SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 ss. 240.14a-11(c) or ss. 240.14a-12
COACH USA, 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)(4) 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
April 30, 1999
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite all
stockholders to attend the Annual Meeting of Coach USA, Inc. to be held on
Thursday, June 3, 1999, at 1:30 p.m., at The Houstonian, 111 North Post Oak
Lane, Houston, Texas 77024. Proxy materials, which include a Notice of the
Meeting, Proxy Statement and proxy card, are enclosed with this letter. The
Company's 1998 Annual Report to stockholders, which includes the Company's
Annual Report on Form 10-K, is also enclosed and provides additional information
regarding the financial results of the Company in 1998.
We hope that you will be able to attend the Annual Meeting. Your vote
is important. If you cannot be present, please execute and return the proxy card
in the enclosed envelope so that your shares will be represented. If your shares
are not registered in your own name and you would like to attend the Annual
Meeting, please ask the broker, trust, bank or other nominee that holds the
shares to provide you with evidence of your share ownership. We look forward to
seeing you at the Annual Meeting.
Sincerely,
Lawrence K. King
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER
<PAGE>
COACH USA, INC.
ONE RIVERWAY, SUITE 500
HOUSTON, TEXAS 77056
---------------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999
---------------------------
TO THE STOCKHOLDERS:
The 1999 Annual Meeting of Stockholders of Coach USA, Inc. (the
"Company"), will be held at The Houstonian, 111 North Post Oak Lane, Houston,
Texas 77024 at 1:30 p.m. on Thursday, June 3, 1999, for the following purposes:
1. To elect three Class III directors of the Company to hold
office until the third succeeding Annual Meeting of
stockholders after their election (the 2002 Annual Meeting)
and until their respective successors shall have been elected
and qualified.
2. To ratify the selection of Arthur Andersen LLP as the
Company's independent certified public accountants to audit
the Company's consolidated financial statements for the year
ending December 31, 1999.
3. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The holders of record of the Company's common stock at the close of
business on April 19, 1999, are entitled to notice of and to vote at the Annual
Meeting with respect to all proposals. We urge you to sign and date the enclosed
proxy and return it promptly by mail in the enclosed envelope, whether or not
you plan to attend the Annual Meeting in person. No postage is required if
mailed in the United States. If you do attend the Annual Meeting in person, you
may withdraw your proxy and vote personally on all matters brought before the
Annual Meeting.
By Order of the Board of Directors,
Douglas M. Cerny
SECRETARY
Houston, Texas
April 30, 1999
<PAGE>
COACH USA, INC.
ONE RIVERWAY, SUITE 500
HOUSTON, TEXAS 77056
---------------------------
PROXY STATEMENT
---------------------------
MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Coach USA, Inc., a Delaware corporation
(the "Company"), for use at the Company's Annual Meeting of Stockholders or any
postponement or adjournment thereof (the "Annual Meeting") to be held at The
Houstonian, 111 North Post Oak Lane, Houston, Texas 77024 at 1:30 p.m. on
Thursday, June 3, 1999 for the purposes set forth in the notice attached hereto.
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about April 30, 1999.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 19, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. On the record date, the Company had
outstanding and entitled to vote 25,427,140 shares of its common stock, par
value $.01 per share ("Common Stock"). There are no other classes of voting
securities of the Company outstanding. Each share of Common Stock entitles the
holder to one vote on each matter presented at the Annual Meeting. A proxy will
be voted in the manner specified on the proxy, or if no manner is specified, it
will be voted in favor of the proposals set forth in the notice attached hereto.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote at the Annual Meeting, either in person
or represented by duly executed proxies, is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. If sufficient shares to
constitute a quorum are not represented, in person or by proxy at the Annual
Meeting, the Annual Meeting may be postponed or adjourned in order to permit
further solicitation of proxies by the Company. Abstentions are counted as
"shares present" at the meeting for purposes of determining the presence of a
quorum, but broker non-votes (which result when a broker holding shares for a
beneficial owner has not received timely voting instructions on certain matters
from such beneficial owner) are not considered "shares present" with respect to
any matter.
The election of directors will be determined by a plurality of the votes
cast by holders of shares of Common Stock. Cumulative voting for the election of
directors is not permitted. The approval of all other matters will require the
affirmative vote of holders of a majority of the shares present in person or
represented by duly executed proxy at the Annual Meeting and entitled to vote on
the subject matter. Accordingly, abstentions will have no effect on the outcome
of the election of directors, but with respect to any other proposal,
abstentions will operate to prevent the approval of such proposal to the same
extent as a vote against such proposal.
REVOCATION OF PROXY
Stockholders submitting proxies may revoke them at any time before they
are voted by (i) notifying Douglas M. Cerny, Secretary of the Company, in
writing of such revocation, (ii) executing a subsequent proxy sent to Mr. Cerny,
or (iii) attending the Annual Meeting in person and giving notice of revocation.
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<PAGE>
Notices to Mr. Cerny referenced in (i) and (ii) should be directed to Douglas M.
Cerny, Secretary, Coach USA, Inc., One Riverway, Suite 500, Houston, Texas
77056.
SOLICITATION EXPENSES
The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition to solicitation of proxies
by mail, certain directors, officers, representatives and employees of the
Company may solicit proxies by telephone and personal interview. Such
individuals will not receive additional compensation from the Company for
solicitation of proxies, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Banks, brokers and other
custodians, nominees and fiduciaries will also be reimbursed by the Company for
their reasonable expenses for sending proxy solicitation materials to the
beneficial owners of Common Stock.
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<PAGE>
ELECTION OF DIRECTORS (PROPOSAL 1)
The Company's Second Amended and Restated Certificate of Incorporation
provides for three classes of directors as nearly equal in number as possible.
The term of office of Class III directors expires at the 1999 Annual Meeting,
the term of office of Class I directors expires at the 2000 Annual Meeting
(I.E., one year of the term remaining), and the term of office of Class II
directors expires at the 2001 Annual Meeting (I.E., two years of the term
remaining). The directors whose terms will expire at the 1999 Annual Meeting
include Steven S. Harter, Gerald Mercadante and John Mercadante, Jr., each of
whom has been nominated to stand for reelection at the Annual Meeting to hold
office until the 2002 Annual Meeting and until their successors are elected and
qualified. Mr. Frank AtLee III was elected to the Board of Directors as a Class
II director by a unanimous vote of the Board of Directors effective June 4,
1998. Mr. Barnett Rukin was elected to the Board of Directors as a Class II
director by a unanimous vote of the Board of Directors effective October 13,
1998. Richard H. Kristinik resigned from his position of Chairman of the Board
of Directors and Chief Executive Officer of the Company effective December 31,
1998, and has indicated he will resign from his position of director prior to
the Annual Meeting.
NOMINEES FOR ELECTION
CLASS III -- TERMS EXPIRING AT 2002 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MESSRS. STEVEN S. HARTER,
GERALD MERCADANTE AND JOHN MERCADANTE, JR. AS DIRECTORS TO HOLD OFFICE UNTIL THE
2002 ANNUAL MEETING AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED. THE
SHARES OF COMMON STOCK REPRESENTED BY RETURNED PROXY CARDS WILL BE VOTED FOR THE
ELECTION OF THESE NOMINEES UNLESS OTHERWISE SPECIFIED.
STEVEN S. HARTER, age 36, has been a director of the Company since
September 1995. Mr. Harter is President of Notre Capital Ventures II, L.L.C.
("Notre"), a venture capital firm which specializes in consolidating fragmented
businesses and which was the principal founder of the Company. Mr. Harter is
also currently a director of Comfort Systems USA, Inc. and Metals USA, Inc. Mr.
Harter served as Senior Vice President of Notre Capital Ventures, Ltd. from June
1993 through July 1995. Mr. Harter and Notre were primarily responsible for the
initial public offerings of US Delivery Systems, Inc., Physicians Resource
Group, Inc., Comfort Systems USA, Inc., Home USA, Inc., Metals USA, Inc.,
Landcare USA, Inc. and Transportation Components, Inc. From April 1989 to June
1993, Mr. Harter was Director of Mergers and Acquisitions for Allwaste, Inc., a
publicly traded environmental services company.
GERALD MERCADANTE, age 52, became a director in, and has served as Senior
Vice President-Northeast Region since, May 1996. Mr. Mercadante was a co-founder
of Leisure Time Tours, Inc., a subsidiary of the Company ("Leisure"), and has
served as President and Chief Executive Officer of Leisure since 1980.
JOHN MERCADANTE, JR., age 54, has been a director of the Company since
May 1996. Mr. Mercadante has served as President of the Company since May 1996
and previously served as President and Chief Operating Officer of the Company
from May 1996 to December 1997. Mr. Mercadante co-founded Leisure with his
brother, Gerald Mercadante, in 1970 and acquired Cape Transit Corp., a
subsidiary of the Company doing business as Adventure Trails ("Adventure
Trails"), in 1988. Mr. Mercadante has served as the President and Chief
Operating Officer of Adventure Trails since 1988. Mr. Mercadante is currently a
director of the Atlantic City Bus Operators Association and a director of the
New Jersey Motor Bus Association, both motorcoach trade associations.
The vote of a plurality of holders of the outstanding shares of Common
Stock present in person or represented by duly executed proxy at the Annual
Meeting for the election of a given nominee is necessary to elect such nominee
as a Class III director of the Company (I.E., the three director nominees
receiving the
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greatest number of votes cast will be elected, regardless of the number of votes
withheld from voting for the election of such director nominees).
INCUMBENT DIRECTORS
CLASS I - TERMS EXPIRING AT 2000 ANNUAL MEETING
FRANK P. GALLAGHER, age 55, became a director of the Company in May 1996.
Mr. Gallagher has served as Executive Vice President and Chief Operating Officer
of the Company since December 1997 and formerly served as Senior Vice
President-Corporate Development of the Company from May 1996 to December 1997.
Mr. Gallagher is also President and Chief Executive Officer of Community Coach,
Inc. and related entities, all of which are subsidiaries of the Company. Mr.
Gallagher has been President and Chief Executive Officer of Community Coach,
Inc. since 1969.
LAWRENCE K. KING, age 42, became a director of the Company in May 1996.
Mr. King has served as Chairman of the Board of Directors and Chief Executive
Officer since December 1998. Mr. King served as Senior Vice President and Chief
Financial Officer of the Company from December 1995 to December 1998. Mr. King
is also currently a director of Transportation Components, Inc. From 1992 until
September 1995, Mr. King was Executive Vice President, Secretary, Treasurer and
Chief Financial Officer of SI Diamond Technology, Inc., a publicly traded
technology development company. From 1988 to 1991, he served as Assistant
Secretary and Treasurer of The Permian Corporation, the general partner of
Permian Partners L.P., a publicly traded crude oil, trucking, transportation and
distribution master limited partnership. From 1979 to 1988, Mr. King served in a
number of positions as a certified public accountant with Arthur Andersen LLP.
WILLIAM J. LYNCH, age 56, became a director in May 1996. Mr. Lynch is a
Managing Director of Capstone Partners, LLC, a special situation venture capital
firm. Mr. Lynch is also currently a director of Capstone Partners, LLC and
Laisen Electronics. From October 1989 to March 1996, Mr. Lynch was a partner of
the law firm of Morgan, Lewis & Bockius LLP.
CLASS II - TERMS EXPIRING AT 2001 ANNUAL MEETING
RICHARD H. KRISTINIK, age 59, has been a director of the Company since
May 1996. Mr. Kristinik served as Chairman of the Board of Directors and Chief
Executive Officer of the Company from March 1996 to December 31, 1998. Mr.
Kristinik is also currently a director of Metals USA, Inc. Prior to that time,
Mr. Kristinik was a Partner with Arthur Andersen LLP from 1973 to March 1996,
serving in its Houston office for all those years, except for the period from
1979 to 1984 when he served as Managing Partner of the Tulsa office, and the
period from 1985 to 1989 when he served as Managing Partner of the Denver
office.
PAUL M. VERROCHI, age 50, became a director in May 1996. Mr. Verrochi is
Chairman of the Board of Directors and Chief Executive Officer of PROVANT, Inc.,
a publicly traded provider of corporate training and education, and Chairman of
the Board of Directors of BridgeStreet Accommodations, a publicly traded
provider of temporary corporate housing. Mr. Verrochi served as Chairman of the
Board of American Medical Response, Inc., a publicly traded provider of
ambulance services, from its inception in February 1992 through March 1997, when
it was purchased by Laidlaw, Inc. Since February 1992, he has also been a
Principal of Exel Holdings, Ltd., and since March 1996, he has been a Principal
of American Business Partners, LLC, a privately-held investment firm he
co-founded. From April 1989 to December 1990, Mr. Verrochi was President of
Allwaste Asbestos Abatement, Inc., a subsidiary of Allwaste, Inc. Mr. Verrochi
was a founder of American Environmental Group, a regional asbestos abatement
company, and served as Chairman of its Board of Directors from July 1987 until
April 1989, when it was acquired by Allwaste, Inc.
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<PAGE>
BARNETT RUKIN, age 58, became a director in, and has served as Senior
Vice President - Northeast Region since, October 1998. Mr. Rukin has also served
as President and Chief Executive Officer of Short Line Terminal Agency, Inc. and
its related companies, all wholly-owned subsidiaries of the Company, since 1987.
Mr. Rukin is currently a director of Valley National Bank.
FRANK V. ATLEE III, age 58, has been a director of the Company since June
1998. From 1993 to 1995, Mr. AtLee served as President of American Cyanamid
Company ("Cyanamid"), a research-based life sciences company which develops,
manufactures and markets medical and agricultural products, and chairman of
Cyanamid International. From 1966 to 1993, Mr. AtLee served in various
management positions within divisions of Cyanamid, including executive vice
president with authority over Cyanamid's worldwide medical business. Mr. AtLee
is currently a director of Fingold and Takeda Italia, both in Rome, Italy.
GENERAL INFORMATION WITH RESPECT
TO THE BOARD OF DIRECTORS
MEETINGS
During the year ended December 31, 1998, the Board of Directors held five
meetings and acted two times by unanimous consent. During 1998, each member of
the Board of Directors attended at least 75% of all meetings of the Board of
Directors and committees of the Board of Directors of which such director was a
member. There are five standing committees of the Board of Directors.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Audit Committee consists of William J. Lynch
(Chairman), Steven S. Harter, Paul M. Verrochi and Frank V. AtLee III. The Audit
Committee: (i) makes recommendations to the Board of Directors with respect to
the independent auditors who conduct the annual examination of the Company's
accounts; (ii) reviews the scope of the annual audit and meets periodically with
the Company's independent auditors to review their findings and recommendations;
(iii) reviews quarterly financial information and earnings releases prior to
dissemination to the public; (iv) approves major accounting policies or changes
thereto; and (v) periodically reviews principal internal controls to assure that
the Company is maintaining a sound and modern system of financial controls.
During 1998, the Audit Committee held eight meetings.
ACQUISITION COMMITTEE. The Acquisition Committee consists of Steven S.
Harter (Chairman) and Lawrence K. King. The Acquisition Committee reviews and
monitors the strategic direction of the Company's acquisition program and,
within guidelines established by the full Board of Directors, has authority to
approve offers and the form of consideration to be offered for the acquisition
of other businesses. In August 1997, the Board of Directors gave the Acquisition
Committee authority to approve, without further full Board review, any
acquisition the consideration for which is equal to or less than $10 million.
During 1998, the Acquisition Committee did not meet.
COMPENSATION COMMITTEE. The Compensation Committee consists of Paul M.
Verrochi (Chairman), Steven S. Harter, William J. Lynch and Frank V. AtLee III.
The Compensation Committee periodically determines the amount and form of
compensation and benefits payable to all principal officers and certain other
management personnel. See "Report of Compensation Committee on Executive
Compensation." During 1998, the Compensation Committee held four meetings.
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EXECUTIVE COMMITTEE. The Executive Committee consists of Lawrence K. King
(Chairman), Frank P. Gallagher and John Mercadante, Jr. The Executive Committee
has such authority as is delegated to it from time to time by the full Board of
Directors. During 1998, the Executive Committee did not meet.
NOMINATING COMMITTEE. The Nominating Committee consists of Frank P.
Gallagher and Lawrence K. King. The Nominating Committee reviews the size and
composition of the Board of Directors, designates new directors by classes,
interviews new director candidates and makes recommendations with respect to
nominations for the election of directors. The Nominating Committee will
consider suggestions from stockholders for nominees to serve as directors, if
such proposals are submitted in writing to the Secretary at the Company's
corporate offices. During 1998, the Nominating Committee did not meet.
DIRECTORS' COMPENSATION
FEES
During 1998, each non-employee director was paid a fee of $2,000 for each
meeting of the full Board attended. Non-employee directors of the Company also
receive $1,000 for each committee meeting attended, unless held the same day as
a meeting of the full Board, and are reimbursed for all expenses relating to
attendance at meetings. The Company paid aggregate fees of $42,000 to
non-employee directors of the Company in connection with the Board of Directors
and committee meetings in 1998. The Company does not pay director fees to
directors who also are employees of the Company. No member of the Board of
Directors was paid compensation during 1998 for his service as a director of the
Company other than pursuant to the standard compensation arrangement described
above. Non-employee directors also receive annual stock option awards pursuant
to the Company's 1996 Non-Employee Directors' Stock Plan (the "Directors'
Plan").
STOCK OPTION GRANTS
The Directors' Plan provides for the automatic grant to each non-employee
director of an option to purchase 10,000 shares of Common Stock upon such
person's initial election as a director. In addition, upon the effectiveness of
the Company's registration statement relating to its initial public offering
(the "Initial Public Offering"), the Company granted options to purchase 10,000
shares of Common Stock to each of the Company's directors at such time, pursuant
to the Directors' Plan. The Directors' Plan also provides for an automatic
annual grant to each non-employee director of an option to purchase 5,000 shares
of Common Stock at each annual meeting of stockholders; provided, however, that
if the first annual meeting of stockholders following a person's initial
election as a non-employee director is within three months of the date of such
election, such person will not be granted an option to purchase 5,000 shares of
Common Stock at such annual meeting.
The options granted under the Directors' Plan will have an exercise price
per share equal to the fair market value of a share at the date of grant. The
options granted to Messrs. Harter, Lynch and Verrochi at the annual meeting in
1998 have an exercise price equal to $44.438 per share. The options granted to
Mr. AtLee on June 4, 1998 have an exercise price equal to $44.438 per share.
Options granted under the Directors' Plan will expire at the earlier of
10 years from the date of grant or one year after termination of service as a
director. Once issued, the options are immediately exercisable. In addition, the
Directors' Plan permits non-employee directors to elect to receive, in lieu of
cash directors' fees, shares or credits representing "deferred shares" that may
be settled at future dates, as elected by the director. The number of shares or
deferred shares received will be equal to the number of shares which, at the
date the fees would otherwise be payable, will have an aggregate fair market
value equal to the amount of such fees.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information as of April 21, 1999, with
respect to beneficial ownership of the Company's Common Stock by (i) each
director, (ii) each executive officer, (iii) the executive officers and
directors as a group, and (iv) each person known to the Company to beneficially
own 5% or more of the outstanding shares of its Common Stock. The address of all
such persons is c/o Coach USA, Inc., One Riverway, Suite 500, Houston, Texas
77056. Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
----------------------------------
BENEFICIAL OWNER SHARES PERCENTAGE
---------------- --------------- -------------
<S> <C> <C>
Lawrence K. King(1)............................................... 129,500 *
John Mercadante, Jr.(2)........................................... 299,707 1.18%
Douglas M. Cerny(3)............................................... 98,600 *
Frank P. Gallagher(4)............................................. 167,260 *
Gerald Mercadante(5).............................................. 628,800 2.47%
Richard H. Kristinik(6)........................................... 225,100 *
Steven S. Harter(7)............................................... 349,381 1.37%
William J. Lynch(8)............................................... 45,468 *
Paul M. Verrochi(9)............................................... 60,000 *
Frank V. AtLee III(10)............................................ 10,342 *
Barnett Rukin(11)................................................. 17,359 *
T. Rowe Price Associates, Inc. (12)............................... 3,119,700 12.27%
Warburg Pincus Asset Management, Inc.(13)......................... 1,993,100 7.84%
All officers and directors as a group (11 persons)................ 2,111,175 8.30%
</TABLE>
* Less than one percent.
(1) Includes 45,000 shares of Common Stock underlying options which are
exercisable within 60 days. Excludes 280,000 shares of Common Stock
underlying options which are not exercisable within 60 days.
(2) Includes 137,774 shares of Common Stock held by Mr. John Mercadante,
Jr.'s spouse, as to which shares Mr. John Mercadante, Jr. disclaims
beneficial ownership. Includes 25,000 shares of Common Stock underlying
options which are exercisable within 60 days. Excludes 80,000 shares of
Common Stock underlying options which are not exercisable within 60 days.
(3) Includes 45,000 shares of Common Stock underlying options which are
exercisable within 60 days. Excludes 80,000 shares of Common Stock
underlying options which are not exercisable within 60 days.
(4) Includes 55,370 shares of Common Stock held by Mr. Gallagher's spouse and
6,520 shares held in a trust for the benefit of Mr. Gallagher's daughter,
for which Mr. Gallagher is a trustee. Includes 50,000 shares of Common
Stock underlying options which are exercisable within 60 days. Excludes
100,000 shares of Common Stock underlying options which are not
exercisable within 60 days.
(5) Includes 103,210 shares held by Mr. Gerald Mercadante's spouse, as to
which shares Mr. Gerald Mercadante disclaims beneficial ownership.
Includes 10,000 shares of Common Stock underlying options which are
exercisable within 60 days. Excludes 15,000 shares of Common Stock
underlying options which are not exercisable within 60 days.
(6) 180,000 of these shares of Common Stock are held by the Kristinik Family
Partnership, of which Mr. Kristinik is a general partner. Includes 45,000
shares of Common Stock underlying options which are exercisable within 60
days. Excludes 140,000 shares of Common Stock underlying options which
are not exercisable within 60 days.
(7) These shares of Common Stock are held by Harter Investment Partners,
Ltd., of which Mr. Harter is a general partner. Includes 20,000 shares of
Common Stock underlying options granted under the Directors' Plan which
are currently exercisable. Excludes 20,000 shares of Common Stock held by
the Victoria Harter and Phyllis Spisak Educational Trust, of which Mr.
Harter's minor children are beneficiaries, as to which shares Mr. Harter
disclaims beneficial ownership.
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(8) Includes 20,000 shares of Common Stock underlying options granted under
the Directors' Plan which are currently exercisable.
(9) Includes 20,000 shares of Common Stock underlying options granted under
the Directors' Plan which are currently exercisable and 40,000 shares of
Common Stock underlying warrants.
(10) Includes 10,000 shares of Common Stock underlying options granted under
the Directors' Plan which are currently exercisable.
(11) Includes 150 shares of Common Stock held by Mr. Rukin's spouse and 1,034
shares held in three separate trusts for the benefit of Mr. Rukin's
children, for which Mr. Rukin is a trustee.
(12) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(13) These securities are owned by or on behalf of various individual and
institutional investors for which Warburg Pincus Asset Management, Inc.
("Warburg") serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Warburg expressly
disclaims that it is, in fact, the beneficial owner of such securities.
EXECUTIVE OFFICERS
The Board elects executive officers annually at its first meeting
following the annual meeting of stockholders. Information concerning the
following executive officers is set forth above under "Election of Directors":
former Chief Executive Officer, Richard H. Kristinik; President, John
Mercadante, Jr.; Chief Executive Officer, Lawrence K. King; Executive Vice
President and Chief Operating Officer, Frank P. Gallagher; and Senior Vice
President- Northeast Region, Gerald Mercadante. Information concerning Senior
Vice President - Corporate Development, General Counsel and Secretary, Douglas
M. Cerny, is set forth below.
DOUGLAS M. CERNY, age 40, has served as Senior Vice President - Corporate
Development, General Counsel and Secretary of the Company since December 1997.
Mr. Cerny served as Senior Vice President, General Counsel and Secretary of the
Company from January 1996 to December 1997. From February 1994 through January
1996, he was Vice President and General Counsel of Medical Review Systems, Inc.,
a privately held health care cost-containment services company which was
acquired by Equifax, Inc. in March 1995. Between March 1995 and January 1996,
Mr. Cerny provided operational support in the transition of operations to
Equifax, Inc. From July 1988 through February 1994, Mr. Cerny was Vice President
and Corporate Counsel and then Vice President and General Counsel of Allwaste,
Inc.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE. The following table provides certain summary
information concerning compensation earned by the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers
(collectively, the "Named Executive Officers") during the years ended December
31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
OTHER SECURITIES
ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS (#)
------------------ ---- ------ ----------------- -----------
<S> <C> <C> <C>
Lawrence K. King............................... 1998 $ 200,000 $ -- 225,000
Chief Executive Officer 1997 150,000 -- --
1996 94,355(1) -- 100,000
John Mercadante, Jr............................ 1998 200,000 -- 25,000
President 1997 150,000 -- --
1996 94,355(2) 32,617 100,000
Frank P. Gallagher............................. 1998 200,000 -- 50,000
Executive Vice President and Chief 1997 150,000 -- --
Operating Officer 1996 94,355(2) -- 100,000
Douglas M. Cerny............................... 1998 200,000 -- 25,000
Senior Vice President - Corporate 1997 150,000 -- --
Development, General Counsel and 1996 94,355(1) 38,286 100,000
Secretary
Richard H. Kristinik........................... 1998 200,000 -- 25,000
Former Chief Executive Officer 1997 150,000 -- --
1996 94,355(1) -- 200,000
</TABLE>
- ---------------------------
(1) Represents less than one full year's compensation. Pursuant to an
employment agreement between the officer and the Company, no compensation
was paid to such officer until May 14, 1996, the date on which the
registration statement with respect to the Company's initial public
offering became effective.
(2) Represents less than one full year's compensation. Pursuant to an
employment agreement between the officer and the Company, such officer
did not begin to earn compensation until May 17, 1996, the date of the
closing of the Company's initial public offering. Does not include
amounts paid to such officer by subsidiaries of the Company prior to May
17, 1996.
-9-
<PAGE>
STOCK OPTION GRANTS TABLE. The following table provides certain summary
information concerning grant of stock options to the Named Executive Officers
pursuant to the 1998 Long-Term Incentive Plan during the year ended December 31,
1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS GRANTED EXERCISE OF STOCK PRICE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION APPRECIATION FOR OPTION
NAME GRANTED (#) 1998 ($/SHARE) DATE TERM
- ---- ----------- ---- --------- ---- ----------------------------
5% 10%
----- ------
<S> <C> <C> <C> <C> <C> <C>
Lawrence K. King........... 25,000 2.28% $ 30.6875 1/21/08 $ 482,480 $ 1,222,699
200,000 18.22 23.3125 11/12/08 2,932,220 7,430,823
John Mercadante, Jr........ 25,000 2.28 30.6875 1/21/08 482,480 1,222,699
Frank P. Gallagher......... 50,000 4.56 30.6875 1/21/08 964,960 2,445,398
Douglas M. Cerny........... 25,000 2.28 30.6875 1/21/08 482,480 1,222,699
Richard H. Kristinik....... 25,000 2.28 30.6875 1/21/08 482,480 1,222,699
</TABLE>
STOCK OPTION EXERCISES AND YEAR-END VALUES TABLE. The following table
provides, as to the Named Executive Officers, information with respect to stock
options exercised during the year ended December 31, 1998, and the unexercised
options to purchase Common Stock granted under the 1998 Long-Term Incentive
Plan, or its predecessor, and held as of December 31, 1998.
OPTION EXERCISES IN 1998
AND YEAR END 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
EXERCISE (#) REALIZED ($) AT DECEMBER 31, 1998(#) AT DECEMBER 31, 1998(1)
------------ ------------ ----------------------- -----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence K. King........ 0 $ 0 40,000 285,000 $ 827,500 $ 3,616,250
John Mercadante, Jr..... 20,000 425,000 20,000 85,000 218,750 756,250
Frank P. Gallagher...... 0 0 40,000 110,000 437,500 856,250
Douglas M. Cerny........ 0 0 40,000 85,000 827,500 1,341,250
Richard H. Kristinik.... 40,000 1,240,000 40,000 145,000 827,500 2,582,500
</TABLE>
(1) Based on the difference between $34.6875 per share, which was the closing
price of the Company's Common Stock as listed on the New York Stock
Exchange on December 31, 1998, and the exercise price of each option.
-10-
<PAGE>
STOCK PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Common Stock with the cumulative total return of the
Russell 2000(R) Index, a generally accepted index for small-cap stocks (the
"Russell 2000"), and a peer group stock index (the "Peer Group Index") which
consists of 16 publicly-traded companies. The Peer Group Index is comprised of
companies formed to consolidate fragmented businesses within a particular
industry. The cumulative total return computations set forth in the Performance
Graph assume the investment of $100 in the Company's Common Stock, the Russell
2000 Index and the Peer Group Index on May 17, 1996 (dividends reinvested).
The companies that comprise the Peer Group Index are: American
Residential Services, Inc., Coinmach Laundry Corp., Comfort Systems USA, Inc.,
Cotelligent Group Inc., FYI, Inc., Keystone Automotive Industries, Inc., Medical
Manager Corp., Metals USA, Inc., PalEx, Inc., Service Experts, Inc., Sunterra
Corporation, Staffmark, Inc., Telespectrum Worldwide Inc., Travel Services
International, Inc., U.S. Office Products Co. and United Auto Group, Inc.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURNS
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
5/14/96 12/31/96 12/31/97 12/31/98
------- -------- -------- --------
COACH USA, INC. 100.00 164.54 190.07 196.81
PEER GROUP INDEX 100.00 134.28 135.63 111.40
RUSSELL 2000 INDEX 100.00 105.21 128.72 125.11
-11-
<PAGE>
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee, subject to the approval of the Board of
Directors, determines the amount and form of compensation and benefits payable
to all principal officers, including the Named Executive Officers, and certain
other management personnel. The Compensation Committee currently consists of
three members, none of whom is a current or former employee or officer of the
Company. See "General Information with Respect to the Board of Directors --
Committees of the Board."
The Compensation Committee has instituted an executive compensation
structure designed to attract and retain highly qualified executives and
motivate them to maximize stockholder returns. In order to reach this goal, the
Named Executive Officers compensation has been weighted toward equity options,
with base compensation as set forth in the employment agreements described
below. See "Employment Agreements".
In addition to the compensation plans described below, the Compensation
Committee has recommended, and the Board of Directors has approved, (i) a 401(k)
retirement savings plan which enables Company employees to make pre-tax
contributions to a retirement investment account, which are matched by the
Company up to 50% of the first 2% of salary contributed by the employee, and
(ii) an Employee Stock Purchase Plan which enables employees to purchase shares
of the Company's Common Stock at a price which is 15% less than the price
available in the public market, with the Company paying all applicable brokerage
fees.
BASE SALARY
In connection with the initial public offering, the Company entered into
employment agreements with each of the Named Executive Officers, including the
Chief Executive Officer, which provided for an annual base salary in the amount
of $150,000 and bonuses as determined from time to time. In 1996, 1997 and 1998
there were no bonuses paid to the executive officers of the Company. Because the
Compensation Committee believes that the cash compensation paid to executive
officers has been lower than compensation paid by other comparably sized
publicly traded companies, the Compensation Committee determined in January 1998
to increase the base salary amounts for each of the Named Executive Officers to
$200,000 annually.
ANNUAL BONUS PLAN/1998 PERFORMANCE BASED INCENTIVE BONUS PROGRAM
In March 1998 the Compensation Committee recommended, and the Board of
Directors approved, an annual 1998 performance-based incentive bonus program
(the "Annual Bonus Plan"). The purpose of the Annual Bonus Plan is to provide
senior management as well as other key employees with additional performance
incentives in the form of an annual bonus to be paid in recognition of meeting
certain financial or operational goals to be set on an annual basis. Bonus
levels vary in accordance with levels of responsibility within the Company, with
senior executives eligible to receive a bonus of up to 100% of annual salary and
key employees eligible to receive bonuses ranging from 15% to 75% of annual
salary.
1998 LONG-TERM INCENTIVE PLAN
In March 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Long-Term Incentive Plan. In June 1998, the 1996
Long-Term Incentive Plan ("Plan") was amended and restated and named the 1998
Long-Term Incentive Plan. On January 6, 1998, the Compensation Committee
recommended, and the Board of Directors approved, the grant, under the Plan, of
options to
-12-
<PAGE>
purchase 25,000 shares of Common Stock to each of Messrs. Kristinik, John
Mercadante, Jr., King and Cerny and of options to purchase 50,000 shares of
Common Stock to Mr. Gallagher, all at an exercise price of $30 11/16. The
Compensation Committee believed that such grants were appropriate given the
financial and operational performance of the Company in 1997. In November 1998
the Compensation Committee recommended, and the Board of Directors approved, the
grant of options to purchase 200,000 shares of Common Stock to Mr. King, all at
an exercise price of $23.3125. The Compensation Committee believed that such
grant was appropriate to provide incentive to Mr. King in his new position as
Chief Executive Officer.
This report is furnished by the Compensation Committee of the Board of
Directors.
Paul M. Verrochi, CHAIRMAN
Steven S. Harter
William J. Lynch
Frank V. AtLee III
EMPLOYMENT AGREEMENTS
Messrs. John Mercadante, Jr. and Gallagher each entered into an
employment agreement, effective as of May 17, 1996, with the Company and one of
the companies that merged with and into and became a wholly-owned subsidiary of
the Company in connection with the Initial Public Offering, providing for an
annual base salary of $150,000 and a bonus to be determined annually. The
Company increased the annual salary payable pursuant to each of these agreements
to $200,000 for 1998. Each employment agreement has a term of five years. Unless
terminated or not renewed by the Company or not renewed by the employee, the
term will continue thereafter on a year-to-year basis on the same terms and
conditions existing at the time of renewal. Each of these agreements provides
that, in the event of a termination of employment by the Company without cause
during the first three years of the employment term (the "Initial Term"), the
employee will be entitled to receive from the Company an amount equal to his
then current salary for the remainder of the Initial Term or for one year,
whichever is greater. In the event of a termination of employment without cause
during the final two years of the initial five-year term of the employment
agreement, the employee will be entitled to receive an amount equal to his then
current salary for one year. In either case, payment is due in one lump sum on
the effective date of termination. In the event of a change in control of the
Company (as defined in the agreement) during the Initial Term, if the employee
is not given at least five days' notice of such change in control, the employee
may elect to terminate his employment and receive in one lump sum three times
the amount he would receive pursuant to a termination without cause during the
Initial Term. In addition, if the employee is not given at least five days'
notice of such change in control, the non-competition provisions of the
employment agreement would not apply. In the event the employee is given at
least five days' notice of such change in control, the employee may elect to
terminate his employment agreement and receive in one lump sum two times the
amount he would receive pursuant to a termination without cause during the
Initial Term. In such an event, the non-competition provisions of the employment
agreement would apply for two years from the effective date of termination.
Messrs. Kristinik, Cerny and King each entered into an employment
agreement with the Company, effective as of May 14, 1996, providing for an
annual base salary of $150,000 and a bonus to be determined annually. The
Company increased the annual salary payable pursuant to each of these agreements
to $200,000 for 1998. Each employment agreement is for a term of three years.
Unless terminated or not renewed by the Company or not renewed by the employee,
the term will continue thereafter on a year-to-year basis on the same terms and
conditions existing at the time of renewal. Each of these agreements provides
that, in the event of termination of employment by the Company without cause,
the employee will be entitled to receive from the Company an amount equal to one
year's salary, payable in one lump sum on the effective date of termination. In
the event of a change in control of the Company (as defined in the agreement)
during the initial three-year term, if the employee is not given at least five
days' notice of such change in control,
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<PAGE>
the employee may elect to terminate his employment and receive in one lump sum
three times the amount he would receive pursuant to a termination without cause
during such initial term. In addition, if the employee is not given at least
five days' notice of such change in control, the non-competition provisions of
the employment agreement would not apply. In the event the employee is given at
least five days' notice of such change in control, the employee may elect to
terminate his employment and receive in one lump sum three times the amount he
would receive pursuant to a termination without cause during such initial term.
In such an event, the non-competition provisions of the employment agreement
would apply for two years from the effective date of termination.
Each employment agreement contains a covenant not to compete with the
Company for a period equivalent to the longer of two years immediately following
termination of employment, or in the case of or termination by the Company
without cause in the absence of a change in control, for a period of one year
following termination of employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES OF FACILITIES
The Company leases a number of properties from former owners of acquired
businesses who are, or are affiliates of, certain of the Company's executive
officers and directors. In 1998, the Company paid affiliates of Frank P.
Gallagher, Gerald Mercadante and Barnett Rukin approximately $195,000, $77,000
and $270,000, respectively, in annual rentals for such properties. The Company
believes that these amounts do not exceed the fair market rental value for such
properties.
OTHER TRANSACTIONS
On July 7, 1998, the Company purchased the following companies: Orange,
Newark, Elizabeth Bus, Inc., Twenty-Four Corp., Wohlgemuth Bus Company, Clinton
Avenue Bus Company, Trans Maintenance Inc. and Transit Video Security Systems,
Inc. (collectively referred to as "ONE Bus"). Frank P. Gallagher and his
immediate family members, and trusts controlled by his immediate family members,
received a total of $13,044,205 as consideration for their ownership in ONE Bus.
COMPANY POLICY
The Board of Directors of the Company has instituted a policy, effective
as of March 21, 1996, requiring all transactions between the Company and its
officers, directors and holders of more than 5% of the Common Stock to be
approved by the majority of the Board of Directors, including a majority of the
disinterested Directors.
-14-
<PAGE>
APPOINTMENT OF AUDITORS (PROPOSAL 2)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS TO AUDIT THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDING DECEMBER 31, 1999. THE SHARES OF COMMON STOCK REPRESENTED BY
RETURNED PROXY CARDS WILL BE VOTED FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS UNLESS OTHERWISE
SPECIFIED.
At the Annual Meeting a vote will be taken on the proposal to ratify the
appointment by the Board of Directors of Arthur Andersen LLP, independent
certified public accountants, as auditors of the Company's consolidated
financial statements for the year ending December 31, 1999. Arthur Andersen LLP
audited the consolidated financial statements of the Company for the years ended
December 31, 1996, 1997 and 1998.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting, with the opportunity to make a statement should they choose to
do so, and to be available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons holding more than 10% of a registered
class of the Company's equity securities to file with the Securities and
Exchange Commission and any stock exchange or automated quotation system on
which the Common Stock may then be listed or quoted (i) initial reports of
ownership, (ii) reports of changes in ownership and (iii) annual reports of
ownership of Common Stock and other equity securities of the Company. Such
directors, officers and 10% stockholders are also required to furnish the
Company with copies of all such filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1998, the Company believes that all Section 16(a) reporting requirements related
to the Company's directors and executive officers were timely filed during 1998
except Form 3 - Initial Statement of Beneficial Ownership of Securities for
Messrs. Rukin and AtLee.
ANNUAL REPORTS
The Company's Annual Report to stockholders, together with its Annual
Report on Form 10-K, accompanies this Proxy Statement. The Company filed its
Annual Report on Form 10-K with the Securities and Exchange Commission on March
19, 1999. Additional copies of the Form 10-K, including any financial statements
and schedules and a list describing any exhibits not contained therein, may be
obtained without charge by any stockholder. Written requests for copies of the
report should be directed to Douglas M. Cerny, Secretary, Coach USA, Inc., One
Riverway, Suite 500, Houston, Texas 77056.
-15-
<PAGE>
PROPOSALS, NOMINATIONS AND OTHER BUSINESS FOR NEXT ANNUAL MEETING
The Board of Directors knows of no other matters than those described
above which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
To be included in the Proxy Statement, any proposals of holders of
Common Stock of the Company intended to be presented at the Annual Meeting to be
held in 2000 must be received by the Company, addressed to the Secretary of the
Company, One Riverway, Suite 500, Houston, Texas, 77056, no later than December
31, 1999, and must otherwise comply with the requirements of Rule 14a-8 under
the Securities Exchange Act of 1934, as amended.
Any holder of Common Stock of the Company desiring to bring business
before the 2000 Annual Meeting in a form other than a stockholder proposal in
accordance with the preceding paragraph must give written notice that is
received by the Company, addressed to the Secretary of the Company, One
Riverway, Suite 500, Houston, Texas, 77056, no later than March 16, 2000.
By Order of the Board of Directors,
Douglas M. Cerny
SECRETARY
April 30, 1999
-16-
<PAGE>
COACH USA, INC.
ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS OF COACH USA, INC.
The undersigned hereby appoints Lawrence K. King and Douglas M. Cerny,
and each of them individually, as proxies with full power of substitution, to
vote all shares of Common Stock of Coach USA, Inc. that the undersigned is
entitled to vote at the Annual Meeting of Stockholders thereof to be held on
June 3, 1999, or at any adjournment or postponement thereof, as follows:
Any executed proxy which does not designate a vote shall be deemed to
grant authority for any item not designated.
PROPOSAL 1: ELECTION OF DIRECTORS
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY FOR ALL
NOMINEES LISTED BELOW
STEVEN S. HARTER, GERALD MERCADANTE AND JOHN MERCADANTE, JR. TO HOLD
OFFICE UNTIL THE 2002 ANNUAL MEETING AND UNTIL THEIR SUCCESSORS ARE ELECTED AND
QUALIFIED.
INSTRUCTION: to withhold authority to vote for any individual nominee or
nominees, write the appropriate name or names in the space provided here.
PROPOSAL 2: APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS FOR THE COMPANY
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please check the following box if you plan to attend the Annual Meeting
of Stockholders in person. [ ]
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED "FOR" PROPOSAL 1 (ALL NOMINEES) AND "FOR" PROPOSAL 2 AND
IN ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE PROXY WITH RESPECT TO
ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.
Dated: _____________________________, 1999
__________________________________________
Signature
Please sign exactly as name appears on this
card. Joint owners should each sign.
Executors, administrators, trustees, etc.,
should give their full titles.
PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
-17-
