DEF 14A: Arq, Inc. Seeks Stockholder Approval for Director Elections, Executive Pay, Incentive Plan, and Tax Asset Protection Amendment

Arq, Inc. is holding its 2024 Annual Meeting of Stockholders to vote on key proposals including the election of directors, executive compensation, a new omnibus incentive plan, and an amendment to the company's tax asset protection plan.

Summary

• Arq, Inc. is soliciting proxies for its 2024 Annual Meeting of Stockholders to be held virtually on June 10, 2024.
• Stockholders will vote on the election of eight directors, advisory approval of executive compensation, ratification of the appointment of Moss Adams LLP as the independent registered public accounting firm, approval of the Arq, Inc. 2024 Omnibus Incentive Plan, and approval of the Seventh Amendment of the Company's Tax Asset Protection Plan.
• The Board recommends voting FOR all director nominees, the advisory approval of executive compensation, the ratification of Moss Adams LLP, the approval of the 2024 Omnibus Incentive Plan, and the approval of the Seventh Amendment to the Tax Asset Protection Plan.
• The record date for determining stockholders eligible to vote at the Annual Meeting is April 12, 2024.
• As of the record date, 33,474,983 shares of common stock were issued and outstanding.
• The company's proxy statement and annual report are available online at www.proxyvote.com.

Sentiment

Score: 7

Explanation: The document is primarily factual and procedural, outlining the proposals for the annual meeting. The tone is professional and optimistic about the company's future, but there are also some challenges and risks mentioned.

Positives

• The company is taking steps to protect its valuable tax assets through the Tax Asset Protection Plan.
• The proposed 2024 Omnibus Incentive Plan includes several best practices, such as a minimum one-year vesting requirement, no dividends on unvested awards, and no repricing of options or SARs.
• The company has a clawback policy in place for incentive-based compensation from executive officers.
• The Board is committed to good corporate governance, with independent directors comprising the audit, compensation, and nominating and governance committees.

Negatives

• The company's say-on-pay proposal in 2023 received approximately 68% of the votes cast in favor, which is lower than some companies.
• The company did not meet its performance metrics for the 2023 STIP, and did not award STIP payments to NEOs for 2023.
• The 2021 PSUs vested on March 10, 2024. The PSUs were subject to a three-year performance period ending December 31, 2023, which the TSR performance of the 2021 PSUs was below the threshold. This resulted in these awards being unearned and forfeited.

Risks

• The company's ability to use its tax assets is dependent on generating future taxable income.
• The IRS could challenge the amount of the company's tax assets.
• The Tax Asset Protection Plan may have an anti-takeover effect, potentially discouraging mergers or acquisitions.
• The company's stock ownership could change in the future, potentially triggering an ownership change even with the Tax Asset Protection Plan in place.

Future Outlook

The company aims to attract and retain qualified personnel, incentivize performance, and optimize profitability and growth through the proposed incentive plan and tax asset protection measures.

Management Comments

• Robert Rasmus, Chief Executive Officer, thanks stockholders for their continued support and interest in the Company.

Industry Context

The use of omnibus incentive plans and tax asset protection plans are common practices among publicly traded companies to align executive and shareholder interests and preserve valuable tax attributes.

Comparison to Industry Standards

• The proxy statement references a peer group of 13 companies from similar industries, including Commodity Chemicals, Environmental and Facility Services, Fertilizers and Agricultural Chemicals, Industrial Machinery, Oil and Gas Equipment and Services, Oil and Gas Refining and Marketing, and Specialty Chemicals, used for compensation benchmarking.
• The company's burn rate for equity plan is calculated as the number of shares subject to issuance under equity-based awards granted in a fiscal year, divided by the weighted average number of shares of Common Stock outstanding for that fiscal year.
• The company's average annual burn rate was 2.55%, and its average annual fully diluted burn rate was 2.55%.

Related Party Transactions

• In connection with the Arq Acquisition, Jeremy Blank, Richard Campbell-Breeden and Julian McIntyre were appointed as new directors to the Board.
• Messrs. Blank, Campbell-Breeden and McIntyre, either individually or through their affiliated entities were Subscribers in the PIPE Investment in the amount of $2.5 million, $0.2 million, and $4.8 million, respectively.
• CF Global is an affiliate of one of the Company's directors, Jeremy Blank, who is Chief Investment Officer of Community Fund.
• Mr. Blank is entitled to a portion of interest and fees related to the Term Loan given his ownership position in CF Global, which amount was in excess of $120,000 during the last completed fiscal year.
• Pursuant to the Subscription Agreement, Mr. Rasmus subscribed for and agreed to purchase 950,000 shares of our common stock, par value $0.001 per share, from the Company for an aggregate purchase price of $1.8 million (at a price per share of approximately $1.90).

Stakeholder Impact

• Approval of the proposals will impact shareholders through potential changes in the board of directors, executive compensation, and the company's ability to utilize its tax assets.
• Employees may be affected by the approval of the 2024 Omnibus Incentive Plan, which provides for equity-based awards.
• The Tax Asset Protection Plan aims to protect the company's financial stability, which could benefit all stakeholders.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold its Annual Meeting on June 10, 2024, to discuss and vote on the proposals.
• The Board will consider the outcome of the advisory vote on executive compensation when making future compensation decisions.

Key Dates

Keywords

proxy statement, annual meeting, directors, executive compensation, incentive plan, tax asset protection, stockholders, governance, voting, shares