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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Filed by the Registrant |
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Filed by a Party other than the Registrant |
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Check 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 |
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 all the boxes that
apply):
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No fee required. |
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Fee paid previously with preliminary materials. |
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Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a-6(i)(1) and 0-11. |
Notice of 2022 Annual Meeting of Stockholders
ARC Document Solutions, Inc.
12657 Alcosta Blvd., Suite 200
San Ramon, CA 94583
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DATE AND TIME |
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Thursday, April 28, 2022, at 9:00 a.m. PDT
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PLACE |
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Virtually at www.virtualshareholdermeeting/ARC2022
There is no physical location for the annual meeting.
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ITEMS OF BUSINESS |
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Elect the five directors named in the proxy statement for the 2022
annual meeting of stockholders, each for a term of one year or
until their successors are elected and qualified;
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Ratify the appointment of Armanino LLP as ARC Document Solutions,
Inc.’s independent registered public accounting firm for fiscal
year 2022;
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Hold an advisory, non-binding vote on executive compensation;
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Transact any other business that may properly come before the
annual meeting and any postponements or adjournments of the annual
meeting. |
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RECORD DATE
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Stockholders of record at the close of business on March 2,
2022 are entitled to vote at the annual meeting and at any
adjournment or postponement thereof.
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PROXY VOTING |
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It is important you vote your shares so they are counted at the
annual meeting. You can vote your shares over the internet at the
web address included in the Notice of Annual Meeting and included
in the proxy card (if you received a proxy card), by telephone
through the number included in the proxy card (if you received a
proxy card), or by signing and dating your proxy card (if you
received a proxy card) and mailing it in the prepaid and addressed
envelope. |
By order of the Board of Directors,
1.
Tracey Luttrell
Corporate Counsel and Corporate Secretary
March 25, 2022
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Important Notice Regarding the Availability of Proxy Materials for
the Stockholder Meeting to Be Held on April 28,
2022:
The Notice of 2022 Annual Meeting and Proxy Statement and 2021
Annual Report are available as of today’s date, March 25,
2022, at www.proxyvote.com.
Virtual Meeting Format: Due
to COVID-19-related public health restrictions and for
the safety and well-being of our stockholders, the 2022 annual
meeting will be conducted virtually. You will be able to attend the
annual meeting, as well as vote and submit questions during the
meeting, by visiting www.virtualshareholdermeeting/ARC2022 and
entering your control number. Please refer to the additional
logistical details in the accompanying proxy statement for
additional information on how to participate in the annual
meeting.
Participation in the meeting is limited due to the capacity of the
host platform, and access to the meeting will be accepted on a
first come, first served basis. Electronic entry to the meeting
will begin at 8:45 a.m., PDT, and the meeting will begin promptly
at 9:00 a.m. PDT. If you encounter difficulties accessing the
virtual meeting, please call the technical support number that will
be posted at www.virtualshareholdermeeting/ARC2022.
A list of registered stockholders as of the close of business on
the record date will be available for examination by any
stockholder for any purpose germane to the annual meeting for a
period of at least ten days prior to the annual meeting. The
stockholder list will also be available to stockholders of record
for examination during the annual meeting at the same
website.
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ARC DOCUMENT SOLUTIONS, INC.
2022 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
ARC DOCUMENT SOLUTIONS, INC.
12657 Alcosta Blvd., Suite 200
San Ramon, CA 94583
(925) 949-5100
March 25, 2022
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 2022 annual meeting
of stockholders. Due to the ongoing COVID-19 pandemic, the meeting
will be held in a virtual format only at
www.virtualshareholdermeeting/ARC2022 on Thursday, April 28,
2022, 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 K. Suriyakumar, the Chairman of the
Board, President and Chief Executive Officer, and a director of
ARC, and Tracey Luttrell, Corporate Counsel and Corporate
Secretary, and a director 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 25,
2022.
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 of directors 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 in a virtual format only at
www.virtualshareholdermeeting/ARC2022 on Thursday, April 28,
2022, at 9:00 a.m. PDT.
If you encounter difficulties accessing the virtual meeting, please
call the technical support number that will be posted at
www.virtualshareholdermeeting/ARC2022.
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, 2021, on or about March 25, 2022, 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, 2021 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:
1.The
election of the five directors named in this proxy statement, each
for a term of one year or until their successors are elected and
qualified;
2.Ratification
of the appointment of Armanino LLP as the Company’s independent
registered public accounting firm for fiscal year 2022;
and
3.An
advisory, non-binding vote on executive compensation.
Stockholders also will transact any other business that may
properly come before the meeting. Members of ARC’s management team
and representatives of Armanino LLP (“Armanino”), the Company’s
independent registered public accounting firm for fiscal year 2021,
will be present at the meeting and available to respond to
appropriate questions from stockholders. Representatives of
Armanino 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 virtual annual meeting online. To be admitted as a participant
in the annual meeting, you will need to log on at
www.virtualshareholdermeeting/ARC2022 and enter the control number
found on your proxy card, voting instruction form, or previously
received notice.
If you did not receive a control number, please follow the
instructions provided by your broker. We encourage you to log on 15
minutes prior to the start time for the meeting.
Questions may be submitted before or during the annual meeting. To
submit a question in advance, visit
www.virtualshareholdermeeting/ARC2022
before 8:59 a.m. PDT, on
April 28, 2022,
and enter a valid control number. As many stockholder questions
will be answered as time
permits. We may not respond to questions that are not pertinent to
meeting matters or our business. Single responses to a group of
substantially similar questions may be provided to avoid
repetition. We ask that attendees please help us keep the
proceedings orderly and follow the annual meeting rules of
conduct.
Record Date
The record date for the annual meeting is March 2, 2022. 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 43,205,623 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 attendance virtually 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 five nominees for director named
in Proposal 1. This means that the five 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 and 3
Approval of Proposals 2 and 3 requires the affirmative vote of a
majority of the shares present at the meeting or by proxy and
entitled to vote, assuming a quorum is present.
Routine and Non-Routine Matters
Proposal 2 (ratification of the appointment of Armanino as our
independent registered public accounting firm for 2022) 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) and Proposal 3 (advisory vote 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 and 3. 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.
Beneficial owners who did not receive a 16-digit control number
from their bank or brokerage firm who wish to attend the meeting
should follow the instructions from their bank or brokerage firm,
including any requirement to obtain a legal proxy. Most brokerage
firms or banks allow a stockholder to obtain a legal proxy either
online or by mail.
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 will be
counted as votes against the ratification of the appointment of our
independent registered public accounting firm (Proposal 2) and as
votes against the proposal regarding an advisory, non-binding vote
on executive compensation (Proposal 3).
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 NYSE rules, Proposals 1 and 3 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 and 3
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, or submit your vote via
electronic or telephonic means, 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 as of March 2, 2022, you will be
able to vote by telephone, by the internet, by mail , or at the
virtual annual meeting.
•TO
VOTE BY TELEPHONE; Call toll-free 1-800-690-6903, 24 hours a day,
seven days a week, until 11:59 p.m., ET on April 27, 2022. Use any
touch-tone telephone to transmit your voting instructions, and have
your proxy card in hand when you call and then follow the
instructions.
•TO
VOTE BY INTERNET: At www.virtualshareholdermeeting/ARC2022 you can
transmit your voting instructions until 11:59 p.m., ET on April 27,
2022. Have your proxy card in hand when you access the website and
follow the instructions to obtain your records and to create an
electronic voting instruction form.
•TO
VOTE BY MAIL: Mark, sign and date you proxy card and return it in
the postage-paid envelope that was provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
If you are the beneficial holder of shares held in "street name"
and you did not receive a
16-digit control number from your bank or brokerage firm and you
wish to attend the meeting, you should follow the instructions from
your bank or brokerage firm, including any requirement to obtain a
legal proxy.
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:
•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;
•by
giving written notice of your revocation to the Corporate Secretary
of ARC prior to the meeting or by voting at the meeting;
or
•by
attending the annual meeting virtually and voting at the annual
meeting.
Your attendance at the virtual 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.
12657 Alcosta Blvd., Suite 200
San Ramon, CA 94583
Attention: Tracey Luttrell, Corporate Secretary
If your shares are held in “street name” through a broker, bank or
other nominee, please refer to the instructions they provide
regarding how to vote your shares or to revoke your voting
instructions. The availability of telephone and internet voting
depends upon the voting processes of the broker, bank or other
nominee.
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 your proxy to vote on matters that will be
presented at the annual meeting. Solicitation of proxies will be
primarily by mail. We will bear the cost of soliciting proxies from
beneficial owners of our shares. In addition to solicitation by
mail, our directors, officers, employees, and agents may solicit
proxies by telephone, internet, or otherwise. These directors,
officers, and employees will not be additionally compensated for
the solicitation but may be reimbursed for out-of-pocket expenses
incurred in connection with the solicitation. Copies of
solicitation materials will be furnished to brokerage firms,
fiduciaries, and other custodians who hold our shares of record for
beneficial owners for forwarding to such beneficial owners. We may
also reimburse persons representing beneficial owners of our shares
for their reasonable expenses incurred in forwarding such
materials.
Other Business
We know of no other business that will be presented at the annual
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 of directors currently consists of five directors who
have been nominated for re-election at the annual meeting to serve
for a term of one year or until his or her successor is duly
elected and qualified. The 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 five director nominees listed
below. This means that the five 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 the name of each nominee, the year
in which each nominee first became a director of ARC and the
nominee’s age as of March 2, 2022. Each of the nominees has
served continuously on the board since first becoming a director of
ARC.
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Director |
Year Elected |
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Kumarakulasingam Suriyakumar |
1998(1)
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68 |
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Bradford L. Brooks |
2018 |
54 |
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Cheryl Cook |
2018 |
58 |
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Tracey Luttrell |
2020 |
53 |
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Mark W. Mealy |
2005 |
64 |
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(1)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.
The following is a brief description of the principal occupation
and business experience of each of our directors and nominees
standing for election, 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.
Bradford L. Brooks
has served as CEO of Censys, Inc., a leading provider of continuous
attack surface management, since January 2022. Previously, Mr.
Brooks served as President and CEO of OneLogin, a global leader in
cloud-based identity and access management as a service, from
August 2017 to October 2021. From January 2015 to June 2017, Mr.
Brooks was CMO as well as the executive leader of product
management and engineering for DocuSign. Mr. Brooks held senior
executive level positions at Juniper Networks and Microsoft prior
to DocuSign. The board believes that Mr. Brooks’
extensive experience across multiple technology sectors, and his
extensive executive leadership experience in enterprise-level
technology product management, and in sales and marketing have
provided him with a deep understanding of business matters. His
business understanding, coupled with his broad operational
expertise, 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 in light of his
understanding of accounting and financial reporting, make his
service on the board valuable to ARC. Mr. Brooks has a Bachelor of
Science in Economics from California State University, Chico, and a
Masters of International Management from Thunderbird School of
Global Management, Arizona State University.
Cheryl Cook
is currently a Senior Vice President at Dell EMC, and is
responsible for spearheading development and strategy for Dell’s
Global Partner Marketing Organization and driving long-term partner
marketing strategy. She joined Dell in 2011 from Nuance
Communications, where she served as a Senior Vice President from
February 2010 to February 2011, managing sales across all lines of
business. Previously Ms. Cook was a Senior Vice President at Sun
Microsystems. Ms. Cook’s business understanding, coupled with her
broad sales and marketing expertise in technology fields and her
independent director status, make her service on the board valuable
to ARC. Ms. Cook has a Bachelor of Science in Computer Science from
the University of Florida.
Tracey Luttrell
joined ARC as its Corporate Counsel and Corporate Secretary in
August 2018, a role that she previously held from 2008 to 2012.
Prior to her role with the Company, Ms. Luttrell practiced
corporate law with several law firms, including Wilson Sonsini
Goodrich & Rosati, a preeminent Silicon Valley law firm, and
she held a business development role with RGP, a global consulting
firm. She has extensive experience working as counsel to public and
private companies in a variety of industry sectors, and holds her
law and undergraduate degrees from McGill University in Montreal,
Canada. Ms. Luttrell’s experience as an attorney with strong
experience with companies in different industry sectors, combined
with her knowledge and understanding of the Company gained from
years working as its Corporate Counsel and Corporate Secretary,
make her service on the board valuable to ARC.
Mark W. 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 service on the board valuable to
ARC. Mr. Mealy has a Bachelor of Arts degree from the Woodrow
Wilson School of Public and International Affairs at Princeton
University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR”
THE ELECTION OF EACH OF THE FIVE DIRECTOR NOMINEES LISTED
ABOVE
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Appointment of Auditors
Armanino has been our independent registered public accounting firm
and has audited our financial statements since 2020. Stockholders
are asked to ratify the appointment of Armanino at the annual
meeting. Representatives of Armanino will attend the annual
meeting, will have an opportunity to make a statement if they
desire and will be available to respond to questions, as
appropriate.
Auditor Fees
A summary of the services provided by Armanino, our independent
registered public accounting firm for the fiscal years ended
December 31, 2021 and December 31, 2020, and fees billed
for such services (in thousands), is as follows:
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2021
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2020
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Audit fees
(1)
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$ |
605 |
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$ |
490 |
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Audit related fees |
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— |
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— |
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Tax fees |
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— |
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— |
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All other fees |
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$ |
— |
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$ |
— |
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Total |
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$ |
605 |
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$ |
490 |
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_______________
(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,
2021 and 2020, respectively, and reviews of our condensed
consolidated financial statements in our quarterly reports during
the fiscal years ended December 31, 2021 and 2020,
respectively. Out-of-pocket expenses of $27,352 and $20,334 for the
fiscal years ended December 31, 2021 and 2020, respectively,
are not included in the amounts shown above.
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 in 2021 and 2020 by Armanino, the
Company’s independent registered public accounting firm for fiscal
years 2021 and 2020, 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
adviser 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 2022 pursuant to
the terms of the Audit Committee Charter. Although ratification of
our selection of Armanino is not required by our bylaws, NYSE
listing standards or otherwise, we are asking our stockholders to
do so as a matter of sound corporate governance. The board
appreciates the input from our stockholders on the selection of our
independent accounting firm. If the selection of Armanino is not
ratified, the Audit Committee will consider whether it is
appropriate to select another independent registered public
accounting firm. Even if the selection is ratified, the Audit
Committee in its discretion may select a different independent
registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of the
Company and our stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
THE
RATIFICATION OF ARMANINO AS ARC’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR
2022
PROPOSAL 3
ADVISORY, NON-BINDING VOTE ON EXECUTIVE COMPENSATION
We received a majority vote for our executive compensation program
at our 2021 annual meeting, with 89% of our stockholders who voted
at the meeting approving our compensation practices.
In 2018, the SEC amended the definition of “smaller reporting
company” (“SRC”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), to allow more companies to take
advantage of scaled disclosures (including disclosures regarding
executive compensation). ARC is an SRC under the amended definition
and, as such, we are taking advantage of the reduced disclosure
requirements regarding executive compensation, including the
omission of the “Compensation Discussion and Analysis” section, as
set forth under the Executive Compensation section, beginning on
page 22 of this proxy statement.
It should be noted, however, that our compensation program for 2021
was based on pre-determined criteria and performance expectations
similar to the program that was in place for 2020.
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 U.S. Securities and Exchange Commission, including in the
compensation tables and the related narrative discussion contained
in the Company’s 2022 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 2021 following ARC’s annual
meeting, will consider the outcome of the vote when making future
compensation decisions for the Company’s executive officers named
in the Summary Compensation Table in the "Executive Compensation"
section below (“NEOs”).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR”
THE APPROVAL OF THE COMPENSATION OF OUR EXECUTIVE
OFFICERS
DISCLOSED IN THE 2022 PROXY STATEMENT
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,
by 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 12657 Alcosta Blvd., Suite 200, San
Ramon, CA 94583, 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 Exchange Act. A copy of our Code of Conduct can be accessed on
our investor relations website,
ir.e-arc.com,
by 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, and all relevant facts and circumstances,
including:
•The
nature of any relationships with the Company;
•The
significance of the relationship with 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; and
•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 and director nominees are
independent, except for Mr. Suriyakumar, a current director,
Chairman of the Board and our President and Chief Executive
Officer, and Ms. Luttrell, a current director and our Corporate
Counsel and Corporate Secretary. The Board has also determined that
each current member of the Audit Committee satisfies the additional
SEC independence requirements applicable to audit committee
members, and that each current member of the Compensation Committee
satisfies the enhanced independence requirements of the NYSE
listing standards.
Director Nomination Process
The Nominating and Corporate Governance Committee is responsible
under its charter for recommending to the full board of directors
the director nominees for election by our stockholders and for
identifying and recommending candidates to fill any vacancies that
may occur on the board. The Nominating and Corporate Governance
Committee may use a variety of sources to identify candidates,
including recommendations from independent directors or members of
management, search firms, communications with other persons who may
know of suitable candidates to serve on the board and stockholder
recommendations.
Evaluations of director candidates who would be new to the board
(other than nominees recommended by our stockholders, as described
below) include evaluations of the candidate’s background and
qualifications by the Nominating and Corporate Governance Committee
and deliberations of the Nominating and Corporate Governance
Committee and the full board. The Nominating and Corporate
Governance Committee then recommends the candidate to the full
board, with the full board selecting the candidate to be nominated
for election by our stockholders or to be elected by the board to
fill a vacancy.
In connection with its recommendations to the board of nominees for
election at each annual meeting, the Nominating and Corporate
Governance Committee considers the size of the board and the
criteria set forth below to recommend nominees
who, individually and as a group and collectively with directors
who are already serving on the board, the Committee believes
comprise the skills, experiences and qualifications the board needs
to exercise its oversight function.
Director Qualifications
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 experience, including leadership experience from
various industry sectors, 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. We have long embraced inclusion,
diversity and equity in our workforce from the top down. Our
Chairman and Chief Executive Officer, our Chief Operating Officer
and our Chief Technology Officer are Southeast Asian, our Chief
Financial Officer is Hispanic, and our Corporate Counsel and
Corporate Secretary is a woman. Similar racial and gender diversity
is represented across our workforce. In keeping with this strategy,
the primary goal of board composition is to achieve a diverse and
complementary set of backgrounds 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
actively seeks candidates that offer diverse points of view about
our business. It carefully considers the nominees’ differences in
background, experience, gender, and race, education, and overall
skill set in order to ensure complementary perspectives and areas
of expertise. This approach has provided a current board comprised
of both male and female directors with diverse professional
experiences, including individuals from the construction industry,
cloud-based technology businesses and financial and services
sectors. The diverse backgrounds and experiences of our current and
nominated 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 three independent directors and
two employee directors. Mr. Suriyakumar has served as our President
and Chief Executive Officer since 2007 and as the chairman of our
board of directors since 2008. Ms. Luttrell has served as our
Corporate Counsel and Corporate Secretary for several years. 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. We believe that this structure
eliminates the potential for confusion, promotes efficiency and
provides clear leadership, which is appropriate for our company
which has widespread domestic and international
operations.
Our board has designated Mr. Brooks, 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. The Board oversees the Company’s processes
to manage risk and the Company’s cybersecurity program. Management
is responsible for the development, implementation and maintenance
of the risk management processes and cybersecurity program. The
Board consults with the Company’s Chief Technology Officer
regarding ongoing cybersecurity initiatives, and requests such
individual, together with senior management, to report to the full
board regularly on their assessment of operational, financial and
accounting, competitive, reputational, cybersecurity and legal
risks to the Company.
Stock Ownership Guidelines
ARC’s Nominating and Corporate Governance Committee maintains
minimum stock ownership requirements for the board’s independent
directors and all NEOs, which include a five-year window in which
such ownership requirements should be met. The ownership threshold
for the board’s independent directors is three times their annual
cash retainer. The ownership threshold for our CEO is five times
his base salary and the threshold for our other NEOs is two times
their respective base salaries. Stock ownership for the purpose of
the Stock Ownership 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 Exchange Act 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.
Anti-Hedging
Policy
Our insider trading policy prohibits directors, executive officers
and certain other designated employees from engaging in speculative
transactions in the Company’s securities, such as trades in puts,
calls and short sales and the purchase of securities on
margin.
Director Attendance at Board and Committee Meetings
In 2021, no board member attended or participated in less than 75%
of the aggregate of (i) the total number of board meetings (held
during the period that such person served as a director) and (ii)
the total number of meetings held by all board committees on which
such person served (held during the period that such person served
as a committee member). Our Corporate Governance Guidelines provide
that it is the responsibility of individual directors to make
themselves available to attend Board meetings on a consistent
basis.
Board Meetings
Our board of directors held six meetings in 2021. In addition to
the six board of directors meetings, all of our directors attended
the 2021 annual meeting of stockholders.
Board Committees
Our board has the following committees: Audit Committee;
Compensation Committee; and Nominating and Corporate Governance
Committee. Committee memberships are currently as
follows:
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Nominating and Corporate Governance |
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Audit Committee |
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Compensation Committee |
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Committee |
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Mark W. Mealy |
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Bradford L. Brooks |
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Cheryl Cook |
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(Chairperson) |
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(Chairperson) |
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(Chairperson) |
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Bradford L. Brooks |
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Cheryl Cook |
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Bradford L. Brooks |
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Cheryl Cook |
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Mark W. Mealy |
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Mark W. Mealy |
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Each of our committees is governed by a charter. The charters for
our board 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 12657 Alcosta Blvd., Suite 200, San Ramon, CA
94583, Attention: David Stickney, Vice President Corporate
Communications. The information on our investor relations website
is not a part of this proxy statement.
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 than
quarterly.
Our board of directors has determined that all of the members of
the Audit Committee meet 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 a majority of the 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 2021.
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 Compensation Committee held three meetings in
2021.
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 or to
fill any vacancies that may occur on the board, developing and
recommending to the board a set of corporate governance principles,
and overseeing the evaluation of the board.
The Nominating and Corporate Governance Committee held three
meetings in 2021.
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
2022 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 in the section of this proxy
statement entitled “Stockholder Proposals for the 2023 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 applicable 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., 12657 Alcosta Blvd., Suite 200, San
Ramon, CA 94583. 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 $65,000 to each of our non-employee
directors, payable quarterly. In addition, non-employee directors
receive $5,000 cash per year for duties as chairperson of any board
committee.
Equity Compensation
In addition to cash fees, we grant each non-employee director a
restricted stock award under our current stock incentive plan for
that number of shares of our common stock having an aggregate grant
date value equal to $60,000, based on the closing price of our
common stock on the NYSE on the date of grant. These restricted
stock awards are intended to compensate non-employee directors for
their service over the coming year. Each restricted stock award
granted to our non-employee directors during each fiscal year vests
100% on the one-year anniversary of the grant date.
Reimbursements
We reimburse our employee and non-employee directors for reasonable
travel expenses relating to attendance at board meetings and
participation in director continuing education.
The following table summarizes compensation earned by our
non-employee directors during fiscal year 2021. Mr. Suriyakumar,
Chairman of the Board and our President and Chief Executive
Officer, does not receive compensation for serving on our board of
directors. Similarly, Ms. Luttrell, our Corporate Counsel and
Corporate Secretary, does not receive compensation for her service
on our board.
Director Compensation
For Fiscal Year Ended December 31, 2021
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Fees Earned or
Paid in Cash(1)
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Stock
Awards(2)(3)
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Option Awards |
Non-Equity Incentive Plan Compensation |
All Other Compensation |
Total(4)
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Director |
($) |
($) |
($) |
($) |
($) |
($) |
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Bradford L. Brooks
(5)
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$66,250(6)
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60,000
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— |
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— |
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— |
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$126,250
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Cheryl Cook |
$61,250
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60,000
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— |
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— |
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— |
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$121,250
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Dewitt Kerry McCluggage
(7)
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$66,250(8)
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60,000
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— |
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— |
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— |
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$126,250
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Mark W. Mealy |
$66,250(9)
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60,000
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— |
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— |
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— |
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$126,250
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_______________
(1)Reflects
an increase in annual cash fee payable to our non-employee
directors effective as of the second quarter of 2021.
(2)Reflects
individual awards of 28,301 restricted shares of our common stock
granted under our 2021 Incentive Plan to each non-employee
director, which were outstanding as of December 31, 2021. One
hundred percent of the shares subject to restricted stock awards
granted in 2021 vest on the one-year anniversary of the grant
date.
(3)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,
2021.
(4)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.
(5)As
of December 31, 2021, an option to acquire 20,350 shares of our
common stock was outstanding.
(6)Includes
cash compensation of $5,000 for serving as Chairperson of the
Compensation Committee for 2021.
(7)Mr.
McCluggage retired from ARC's board of directors effective December
23, 2021.
(8)Includes
cash compensation of $5,000 for serving as Chairperson of the
Nominating and Corporate Governance Committee for
2021.
(9)Includes
cash compensation of $5,000 for serving as Chairperson of the Audit
Committee for 2021.
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 March 2,
2022 are listed below:
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Executive
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Age
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Position
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Kumarakulasingam Suriyakumar |
68
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Chairman, President and Chief Executive Officer |
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Dilantha Wijesuriya |
60
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Chief Operating Officer |
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Rahul K. Roy |
62
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Chief Technology Officer |
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Jorge Avalos |
46
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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, our predecessor company, 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 Corporation, a provider of printing, software,
duplication, packaging, assembly and distribution services to
technology companies, from 1993 until it was acquired by the
Company in 1998.
Jorge Avalos
was appointed Chief Financial Officer effective February 2015. From
2011 until his appointment as CFO, Mr. Avalos was Chief Accounting
Officer and Vice President Finance of the Company. 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 then 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, 2021. 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 of 1933, as amended (the “Securities Act”) or the
Exchange Act except to the extent that the Company specifically
incorporates such information by reference in such
filing.
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 Audit 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, 2021. The
Audit Committee has also discussed with the independent auditors
matters required to be discussed by standards of the Public Company
Accounting Oversight Board (“PCAOB”) and the SEC.
The Audit 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 Audit Committee concerning independence,
and the Audit 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, 2021, for filing with the
SEC.
|
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Mark W. Mealy, Chairperson
|
|
|
Bradford L. Brooks |
|
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Cheryl Cook
|
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth information, as of March 2,
2022, 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 and each of our executive officers named in the
Summary Compensation Table; and
•all
directors, nominees and executive officers as a group.
The table includes all shares of common stock issuable within 60
days of March 2, 2022, 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 43,205,623 shares of common stock
outstanding as of March 2, 2022. Shares of common stock
issuable upon exercise of options and other rights beneficially
owned, to the extent exercisable or that may otherwise vest within
sixty days of March 2, 2022, were deemed outstanding for the
purpose of computing the percentage ownership of the person holding
these options and other rights, but were not deemed outstanding for
the purpose of 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.
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Shares Beneficially
Owned
|
|
Name and Address* of Beneficial Owner |
|
Title of Class |
|
|
Number |
|
Percent |
|
More than 5% Stockholders:
|
|
|
|
|
|
|
|
|
Renaissance Technologies LLC(1)
800 Third Avenue
New York, NY 10022
|
|
Common stock |
|
|
3,529,455
|
|
|
8.17
|
% |
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
Kumarakulasingam Suriyakumar(2)(3)(4)
|
|
Common stock |
|
|
4,768,436
|
|
|
11.04
|
% |
|
Bradford L. Brooks(5)(6)
|
|
Common stock |
|
|
130,590
|
|
|
** |
|
Cheryl Cook(5)
|
|
Common stock |
|
|
102,160
|
|
|
** |
|
Tracey Luttrell(7)
|
|
Common stock |
|
|
49,012
|
|
|
** |
|
Mark W. Mealy(5)
|
|
Common stock |
|
|
319,946
|
|
|
** |
|
Rahul K. Roy(8)
|
|
Common stock |
|
|
891,154
|
|
|
2.06
|
% |
|
Dilantha Wijesuriya(9)
|
|
Common stock |
|
|
1,715,258
|
|
|
3.97
|
% |
|
Jorge Avalos(10)
|
|
Common stock |
|
|
561,656
|
|
|
1.30
|
%
|
|
All directors and executive officers as a group (eight
persons)
|
|
Common stock |
|
|
8,538,212
|
|
|
19.76
|
% |
|
|
|
|
|
|
|
* |
Except as otherwise noted, the address of each person listed in the
table is c/o ARC Document Solutions, Inc., 12657 Alcosta Blvd.,
Suite 200, San Ramon, CA 94583. |
|
** |
Less than one percent of the outstanding shares of common
stock. |
_______________
(1)This
information is derived from a Schedule 13G filed by Renaissance
Technologies LLC (“Renaissance”) on February 11, 2022. Renaissance
has sole voting power over 3,029,091 shares, shared voting power
over zero shares, sole dispositive power over 3,529,455 shares and
shared dispositive power over zero shares.
(2)Includes
250,000 shares of unvested restricted stock and 400,000 shares
issuable upon exercise of outstanding stock options exercisable
within 60 days of March 2, 2022.
(3)Includes
1,772,664 shares held by the Suriyakumar Family Trust. Mr.
Suriyakumar and his spouse, as trustees of the Suriyakumar Family
Trust, share voting and investment power over these
shares.
(4)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.
(5)Includes
28,301 shares of unvested restricted stock.
(6)Includes
13,566 shares issuable upon exercise of an outstanding stock option
within 60 days of March 2, 2022.
(7)Includes
35,833 shares issuable upon exercise of outstanding stock options
within 60 days of March 2, 2022.
(8)Includes
235,000 shares of unvested restricted stock and 484,000 shares
issuable upon exercise of outstanding stock options exercisable
within 60 days of March 2, 2022.
(9)Includes
235,000 shares of unvested restricted stock, 959,898 shares
issuable upon exercise of outstanding stock options exercisable
within 60 days of March 2, 2021, 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.
(10)Includes
235,000 shares of unvested restricted stock and 103,000 shares
issuable upon exercise of outstanding stock options exercisable
within 60 days of March 2, 2022.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31,
2021 regarding all equity compensation plans previously approved by
our security holders and all equity compensation plans not
previously approved by our security holders.
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(a) |
|
(b) |
|
(c) |
|
Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding
Options, Warrants and Rights |
|
Weighted-Average Exercise Price of Outstanding Options, Warrants
and Rights |
|
Number of Securities Remaining Available for Future Issuance Under
Equity Compensation Plans (Excluding Securities Reflected in Column
(a)) |
|
Equity compensation plans approved by stockholders |
|
|
|
|
|
|
● 2005 Stock Plan
|
1,726,783(1)
|
|
$3.56
|
|
— |
|
● 2005 Employee Stock Purchase Plan
|
— |
|
— |
|
351,588
|
|
● 2014 Stock Incentive Plan(2)
|
3,635,645(3)
|
|
$3.60
|
|
— |
|
● 2021 Incentive Plan
|
100,000(4)
|
|
$2.07 |
|
2,643,541(5)
|
|
Equity compensation plans not approved by stockholders |
— |
|
— |
|
— |
|
Total
|
5,462,428
|
|
|
|
2,995,129
|
_______________
(1)Represents
outstanding options to acquire shares of common stock granted under
our 2005 Stock Plan.
(2)Includes
shares from the Company’s 2005 Stock Plan subject to issuance under
the 2014 Stock Incentive Plan, as amended (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)Represents
outstanding options to acquire shares of common stock granted under
our 2021 Plan.
(5)As
of December 31, 2021, 2,643,541 shares were available for issuance
under the 2021 Incentive Plan ("2021 Plan"), and as of March 4,
2022, after certain grants were awarded in the first quarter of
2022, 1,247,541 shares were available for issuance under the 2021
Plan.
EXECUTIVE COMPENSATION
Our Compensation Committee has designed and implemented a program
for our executives that provides a market competitive,
performance-based compensation structure consisting of base salary,
annual non-equity incentive plans based on pre-established metrics
and simple formulas, as well as long-term equity awards. In 2021,
ARC received a 89% favorable advisory, non-binding vote by
stockholders regarding executive compensation, commonly known as
“say on pay.”
The Compensation Committee annually reviews a market analysis of
executive compensation plans of peer companies in similar
industries and with similar financial metrics, such as revenue and
market capitalization. The methodology of the analysis is
periodically reviewed by a third-party compensation consultant to
ensure its integrity. In February 2022, after its review of the
peer-company market analysis and public-company peers, the
Compensation Committee determined the plan-based total compensation
of our CEO and our other NEOs relative to the median of its peer
group as follows:
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Executive or Group |
|
Peer Group Median Compensation*
|
ARC Compensation Defined by Contract*
|
Percentage of Peer Group Median |
|
All NEOs |
|
$6,120,678
|
$5,587,485
|
91%
|
|
CEO |
$1,757,908
|
$1,816,500
|
103%
|
In consideration of the effects of the continuing COVID-19 pandemic
on the Company and its employees in 2021, each NEO volunteered to
continue receiving a reduced salary, as each of them did in 2020.
As the Company’s performance improved throughout 2021, the base
salary reductions for each of the NEOs were decreased
incrementally. By December 31, 2021, our CEO’s salary remained
reduced by 30%, and each of the other NEOs remained reduced by
10%.
Adjusting the Company’s peer group compensation analysis to reflect
the reduced cash base salaries paid in 2021, total compensation of
our CEO and our other NEOs relative to the median of its peer group
was as follows:
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|
Executive or Group |
|
Peer Group Median Compensation*
|
ARC Compensation Actually Paid in 2020*
|
Percentage of Peer Group Median |
|
All NEOs |
|
$6,120,678
|
$5,294,389
|
87%
|
|
CEO |
$1,757,908
|
$ 1,607,269
|
91%
|
* For purposes of comparative analysis, compensation figures for
peer group and ARC NEOs include a three-year average of
equity-based incentives.
The 2021 pre-determined, quantitative targets for non-equity
incentive compensation (annual cash bonuses) for Messrs.
Suriyakumar, Wijesuriya and Avalos are based on the Company’s
revenue, earnings per share, and cash flow from operations, the
latter of which is most heavily weighted. Mr. Roy’s pre-determined,
quantitative targets for non-equity incentive compensation are
based on revenue and earnings per share, and a third target based
on the achievement of certain technology-based objectives, the
latter of which is most heavily weighted. Certain thresholds were
required to be met for each quantitative target before any NEO was
deemed to be eligible to receive an award for said target. At no
point during 2021 or subsequent to December 31, 2021 were the
pre-determined quantitative targets for 2021 for any of our NEOs
changed or reset.
In February 2022, the Compensation Committee determined that
Messrs. Suriyakumar, Wijesuriya and Avalos were eligible to receive
a portion of their annual bonuses based on the achievement of their
pre-determined 2021 revenue and adjusted earnings per share
thresholds, and Mr. Roy was eligible to receive a portion of his
annual bonus based on the achievement of his pre-determined
revenue, adjusted earnings per share threshold and his
technology-based objectives. Bonus thresholds for cash flow from
operations were not met and thus were not awarded to any of our
NEOs. Further, an additional threshold for new business growth was
not met and reduced the bonus amounts otherwise payable by 10
percent. These bonus awards continue to demonstrate the Company’s
pay-for-performance philosophy.
The Compensation Committee also felt that the Company’s execution
of its strategic goals and the accelerated recovery of its
financial performance in 2021 was worthy of further recognition and
reward. Of note were the Company’s earnings per share (EPS), which
increased by more than 45% year-over-year in 2021, and was higher
than its pre-pandemic performance in 2018 and 2019; and also, its
leverage ratio, net of cash, was at an all-time low at the end of
2021. In consideration of these facts and other significant sales
and operational achievements in 2021, the Compensation Committee
determined that discretionary bonus payments were appropriate for
Messrs. Suriyakumar, Wijesuriya and Avalos, in addition to their
plan-based non-equity incentive
compensation. The discretionary bonus amount paid to Mr.
Suriyakumar was $250,000. Mr. Wijesuriya and Mr. Avalos were each
paid a discretionary bonus amount of $150,000.
Consistent with the SEC’s recent amendments to the SRC definition,
as defined under applicable SEC rules, ARC is taking advantage of
its ability to condense disclosures in our SEC filings, including
reduced executive compensation disclosures as set forth
below.
2021 Summary Compensation Table
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|
|
Name and |
|
Salary |
Bonus(2)
|
Stock Awards |
Option Awards(3)
|
Non-Equity Incentive Plan Compensation |
|
All Other Compensation
(4)
|
Total |
|
Principal Position
(1)
|
Year |
($) |
($) |
($) |
($) |
($) |
|
($) |
($) |
|
Kumarakulasingam |
|
|
|
|
|
|
|
|
|
|
Suriyakumar |
2021 |
$800,000(5)
|
$250,000 |
$517,500(6)
|
— |
|
$468,000(15)
|
|
$25,279 |
|
$2,060,779(18)
|
|
President & Chief |
2020 |
$800,000(5)
|
— |
|
— |
|
— |
|
$594,000(16)
|
|
$24,540 |
|
$1,418,540(19)
|
|
Executive Officer |
2019 |
$800,000 |
|
— |
|
$378,000(7)
|
— |
|
$540,000(17)
|
|
$23,996 |
|
$1,741,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Jorge Avalos |
2021 |
$420,000(5)
|
$150,000 |
$414,000(8)
|
— |
|
$196,560(15)
|
|
$39,001 |
|
$1,219,561(18)
|
|
Chief Financial |
2020 |
$414,110(5)
|
— |
|
$126,000(9)
|
— |
|
$249,480(16)
|
|
$37,867 |
|
$827,457(19)
|
|
Officer |
2019 |
$360,308 |
|
— |
|
$242,000(10)
|
— |
|
$199,800(17)
|
|
$34,409 |
|
$836,517 |
|
|
|
|
|
|
|
|
|
|
|
|
Rahul K. Roy |
2021 |
$675,000(5)
|
— |
|
$414,000(8)
|
$128,575(11)
|
$528,525(15)
|
|
$34,837 |
|
$1,780,937(18)
|
|
Chief Technology |
2020 |
$675,000(5)
|
— |
|
$126,000(9)
|
— |
|
$279,450(16)
|
|
$33,421 |
|
$1,113,871(19)
|
|
Officer |
2019 |
$675,000 |
|
— |
|
$242,000(10)
|
— |
|
$243,000(17)
|
|
$31,168 |
|
$1,191,168 |
|
|
|
|
|
|
|
|
|
|
|
|
Dilantha Wijesuriya |
2021 |
$470,000(5)
|
$150,000 |
$414,000(8)
|
$100,000(12)
|
$274,950(15)
|
|
$39,001 |
|
$1,447,951(18)
|
|
Chief Operating Officer |
2020 |
$470,000(5)
|
— |
|
$126,000(9)
|
$100,000(13)
|
$348,975(16)
|
|
$37,867 |
|
$1,082,842(19)
|
|
|
2019 |
$453,846 |
|
— |
|
$242,000(10)
|
$100,000(14)
|
$317,250(17)
|
|
$35,003 |
|
$1,148,099 |
|
_______________
(1)In
addition to our principal executive officer and our principal
financial officer, our other NEOs (as defined in Rule 3b-7 of the
Exchange Act) in 2021 were our Chief Technology Officer, Mr. Roy,
and our Chief Operating Officer, Mr. Wijesuriya.
(2)In
addition to plan-based non-equity incentive compensation,
discretionary bonuses were awarded to Messrs. Suriyakumar,
Wijesuriya and Avalos due to the Company's execution of its
strategic goals and the accelerated recovery of its financial
performance in 2021 as further described above.
(3)The
amounts shown in this column reflect the fair value at the time of
grant by the Company to the NEO in accordance with FASB ASC 718.
For a discussion of the assumptions used in these calculations, see
Note 2 of the Notes to Consolidated Financial Statements included
in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021.
(4)The
amounts in this column are set forth in the table
below:
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|
|
|
Health,
Life and
Disability
Insurance
Premiums
|
401(k)
Company
Match
|
Total |
|
Executive |
Year |
($) |
($) |
($) |
|
Kumarakulasingam Suriyakumar |
2021
|
$25,279
|
— |
$25,279
|
|
|
2020 |
$24,540 |
— |
$24,540 |
|
|
2019 |
$23,996 |
— |
$23,996 |
|
Jorge Avalos |
2021
|
$36,681
|
$2,320
|
$39,001
|
|
2020 |
$35,587 |
$2,280 |
$37,867 |
|
2019 |
$32,169 |
$2,240 |
$34,409 |
|
Rahul K. Roy |
2021
|
$34,442
|
$395
|
$34,837
|
|
|
2020 |
$33,421 |
— |
$33,421 |
|
|
2019 |
$31,168 |
— |
$31,168 |
|
Dilantha Wijesuriya |
2021
|
$36,681
|
$2,320
|
$39,001
|
|
2020 |
$35,587 |
$2,280 |
$37,867 |
|
|
2019 |
$32,763 |
$2,240 |
$35,003 |
(5)
Reflects base salary amount pursuant to the terms of the NEO's
employment contract. In consideration of the effects of the
COVID-19 pandemic on the Company and its employees, each NEO
volunteered to reduce his respective cash base salary. Actual
reduced base salary amounts in 2021 were as follows: Mr.
Suriyakumar ($590,769), Mr. Avalos ($380,423), Mr. Roy ($620,481)
and Mr. Wijesuriya ($425,712). Actual reduced base salary amounts
in 2020 were as follows: Mr. Suriyakumar ($570,000), Mr. Avalos
($337,212), Mr. Roy ($554,928) and Mr. Wijesuriya
($386,394).
(6)On
May 11, 2021, Mr. Suriyakumar was granted 250,000 restricted shares
of our common stock under our 2021 Plan.
(7)On
February 21, 2019, Mr. Suriyakumar was granted 150,000 restricted
shares of our common stock under our 2014 Plan.
(8)On
May 11, 2021, Messrs. Avalos, Roy and Wijesuriya were granted
200,000 restricted shares of our common stock under our 2021
Plan.
(9)On
February 10, 2021, each of Messrs. Avalos, Roy and Wijesuriya
agreed to voluntarily surrender 100,000 shares of restricted common
stock (“Award Shares”) granted to each of them on February 13, 2020
(the “Award Date”), after the Company subsequently determined that
there was an insufficient number of shares available for awards of
restricted shares and restricted stock units under the 2014 Plan to
validly issue the Award Shares on the Award Date.
(10)On
February 13, 2019, each of Messrs. Avalos, Roy and Wijesuriya were
granted 100,000 restricted shares of our common stock under our
2014 Plan.
(11)On
May 11, 2021, Mr. Roy was granted an option to acquire 100,000
shares of our common stock under our 2021 Plan.
(12)On
February 10, 2021, Mr. Wijesuriya was granted an option to acquire
90,118 shares of our common stock under our 2014 Plan.
(13)On
February 13, 2020, Mr. Wijesuriya was granted an option to acquire
207,528 shares of our common stock under our 2014
Plan.
(14)On
February 13, 2019, Mr. Wijesuriya was granted an option to acquire
75,551 shares of our common stock under our 2014 Plan.
(15)Payment
of bonus based on his performance against his pre-determined
quantitative performance objectives and also, in the case of Mr.
Roy, his pre-determined individual performance objectives in
2021.
(16)Payment
of bonus based on his performance against his pre-determined
quantitative performance objectives and also, in the case of Mr.
Roy, his pre-determined individual performance objectives in
2020.
(17)Payment
of bonus based on his performance against his pre-determined
quantitative performance objectives and also, in the case of Mr.
Roy, his predetermined individual performance objectives in
2019.
(18)Taking
into account voluntary cash base salary reductions (as described in
footnote five), actual total compensation paid to each NEO in 2021
was as follows: Mr. Suriyakumar ($1,851,548), Mr. Avalos
($1,179,984), Mr. Roy ($1,726,418) and Mr. Wijesuriya
($1,403,663).
(19)Taking
into account voluntary cash base salary reductions and voluntary
surrender of restricted stock grants (as described in footnotes
five and nine respectively), actual total compensation paid to each
NEO in 2020 was as follows: Mr. Suriyakumar ($1,188,540), Mr.
Avalos ($624,559). Mr. Roy ($867,799) and Mr. Wijesuriya
($873,236).
Outstanding Equity Awards at Fiscal 2021 Year-End
The following table provides information as of December 31,
2021 regarding outstanding equity awards held by the NEOs listed in
the Summary Compensation Table.
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|
|
|
|
|
|
|
|
Option Awards |
Stock Awards |
|
Executive |
Number of Securities Underlying Unexercised Options
(#) Exercisable
|
Number of Securities Underlying Unexercised Options
(#) Unexercisable
|
Equity Incentive Plan Awards; Number of Securities Underlying
Unexercised Unearned Options
(#)
|
Option Exercise Price
($)
|
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)
|
|
|
Kumarakulasingam |
|
|
|
|
|
|
|
|
|
Suriyakumar |
100,000 |
|
— |
|
— |
|
$5.37 |
|
5/23/2022 |
50,000(2)
|
$175,000 |
|
|
|
300,000 |
|
— |
|
— |
|
$2.70 |
|
3/8/2023 |
250,000(3)
|
$875,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Jorge Avalos |
20,000 |
|
— |
|
— |
|
$5.37 |
|
5/23/2022 |
33,334(4)
|
$116,669 |
|
|
35,000 |
|
— |
|
— |
|
$2.70 |
|
3/8/2023 |
200,000(5)
|
$700,000 |
|
|
15,000 |
|
— |
|
— |
|
$6.16 |
|
6/2/2024 |
— |
|
— |
|
|
33,000 |
|
— |
|
— |
|
$8.89 |
|
3/19/2025 |
— |
|
— |
|
|
Rahul K. Roy |
100,000 |
|
— |
|
— |
|
$5.37 |
|
5/23/2022 |
33,334(4)
|
$116,669 |
|
|
|
250,000 |
|
— |
|
— |
|
$2.70 |
|
3/8/2023 |
200,000(5)
|
$700,000 |
|
|
|
100,000 |
|
— |
|
— |
|
$6.16 |
|
6/2/2024 |
— |
|
— |
|
|
|
34,000 |
|
— |
|
— |
|
$8.89 |
|
3/19/2025 |
— |
|
— |
|
|
|
— |
|
100,000(6)
|
|
— |
|
$2.07
|
|
5/11/2031
|
— |
|
— |
|
|
Dilantha |
63,941 |
|
— |
|
— |
|
$5.62 |
|
4/26/2022 |
33,334(4)
|
$116,669 |
|
|
Wijesuriya
|
10,000 |
|
— |
|
— |
|
$5.37 |
|
5/23/2022 |
200,000(5)
|
$700,000 |
|
|
|
143,792 |
|
— |
|
— |
|
$2.37 |
|
2/21/2023 |
— |
|
— |
|
|
|
60,000 |
|
— |
|
— |
|
$2.70 |
|
3/8/2023 |
— |
|
— |
|
|
|
47,630 |
|
— |
|
— |
|
$7.19 |
|
2/13/2024 |
— |
|
— |
|
|
|
25,000 |
|
— |
|
— |
|
$6.16 |
|
6/2/2024 |
— |
|
— |
|
|
|
40,283 |
|
— |
|
— |
|
$9.09 |
|
2/11/2025 |
— |
|
— |
|
|
|
46,000 |
|
— |
|
— |
|
$8.89 |
|
3/19/2025 |
— |
|
— |
|
|
|
98,938 |
|
— |
|
— |
|
$3.65 |
|
2/18/2026 |
— |
|
— |
|
|
76,347
|
|
— |
— |
|
$4.75 |
|
2/15/2027 |
— |
|
— |
|
|
123,758
|
|
41,253(7)
|
— |
|
$2.21 |
|
2/22/2028 |
— |
|
— |
|
|
37,775
|
|
37,776(8)
|
— |
|
$2.42 |
|
2/13/2029 |
— |
|
— |
|
|
51,882
|
|
155,646(9)
|
— |
|
$1.26 |
|
2/13/2030 |
— |
|
— |
|
|
— |
|
90,118(10)
|
|
|
|
$2.25
|
|
2/10/2031
|
— |
|
— |
|
(1)The
market value of shares that have not vested is based on the closing
stock price as of December 31, 2021, which was $3.50.
(2)On
February 21, 2019, Mr. Suriyakumar was granted 150,000 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.
(3)On
May 11, 2021, Mr. Suriyakumar was granted 250,000 restricted shares
of our common stock under our 2021 Plan. The shares vest at a rate
of 33.3% on each of the first three anniversaries of the grant
date.
(4)On
February 13, 2019, each of Messrs. Avalos, Roy and Wijesuriya was
granted 100,000 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.
(5)
On May 11, 2021, each of Messrs. Avalos, Roy and Wijesuriya was
granted 200,000 restricted shares of our common stock under our
2021 Plan. The shares vest at a rate of 33.3% on each of the first
three anniversaries of the grant date.
(6)On
May 11, 2021, Mr. Roy was granted an option to acquire 100,000
shares that vests 25% on each of the first four anniversaries of
the grant date.
(7)On
February 22, 2018, Mr. Wijesuriya was granted an option to acquire
165,011 shares that vests 25% on each of the first four
anniversaries of the grant date.
(8)On
February 13, 2019, Mr. Wijesuriya was granted an option to acquire
75,551 shares that vests 25% on each of the first four
anniversaries of the grant date.
(9)On
February 13, 2020, Mr. Wijesuriya was granted an option to acquire
207,528 shares that vests 25% on each of the first four
anniversaries of the grant date.
(10)On
February 10, 2021, Mr. Wijesuriya was granted an option to acquire
90,118 shares that vests 25% on each of the first four
anniversaries of the grant date.
Potential Payments Upon Termination or Change of
Control
Our employment agreements with our NEOs require us to provide
compensation and other benefits to our NEOs if their employment
terminates or they resign under specified circumstances. The
following is a summary of the potential payments upon termination
of employment pursuant to the employment agreements with our NEOs
in effect as of December 31, 2021. The amounts specified below
assume that employment terminated on December 31, 2021, and
the calculations of the value of equity awards reflect the closing
price of our common stock on the NYSE on December 31,
2021.
The severance payments and benefits described below are only
payable if the NEO executes and delivers to us an agreement
releasing us and our related parties for all claims and liabilities
that the NEO may have against us and our related
parties.
Under each of our employment agreements with Messrs. Suriyakumar,
Avalos, Roy and Wijesuriya:
•“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. Avalos, Roy, and
Wijesuriya,.
•“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 is terminated without Cause or his employment
terminates for Good Reason, he is entitled to receive: (a) his 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, 2021, payment of all the foregoing in connection
with termination of Mr. Suriyakumar’s employment without Cause or
for Good Reason would have totaled approximately $3,118,000.
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 300,000 shares of unvested
restricted common stock outstanding as of December 31, 2021,
with an aggregate market value of approximately $1,050,000.
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, 2021.
Rahul K. Roy
If Mr. Roy is terminated without Cause or his employment terminates
for Good Reason, he is entitled to receive: (a) his 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, 2021, payment of all the foregoing in
connection with termination of Mr. Roy’s employment without Cause
or for Good Reason would have totaled approximately $2,197,636.
Accelerated vesting of Mr. Roy’s outstanding unvested stock options
would have resulted in vesting of 100,000 shares of common stock
subject to unvested options as of December 31, 2021, with a
fair market value of $143,000. Accelerated vesting of Mr. Roy’s
unvested restricted stock would have resulted in vesting of 233,334
shares of unvested restricted common stock outstanding as of
December 31, 2021, with an aggregate market value of
approximately $816,669. 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, 2021.
Dilantha Wijesuriya
If Mr. Wijesuriya is terminated without Cause or his employment
terminates for Good Reason, 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, 2021, 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 $2,153,609. Accelerated vesting of Mr. Wijesuriya’s
outstanding unvested stock options would have resulted in vesting
of 324,793 shares of common stock subject to unvested options as of
December 31, 2021, with a fair market value of $555,309.
Accelerated vesting of Mr. Wijesuriya’s unvested restricted stock
would have resulted in vesting of 233,334 shares of unvested
restricted common stock outstanding as of December 31, 2021,
with an aggregate market value of approximately $816,669. 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, 2021.
Jorge Avalos
If Mr. Avalos is terminated without Cause or his employment
terminates for Good Reason, 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, 2021, payment of all of the
foregoing in connection with termination of Mr. Avalos’ employment
without Cause or for Good Reason would have totaled approximately
$1,469,910. Accelerated vesting of Mr. Avalos’ outstanding unvested
stock options would not have resulted in any additional
compensation. Accelerated vesting of Mr. Avalos’ outstanding
unvested restricted stock would have resulted in full vesting of
233,334 shares of unvested restricted common stock as of
December 31, 2021, with an aggregate market value of
approximately $816,669. 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, 2021.
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, 2021,
and the Company’s policies and procedures applicable to such
transactions.
Policies and Procedures Regarding Related Transactions
Our written 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);
•an
executive officer;
•any
person who is known to be the beneficial owner of more than 5% of
any class of our securities; or
•any
immediate family member of any of the persons listed
above.
We review all 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
department 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, all transactions involving payments between ARC and any
company that has an ARC executive officer or director as an officer
or director are reviewed. 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 it is determined 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, 2021, we were a
party to real property leases with entities owned by our former
Chairman of the Board, Mr. Sathiyamurthy 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. Those
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 those entities rent in
the aggregate amount of $534,000 in 2021. 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 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 (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.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires directors and executive
officers of the Company to file with the SEC initial reports of
initial ownership and reports of changes in ownership of ARC’s
equity securities. Based solely on our review of copies of the
Section 16(a) reports furnished to us, we believe that the
Company’s directors and executive officers timely filed all reports
required under Section 16(a) during 2021, except that a Form 4 for
Mark W. Mealy was filed one day late on December 15, 2021 due to an
administrative oversight.
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 Tracey Luttrell, Corporate Secretary,
ARC Document Solutions, Inc., 12657 Alcosta Blvd., Suite 200, San
Ramon, CA 94583, 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 Tracey Luttrell, Corporate
Secretary, ARC Document Solutions, Inc., 12657 Alcosta Blvd., Suite
200, San Ramon, CA 94583, 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 2023 Annual Meeting
In order to present a proposal at our 2023 annual meeting of
stockholders, 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 90th day nor earlier than the 120th day before the
one-year anniversary of our 2022 annual meeting of stockholders, or
between December 29, 2022 and January 28, 2023. 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 2023 annual meeting of stockholders, a stockholder must
submit the proposal not later than November 25, 2022, and follow
the other procedures set forth in Rule 14a-8 of the Exchange Act.
If we hold our 2023 annual meeting of stockholders more than 30
days before or after April 28, 2023 (the one-year anniversary date
of the 2022 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 Tracey Luttrell, our Corporate
Secretary, at (925) 949-5100, or by sending a request by mail to
ARC Document Solutions, Inc., 12657 Alcosta Blvd., Suite 200, San
Ramon, CA 94583, Attention: Tracey Luttrell, Corporate
Secretary.
Additional Information
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. 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 website, our proxy statements, Annual Reports 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 relations website
ir.e-arc.com,
statements of beneficial ownership of our equity securities filed
by our directors, executive 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,
by selecting “Corporate Governance” from the navigation menu. Our
Code of Conduct applies to all directors, officers and employees,
including our Chief Executive Officer and our Chief Financial
Officer. 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 12657 Alcosta Blvd.,
Suite 200, San Ramon, CA 94583, 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 25, 2022
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Tracey Luttrell |
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Corporate Counsel and Corporate Secretary |
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