
|
Shares
|
Securities
|
Price of
|
and
|
|
|
|
Plan
Awards
|
|
Awards
|
of Stock
|
underlying
|
Option
|
Option
|
|
|
Grant
|
Threshold
|
Target
|
Maximum
|
|
Threshold
|
Target
|
Maximum
|
or Units
|
Options
|
Awards
|
Awards
|
|
Executive
|
Date
|
(#)
|
(#)
|
(#)
|
|
(#)
|
(#)
|
(#)
|
(#)
|
(#)
|
($/sh)
|
($)
(1)
|
|
Kumarakulasingam Suriyakumar
|
2/18/2016
|
—
|
—
|
—
|
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Rahul K. Roy
|
2/18/2016
|
—
|
—
|
—
|
|
—
|
—
|
—
|
40,000
(2)
|
—
|
—
|
146,000
|
|
Dilantha Wijesuriya
|
2/18/2016
|
—
|
—
|
—
|
|
—
|
—
|
—
|
—
|
98,938
(3)
|
3.65
|
200,000
|
|
|
2/18/2016
|
—
|
—
|
—
|
|
—
|
—
|
—
|
50,000
(2)
|
—
|
—
|
182,500
|
|
Jorge Avalos
|
2/18/2016
|
—
|
—
|
—
|
|
—
|
—
|
—
|
40,000
(2)
|
—
|
—
|
146,000
|
|
|
(1)
|
Under our 2014 Plan the exercise price for a stock option
grant is the closing price of our common stock as listed by the NYSE on the grant date.
|
|
|
(2)
|
On February 18, 2016, we granted Messrs. Roy and Avalos
40,000, and Mr. Wijesuriya 50,000, restricted shares of our common stock under our 2014 Plan. The shares vest at a rate of 33.3%
on each of the first three anniversaries of the grant date, subject to their continued employment with the Company.
|
|
|
(3)
|
On February 18, 2016, we granted Mr. Wijesuriya an option
to purchase 98,938 shares of our common stock under our 2014 Plan, at an exercise price equal to $3.65, which was the closing
price of our common stock on the NYSE on the date of grant. The option vests at a rate of 25% on each of the first four anniversaries
of the grant date, subject to Mr. Wijesuriya’s continued employment with the Company.
|
Outstanding
Equity Awards at Fiscal 2016 Year-End
The
following table provides information as of December 31, 2016 regarding outstanding equity awards held by the executive officers
listed in the Summary Compensation Table.
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
Executive
|
|
Number
of
Securities
underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards;
Number of
Securities
underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of Stock
that
Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares
or Units
of
Stock
that
Have
Not
Vested
($)
(1)
|
|
|
Equity
Incentive
Plan
Awards;
Number of
Unearned
Shares,
Units or
Other
Rights that
Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested
($)
|
|
|
Kumarakulasingam
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suriyakumar
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.37
|
|
|
5/23/2022
|
|
|
71,897
|
|
|
$
|
365,237
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.70
|
|
|
3/8/2023
|
|
|
69,775
|
|
|
$
|
354,457
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rahul K. Roy
|
|
|
15,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
40,000
|
|
|
$
|
203,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.37
|
|
|
5/23/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.70
|
|
|
3/8/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
66,666
|
|
|
|
33,334
|
(3)
|
|
|
—
|
|
|
|
6.16
|
|
|
6/2/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11,333
|
|
|
|
22,667
|
(4)
|
|
|
—
|
|
|
|
8.89
|
|
|
3/19/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilantha Wijesuriya
|
|
|
15,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
.20
|
|
|
5/21/2019
|
|
|
50,000
|
|
|
$
|
254,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12,500
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
25,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
13,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6.20
|
|
|
2/19/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
45,249
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.66
|
|
|
3/15/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
63,941
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.62
|
|
|
4/26/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.37
|
|
|
5/23/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
107,844
|
|
|
|
35,948
|
|
|
|
—
|
|
|
|
2.37
|
|
|
2/21/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.70
|
|
|
3/8/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
23,815
|
|
|
|
23,815
|
(5)
|
|
|
—
|
|
|
|
7.19
|
|
|
2/13/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
16,666
|
|
|
|
8,334
|
(6)
|
|
|
—
|
|
|
|
6.16
|
|
|
6/2/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,070
|
|
|
|
30,213
|
(7)
|
|
|
—
|
|
|
|
9.09
|
|
|
2/11/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
15,333
|
|
|
|
30,667
|
(8)
|
|
|
—
|
|
|
|
8.89
|
|
|
3/19/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
98,938
|
(9)
|
|
|
—
|
|
|
|
3.65
|
|
|
2/18/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge Avalos
|
|
|
7,500
|
(2)
|
|
|
—
|
|
|
|
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
15,000
|
|
|
$
|
76,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6,250
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
40,000
|
|
|
$
|
203,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
15,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
8.20
|
|
|
5/21/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.37
|
|
|
5/23/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.70
|
|
|
3/8/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
10,000
|
|
|
|
5,000
|
(10)
|
|
|
—
|
|
|
|
6.16
|
|
|
6/2/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11,000
|
|
|
|
22,000
|
(11)
|
|
|
—
|
|
|
|
8.89
|
|
|
3/19/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1)
|
The
Market value of shares that have not vested is based on the closing stock price as of
December 31, 2016, which was $5.08.
|
|
|
(2)
|
Under
the Company’s 2009 stock option exchange program, this stock option was exchanged
for an option covering an equivalent number of shares with an exercise price of $8.20,
equal to the closing price of the Company’s common stock on the NYSE on May 21,
2009, the date of grant of the replacement option. Fifty
|
percent
of the shares subject to the option vested on the first anniversary date of grant and the remaining 50% of the shares subject
to the option vested on the second anniversary of the grant date.
|
|
(3)
|
On
June 2, 2014, we granted Mr. Roy an option to purchase 100,000 shares that vests 33.3%
on the first three anniversaries of the date of grant.
|
|
|
(4)
|
On
March 19, 2015, we granted Mr. Roy an option to purchase 34,000 shares that vests 33.3%
on the first three anniversaries of the date of grant.
|
|
|
(5)
|
On
February 13, 2014 we granted Mr. Wijesuriya an option to purchase 47,630 shares that
vests 25% on the first four anniversaries of the date of grant.
|
|
|
(6)
|
On
June 2, 2014, we granted Mr. Wijesuriya an option to purchase 25,000 shares that vests
33.3% on the first three anniversaries of the date of grant.
|
|
|
(7)
|
On
February 11, 2015, we granted Mr. Wijesuriya an option to purchase 40,283 shares that
vests 25% on the first four anniversaries of the date of grant.
|
|
|
(8)
|
On
March 19, 2015, we granted Mr. Wijesuriya an option to purchase 46,000 shares that vests
33.3% on the first three anniversaries of the date of grant.
|
|
|
(9)
|
On
February 18, 2016, we granted Mr. Wijesuriya an option to purchase 98,938 shares that
vests 25% on the first four anniversaries of the grant date.
|
|
|
(10)
|
On
June 2, 2014, we granted Mr. Avalos an option to purchase 15,000 shares that vests 33.3%
on the first three anniversaries of the date of grant.
|
|
|
(11)
|
On
March 19, 2015, we granted Mr. Avalos an option to purchase 33,000 shares that vests
33.3% on the first three anniversaries of the date of grant.
|
Option
Exercises and Stock Vested in 2016
The
following table presents certain information concerning the exercise of options, and vesting of restricted stock held, by certain
executive officers listed in the Summary Compensation Table during the fiscal year ended December 31, 2016.
Option
Exercises and Stock Vested
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Executive
|
|
Number
of Shares
Acquired on Exercise
(#)
|
|
|
Value
Realized
on
Exercise
($)
|
|
|
Number
of Shares
Acquired on Vesting
(#)
|
|
|
Value
Realized on
Vesting
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kumarakulasingam
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Suriyakumar
|
|
|
|
|
|
|
|
|
|
|
59,207
|
|
|
|
218,454
|
|
|
Jorge Avalos
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
18,650
|
|
Pension
Benefits
None
of our executive officers participates in, or has account balances in, qualified or non-qualified defined benefit plans sponsored
by us.
Nonqualified
Deferred Compensation
None
of our executive officers participates in or has account balances in non-qualified defined contribution plans or other deferred
compensation plans maintained by us.
Potential
Payments Upon Termination or Change-in-Control
The
employment agreements we entered into with our executive officers also required us to provide compensation and other benefits
to our executive officers if their employment terminated or they resigned under specified circumstances. The following discussion
summarizes the potential payments upon termination of employment pursuant to the employment agreements in affect as of December
31, 2016 with our NEOs. The amounts specified below assume that employment terminated on December 31, 2016 and the calculations
of the value of equity awards reflect the closing price of our common stock on the NYSE on December 31, 2016.
The
severance payments and benefits described below are only payable if the executive officer executes and delivers to us an agreement
releasing us and our related parties for all claims and liabilities that the executive officer may have against us and our related
parties.
Under
each of our employment agreements with Messrs. Suriyakumar, Roy, Wijesuriya, and Avalos:
|
|
●
|
“Cause”
means a willful refusal to perform the duties set forth in the agreement or as delegated
to him, gross negligence, self-dealing or willful misconduct injurious to the Company,
fraud or misappropriation of our business and assets, habitual insobriety or use of illegal
drugs, criminal activity involving moral turpitude, indictment or trial for a felony
or misdemeanor involving moral turpitude, any felony conviction or guilty plea that harms
the reputation or business of the Company, or material breach of the employment agreement
or any material policy of the Company.
|
|
|
●
|
“Good
Reason” means a material change in his respective title, duties and responsibilities
set forth in the employment agreement, without his written consent, a reduction in his
compensation, without his written consent, a material breach by the Company of any other
material terms of the employment agreement, or a Change of Control, as a result of which
he is not offered the same or comparable position in the surviving company, or within
12 months after accepting such position, he is terminated without Cause, or he terminates
his employment for Good Reason, as provided in the employment agreement. A change in
the officer to whom the executive reports, without his consent, also constitutes “Good
Reason” under the employment agreements with Messrs. Roy, Wijesuriya, and Avalos.
|
|
|
●
|
“Change
of Control” means: (a) our being merged with any other corporation, as a result
of which we are not the surviving company or our shares are not exchanged for or converted
into more than 50% of the voting securities of the merged company; (b) our sale or transfer
of all or substantially all of our assets; or (c) any third party becoming the beneficial
owner in one transaction or a series of transactions within 12 months, of at least 50%
of our voting securities.
|
Kumarakulasingam
Suriyakumar
If Mr. Suriyakumar was terminated without “Cause” (as defined above) or his employment was terminated
for “Good Reason” (as defined above), he would have been entitled to receive: (a) his then base salary for twenty-four
months following the effective date of termination; (b) earned but unpaid incentive bonus; (c) continued payment of premiums for
him and his eligible dependents to remain covered by our group medical insurance programs, until the earlier of (i) medical insurance
coverage being available through another employer, (ii) termination of eligibility for his children under our policies and applicable
laws, or (iii) qualification of him and his spouse, in each instance, for Medicare coverage; (d) continued payment of employer-paid
benefits, including without limitation, the lease of automobiles, for twenty-four months following the effective date of termination,
provided that the annual cost to the Company shall not exceed $10,000; and (e) immediate vesting of any unvested stock options,
restricted stock or similar rights granted to him as of the effective date of termination. As of December 31, 2016, payment of
all the foregoing in connection with termination of Mr. Suriyakumar’s employment without Cause or for Good Reason would
have totaled approximately $2,667,376. Accelerated vesting of Mr. Suriyakumar’s outstanding unvested stock options would
not have resulted in any additional compensation. Accelerated vesting of Mr. Suriyakumar’s unvested restricted stock would
have resulted in vesting of 141,662 shares of unvested restricted common stock outstanding as of December 31, 2016 with an aggregate
market value of approximately $719,694. In the case of both stock options and restricted stock, the aggregate market value is
based on the closing price on the NYSE on December 31, 2016.
Rahul
K. Roy
If Mr. Roy is terminated without “Cause” (as defined above) or his employment terminates for “Good
Reason” (as defined above), he is entitled to receive: (a) his then base salary for 12 months following the effective date
of the termination; (b) earned but unpaid incentive bonus; (c) continued payment of premiums for him and his eligible dependents
to remain covered by our group medical insurance programs for the period in which he is entitled to continue to receive his base
salary; and (d) immediate vesting of all unvested stock options, restricted stock or similar rights granted to him as of the effective
date of termination. As of December 31, 2016, payment of all the foregoing in connection with termination of Mr. Roy’s employment
without Cause or for Good Reason would have totaled approximately $1,173,148. Accelerated vesting of Mr. Roy’s outstanding
unvested stock options would have resulted in vesting of 56,001 shares of common stock subject to unvested options as of December
31, 2016, with no fair market value. Accelerated vesting of Mr. Roy’s unvested restricted stock would have resulted in vesting
of 40,000 shares of unvested restricted common stock outstanding as of December 31, 2016 with an aggregate market value of approximately
$203,200. In the case of stock options the aggregate market value is based on the closing price on the NYSE on December 31, 2016.
Dilantha
Wijesuriya
If Mr. Wijesuriya is terminated without “Cause” (as defined above) or his employment terminates
for “Good Reason” (as defined above), he is entitled to receive: (a) his base salary for twelve months following the
effective date of termination; (b) earned but unpaid incentive bonus; (c) continued payment of premiums for Mr. Wijesuriya and
his eligible dependents to remain covered by our group medical insurance programs for twelve months following the effective date
of termination; and (d) immediate vesting of all unvested stock options, restricted stock or similar rights granted to him as
of the effective date of termination. As of December 31, 2016, payment of all of the foregoing in connection with termination
of Mr. Wijesuriya’s employment without Cause or for Good Reason would have totaled approximately $980,348. Accelerated vesting
of Mr. Wijesuriya’s outstanding unvested stock options would have resulted in vesting of 227,915 shares of common stock
subject to unvested options as of December 31, 2016, with an aggregate fair market value of approximately $238,900 (representing
the aggregate amount by which the accelerated stock options would have been “in the money” on December 31, 2016).
Accelerated vesting of Mr. Wijesuriya’s unvested restricted stock would have resulted in vesting of 50,000 shares of unvested
restricted common stock outstanding as of December 31, 2016 with an aggregate market value of approximately $254,000. In the case
of stock options the aggregate market value is based on the closing price on the NYSE on December 31, 2016.
Jorge
Avalos
If Mr. Avalos is terminated without “Cause” (as defined above) or his employment terminates for “Good
Reason” (as defined above), he is entitled to receive: (a) his base salary for twelve months following the effective date
of termination; (b) earned but unpaid incentive bonus; (c) continued payment of premiums for Mr. Avalos and his eligible dependents
to remain covered by our group medical insurance programs for twelve months following the effective date of termination; and (d)
immediate vesting of all unvested stock options, restricted stock or similar rights granted to him as of the effective date of
termination. As of December 31, 2016, payment of all of the foregoing in connection with termination of Mr. Avalos’ employment
without Cause or for Good Reason would have totaled approximately $677,932. Accelerated vesting of Mr. Avalos’ outstanding
unvested stock options would have resulted in vesting of 27,000 shares of common stock subject to unvested options as of December
31, 2016, with no fair market value. Accelerated vesting of Mr. Avalos’ outstanding unvested restricted stock would have
resulted in full vesting of 55,000 shares of unvested restricted common stock as of December 31, 2016 with an aggregate market
value of approximately $279,400. In the case of both stock options and restricted stock, the aggregate market value is based on
the closing price on the NYSE on December 31, 2016.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
members of our Compensation Committee from January 2016 to December 2016 were Messrs. McNulty, Formolo, McCluggage and Perez de
la Mesa. No member of our Compensation Committee during the last fiscal year (i) was, during fiscal year 2016, an officer or employee
of the Company, (ii) was formerly an officer of the Company, or (iii) had any relationship requiring disclosure under Item 404
of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Certain
of our directors, executive officers, 5% beneficial owners and their affiliates have engaged in transactions with us in the ordinary
course of business. The following is a description of such transactions during our fiscal year ended December 31, 2016 and the
Company’s policies and procedures applicable to such transactions.
Policies
and Procedures Regarding Related Transactions
Our
Related Party Transactions Policy provides that we will only enter into or ratify a transaction with a related party when our
board of directors, acting through the Audit Committee, determines that the transaction is in the best interests of ARC and our
stockholders.
For
the purposes of this policy, a related party means:
|
|
●
|
a
member of the board of directors (or a nominee to the board of directors);
|
|
|
●
|
any
person who is known to be the beneficial owner of more than five percent of any class
of our securities; or
|
|
|
●
|
any
immediate family member of any of the persons listed above.
|
We
review all known relationships and transactions in which ARC and our directors, executive officers, and significant stockholders
or their immediate family members are participants to determine whether such persons have a direct or indirect interest. Our legal
staff is primarily responsible for developing and implementing processes and controls to obtain information regarding our directors,
executive officers, and significant stockholders with respect to related party transactions and then determining, based on the
facts and circumstances, whether ARC or a related party has a direct or indirect interest in these transactions. On a periodic
basis, the legal team will review all transactions involving payments between ARC and any company that has an ARC executive officer
or director as an officer or director. In addition, our directors and executive officers are required to notify us of any potential
related party transactions and provide us with the information regarding such transactions.
If
our legal department determines that a transaction is a related party transaction, the Audit Committee must review the transaction
and either approve or disapprove it. If advance approval of a transaction is not feasible, the chair of the Audit Committee may
approve the transaction and the transaction may be ratified by the Audit Committee in accordance with the Related Party Transactions
Policy. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into account
all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate, such as:
|
|
●
|
the
benefits to us of the transaction;
|
|
|
●
|
the
nature of the related party’s interest in the transaction;
|
|
|
●
|
whether
the transaction would impair the judgment of a director or executive officer to act in
the best interests of ARC and our stockholders;
|
|
|
●
|
the
potential impact of the transaction on a director’s independence; and
|
|
|
●
|
whether
the transaction is on terms no less favorable than terms generally available to an unaffiliated
third party under the same or similar circumstances.
|
Any
member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations
or vote on the approval of the transaction.
Related
Party Real Property Leases
During
our fiscal year ended December 31, 2016, we were a party to real property leases with entities owned by our former Chairman of
the board, Mr. Chandramohan, and our current Chairman of the Board, President and Chief Executive Officer, Mr. Suriyakumar, for
two of our facilities located in Costa Mesa, California and Los Angeles, California. These facilities are leased to us under written
lease agreements between us and Sumo Holdings Costa Mesa, LLC and Sumo Holdings, LA, LLC, respectively. Messrs. Chandramohan and
Suriyakumar are the only members of each of the Sumo Holdings limited liability companies.
Under
these real property leases, we paid these entities rent in the aggregate amount of $504,000 in 2016. We were also obligated to
reimburse these entities for certain real property taxes and the actual costs incurred by these entities for insurance and maintenance
on a triple net basis.
The
real property leases described above were originally entered into by us between November 19, 1997 and February 1, 1999. Our board
of directors determined that, as of the February 2005 closing of our initial public offering, we would not enter into any arrangements
to lease any additional facilities from Messrs. Chandramohan and Suriyakumar or their affiliates. Our board of directors reviews
and approves the renewal terms for any existing related party real property leases and requires that any extensions will not be
approved if the proposed base rent exceeds the then-existing fair market rate in the applicable geographic market. Our Chief Financial
Officer reviews relevant market data to ensure that lease term base rent for any extension term does not exceed the fair market
rate and is authorized to consult with and retain the services of professionals, as necessary, to determine prevailing market
rental rates.
Indemnification
Agreements
We
have entered into, and expect to continue to enter into, indemnification agreements with our directors and executive officers
that provide indemnification under certain circumstances for acts and omissions that may not be covered by any directors’
and officers’ liability insurance. The indemnification agreements may require us, among other things, to indemnify our officers
and directors against certain liabilities that may arise by reason of their status or service as officers and directors (other
than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain officers’ and directors’ insurance if
available on reasonable terms.
Registration
Rights Agreement
We
have a registration rights agreement dating back to April 10, 2000 that is currently in effect only with respect to shares held
by Mr. Suriyakumar and Mr. Chandramohan, a former officer of the Company (or entities in which they control a majority of voting
shares). The registration rights agreement entitles them to certain rights with respect to the registration of their shares under
the Securities Act. These registration rights are summarized below.
Piggyback
Registrations.
If we propose to register any of our equity securities under the Securities Act (other than pursuant to a demand
registration of registrable securities or a registration on Form S-4 or Form S-8) for us or for holders of securities other than
the registrable securities, we will offer the holders of registrable securities the opportunity to register their registrable
securities.
Conditions
and Limitations; Expenses.
The registration rights are subject to conditions and limitations, including the right of the underwriters
to limit the number of shares to be included in a registration and our right to delay or withdraw a registration statement under
specified circumstances. We will pay the registration expenses of the holders of registrable securities in demand registrations
and piggyback registrations in connection with the registration rights agreement.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires directors and certain officers of the Company and persons who own more than 10% of our common
stock to file with the SEC initial reports of beneficial ownership (Form 3) and reports of subsequent changes in their beneficial
ownership (Form 4 or Form 5) of ARC’s common stock. Such directors, officers and greater-than-10% stockholders are required
to furnish us with copies of the Section 16(a) reports they file. The SEC has established specific due dates for these reports,
and ARC is required to disclose in this report any late filings or failures to file.
Based
solely on our review of copies of the Section 16(a) reports received or written representations from such officers, directors
and greater-than-10% stockholders, we believe that all Section 16(a) filing requirements applicable to our officers, directors
and greater-than-10% stockholders were complied with during the fiscal year ended December 31, 2016.
ADDITIONAL
INFORMATION
Householding
Under
rules adopted by the SEC, we are permitted to deliver a single set of any proxy statement, information statement, annual report
and prospectus to any household at which two or more stockholders reside if we believe the stockholders are members of the same
family. This process, called householding, allows us to reduce the number of copies of these materials we must print and mail.
Even if householding is used, each stockholder will continue to receive a separate proxy card or voting instruction card.
The
Company is not householding for those stockholders who hold their shares directly in their own name. If you share the same last
name and address with another Company stockholder who also holds his or her shares directly, and you would each like to start
householding for the Company’s annual reports, proxy statements, information statements and prospectuses for your respective
accounts, then please contact our corporate secretary c/o ARC Document Solutions, Inc., 1981 North Broadway, Suite 385, Walnut
Creek, California 94596, Attention: D. Jeffery Grimes, Secretary, telephone (925) 949-5100.
This
year, some brokers and nominees who hold Company shares on behalf of stockholders may be participating in the practice of householding
proxy statements and annual reports for those stockholders. If your household received
a
single proxy statement and annual report for this year, but you would like to receive your own copy this year, please contact
our corporate secretary c/o ARC Document Solutions, Inc., 1981 North Broadway, Suite 385, Walnut Creek, California 94596, Attention:
D. Jeffery Grimes, Secretary, telephone (925) 949-5100, and we will promptly send you a copy. If a broker or nominee holds Company
shares on your behalf and you share the same last name and address with another stockholder for whom a broker or nominee holds
Company shares, and together both of you would like to receive only a single set of the Company’s disclosure documents,
please contact your broker or nominee as described in the voting instruction card or other information you received from your
broker or nominee.
If
you consent to householding, your election will remain in effect until you revoke it. Should you later revoke your consent, you
will be sent separate copies of those documents that are mailed at least 30 days or more after receipt of your revocation.
Stockholder
Proposals for the 2018 Annual Meeting
In
order to present a proposal at our 2018 annual meeting, a stockholder must comply with the specific requirements set forth in
our Second Amended and Restated Bylaws, including the requirement to provide notice in writing to our corporate secretary at our
principal executive offices not later than the 90
th
day nor earlier than the 120
th
day before the one-year
anniversary of our 2017 annual meeting of stockholders. The stockholder’s notice must include the specific items set forth
in our Second Amended and Restated Bylaws.
In
order to submit a proposal for inclusion in our proxy materials for the 2018 annual meeting of stockholders, a stockholder must
submit the proposal not later than January 27, 2018, and follow the other procedures set forth in Rule 14a-8 of the Exchange Act.
If we hold our 2018 annual meeting of stockholders more than 30 days before or after April 27, 2018 (the one-year anniversary
date of the 2017 Annual Meeting of Stockholders), we will disclose the new deadline by which stockholders proposals must be received
in our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders.
Proposals must also comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored
proxy materials.
You
may request a printed copy of the relevant provision of our Second Amended and Restated Bylaws regarding the requirements for
presenting stockholder proposals at our annual meetings of stockholders by contacting our corporate secretary at (925) 949-5100
or by sending a request by mail to ARC Document Solutions, Inc., 1981 North Broadway, Suite 385, Walnut Creek, California 94596,
Attention: D. Jeffery Grimes, Secretary.
Additional
Information
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document
we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for information on the public reference room. The SEC maintains an internet site that contains annual, quarterly
and current reports, proxy and information statements and other information that issuers file electronically with the SEC. The
SEC’s internet site is
www.sec.gov
.
Our
investor relations internet address is
ir.e-arc.com
. We make available free of charge, on or through our investor relations
webpage, our proxy statements, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to the Exchange Act, as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the SEC. We also make available, through our Investors webpage, statements of beneficial
ownership of our equity securities filed by our directors, officers, 10% or greater stockholders and others under Section 16 of
the Exchange Act. The reference to our website address does not constitute incorporation by reference of the information contained
in the website and should not be considered part of this document.
A
copy of our Code of Conduct, as defined under Item 406 of Regulation S-K, including any amendments thereto or waivers thereof,
our Corporate Governance Guidelines, and board committee charters can also be accessed on our investor relations website
ir.e-arc.com
and selecting “Corporate Governance” from navigation menu. Our Code of Conduct applies to all directors, officers
and employees, including our Chief Executive Officer, our Chief Financial Officer and our Controller. We will post any amendments
to the Code of Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE, on our website.
You
can request a printed copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations at (925) 949-5100
or by sending a request by mail to 1981 North Broadway, Suite 385, Walnut Creek, California 94596, Attention: David Stickney,
Vice President Corporate Communications.
YOUR
VOTE AT THIS YEAR’S ANNUAL MEETING OF STOCKHOLDERS IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. PLEASE SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY.
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By order of the Board of Directors,
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March 28, 2017
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D. Jeffery Grimes
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Vice President, Senior Corporate
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Counsel & Corporate Secretary
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ARC
DOCUMENT SOLUTIONS, INC.
ATTN:
ARC Legal Department
1981
N. BROADWAY, SUITE 385
WALNUT
CREEK, CA 94596
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VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow
the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If
you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree
to receive or access proxy materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE
OR BLACK INK AS FOLLOWS:
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS
PORTION ONLY
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For
All
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Withhold
All
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For All
Except
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To withhold
authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s)
on the line below.
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The
Board of Directors recommends you vote FOR the following:
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☐
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☐
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☐
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1.
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Election of Directors
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Nominees
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01
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K. Suriyakumar 02
Thomas J. Formolo 03
John G. Freeland 04
Dewitt Kerry McCluggage 05
James F. McNulty
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06
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Mark W. Mealy 07
Manuel Perez de la Mesa
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The Board of Directors recommends
you vote FOR proposals 2. and 3..
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For
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Against
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Abstain
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2.
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Ratify the appointment of Deloitte
& Touche LLP as ARC Document Solutions, Inc.’s independent registered public accounting firm for 2017.
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☐
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☐
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☐
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3.
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Approve advisory, non-binding vote
on executive compensation.
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☐
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☐
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☐
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The Board of Directors recommends
you vote 1 YEAR on the following proposal:
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1 year
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2 years
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3 years
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Abstain
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4.
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Approval, by non-binding advisory
vote, of the frequency of executive compensation votes.
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☐
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☐
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☐
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☐
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NOTE:
Transact any other business
that may properly come before the annual meeting and any postponements and any adjournments of the annual meeting.
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Yes
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No
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Please indicate if you plan to attend
this meeting
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☐
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☐
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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0000323071_1
R1.0.1.15
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Annual Report
are available at
www.proxyvote.com
.
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ARC DOCUMENT SOLUTIONS, INC.
Annual Meeting of Stockholders
April 27, 2017 9:00 AM PDT
This proxy is solicited by the Board of Directors
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The
undersigned hereby appoints Kumarakulasingam Suriyakumar, the Chairman of the Board, Chief
Executive Officer, President and a director of ARC Document Solutions, Inc., and D. Jeffery
Grimes, Secretary of ARC Document Solutions, Inc., and each of them, with full power of substitution,
proxies of the undersigned to vote all shares of Common Stock of ARC Document Solutions Inc.
held by the undersigned on February 27, 2017, at the annual meeting of stockholders to be
held at the Diablo Country Club, 1700 Clubhouse Road, Diablo, CA 94528 on Thursday, April
27, 2017 at 9:00 a.m. PDT, and at any postponements or adjournments thereof. Without limiting
the authority granted herein, the above named proxies are expressly authorized to vote as
directed by the undersigned as to those matters set forth on the reverse side hereof.
If
no directions are given, this Proxy will be voted “FOR” all of the director nominees
named on the reverse side under Proposal 1, “FOR” Proposals 2 and 3, and “FOR
1 Year” for Proposal 4.
The above named proxies will vote in their discretion on
all other matters that are properly brought before the annual meeting. The undersigned hereby
revokes any proxy heretofore given to vote at such meeting.
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Continued
and to be signed on reverse side
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0000323071_2
R1.0.1.15
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