<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EAGLE USA AIRFREIGHT, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[EAGLE USA AIRFREIGHT, INC. LOGO]
January 12, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Eagle USA Airfreight, Inc. (the "Company") to be held at 10:00 a.m. on Monday,
February 23, 1998 at The Hyatt Regency at George Bush Intercontinental Airport,
15747 John F. Kennedy Blvd., Houston, Texas 77032.
At the meeting, you will be asked to consider and vote upon (1) the
election of five directors; (2) a proposal to amend the Company's Restated
Articles of Incorporation to increase the Company's authorized common stock; (3)
a proposal to approve the Company's Long-Term Incentive Plan which will be
amended and restated to increase the shares of common stock reserved under the
plan; (4) a proposal to approve the Company's Employee Stock Purchase Plan; (5)
the approval of the appointment of the Company's independent public accountants;
and (6) such other business as may properly come before the meeting or any
adjournment thereof.
We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure representation at the meeting and the presence of a
quorum, please date, sign and promptly mail the enclosed proxy in the return
envelope provided.
A copy of the Company's 1997 Annual Report to Shareholders is also
enclosed.
Sincerely,
/s/ JAMES R. CRANE
James R. Crane
Chairman of the Board and President
<PAGE> 3
EAGLE USA AIRFREIGHT, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 1998
To The Shareholders of
Eagle USA Airfreight, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Eagle USA
Airfreight, Inc. (the "Company") will be held at The Hyatt Regency at George
Bush Intercontinental Airport, 15747 John F. Kennedy Blvd., Houston, Texas
77032, on Monday, February 23, 1998 at 10:00 a.m. for the following purposes:
(1) to elect five members to the Board of Directors for the ensuing year;
(2) to consider and act upon a proposal to approve an amendment to the
Company's Restated Articles of Incorporation to increase the Company's
authorized Common Stock to 100,000,000 shares;
(3) to consider and act upon a proposal to approve the Company's 1994
Long-Term Incentive Plan which will be amended to increase by 3,000,000
the number of authorized shares available under that plan;
(4) to consider and act upon a proposal to adopt an Employee Stock Purchase
Plan;
(5) to approve the appointment of Price Waterhouse LLP as independent
public accountants of the Company for the fiscal year ending September
30, 1998; and
(6) to transact such other business as may properly come before the
meeting.
The Company has fixed the close of business on December 30, 1997 as the
record date for determining shareholders entitled to notice of, and to vote at,
such meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, you are requested to mark, sign, date and return the
accompanying proxy as soon as possible.
By Order of the Board of Directors
/s/ DOUGLAS A. SECKEL
Douglas A. Seckel
Secretary
January 12, 1998
3214 Lodestar
Houston, TX 77032
<PAGE> 4
EAGLE USA AIRFREIGHT, INC.
3214 LODESTAR
HOUSTON, TEXAS 77032
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Eagle USA Airfreight, Inc., a Texas
corporation (the "Company"), to be voted at the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at The Hyatt Regency at George
Bush Intercontinental Airport, 15747 John F. Kennedy Blvd., Houston, Texas
77032, on Monday, February 23, 1998 at 10:00 a.m., and any and all adjournments
thereof.
This statement and the accompanying form of proxy are first being mailed to
shareholders on or about the week of January 12, 1998. In addition to the
solicitation of proxies by mail, regular officers and employees of the Company
may, without additional compensation, solicit the return of proxies by mail,
telephone, telegram or personal contact. The Company will pay the cost of
soliciting proxies in the accompanying form. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their reasonable expenses in forwarding proxy material to beneficial owners
of stock.
VOTING SECURITIES
Shareholders of record as of December 30, 1997, the record date for
determining persons entitled to notice of, and to vote at, the Annual Meeting,
are entitled to vote on all matters at the Annual Meeting and at any
adjournments thereof. On that date, the issued and outstanding capital stock of
the Company consisted of 18,269,061 shares of Common Stock, par value $0.001 per
share (the "Common Stock"), each of which shares is entitled to one vote on each
matter submitted to a vote of shareholders. Cumulative voting is not allowed. No
other voting class of stock is outstanding. The holders of a majority of the
shares entitled to vote, at the Annual Meeting represented in person or by
proxy, constitute a quorum for the transaction of business at the Annual
Meeting.
All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the choices specified thereon and, in connection with
any other business that may properly come before the meeting, in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified in the proxy, the shares represented thereby will be voted by the
persons named in the proxy, to the extent applicable, (1) for the election as a
director of each nominee listed herein; (2) for the proposal to amend the
Company's Restated Articles of Incorporation to increase the Company's
authorized Common Stock to 100,000,000 shares; (3) for the proposal to approve
the Company's 1994 Long-Term Incentive Plan (the "Incentive Plan") which has
been amended to increase by 3,000,000 the number of authorized shares available
under such plan and to restate such plan; (4) for the proposal to approve the
Company's new Employee Stock Purchase Plan; (5) for the appointment of Price
Waterhouse LLP as independent public accountants of the Company for the fiscal
year ended September 30, 1998; and (6) in the discretion of the persons named in
the proxy in connection with any other business that may properly come before
the meeting. A shareholder giving a proxy may revoke it at any time before it is
voted at the Annual Meeting by delivering written notice to the Secretary of the
Company or by delivering a properly executed proxy bearing a later date. A
shareholder who attends the Annual Meeting may, if he or she wishes, vote by
ballot at the Annual Meeting and that vote will cancel any proxy previously
given. Attendance at the Annual Meeting will not in itself, however, constitute
the revocation of a proxy.
Proxies indicating shareholder abstentions will be counted for purposes of
determining whether there is a quorum at the Annual Meeting, but will not be
voted on any matter and therefore will have the same effect as a vote against a
matter, except in the case of director elections, which are determined by a
plurality of votes cast, as to which those abstentions will have no effect.
Shares held by brokers or nominees for which instructions have not been received
from the beneficial owners or persons entitled to vote and for which the broker
or nominee does not have discretionary power to vote on a particular matter will
be counted for purposes of determining whether there is a quorum at the Annual
Meeting, but will not be voted on particular
<PAGE> 5
matter for which the broker has no discretionary power, and thus will be
disregarded in the calculation of "votes cast" with respect to that matter (even
though those shares may be considered as entitled to vote or be voted on other
matters). Votes cast by proxy or in person at the Annual Meeting will be counted
by the persons appointed as election inspectors for the Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below sets forth information concerning (i) the only persons
known by the Company, based on statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
December 31, 1997 and (ii) the shares of Common Stock beneficially owned, as of
December 31, 1997, by each director, the Chief Executive Officer and the two
other executive officers who were serving at the end of the Company's last
fiscal year and by all executive officers and directors collectively. Except as
indicated, each individual has sole voting power and sole investment power over
all shares listed opposite his name.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF OF STOCK(2)
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP (ROUNDED)
--------------------------------------- -------------------- -----------
<S> <C> <C>
Directors and Executive Officers:
James R. Crane(3)......................................... 10,342,378 56.6%
Douglas Seckel............................................ 140,976 --
William P. O'Connell(4)................................... 25,000 --
Neil E. Kelley(4)......................................... 26,000 --
Frank J. Hevrdejs(4)...................................... 46,000 --
Ronald E. Talley(5)....................................... 24,498 --
Executive Officers and Directors as a Group (6 persons)..... 10,604,852(6) 57.8%
Pilgrim Baxter & Associates................................. 1,365,900(7) 7.5%
Edgemont Asset Management Corporation....................... 1,000,000(8) 5.5%
</TABLE>
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(1) The business address of each director and executive officer is c/o Eagle USA
Airfreight, Inc., 3214 Lodestar, Houston, Texas 77032.
(2) The table includes shares of Common Stock that can be acquired through the
exercise of options, warrants or convertible securities within 60 days. The
percent of the class owned by each person has been computed assuming the
exercise of all options, warrants and convertible securities deemed to be
beneficially owned by that person, and assuming that no options, warrants or
convertible securities held by any other person have been exercised.
(3) As described under Proposal 2, the Company has filed a registration
statement for the sale by Mr. Crane of 1,500,000 shares.
(4) Includes 25,000 shares issuable upon the exercise of stock options within 60
days of December 31, 1997.
(5) Mr.Talley was appointed Chief Operating Officer of the Company in December
1997. His share ownership includes 3,000 shares issuable upon the exercise
of stock options within 60 days of December 31, 1997.
(6) Includes 78,000 shares issuable upon the exercise of stock options within 60
days of December 31, 1997.
(7) Based on a filing made with the SEC reflecting ownership of Common Stock as
of September 30, 1997. The address of Pilgrim Baxter & Associates is 1255
Drummers Lane, Suite 300, Wayne, Pennsylvania 19087.
(8) Based on a filing made with the SEC reflecting ownership of Common Stock as
of September 30, 1997. The address of Edgemont Asset Management Corporation
is 140 East 45th Street, 43rd Floor, New York, New York 10017.
2
<PAGE> 6
PROPOSAL I
ELECTION OF DIRECTORS
The persons designated as proxies in the enclosed proxy card intend, unless
the proxy is marked with contrary instructions, to vote for the following
nominees as directors to serve until the 1999 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified: Mr. James R. Crane;
Mr. Douglas A. Seckel; Mr. William P. O'Connell; Mr. Neil E. Kelley; and Mr.
Frank J. Hevrdejs. The Board of Directors has no reason to believe that any
nominee for election as a director will not be a candidate or will be unable to
serve, but if for any reason one or more of these nominees is unavailable as a
candidate or unable to serve when election occurs, the persons designated as
proxies in the enclosed proxy card, in the absence of contrary instructions,
will in their discretion vote the proxies for the election of any of the other
nominees or for a substitute nominee or nominees, if any, selected by the Board
of Directors. The affirmative vote of a plurality of the votes cast at the
Annual Meeting is required for the election of each nominee for director.
NOMINEES
The following sets forth information concerning the five nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of November 30, 1997, position with the Company and business
experience during the past five years.
JAMES R. CRANE, age 43, has served as President and a director of the
Company since he founded the Company in March 1984. Prior to the organization of
the Company, Mr. Crane had been employed by other air freight forwarders. Mr.
Crane has a total of 15 years' experience in the transportation industry.
DOUGLAS A. SECKEL, age 46, has served as Chief Financial Officer of the
Company since April 1989, has served as Secretary and Treasurer of the Company
since May 1991 and has served as a director of the Company since May 1995. From
1984 through 1989, he served as finance director for the City of Bellaire,
Texas. Mr. Seckel and Mr. Crane are first cousins.
WILLIAM P. O'CONNELL, age 58, has served as a director of the Company since
May 1995. Mr. O'Connell has served as the President and Chief Executive Officer
of AIM, Inc., a materials handling systems and equipment company, since 1988.
NEIL E. KELLEY, age 38, has served as a director of the Company since
September 1995. Mr. Kelley is the Vice Chairman and a senior partner of the
Vitol Group of Companies, an international oil supply, trading and refining
company, where he has served as an Executive Director since 1990. In addition,
Mr. Kelley is Chairman of Vitol Gas & Electric and North Atlantic Refining
Limited, subsidiary companies of the Vitol Group. Mr. Kelley is also an outside
director of Quantum Energy Technologies, an energy technology development
company based in Cambridge, Massachusetts.
FRANK J. HEVRDEJS, age 52, has served as a director of the Company since
December 1995. Mr. Hevrdejs is a Co-founder and a principal of The Sterling
Group, Inc., a private financial organization engaged in the acquisition and
ownership of operating businesses since 1982. He has served as President of The
Sterling Group from 1982 to 1989 and from 1994 to the present. Since 1989, he
has served as Chairman of First Sterling Ventures Corp. Mr. Hevrdejs also serves
as a director for Mail-Well Holdings, Inc., Sterling Chemical Holdings, Inc. and
Purina Mills, Inc.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors not employed by the Company or any of its subsidiaries ("Outside
Directors") receive an annual retainer of $10,000. Directors who are also
employees of the Company receive no payment for serving as directors. All
directors are reimbursed for travel and lodging expenses of attending meetings.
Under the Company's Nonemployee Director Stock Option Plan (the "Nonemployee
Stock Option Plan"), each current Outside Director has been granted options to
purchase 20,000 (as adjusted for the two-for-one stock split, effective August
1, 1996) shares of Common Stock. Thereafter, each additional Outside Director
will be automatically granted nonqualified options to purchase 20,000 shares of
Common Stock, generally on the date
3
<PAGE> 7
that person first becomes an Outside Director of the Company. In addition, each
Outside Director serving on the day after the date of the annual meeting of
shareholders will automatically be granted options to purchase an additional
5,000 shares of Common Stock, subject to the availability for issuance of those
shares under the Nonemployee Director Plan. Options under this plan become
exercisable on the day before the annual meeting of shareholders following the
date of grant. During the fiscal year ended September 30, 1997, options to
purchase 5,000 shares were granted to each of Messrs. O'Connell, Kelley and
Hevrdejs at an exercise price per share of $30.13.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during the fiscal
year ended September 30, 1997, and transacted business on ten occasions during
the fiscal year by unanimous written consent.
The Board of Directors has an Audit Committee which, during the fiscal year
ended September 30, 1997, initially consisted of Messrs. O'Connell, Kelley and
Swannie. Mr. Hevrdejs was appointed to the Audit Committee in February 1997. The
function of the Audit Committee is to meet with the internal financial staff of
the Company and the independent public accountants engaged by the Company to
review (i) the scope and findings of the annual audit, (ii) quarterly financial
statements, (iii) accounting policies and procedures and the Company's financial
reporting, and (iv) the internal controls employed by the Company. The Audit
Committee also recommends to the Board of Directors the independent public
accountants to be selected to audit the Company's annual financial statements,
and reviews the fees charged for audits and for any nonaudit engagements. The
Committee's findings and recommendations are reported to management and the
Board of Directors for appropriate action. The Audit Committee met two times
during fiscal 1997.
The Board of Directors has a Compensation Committee which consists of
Messrs. O'Connell, Kelley and Hevrdejs whose function is to consider and act
upon management's recommendations to the Board of Directors on salaries, bonuses
and other forms of compensation for the Company's executive officers and certain
other key employees. The Compensation Committee has been appointed by the Board
of Directors to administer the Company's stock option plans. The Compensation
Committee transacted business on one occasion by unanimous written consent
during fiscal 1997.
The Board of Directors has a Nominating Committee which consists of Messrs.
Kelley, Hevrdejs and Crane. The Nominating Committee did not meet during fiscal
1997.
During the fiscal year ended September 30, 1997, each director attended at
least 75% of the aggregate of the total number of Board of Directors' meetings
and of meetings of committees of the Board of Directors on which he served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes of ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all such forms
they file.
Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the filing requirements, the Company believes
that during the fiscal year ended September 30, 1997, all reports required by
Section 16(a) to be filed by its directors, officers and greater than 10%
beneficial owners were filed on a timely basis.
4
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation for
the Company's Chief Executive Officer and its other two executive officers with
annual salary and bonus in excess of $100,000 (collectively, the "Named
Executives"), as well as the total compensation paid to each Named Executive for
the Company's fiscal years ended September 30, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------------------
NAME AND FISCAL ---------------------- OTHER ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) OPTIONS (#) COMPENSATION ($)(2)
------------------ ------ ---------- --------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
James R. Crane................. 1997 $521,066 $407,976 -- -- $16,494
President, Chief 1996 $521,066 $240,490 -- -- $14,042
Executive Officer Chairman 1995 $521,066 $ 22,500 -- -- $16,255
of Board of Directors
Donald P. Roberts.............. 1997 $300,000 $330,881 -- -- $ 7,500
Chief Marketing 1996 $188,462 $196,892 -- 400,000(3) $ 7,500
Officer 1995 $150,000 $ 22,500 -- -- $ 7,500
Douglas A. Seckel.............. 1997 $125,000 $113,106 -- -- $ 7,500
Chief Financial 1996 $121,538 $ 73,061 -- -- $ 7,500
Officer, Secretary and 1995 $110,000 $ 19,217 -- -- $ 7,500
Treasurer
</TABLE>
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(1) For the fiscal years 1995, 1996, and 1997 the Named Executives did not
receive any annual compensation not properly categorized as salary or bonus,
except for certain perquisites and other personal benefits which are not
shown because the aggregate amount of such compensation, if any, for each
Named Executive during each of those fiscal years did not exceed the lesser
of $50,000 or 10% or total salary and bonus reported for that Named
Executive.
(2) For the fiscal year 1995, all other compensation consists of premiums of
$6,405 paid by the Company under a life insurance policy and premiums of
$2,350 under a disability insurance policy for Mr. Crane and contributions
of $7,500 by the Company under its 401(k) Profit Sharing Plan for each Named
Executive. For the fiscal year 1996, all other compensation consists of
premiums of $4,490 paid by the Company under a life insurance policy and
premiums of $2,052 under a disability insurance policy for Mr. Crane and
contributions of $7,500 by the Company under its 401(k) Profit Sharing Plan
for each Named Executive. For the fiscal year 1997, all other compensation
consists of premiums of $6,610 paid by the Company under a life insurance
policy and premiums of $2,384 under a disability insurance policy for Mr.
Crane and contributions of $7,500 by the Company under its 401(k) Profit
Sharing Plan for each Named Executive.
(3) For the fiscal year 1996, Mr. Roberts was granted 400,000 options to
purchase Common Stock of the Company, as adjusted for the two-for-one stock
split effective August 1, 1996. Mr. Roberts resigned his position as Chief
Marketing Officer as of October 1, 1997 and his position as a director of
the Company as of December 11, 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No options were granted during fiscal 1997 to any of the Named Executives.
5
<PAGE> 9
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
stock options and the unexercised options to purchase the Common Stock held by
the Named Executives at September 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END($)(2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Crane..................... -- -- -- -- -- --
Donald P. Roberts.................. 87,000.. 1,348,065 113,000(3) -- 2,386,560 --
Donald P. Roberts.................. -- -- 200,000(3) -- 3,900,000 --
Douglas A. Seckel.................. -- -- -- -- -- --
</TABLE>
- ---------------
(1) Value realized is calculated based on the difference between the option
exercise price and the market price of the Company's Common Stock on the
date of exercise, multiplied by the number of shares underlying the options.
(2) Value of unexercised in-the-money options is calculated based upon the
difference between the option price and the closing market price of the
Company's Common Stock at fiscal year-end, multiplied by the number of
shares underlying the options. The closing market price of the Company's
Common Stock, as reported on the NASDAQ Stock Market on September 30, 1997
was $33.50.
(3) Adjusted for two-for-one stock split effective August 1, 1996.
CERTAIN TRANSACTIONS
In February 1997, the Company completed an underwritten secondary public
offering of 1,779,922 shares of its common stock at a price to the public of
$28.25 per share. The Company sold 232,164 of these shares, and the net proceeds
received by the Company after deducting underwriting discounts and commissions
were $6.2 million. The Company did not receive any of the proceeds from the sale
of the 1,547,758 shares sold by Daniel S. Swannie, a former executive officer
and director of the Company. Pursuant to an agreement between the Company and
Mr. Swannie entered into in connection with the offering, Mr. Swannie reimbursed
the Company for all of its out-of-pocket expenses incurred in connection with
the offering and made a payment to the Company of $375,000 for the Company's
estimated internal costs relating to the offering. The agreement also restricts
Mr. Swannie's ability to compete against the Company for a three-year term and
places certain other limitations on his ability to act against the interests of
the Company.
Donald P. Roberts resigned as executive officer of the Company effective
October 1, 1997 and as a director of the Company effective December 11, 1997.
Prior to his resignation as an executive officer, Mr. Roberts had been the Chief
Marketing Officer of the Company since October, 1994. In connection with his
resignation, Mr. Roberts entered into an employment agreement with the Company
whereby Mr. Roberts has agreed to continue employment with the Company until
September 30, 1999. This agreement provides for a base salary of $300,000 per
annum and participation by Mr. Roberts in the Company's insurance plans and
401(k) plan and gave Mr. Roberts title to his Company car. The agreement
contemplates that Mr. Roberts will engage in other business activities and
limits his Company service requirement to 30 hours per month. The agreement
terminates prior to its term upon the earlier of his death, for cause (as set
forth in the agreement) or for certain breaches of the agreement. The agreement
restricts Mr. Roberts' ability to compete against the Company during the term of
his employment and for period of two years thereafter and during the same period
restricts Mr. Roberts from taking certain other actions that may be against the
interest of the Company and certain persons affiliated or associated with the
Company.
James R. Crane, the Company's Chairman of the Board, owns 50% (and during
1995 and part of 1996 owned 100%) of the common stock of an entity that leases
aircraft to the Company. From time to time, employees of the Company utilize the
passenger aircraft owned by that entity in connection with travel associated
with the Company's business, for which the Company makes payments to that
entity. Those payments were approximately $125,000 during the fiscal year ended
September 30, 1997.
6
<PAGE> 10
The Company has periodically made short-term unsecured loans bearing
interest at a bank's prime rate to its executive officers for their personal use
and, in certain cases involving Mr. Crane, for other business ventures. During
fiscal 1996, Mr. Crane, Mr. Swannie and Mr. Roberts repaid the Company $230,000,
$200,000 and $317,000, respectively, pursuant to such loans. As of September 30,
1996, no loans by the Company to executive officers were outstanding. No such
loans were made during fiscal 1997.
The Company has entered into a tax indemnification agreement with Messrs.
Crane, Roberts, Seckel and a former officer and director which provides for,
among other things, the indemnification of those shareholders for any losses or
liabilities with respect to any additional taxes (including interest, penalties
and legal fees) resulting from the Company's operations during the period it was
an S Corporation.
The Company made distributions of cash and/or notes to those persons who
were its shareholders before its initial public offering in an estimated amount
of $14.6 million and $2.7 million during the fiscal years ended September 30,
1995 and 1996, respectively. Prior to the closing of the Company's initial
public offering the Company paid a series of distributions of cash and notes in
an amount estimated to equal to all of its previously undistributed S
Corporation earnings. A final payment on the notes of $634,855 was made during
the fiscal year ended September 30, 1997 (including $495,441 to Mr. Crane,
$102,846 to Mr. Swannie, $26,029 to Mr. Roberts, $10,539 to Mr. Seckel).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Company's executive compensation programs are designed to attract and
retain highly qualified executives and to motivate them to maximize shareholder
returns by achieving both short- and long-term strategic Company goals. The
programs link each executive's compensation directly to individual and Company
performance. A significant portion of each executive's total compensation is
variable and dependent upon the attainment of strategic and financial goals,
individual performance objectives, and the appreciation in value of the Common
Stock.
There are three basic components to the Company's performance-based
compensation system: base pay; annual incentive bonus; and long-term
equity-based incentive compensation. Each component is addressed in the context
of individual and Company performance and competitive conditions. In determining
competitive compensation levels, the Company analyzes data that includes
information regarding the general freight forwarding industry as well as other
transportation companies. A comparison of the Company's financial performance
with that of the companies and indices shown in the Performance Graph is only
one of the many factors considered by the Committee to determine executive
compensation.
Actual individual awards and changes in remuneration to the individual
executives are determined by the Committee. The Chief Executive Officer works
with the Committee in the design of the plans and makes recommendations to the
Committee regarding the salaries and bonuses of Company employees that report
directly to him. Grants or awards of stock, including stock options, are
individually determined and administered by the Committee.
Following the completion of the Company's initial public offering, the
Compensation Committee in fiscal 1996, restructured the compensation
arrangements with the Company's executive officers by adjusting the base salary
for each executive officer to a level generally comparable to that of other
companies in the freight industry, and implementing the Five-Year Executive
Incentive Plan pursuant to which each executive officer is eligible to receive
an annual cash bonus as described in more detail below. In fiscal 1997, awards
to executive officers as a group reflected (i) the Company's record revenues and
earnings, and (ii) continued progress toward strategic goals such as continued
market expansion and enhancements to the Company's management information
systems.
Base Pay. Base pay is designed to be competitive with salary levels for
comparable executive positions at other freight forwarding service companies and
the Compensation Committee reviews such comparable salary information as one
factor to be considered in determining the base pay for the Company's executive
officers. Other factors the Compensation Committee considers in determining base
pay for each of the executive officers are that officer's responsibilities,
experience, leadership, potential future contribution, and demon-
7
<PAGE> 11
strated individual performance (measured against strategic management objectives
such as maintaining customer satisfaction, strengthening market share, expanding
the markets for the Company's services, enhancement of the Company's management
information systems and the attainment of certain financial objectives). The
types and relative importance of specific financial and other business
objectives vary among the Company's executives depending on their positions and
the particular operations and functions for which they are responsible. The
Company's philosophy and practice is to place a significant emphasis on the
incentive components of compensation.
Annual Incentive Bonus. To establish baseline criteria for use in
calculating the amount of cash bonuses paid to executive officers, the Company
established a Five-Year Executive Incentive Plan in which each executive officer
of the Company participates. Pursuant to this Plan, each executive officer of
the Company is eligible to receive an annual cash bonus, the "target" level of
which is set with reference to the Company-wide managers' bonus program and
competitive conditions. These target levels are intended to motivate the
Company's executives by providing bonus payments for the achievement of
financial and operational goals within the Company's business plan. An executive
receives a percentage of his target bonus, depending primarily upon the extent
to which that executive has achieved the specific sales and operating goals for
that executive that have been set by the Committee and the Board and included in
the Five-Year Executive Incentive Plan. Although the Five-Year Executive
Incentive Plan provides the Committee with specific criteria for use in
determining bonuses, bonuses may exceed the target amount if the Company's
performance in the judgment of the Committee exceeds the goals set forth in that
Plan. Furthermore, the Committee may in its discretion consider business
achievements and other criteria not set forth in the Five-Year Executive
Incentive Plan in determining the final amount of the annual bonus to be paid to
each executive officer. For the fiscal year ended September 30, 1997, all
executive officers of the Company who were serving in that capacity at the end
of such year were paid 100% of their respective "target" amounts pursuant to the
Five-Year Executive Incentive Plan.
Long-Term Equity-Based Compensation. Long-term equity-based compensation is
tied directly to shareholder return. Under the Company's Long-Term Incentive
Plan, long-term incentive compensation consists of stock options, which
generally vest in twenty percent increments in each of the five years following
the date of the grant, although vesting can be accelerated if deemed appropriate
by the Committee. The exercise price of stock options granted is equal to the
fair market value of the Common Stock on the date of grant; accordingly,
executives receiving stock options are rewarded only if the market price of the
Common Stock appreciates. Stock options are thus designed to align the interests
of the Company's executives with those of its shareholders by encouraging
executives to enhance the value of the Company and, hence, the price of the
Common Stock and each shareholder's return.
In determining whether to grant executive officers stock options under the
Plan, the Compensation Committee considers factors, including that executive's
current ownership stake in the Company, the degree to which increasing that
ownership stake would provide the executive with additional incentives for
future performance, the likelihood that the grant of those options would
encourage the executive to remain with the Company, prior option grants
(including the size of previous grants and the number of options held) and the
value of the executive's service to the Company. No options were granted to any
of the Named Executives during the fiscal year ended September 30, 1997.
Compensation of the Chief Executive Officer. In reviewing Mr. Crane's
performance, the Committee focused primarily on the Company's outstanding
performance in fiscal year 1997, including a 57% sales increase, an 8.8%
operating margin and a 46% growth in earnings. The committee compared these
performance measures against the goals under the Five-Year Executive Incentive
Plan of 25% annual sales increases and a 10% operating margin. Under the
Five-Year Executive Incentive Plan, Mr. Crane's incentive multiple of 1.5% was
applied to Fiscal 1997 operating income of $25,699,000 to reach an incentive
bonus of $385,476, the maximum target bonus under the plan. Mr. Crane also
received $22,500 under the Company's profit sharing plan, which is the capped
maximum formula amount under that plan.
8
<PAGE> 12
Mr. Crane's position as the founder of and a major shareholder in the
Company provides an effective long-term performance incentive tied directly to
shareholder return. Accordingly, he received no stock option awards.
Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation practices or its
philosophy. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.
The Compensation Committee
William P. O'Connell
Neil E. Kelley
Frank J. Hevrdejs
SECTION 162(M) OF THE INTERNAL REVENUE CODE.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits (to $1 million per covered executive) the deductibility for federal
income tax purposes of annual compensation paid to a company's chief executive
officer and each of its other four most highly compensated executed officers. No
options were granted to executive officers in fiscal 1997. All options
previously granted under the Company's Incentive Plan and assuming shareholder
approval of the proposal to approve the amended and restated Incentive Plan, all
newly authorized options will qualify for an exemption from the application of
Section 162(m) of the Code, thereby preserving the deductibility for federal
income tax purposes of compensation that may be attributable to the exercise of
such options.
EMPLOYMENT ARRANGEMENTS
During the fiscal year ended September 30, 1997 the Company was a party to
employment agreements with each executive officer listed below. The following
chart shows the annual salaries that the executive officers listed therein will
be paid by the Company.
<TABLE>
<CAPTION>
NAME AND POSITION ANNUAL SALARY
----------------- -------------
<S> <C>
James R. Crane.............................................. $521,066
President, Chairman and Chief Executive Officer
Donald P. Roberts(1)........................................ $300,000
Vice President, Director and Chief Marketing Officer
Douglas A. Seckel........................................... $125,000
Secretary/Treasurer, Director and Chief Financial Officer
</TABLE>
- ---------------
(1) Mr. Roberts resigned as Chief Marketing Director as of October 1, 1997 and
as a director of the Company as of December 11, 1997.
In addition to the base salaries set forth above, each of the employment
agreements provides that the Company will, subject to certain conditions set
forth therein, pay the executive an annual cash bonus pursuant to the terms of
the Five-Year Executive Incentive Plan. The fiscal 1998 cash incentive under
such plan assuming all goals are met is 1.4% of operating income for Mr. Crane
and 0.32% of operating income for Mr. Seckel. Each of the above employment
agreements provided that it continues in effect until terminated by either the
Company or the executive pursuant to its terms. Both the Company and the
executive have the right to terminate the agreement upon 30 days' written
notice, and the Company has the right to terminate the agreement for cause
immediately upon notice of such termination. Each agreement includes a covenant
of the executive not to compete with the Company during the term of the
agreement and for a period of up to two
9
<PAGE> 13
years following its termination. The employment agreements for Messrs. Crane and
Seckel continue in effect for fiscal 1998. See "Certain Transactions" for a
description of Mr. Roberts' new employment contract.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the fiscal year ended September 30, 1997, the Compensation Committee of
the Board of Directors was comprised of Messrs. O'Connell, Kelley and Hevrdejs.
PERFORMANCE GRAPH
The following graph presents a comparison of the yearly percentage change
in the cumulative total return on the Common Stock over the period from November
30, 1995, the date of the Company's initial public offering, to September 30,
1997, with the cumulative total return of the S&P 500 Index and of the Dow Jones
Air Freight/Couriers Index of publicly traded companies over the same period.
The Dow Jones Air Freight/ Couriers Index consists of the following companies:
Air Express International Corporation, Airborne Freight Corporation, Atlas Air,
Inc., Expeditors International of Washington, Inc., Federal Express Corporation
and Pittston Burlington Group. The graph assumes that $100 was invested on
December 1, 1995 in the Common Stock at its initial public offering price of
$8.25 per share (as adjusted for the two-for-one stock split) and in each of the
other two indices and the reinvestment of all dividends, if any.
The graph is presented in accordance with SEC requirements. Shareholders
are cautioned against drawing any conclusions from the data contained therein,
as past results are not necessarily indicative of future financial performance.
COMPARISON OF 22-MONTH CUMULATIVE TOTAL RETURN*
AMONG EAGLE USA AIRFREIGHT, INC., THE S&P
500 INDEX AND THE DOW JONES AIR FREIGHT/COURIERS INDEX
<TABLE>
<CAPTION>
EAGLE USA DOW JONES
Measurement Period AIRFREIGHT, AIR FREIGHT
(Fiscal Year Covered) INC. S&P 500 COURIERS
<S> <C> <C> <C>
12/01/95 100 100 100
9/96 315 115 103
9/97 406 162 194
</TABLE>
* $100 Invested on 12/01/95 in Stock or Index (Including Reinvestment of
Dividends).
10
<PAGE> 14
PROPOSAL 2
AMENDMENT OF THE SECOND RESTATED ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has approved by unanimous vote a resolution
proposing that the Company's Second Amended and Restated Articles of
Incorporation (the "Articles") be amended to increase the number of authorized
shares of Common Stock to 100,000,000. The Articles currently authorize the
Company to issue 30,000,000 shares of Common Stock and 10,000,000 of Preferred
Stock. As of December 30, 1997, 18,269,061 shares of Common Stock were issued
and outstanding and 3,300,000 shares of Common Stock were reserved for issuance
under the Incentive Plan and the 1995 Nonemployee Director Stock Option Plan
(the "Nonemployee Director Plan"). The approval of the Employee Stock Purchase
Plan described in Proposal 4 could require the reservation and issuance of up to
200,000 additional shares of Common Stock. As described below, an estimated
101,695 shares may be used for a recently announced transaction and
approximately 225,000 shares have been authorized for issuance pursuant to an
underwriters' overallotment option for a proposed offering. After taking into
account such reserved, estimated or authorized shares, a balance of 7,915,444
authorized but unissued shares of Common Stock would be unreserved and available
for future use.
The proposed amendment would replace the first sentence of Article Four of
the Articles with the following: "The aggregate number of shares that the
corporation shall have the authority to issue is 110,000,000 shares, consisting
of 100,000,000 shares of Common Stock, par value $0.001 per share, and
10,000,000 shares of Preferred Stock, par value $0.001 per share."
Adoption of the proposed amendment to the Articles will require the
affirmative vote of the holders of at least a majority of the outstanding shares
of Common Stock entitled to vote at the meeting. The persons named in the
accompanying proxy will vote in accordance with the choice specified thereon,
or, if no choice is properly indicated, in favor of the adoption of the proposed
amendment to the Restated Articles of Incorporation. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION OF THE PROPOSED
AMENDMENT.
REASONS FOR THE PROPOSED AMENDMENT
The number of shares of the Company's outstanding Common Stock has more
than tripled since September 30, 1995 and the Company's available Common Stock
has as a result, been reduced. In this light, the Board of Directors deems it
advisable to increase the Company's authorized Common Stock. The additional
Common Stock to be authorized would be available for possible future financing
and acquisition transactions, stock dividends or stock splits, employee benefit
plans and other corporate purposes. Having such shares available for issuance in
the future would give the Company greater flexibility and would generally allow
shares of Common Stock to be issued without the expense and delay of a special
shareholders' meeting.
Prior to its initial public offering, the Company had 6,000,000 shares of
Common Stock issued and outstanding on September 30, 1995, and 1,650,000
reserved for issuance under the Incentive Plan and the Nonemployee Director
Plan, leaving 22,350,000 shares of Common Stock available for issuance. The
number of available shares has been further reduced by (i) the initial public
offering in December 1995 and the transactions related to that offering, (ii)
the 2-for-1 stock split effected in August 1996, (iii) the overallotment shares
issued in a secondary offering in February 1997 and (iv) shares issued in a
September 1997 acquisition. In addition to the shares that may be used for the
proposed Employee Stock Purchase Plan, two recently announced transactions may
further decrease the number of available shares. First, on January 5, 1998, the
Company announced the signing of a letter of intent for an acquisition, in which
the Company may issue up to $3 million of shares of the Common Stock, most of
which shares would only be issued in the future if certain performance criteria
were achieved. Based on the closing sales price on January 5, 1998 of $29.50 per
share, a maximum of 101,695 shares of stock could be issued pursuant to this
acquisition. Such transaction, including the number of shares that would be
issued in the transaction, is subject to numerous conditions, including the
negotiation and execution of a definitive purchase agreement. Second, on January
9, 1998, the Company filed a registration statement with the Securities and
Exchange Commission covering a possible sale of 1,500,000 shares of Common Stock
by James R. Crane and 225,000 shares by the Company pursuant to an
11
<PAGE> 15
underwriters' overallotment option. There can be no assurance as to the actual
number, if any, of such shares that will be sold by the Company.
The additional shares of Common Stock would be available for issuance
without further action by the shareholders unless such action is required by
applicable law or the rules of any stock exchange or quotation system on which
the Common Stock may be listed or quoted. The Nasdaq Stock Market, on which the
Common Stock is quoted, currently requires shareholder approval in certain
instances, including in connection with acquisition transactions where the
present or potential issuance of shares is or will be equal to or in excess of
20% of the number of shares or common stock outstanding before the issuance of
the stock.
The Company has no current plans for the issuance of the additional shares
of Common Stock for which authorization is being sought, other than as described
in this Proxy Statement.
DESCRIPTION OF COMMON STOCK
Holders of Common Stock have no preemptive rights to purchase or subscribe
for securities of the Company, and the Common Stock is not convertible or
subject to redemption by the Company. Subject to the rights of the holders of
any class of capital stock of the Company having any preference or priority over
the Common Stock, none of which are currently outstanding, the holders of the
Common Stock are entitled to dividends in such amounts as may be declared by the
Board of Directors of the Company from time to time out of funds legally
available for such payments and, in the event of liquidation, to share ratably
in any assets of the Company remaining after payment in full of all creditors
and provisions for any liquidation preferences on any outstanding stock ranking
prior to the Common Stock.
Holders of Common Stock are entitled to cast one vote per share on matters
submitted to a vote of shareholders and do not have cumulative voting rights.
Directors are elected annually. Any director may be removed, with or without
cause, at any meeting of shareholders called expressly for that purpose, by a
vote of the holders of a majority of the outstanding shares.
Subject to any additional voting rights that may be granted to holders of
future classes or series of stock, the Articles require the affirmative vote of
holders of a majority of the outstanding shares entitled to vote thereon to
approve any merger, consolidation or share exchange, sale of all or
substantially all of the assets of the Company, dissolution of the Company or
amendment to the Articles for which a vote is required by the Texas Business
Corporation Act. Approval of any other matter not described above that is
submitted to the shareholders requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented at the meeting. Special
Meetings of the shareholders of the Company may be called by the Chief Executive
Officer, the Board of Directors or by shareholders holding not less than 50% of
the outstanding voting stock of the Company.
The increase in the number of authorized shares of Common Stock is not
designed to deter or to prevent a change in control; however, under certain
circumstances, the Company could use the additional shares to create voting
impediments or to frustrate persons seeking to effect a takeover or otherwise
gain control of the Company. The Company could also privately place such shares
with purchasers who might side with the Board of Directors in opposing a hostile
takeover bid, although there is no present intention to do so.
CERTAIN EXISTING ANTITAKEOVER PROVISIONS
Certain existing provisions of Texas law, the Articles and the Company's
Bylaws may have antitakeover effects. Pursuant to Articles, the Board of
Directors, without further action by the shareholders, is authorized to issue
shares of Preferred Stock in one or more series and to fix and determine as to
any series all the relative rights and preferences of shares in such series,
including, without limitation, preferences, limitations or relative rights with
respect to redemption rights, conversion rights, if any, voting rights, if any,
dividend rights and preferences on liquidation. As of the date hereof, no shares
of Preferred Stock were outstanding. The proposed amendment would not change the
total number of shares of Preferred Stock authorized by the Articles.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could adversely affect the voting power of the Common
Stock, discourage an unsolicited acquisition proposal or
12
<PAGE> 16
make it more difficult for a third party to gain control of the Company.
Although the Board of Directors is required to make any determination to issue
such stock based on its judgment as to the best interests of the shareholders of
the Company, the Board of Directors could act in a manner that would discourage
an acquisition attempt or other transaction that some, or a majority, of the
shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then market price
of such stock. The Board of Directors does not at present intend to seek
shareholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law.
The Company's Bylaws provide that shareholders who wish to nominate
directors or to bring business before a shareholders' meeting must notify the
Company and provide certain pertinent information at least 80 days before the
meeting date (or within ten days after public announcement pursuant to the
Bylaws of the meeting date, if the meeting date has not been publicly announced
at least 90 days in advance).
The Company is subject to Part Thirteen (the "Business Combination Law") of
the Texas Business Corporation Act, which took effect September 1, 1997. In
general, the Business Combination Law prevents an "affiliated shareholder"
(defined generally as a person that is or was within the preceding three-year
period the beneficial owner of 20% or more of a corporation's outstanding voting
shares) or its affiliates or associates from entering into or engaging in a
"business combination" (defined generally to include (i) mergers or share
exchanges, (ii) dispositions of assets having an aggregate value equal to 10% or
more of the market value of the assets or of the outstanding common stock or
representing 10% or more of the earning power or net income of the corporation,
(iii) certain issuances or transactions by the corporation that would increase
the affiliated shareholder's number of shares of the corporation, (iv) certain
liquidations or dissolutions, and (v) the receipt of tax, guarantee, loan or
other financial benefits by an affiliated shareholder other than proportionately
as a shareholder of the corporation) with an "issuing public corporation" (which
includes the Company) during the three-year period immediately following the
affiliated shareholder's acquisition of shares unless (a) before the date such
person became an affiliated shareholder, the board of directors of the issuing
public corporation approves the business combination or the acquisition of
shares made by the affiliated shareholder on such date or (b) not less than six
months after the date such person became an affiliated shareholder, the business
combination is approved by the affirmative vote of holders of at least
two-thirds of the issuing public corporation's outstanding voting shares not
beneficially owned by the affiliated shareholder or its affiliates or
associates. The Business Combination Law does not apply to a business
combination with an affiliated shareholder that was the beneficial owner of 20%
or more of the outstanding voting shares of the issuing public corporation on
December 31, 1996, and continuously until the announcement date of the business
combination; as a result, the restrictions of the Business Combination Act would
not apply to Mr. Crane who has been the beneficial owner of more than 20% of the
outstanding Common Stock continuously since prior to December 31, 1996. In
discharging the duties of director under the Business Combination Act or
otherwise, a director, in considering the best interests of the Company, may
consider the long-term as well as the short-term interests of the Company and
its shareholders, including the possibility that those interests may be best
served by the continued independence of the Company.
PROPOSAL 3
APPROVAL OF THE COMPANY'S 1994
LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED
The Board of Directors has by unanimous vote approved an amendment and
restatement of the Incentive Plan which would increase by 3,000,000 the number
of authorized shares available in the Incentive Plan from 3,100,000 to
6,100,000. As of September 30, 1997, 749,055 shares have been issued upon the
exercise of options granted under the Plan and 2,177,579 shares are subject to
issuance upon the exercise of outstanding options. The Amended and Restated Plan
also differs from the original Incentive Plan in that (i) it has been updated to
delete certain references to Rule 16b under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that were no longer necessary as a result of
changes in such Rule since the adoption of the original Incentive Plan, (ii)
expands the definition of subsidiary to include non-corporate entities and
13
<PAGE> 17
(iii) allows independent contractors as well as employees to be plan
participants. Shares currently available for option awards under the Incentive
Plan qualify for an exemption from the application of Section 162(m) of Code,
thereby preserving the deductibility for federal income tax purposes of
compensation that may be attributable to the exercise of such options,
regardless of the Section 162(m) limit of $1 million per covered executive.
Approval of the Amended and Restated Plan by shareholders will allow the future
option grants under the Amended and Restated Plan, including the additional
3,000,000 authorized shares, to also preserve such deductibility. The
description of the Amended and Restated Incentive Plan set forth below is
qualified by reference to the terms of the Amended and Restated Incentive Plan,
a copy of which is attached as Annex A to this Proxy Statement.
The Board of Directors and the shareholders of the Company approved the
adoption of the Company's Incentive Plan in September 1994. The Incentive Plan
is administered by the Compensation Committee. Subject to the provisions of the
Incentive Plan, the Compensation Committee is authorized to determine the type
or types of awards made to each participant and the terms, conditions and
limitations applicable to each award. In addition, the Compensation Committee
has the exclusive power to interpret the Incentive Plan and to adopt such rules
and regulations as it may deem necessary or appropriate in keeping with the
objectives of the Incentive Plan. The Compensation Committee may delegate
certain of its duties under the Incentive Plan to senior officers of the
Company.
The purpose of the Incentive Plan is to retain selected employees,
independent contractors and consultants of the Company, reward them for making
significant contributions to the success of the Company and provide them with a
proprietary interest in the growth and performance of the Company.
Pursuant to the Incentive Plan, designated employees of the Company will be
eligible to receive awards consisting of (i) stock options, (ii) stock
appreciation rights, (iii) restricted or nonrestricted stock, (iv) cash or (v)
any combination of the foregoing. Stock options may be either incentive stock
options with the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or nonqualified stock options. Stock options will have an exercise
price as specified in the option agreement, but incentive stock options will
have an exercise price not less than the fair market value of the Common Stock
on the date of grant. The Compensation Committee does not currently intend to
grant options with an exercise price less than the fair market value on the date
of grant to persons who would be covered executives under Section 162(m) of the
Code. The exercise price of any stock options may, at the discretion of the
Compensation Committee, be paid in cash or by surrendering shares of Common
Stock or another award under the Incentive Plan, valued at the fair market value
on the date of exercise, or any combination thereof. Stock appreciation rights
are rights to receive, without payment to the Company, cash or shares of Common
Stock with a value determined by reference to the difference between the
exercise or "strike" price of the stock appreciation right and the fair market
value or other specified valuation of the Common Stock at the time of exercise.
Stock appreciation rights may be granted in tandem with stock options or
separately. Stock awards may consist of Common Stock or be denominated in units
of Common Stock. Stock awards may be subject to conditions established by the
Compensation Committee, including service vesting conditions based on
achievement of specific business objectives, increases in specified indices and
attaining specified growth rates. A stock award denominated in units may provide
for dividend-equivalent rights. Cash awards may be denominated in cash with the
amount of payment subject to conditions specified by the Compensation Committee,
including service conditions and performance conditions.
No participant may be granted awards consisting of stock options or stock
appreciation rights exercisable for more than 620,000 shares of Common Stock
subject to certain adjustments set forth in the Incentive Plan (i.e., 20% of the
shares of Common Stock originally reserved for issuance under the Incentive
Plan, as previously adjusted). Payment of awards may be made in cash or Common
Stock or combinations thereof, as determined by the Compensation Committee. An
award may provide for the granting or issuance of additional, replacement or
alternative awards upon the occurrence of specified events, including the
exercise of the original award.
The Board of Directors may amend, modify, suspend or terminate the
Incentive Plan for the purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law except that
14
<PAGE> 18
(i) no amendment or alteration that would impair the rights under any award
previously granted will be made without the award holder's consent and (ii) no
amendment or alteration will be effective prior to approval by the Company's
shareholders to the extent such approval is then required by applicable laws,
regulation, exchange or quotation system.
The holder of a nonqualified stock option recognizes no taxable income as a
result of the grant of the stock option. Upon the exercise of the stock option,
however, the holder of a nonqualified stock option recognizes ordinary income in
an amount equal to the difference between the then fair market value of the
shares on the date of exercise and the exercise or purchase price (or, in the
case of relinquishment in an amount equal to the sum of the cash received and
the fair market value of the shares or award received determined on the date of
exercise) and, correspondingly, the Company will be entitled to an income tax
deduction for such amount.
Upon the exercise of an incentive stock option, the stock option holder
generally does not recognize taxable income by reason of the exercise (although
alternative minimum tax may apply), and the Company normally is not entitled to
any income tax deduction. If the stock option holder disposes of the shares
acquired upon the exercise of an incentive stock option after satisfaction of
certain minimum holding periods, any gain realized is capital gain. If a stock
option holder disposes of the shares acquired upon the exercise of an incentive
stock option within the minimum holding periods, the stock option holder would
recognize ordinary income, and the Company would be entitled to a commensurate
income tax deduction (except with respect to post-exercise appreciation).
The grant of a stock appreciation right produces no U.S. federal tax
consequences for the participant or the Company. The exercise of a stock
appreciation right results in taxable income to the participant, equal to the
difference between the exercise price of the shares and the market price of the
shares on the date of exercise, and a corresponding tax deduction to the
Company.
A participant under the Incentive Plan who has been granted an award of
restricted shares of Common Stock does not realize taxable income at the time of
the grant, and the Company will not be entitled to a tax deduction at the time
of the grant, unless the participant makes an election to be taxed at the time
of the award. When the restrictions lapse, the participant will recognize
taxable income in an amount equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares. The Company
will be entitled to a corresponding tax deduction. Dividends paid to the
participant during the restriction period will also be compensation income to
the participant and deductible as such by the Company. The holder of a
restricted stock award may elect to be taxed at the time of grant of the
restricted stock award on the market value of the shares, in which case (1) the
Company will be entitled to a deduction at the same time and in the same amount,
(2) dividends paid to the participant during the restriction period will be
taxable as dividends to him and not deductible by the Company and (3) there will
be no further federal income tax consequences when the restrictions lapse. This
tax information is only a summary, does not purport to be complete and does not
cover, among other things, foreign, state and local tax treatment of
participation in the Incentive Plan.
1994 LONG-TERM INCENTIVE PLAN
SUMMARY OF GRANTS AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CUMULATIVE OPTIONS AVERAGE PER SHARE
NAME GRANTED(1) EXERCISE PRICE(2)
- ---- ------------------ -----------------
<S> <C> <C>
James R. Crane.............................................. -- --
Donald P. Roberts (3)....................................... 313,000 $13.42
Douglas A. Seckel........................................... -- --
All current executive officers as a group (4)............... 313,000 $13.42
All current nonexecutive directors (5)...................... 75,000 $13.66
All other employees as a group.............................. 1,721,600 $10.58
</TABLE>
- ---------------
(1) Reflects options granted since adoption of the Plan. In fiscal 1997, no
options were granted to any executive officers and a total of 422,250
options were granted to other employees as a group.
15
<PAGE> 19
(2) The exercise price of all options was the fair market value at the date of
grant.
(3) Mr. Roberts resigned his position as Chief Marketing Officer effective
October 1, 1997 and is employed by the Company on a reduced time commitment
basis for a period of two years and resigned as a director of the Company
effective December 11, 1997. See "Certain Transactions". In August 1997, Mr.
Roberts exercised options for 87,000 shares of Common Stock. The options for
the remaining shares are fully vested. The options listed reflect in excess
of 5% of the total options under the Incentive Plan.
(4) Includes options listed above for Mr. Roberts.
(5) Excludes the options listed above for Mr. Roberts. Nonemployee directors
receive options under the Nonemployee Director Plan.
Approximately 212 employees and one director of the Company have
outstanding options under the Incentive Plan as of September 30, 1997.
The Board unanimously believes that the amendment of the Incentive Plan is
in the best interest of the Company and its shareholders as it will assist the
Company in achieving the purposes of the Incentive Plan. THE BOARD THEREFORE
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT. The
persons named in the accompanying proxy will vote in accordance with the choice
specified thereon, or, if no choice is properly indicated, in favor of the
adoption of the proposed amendment to the Incentive Plan. Since the amendment
will increase the number of shares that could be subject to awards that may be
granted to all executive officers of the Company, such officers of the Company
could be deemed to have an interest in and could benefit from the adoption of
the amendment. The affirmative vote of a majority of the outstanding shares of
Common Stock of the Company present or represented and entitled to vote at the
Annual Meeting is required for approval of the amendment. Failure to approve the
amendment will cause the Incentive Plan to terminate except with respect to
outstanding awards under the Plan.
PROPOSAL 4
PROPOSAL TO APPROVE
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
description of the Stock Purchase Plan set forth below is qualified by reference
to the terms of the Stock Purchase Plan. The purpose of the Stock Purchase Plan
is to encourage and assist all employees of the Company, where permitted by
applicable laws and regulations, to acquire an equity interest in the Company
through the purchase of shares of Common Stock. A maximum of 200,000 shares of
Common Stock (subject to certain antidilution adjustments applicable in certain
circumstances) may be purchased pursuant to the Stock Purchase Plan. Assuming
approval by the stockholders, the Stock Purchase Plan will become effective July
1, 1998 and will terminate after all the Common Stock covered by the Plan has
been purchased, unless terminated earlier by the Board or unless additional
Common Stock is permitted to be issued under the Stock Purchase Plan and is
approved by the stockholders. The Stock Purchase Plan will be administered by
the Company's Compensation Committee. The description of the Stock Purchase Plan
set forth below is qualified by reference to the terms of the Stock Purchase
Plan, a copy of which is attached as Annex B to this Proxy Statement.
Under the Stock Purchase Plan, all full-time employees of the Company who
have completed at least six months of service and who do not own, or hold
options to acquire, 5% or more of the total combined voting power or value of
the Common Stock are eligible to participate in the Stock Purchase Plan. As of
September 30, 1997, approximately 1,293 employees of the Company would be
eligible to participate in the Stock Purchase Plan. Participants in the Stock
Purchase Plan may purchase shares of Common Stock through payroll deductions on
an after-tax basis over a six-month period beginning on each January 1 and
ending on the following June 30 and on each July 1 and ending on the following
December 31 (each such period referred to as the "Purchase Period") during the
term of the Stock Purchase Plan. A participant's right to participate in the
Stock Purchase Plan terminates immediately when a participant ceases to be
employed by the Company. An employee may elect to participate in the Stock
Purchase Plan as of any January 1 or July 1
16
<PAGE> 20
following the date he first meets the eligibility requirements. A participant
may elect to make contributions each pay period in an amount not less than $10,
subject to an annual limitation equal to $20,000. The contributions will be held
in trust during the Purchase Period and interest will be credited to the
participant's account. Unless a participant elects otherwise, the dollar amount
in the participant's account at the end of the Purchase Period will then be used
to purchase as many whole shares of Common Stock as the funds in his account
will allow. The purchase price for the stock will be the lesser of 85% of its
fair market value (defined as the final closing sales price per share of Common
Stock on the Nasdaq National Market on the applicable date) on the first trading
day of the Purchase Period or its fair market value on the last trading day of
the Purchase Period. Any dollars remaining in the participant's account will be
carried over to the next Purchase Period. If the participant elects not to
purchase Common Stock at the end of the Purchase Period, such participant will
receive his payroll deductions during the Purchase Period plus the interest
which has accrued on such deductions. At the end of each Purchase Period,
participants will receive a statement of their account balance, including
interest earned and the number of whole shares of Common Stock purchased and in
their account. Any dividends on shares held in a participant's account will be
credited to his account.
A participant may elect to withdraw his entire contributions for the
current Purchase Period from the Stock Purchase Plan by giving timely written
notice to the Company. Any participant who so elects will receive his entire
account balance, including interest and dividends, if any. A participant who
suspends his payroll deductions or withdraws contributions cannot resume
participation in the Stock Purchase Plan during that Purchase Period and must
re-enroll in the Stock Purchase Plan the following Purchase Period in order to
participate. A participant may also elect to withdraw stock at any time (without
withdrawing from participation in the Plan) held in his account; provided,
however, that a participant may withdraw stock held in his account for less than
six months only if the Compensation Committee, in its sole discretion approves
such a withdrawal or the participant terminates employment. In the event of a
participant's death, amounts credited to his account, including interest and
dividends, if applicable, will be paid in cash and a certificate for any shares
will be delivered to his designated beneficiaries or other legal representative.
The Board of Directors of the Company may generally amend or terminate the
Stock Purchase Plan at any time, except that no amendment will be effective
without subsequent approval of the Amendment by the Company's shareholders to
the extent such approval is then required in order to cause the rights granted
under the Stock Purchase Plan to purchase shares of Common Stock to meet the
requirements of Code Section 423.
The shares to be issued pursuant to the Stock Purchase Plan may be
authorized but unissued shares or previously issued shares that have been
reacquired and are held by the Company or shares purchased on the open market.
On January 5, 1998, the last reported sales price of the Common Stock on the
Nasdaq National Market was $29.50 per share.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required to approve the Stock Purchase Plan. THE BOARD OF
DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
EAGLE USA AIRFREIGHT, INC. EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 5
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, Price Waterhouse LLP, who have been the Company's auditors since
1991, as independent public accountants for the fiscal year ending September 30,
1998. Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
Unless shareholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of Price Waterhouse LLP as the Company's
auditors for 1998. The affirmative vote of a majority of the votes cast at the
Annual Meeting will be required for ratification.
17
<PAGE> 21
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP.
OTHER BUSINESS
As of the date of this proxy, the Board of Directors is not informed of any
other matters, other than those above, that may be brought before the meeting.
The persons named in the enclosed form of proxy or their substitutes will vote
with respect to any such matters in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders' proposals intended to be presented at the 1999 Annual Meeting
must be received by the Company no later than September 14, 1998, for inclusion
on the Company's proxy statement and form of proxy for that meeting. Shareholder
proposals must also be otherwise eligible for inclusion.
By Order of the Board of Directors
/s/ DOUGLAS SECKEL
Douglas Seckel, Secretary
Dated: January 12, 1998
Houston, Texas
18
<PAGE> 22
ANNEX A
EAGLE USA AIR FREIGHT, INC.
LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective , 1998)
1. OBJECTIVES. The Eagle USA Air Freight, Inc. Long-Term Incentive Plan
(the "Plan") is designed to retain selected employees of Eagle USA Air Freight,
Inc. (the "Company") and its Subsidiaries and reward them for making significant
contributions to the success of the Company and its Subsidiaries. These
objectives are to be accomplished by making awards under the Plan and thereby
providing Participants with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall have the
following respective meanings:
"AWARD" means the grant of any form of stock option, stock
appreciation right, stock award or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to any applicable
terms, conditions and limitations as the Committee may establish in order
to fulfill the objectives of the Plan.
"AWARD AGREEMENT" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations
applicable to an Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means such committee of two or more members of the Board
as is designated by the Board to administer the Plan.
"COMMON STOCK" means the Common Stock, par value $.001 per share, of
the Company.
"DIRECTOR" means an individual serving as a member of the Board.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"FAIR MARKET VALUE" means, as of a particular date, (a) if the shares
of Common Stock are listed on a national securities exchange, the mean
between the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale
so reported on that date, on the last preceding date on which such a sale
was so reported, (b) if the shares of Common Stock are not so listed but
are quoted on the Nasdaq National Market, the mean between the highest and
lowest sales price per share of Common Stock on the Nasdaq National Market
on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported, (c)
if the Common Stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such
quotations shall be available, as reported by Nasdaq, or, if not reported
by Nasdaq, by the National Quotation Bureau, Inc. or (d) if none of the
above is applicable, such amount as may be determined by the Board (or an
Independent Third Party, should the Board elect in its sole discretion to
instead utilize an Independent Third Party for this purpose), in good
faith, to be the fair market value per share of Common Stock.
"INDEPENDENT THIRD PARTY" means an individual or entity independent of
the Company (and any transferor or transferee of Common Stock acquired upon
the exercise of an option under the Plan, if applicable) with experience in
providing investment banking appraisal or valuation services and with
expertise generally in the valuation of securities or other property of the
type at issue, that is chosen by the Board, in its sole discretion, to
value securities or other property for purposes of this Plan. The Company's
independent accountants shall be deemed to satisfy the criteria for an
Independent Third Party if selected by the Board for that purpose. The
Board may utilize one or more Independent Third Parties.
"PARTICIPANT" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
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<PAGE> 23
"RESTRICTED STOCK" means Common Stock that is restricted or subject to
forfeiture provisions.
"SUBSIDIARY" means (i) with respect to any Awards other than incentive
stock options within the meaning of Code Section 422, any corporation,
limited liability company, general or limited partnership, or similar
entity of which the Company directly or indirectly owns shares representing
more than 50% of the voting power of all classes or series of equity
securities of such entity, which have the right to vote generally on
matters submitted to a vote of the holders of equity interests in such
entity, and (ii) with respect to Awards of incentive stock options, any
subsidiary within the meaning of Section 424(f) of the Code or any
successor provision.
3. ELIGIBILITY. All employees consultants and independent contractors of
the Company and its Subsidiaries are eligible for Awards under this Plan. The
Committee shall select the Participants in the Plan from time to time by the
grant of Awards under the Plan.
4. COMMON STOCK AVAILABLE FOR AWARDS. There shall be available for Awards
granted wholly or partly in Common Stock (including rights or options which may
be exercised for or settled in Common Stock) during the term of this Plan an
aggregate of 4,800,000 shares of Common Stock, subject to adjustment as provided
in Paragraph 14. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file required documents
with governmental authorities and stock exchanges and transaction reporting
systems to make shares of Common Stock available for issuance pursuant to
Awards. Common Stock related to Awards that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner such
that all or some of the shares covered by an Award are not issued to a
Participant, or are exchanged for Awards that do not involve Common Stock, shall
immediately become available for Awards hereunder. The Committee may from time
to time adopt and observe such procedures concerning the counting of shares
against the Plan maximum as it may deem appropriate.
5. ADMINISTRATION. This Plan shall be administered by the Committee, which
shall have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of
the Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the provisions of
Paragraph 6 of this Plan shall be liable for anything done or omitted to be done
by him or her, by any member of the Committee or by any officer of the Company
in connection with the performance of any duties under this Plan, except for his
or her own willful misconduct or as expressly provided by statute.
6. DELEGATION OF AUTHORITY. The Committee may delegate to the President and
to other senior officers of the Company its duties under this Plan pursuant to
such conditions or limitations as the Committee may establish, except that the
Committee may not delegate to any person the authority to grant Awards to, or
take other action with respect to, Participants who are subject to Section 16 of
the Exchange Act.
7. AWARDS. The Committee shall determine the type or types of Awards to be
made to each Participant under this Plan. Each Award made hereunder shall be
embodied in an Award Agreement, which shall contain such terms, conditions and
limitations as shall be determined by the Committee in its sole discretion and
shall be signed by the Participant and by the President or any Vice President of
the Company for and on behalf of the Company. An Award Agreement may include
provisions for the repurchase by the Company of Common Stock acquired pursuant
to the Plan and the repurchase of a Participant's option rights under the Plan.
Awards may consist of those listed in this Paragraph 7 and may be granted
singly, in combination or in tandem. Awards may also be made in combination or
in tandem with, in replacement of, or as alternatives to grants or rights (a)
under this Plan or any other employee plan of the Company or any of its
Subsidiaries, including the plan of any acquired entity, or (b) made to any
Company or Subsidiary employee by the Company or any Subsidiary. An Award may
provide for the granting or issuance of additional, replacement or alternative
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<PAGE> 24
Awards upon the occurrence of specified events, including the exercise of the
original Award. Notwithstanding anything herein to the contrary, no Participant
may be granted Awards consisting of stock options or stock appreciation rights
exercisable for more than 620,000 shares of Common Stock, subject to adjustment
as provided in Paragraph 14 (i.e., 20% of the shares of Common Stock originally
authorized for Awards under this Plan, as previously adjusted pursuant to
Paragraph 14). In the event of an increase in the number of shares authorized
under the Plan, the 20% limitation will apply to the number of shares
authorized.
(i) STOCK OPTION. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a price specified by the
Committee in the Award Agreement or otherwise. A stock option may be in the
form of an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code. Notwithstanding the
foregoing, no ISO can be granted under the Plan more than ten years
following the Effective Date of the Plan.
(ii) STOCK APPRECIATION RIGHT. An Award may consist of a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares
of Common Stock on the date the stock appreciation right ("SAR") is
exercised over a specified strike price as set forth in the applicable
Award Agreement.
(iii) STOCK AWARD. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock Award may be
subject to conditions established by the Committee and set forth in the
Award Agreement, which conditions may include, but are not limited to,
continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, increases in specified indices, attaining
specified growth rates and other comparable measurements of performance.
Such Awards may be based on Fair Market Value or other specified
valuations. The certificates evidencing shares of Common Stock issued in
connection with a stock Award shall contain appropriate legends and
restrictions describing the terms and conditions of the restrictions
applicable thereto.
(iv) CASH AWARD. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee and set
forth in the Award Agreement, including, but not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining specified
growth rates and other comparable measurements of performance.
8. PAYMENT OF AWARDS.
(a) GENERAL. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as
the Committee shall determine including, in the case of Common Stock,
restrictions on transfer and forfeiture provisions.
(b) DEFERRAL. The Committee may, in its discretion, (i) permit
selected Participants to elect to defer payments of some or all types of
Awards in accordance with procedures established by the Committee or (ii)
provide for the deferral of an Award in an Award Agreement or otherwise.
Any such deferral may be in the form of installment payments or a future
lump sum payment. Any deferred payment, whether elected by the Participant
or specified by the Award Agreement or by the Committee, may be forfeited
if and to the extent that the Award Agreement so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock
or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated in
Common Stock or units of Common Stock.
(d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type.
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<PAGE> 25
9. STOCK OPTION EXERCISE. The price at which shares of Common Stock may be
purchased under a stock option shall be paid in full at the time of exercise in
cash or, if permitted by the Committee, by means of tendering Common Stock or
surrendering all or part of that or any other Award, including Restricted Stock,
valued at Fair Market Value on the date of exercise, or any combination thereof.
The Committee shall determine acceptable methods for tendering Common Stock or
Awards to exercise a stock option as it deems appropriate. If permitted by the
Committee, payment may be made by successive exercises by the Participant. The
Committee may provide for procedures to permit the exercise or purchase of
Awards by (a) loans from the Company or (b) use of the proceeds to be received
from the sale of Common Stock issuable pursuant to an Award. Unless otherwise
provided in the applicable Award Agreement, in the event shares of Restricted
Stock are tendered as consideration for the exercise of a stock option, a number
of the shares issued upon the exercise of the stock option, equal to the number
of shares of Restricted Stock used as consideration therefor, shall be subject
to the same restrictions as the Restricted Stock so submitted as well as any
additional restrictions that may be imposed by the Committee.
10. TAX WITHHOLDING. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a combination thereof for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common Stock theretofore owned by the holder of the Award
with respect to which withholding is required. If shares of Common Stock are
used to satisfy tax withholding, such shares shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (a) no amendment or alteration that would impair the rights
of any Participant under any Award previously granted to such Participant shall
be made without such Participant's consent and (b) no amendment or alteration
shall be effective prior to approval by the Company's shareholders to the extent
such approval is required by applicable laws, regulations, stock exchange or
quotation system requirements.
12. TERMINATION OF EMPLOYMENT. Upon the termination of employment by a
Participant, any unexercised, deferred or unpaid Awards shall be treated as
provided in the specific Award Agreement evidencing the Award. Each Award
granted pursuant to this Plan which is a stock option shall provide that if the
Participant ceases to be employed by the Company or its affiliates for any
reason whatsoever, the option shall immediately terminate to the extent the
option is not vested (or does not become vested as a result of such termination
of employment) on the date the Participant terminates employment.
13. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The Committee may prescribe and include
in applicable Award Agreements other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
Paragraph 13 shall be null and void.
14. ADJUSTMENTS.
(a) The existence of outstanding Awards shall not affect in any manner
the right or power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes
in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stock (whether or not such issue is prior to, on a
parity with or junior to the Common Stock) or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
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<PAGE> 26
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under this Plan and covered by
outstanding Awards denominated in Common Stock or units of Common Stock;
(ii) the exercise or other price in respect of such Awards; and (iii) the
appropriate Fair Market Value and other price determinations for such
Awards. Notwithstanding the foregoing, no adjustment is required for the
stock split effected or to be effected shortly before the initial grant of
Options under this Plan. In the event of any consolidation or merger of the
Company with another corporation or entity or the adoption by the Company
of a plan of exchange affecting the Common Stock or any distribution to
holders of Common Stock of securities or property (other than normal cash
dividends or dividends payable in Common Stock), the Committee shall make
such adjustments or other provisions as it may deem equitable, including
adjustments to avoid fractional shares, to give proper effect to such
event. Additionally, and without limiting the generality of the foregoing,
there shall be no adjustment for any dividend or distribution of cash, debt
or other property in respect of the Company's earnings or its accumulated
adjustments account as defined in Section 1368(e)(1) of the Code (including
any estimated amount of such account) in respect of the period in which the
Company is an "S" corporation within the meaning of Section 1361 of the
Code. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized, in its discretion, (i) to issue or assume stock
options, regardless of whether in a transaction to which Section 424(a) of
the Code applies, by means of substitution of new options for previously
issued options or an assumption of previously issued options, (ii) to make
provision, prior to the transaction, for the acceleration of the vesting
and exercisability of, or lapse of restrictions with respect to, Awards and
the termination of options that remain unexercised at the time of such
transaction or (iii) to provide for the acceleration of the vesting and
exercisability of the options and the cancellation thereof in exchange for
such payment as shall be mutually agreeable to the Participant and the
Committee.
15. RESTRICTIONS. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. It is the intent of the Company that this
Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of the
Exchange Act unless otherwise provided herein or in an Award Agreement, that any
ambiguities or inconsistencies in the construction of this Plan be interpreted
to give effect to such intention and that, if any provision of this Plan is
found not to be in compliance with Rule 16b-3, such provision shall be null and
void to the extent required to permit this Plan to comply with Rule 16b-3.
Certificates evidencing shares of Common Stock delivered under this Plan may be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or transaction
reporting system upon which the Common Stock is then listed and any applicable
federal and state securities law. The Committee may cause a legend or legends to
be placed upon any such certificates to make appropriate reference to such
restrictions.
16. UNFUNDED PLAN. Insofar as it provides for Awards of cash, Common Stock
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to a
grant of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award Agreement, and no such liability or obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. None of the Company, the Board or the Committee shall be required to
give any security or bond for the performance of any obligation that may be
created by this Plan.
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<PAGE> 27
17. GOVERNING LAW. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Texas.
18. EFFECTIVE DATE OF PLAN. This amendment and restatement of the Plan
shall be effective as of the date (the "Effective Date") it is approved by the
Board of Directors of the Company. Notwithstanding the foregoing, the amendment
and restatement of this Plan is expressly conditioned upon the approval by the
holders of a majority of outstanding shares of Common Stock present, or
represented, and entitled to vote at the 1998 annual meeting of shareholders. If
the shareholders of the Company should fail so to approve this Plan at such
annual meeting, this Plan shall terminate and cease to be of any further force
or effect except with respect to Awards then outstanding.
Attested to by the Secretary of
Eagle USA Air Freight, Inc. as
adopted by the Board of Directors
and Shareholders of Eagle USA Air
Freight, Inc. effective as of the
day of , 1998 (the
"Effective Date").
------------------------------------
Douglas A. Seckel
Secretary
<PAGE> 28
ANNEX B
EAGLE U.S.A. AIR FREIGHT, INC. EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE JULY 1, 1998)
1. PURPOSE
The Eagle U.S.A. Air Freight, Inc. Employee Stock Purchase Plan (the
"Plan") is designed to encourage and assist all employees of Eagle U.S.A. Air
Freight, Inc., a Texas corporation ("Eagle") and Subsidiaries (as defined in
Section 4) (hereinafter collectively referred to as the "Company"), where
permitted by applicable laws and regulations, to acquire an equity interest in
Eagle through the purchase of shares of common stock, .001 par value, of Eagle
("Common Stock"). It is intended that this Plan shall constitute an "employee
stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered and interpreted by the Compensation
Committee (the "Committee") appointed by the Board of Directors of Eagle (the
"Board"), which Committee shall consist of at least two (2) persons. The
Committee shall supervise the administration and enforcement of the Plan
according to its terms and provisions and shall have all powers necessary to
accomplish these purposes and discharge its duties hereunder including, but not
by way of limitation, the power to (i) employ and compensate agents of the
Committee for the purpose of administering the accounts of participating
employees; (ii) construe or interpret the Plan; (iii) determine all questions of
eligibility; and (iv) compute the amount and determine the manner and time of
payment of all benefits according to the Plan.
The Committee may act by decision of a majority of its members at a regular
or special meeting of the Committee or by decision reduced to writing and signed
by all members of the Committee without holding a formal meeting.
3. NATURE AND NUMBER OF SHARES
The Common Stock subject to issuance under the terms of the Plan shall be
shares of Eagle's authorized but unissued shares, previously issued shares
reacquired and held by Eagle or shares purchased on the open market. The
aggregate number of shares which may be issued under the Plan shall not exceed
two hundred thousand (200,000) shares of Common Stock. All shares purchased
under the Plan, regardless of source, shall be counted against the two hundred
thousand (200,000) share limitation.
In the event of any reorganization, stock split, reverse stock split, stock
dividend, combination of shares, merger, consolidation, offering of rights or
other similar change in the capital structure of Eagle, the Committee may make
such adjustment, if any, as it deems appropriate in the number, kind and
purchase price of the shares available for purchase under the Plan and in the
maximum number of shares which may be issued under the Plan, subject to the
approval of the Board and in accordance with Section 19.
4. ELIGIBILITY REQUIREMENTS
Each "Employee" (as hereinafter defined), except as described in the next
following paragraph, shall become eligible to participate in the Plan in
accordance with Section 5 on the first "Enrollment Date" (as defined therein)
following employment by the Company. Participation in the Plan is voluntary.
The following Employees are not eligible to participate in the Plan:
(i) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an aggregate
of five percent (5%) or more of the total combined voting power or value of
all outstanding shares of all classes of the Company or any subsidiary (in
determining
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stock ownership of an individual, the rules of Section 424(d) of the Code
shall be applied, and the Committee may rely on representations of fact
made to it by the employee and believed by it to be true);
(ii) Employees who are customarily employed by the Company less than
twenty (20) hours per week or less than five (5) months in any calendar
year; and
(iii) Employees who have not completed at least six (6) months of
service with the Company as of an Enrollment Date.
"Employee" shall mean any individual employed full-time by Eagle or any
Subsidiary (as hereinafter defined). "Subsidiary" shall mean Eagle Freight
Services, Inc. and any other corporation (a) which is in an unbroken chain of
corporations beginning with Eagle if, on or after the Effective Date, each of
the corporations other than the last corporation in the chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain and (b) which has
adopted the Plan with the approval of the Committee.
5. ENROLLMENT
Each eligible Employee of Eagle or any Subsidiary as of July 1, 1998 (the
"Effective Date" herein) may enroll in the Plan as of the Effective Date. Each
other eligible Employee of Eagle or a participating Subsidiary who thereafter
becomes eligible to participate may enroll in the Plan on the first to occur of
January 1 or July 1 following the date he first meets the eligibility
requirements of Section 4. Any eligible Employee not enrolling in the Plan when
first eligible may enroll in the Plan any subsequent January 1 or July 1. Any
eligible Employee may enroll or re-enroll in the Plan on the dates hereinabove
prescribed or such other specific dates established by the Committee from time
to time ("Enrollment Dates"). In order to enroll, an eligible Employee must
complete, sign and submit the appropriate form to the person designated by the
Committee.
6. METHOD OF PAYMENT
Payment for shares is to be made as of the applicable "Purchase Date" (as
defined in Section 9) through payroll deductions on an after-tax basis (with no
right of prepayment) over the Plan's designated purchase period (the "Purchase
Period"), with the first such deduction commencing with the first payroll period
ending after the Enrollment Date. Each Purchase Period under the Plan shall be a
period of six (6) calendar months beginning on each January 1 and ending on the
following June 30 and on each July 1 and ending on the following December 31 or
such other period as the Committee may prescribe; provided, however, that the
Purchase Period beginning on the Effective Date shall commence on the Effective
Date and end on December 31, 1998. Each participating Employee (hereinafter
referred to as a "Participant") will authorize such deductions from his pay for
each month during the Purchase Period and such amounts will be deducted in
conformity with his employer's payroll deduction schedule.
Each Participant may elect to make contributions each pay period in amounts
not less than $10, not to exceed an annual contribution equal to $20,000 (or
such other dollar amounts as the Committee may establish from time to time
before an Enrollment Date for all purchases to occur during the relevant
Purchase Period). In establishing other dollar amounts of permitted
contributions, the Committee may take into account the "Maximum Share
Limitation" (as defined in Section 8). The rate of contribution shall be
designated by the Participant in the enrollment form.
A Participant may elect to increase or decrease the rate of contribution
effective as of the first day of the Purchase Period by giving prior written
notice to the person designated by the Committee on the appropriate form. A
Participant may not elect to increase or decrease the rate of contribution
during a Purchase Period. A Participant may suspend payroll deductions at any
time during the Purchase Period, by giving prior written notice to the person
designated by the Committee on the appropriate form. If a Participant elects to
suspend his payroll deductions, such Participant's account will continue to
accrue interest and will be used to purchase stock at the end of the Purchase
Period. A Participant may also elect to withdraw his entire contributions for
the current Purchase Period in accordance with Section 8 by giving prior written
notice to the person
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designated by the Committee on the appropriate form. Any Participant who
withdraws his contributions will receive, as soon as practicable, his entire
account balance, including interest and dividends, if any. Any Participant who
suspends payroll deductions or withdraws contributions during any Purchase
Period cannot resume payroll deductions during such Purchase Period and must
re-enroll in the Plan in order to participate in the next Purchase Period.
Except in case of cancellation of election to purchase, death, resignation
or other terminating event, the amount in a Participant's account at the end of
the Purchase Period will be applied to the purchase of the shares.
7. CREDITING OF CONTRIBUTIONS, INTEREST AND DIVIDENDS
Contributions shall be credited to a Participant's account as soon as
administratively feasible after payroll withholding. Unless otherwise prohibited
by laws and regulations, Participant contributions will receive interest at a
rate realized for the investment vehicle or vehicles designated by the Committee
for purposes of the Plan. Interest will be credited to a Participant's account
from the first date on which such Participant's contributions are deposited with
the investment vehicle until the earlier of (i) the end of the Purchase Period
or (ii) in the event of cancellation, death, resignation or other terminating
event, the last day of the month prior to the date on which such contributions
are returned to the Participant. Dividends on shares held in a Participant's
account in the Plan will also be credited to such Participant's account. Any
such contributions, interest and dividends shall be deposited in or held by a
bank or financial institution designated by the Committee for this purpose (the
"Custodian").
8. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will constitute
the grant by the Company to the Participant of the right to purchase shares of
Common Stock under the Plan. Re-enrollment by a Participant in the Plan will
constitute a grant by the Company to the Participant of a new opportunity to
purchase shares on the Enrollment Date on which such re-enrollment occurs. A
Participant who has not (a) terminated employment, (b) withdrawn his
contributions from the Plan, or (c) notified the Company in writing, by such
date as the Committee shall establish (which date shall not be later than June 1
or December 1, as applicable), of his election to withdraw his payroll
deductions plus interest as of the applicable of June 30 or December 31 will
have shares of Common Stock purchased for him on the applicable Purchase Date,
and he will automatically be re-enrolled in the Plan on the Enrollment Date
immediately following the Purchase Date on which such purchase has occurred,
unless each Participant notifies the person designated by the Committee on the
appropriate form that he elects not to re-enroll.
Each right to purchase shares of Common Stock under the Plan during a
Purchase Period shall have the following terms:
(i) the right to purchase shares of Common Stock during a particular
Purchase Period shall expire on the earlier of: (A) the completion of the
purchase of shares on the Purchase Date occurring in the Purchase Period,
or (B) the date on which participation of such Participant in the Plan
terminates for any reason;
(ii) payment for shares purchased will be made only through payroll
withholding and the crediting of interest and dividends, if applicable, in
accordance with Sections 6 and 7;
(iii) purchase of shares will be accomplished only in accordance with
Section 9;
(iv) the price per share will be determined as provided in Section 9;
(v) the right to purchase shares (taken together with all other such
rights then outstanding under this Plan and under all other similar stock
purchase plans of Eagle or any Subsidiary) will in no event give the
Participant the right to purchase a number of shares during a calendar year
in excess of the number of shares of Common Stock derived by dividing
$25,000 by the fair market value of the Common Stock (the "Maximum Share
Limitation") on the applicable Grant Date determined in accordance with
Section 9;
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(vi) shares purchased under this Plan may not be sold within six (6)
months of the Purchase Date, unless the Compensation Committee, in its sole
discretion, waives this requirement; and
(vii) the right to purchase shares will in all respects be subject to
the terms and conditions of the Plan, as interpreted by the Committee from
time to time.
9. PURCHASE OF SHARES
The right to purchase shares of Common Stock granted by the Company under
the Plan is for the term of a Purchase Period. The fair market value of the
Common Stock ("Fair Market Value") to be purchased during such Purchase Period
will be the final closing sales price per share of the Common Stock on the
NASDAQ National Market System on the first trading day of the calendar month of
January or July, as applicable, or such other trading date designated by the
Committee (the "Grant Date"). The Fair Market Value of the Common Stock will
again be determined in the same manner on the last trading day of the calendar
month of June or December, as applicable, or such other trading date designated
by the Committee (the "Purchase Date"); however, in no event shall the
Committee, in the exercise of its discretion, designate a Purchase Date beyond
twenty-seven (27) months from the related Enrollment Date or otherwise fail to
meet the requirements of Section 423(b)(7) of the Code. These dates constitute
the date of grant and the date of exercise for valuation purposes of Section 423
of the Code.
As of the Purchase Date, the Committee shall apply the funds then credited
to each Participant's account to the purchase of whole shares of Common Stock.
The cost to the Participant for the shares purchased during a Purchase Period
shall be the lower of:
(i) eighty-five percent (85%) of the Fair Market Value of Common Stock
on the Grant Date; or
(ii) eighty-five percent (85%) of the Fair Market Value of Common
Stock on the Purchase Date.
Certificates evidencing shares purchased shall be delivered to the
Custodian or to any other bank or financial institution designated by the
Committee for this purpose or delivered to the Participant (if the Participant
has elected by written notice to the Committee to receive the certificate) as
soon as administratively feasible after the Purchase Date; however, certificates
shall not be delivered to the Participant within six (6) months of the Purchase
Date of the underlying shares, except as otherwise provided herein.
Notwithstanding the foregoing, Participants shall be treated as the record
owners of their shares effective as of the Purchase Date. Shares that are held
by the Custodian or any other designated bank or financial institution shall be
held in book entry form. Any cash equal to less than the price of a whole share
of Common Stock shall be credited to a Participant's account on the Purchase
Date and carried forward in his account for application during the next Purchase
Period. Any Participant (i) who purchases stock at the end of a Purchase Period
and is not re-enrolled in the Plan for the next Purchase Period or (ii) who
withdraws his contributions from the Plan prior to the next Purchase Date will
receive a certificate for the number of shares held in his account for at least
six (6) months as of the most recent Purchase Date and any cash, dividends or
interest remaining in his account. Such Participant may elect to receive a
certificate for the remaining number of shares held in his account six (6)
months after such shares were purchased or, if earlier, upon such Participant's
termination of employment. This six-month holding requirement may be waived by
the Compensation Committee, in its sole discretion. Until such certificates are
distributed to the Participant, the Participant will not be permitted to
transfer ownership of the certificates except as contemplated by Section 14 of
the Plan. Any Participant who terminates employment will receive a certificate
for the number of shares held in his account and a cash refund attributable to
amounts equal to less than the price of a whole share, and any accumulated
contributions, dividends and interest. If for any reason the purchase of shares
with a Participant's allocations to the Plan exceeds or would exceed the Maximum
Share Limitation, such excess amounts shall be refunded to the Participant as
soon as practicable after such excess has been determined to exist.
If as of any Purchase Date the shares authorized for purchase under the
Plan are exceeded, enrollments shall be reduced proportionately to eliminate the
excess. Any funds that cannot be applied to the purchase of shares due to excess
enrollment shall be refunded as soon as administratively feasible, including
interest determined in accordance with Section 7. The Committee in its
discretion may also provide that excess
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enrollments may be carried over to the next Purchase Period under this Plan or
any successor plan according to the regulations set forth under Section 423 of
the Code.
10. MANNER OF WITHDRAWAL
A Participant may elect to withdraw at any time (without withdrawing from
participation in the Plan) shares which have been held in his account for at
least six (6) months by giving notice to the person designated by the Committee
on the appropriate form. Upon receipt of such notice from the person designated
by the Committee, the Custodian, bank or other financial institution designated
by the Committee for this purpose will arrange for the issuance and delivery of
such shares held in the Participant's account as soon as administratively
feasible.
11. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by the Company for any reason whatsoever
(including death, unpaid disability or when the Participant's employer ceases to
be a Subsidiary) or the Participant otherwise becomes ineligible. Participation
also terminates immediately when the Participant voluntarily withdraws his
contributions from the Plan. Participation terminates immediately after the
Purchase Date if the Participant is not re-enrolled in the Plan for the next
Purchase Period or if the Participant has suspended payroll deductions during
any Purchase Period and has not re-enrolled in the Plan for the next Purchase
Period. As soon as administratively feasible after termination of participation,
the Committee shall pay to the Participant or his beneficiary or legal
representative all amounts credited to his account, including interest and
dividends, if applicable, determined in accordance with Section 7, and shall
cause a certificate for the number of shares held in his account to be delivered
to the Participant, subject to the restrictions in Section 9. For purposes of
the Plan, a Participant is not deemed to have terminated his employment if he
transfers employment from Eagle to a Subsidiary, or vice versa, or transfers
employment between Subsidiaries.
12. UNPAID LEAVE OF ABSENCE
Unless the Participant has voluntarily withdrawn his contributions from the
Plan, shares will be purchased for his account on the Purchase Date next
following commencement of an unpaid leave of absence by such Participant,
provided such leave does not constitute a termination of employment. The number
of shares to be purchased will be determined by applying to the purchase the
amount of the Participant's contributions made up to the commencement of such
unpaid leave of absence plus interest on such contributions and dividends, if
applicable, both determined in accordance with Section 7. If the Participant's
unpaid leave of absence both commences and terminates during the same Purchase
Period and he has resumed eligible employment prior to the Purchase Date related
to that Purchase Period, he may also resume payroll deductions immediately, and
shares will be purchased for him on such Purchase Date as otherwise provided in
Section 9.
13. DESIGNATION OF BENEFICIARY
Each Participant may designate one or more beneficiaries in the event of
death and may, in his sole discretion, change such designation at any time. Any
such designation shall be effective upon receipt by the person designated by the
Committee and shall control over any disposition by will or otherwise.
As soon as administratively feasible after the death of a Participant,
amounts credited to his account, including interest and dividends, if
applicable, determined in accordance with Section 7, shall be paid in cash and a
certificate for any shares shall be delivered to the Participant's designated
beneficiaries or, in the absence of such designation, to the executor,
administrator or other legal representative of the Participant's estate. Such
payment shall relieve the Company of further liability to the deceased
Participant with respect to the Plan. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the Participant has given express contrary instructions.
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14. ASSIGNMENT
Except as provided in Section 13, the rights of a Participant under the
Plan will not be assignable or otherwise transferable by the Participant, other
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order," as defined in Section 414(p) of the Code. No
purported assignment or transfer of such rights of a Participant under the Plan,
whether voluntary or involuntary, by operation of law or otherwise, shall vest
in the purported assignee or transferee any interest or right therein
whatsoever, but immediately upon such assignment or transfer, or any attempt to
make the same, such rights shall terminate and become of no further effect. If
this provision is violated, the Participant's election to purchase Common Stock
shall terminate, and the only obligation of the Company remaining under the Plan
will be to pay to the person entitled thereto the amount then credited to the
Participant's account. No Participant may create a lien on any funds,
securities, rights or other property held for the account of the Participant
under the Plan, except to the extent that there has been a designation of
beneficiaries in accordance with the Plan, and except to the extent permitted by
will or the laws of descent and distribution if beneficiaries have not been
designated. A Participant's right to purchase shares under the Plan shall be
exercisable only during the Participant's lifetime and only by him.
15. COSTS
All costs and expenses incurred in administering this Plan shall be paid by
the Company. Any brokerage fees for the sale of shares purchased under the Plan
shall be paid by the Participant.
16. REPORTS
At the end of each Purchase Period, the Company shall provide or cause to
be provided to each Participant a report of his contributions, including
interest earned, and the number of whole shares of Common Stock purchased with
such contributions by that Participant on each Purchase Date.
17. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and
related regulations. Any provision of the Plan which is inconsistent with
Section 423 or any successor provision of the Code shall without further act or
amendment by the Company be reformed to comply with the requirements of Section
423. This Section 17 shall take precedence over all other provisions in the
Plan.
18. RIGHTS AS SHAREHOLDERS
A Participant will have no rights as a stockholder under the election to
purchase until he becomes a stockholder as herein provided. A Participant will
become a stockholder with respect to shares for which payment has been completed
as provided in Section 9 at the close of business on the last business day of
the Purchase Period.
19. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time insofar as permitted
by law. No amendment shall be effective unless within one (1) year after it is
adopted by the Board it is approved by the holders of Eagle's outstanding shares
if and to the extent such amendment is required to be approved by shareholders
in order to cause the rights granted under the Plan to purchase shares of Common
Stock to meet the requirements of Section 423 of the Code (or any successor
provision).
The Plan shall terminate after all Common Stock issued under the Plan has
been purchased, unless terminated earlier by the Board or unless additional
Common Stock is issued under the Plan with the approval of the shareholders. In
the event the Plan is terminated, the Committee may elect to terminate all
outstanding rights to purchase shares under the Plan either immediately or upon
completion of the purchase of shares on
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the next Purchase Date, unless the Committee has designated that the right to
make all such purchases shall expire on some other designated date occurring
prior to the next Purchase Date. If the rights to purchase shares under the Plan
are terminated prior to expiration, all funds contributed to the Plan which have
not been used to purchase shares shall be returned to the Participants as soon
as administratively feasible, including interest and dividends, if applicable,
determined in accordance with Section 7.
20. BOARD AND SHAREHOLDER APPROVAL; EFFECTIVE DATE
Effective Date of Plan. This Plan was adopted by the Board on February 23,
1998. This Plan shall be effective as of the Effective Date. Notwithstanding the
foregoing, the adoption of this Plan is expressly conditioned upon the approval
by written consent of the holders of a majority of shares of outstanding shares
of Common Stock on or before February 23, 1998. If the shareholders of the
Company should fail so to approve this Plan on or before such date, this Plan
shall terminate and cease to be of any further force or effect and all purchases
of shares of Common Stock under the Plan shall be null and void.
21. GOVERNMENTAL APPROVALS OR CONSENTS
This Plan and any offering or sale made to Employees under it are subject
to any governmental approvals or consents that may be or become applicable in
connection therewith. Subject to the provisions of Section 19, the Board may
make such changes in the Plan and include such terms in any offering under the
Plan as may be desirable to comply with the rules or regulations of any
governmental authority.
22. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board or the Committee shall determine, based on opinion
of legal counsel, that the listing, registration or qualification of the shares
covered by the Plan upon any national securities exchange or reporting system or
under any state or federal law is necessary or desirable as a condition of, or
in connection with, the sale or purchase of shares under the Plan, no shares
will be sold, issued or delivered unless and until such listing, registration or
qualification shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to legal counsel.
23. EMPLOYMENT RIGHTS
The Plan shall neither impose any obligation on Eagle or on any Subsidiary
to continue the employment of any Participant, nor impose any obligation on any
Participant to remain in the employ of Eagle or of any Subsidiary.
24. WITHHOLDING OF TAXES
The Committee may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with the
purchase of Common Stock under the Plan.
25. GOVERNING LAW
The Plan and rights to purchase shares that may be granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
state of Texas.
26. USE OF GENDER
The gender of words used in the Plan shall be construed to include
whichever may be appropriate under any particular circumstances of the
masculine, feminine or neuter genders.
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27. OTHER PROVISIONS
The agreements to purchase shares of Common Stock under the Plan shall
contain such other provisions as the Committee and the Board shall deem
advisable, provided that no such provision shall in any way be in conflict with
the terms of the Plan.
ADOPTED effective July 1, 1998.
EAGLE U.S.A. AIR FREIGHT, INC.
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EAGLE USA AIRFREIGHT, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
FEBRUARY 23, 1998
P The undersigned hereby appoints James R. Crane and Douglas A.
Seckel, jointly and severally, proxies, with full power of
R substitution and with discretionary authority, to vote all shares of
Common Stock which the undersigned is entitled to vote at the Annual
O Meeting of Shareholders of Eagle USA Airfreight, Inc. (the
"Company") to be held on Monday, February 23, 1998, at The Hyatt
X Regency at George Bush Intercontinental Airport, 15747 John F.
Kennedy Blvd., Houston, Texas 77032, at 10:00 a.m., or at any
Y adjournment thereof, hereby revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE
CONTRARY, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE
DIRECTORS NAMED BELOW, FOR THE PROPOSAL TO AMEND THE COMPANY'S
RESTATED ARTICLES OF INCORPORATION TO INCREASE THE COMPANY'S
AUTHORIZED COMMON STOCK, FOR THE PROPOSAL TO AMEND THE COMPANY'S
LONG-TERM INCENTIVE PLAN TO INCREASE THE SHARES OF COMMON STOCK
RESERVED UNDER THE PLAN, FOR THE PROPOSAL TO APPROVE THE EMPLOYEE
STOCK PURCHASE PLAN, AND FOR THE APPROVAL OF PRICE WATERHOUSE LLP AS
THE COMPANY'S ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
1998.
The undersigned hereby acknowledges receipt of the Notice of,
and Proxy Statement for, the aforesaid Annual Meeting.
1. ELECTION OF DIRECTORS, NOMINEES:
James R. Crane; Douglas A. Seckel; William P. O'Connell; Neil E.
Kelley; and Frank J. Hevrdejs as directors, except as indicated
below; or
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
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(Continued, and to be signed and dated, on reverse side)
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(Continued from front)
2. PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S LONG-TERM INCENTIVE PLAN WHICH WILL BE
AMENDED AND RESTATED TO INCREASE THE SHARES OF COMMON STOCK RESERVED UNDER
THE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE EMPLOYEE STOCK PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. APPROVAL OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. WITH DISCRETIONARY AUTHORITY AS TO SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
Date:-----------------------, 1998
----------------------------------
(Signature)
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(Signature)
Sign exactly as name appears
hereon. (Joint owners should each
sign. When signing as attorney,
executor, officer, administrator,
trustee, or guardian, please give
full title as such.)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
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