<PAGE> 1
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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 13, 1999
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 22, 1999, at the Corporate Headquarters of Eagle USA Airfreight, Inc.
(located near George Bush Intercontinental Airport), 15350 Vickery Drive,
Houston, Texas 77032.
At the meeting, you will be asked to consider and vote upon (1) the
election of six directors; (2) the approval of the appointment of the Company's
independent public accountants; and (3) 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 1998 Annual Report to Shareholders is also
enclosed.
Sincerely,
LOGO
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 22, 1999
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 Corporate Headquarters of
Eagle USA Airfreight, Inc. (located near George Bush Intercontinental Airport),
15350 Vickery Drive, Houston, Texas 77032, on Monday, February 22, 1999, at
10:00 a.m. for the following purposes:
(1) to elect six members to the Board of Directors for the ensuing year;
(2) to approve the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for the fiscal year ending September
30, 1999; and
(3) to transact such other business as may properly come before the
meeting.
The Company has fixed the close of business on December 30, 1998, 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
LOGO
Douglas A. Seckel
Secretary
January 13, 1999
15350 Vickery Drive
Houston, TX 77032
<PAGE> 4
EAGLE USA AIRFREIGHT, INC.
15350 VICKERY DRIVE
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 1999 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Corporate Headquarters of
Eagle USA Air Freight, Inc. (located near George Bush Intercontinental Airport),
15350 Vickery Drive, Houston, Texas 77032, on Monday, February 22, 1999, 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 11, 1999. 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, 1998, 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 18,732,211 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 appointment of
PricewaterhouseCoopers LLP as independent public accountants of the Company for
the fiscal year ended September 30, 1999; and (3) 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 a particular 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.
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<PAGE> 5
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
November 30, 1998 and (ii) the shares of Common Stock beneficially owned, as of
November 30, 1998, by each director, the Chief Executive Officer and the three
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............................................ 8,272,378 43.9%
Douglas Seckel............................................ 100,976 --
Ronald E. Talley(3)....................................... 39,497 --
John C. McVaney(4)........................................ 13,800 --
William P. O'Connell(5)................................... 17,500 --
Neil E. Kelley(6)......................................... 35,000 --
Frank J. Hevrdejs(6)...................................... 56,500 --
Norwood W. Knight-Richardson(7)........................... -- --
Executive Officers and Directors as a Group (8 persons)..... 8,535,651(8) 45.3%
T. Rowe Price Associates, Inc.(9)........................... 1,085,600 5.8%
</TABLE>
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(1) The business address of each director and executive officer is c/o Eagle USA
Airfreight, Inc., 15350 Vickery Drive, 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) Includes 33,497 shares issuable upon the exercise of stock options within 60
days of November 30, 1998.
(4) Mr. McVaney was appointed Executive Vice President of the Company in January
1998. His share ownership includes 13,800 shares issuable upon the exercise
of stock options within 60 days of November 30, 1998.
(5) Includes 17,500 shares issuable upon the exercise of stock options within 60
days of November 30, 1998.
(6) Includes 25,000 shares issuable upon the exercise of stock options within 60
days of November 30, 1998. Includes 1,500 shares owned by Mr. Hevrdejs' wife
as to which he declines beneficial ownership.
(7) Dr. Knight-Richardson was appointed to the Board of Directors in May 1998.
(8) Includes 114,797 shares issuable upon the exercise of stock options within
60 days of November 30, 1998.
(9) Based on a filing made with the SEC reflecting ownership of Common Stock as
of September 30, 1998. The address of T. Rowe Price Associates, Inc. is 100
East Pratt Street, Baltimore, Maryland 21202.
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<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; Mr. Frank
J. Hevrdejs and Dr. Norwood W. Knight-Richardson. 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 six nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of November 30, 1998, position with the Company and business
experience during the past five years.
JAMES R. CRANE, age 44, 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 16 years' experience in the transportation industry.
DOUGLAS A. SECKEL, age 47, 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 59, 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 39, 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 53, 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.
NORWOOD W. KNIGHT-RICHARDSON, age 51, has served as a director of the
Company since May 1998. Dr. Knight-Richardson has served as the Medical Director
of and a practicing physician for CareMark Behavioral Health Services, a private
behavioral health services company, since August 1998. He has served as the
President and Chief Medical Officer of Continuum Healthcare Services, Inc. from
December 1997 to August 1998 and the Practicing Physician and Director of
University Behavioral Health Services from 1996 to December 1997. Dr.
Knight-Richardson was the Founder, President and Chief Executive Officer of the
Richardson Clinics from 1992 to 1996. Prior to such time, Dr. Knight-Richardson
held several positions including that of Vice President in the International
Division of Bank of America. Dr. Knight-Richardson has
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<PAGE> 7
also held faculty positions at several medical schools and is currently clinical
associate professor at Baylor College of Medicine in Houston, Texas.
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. For Dr. Knight-Richardson,
who was not a director for the full fiscal year, this amount was pro rated to
$7,500. 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 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, 1998, options to purchase 5,000 shares were
granted to each of Messrs. O'Connell, Kelley and Hevrdejs at an exercise price
per share of $28.19. During the fiscal year ended September 30, 1998, options to
purchase 20,000 shares were granted to Dr. Knight-Richardson at an exercise
price per share of $33.97.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held four meetings during the fiscal
year ended September 30, 1998, and transacted business on seven occasions during
the fiscal year by unanimous written consent.
The Board of Directors has an Audit Committee which consisted of Messrs.
O'Connell, Kelley and Hevrdejs. 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 did not meet during fiscal 1998 but did meet in November
1998 to discuss certain of these matters.
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 two occasions by unanimous written consent
during fiscal 1998.
The Board of Directors has a Nominating Committee which consists of Messrs.
Kelley, Hevrdejs and Crane. The Nominating Committee did not meet during fiscal
1998. The functions performed by the Nominating Committee are to make
non-binding recommendations with respect to the nomination of directors to serve
on the board of Directors of the Company for the Board's final determination and
approval, and any other duties that may be assigned by the Board from time to
time. Shareholders of the Company who wish to nominate persons for election to
the Board of Directors must comply with the provisions of the Bylaws that are
described more fully under "Shareholder Proposals for Next Annual Meeting."
During the fiscal year ended September 30, 1998, each director, other than
Mr. Hevrdejs, 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.
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<PAGE> 8
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 10% 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, 1998, 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, except that Neil E. Kelley filed
two late Form 4's reporting a total of five transactions.
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 three executive officers
with annual salary and bonus in excess of $100,000 (collectively, the "Named
Executives"), as well as the total compensation paid to each Named Executive for
the Company's fiscal years ended September 30, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION($)(2)
----------------------------------------- ------------ ------------------
NAME AND FISCAL OTHER ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#)
- ------------------ ------ --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James R. Crane 1998 $521,066 $235,518 -- -- $ 9,459
President, Chief 1997 $521,066 $407,976 -- -- $16,494
Executive 1996 $521,066 $240,490 -- -- $14,042
Officer Chairman of
Board of Directors
Douglas A. Seckel 1998 $125,000 $ 67,915 -- 50,000 $ 7,500
Chief Financial 1997 $125,000 $113,106 -- -- $ 7,500
Officer, Secretary 1996 $121,538 $ 73,061 -- -- $ 7,500
and Treasurer
Ronald E. Talley 1998 $182,000 $128,978 -- 50,000 $ 7,500
Chief Operating
Officer(3)
John C. McVaney 1998 $182,000 $ 94,736 -- 60,000 $ 7,500
Executive Vice
President(3)
</TABLE>
- ---------------
(1) For the fiscal years 1996, 1997, and 1998, 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 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. For the fiscal year 1998, all other compensation
consists of premiums of $1,959 paid
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by the Company under a disability insurance policy for Mr. Crane and
contributions of $7,500 by the Company under its 401(k) Profit Sharing Plan
for each Named Executive.
(3) Messrs. Talley and McVaney were named executive officers in fiscal 1998.
Information for prior years is omitted.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning Options/SARs granted
during 1998 to the named executives:
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
------------ POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/SARS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION OF
OPTIONS/SARS EMPLOYEES EXERCISE OR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME (#) YEAR ($/SHARE)(1) DATE 5%($) 10%($)
- ---- ------------ ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James R. Crane....... -- -- -- -- -- --
Douglas A. Seckel.... 50,000 2.8% $29.13 3/31/05 $460,924 $1,198,877
Ronald E. Talley..... 50,000 2.8% $29.13 3/31/05 $460,924 $1,198,877
John C. McVaney...... 10,000 0.6% $25.38 12/30/04 $103,302 $ 240,737
John C. McVaney...... 50,000 2.8% $29.13 3/31/05 $460,924 $1,198,877
</TABLE>
- ---------------
(1) The exercise price of the options granted is equal to the market value of
the Company's Common Stock on the date of grant.
(2) Potential realizable value of each grant assumes that the market prices of
the underlying security appreciates at annualized rates of 5% and 10% over
the term of the award. Actual gains, if any, on stock option exercises are
dependent on the future performance of Common Stock and overall market
conditions. There can be no assurance that the amounts reflected on this
table will be achieved.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
stock options and the unexercised options to purchase the Common Stock held by
the Named Executives at September 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END ($)(2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Crane.......... -- -- -- -- -- --
Douglas A. Seckel....... -- -- -- 50,000 -- --
Ronald E. Talley........ 26,498 $882,715 30,497 89,497 $337,837 $337,837
John C. McVaney......... -- -- 11,800 95,400 -- --
</TABLE>
- ---------------
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company's Common Stock on
the date of exercise, multiplied by the number of shares underlying the
options exercised.
(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, 1998,
was $14.00.
CERTAIN TRANSACTIONS
On January 30, 1998, the Company completed an underwritten secondary public
offering of 2,012,500 shares of its Common Stock at a purchase to the public of
$27.75 per share. The Company sold 262,500 of these shares and the net proceeds
received by the Company after deducting underwriting discounts and commissions
and offering expenses were $6.6 million and will be used for general corporate
purposes. The
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<PAGE> 10
Company did not receive any of the proceeds from the sale of 1,750,000 of these
shares sold by James R. Crane, the Company's Chairman of the Board of Directors,
President and Chief Executive Officer. The Company paid for the expenses of this
offering (other than underwriting discounts and commissions) pursuant to a
Shareholders' Agreement dated as of October 1, 1994, which among other things
grants to Mr. Crane three demand registrations and two additional demand
registrations on SEC Form S-3 as well as certain "piggy-back" registration
rights, each of which is at the expense of the Company.
James R. Crane, the Company's Chairman of the Board, owns 50% of an entity
that leases an 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 $424,000 during the
fiscal year ended September 30, 1998. During the current fiscal year, the
Company has entered into similar arrangements with an entity that is owned 100%
by Mr. Crane.
The Company has entered into a tax indemnification agreement with Messrs.
Crane, Seckel and two former officers and directors 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.
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 1998, awards to executive
officers as a group reflected (i) the Company's record revenues and earnings,
(ii) continued progress toward strategic goals such as continued market
expansion and enhancements to the Company's management information systems,
(iii) the performance of the Company's Common Stock and (iv) changes in the
Company's operating margin.
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
7
<PAGE> 11
officers are that officer's responsibilities, experience, leadership, potential
future contribution, and demonstrated 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, 1998, Messrs.
Crane and Seckel were paid 58% and Messrs. Talley and McVaney were paid 90% of
their respective maximum "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. Options under the Plan were
granted to Messrs. Seckel, Talley and McVaney during the fiscal year ended
September 30, 1998.
Compensation of the Chief Executive Officer. In reviewing Mr. Crane's
performance, the Committee focused primarily on the Company's performance in
fiscal year 1998, including a 43% sales increase, a 7.7% operating margin and a
25% 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 fiscal 1998 incentive multiple of 1.2%, when applied
to Fiscal 1998 operating income of $31,660,688 (which is net of the effect of
acquisitions), would have allowed for a maximum incentive bonus of $379,928. The
Committee, however, took into account declines in the Company's Common Stock
price during the year and the 7.7% operating margin in deciding to award Mr.
Crane $220,518, which constituted 58% of such maximum amount.
8
<PAGE> 12
Mr. Crane also received $15,000 under the Company's profit sharing plan, which
was the maximum amount granted under that plan to any senior executive of the
Company during fiscal 1998.
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. As
described above, options were granted to three executive officers in fiscal
1998. All options previously granted under the Company's Incentive Plan 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, 1998, 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
Douglas A. Seckel........................................... $125,000
Secretary/Treasurer, Director
and Chief Financial Officer
Ronald E. Talley............................................ $200,000
Chief Operating Officer
John C. McVaney............................................. $200,000
Executive Vice President
</TABLE>
In addition to the base salaries set forth above, the Company expects to,
subject to certain conditions, pay the executive an annual cash bonus pursuant
to the terms of the Five-Year Executive Incentive Plan. The fiscal 1999 cash
incentive under such plan, assuming all goals are met, is 1.08% of operating
income for Mr. Crane and 0.36% of operating income for Mr. Seckel, Mr. Talley
and Mr. McVaney. Each of the above employment agreements provides that it
continues in effect until terminated by either the Company or the
9
<PAGE> 13
executive pursuant to its terms. Both the Company and the executive have the
right to terminate the agreement upon advance written notice specified in such
agreement, 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 specified in such agreement following its
termination. The employment agreements for Messrs. Crane, Seckel, Talley and
McVaney continue in effect for fiscal 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the fiscal year ended September 30, 1998, 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,
1998, 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., FDX Corporation and the
Pittston BAX Group (a tracking stock of the Pittston Company). 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 a subsequent
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.
10
<PAGE> 14
COMPARISON OF 34-MONTH CUMULATIVE TOTAL RETURN*
AMONG EAGLE USA AIRFREIGHT, INC., THE S&P 500
INDEX AND THE DOW JONES AIR FREIGHT/COURIERS INDEX
CHART
<TABLE>
<CAPTION>
EAGLE DOW
USA JONES AIR
Measurement Period AIRFREIGHT, FREIGHT
(Fiscal Year Covered) INC. S&P 500 COURIERS
<S> <C> <C> <C>
12/1/95 100 100 100
9/96 315.15 115.18 102.76
9/97 406.06 161.76 193.86
9/98 169.70 176.39 111.04
</TABLE>
* $100 Invested on 12/01/95 in Stock or Index
(Including Reinvestment of Dividends).
11
<PAGE> 15
PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, PricewaterhouseCoopers LLP, who have been the Company's auditors
since 1991, as independent public accountants for the fiscal year ending
September 30, 1999. Representatives of PricewaterhouseCoopers 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 PricewaterhouseCoopers LLP as the
Company's auditors for 1999. The affirmative vote of a majority of the votes
cast at the Annual Meeting will be required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS 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
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, addresses
when a company must include a shareholder's proposal in its proxy statement and
identify the proposal in its form of proxy when the company holds an annual or
special meeting of shareholders. Under Rule 14a-8, proposals that shareholders
intend to have included in the Company's proxy statement and form of proxy for
the 2000 Annual Meeting of Shareholders must be received by the Company no later
than September 13, 1999. However, if the date of the 2000 Annual Meeting of
Shareholders changes by more than 30 days from the date of the 1999 Annual
Meeting of Shareholders, the deadline is a reasonable time before the Company
begins to print and mail its proxy materials, which deadline will be set forth
in a Quarterly Report on Form 10-Q or will otherwise be communicated to
shareholders. Shareholder proposals must also be otherwise eligible for
inclusion.
If a shareholder desires to bring a matter before an annual or special
meeting and the proposal is submitted outside the process of Rule 14a-8, the
shareholder must follow the procedures set forth in the Company's Bylaws. The
Company's Bylaws provide generally 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). If the date of the 2000 Annual Meeting of
Shareholders is the same as the date of the 1999 Annual Meeting of Shareholders,
shareholders who wish to nominate directors or to bring business before the 2000
Annual Meeting of Shareholders must notify the Company no later than December 4,
1999.
By Order of the Board of Directors
LOGO
Douglas A. Seckel
Secretary
Dated: January 13, 1999
Houston, Texas
12
<PAGE> 16
- --------------------------------------------------------------------------------
P
R EAGLE USA AIRFREIGHT, INC.
O PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
Y FEBRUARY 22, 1999
The undersigned hereby appoints James R. Crane and Douglas A. Seckel,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to vote all shares of Common Stock which the under
signed is entitled to vote at the Annual Meeting of Shareholders of Eagle USA
Airfreight, Inc. (the "Company") to be held on Monday, February 22, 1999, at the
Corporate Headquarters of Eagle USA Airfreight, Inc. (located near George Bush
Intercontinental Airport), 15350 Vickery Drive., Houston, Texas 77032, at 10:00
a.m., or at any 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 AND FOR THE APPROVAL OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S ACCOUNTANTS FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1999.
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;
Frank J. Hevrdejs; and Norwood W. Knight-Richardson as directors, except as
indicated below; or
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly come
before the meeting.
Date:
- -------------------------------------------------------------------------------,
1999
------------------------------
(Signature)
------------------------------
(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.
- --------------------------------------------------------------------------------
