<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
EXPEDITORS INTERNATIONAL OF WASHINGTON, 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Payment of Filing Fee (Check the appropriate box): No Longer Applicable
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the contraversy prusuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
[LOGO]
EXPEDITORS INTERNATIONAL
OF WASHINGTON, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 7, 1997
------------------------
To the Shareholders of Expeditors International of Washington, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of EXPEDITORS
INTERNATIONAL OF WASHINGTON, INC. (the "Company") will be held at 2:00 in the
afternoon, on Wednesday, May 7, 1997, at The Rainier Club located at 820 Fourth
Avenue, Seattle, Washington, for the following purposes:
(1) To elect six (6) directors, each to serve until the next annual meeting
of shareholders and until a successor is elected and qualified;
(2) To approve and ratify adoption of the 1997 Stock Option Plan;
(3) To approve and ratify adoption of the 1997 Executive Incentive
Compensation Plan; and
(4) To transact such other business as may properly come before the meeting.
Shareholders of record on the books of the Company at the close of business
on March 10, 1997, will be entitled to notice of and to vote at the meeting and
any adjournment thereof.
By Order of the Board of Directors
[SIGNATURE]
Jeffrey J. King
SECRETARY
Seattle, Washington
March 24, 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED AND ADDRESSED
ENVELOPE. THIS WILL ENSURE A QUORUM AT THE MEETING. THE GIVING OF THE PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE AT THE MEETING IF THE PROXY IS REVOKED IN THE
MANNER SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
<PAGE>
[LOGO]
EXPEDITORS INTERNATIONAL
OF WASHINGTON, INC.
999 THIRD AVENUE, SUITE 2500
SEATTLE, WASHINGTON 98104
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
------------------------
INFORMATION REGARDING PROXIES
This proxy statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of
Expeditors International of Washington, Inc. (the "Company") for use at the
annual meeting of shareholders (the "Annual Meeting") to be held at The Rainier
Club located at 820 Fourth Avenue, Seattle, Washington on Wednesday, May 7,
1997, at 2:00 p.m. local time, and at any adjournment or adjournments thereof.
Only shareholders of record on the books of the Company at the close of business
on March 10, 1997 (the "Record Date") will be entitled to notice of and to vote
at the meeting. It is anticipated that these proxy solicitation materials and a
copy of the Company's 1996 Annual Report to Shareholders will be mailed to
shareholders on or about March 24, 1997.
If the accompanying form of proxy is properly executed and returned, the
shares represented thereby will be voted in accordance with the instructions
specified thereon. In the absence of instructions to the contrary, such shares
will be voted for all of the nominees for the Company's Board of Directors
listed in this proxy statement and in the form of proxy, for approval of the
Company's 1997 Stock Option Plan and for approval of the Company's 1997
Executive Incentive Compensation Plan. Any shareholder executing a proxy has the
power to revoke it at any time prior to the voting thereof on any matter
(without, however, affecting any vote taken prior to such revocation) by
delivering written notice to the Secretary of the Company, by executing and
delivering to the Company another proxy dated as of a later date or by voting in
person at the meeting.
VOTING SECURITIES
The only outstanding voting securities of the Company are shares of common
stock, $.01 par value (the "Common Stock"). As of the Record Date, there were
24,282,689 shares of Common Stock issued and outstanding, and each such share is
entitled to one vote at the Annual Meeting. The presence in person or by proxy
of holders of record of a majority of the outstanding shares of Common Stock is
required to constitute a quorum for the transaction of business at the Annual
Meeting. Shares of Common Stock underlying abstentions and broker non-votes will
be considered present at the Annual Meeting for the purpose of determining
whether a quorum is present.
<PAGE>
Under Washington law and the Company's charter documents, if a quorum is
present, the six nominees for election to the Board of Directors who receive the
greatest number of votes cast by persons present in person at the Annual Meeting
or represented by proxy shall be elected Directors. Abstentions and broker
non-votes will have no effect on the election of directors. With respect to the
proposals to approve and ratify adoption of (i) the 1997 Stock Option Plan, and
(ii) the 1997 Executive Incentive Compensation Plan, such proposals will be
approved by a majority of the votes cast, including abstentions, by persons
present at the Annual Meeting or represented by proxy and entitled to vote on
the proposal. An abstention from voting on either proposal will have the effect
of a vote "Against." Broker non-votes on a proposal will, however, have no
effect because such non-votes are not considered "shares entitled to vote" on
the proposals.
Proxies and ballots will be received and tabulated by ChaseMellon
Shareholder Services, an independent business entity not affiliated with the
Company.
The Common Stock is listed for trading on the NASDAQ National Market under
the symbol EXPD. The last sale price for the Common Stock, as reported by NASDAQ
on March 10, 1997, was $27.125 per share.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information, as of March 10, 1997, with
respect to all shareholders known by the Company to be beneficial owners of more
than five percent of its outstanding Common Stock. Except as noted below, each
person has sole voting and dispositive powers with respect to the shares shown.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP OF CLASS
- ---------------------------------------- ---------- --------
<S> <C> <C>
FMR Corp. (1) .......................... 2,148,800 8.85%
82 Devonshire Street
Boston, MA 02109
RCM Capital Management, L.L.C. (2) ..... 1,829,400 7.53%
Four Embarcadero Center
Suite 2900
San Francisco, CA 94111
Wanger Asset Management, L.P. (3) ...... 1,300,000 5.35%
227 West Monroe Street
Suite 3000
Chicago, IL 60606
</TABLE>
- ------------------------
(1) The holding shown is as of December 31, 1996, according to a Schedule 13G
dated February 14, 1997 filed by FMR Corp., a parent holding company on
behalf of itself and Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment advisor ("Fidelity Management");
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.
and a bank; Fidelity International Limited, Edward C. Johnson 3d ("Mr.
Johnson") in his individual capacity and as a predominant shareholder of FMR
Corp.; and Abigail Johnson in her individual
2
<PAGE>
capacity and as a predominant shareholder of FMR Corp. Fidelity Management
reports that it is the beneficial owner of 1,294,800 shares. FMR Corp. and
Mr. Johnson report that they have sole dispositive power with respect to
1,275,200 shares. Fidelity International Limited reports that it has sole
voting and dispositive power over 19,600 of these shares. Fidelity
Management Trust Company reports that it is the beneficial owner of 854,000
shares. Mr. Johnson and FMR Corp. report that they have sole voting and
dispositive power over 854,000 of these shares.
(2) The holding shown is as of December 31, 1996, according to a joint statement
on Schedule 13G dated January 30, 1997 filed by RCM Capital Management,
L.L.C. ("RCM"), an investment advisor; RCM Limited L.P. ("RCM Limited"), the
Managing Agent of RCM; and RCM General Corporation ("RCM General"), the
General Partner of RCM Limited. RCM, RCM Limited, and RCM General report
that, as a group, they have sole voting power with respect to 1,595,400 of
these shares, sole dispositive power with respect to 1,789,400 shares and
shared dispositive power with respect to 40,000 shares. The above disclosure
includes 952,000 shares as to which RCM Capital Funds, Inc., a diversified
open-end management investment company, claims sole dispositive power and
444,000 shares as to which RCM Growth Equity Fund claims sole dispositive
power, as set forth in a joint Schedule 13G dated February 14, 1997. In a
Schedule 13G dated February 7, 1997, Dresdner Bank AG ("Dresdner"), an
international banking organization and parent holding corporation of RCM,
reports beneficial ownership of 1,829,400 shares to the extent that Dresdner
may be deemed to have beneficial ownership of securities deemed to be
beneficially owned by RCM.
(3) The holding shown is as of December 31, 1996, according to a Schedule 13G
dated February 14, 1997 filed jointly by Wanger Asset Management, Ltd. ("WAM
Ltd."), for itself and as sole general partner for Wanger Asset Management,
L.P. ("WAM") and by Ralph Wanger ("Wanger") in his individual capacity as
principal stockholder of WAM, Ltd. Each of WAM Ltd., WAM and Wanger report
shared voting and dispositive power with respect to the 1,300,000 shares.
WAM serves as investment advisor to Acorn Investment Trust, Series
Designated Acorn Fund (the "Trust"), and various of WAM's limited partners
and employees are also officers and trustees of the Trust. WAM, as
investment advisor, reports shared voting and dispositive power with respect
to 1,000,000 shares which are held by the Trust.
PROPOSAL 1--ELECTION OF DIRECTORS
NOMINEES
A Board of Directors consisting of six directors will be elected at the
Annual Meeting to hold office until the next annual meeting of shareholders and
until their successors are elected and qualified. The Board of Directors has
unanimously approved the nominees named below, all of whom are members of the
current Board of Directors. Unless otherwise instructed, it is the intention of
the persons named in the accompanying form of proxy to vote shares represented
by properly executed proxies for the six nominees of the Board of Directors
named below. Although the Board of Directors anticipates that all of the
nominees will be available to serve as directors of the Company, should any one
or more of them not accept the nomination, or otherwise be unwilling or unable
to serve, it is intended that the proxies will be voted for the election of a
substitute nominee or nominees designated by the Board of Directors.
3
<PAGE>
The following table lists the names and ages, and the amount and nature of
the beneficial ownership of Common Stock of each nominee, of each of the Named
Executive Officers described in the Summary Compensation Table, and all
directors and executive officers as a group at March 10, 1997. Except as noted
below, each person has sole voting and dispositive powers with respect to the
shares shown.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AGE OWNERSHIP OF CLASS
- ---------------------------------------- --- ----------------- --------
<S> <C> <C> <C>
Nominees:
Peter J. Rose (1)..................... 53 585,300 2.41%
Kevin M. Walsh (1).................... 46 612,320 2.52%
James L.K. Wang (2)................... 49 312,104 1.29%
James J. Casey (3).................... 64 22,700 *
Dan P. Kourkoumelis (3)............... 45 16,000 *
John W. Meisenbach (3)................ 60 126,000 *
Additional Named Executives:
Glenn M. Alger (4).................... 40 355,474 1.46%
Michael R. Claydon (5)(6)............. 49 134,924 *
All directors and executive officers as
a group (15 persons) (2)(5)(7)........ 2,553,838 10.52%
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 160,000 shares subject to purchase options exercisable within sixty
days.
(2) Includes an aggregate of 62,000 shares held by Mr. Wang for the benefit of
the following individuals: Johnny Chang (30,000 shares), M.F. Chi (16,000
shares), Michael Wong (2,000 shares) and Tammy Han (14,000 shares), with
respect to which Mr. Wang disclaims beneficial ownership. Mr. Wang and each
of these beneficial owners are current or former employees of E.I. Freight
(Taiwan), Ltd.
(3) Includes 16,000 shares subject to purchase options exercisable within sixty
days.
(4) Includes 180,000 shares subject to purchase options exercisable within sixty
days.
(5) Does not include 1,000 shares held by a child of Mr. Claydon, as to which
Mr. Claydon disclaims beneficial ownership.
(6) Includes 59,000 shares subject to purchase options exercisable within sixty
days.
(7) Includes 889,000 shares subject to purchase options exercisable within sixty
days.
------------------------
All directors hold office until the next annual meeting of shareholders of
the Company and until their successors are elected and qualified.
Peter J. Rose has served as a director and Vice President of the Company
since July 1981. Mr. Rose was elected a Senior Vice President of the Company in
May 1986, Executive Vice President in May 1987, President and Chief Executive
Officer in October 1988, and Chairman and Chief Executive Officer in May 1991.
4
<PAGE>
Kevin M. Walsh has served as a director and Vice President of the Company
since July 1981. Mr. Walsh was elected a Senior Vice President of the Company in
May 1986, Executive Vice President in December 1989, and President and Chief
Operating Officer in May 1991.
James L.K. Wang has served as a director and the Managing Director of
Expeditors International Taiwan Ltd. since September 1981 and with its
successor, E.I. Freight (Taiwan), Ltd., since January 1991. In October 1988, Mr.
Wang became a director and Director-Far East of the Company and in January 1996
he was elected Executive Vice President and Director-Far East. Mr. Wang has been
nominated for reelection to the Board of Directors pursuant to a contractual
undertaking made by the Company in connection with the 1984 acquisition of the
Company's Hong Kong, Singapore and Taiwan offices. See "Executive
Compensation--Employment Contracts" and "Certain Transactions."
James J. Casey became a director of the Company in May 1984. From May 1987
to December 1989, Mr. Casey was the Executive Vice President of Avia Group
International, a subsidiary of Reebok and retailer of athletic shoes and
sporting apparel. From December 1985 to April 1987, Mr. Casey was the Chief
Operating Officer of Starbucks Coffee and Tea, a distributor of premium coffees
and teas. From 1978 to November 1985, Mr. Casey was employed by Eddie Bauer,
Inc., a subsidiary of General Mills and retailer of high quality recreational
and sporting apparel and equipment, in various management capacities including,
most recently, President-Direct Marketing.
Dan P. Kourkoumelis became a director of the Company in March 1993. Since
1967, Mr. Kourkoumelis has been employed in various positions by Quality Food
Centers, Inc., an independent supermarket chain. He was appointed Executive Vice
President in 1983 and Chief Operating Officer in 1987, President in 1989 and
Chief Executive Officer in 1996. Mr. Kourkoumelis is a member of the Board of
Directors of the Western Association of Food Chains and Washington Food Industry
and serves as a director of Associated Grocers, Incorporated.
John W. Meisenbach became a director of the Company in November 1991. Since
1972, Mr. Meisenbach has been the President and sole shareholder of Meisenbach
Capital Management, a financial services company. He currently serves on the
Board of Directors of Costco Companies, Inc., a wholesale membership store
chain. Mr. Meisenbach is a trustee of the Elite Fund, an investment company
registered under the Investment Company Act of 1940.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held one meeting during the year ended
December 31, 1996, and transacted business on nineteen occasions during the year
by unanimous written consent.
The Board of Directors has an Audit Committee which consists of Messrs.
Casey, Kourkoumelis, and Meisenbach. The function of the Audit Committee is to
meet with the internal financial staff of the Company and the independent public
accountants engaged by the Company to review (i) the scope and findings of the
annual audit, (ii) quarterly financial statements, (iii) accounting policies and
procedures and the Company's financial reporting, and (iv) the internal controls
employed by the Company. The Audit Committee also recommends to the Board of
Directors the independent public accountants to be selected to audit the
Company's annual financial statements and reviews the fees charged for audits
and for any non-audit engagements. The Committee's findings and recommendations
are reported to management and the Board of Directors for appropriate action.
The Audit Committee held four meetings during 1996.
5
<PAGE>
The Board of Directors has a Compensation Committee which consists of
Messrs. Casey, Kourkoumelis, and Meisenbach. The function of the Compensation
Committee is to consider and act upon management's recommendations to the Board
of Directors on salaries, bonuses and other forms of compensation for the
Company's executive officers and certain other key employees. The Compensation
Committee has been appointed by the Board of Directors to administer the
Company's stock option plans. The Compensation Committee held two meetings
during 1996, and transacted business on one occasion during the year by
unanimous written consent.
The Board of Directors does not have a standing Nominating Committee.
Each director attended at least 75% of the aggregate of the total number of
Board of Directors meetings and meetings of committees of the Board of Directors
on which he served.
DIRECTORS' COMPENSATION
Currently directors who are not employees of the Company are each paid an
annual retainer fee of $7,500, as well as $750 for each Board of Directors and
committee meeting attended. Pursuant to the 1993 Directors' Non-Qualified Stock
Option Plan, each director who is not an employee of the Company and who is
elected to office at the annual meeting of shareholders of any year will, on the
first business day of the immediately succeeding month, be automatically granted
an option to purchase 4,000 shares of Common Stock at the fair market value of
the stock on that date.
6
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company operates in the highly-competitive global logistics services
industry. The Company believes that the quality of its service depends upon the
quality of its officers and employees. In order to succeed, the Company believes
that it must be able to attract and retain qualified executives.
The Compensation Committee of the Board of Directors was established to
develop and implement compensation policies, plans and programs which seek to:
- attract and retain key executives critical to the long-term success of the
Company,
- enhance the profitability of the Company, and thus shareholder value, by
aligning closely the financial interests of the Company's senior managers
with those of its shareholders, and
- support the short- and long-term strategic goals and objectives of the
Company.
Compensation for each of the Named Executive Officers, as well as other
senior executives, consists of a base salary, annual incentive bonus
compensation, and long-term incentives in the form of stock options. The
Committee considers the competitiveness of the entire compensation package of an
executive officer relative to that paid by similar companies when determining
base salaries, percentage allocation of the bonus program, and grant of stock
options. The Company's objective is to offer a total compensation package which
gives the executive the opportunity to be paid at a level which is superior to
that offered by the Company's competitors in the global logistics services
industry.
BASE SALARY. Throughout its history, the Company has followed the policy of
offering its officers and other key managers a compensation package which is
weighted toward incentive-based compensation. Accordingly, the Company believes
that annual base salaries of its executive officers are generally set well below
competitive levels paid to senior executives with comparable qualifications,
experience and responsibilities at other comparably-sized companies engaged in
similar businesses as the Company. This belief is based on the general knowledge
of the Committee and management of compensation practices in the industry and,
in part, on a review of compensation disclosures in the proxy statements of such
comparably-sized companies, including certain companies in the industry group
index shown in the stock performance graph elsewhere in this proxy statement.
Base salaries for executives are reviewed by the Compensation Committee on an
annual basis as part of an overall examination of compensation and the base
salary may be changed based on the Committee's decision that an individual's
contribution, duties, and responsibilities to the Company has changed. The
Compensation Committee believes that the total compensation of the Chairman and
Chief Executive Officer should be closely linked to operating income, and as a
result, the fixed portion (represented by base salary) of the compensation
package for this position has remained at the current level since June 1, 1987.
INCENTIVE COMPENSATION. The Company has maintained an incentive bonus
program for executive officers since inception of the Company. In January 1985,
the Compensation Committee fixed the aggregate amount of bonuses available under
the program at ten percent of pre-bonus operating income. Factors considered in
determining the percentage to be made available for distribution included the
number of executives participating in the bonus program, as well as the level of
Company operations. The Compensation Committee also considered the aggregate
amount of discretionary bonuses paid to executive officers in each of the years
from 1982 to 1984, which approximated ten percent of operating income during
those years. The Committee believes that setting the aggregate executive bonus
at a fixed
7
<PAGE>
percentage of operating income, with fluctuations in bonuses paid tied to actual
changes in operating income, provides both a better incentive to the executives
than discretionary bonuses or alternative targeted performance goals, and a more
direct relationship between the executives' incentive compensation and
shareholders' return. By placing emphasis on growth in operating income, any
change in compensation is directly proportional to the profit responsibility of
the executive team.
All officers of the Company are eligible for inclusion in the executive
officer bonus program, although inclusion in the program and the allocation of
the aggregate amount among individual executives is determined at the beginning
of each year at the discretion of senior management. Annually the Compensation
Committee reviews the compensation package for each executive officer, including
the allocation of incentive compensation. The percentage of the executive bonus
pool allocated to the Chairman and Chief Executive Officer has changed
periodically to allow increased allocations to other executives and as a result
of a change in the total number of participating executives. The portion of the
executive bonus pool allocated to the Chairman and Chief Executive Officer
remained constant during 1996 while there was a decrease in the total number of
participating executives.
The incentive compensation program adopted by the Compensation Committee for
senior executives mirrors the compensation program that has been in place in
each operating office since the inception of the Company. The Company has
maintained a consistent compensation philosophy: offer a confident and capable
individual a modest base salary and the opportunity to share in a fixed and
determinable percentage of the operating profit generated by the business unit
under his or her control. Growth in individual compensation will only occur in
conjunction with an increase in the contribution to Company profits. Along with
the branch manager, key department managers and supervisors share in the
distribution of this branch bonus pool.
Key elements of this compensation philosophy include encouraging each
manager to think and act as an entrepreneur, establishing compensation levels
that are not perceived as being arbitrary, developing financial rewards that are
team oriented, and closely aligning the interests of the individual employee
with the goals of the Company and returns to the shareholders.
LONG-TERM INCENTIVES. The Compensation Committee believes that stock option
grants afford a desirable, long-term compensation method because they closely
ally the interests of management with shareholder value. During 1996, the
Committee granted stock options to eighty-eight employees based upon
recommendations made by senior management. Prior to approving any stock option
grants, the Committee reviews and considers factors such as the employee's
current position, length of service, and any prior stock option grants.
No stock options were granted to a Named Executive Officer in 1996. The most
recent grant for each Named Executive Officer came one year earlier during the
1995 stock option review process. These 1995 options were the first options
granted to the Chairman and Chief Executive Officer and certain other Named
Executive Officers since a 1990 stock option grant that contained reload
provisions. In 1993, the Chairman and Chief Executive Officer along with each
executive officer holding options with reload provisions, voluntarily waived
their rights to, and released the Company from any obligation for, the automatic
reload of stock options. No reload provisions have been included with any other
options granted by the Committee.
Each executive officer of the Company currently holds unvested stock
options. The Committee believes that unvested options promote stability in the
management team and provide a continuing incentive for focus on sustained
long-term growth in shareholder value.
8
<PAGE>
POST EMPLOYMENT--PERSONAL SERVICES AGREEMENT. The employment contract of
the Chairman and Chief Executive Officer contains a provision calling for post
employment personal services for a minimum of sixty days per year including up
to twenty days of business travel annually. Subject to earlier termination as
described below, the personal services agreement will run for a period of ten
years or until age seventy whichever comes first. In exchange, the Chairman and
Chief Executive Officer will receive an annual payment initially equal to the
base salary received for the most recent twelve months of service. Payments
after the first year will be indexed for changes to the CPI or similar index. In
the event that retirement occurs prior to age sixty, the initial annual
compensation shall be reduced by four percent for each year, or fraction
thereof, below age sixty. If the Chairman and Chief Executive Officer were to
retire in 1997 the initial annual payment would be $83,600 and the agreement
would run for ten years unless terminated as provided below. The contract also
extends coverage under the Company standard benefits package as amended from
time to time. The Chairman and Chief Executive Officer is prohibited from
competing with the Company during the term of the personal services agreement.
The obligation of the Company for such compensation is subject to termination in
the event of death, disability or willful failure to perform and would also
terminate in the event that employment was terminated with cause.
The Compensation Committee recognizes the key role that continuity in
personal relationships play in the global logistics services business. This
agreement calling for personal services assures the Company of the post
retirement involvement and loyalty of the Chairman and Chief Executive Officer.
In addition, this agreement anticipates and facilitates the eventual orderly
transition from one Chief Executive Officer to another while at the same time
providing a modest incentive for the incumbent to delay retirement until at
least age sixty.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Federal income tax
deduction for certain types of compensation paid to the Company's Chief
Executive Officer and to the four highest compensated officers whose
compensation must be reported to shareholders under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), is limited to $1,000,000 per officer
per taxable year unless such compensation meets certain requirements. The
Compensation Committee is aware of this limitation and cannot eliminate the
possibility that the deductibility of compensation payable in 1997 could be
affected by this limitation in the event that the shareholders fail to adopt and
ratify the 1997 Executive Incentive Compensation Plan. In making future
compensation decisions, the Compensation Committee intends to take into account
the effect of Section 162(m) as it discharges its responsibilities, although in
certain cases the Compensation Committee may award compensation to covered
officers which is not fully deductible by the Company as a result of this
limitation.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
James J. Casey
Dan P. Kourkoumelis
John W. Meisenbach
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows compensation paid by the Company for services
rendered during fiscal years 1996, 1995, and 1994 to the person who was the
Chief Executive Officer at the end of fiscal 1996 and the four other most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 in 1996 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS # COMPENSATION (2)
- --------------------------------- ---- ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Peter J. Rose,................... 1996 $ 110,000 $768,366 -0- $ 1,500
Chairman and 1995 110,000 551,278 40,000 1,500
Chief Executive Officer 1994 110,000 448,961 -0- 1,500
Kevin M. Walsh,.................. 1996 110,000 768,366 -0- 1,500
President and Chief 1995 110,000 551,278 40,000 1,500
Operating Officer 1994 110,000 448,961 -0- 1,500
James L.K. Wang,................. 1996 94,454 400,247 -0- -0-
Executive Vice President 1995 97,881 406,165 40,000 -0-
and Director-Far East 1994 92,179 522,492 -0- -0-
Glenn M. Alger,.................. 1996 96,000 550,510 -0- 1,500
Executive Vice President 1995 96,000 394,973 25,000 1,500
and Director-North America 1994 96,000 322,292 5,000 1,500
Michael R. Claydon,.............. 1996 121,664 389,967 -0- 26,281
Director-Europe 1995 122,433 279,788 25,000 23,619
1994 118,865 224,887 5,000 21,917
</TABLE>
- ------------------------
(1) These amounts were paid pursuant to bonus programs in place since the
inception of the Company. Since 1985, the Compensation Committee of the
Board of Directors has set the aggregate amount of executive bonuses at ten
percent of pre-bonus operating income. Since the inception of the Company,
Mr. Wang's bonus has been paid from a share in the Company standard bonus
program for operating units in the Far East under Mr. Wang's supervision.
(2) Except with respect to Mr. Claydon, these amounts represent the Company's
matching contributions of $.50 for each $1.00 of employee savings, up to a
maximum annual Company contribution of $1,500 per qualified employee, under
an employee savings plan intended to qualify under Section 401(k) of the
Code. The amounts shown for Mr. Claydon represent the initial disclosure of
a 7.5% Company match of a 5% voluntary employee contribution made to a
defined benefit plan established for employees of the Company's United
Kingdom subsidiary.
10
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table sets forth certain information as of December 31, 1996
regarding options held by the Named Executive Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
-------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT DECEMBER 31, VALUE OF UNEXERCISED IN-THE-MONEY
SHARES VALUE 1996 OPTIONS AT DECEMBER 31, 1996 (2)
ACQUIRED ON REALIZED -------------------------- -------------------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- ----------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Rose................ -0- -0- 160,000 80,000 $ 2,779,200 $ 940,000
Kevin M. Walsh............... -0- -0- 160,000 80,000 $ 2,779,200 $ 940,000
James L.K. Wang.............. 40,000 $ 324,800 -0- 80,000 -0- $ 940,000
Glenn M. Alger............... -0- -0- 180,000 60,000 $ 3,112,800 $ 732,500
Michael R. Claydon........... 30,000 $ 760,900 80,000 60,000 $ 1,389,600 $ 732,500
</TABLE>
- ------------------------
(1) Represents the difference between the closing price of the Company's Common
Stock on the date of exercise and the exercise price of the options,
multiplied by the number of options exercised.
(2) This value is calculated based on the closing price of the Company's Common
Stock at December 31, 1996, less the exercise price multiplied by the number
of in-the-money options held and ignoring tax consequences. There is no
guarantee that if and when these options are exercised they will have this
value.
11
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative returns for
the Company's Common Stock, the NASDAQ Stock Market (U.S. and Foreign) and
NASDAQ Trucking and Transportation Stock Index. The total cumulative return on
investment (change in month-end stock price plus reinvested dividends) for each
of the periods for the Company, the NASDAQ Stock Market (U.S. and Foreign) and
the NASDAQ Trucking and Transportation Index is based on the stock price or
index at December 31, 1991.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
Produced on 02/20/97 including data to 12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EXPEDITORS NASDAQ STOCK NASDAQ TRUCKING &
INTERNATIONAL MARKET TRANSPORTATION STOCKS
OF WASHINGTON, (US & SIC 3700-3799, 4200-4299,
<S> <C> <C> <C>
Inc. Foreign) 4400-4599, 4700-4799 US & Foreign
12/31/91 100.0 100.0 100.0
1/31/92 103.2 106.0 110.2
2/28/92 108.9 108.4 116.6
3/31/92 108.9 103.3 114.8
4/30/92 92.3 98.9 116.3
5/29/92 104.8 100.2 116.1
6/30/92 104.8 96.3 109.2
7/31/92 108.1 99.5 108.9
8/31/92 100.8 96.6 105.4
9/30/92 100.0 100.0 108.2
10/30/92 100.0 103.7 112.3
11/30/92 97.6 111.8 118.0
12/31/92 100.0 116.0 122.4
1/29/93 109.7 119.5 126.3
2/26/93 94.4 115.2 126.0
3/31/93 93.5 118.7 131.7
4/30/93 80.6 113.9 130.4
5/28/93 89.4 120.8 133.9
6/30/93 85.8 121.6 134.4
7/30/93 82.6 121.8 136.7
8/31/93 85.8 128.1 140.6
9/30/93 93.1 131.7 140.3
10/29/93 101.2 134.7 145.0
11/30/93 89.4 130.5 145.5
12/31/93 97.5 134.3 148.7
1/31/94 104.8 138.6 158.4
2/28/94 123.5 137.1 158.3
3/31/94 115.4 128.7 148.6
4/29/94 103.2 127.0 147.6
5/31/94 114.1 127.2 143.0
6/30/94 112.5 122.2 137.6
7/29/94 117.3 125.1 144.1
8/31/94 132.0 132.7 148.0
9/30/94 130.4 132.5 141.8
10/31/94 135.3 134.8 141.7
11/30/94 142.1 130.1 132.6
12/30/94 142.1 130.3 134.8
1/31/95 140.5 130.7 134.6
2/28/95 143.8 137.4 143.8
3/31/95 137.2 141.7 141.2
4/28/95 150.3 146.3 147.7
5/31/95 145.8 149.9 146.4
6/30/95 147.4 162.0 153.9
7/31/95 160.5 173.6 158.9
8/31/95 152.3 177.0 157.6
9/29/95 176.9 181.3 158.0
10/31/95 172.0 179.9 150.7
11/30/95 167.4 184.1 162.4
12/29/95 171.5 183.0 157.2
1/31/96 156.0 184.2 151.9
2/29/96 192.1 191.4 161.6
3/29/96 172.4 191.8 171.8
4/30/96 195.3 207.5 175.1
5/31/96 203.3 217.0 175.9
6/28/96 204.1 206.7 170.5
7/31/96 189.3 188.1 155.5
8/30/96 215.6 198.9 162.3
9/30/96 232.1 213.8 163.3
10/31/96 275.7 211.5 161.1
11/29/96 293.2 224.4 173.8
12/31/96 303.1 224.1 173.7
Notes:
A. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the
market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal
year-end,
is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on
12/31/91.
</TABLE>
12
<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with the following Named
Executive Officers which provide for the base salaries and expiration dates
indicated below:
<TABLE>
<CAPTION>
CURRENT
BASE ANNUAL EXPIRATION
NAME AND CURRENT POSITION SALARY DATE
- ---------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Peter J. Rose ............................................ US$110,000 May 1997
Chairman and Chief Executive Officer
Kevin M. Walsh ........................................... US$110,000 May 1997
President and Chief Operating Officer
James L.K. Wang .......................................... NT$2,592,960 February 1998
Executive Vice President and Director-Far East
Glenn M. Alger ........................................... US$96,000 May 1997
Executive Vice President and Director-North America
Michael R. Claydon ....................................... UKL77,500 April 1998
Director-Europe
</TABLE>
Each of the above employment agreements is automatically renewable upon
expiration for additional one-year periods unless either party elects otherwise.
Each agreement includes a covenant of the employee not to compete with the
Company during its term and for a period of at least six months following
termination, at the option of the Company, provided that no change in control
shall have occurred. See "Change in Control Arrangements" below. The Company has
the right to terminate any of these agreements at any time. For Messrs. Rose,
Walsh and Alger, if the Company terminates an agreement without cause during the
term thereof, the employee is entitled to receive an amount equal to his last
six-months compensation. In other circumstances, such persons will receive a
lump sum payment equal to six months base salary in the event the Company elects
the post employment covenant not to compete. If the Company terminates Mr.
Wang's agreement without cause during the term thereof, Mr. Wang will receive
his base salary for the remainder of the term or until such time as he becomes
otherwise employed in the freight forwarding business, whichever is earlier. Mr.
Claydon is entitled to 12-months notice in the event employment is terminated
without cause, and an additional six-months compensation in the event the
Company exercises its rights under the non-competition provisions of the
agreement.
CHANGE IN CONTROL ARRANGEMENTS
The employment agreement for each executive officer allows the Company to
extend the restriction on competition with the Company for at least six months
following termination of the employment relationship. The extension is at the
sole election of the Company unless the employee terminates the employment
relationship by resigning during a specified period surrounding a "change in
control," as defined below, in which case the employee may decline any offered
lump sum payment and thereby avoid the accompanying restriction on competition.
Historically, most options granted under the Company's 1985 Plan vest at the
rate of 50% three years after the date of grant, an additional 25% four years
after the date of grant and the balance five years after
13
<PAGE>
the date of grant. However, the 1985 Plan provides that outstanding options will
become immediately vested and fully exercisable in connection with the
occurrence of a "change in control" of the Company.
"Change in Control" means either one of the following: (i) when any person
(with certain exceptions) becomes the beneficial owner, directly or indirectly,
of 50% or more of the combined voting power of the Company's then outstanding
securities or (ii) shareholder approval of a transaction involving the sale of
all or substantially all of the assets of the Company or the merger of the
Company with or into another corporation.
PROPOSAL 2--APPROVAL AND RATIFICATION OF THE 1997
STOCK OPTION PLAN
At the Annual Meeting, the shareholders of the Company will be asked to
approve and ratify the Company's 1997 Stock Option Plan ("1997 Option Plan"),
which, if approved, will make available 2,000,000 shares of the Company's
authorized but unissued Common Stock for purchase upon exercise of options
granted under the 1997 Option Plan.
At March 10, 1997, options to purchase a total of 2,551,340 shares of Common
Stock were outstanding under the Company's 1985 Stock Option Plan and options to
purchase a total of 48,000 shares of Common Stock were outstanding under the
Company's 1993 Directors' Non-Qualified Stock Option Plan. If Proposal 2 is
approved, 159,664 shares of Common Stock will be available for grant pursuant to
the 1985 Stock Option Plan, 64,000 shares of Common Stock will be available for
grant pursuant to the 1993 Directors' Non-Qualified Stock Option Plan, 724,254
shares of Common Stock will be available for grant pursuant to the 1988 Employee
Stock Purchase Plan, and 2,000,000 shares of Common Stock will be available for
grant pursuant to the 1997 Option Plan.
The Board of Directors has approved a non-discretionary stock repurchase
plan which currently authorizes the repurchase of up to 1,100,000 shares of
Common Stock with the proceeds received from the exercise of stock options
outstanding under the plans noted above. As of March 10, 1997, the Company had
repurchased and retired 585,212 shares of Common Stock.
Adoption of the 1997 Option Plan will enable the Company to continue to
provide key employees with long-term compensation that will closely ally the
interests of these employees with positive changes in shareholder value.
Approximately 3,200 individuals would be eligible to receive options under the
1997 Option Plan as of March 10, 1997. The 1997 Option Plan includes an annual
limitation on the maximum number of shares that may be granted to any individual
to meet the Section 162(m) exception for deductibility of performance based
compensation.
SUMMARY OF THE 1997 OPTION PLAN
The following summary of the Company's 1997 Option Plan is qualified in its
entirety by reference to the full text of the 1997 Option Plan, a copy of which
is included as Appendix A to this Proxy Statement.
The 1997 Option Plan provides for the grant of two types of options: 1)
Incentive Stock Options which are options that meet the requirements of Section
422 of the Code, and 2) Non-Qualified Options. Shareholder approval will make
available 2,000,000 shares of the Company's authorized but unissued Common Stock
for purchase upon exercise of options granted under the 1997 Option Plan.
Incentive stock options may be granted to employees of the Company or a
related corporation. Non-qualified stock options may be granted to employees of
the Company, a related corporation, or affiliated
14
<PAGE>
companies. In any fiscal year, no employee may receive options to purchase more
than 10,000 shares of stock and no option may be granted at a price less than
the fair market value measured on the date of the grant. This annual limitation
may be increased to 50,000 shares, provided that at least 40,000 of such options
have an exercise price of not less than 120% of the fair market value at the
date of grant and expire no later than five years from the date of grant.
The 1997 Option Plan will be administered by a committee of the Board of
Directors consisting exclusively of members that are both "non-employee
directors" and "outside directors" as those terms are defined. The committee
will have authority to construe, amend or terminate the 1997 Option Plan. A
written agreement will evidence each option and determine whether the option is
an incentive or non-qualified stock option.
Options will expire no later than ten years from the date of grant;
provided, that no Incentive Stock Option granted to a greater-than-ten-percent
shareholder will expire later than five years from the date of grant. Vested
Options generally will terminate upon the first to occur of: (i) expiration of
the Option; (ii) termination of the optionee's employment; or (iii) ninety days
after the optionee's death or cessation of employment by reason of disability.
If no other vesting schedule is specified, Options will be 50% vested after
three years, 75% vested after four years and fully vested five years from the
date of grant. The Committee may accelerate vesting, or specify an alternative
vesting schedule including vesting based on the achievement of performance
objectives. Upon a change of control, all options outstanding at the date
thereof will become fully vested and exercisable.
The purchase price of option shares may be paid in cash, by cashier's check,
in shares of the Company's Common Stock already owned by the option holder, by
having shares withheld from the number of shares of Common Stock to be received
by the option holder, or by another payment mechanism approved by the Committee.
Shares used in payment shall be valued at fair market value on the date of
exercise.
The 1997 Option Plan will only be effective upon approval by the
shareholders. No options have been granted under the 1997 Option Plan and no
determination has been made as to who will receive an option grant if the 1997
Option Plan is approved by the shareholders.
Incentive stock options may be granted for 10 years after the effective date
and non-qualified stock options may be granted until no additional shares are
available or until the 1997 Option Plan is terminated.
The Plan is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended, and is not qualified under Code Section
401(a).
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 1997 OPTION PLAN
The following description of Federal income tax consequences addresses the
tax consequences for both "Incentive Stock Options" as defined in Section 422 of
the Code and "Non-Qualified Options" and is intended merely to provide basic
information with respect to the tax treatment applicable to the 1997 Option
Plan. Although the Company believes the following statements are correct, the
statements are based upon legislative, administrative, and judicial authority
that is subject to revision and differing interpretations. Each participant in
the Company's 1997 Option Plan should consult his or her own tax advisor
concerning the tax consequences of grant, exercise, or surrender of an option
and the sale or other
15
<PAGE>
disposition of any stock acquired pursuant to the exercise of an option.
Individual financial and Federal tax situations may vary, and state and local
tax considerations may be significant.
NON-QUALIFIED OPTIONS
Any option that does not meet with all the requirements of Section 422 of
the Code is commonly referred to as a non-qualified option. The grant of a
non-qualified stock option does not have income tax consequences for either the
Company or the recipient. Upon exercise of the option, and possibly subject to
the later expiration of any substantial risk of forfeiture, the optionee must
recognize ordinary taxable income in an amount equal to the difference between
the fair market value of the shares acquired and the amount paid to exercise the
option. The optionee exercising a non-qualified option will have a tax liability
even though the shares giving rise to the liability may not have been sold and
converted to cash. The optionee receives a tax basis in the shares equal to the
amount of income reported plus the amount of cash or basis of other property
exchanged in the exercise.
The Company will be entitled to an income tax deduction at the same time,
and in the same amount, as the optionee recognizes ordinary taxable income,
provided that the total compensation is reasonable and the Company has met any
applicable Federal income tax withholding obligations in connection with the
optionee's income.
Stock acquired through the exercise of a non-qualified option is a capital
asset in the hands of the optionee. When the stock is sold, the holder will
recognize a capital gain or loss in an amount equal to the difference between
the amount realized upon the sale and the adjusted basis of the stock sold. The
sale of stock has no tax impact on the Company.
INCENTIVE STOCK OPTIONS
An Incentive Stock Option must meet all the requirements of Section 422 of
the Code. Optionees do not recognize regular taxable income upon the grant or
upon the exercise of an Incentive Stock Option. However, the difference between
the exercise price and the fair market value of such shares as of the date of
exercise will be an adjustment for the purpose of calculating alternative
minimum taxable income. The alternative minimum tax is payable only to the
extent that it exceeds the regular income tax. If the alternative minimum tax
applies, it may be possible to recover some, if not all, of the alternative
minimum tax paid through a credit carried forward to a tax year where regular
tax liability exceeds the alternative minimum tax.
So long as the stock acquired through an Incentive Stock Option is held for
at least one year from the date of exercise and two years from the date of the
grant, any sale is not considered to be a disqualifying disposition. Any gain or
loss, measured by the difference between the amount realized and the adjusted
basis, will be treated as proceeds from the sale of a long-term capital asset.
In general, the adjusted basis will be the cash or adjusted basis of other
property exchanged to exercise the option. If there is no disqualifying
disposition, the Company will not receive an income tax deduction with respect
to the grant, exercise or sale of the stock or stock option.
Stock which is sold in a disqualifying disposition (other than in an
insolvency proceeding) requires the seller to recognize ordinary income in an
amount equal to the amount of the gain, but not more than the gain measured by
the fair market value of the stock at exercise, as ordinary income with any
remaining gain treated as capital gain. Any loss sustained on the disposition of
the shares is a capital loss. In the event the optionee recognizes ordinary
income in a disqualifying disposition, the Company receives an income tax
16
<PAGE>
deduction so long as the total compensation is reasonable and the Company has
met any applicable Federal income tax withholding obligations in connection with
the optionee's income.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 2--APPROVAL AND RATIFICATION OF THE 1997 STOCK OPTION PLAN.
PROPOSAL 3--APPROVAL AND RATIFICATION OF THE 1997 EXECUTIVE
INCENTIVE COMPENSATION PLAN
In 1993, the Internal Revenue Code was amended to add Section 162(m), which
prevents a publicly held corporation from taking Federal income tax deductions
previously allowed for compensation in excess of $1 million per year paid to the
Named Executive Officers whose compensation is disclosed in the corporation's
proxy statement. The Code, however, exempts compensation that qualifies as
"performance-based".
The Board of Directors has adopted, and proposed for approval and
ratification by the shareholders, the 1997 Executive Incentive Compensation Plan
(the "1997 Compensation Plan"). The 1997 Compensation Plan is a continuation of
the long established incentive bonus program for corporate officers, and is
similar to the incentive bonus program for all employees of the Company. The
1997 Compensation Plan is a "performance-based" plan which does not change the
existing compensation policy more fully set forth under the caption
"Compensation Committee Report on Executive Compensation." Shareholder approval
of the 1997 Compensation Plan is necessary to ensure the continuation of the
Company's income tax deduction for the incentive compensation payments to the
Named Executive Officers.
SUMMARY OF THE 1997 COMPENSATION PLAN
The following summary is qualified in its entirety by reference to the full
text of the 1997 Compensation Plan, a copy of which is attached as Appendix B.
The 1997 Compensation Plan establishes an executive bonus pool in an amount
equal to 10% of pre-bonus operating income. Administration of the 1997
Compensation Plan is vested in a committee of the Board of Directors comprised
solely of two or more "outside directors" (the "Committee") as that term is
defined in regulations under Section 162(m).
To be eligible to participate in the 1997 Compensation Plan an employee must
be a corporate officer with an annual base salary below $120,000.00 (to preserve
flexibility in the Company's compensation policy this amount is subject to
adjustment). Within the time period established by regulation, the Committee
shall establish the percentage to be allocated to each Named Executive Officer
and to such other employees as the Committee may select. Any amount not
allocated by the Committee shall be available to be allocated by the Chief
Executive Officer, provided that any such allocation shall not increase the
amount allocated to any Named Executive Officer nor increase the compensation
payable to any employee such that the individual would become a Named Executive
Officer.
At the end of each fiscal quarter, the Committee will certify the attainment
of the performance target and the calculation of the payouts of the related
awards. No award shall be paid prior to such certification and the Committee
may, in its discretion, reduce or eliminate an award based on circumstances
relating to the performance of the Company or the officer.
17
<PAGE>
If approved by shareholders, the 1997 Compensation Plan will be effective
for the quarter beginning July 1, 1997. The Plan may be amended by the
Committee, with the approval of the Board of Directors, at any time except to
the extent that shareholder approval would be required to maintain the
qualification of Plan awards as performance-based compensation.
The actual amounts to be paid to participants for the third and fourth
quarters of 1997 cannot be determined at this time, as such amounts are
dependent upon the Company's performance for the last six months of the current
fiscal year. However, since the Plan is a continuation of the previously
existing annual incentive bonus program, shareholders may assume that if the
Plan had been in effect for fiscal 1996, the actual bonus compensation received
by the Named Executive Officers as shown in the table under the caption entitled
"Executive Compensation--Summary Compensation Table" closely approximates the
incentive compensation that would have been received under the 1997 Compensation
Plan. The total incentive compensation paid during 1996 to all eleven
participants under the existing executive bonus plan was $4,158,358.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 3--APPROVAL AND RATIFICATION OF THE 1997 EXECUTIVE INCENTIVE
COMPENSATION PLAN.
CERTAIN TRANSACTIONS
In connection with the acquisition of the assets of certain Far East
affiliates including Taiwan effective January 1, 1984, the Company agreed to use
its best efforts, so long as James L.K. Wang remains a shareholder of the
Company and is employed by the Company or any of its affiliates or exclusive
agents, to cause one person nominated by Mr. Wang to be elected to the Company's
Board of Directors. In addition, the Company agreed that it will make no
appointment of a manager for any Far East office without prior consultation with
Mr. Wang so long as he remains a shareholder of the Company and is employed by
the Company or one of its affiliates or exclusive agents. Pursuant to this
agreement, Mr. Wang has been nominated for re-election to the Company's Board of
Directors.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected KPMG Peat Marwick, LLP to continue as its principal
independent public accountants for the current year. Representatives of KPMG
Peat Marwick, LLP are expected to be present at the Annual Meeting and have the
opportunity to make a statement, if they so desire, and to respond to
appropriate questions.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business which will be presented for action at the meeting. If any other
business requiring a vote of the shareholders should come before the meeting,
the persons designated as your proxies will vote or refrain from voting in
accordance with their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's directors,
certain of its officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
on Form 3 and changes of ownership on Form 4 or 5 with the Securities and
18
<PAGE>
Exchange Commission (the "SEC") and the National Association of Securities
Dealers. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all such forms
they file.
Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the filing requirements, the Company believes
that all reports required from its officers, directors and greater than ten
percent beneficial owners were filed on a timely basis during 1996.
SHAREHOLDER PROPOSALS FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Secretary at the Company's executive
offices by November 24, 1997, in order to be included in the Company's Proxy
Statement and form of proxy relating to that meeting.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. In addition, the Company
has agreed to pay the firm of Allen Nelson & Co. a fee of $3,000 plus reasonable
expenses for proxy solicitation services. Solicitations of proxies may be made
personally, or by mail, telephone, telegraph, facsimile or messenger.
The Company, if requested, will pay persons holding shares of Common Stock
in their names or in the names of nominees, but not owning such shares
beneficially, such as brokerage houses, banks and other fiduciaries, for the
expense of forwarding soliciting materials to their principals. All such costs
of solicitation of proxies will be paid by the Company.
By Order of the Board of Directors
[SIGNATURE]
Jeffrey J. King
SECRETARY
Seattle, Washington
March 24, 1997
19
<PAGE>
APPENDIX A
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
1997 STOCK OPTION PLAN
This 1997 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, $.01 par value (the "Common Stock"), of
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., a Washington corporation (the
"Company"). Stock options granted under this Plan that qualify under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), are referred to
in this Plan as "Incentive Stock Options." Incentive Stock Options and stock
options that do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options") granted under this Plan are referred to as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key employees
of the Company, its subsidiaries and such other affiliates as the Plan
Administrator shall select in accordance with Section 3 below; to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company; and to serve as an aid and inducement in the hiring of new
employees.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the Company
(the "Board") if each director is an "outside director" (as defined below). If
all directors are not outside directors, the Plan shall be administered by a
committee designated by the Board and composed of two (2) or more members of the
Board that are "non-employee directors" (as defined below) and outside
directors, which committee (the "Committee") may be the compensation committee
or a separate committee especially created for this purpose. The term
"non-employee director" shall have the meaning assigned to it under Rule 16b-3
(as amended from time to time) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor rule or regulatory
requirement. The term "outside director" shall have the meaning assigned under
Section 162(m) of the Code (as amended from time to time) and the regulations
(or any successor regulations) promulgated thereunder ("Section 162(m) of the
Code"). The Committee shall have the powers and authority vested in the Board
hereunder (including the power and authority to interpret any provision of this
Plan or of any Option). The members of any such Committee shall serve at the
pleasure of the Board. A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written instrument
signed by all of the members of the Committee and any action so taken shall be
fully effective as if it had been taken at a meeting. The Board, or any
committee thereof appointed to administer the Plan, is referred to herein as the
"Plan Administrator."
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) grant Options under this Plan; (f) determine the
individuals to whom Options shall be granted under this Plan and whether the
Option is an Incentive Stock Option or a Non-Qualified Stock Option; (g)
determine the time or times at which Options shall be granted under this Plan;
(h) determine the number of shares of Common Stock subject to each Option, the
exercise price of each Option, the duration of each Option and
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the times at which each Option shall become exercisable; (i) determine all other
terms and conditions of Options; and (j) make all other determinations necessary
or advisable for the administration of this Plan. All decisions, determinations
and interpretations made by the Plan Administrator shall be binding and
conclusive on all participants in this Plan and on their legal representatives,
heirs and beneficiaries.
The Board or the Committee may delegate to one or more executive officers of
the Company the authority to grant Options under this Plan to employees of the
Company who, on the Date of Grant, are not subjected to Section 16(b) of the
Exchange Act with respect to the Common Stock ("Non-Insiders"), and are not
"covered employees" as such term is defined for purposes of Section 162(m) of
the Code ("Non-Covered Employees"), and in connection therewith the authority to
determine: (a) the number of shares of Common Stock subject to such Option; (b)
the duration of the Option; (c) the vesting schedule for determining the times
at which such Option shall become exercisable; and (d) all other terms and
conditions of such Options. The exercise price for any Option granted by action
of an executive officer or officers pursuant to such delegation of authority
shall not be less than the fair market value per share of the Common Stock on
the Date of Grant. Unless expressly approved in advance by the Board or the
Committee, such delegation of authority shall not include the authority to
accelerate the vesting, extend the period for exercise or otherwise alter the
terms of outstanding Options. The term "Plan Administrator" when used in any
provision of this Plan other than Sections 2, 5(m), 5(n) and 12 shall be deemed
to refer to the Board or the Committee, as the case may be, and an executive
officer who has been authorized to grant Options pursuant thereto, insofar as
such provisions may be applied to persons that are Non-Insiders and Non-Covered
Employees and Options granted to such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any Related Corporation
(as defined below), including employees who are directors of the Company
("Employees"). Non-Qualified Stock Options may be granted to Employees and to
such other persons who are employed by affiliated companies, other than
directors who are not Employees, as the Plan Administrator shall select. Options
may be granted in substitution for outstanding Options of another corporation in
connection with the merger, share exchange, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. Any person to whom an Option is granted under this
Plan is referred to as an "Optionee." Any person who is the owner of an Option
is referred to as a "Holder."
As used in this Plan, the term "Related Corporation" shall mean any
corporation (other than the Company) that is a "Parent Corporation" of the
Company or "Subsidiary Corporation" of the Company, as those terms are defined
in Sections 424(e) and 424(f) respectively, of the Code (or any successor
provisions), and the regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of 2,000,000 shares of the Company's authorized but unissued Common Stock.
The number of shares with respect to which Options may be granted hereunder is
subject to adjustment as set forth in Subsection 5(m) hereof. In the event that
any outstanding Option expires or is terminated for any reason, the shares of
Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option to the same Optionee or to a different person eligible
under Section 3 of this Plan; provided however, that any canceled Options will
be counted against the maximum number of shares with respect to which Options
may be granted to any particular person as set forth in Section 6 hereof.
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5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) NUMBER OF SHARES AND TYPE OF OPTION.
Each Agreement shall state the number of shares of Common Stock to which it
pertains and whether the Option is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence of action to the contrary by the Plan
Administrator in connection with the grant of an Option, all Options shall be
Non-Qualified Stock Options. The aggregate fair market value (determined at the
Date of Grant, as defined below) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by the Optionee during any
calendar year (granted under this Plan and all other Incentive Stock Option
plans of the Company, a Related Corporation or a predecessor corporation) shall
not exceed $100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time. Any portion of an Option which exceeds the
annual limit shall not be void, but rather shall be a Non-Qualified Stock
Option.
(b) DATE OF GRANT.
Each Agreement shall state the date the Plan Administrator has deemed to be
the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) OPTION PRICE.
Each Agreement shall state the price per share of Common Stock at which it
is exercisable. The exercise price shall be fixed by the Plan Administrator at
whatever price the Plan Administrator may determine in the exercise of its sole
discretion; PROVIDED that the per share exercise price for any Option granted
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith;
PROVIDED FURTHER, that with respect to Incentive Stock Options granted to
greater-than-10 percent (> 10%) shareholders of the Company (as determined with
reference to Section 424(d) of the Code), the exercise price per share shall not
be less than 110 percent (110%) of the fair market value per share of the Common
Stock at the Date of Grant as determined by the Plan Administrator in good
faith; and, PROVIDED FURTHER, that Options granted in substitution for
outstanding options of another corporation in connection with the merger, share
exchange, acquisition of property or stock or other reorganization involving
such other corporation and the Company or any subsidiary of the Company may be
granted with an exercise price equal to the exercise price for the substituted
option of the other corporation, subject to any adjustment consistent with the
terms of the transaction pursuant to which the substitution is to occur.
(d) DURATION OF OPTIONS.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to Subsection 5(g) below, the expiration date of the Option,
which date shall not be later than ten (10) years from the Date of Grant;
PROVIDED, that the expiration date of any Incentive Stock Option granted to a
greater-than-10 percent ( > 10%) shareholder of the Company (as determined with
reference to Section 424(d) of the Code) shall not be later than five (5) years
from the Date of Grant. In the absence of action to the contrary by the Plan
Administrator in connection with the grant of a particular Option, and except in
the
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case of Incentive Stock Options as described above, all Options granted under
this Section 5 shall expire ten (10) years from the Date of Grant.
(e) VESTING SCHEDULE.
No Option shall be exercisable until it has vested. The vesting schedule for
each Option shall be specified by the Plan Administrator at the time of grant of
the Option prior to the provision of services with respect to which such Option
is granted; PROVIDED, that if no vesting schedule is specified at the time of
grant, the Option shall be fifty percent (50%) vested three (3) years from the
Date of Grant, seventy-five percent (75%) vested four (4) years from the Date of
Grant and one hundred percent (100%) vested five (5) years from the Date of
Grant.
The Plan Administrator may specify a vesting schedule for all or any portion
of an Option based on the achievement of performance objectives established in
advance of the commencement by the Optionee of services related to the
achievement of the performance objectives. Performance objectives shall be
expressed in terms of one or more of the following: return on equity, return on
assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or the
Company's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated basis), a Related Corporation, or a
subdivision, operating unit, product or product line of either of the foregoing.
Performance objectives may be absolute or relative and may be expressed in terms
of a progression or a range. An Option that is exercisable (in full or in part)
upon the achievement of one or more performance objectives may be exercised only
following written notice to the Optionee and the Company by the Plan
Administrator that the performance objectives have been achieved.
(f) ACCELERATION OF VESTING.
The vesting of one or more outstanding Options may be accelerated by the
Plan Administrator at such times and in such amounts as it shall determine in
its sole discretion. The vesting of Options also shall be accelerated under the
circumstances described in Subsections 5(m) and 5(n) below.
(g) TERM OF OPTION.
Vested Options shall terminate, to the extent not previously exercised, upon
the occurrence of the first of the following events: (i) the expiration of the
Option, as designated by the Plan Administrator in accordance with Subsection
5(d) above; (ii) the date of an Optionee's termination of employment with the
Company or any Related Corporation; or (iii) the expiration of ninety (90) days
from (A) the date of death of the Optionee or (B) cessation of an Optionee's
employment by reason of Disability (as defined below) unless, in the case of a
Non-Qualified Stock Option, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the Option. If
an Optionee's employment or contractual relationship is terminated by death, any
Option held by the Optionee shall be exercisable only by the person or persons
to whom such Optionee's rights under such Option shall pass by the Optionee's
will or by the laws of descent and distribution of the state or county of the
Optionee's domicile at the time of death. For purposes of the Plan, unless
otherwise defined in the Agreement, "Disability" shall mean any physical, mental
or other health condition which substantially impairs the Optionee's ability to
perform his or her assigned duties for one hundred twenty (120) days or more in
any two hundred forty (240) day period or that can be expected to result in
death. The Plan Administrator shall determine whether an Optionee has incurred a
Disability on the basis of medical evidence acceptable to the Plan
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Administrator. Upon making a determination of Disability, the Plan Administrator
shall, for purposes of the Plan, determine the date of an Optionee's termination
of employment.
Unless accelerated in accordance with Subsection 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability. For purposes of this Plan, transfer of employment between or among
the Company and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Company or any Related Corporation. For
purposes of this Subsection with respect to Incentive Stock Options, employment
shall be deemed to continue while the Optionee is on military leave, sick leave
or other bona fide leave of absence (as determined by the Plan Administrator).
The foregoing notwithstanding, employment shall not be deemed to continue beyond
the first ninety (90) days of such leave, unless the Optionee's re-employment
rights are guaranteed by statute or by contract.
(h) EXERCISE OF OPTIONS.
Options shall be exercisable, in full or in part, at any time after vesting,
until termination. If less than all of the shares included in the vested portion
of any Option are purchased, the remainder may be purchased at any subsequent
time prior to the expiration of the Option term. No portion of any Option for
less than ten (10) shares (as adjusted pursuant to Subsection 5(m) below) may be
exercised; PROVIDED, that if the vested portion of any Option is less than ten
(10) shares, it may be exercised with respect to all shares for which it is
vested. Only whole shares may be issued pursuant to an Option, and to the extent
that an Option covers less than one (1) share, it is unexercisable.
Options or portions thereof may be exercised by giving written notice to the
Company, which notice shall specify the number of shares to be purchased, and be
accompanied by payment in the amount of the aggregate exercise price for the
Common Stock so purchased, which payment shall be in the form specified in
Subsection 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or a transferee who takes title to
the Option in the manner permitted by Subsection 5(k) hereof.
(i) PAYMENT UPON EXERCISE OF OPTION.
Upon the exercise of any Option, the aggregate exercise price shall be paid
to the Company in cash or by cashier's check. In addition, the Holder may pay
for all or any portion of the aggregate exercise price by complying with one or
more of the following alternatives:
(1) by delivering to the Company shares of Common Stock previously held
by such Holder, or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares of
Common Stock received or withheld shall have a fair market value at the date
of exercise (as determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise; or
(2) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
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(j) RIGHTS AS A SHAREHOLDER.
A Holder shall have no rights as a shareholder with respect to any shares
covered by an Option until such Holder becomes a record holder of such shares,
irrespective of whether such Holder has given notice of exercise. Subject to the
provisions of Subsections 5(m) and 5(n) hereof, no rights shall accrue to a
Holder and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Holder becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(k) TRANSFER OF OPTION.
Options granted under this Plan and the rights and privileges conferred by
this Plan may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any Option or of any right or
privilege conferred by this Plan contrary to the provisions hereof, or upon the
sale, levy or any attachment or similar process upon the rights and privileges
conferred by this Plan, such Option shall thereupon terminate and become null
and void.
(l) SECURITIES REGULATION AND TAX WITHHOLDING.
(1) Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares shall comply with
all relevant provisions of law, including, without limitation, Section 162(m) of
the Code, any applicable state securities laws, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations thereunder and the
requirements of any stock exchange or automated inter-dealer quotation system of
a registered national securities association upon which such shares may then be
listed, and such issuance shall be further subject to the approval of counsel
for the Company with respect to such compliance, including the availability of
an exemption from registration for the issuance and sale of such shares. The
inability of the Company to obtain from any regulatory body the authority deemed
by the Company to be necessary for the lawful issuance and sale of any shares
under this Plan, or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan, shall relieve the Company of
any liability with respect to the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator may
require the Holder to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with Federal and state securities laws.
(2) The Holder shall pay to the Company by certified or cashier's check,
promptly upon exercise of an Option or, if later, the date that the amount of
such obligations becomes determinable, all applicable Federal, state, local and
foreign withholding taxes that the Plan Administrator, in its discretion,
determines to result upon exercise of an Option or from a transfer or other
disposition of shares of Common Stock
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acquired upon exercise of an Option or otherwise related to an Option or shares
of Common Stock acquired in connection with an Option. Upon approval of the Plan
Administrator, a Holder may satisfy such obligation by complying with one or
more of the following alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock previously held
by such Holder or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to the exercise of the Option, which shares
of Common Stock received or withheld shall have a fair market value at the
date of exercise (as determined by the Plan Administrator) equal to the tax
obligation to be paid by the Optionee upon such exercise; or
(B) by complying with any other payment mechanism approved by the Plan
Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the Federal and state securities laws and the
withholding provisions of the Code have been met.
(m) STOCK DIVIDEND OR REORGANIZATION.
(1) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, subject to applicable law, with respect to
each outstanding Option, proportionately adjust the number of shares of Common
Stock subject to such Option and/or the exercise price per share so as to
preserve the rights of the Holder substantially proportionate to the rights of
the Holder prior to such event, and to the extent that such action shall include
an increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan Administrator,
the Company, the Company's shareholders, or any Holder.
(2) In the event that the presently authorized capital stock of the Company
is changed into the same number of shares with a different par value, or without
par value, the stock resulting from any such change shall be deemed to be Common
Stock within the meaning of the Plan, and each Option shall apply to the same
number of shares of such new stock as it applied to old shares immediately prior
to such change.
(3) If the Company shall at any time declare an extraordinary dividend with
respect to the Common Stock, whether payable in cash or other property, the Plan
Administrator may, subject to applicable law, in the exercise of its sole
discretion and with respect to each outstanding Option, proportionately adjust
the number of shares of Common Stock subject to such Option and/or adjust the
exercise price per share so as to preserve the rights of the Holder
substantially proportionate to the rights of the Holder prior to such event, and
to the extent that such action shall include an increase or decrease in the
number of shares of Common Stock subject to outstanding Options, the number of
shares available under Section 4 of this Plan shall automatically be increased
or decreased proportionately, without further action on the part of the Plan
Administrator, the Company, the Company's shareholders, or any Holder.
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(4) The foregoing adjustments in the shares subject to Options shall be made
by the Plan Administrator, or by any successor administrator of this Plan, or by
the applicable terms of any assumption or substitution document.
(5) The grant of an Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business or assets.
(n) CHANGE IN CONTROL.
(1) If at any time there is a Change in Control (as defined below) of the
Company, all Options outstanding at the date thereof shall accelerate and become
fully vested and exercisable in full for the duration of the Option term as of
the later of the date of the Change in Control or six months after the Date of
Grant of the Option. For purposes of this Subsection, "Change in Control" shall
mean either one of the following: (i) when any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act as amended (other than the Company,
a subsidiary thereof or a Company employee benefit plan, including any trustee
of such plan acting as trustee) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company's then outstanding securities; or (ii) the occurrence of a
transaction requiring shareholder approval, and involving the sale of all or
substantially all of the assets of the Company or the merger of the Company with
or into another corporation.
(2) Except as provided in this Section 5, no Optionee or Holder shall have
rights by reason of any subdivision or consolidation of shares of stock of any
class including Common Stock or the payment of any stock dividend on shares of
Common Stock, or any other increase or decrease in the number of shares of
Common Stock, or by reason of any liquidation, dissolution, corporate
combination or division; and any issuance by the Company of shares of stock of
any class including Common Stock, or securities convertible into shares of stock
of any class including Common Stock, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to any Option.
6. ANNUAL LIMITATION ON INDIVIDUAL OPTION GRANTS.
Except as otherwise provided in this Section 6, no person shall be eligible
to receive in any fiscal year Options to purchase more than 10,000 shares of
Common Stock (the "Annual Limitation"). The Annual Limitation may be increased
to 50,000 shares of Common Stock in any fiscal year, PROVIDED that at least
40,000 of such Options shall have an exercise price of not less than one hundred
twenty percent (120%) of the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith; and,
PROVIDED FURTHER, that the expiration date of at least 40,000 of such Options
shall not be later than five (5) years from the Date of Grant. The amount of the
Annual Limitation shall be subject to adjustment as set forth in Subsection 5(m)
hereof.
7. EFFECTIVE DATE; TERM.
The date on which this Plan is adopted (the "Effective Date") shall be the
date of ratification by the shareholders. Incentive Stock Options may be granted
by the Plan Administrator from time to time on or after the Effective Date
through the day immediately preceding the tenth anniversary of the Effective
Date. Non-Qualified Stock Options may be granted by the Plan Administrator on or
after the Effective Date and until this Plan is terminated by the Board in its
sole discretion. Termination of this Plan shall not
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terminate any Option granted prior to such termination. No Option shall be
granted by the Plan Administrator prior to the approval of this Plan by a vote
of the shareholders of the Company.
8. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
9. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company, any Related
Company or any affiliate, express or implied, that the Company, any Related
Company or any affiliate will employ or contract with an Optionee for any length
of time, nor shall it interfere in any way with the Company's or, where
applicable, a Related Company's or affiliate's right to terminate Optionee's
employment at any time, which right is hereby reserved.
10. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued
upon the exercise of Options shall be used to purchase and retire Common Stock
pursuant to Rule 10b-18 to the extent such transactions have been authorized by
the Board and in other cases for general corporate purposes, unless otherwise
directed by the Board.
11. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
12. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this
Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; PROVIDED HOWEVER, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof shall be made over the objection of
such Holder. The Plan Administrator may condition the effectiveness of any such
amendment on the receipt of shareholder approval at such time and in such manner
as the Plan Administrator may consider necessary for the Company to comply with
or to avail the Company and/or the Optionees of the benefits of any securities,
tax, market listing or other administrative or regulatory requirement. Without
limiting the generality of the foregoing, the Plan Administrator may modify
grants to persons who are eligible to receive Options under this Plan who are
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foreign nationals or employed outside the United States to recognize differences
in local law, tax policy or custom.
The Effective Date of this Plan was established by vote of the shareholders of
the Company held on ___________, 1997.
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APPENDIX B
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., a Washington corporation (the
"Company"), hereby establishes on the terms set forth below an incentive
compensation plan to be known as the "1997 Executive Incentive Compensation
Plan" (the "Plan").
1. PURPOSES.
The Plan is designed to (i) recognize and reward on an annual basis selected
Company executives for their contributions to the overall success of the
Company, (ii) submit the Company's long established incentive compensation plan
for certain key officers to a vote of the shareholders by incorporating the
existing compensation arrangement into the Plan, and (iii) qualify compensation
paid under the Plan as "performance-based compensation" as that term is defined
in Section 162(m) of the Internal Revenue Code of 1986 (the "Code"). Subject to
approval by the Company's shareholders, the Plan will commence as of July 1,
1997 (the "Effective Date"). No award may be made under the Plan prior to the
Effective Date. If the Plan is not approved by the Company's shareholders, the
Plan will not be effective.
2. DEFINITIONS.
The following terms shall have the meanings set forth below when the initial
letters appear in the Plan in capital letters:
(a) "Award" means the agreement of the Company to pay compensation to a
Participant upon the attainment of specified Performance Goals.
(b) "Award Agreement" means the written agreement, if any, evidencing the
terms and conditions of an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Covered Employee" means an Employee who is a "covered employee" within
the meaning of Section 162(m) of the Code and the regulations issued
thereunder.
(e) "Employee" means any full-time, nonunion employee of the Company.
Members of the Board who are not otherwise employed by the Company shall not
be considered employees under this Plan.
(f) "Outside Director" shall have the meaning assigned under Section 162(m)
of the Code.
(g) "Participant" means those Employees who are designated by the Committee
to participate in the Plan for a Performance Period pursuant to Section 4.
(h) "Performance Period" means the Company's quarterly reporting period for
financial statement purposes.
3. ADMINISTRATION.
The Plan shall be administered by a committee designated by the Board and
composed of two (2) or more members of the Board that are Outside Directors,
which committee shall be the compensation committee unless the Board by separate
action designates another committee, including a separate committee especially
created for this purpose (the "Committee"). The Committee shall have all the
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authority that is necessary or helpful to enable it to discharge its
responsibilities under the Plan. Without limiting the generality of the
preceding sentence, the Committee shall have the exclusive right to interpret
the Plan, to determine eligibility for participation in the Plan, to decide all
questions concerning eligibility for and the amount of Awards payable under the
Plan, to establish and administer the Performance Goals and certify whether, and
to what extent, they are attained, to construe any ambiguous provisions of the
Plan, to correct any default, to supply any omission, to reconcile any
inconsistency, to issue administrative guidelines as an aide to the
administration of the Plan, to make regulations for carrying out the Plan, and
to decide any and all questions arising in the administration, interpretation,
and application of the Plan. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its shareholders, Employees, Participants,
and their estates and beneficiaries.
4. ELIGIBILITY.
No Employee who receives an annual base salary in excess of $120,000, or
such other amount as the Committee may from time to time establish by
resolution, shall be eligible to receive an Award under the Plan. Participation
is further limited in any fiscal year to those Covered Employees and such
additional executive and other key officers that the Committee determines will
be eligible for such year.
5. EXECUTIVE BONUS POOL.
There is hereby established an Executive Bonus Pool in an amount equal to
ten percent (10%) of consolidated pre-tax operating income for the Performance
Period computed before any accrual for such bonus. The amount of the Executive
Bonus Pool may be decreased, suspended or terminated at any time by the
Committee. The percentage share in the Executive Bonus Pool to be reserved as an
Award to any Covered Employee and to such additional Participants as the
Committee shall determine will be established by Award Agreements executed
within the time period allowed in the regulations under Section 162(m) of the
Code.
Any portion of the Executive Bonus Pool not allocated by action of the
Committee may be allocated at any time during the fiscal year to key officers
determined to be eligible in the discretion of the Chief Executive Officer. The
compensation of any Covered Employee shall not be increased in any way as a
result of this exercise of discretion by the Chief Executive Officer and no
allocation made by the Chief Executive Officer shall be valid to the extent that
such allocation would cause the selected individual to become a Covered
Employee.
6. FORM OF AWARDS.
All Awards will be evidenced by an Award Agreement. Awards shall be paid in
cash upon written certification by the Committee prior to payment that the
performance goals and any other material terms were in fact satisfied. The
Company shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes required by law to be withheld with respect to any grant,
exercise, or payment made under or as a result of this Plan.
The Committee may, in its sole discretion, subject any Award to such
additional terms, conditions, restrictions, or limitations (including but not
limited to restrictions on transferability, vesting, termination of employment
for cause or otherwise, or change of control) that the Committee deems to be
appropriate, provided that such terms are not inconsistent with the terms of the
Plan or Section 162(m) of the Code.
B-2
<PAGE>
7. RIGHTS OF EMPLOYEES.
No Employee shall have the right to be selected to receive an Award under
the Plan. The fact that an Employee was selected to receive an Award in one or
more years shall not give such Employee any right to receive an Award in any
subsequent period. Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company.
8. AMENDMENT, MODIFICATION, AND TERMINATION.
The Committee may suspend or terminate the Plan at any time with or without
prior notice. In addition, the Committee may from time to time and with or
without prior notice, amend or modify the Plan in any manner, but may not
without shareholder approval adopt any amendment that would require the vote of
shareholders of the Company pursuant to Section 162(m) of the Code.
9. SUCCESSORS.
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, share exchange, or otherwise, of all or substantially all of the
business and/or assets of the Company.
10. GOVERNING LAW.
The Plan, and all agreements hereunder, shall be governed by the laws of the
State of Washington.
The Effective Date of this Plan was established by vote of the shareholders of
the Company held on ___________, 1997.
B-3
<PAGE>
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark your votes as indicated in this example /X/.
The undersigned hereby appoints Peter J. Rose and Jeffrey J. King, and each
of them, as proxies, each with full power of substitution, to represent and to
vote for and on behalf of the undersigned, as designated below, the number of
shares of common stock of Expeditors International of Washington, Inc. that the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders to be held on May 7, 1997, or at any adjournment
thereof. The undersigned directs that this proxy be voted as follows:
<TABLE>
<S> <C> <C>
(1) Election of Directors:
/ / FOR all nominees (except as indicated to the contrary / / WITHHOLD AUTHORITY to vote for all
below). nominees named below.
</TABLE>
P.J. Rose, K.M. Walsh, J.L.K. Wang, J.J. Casey, D.P. Kourkoumelis, J.W.
Meisenbach
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name in the following space:
________________________________________
<TABLE>
<S> <C> <C>
(2) Approval of the 1997 Stock Option Plan as described in the Company's proxy statement dated March 24,
1997.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C>
(3) Approval of the 1997 Executive Incentive Compensation Plan as described in the Company's proxy
statement dated March 24, 1997.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C>
(4) In their discretion, the holders of this proxy are authorized to vote upon such other business as
may properly come before the meeting.
</TABLE>
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON
THIS PROXY CARD. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
DESIGNATED ON THIS PROXY CARD, A VOTE FOR APPROVAL OF THE 1997 STOCK OPTION
PLAN, AND A VOTE FOR APPROVAL OF THE 1997 EXECUTIVE INCENTIVE COMPENSATION PLAN.
IF NO SPECIFICATION IS MADE, ALL SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR ALL OF SAID NOMINEES, FOR APPROVAL OF THE 1997 STOCK OPTION PLAN, FOR
APPROVAL OF THE 1997 EXECUTIVE INCENTIVE COMPENSATION PLAN, AND WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS WHICH MAY
COME BEFORE THE MEETING OR ANY ADJOURNMENT.
THE UNDERSIGNED HEREBY ACKNOWLEDGES ANY PROXY OR PROXIES HEREUNTO GIVEN
FOR SUCH SHARES AND RATIFIES ALL THAT SAID PROXIES OR THEIR SUBSTITUTES MAY
LAWFULLY DO BY VIRTUE HEREOF.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. IF STOCK IS HELD JOINTLY,
BOTH PERSONS SHOULD SIGN. PERSONS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD
GIVE THEIR TITLE.
DATE: _____________________, 1997.
__________________________________
SIGNATURE
__________________________________
SIGNATURE IF HELD JOINTLY
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD
