FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1997
TO THE SHAREHOLDERS OF
FROZEN FOOD EXPRESS INDUSTRIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Frozen Food Express Industries, Inc. (the "Company"), a
Texas corporation, will be held on Thursday, April 24, 1997, at 3:30 p.m.,
Dallas, Texas time, in the offices of Wells Fargo Bank, Fountain Place, 1445
Ross Avenue, 4th Floor, Dallas, Texas 75202 for the following purposes:
1. Electing eight (8) directors to serve until the next Annual Meeting
of Shareholders and until their respective successors are elected
and qualified;
2. Considering and voting upon approval of an amendment to the
Company's 1992 Incentive and Nonstatutory Stock Option Plan, as
amended, increasing the total number of shares available for the
grant of options from 1,256,944 to 2,006,944 shares; and
3. Transacting such other business as may properly be brought before
the Annual Meeting or any adjournment thereof.
You are encouraged to attend the Annual Meeting in person. Whether or
not you plan to attend the Annual Meeting, please complete, date, sign and
return the accompanying proxy at your earliest convenience. A reply envelope
is provided for this purpose, which needs no postage if mailed in the United
States. Your immediate attention is requested in order to save your Company
additional solicitation expense.
Information regarding the matters to be acted upon at the Annual Meeting
is contained in the Proxy Statement attached to this Notice.
Only shareholders of record at the close of business on March 7, 1997,
are entitled to notice of and to vote at such meeting or any adjournment
thereof.
By Order of the Board of Directors
Dallas, Texas LEONARD W. BARTHOLOMEW
March 28, 1997 Secretary
<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1997
FROZEN FOOD EXPRESS INDUSTRIES, INC.
1145 Empire Central Place
P. O. Box 655888
Dallas, Texas 75265-5888
Telephone: (214) 630-8090
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 24, 1997
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the management of Frozen Food
Express Industries, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held at Dallas, Texas, on the 24th day of April, 1997 (the
"Annual Meeting"), and at any adjournment thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and accompanying proxy are being mailed or delivered to
shareholders on or about March 28, 1997. Solicitations of proxies may be made
by personal interview, mail, telephone or telegram by directors, officers and
regular employees of the Company. The Company may also request banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries
to forward solicitation material to the beneficial owners of the Company's
$1.50 par value Common Stock (the "Common Stock") held of record by such
persons and may reimburse such forwarding expenses. All costs of preparing,
printing, assembling and mailing the form of proxy and the material used in
the solicitation thereof and all clerical and other expenses of solicitation
will be borne by the Company.
ANNUAL REPORT
The Company's Annual Report to Shareholders, covering the fiscal year
ended December 31, 1996, including audited financial statements, is also
being mailed to the shareholders entitled to notice of and vote at the Annual
Meeting in the envelope containing this Proxy Statement. The Annual Report
does not form any part of the material for solicitation of proxies.
SIGNATURES OF PROXIES IN CERTAIN CASES
If a shareholder is a corporation, the accompanying proxy should be
signed in its full corporate name by the President or another authorized
officer who should indicate his title. If a shareholder is a partnership,
the proxy should be signed in the partnership name by an authorized person.
If stock is registered in the name of two or more trustees or other persons,
the proxy should be signed by each of them. If stock is registered in the
name of a decedent, the proxy should be signed by an executor or an
administrator. The executor or administrator should attach to the proxy
appropriate instruments showing his qualification and authority. Proxies
signed by a person as agent, attorney, administrator, executor, guardian or
trustee should indicate such person's full title following his signature.
<PAGE>
REVOCATION OF PROXY
All shares represented by a valid proxy will be voted. A proxy may be
revoked at any time before it is voted by the giving of written notice to
that effect to the Secretary of the Company, by executing and delivering a
later-dated proxy or by attending the Annual Meeting and voting in person.
OUTSTANDING CAPITAL STOCK; PRINCIPAL SHAREHOLDERS
At the close of business on the 7th day of March, 1997, the record date
for determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting, there were outstanding and entitled to be voted 16,685,981
shares of Common Stock. The following table sets forth certain information,
as of March 7, 1997, with respect to each person known to the management of
the Company to be a beneficial owner of more than five percent of the
outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership (1) of Class
- --------------------------------------- --------------------------- --------
<S> <C> <C>
FFE Transportation Services, Inc. (2) 2,717,859 16.29%
Employee Stock Ownership Trust
Texas Commerce Bank,
National Association, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Savings Plan For Employees of 1,812,601 10.86%
Frozen Food Express Industries, Inc.
Texas Commerce Bank,
National Association, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Sarah M. Daniel (3) 1,464,210 8.78%
612 Linda
El Paso, Texas 79922
Lucile B. Fielder (3) 1,337,924 8.02%
1318 Clear Fork
Lockhart, Texas 78644
Stoney M. Stubbs, Jr.(4) 1,417,774 (5) 8.39%
158 Jellico Circle
Southlake, Texas 76092
Quest Advisory Corp. and Quest 1,218,600 (6) 7.30%
Management Company
1414 Avenue of the Americas
New York, New York 10019
</TABLE>
______________________
(1) Except as otherwise noted, each beneficial owner has sole voting and
investment power with respect to all shares owned by him, and all shares
are directly held by the person named.
2
<PAGE>
(2) FFE Transportation Services, Inc., ("FFE") is the principal operating
subsidiary of the Company.
(3) Information concerning the number of shares beneficially owned by Sarah
M. Daniel and Lucile B. Fielder was obtained from a Schedule 13D, dated
November 22, 1996, which was jointly filed with the Securities and
Exchange Commission. The Schedule 13D confirms that on August 22, 1996,
Edgar O. Weller transferred 50% of the general partnership interest in
Weller Investment Ltd. (the "Partnership") to each of his two daughters,
Ms. Daniel and Ms. Fielder. Ms. Daniel has sole voting and dispositive
power over 68,047 shares, of which 730 shares are held as custodian for
her daughter, and joint voting and dispositive power with her husband
over 62,831 shares, and shared voting and dispositive power with Ms.
Fielder over 1,333,332 shares owned by the Partnership. Ms. Fielder has
sole voting and dispositive power over 4,592 shares, of which 730 shares
are held as custodian for her daughter and 950 shares are held as
custodian for her niece, and shared voting and dispositive power with
Ms. Daniel over 1,333,332 shares owned by the Partnership.
(4) Mr. Stubbs holds, and has held for the past seventeen years, the offices
of Chairman of the Board, President and Chief Executive Officer of the
Company and FFE. Mr. Stubbs is the nephew of Edgar O. Weller, a
director of the Company.
(5) Includes 203,055 shares Mr. Stubbs has the right to acquire pursuant to
options exercisable within 60 days, 144,620 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 42,340 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc., 880 shares
held by an estate of which Mr. Stubbs is executor, and 769,387 shares
held in family partnerships controlled by Mr. Stubbs.
(6) Information concerning the number of shares beneficially owned by Quest
Advisory Corp. ("Quest") and Quest Management Company ("QMC"), is as of
December 31, 1996, and was obtained from a Schedule 13G, dated February
6, 1997, jointly filed by Quest, QMC and Charles M. Royce with the
Securities and Exchange Commission (the "SEC"). The Schedule 13G
confirms that Quest and QMC are both investment advisers and members of
a "group". Quest has sole voting and dispositive power over 1,117,060
shares and QMC has sole voting and dispositive power over 101,540
shares. Mr. Royce may be deemed to be a controlling person of Quest and
QMC and as such may be deemed to beneficially own the shares
beneficially owned by Quest and QMC. The Schedule 13G indicates that
Mr. Royce does not own any shares outside of Quest and QMC and disclaims
beneficial ownership of the shares held by Quest and QMC.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Abstentions and broker non-votes
will be counted in determining the presence of a quorum. A "broker non-vote"
occurs when a nominee holding shares for a beneficial owner has voted on
certain matters at the Annual Meeting pursuant to discretionary authority or
instructions from the beneficial owner but may not have received instructions
or exercised discretionary voting power with respect to other matters.
3
<PAGE>
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share of such stock owned of record at the close of
business on March 7, 1997. As to the election of directors, a shareholder
may, by checking the appropriate box on the proxy: (i) vote for all director
nominees as a group; (ii) withhold authority to vote for all director
nominees as a group; or (iii) vote for all director nominees as a group
except those nominees identified by the shareholder in the appropriate area.
With respect to each other proposal, a shareholder may, by checking the
appropriate box on the proxy: (a) vote "FOR" the proposal; (b) vote
"AGAINST" the proposal; or (c) "ABSTAIN" from voting on the proposal.
Cumulative voting for directors is not permitted.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying proxy, if properly executed and returned, will be voted
(i) unless otherwise specified thereon, FOR the election of the eight
nominees, named in the next succeeding table, as directors of the Company,
(ii) unless otherwise specified thereon, FOR the approval of the amendment to
the Company's 1992 Incentive and Nonstatutory Stock Option Plan, as amended,
and (iii) in the transaction of such other business as may properly come
before the Annual Meeting or any adjournment thereof. As to any other matter
or business which may be brought before the Annual Meeting, a vote may be
cast pursuant to the accompanying proxy in accordance with the judgment of
the person or persons voting the same. The management of the Company does
not know of any such other matter or business. Should any nominee named
herein for the office of director become unable or be unwilling to accept
nomination for or election to such position, the persons acting under the
proxy will vote for the election, in his stead, of such other person as the
management of the Company may recommend. The management of the Company has
no reason to believe that any of the nominees will be unable or unwilling to
serve if elected to office. To be elected, each director must receive the
affirmative vote of the holders of a plurality of the issued and outstanding
shares of Common Stock represented in person or by proxy at the Annual
Meeting.
Approval of the proposed amendment to the Company's 1992 Incentive and
Nonstatutory Stock Option Plan, as amended, will require the affirmative vote
of the holders of the majority of the issued and outstanding shares of Common
Stock entitled to vote at the Annual Meeting. Abstentions and broker non-
votes will have no effect in the election of directors, but will have the
effect of a vote against the proposed amendment to the Company's 1992
Incentive and Nonstatutory Stock Option Plan, as amended.
NOMINEES FOR DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist
of a minimum of seven and a maximum of fifteen directors. Eight directors
will be elected at the Annual Meeting. Each director elected will serve
until the next Annual Meeting of Shareholders and until his successor has
been elected and qualified.
The persons named below are the Board of Directors' nominees for
election as directors. Each nominee has served continuously as a director
since the date of his first election to the Board. Further items of
information with respect to the nominees and all directors and officers of the
4
<PAGE>
Company as a group, including the beneficial ownership of Common Stock as of
March 7, 1997, by such persons and group, are set forth below:
<TABLE>
<CAPTION>
Amount and
Principal Occupation First Nature of Percent
During Past Five Years Became a Beneficial of
Name Age and Directorships Director Ownership(1) Class
- ---------------------- --- ----------------------------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 60 Chairman of the Board, 1977 1,417,774(2) 8.39%
President and Chief Executive
Officer of the Company
Edgar O. Weller 79 Vice Chairman of the Board 1969 548,560 3.29%
of the Company
W. Grogan Lord 82 Senior Chairman of the Board, 1975 3,750(3) *
TeleCom Corporation
Leroy Hallman 81 Of counsel to the law firm of 1975 18,650(5) *
Storey Armstrong Steger
& Martin, P.C.(4)
Brian R. Blackmarr 55 President, B.R. Blackmarr 1990 22,678(6) *
& Associates, Inc.
T. Michael O'Connor 42 Chief Executive Officer, 1992 22,142(7) *
Ecosource, Inc., Managing
Partner, T.J. O'Connor
Cattle Co. and Vice
Chairman of Texas A & M
University Board of Regents
Charles G. Robertson(8) 55 Executive Vice President 1982 521,167(9) 3.10%
of the Company since
November 1987 and prior
thereto Senior Vice
President of FFE
Burl G. Cott(8) 56 Senior Vice President 1990 119,268(10) *
of the Company and FFE
since November 1989
All directors and 2,673,989(11) 15.64%
executive officers, as
a group
</TABLE>
______________________
* less than 1%
(1) Except as otherwise noted, all shares are held directly, and the owner
has sole voting and investment power.
(2) Includes 203,055 shares Mr. Stubbs has the right to acquire pursuant to
options exercisable within 60 days, 144,620 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 42,340 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc., 880 shares
held by an estate of which Mr. Stubbs is executor, and 769,387 shares
held in family partnerships controlled by Mr. Stubbs.
5
<PAGE>
(3) Represents 3,750 shares which Mr. Lord has the right to acquire pursuant
to options exercisable within 60 days.
(4) Mr. Hallman, and firms of which he is or has been a member, serve, and
for more than 30 years have served, as the Company's principal attorneys
in interstate and intrastate trucking matters.
(5) Includes 6,975 shares held by a trust of which Mr. Hallman is the
Trustee.
(6) Includes 2,678 shares which Mr. Blackmarr has the right to acquire
pursuant to options exercisable within 60 days.
(7) Represents 22,142 shares which Mr. O'Connor has the right to acquire
pursuant to options exercisable within 60 days.
(8) Mr. Robertson is also Executive Vice President and a director of FFE.
Mr. Cott is also Senior Vice President and a director of FFE.
(9) Includes 129,047 shares Mr. Robertson has the right to acquire pursuant
to options exercisable within 60 days, 81,956 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 35,856 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc., and 192,236
shares held by a family partnership which is controlled by Mr.
Robertson.
(10) Includes 50,172 shares Mr. Cott has the right to acquire pursuant to
options exercisable within 60 days, 21,745 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan and 11,888 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc.
(11) Includes 410,844 shares which executive officers and directors have the
right to acquire pursuant to options exercisable within 60 days, 248,321
shares allocated to the accounts of executive officers pursuant to the
FFE Transportation Services, Inc., Employee Stock Ownership Plan, 90,083
shares allocated to the accounts of executive officers pursuant to the
Savings Plan for Employees of Frozen Food Express Industries, Inc., 880
shares held by an estate, and 961,623 shares held by family partnerships
controlled by directors and executive officers, and 6,975 shares held by
a trust controlled by a director.
The Company's Board of Directors held five meetings during 1996. Each
incumbent director attended during 1996 at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors held during the period
that he was director and (ii) the total number of meetings held by all
committees of the Board on which he served (during the periods that he
served).
6
<PAGE>
The Company's Board of Directors has standing compensation, audit and
information services committees, but does not have a standing nominating
committee. The Compensation Committee consists of Messrs. Blackmarr,
Chairman, and Lord. The Committee is charged with recommending compensation
arrangements for the directors and executive officers of the Company and
recommending compensation programs for FFE. The Committee held one meeting
during 1996.
The Audit Committee of the Board of Directors consists of Messrs.
Hallman, Chairman, Weller and O'Connor. During 1996, the Committee held two
meetings at which it reviewed with representatives of Arthur Andersen LLP the
results of its 1995 annual audit, and plans for the 1996 annual audit and
reviewed other services provided by the Company's accountants.
The Information Services Committee of the Board of Directors consists of
Messrs. Stubbs, Chairman, Blackmarr, Cott and Robertson. The Committee is
charged with reviewing the Company's information systems and making
recommendations to the Board of Directors regarding possible improvements to
such systems. The Committee held 17 meetings during 1996.
DIRECTOR COMPENSATION
As consideration for services as a director, each director who is not an
executive officer of the Company receives fees of $1,000 for each meeting
attended and $500 for each telephonic meeting in which he participates.
Members of the Audit, Compensation and Information Services Committees who
are not executive officers of the Company receive fees of $500 for each
committee meeting attended which does not occur on the same day as a Board
meeting.
On April 27, 1995, the shareholders adopted the Frozen Food Express
Industries, Inc., 1995 Non-Employee Director Stock Option Plan (the "1995
Director Plan"). The purpose of the 1995 Director Plan is to advance the
interest of the Company and its shareholders by strengthening the Company's
ability to attract and retain experienced and able individuals to serve as
independent directors of the Company and to furnish additional incentive to
such individuals to expend their best efforts on behalf of the Company.
On the day of a non-employee director's initial appointment or election
(whichever comes first) to the Board, such individual will be granted,
without any further action on the part of the Board or such individual, an
option to purchase 9,375 shares of Common Stock (subject to adjustment to
reflect certain changes in capitalization). Upon the reelection of any non-
employee director to the Board (including the non-employee director's first
election by shareholders if such director was initially appointed to the
Board) such individual will be granted, without any further action on the
part of the Board or such individual, an option to purchase 1,875 shares of
Common Stock (subject to adjustment to reflect certain changes in
capitalization). No option shall be granted pursuant to the 1995 Director
Plan after March 3, 2005.
7
<PAGE>
To the extent that a non-employee director has served as a director for
one or more years prior to the grant of an option, the option is immediately
exercisable for the number of shares equal to the product of one-seventh
(1/7) of the number of shares subject to the option multiplied by the number
of full years such non-employee director has served as a director.
Thereafter, one-seventh of the number of shares subject to the option become
exercisable on each anniversary of the date of grant until the option becomes
fully exercisable. No option granted under the 1995 Director Plan may be
exercised after the tenth anniversary of its grant. In the event that an
optionee dies while serving on the Board of Directors, all options granted to
such optionee under the 1995 Director Plan become fully exercisable as of the
date of his or her death and may be exercised by the beneficiary under the
optionee's will or the executor of such optionee's estate at any time prior
to the second anniversary of his or her death, and his or her unexercised
options expire at the end of such period. In the event that an optionee
ceases to be a director for any reason other than death, such optionee may
exercise the vested portion of his or her option at any time prior to the
second anniversary of the date he or she ceases to be a director, and his or
her unexercised options expire at the end of such period. Should an optionee
die during the first six months from the date such optionee ceases to be a
director, his or her option may be exercised by the beneficiary under the
optionee's will or the executor of such optionee's estate for two years after
death and unexercised options expire at the end of such period. In no event,
however, shall the period during which options may be exercised extend beyond
the terms of the options. No shares underlying the options, however, may be
sold until the expiration of six months after the date of grant.
The exercise price under each option is fifty percent (50%) of the fair
market value of the Common Stock at the close of business on the last
business day prior to the date the option is granted. Options may be
exercised by tendering to the Company the purchase price in cash, check, or
shares of Common Stock already owned by the non-employee director having a
fair market value equal to the purchase price.
In accordance with the Director Plan, each of the Company's non-employee
Directors was granted an option to purchase 1,875 shares of Common Stock for
$5.75 per share on April 25, 1996.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Blackmarr and Lord. The
Committee is charged with recommending compensation arrangements for the
directors and executive officers of the Company and recommending compensation
programs for FFE. No payments other than director fees were made to
Compensation Committee members during 1996.
8
<PAGE>
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The table below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the
cumulative total return on the S&P 500 Index and the Media General Industry
Group Index #221 - Trucking Companies, consisting of the Company and 53 other
trucking companies (assuming the investment of $100 in the Company's Common
Stock, the S&P 500 Index and the Media General Index on December 31, 1991,
and reinvestment of all dividends).
COMPARISON OF FIVE-YEAR TOTAL RETURN AMONG
FROZEN FOOD EXPRESS INDUSTRIES, INC., MEDIA GENERAL
INDUSTRY GROUP #221 - TRUCKING COMPANIES AND S&P 500 INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period Frozen Food Express MG Industry S&P 500
(Fiscal Year Covered) Industries, Inc. Group Index Index
- --------------------- ------------------- ----------- -------
<S> <C> <C> <C>
FYE December 31, 1991 $100.00 $100.00 $100.00
FYE December 31, 1992 $251.27 $116.95 $107.64
FYE December 31, 1993 $368.34 $125.49 $118.50
FYE December 31, 1994 $315.15 $115.73 $120.06
FYE December 31, 1995 $224.81 $ 99.73 $165.18
FYE December 31, 1996 $233.95 $ 94.96 $203.11
</TABLE>
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid by the Company for services rendered during the fiscal
years ended December 31, 1996, 1995 and 1994, to each executive officer
(collectively, the "Executive Officers") of the Company:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------- Awards
------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary Bonus Total(1) Awards $(2) Options/SARs #(3) Compensation(4)
- --------------------------- ---- -------- -------- -------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 1996 $263,495 $110,582 $374,077 $ 88,556 25,000 $25,877
Chairman of the Board 1995 $258,099 $224,281 $482,380 $ 84,652 81,250 $41,172
President and Chief 1994 $258,099 $474,373 $732,950 $138,950 62,500 $23,530
Executive Officer of the
Company and FFE
Charles G. Robertson 1996 $198,842 $ 83,446 $282,288 $ 61,820 20,000 $16,904
Executive Vice President 1995 $194,364 $132,145 $326,509 $ 52,314 58,000 $23,371
of the Company and FFE 1994 $194,364 $283,726 $478,090 $ 84,494 38,125 $20,293
Burl G. Cott 1996 $123,269 $ 51,734 $175,003 $ 35,134 10,000 $ 6,000
Senior Vice President 1995 $120,490 $ 72,328 $192,818 $ 23,820 21,000 $13,668
of the Company and FFE 1994 $120,490 $156,705 $277,195 $ 39,930 8,750 $14,574
</TABLE>
______________________
(1) Personal benefits provided to each of the named individuals under
various Company programs do not exceed the disclosure thresholds
established under SEC rules and are not included in this total.
(2) The awards reported in this column include restricted phantom stock
units and, with regard to 1996, also include amounts awarded to
executive officers which will be converted to phantom stock units during
1997, relating to the achievement of performance goals under the FFE
Transportation Services, Inc. Executive Bonus and Phantom Stock Plan
(the "Executive Plan") or in accordance with the Company's Supplemental
Executive Retirement Plan (the "SERP") or FFE Transportation Services,
Inc. 401(k) Wrap Plan (the "Wrap Plan"). Amounts reported represent the
sum of the amounts to be converted in 1997 plus the product of the
aggregate number of phantom stock units awarded and the market price of
a share of Common Stock on the date of the award. The number of phantom
stock units allocated to an officer generally will be adjusted to
prevent dilution in the event of certain cash and non-cash dividends,
recapitalizations and similar transactions affecting the Common Stock.
An officer may generally elect to "cash out" any number or all of the
phantom stock units allocated to such officer between December 1 and
December 15 of any calendar year, in which event an amount equal to the
fair market value of a share of Common Stock on the last business day of
the year in which such election is made multiplied by the number of
phantom stock units that the officer elected to "cash out" shall be paid
10
<PAGE>
to the officer. Additionally, in the event of certain mergers, the sale
of all or substantially all of the Company's assets and certain similar
transactions (a "Reorganization") within six months after the date an
officer has been paid for phantom stock units and as a result of such
Reorganization the holders of Common Stock receive cash for each share
so held in an amount in excess of the amount paid to such officer for
such phantom stock units, then such excess shall be paid to the officer.
As of the date hereof, none of the executive officers have elected to
"cash out" any of the phantom stock units. The total number of phantom
stock units awarded to Messrs. Stubbs, Robertson, and Cott in 1994,
1995, and 1996 under the Executive Plan, the SERP and the Wrap Plan was
11,206, 6,814, and 3,220; 9,675, 5,979, and 2,722; and 8,145, 5,595 and
3,096, respectively. The total amount of 1996 awards which will be
converted to phantom stock units in the accounts of Messrs. Stubbs,
Robertson, and Cott in 1997 is $15,253, $11,467, and $7,274,
respectively. As of December 31, 1996, the total number of phantom
stock units allocated to the accounts of Messrs. Stubbs, Robertson, and
Cott was 68,946, 41,778 and 21,506, respectively. The total value of
such accounts, based upon the market price of a share of Common Stock on
December 31, 1996 was $635,767, $387,468, and $200,827, respectively,
for Messrs. Stubbs, Robertson and Cott.
(3) Options to acquire shares of the Company's Common Stock.
(4) Company contributions to the FFE Employee Stock Ownership Plan (the
"ESOP") and the Savings Plan for Employees of Frozen Food Express
Industries, Inc. (the "Savings Plan") and the value of benefits, as
determined under a methodology required by the SEC for valuing such
benefits, ascribed to life insurance policies whose premiums are paid by
the Company for the benefit of the persons indicated below. Set forth
below is a summary of such compensation:
<TABLE>
<CAPTION>
Savings Split Dollar
Name Year ESOP Plan Life Insurance
- --------------------- ---- ------ ------- --------------
<S> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 1996 -- $6,000 $19,877
1995 $7,668 $6,000 $27,484
1994 $9,119 $6,000 $ 8,411
Charles G. Robertson 1996 -- $6,000 $10,904
1995 $7,668 $6,000 $ 9,703
1994 $9,119 $6,000 $ 5,174
Burl G. Cott 1996 -- $6,000 --
1995 $7,668 $6,000 --
1994 $9,119 $5,455 --
</TABLE>
11
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the Executive Officers in the last fiscal year under the Company's
1992 Incentive and Nonstatutory Stock Option Plan:
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
% of Total Potential Realizable Value
Number of Options/SARs at Assumed Annual Rates
Securities Granted to of Stock Price Appreciation
Underlying Employees Exercise or For Option Term (1)
Options/SARs in Fiscal Base Price Expiration ---------------------------
Granted (#)(2) Year ($/Sh) Date 5% 10%
- --------------------- -------------- ------------ ----------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 25,000 10.0% $8.063 11/19/06 $ 126,769 $ 321,259
Charles G. Robertson 20,000 8.0% $8.063 11/19/06 $ 101,416 $ 257,007
Burl G. Cott 10,000 4.0% $8.063 11/19/06 $ 50,708 $ 128,503
All Holders of
Common Stock (3) N/A N/A $8.063 N/A $84,610,895 $214,420,620
</TABLE>
______________________
(1) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock and
overall stock market conditions. There can be no assurance that the
amounts reflected in this table will be achieved.
(2) All options granted to Executive Officers were granted on November 19,
1996, under the 1992 Incentive and Nonstatutory Stock Option Plan, are
contingent upon shareholder approval of the proposed amendment to such
plan described elsewhere herein, first become exercisable on
November 19, 1997, and are exercisable for a period of ten years from
the date of grant. All options were granted with an exercise price
equal to 100% of the market price of the Common Stock on the date of
grant of such stock option.
(3) Assumes a total of 16,685,981 shares of Common Stock outstanding with a
value of $8.063 (the closing sales price of the Common Stock on November
19, 1996) per share held from November 19, 1996, until November 19,
2006.
12
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Yearend Option/SAR
Values
The following table provides information, with respect to each Executive
Officer, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year ending December 31,
1996:
<TABLE>
<CAPTION>
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal Yearend at Fiscal Yearend
(#) ($)(1)
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise (#) Realized (1) Unexercisable Unexercisable
- --------------------- --------------- ------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. -- $ -- 203,055/25,000 $90,659/$23,428
Charles G. Robertson -- $ -- 129,047/20,000 $46,473/$18,750
Burl G. Cott -- $ -- 50,172/10,000 $21,993/$ 9,375
</TABLE>
______________________
(1) The closing price for the Company's Common Stock as reported by the
Nasdaq Stock Market on December 31, 1996, was $9.00. Value is
calculated on the basis of the difference between $9.00 and the option
exercise price of an "in-the-money" option multiplied by the number of
shares of Common Stock underlying the option.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report on the compensation policies, programs and decisions of the
Company for 1996 with respect to the Company's executive officers is
presented by the Compensation Committee of the Company (the "Committee"),
which for 1996 was comprised of two members, Messrs. Brian R. Blackmarr,
Chairman, and W. Grogan Lord. The Board of Directors delegates to the
Compensation Committee the responsibility for overseeing the development and
administration of total compensation policies and programs for executive
officers of the Company.
The Committee and the Company have partnered to develop and implement
compensation programs which are designed to enhance the profitability of the
Company. Specifically, the Company's goal is to retain, motivate and reward
management of the Company through its compensation policies and awards, while
aligning their interests and decisions with that of the Company and its
shareholders.
13
<PAGE>
With respect to the retention of management, the Company seeks to
attract and retain the highest caliber of executive leadership by offering
total compensation which is comparable to that offered by the Company's
competitors. The Company seeks to align the interest of management more
closely with that of the Company's strategic objectives and to motivate and
reward exceptional initiative and effort on the part of executive leadership,
by promoting performance-based compensation with a focus on the achievement
of both annual and long-term business interests. This philosophy is
reflected in the Company's executive compensation approach that provides a
major portion of total compensation in pay-at-risk (i.e. payout that is
dependent upon Company performance). In addition to the pay-at-risk
component, the Company's executive officer compensation program includes base
salary, supplemental retirement benefits and various benefits, including
medical and retirement plans generally available to all Company employees.
In February of 1996, as engaged by the Compensation Committee of the
Board, an outside compensation consultant completed a review of the
competitiveness and effectiveness of the Company's executive pay practices
for 1995. This review is intended to occur on a regular basis to maintain
current analysis on competitive pay practices among a peer group of companies
(publicly traded trucking companies with similar size operations and
revenues). The scope of the review covered base salary levels, annual cash
bonus, long-term incentives and retirement benefits for executive officer
positions. The compensation analysis performed by the outside consulting
firm, as directed by the Compensation Committee, was discussed in the prior
year proxy disclosure. Although the analysis has not been performed by
outside consultants for 1996 compensation, it is the policy of the
Compensation Committee to update the competitive analysis on a periodic
basis. Based on the results of the compensation analysis completed in 1996,
the Committee believes the compensation policies and programs for key
management and Company executives are appropriately aligned with shareholder
interests.
The major components of executive compensation are detailed below.
BASE SALARY
Base salaries for the Company's executive officers are reviewed
periodically and are determined through an assessment of comparable positions
at peer companies in the trucking industry. As discussed previously, an
outside consulting firm performed a compensation assessment for 1995 amounts
which was completed in February 1996. It is the intent of the Company to
maintain base salaries below the market median of amounts paid to senior
executives with comparable size, scope, and levels of responsibilities in the
marketplace. As such, the 1996 analysis included examining the compensation
paid by a peer group of 12 publicly-traded trucking companies with operations
and revenue size similar to the Company's. The Committee believes that the
peer group used for the compensation study provided a more meaningful
comparison than would have the broader industry index the Company has
selected for use in the five-year shareholder return comparison. For 1996,
the broader industry index included 41 other companies, many of which are
significantly different from the Company in size and nature of the services
provided.
14
<PAGE>
ANNUAL INCENTIVE/BONUS COMPENSATION
The Company's incentive compensation, as approved by the Company's
shareholders at the 1994 annual meeting, is an annual opportunity designed to
reward key employees for Company performance relative to the achievement of
pre-determined performance goals established for the year. Components of
annual incentive compensation include an Incentive Bonus Plan (the "Incentive
Plan") covering all full-time FFE employees, including executive officers,
and the Company's Executive Bonus and Phantom Stock Plan (the "Executive
Plan") which covers key executive leadership. Both plans focus on
operational efficiencies with Incentive Plan pay-outs based upon a formula
tied to the Company's operating ratio and Executive Plan pay-outs based upon
a calculated percentage of an individual's annual base salary if targeted
operating ratios are met. Through program design, as the Company performance
rises to levels above the median of the peer group, Executive Officer's total
cash compensation opportunity rises to levels above the market median. For
the 1996 fiscal year, reflecting exemplary Company performance, total cash
bonuses averaged approximately 42% of the Executive Officer's annual salaries
as compared to 27% in 1995, and 64% in 1994.
LONG-TERM INCENTIVE COMPENSATION
The stock option and phantom equity programs form the basis of the
Company's long-term incentive plan for officers and certain other key
managers. Specific objectives of the programs are (i) to align executive and
shareholder long-term interests by creating a strong link between executive
pay and shareholder return, and (ii) to provide a balance between the annual
and long-term decision making responsibilities of each executive. It is the
Company's intention that executives develop and maintain a significant, long-
term stock ownership position in the Company's Common Stock.
At the 1994 Annual Meeting, shareholders approved the 1992 Incentive and
Nonstatutory Stock Option Plan (the "1992 Plan") thereby replacing the
expired 1982 Incentive Stock Option. The 1992 Plan permits the granting of
both incentive stock options and nonstatutory stock options. Under the 1992
Plan, the exercise price for incentive stock options granted will not be less
than 100% of the fair market value of a share of the Company's Common Stock
at the time of the grant. The exercise price for nonstatutory stock
options granted under the plan will be determined by the Committee or the
Board of Directors at the time of the grant; provided, however, that the
exercise price will not be less than 50% of the fair market value of a share
of the Company's Common Stock at the time of the grant. Under the 1992 Plan,
the term of the options granted will be determined by the Committee or the
Board of Directors; provided that the term of stock options will not exceed
ten years. The Committee believes the current year awards are competitive in
value with the awards made to comparable executive officer positions in the
Company's peer group as identified during the 1996 assessment described
earlier.
15
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN
The Company maintains the FFE Transportation Services, Inc.,
Supplemental Executive Retirement Plan, as adopted in 1993. The plan was
implemented to provide supplemental benefits in the form of phantom stock
units in the Company for certain key executives whose retirement benefits are
restricted by Internal Revenue Code Sections 401(a) (17) and 415. Plan
amounts awarded for fiscal year 1996 are disclosed in the Summary
Compensation Table.
401(K) WRAP PLAN
During 1996, the Company adopted the FFE Transportation Services, Inc.
401(k) Wrap Plan. The 401(k) Wrap Plan is intended to supplement the 401(k)
Plan sponsored by the Company in which all employees who meet an age and
service requirement are allowed to participate. The 401(k) Wrap Plan is
designed to supplement retirement benefits under the 401(k) Plan which are
limited by Internal Revenue Code Sections 401(k) and 401(m).
Both the Supplemental Retirement Plan and the 401(k) Wrap Plan are
intended to be unfunded deferred compensation arrangements which are not
subject to the reporting and disclosure requirements of the Employee
Retirement Income Security Act of 1974 (ERISA). Plan amounts awarded for
fiscal 1996 are disclosed in the Summary Compensation Table.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Mr. Stoney M. Stubbs, Jr. continued to serve as Chairman of the Board,
President, and Chief Executive Officer of the Company throughout 1996.
In 1996, Mr. Stubbs' salary was $263,495. This salary compares with the
salary of $258,099 that Mr. Stubbs received during 1995 and 1994. The
overall compensation philosophy of aligning the financial interests of key
Company executives with the interests of shareholders is a key factor in the
pay-at-risk components of the Incentive Plan and Executive Plan. For 1996,
in keeping with the Incentive Plan and Executive Plan, Mr. Stubbs received a
total of $110,582 for realization of pre-established criteria.
In 1996, Mr. Stubbs was granted under the Company's 1992 Plan options to
purchase 25,000 shares of Common Stock. The number of shares awarded was
based on the value of long-term incentive plan awards made to the chief
executive officers of the Company's peer group of companies. Additional
considerations include the recent performance of the Company and the
Committee's subjective assessment of Mr. Stubbs individual performance. The
exercise price of the options was equal to the fair market value of the
Company's Common Stock on the date of grant.
In determining Mr. Stubbs total compensation, the Committee took into
account his ability to enhance company performance through effective
leadership and retention of key talent. The criteria used above for
executive officer performance evaluation were also used for Mr. Stubbs.
Ultimately, however, the Committee determined a level of annual compensation
for Mr. Stubbs based upon what it subjectively deemed appropriate based on
Company and individual performance levels.
16
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
In 1993, Section 162(m) was added to the Internal Revenue Code pursuant
to the Omnibus Budget Reconciliation Act of 1993. This section generally
limits the corporate deduction for compensation paid to the chief executive
officer and certain other high paid executive officers as listed in the
Summary Compensation Table to $1 million per year unless certain requirements
are met. The Committee has analyzed the effect of section 162(m) and
anticipates no financial impact for 1996. The Company will continue to
reevaluate this issue and recommend changes to the compensation program where
appropriate in order to maximize earnings and shareholder value.
Brian R. Blackmarr, Chairman
W. Grogan Lord
Members of the Compensation Committee
17
<PAGE>
TRANSACTIONS WITH MANAGEMENT
During 1994, 1995 and 1996 a subsidiary of the Company entered into
lease agreements whereby Stoney M. Stubbs, Jr., Chairman of the Board,
President and Chief Executive Officer of the Company, Charles G. Robertson,
the Executive Vice President and a director of the Company, and a family
partnership controlled by Mr. Stubbs leased certain tractors to the
subsidiary. Lease payments were determined by reference to amounts the
subsidiary was paying to unaffiliated lessors for similar equipment leased
under similar terms. Each tractor is leased under a non-cancelable operating
lease for a period of thirty-six months. As of December 31, 1996, the
subsidiary was also renting certain trailers from these officers. Trailer
leases in effect on such date were cancelable without notice by either party
and are continuing on a month-to-month basis.
Total tractor and trailer rentals paid during 1996 by the subsidiary
pursuant to the lease agreements were as follows: Mr. Stubbs and the family
partnership - $943,080 and Mr. Robertson - $496,324. The leases are triple-
net leases which require the lessee to pay directly to third parties all
taxes, insurance and maintenance expenses. The leases grant the subsidiary an
option to purchase the leased equipment at the end of the lease term for its
fair market value. Fair market value is determined by reference to prices at
which the subsidiary is able to buy and sell similar equipment of similar age
and condition. During 1996, the Company purchased tractors and trailers
valued at $319,477 from Mr. Stubbs and the family partnership and $189,373
from Mr. Robertson. The aggregate future minimum lease payments to Mr.
Stubbs and the family partnership and Mr. Robertson under the tractor leases
are $740,000 and $427,000, respectively, in 1997, $276,000 and $162,000,
respectively, in 1998 and $103,000 and $71,000, respectively, in 1999.
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S
1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN, AS AMENDED
The Board authorized an increase in the number of shares of Common Stock
reserved for issuance under the 1992 Incentive and Nonstatutory Stock Option
Plan (the "1992 Plan"), subject to shareholder approval. The 1992 Plan, as
currently amended, was approved by the shareholders on April 28, 1994.
GENERAL
The objective of the 1992 Plan is to provide an incentive for key
employees, including officers and directors who may be employees, and certain
non-employees of the Company or its subsidiaries to remain in the service of
the Company by providing them with opportunities to acquire an economic
interest in the future success and prosperity of the Company and its
subsidiaries.
The proposed amendment to the 1992 Plan consists of an increase in the
number of shares of Common Stock reserved for issuance under the 1992 Plan by
750,000 shares. At the meeting, the shareholders will be requested to
approve the proposed amendment to the 1992 Plan.
18
<PAGE>
The 1992 Plan as presently in effect reserves 1,256,944 shares (adjusted
for all stock splits) of the Company's Common Stock for issuance pursuant to
stock options to be granted under the 1992 Plan and, as of March 24, 1997, no
shares remained available for future grants. The Board believes that in
order to continue to achieve the purpose of the 1992 Plan, which is to
promote Company success by aligning key employee financial interests with
long-term shareholder value, the number of shares reserved for issuance under
the 1992 Plan should be increased. If approved by the shareholders, the
proposed amendment to the 1992 Plan will increase these numbers by 750,000
shares.
The following table summarizes options granted under the 1992 Plan to
the individuals specified below in fiscal year 1996, options granted under
the 1992 Plan to the individuals specified below in fiscal year 1996 subject
to shareholder approval of the proposed amendment to the 1992 Plan
("Contingent Options"), and options (including Contingent Options) under the
1992 Plan held by the individuals specified below as of March 7, 1997.
<TABLE>
<CAPTION>
Number of Number of
Options Granted Options
Name and Position in 1996 Outstanding (2)
- -------------------------------------- --------------- ---------------
<S> <C> <C>
Stoney M. Stubbs, Jr.
Chairman of the Board, President and
Chief Executive Officer 25,000 (1) 228,055
Charles G. Robertson
Executive Vice President 20,000 (1) 149,077
Burl G. Cott
Senior Vice President 10,000 (1) 60,172
All Executive Officers as a Group 55,000 (1) 473,304
All Non-Executive Directors as a Group -- --
All Non-Executive Officer Employees as
a Group 194,250 1,088,931
</TABLE>
______________________
(1) Represents grants contingent upon approval of the proposed amendment to
the 1992 Plan by the shareholders ("Contingent Options"). See
"Executive Compensation - Option/SAR Grants in Last Fiscal Year".
(2) Includes Contingent Options.
On March 7, 1997, the closing sale price of the Company's Common Stock
as reported by the Nasdaq Stock Market was $9.25.
19
<PAGE>
Options may be granted under the 1992 Plan to employees and consultants
of the Company or its subsidiaries. Both incentive and nonstatutory stock
options may be granted under the 1992 Plan. However, no incentive stock
option may be granted to any individual who is not an employee of the Company
or one of its subsidiaries on the date of grant. The Company and its
subsidiaries currently have approximately 2,600 employees, three of which are
also serving as directors of the Company. Any employee-director or
consultant-director is eligible to receive options under the 1992 Plan,
unless such person serves on the Committee. Actual participation in the 1992
Plan is determined in the sole discretion of the Committee and/or Board of
Directors. Therefore, the number of participants participating in the 1992
Plan in the next fiscal year cannot be determined precisely nor can the
benefits or amounts that will be received by or allocated to any participant.
The 1992 Plan provides that no employee of the Company or its subsidiaries
may receive in any one year options under the 1992 Plan to acquire in excess
of 100,000 shares of Common Stock.
Each option granted under the 1992 Plan is evidenced by a written option
agreement, the terms and provisions of which are determined by the Committee
or Board of Directors at the time of the granting of such option. The
exercise price for incentive stock options granted under the plan may not be
less than 100% of the fair market value of a share of the Company's Common
Stock at the time of the grant. The exercise price for nonstatutory stock
options granted under the plan is determined by the Committee or Board of
Directors at the time of the grant; provided, however, that the exercise
price may not be less than 50% of the fair market value of a share of the
Company's Common Stock at the time of the grant. However, a particular
nonstatutory option will satisfy the "performance-based" requirements of the
1993 Omnibus Budget Reconciliation Act ("OBRA") only if the exercise price is
not less than the fair market value of the stock at the time of the grant of
the particular nonstatutory option. The grant of an option at fair market
value constitutes a performance goal under OBRA for which the Company
obtained shareholder approval on April 28, 1994. The term of the options
granted under the 1992 Plan is determined by the Committee or the Board of
Directors; provided that the term of stock options may not exceed ten years.
In addition to such other terms and restrictions as may be included in a
particular option agreement, options granted under the 1992 Plan are not
transferable other than by will or the laws of descent and distribution and
automatically terminate upon the severance of the option holder's
relationship with the Company or its subsidiaries; provided that the portion
of the option which is exercisable at the time of such severance may be
exercised until the earlier of expiration of the term of the option or (A) in
the case of an employee, (i) ninety days after (a) the severance of the
employment relationship or (b) the employee's retirement or (ii) one year
after (a) severance of the employment relationship by reason of disability of
the employee or (b) the death of such employee during the employment
relationship; or (B) in the case of a non-employee, (i) 90 days after the
severance of the relationship between such non-employee and the Company or
(ii) one year after the death of such non-employee.
20
<PAGE>
The option exercise price may be paid in cash or, at the discretion of
the Committee or the Board of Directors or if the related option agreement so
provides, partially or entirely in issued and outstanding Common Stock,
valued at the fair market value of the Common Stock on the date the option is
exercised.
Option agreements under the 1992 Plan may, in the discretion of the
Committee or Board of Directors, require an optionee to return the Profit
that such optionee received upon the exercise of options granted under the
1992 Plan if the optionee exercises such options within six months before or
after the termination of such optionee's relationship with the Company and
within one year of such termination engages, directly or indirectly, in any
activity that, in the good faith determination of the Board of Directors of
the Company, competes with the business of the Company or its subsidiaries.
For purposes of this provision, "Profit" is defined as the difference between
the fair market value of the shares of Common Stock received upon the
exercise of an option and the aggregate exercise price for the number of
shares so purchased.
The 1992 Plan provides that if the Company subdivides as a whole (by
reclassification, stock split, stock dividend or otherwise) the number of
shares of Common Stock then outstanding or consolidates as a whole (by
reclassification, reverse stock split or otherwise) the number of shares of
Common Stock then outstanding, the maximum number of shares of Common Stock
authorized for issuance under the 1992 Plan, the number of shares of Common
Stock issuable under any stock option granted under the 1992 Plan and the
exercise price of any such stock option shall be adjusted. Similarly, the
1992 Plan provides that the limitation on the number of shares of Common
Stock that may underlie options granted to an employee of the Company or any
of its subsidiaries in any one year will be adjusted in the event of any such
subdivision or combination.
ADMINISTRATION
With respect to individuals subject to Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended, the 1992
Plan is administered by a committee (the "Committee") consisting of directors
of the Company. The members of the Committee are appointed by and serve at
the pleasure of the Board of Directors. With respect to individuals not
subject to Rule 16b-3, the 1992 Plan may be administered by the Board of
Directors of the Company, or if the Board of Directors so decides, by the
Committee. The Committee, or the Board of Directors, as applicable, has full
authority, subject to the provisions of the 1992 Plan, to determine the
individuals to whom options are to be granted, the number of shares of Common
Stock represented by each option, the time or times at which options shall be
granted and exercisable, and the exercise price of the options.
TERMINATION AND AMENDMENT
The 1992 Plan will expire by its terms on February 12, 2002. The Board
of Directors of the Company has the right to revise, amend or terminate the
1992 Plan; provided, however, that shareholder approval is necessary to (a)
materially increase the aggregate number of shares of Common Stock that may
21
<PAGE>
be issued under the 1992 Plan, (b) materially increase the benefits accruing
to eligible individuals under the 1992 Plan or (c) materially modify the
requirements for eligibility for participation in the 1992 Plan. The
amendments described in (a) - (c) above may, however, be made without
shareholder consent if changes occur in the law that would so permit.
ACCOUNTING TREATMENT
During 1996, the Company adopted the provisions of Financial Accounting
Standard No. 123 ("FAS 123"), "Accounting for Stock-Based Compensation."
Generally, FAS 123 defines a fair value method of determining expenses to be
charged against income in connection with stock option grants. Alternately,
FAS 123 allows companies to continue to account for stock options using
methods in effect prior to the adoption of FAS 123, but requires companies to
disclose, on a pro forma basis, the effect application of the fair value
method has on reported net income and net income per share. The Company does
not currently intend to reflect directly the fair value method as a charge
against future net income or earnings per share.
TAX TREATMENT
NONSTATUTORY OPTIONS. Under current federal tax law, upon the grant of
a nonstatutory option under the 1992 Plan, no taxable income will be realized
by a participant and the Company will not be entitled to any deduction. Upon
exercise of a nonstatutory stock option, a participant will realize ordinary
taxable income on the date of exercise. Such taxable income will equal the
difference between the option exercise price and the fair market value of the
Common Stock on the date of exercise (the "bargain element"). The Company
will be entitled to a corresponding deduction for income subject to federal
income tax.
INCENTIVE OPTIONS. Upon the grant of an incentive stock option, no
taxable income will be realized by a participant and the Company will not be
entitled to any deduction. If a participant exercises an option, without
having ceased to be an employee of the Company or any of its subsidiaries at
any time during the period from the grant of the option until ninety days
before its exercise, then, generally, no taxable income will result at the
time of the exercise of such option. If no "disqualifying disposition" of
the stock transferred to a participant upon exercise of the option is made by
him or her (i.e., a disposition within the period that ends on the last to
occur of one year after such stock is so transferred and two years after the
grant of the option), any profit (or loss) realized by a participant from a
sale or exchange of such stock will be treated as long-term capital gain (or
capital loss), and no deduction will be allowable to the Company with respect
thereto. If a disqualifying disposition of such stock is made by a
participant, the disposition generally will result in ordinary income at the
time of the disposition in an amount equal to the lessor of (1) the gain on
the sale or (2) the bargain element. If the gain exceeds the bargain
element, the excess is a short-term or long-term capital gain depending upon
how long the shares are held prior to the sale. If the stock is sold for
less than the exercise price, failure to meet the holding period requirement
generally will result in a short-term or long-term capital loss, again
depending upon how long the shares are held prior to the sale, equal to the
difference between the exercise price and the sale price.
22
<PAGE>
Participants may be subject to the alternative minimum tax, which in
individual cases could reduce or eliminate any tax benefits to them under the
1992 Plan.
At the Committee's or the Board of Directors' discretion, both incentive
stock options and nonstatutory stock options may be exercised by a
participant by tendering shares of the Company's Common Stock which he or she
then owns; in addition, at the Committee's or the Board of Directors'
discretion, any resulting withholding tax may be paid to the Company with
Common Stock acquired pursuant to the exercise of the options. The use of
previously-owned Common Stock has no tax consequences to the Company.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION PURPOSES ONLY AND MAY NOT BE APPLICABLE TO ALL
INDIVIDUALS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A
DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
SHAREHOLDER APPROVAL
The affirmative vote of the holders of a majority of the shares of
Common Stock of the Company entitled to vote at the meeting is required to
approve the proposed amendment to the 1992 Plan. If the proposed amendment
to the 1992 Plan is not approved by the shareholders, the 1992 Plan, as
previously approved, will continue in effect and all options granted subject
to shareholder approval shall be null and void. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent
public accountants for fiscal year 1996. It is expected that representatives
of Arthur Andersen LLP will be present at the Annual Meeting, with the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions. The Company intends to select its
independent public accountants to review and report on the financial
statements of the Company for the 1997 fiscal year after receiving the
recommendation of the Audit Committee of the Board of Directors at the Audit
Committee's May 1997 meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) promulgated under the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors and persons who own
more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and Nasdaq. Officers and directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of such forms received by it, or written
representations from certain reporting persons that no Form 5 filings were
required for those persons, the Company believes that, during the year ended
December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were
complied with.
23
<PAGE>
SHAREHOLDER PROPOSALS AT 1997 ANNUAL MEETING
Shareholders intending to present proposals at the 1998 Annual Meeting
of Shareholders and desiring to have those proposals included in the
Company's proxy statement and form of proxy relating to that meeting must
deliver such proposals to the Secretary of the Company on or before November
29, 1998.
By Order of the Board of Directors
Dallas, TX LEONARD W. BARTHOLOMEW
March 28, 1997 Secretary
THE COMPANY WILL PROVIDE, UPON WRITTEN REQUEST AND WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES, FOR THE YEAR ENDED DECEMBER 31, 1996,
WHICH IT HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY RECORD
OR BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK AT THE CLOSE OF BUSINESS ON
MARCH 7, 1997. REQUESTS SHOULD BE DIRECTED TO LEONARD W. BARTHOLOMEW,
SECRETARY OF THE COMPANY, P. O. BOX 655888, DALLAS, TEXAS 75265-5888.
24
<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS - APRIL 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the notice, dated
March 28, 1997, of the Annual Meeting of Shareholders of Frozen Food Express
Industries, Inc. (herein called the "Company") to be held on Thursday, April
24, 1997, at 3:30 p.m., Dallas, Texas time, in the offices of Wells Fargo
Bank, Fountain Place, 1445 Ross Avenue, 4th Floor, Dallas, Texas 75202, and
the Proxy Statement, also dated March 28, 1997, in connection therewith
(herein called the "Proxy Statement"), and (2) constitutes and appoints
Stoney M. Stubbs, Jr., and Burl G. Cott, and each of them (if only one be
present, then by that one alone), his attorneys and proxies, with full power
of substitution and revocation to each, for and in the name, place and stead
of the undersigned, to vote, and act with respect to, all of the shares of
capital stock of the Company standing in the name of the undersigned or with
respect to which the undersigned is entitled to vote and act, at said meeting
and at any adjournment thereof. The Board of Directors recommends a vote FOR
each of the Company's proposals set forth on the reverse.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR all nominees listed in Proposal 1 and FOR Proposal 2.
-----------
SEE REVERSE
SIDE
(Continued and to be signed on reverse side.) -----------
25
<PAGE>
Please mark
/x/ votes as in
this example.
Please mark boxes in blue or black ink.
1. ELECTION OF DIRECTORS
Nominees: Stoney M. (Mit) Stubbs, Jr., Edgar O. Weller, W. Grogan Lord,
Leroy Hallman, Brian R. Blackmarr, Charles G. Robertson, Burl G. Cott and
T. Michael O'Connor.
FOR WITHHELD
/ / / /
/ / ______________________________________
For all nominees except as noted above
2. Approval of amendment to 1992 incentive and nonstatutory stock option
plan, as amended increasing the total number of shares available for the
grant of options from 1,256,944 to 2,006,944 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE BELOW
Please promptly complete, date, sign and return this proxy using the enclosed
envelope.
When shares are held by joint tenants, both should sign. When signing as an
agent, attorney, administrator, executor, guardian or trustee, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer who should indicate his title. If a
partnership, please sign in partnership name by authorized person. Please
date, sign and mail this proxy card in the enclosed envelope. No postage is
required if mailed in the United States.
Signature: ________________________ Date: ____________________
Signature: ________________________ Date: ____________________
