<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-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):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
EXPEDITORS INTERNATIONAL
OF WASHINGTON, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 7, 1998
------------------------
To the Shareholders of Expeditors International of Washington, Inc.
The Annual Meeting of Shareholders of EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC. (the "Company") will be held at 2:00 in the afternoon, on
Thursday, May 7, 1998, 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; and
(2) 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 9, 1998, 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 23, 1998
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, 1998
------------------------
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 Thursday, May 7, 1998,
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 9, 1998 (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 1997 Annual Report to Shareholders will be mailed to
shareholders on or about March 23, 1998.
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. 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
24,573,494 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.
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
<PAGE>
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.
Proxies and ballots will be received and tabulated by First Chicago Trust
Company of New York, 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 9, 1998, was $40.25 per share.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information, as of March 9, 1998, 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>
Franklin Resources, Inc. (1) ........... 1,256,380 5.11%
777 Mariners Island Blvd.
San Mateo, CA 94404
Ruane, Cunniff & Co., Inc. (2) ......... 1,251,994 5.09%
767 Fifth Avenue
New York, NY 10153-4798
</TABLE>
- ------------------------
(1) The holding shown is as of December 31, 1997 according to a joint statement
on Schedule 13G dated January 16, 1998 filed by Franklin Resources, Inc.
("FRI"), a parent holding company; Franklin Advisers, Inc., an investment
advisor; Charles B. Johnson in his individual capacity as principal
shareholder of FRI; and Rupert H. Johnson in his individual capacity as
principal shareholder of FRI. Franklin Advisers, Inc. reports that it has
sole voting and sole dispositive power with respect to 1,252,800 shares.
Franklin Management, Inc., an investment advisor subsidiary, is reported to
have sole dispositive power with respect to 3,580 shares.
(2) The holding shown is as of December 31, 1997 according to Schedule 13G dated
February 13, 1998 filed by Ruane, Cunniff & Co., Inc. ("Ruane"), a broker or
dealer and an investment advisor. Ruane reports that it has sole voting
power with respect to 201,400 shares.
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
2
<PAGE>
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.
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 9, 1998. 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)..................... 54 526,983 2.14%
Kevin M. Walsh (1).................... 47 612,320 2.49%
James L.K. Wang (2)................... 49 19,052 *
James J. Casey (3).................... 65 26,700 *
Dan P. Kourkoumelis (3)............... 46 20,000 *
John W. Meisenbach (3)................ 61 130,000 *
Additional Named Executives:
Glenn M. Alger (4).................... 41 363,081 1.48%
Michael R. Claydon (5)(6)............. 50 115,107 *
All directors and executive officers as
a group (17 persons) (2)(5)(7)........ 2,218,785 9.03%
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 160,000 shares subject to purchase options exercisable within sixty
days.
(2) Does not include 201,052 shares gifted to and held by a child of Mr. Wang,
as to which Mr. Wang disclaims beneficial ownership.
(3) Includes 20,000 shares subject to purchase options exercisable within sixty
days.
(4) Includes 185,000 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 64,000 shares subject to purchase options exercisable within sixty
days.
(7) Includes 917,500 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.
3
<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. 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., a supermarket chain, and has served as a member of its Board of
Directors since April 1991. 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.
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, 1997 and transacted business on twelve 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 1997.
4
<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 1997.
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 $10,000, as well as $1,000 per diem for attendance at
meetings. 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.
5
<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
Compensation 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 Compensation 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 have
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
6
<PAGE>
during those years. The Compensation Committee believes that setting the
aggregate executive bonus at a fixed 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.
On May 7, 1997 the shareholders approved and ratified the 1997 Executive
Incentive Compensation Plan (the "1997 Compensation Plan") which was written to
bring the long established executive incentive compensation plan into technical
compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") --a section which applied to the Company for the first time in
1997. All bonuses accrued for Named Executive Officers and selected other senior
officers after the July 1, 1997 effective date were computed and paid from a
pool consisting of ten percent of pre-bonus operating income established and
maintained according to the terms of the 1997 Compensation Plan. The
Compensation Committee is responsible for administration of the 1997
Compensation Plan.
All officers of the Company who receive an annual base salary equal to or
less than $120,000 are eligible for inclusion in the 1997 Compensation Plan at
the discretion of the Compensation Committee and individual eligibility and
allocation is determined quarterly. Prior to adoption of the 1997 Compensation
Plan, inclusion in the incentive bonus program and the allocation of the
aggregate amount among individual executives were determined at the beginning of
each year at the discretion of senior management subject to review by the
Compensation Committee.
Any portion of bonus pool established in the 1997 Compensation Plan which is
not allocated by action of the Compensation Committee may be allocated to key
officers determined to be eligible in the discretion of the Chief Executive
Officer, however, such allocation shall not increase the compensation of any
Named Executive Officer nor cause any individual to become a Named Executive
Officer.
The percentage of the 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. During 1997, the number of participating executives
remained constant, but the portion of the executive bonus pool allocated to the
Chairman and Chief Executive Officer decreased by two percent as a result of
changing allocations between the participating executives.
The 1997 Compensation Plan as adopted by the shareholders and administered
by the Compensation Committee 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.
7
<PAGE>
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 1997, the
Compensation Committee granted stock options for 425,950 shares to 267 employees
including four of the Named Executive Officers. Except in the case of the
Chairman and Chief Executive Officer and certain Named Executive Officers, the
Compensation Committee granted stock options based upon recommendations made by
senior management. Prior to approving any stock option grants, the Compensation
Committee reviews and considers factors such as the employee's current position,
length of service, and any prior stock option grants.
During the 1997 stock option review process, the Compensation Committee
determined that stock option grants should also be made to the Chairman and
Chief Executive Officer and certain other Named Executive Officers. These
options were granted from shares authorized under the 1997 Stock Option Plan
which established a 50,000 share annual limit on grants to any individual. In
addition, if more than 10,000 shares are granted to any individual, the excess
shares must be granted at not less than 120% of the market price on the date of
grant and must expire no later than five years from the date of grant. During
1997, the Compensation Committee granted 40,000 shares to the Chairman and Chief
Executive Officer and to certain other Named Executive Officers. Of these
shares, 30,000 were granted at 120% of market subject to a three year vesting
period and an expiration date five years from the date of grant. The remaining
shares were granted with an exercise price equal to 100% of market value with
50% vesting three years from the date of grant, 75% vesting after four years,
100% vesting after five years and an expiration date ten years from the date of
grant.
Each executive officer of the Company currently holds unvested stock
options. The Compensation 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.
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 1998 the initial annual payment would be $88,000 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.
8
<PAGE>
POLICY ON DEDUCTIBILITY OF COMPENSATION. Under Section 162(m) of 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 believes that this limitation will not
apply to compensation accrued in 1997 or 1998. In making future compensation
decisions, the Compensation Committee intends to take into account and mitigate
to the extent feasible 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 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 1997, 1996, and 1995 to the person who was the
Chief Executive Officer at the end of fiscal 1997 and the four other most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 in 1997 (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,................... 1997 $ 110,000 1$,206,265 40,000 $ 1,500
Chairman and 1996 110,000 768,366 -0- 1,500
Chief Executive Officer 1995 110,000 551,278 40,000 1,500
Kevin M. Walsh,.................. 1997 110,000 1,195,771 40,000 1,500
President and Chief 1996 110,000 768,366 -0- 1,500
Operating Officer 1995 110,000 551,278 40,000 1,500
James L.K. Wang,................. 1997 100,000 925,000 40,000 -0-
Executive Vice President 1996 94,454 400,247 -0- -0-
and Director-Far East 1995 97,881 406,165 40,000 -0-
Glenn M. Alger,.................. 1997 96,000 876,918 5,000 1,500
Executive Vice President 1996 96,000 550,510 -0- 1,500
and Director-North America 1995 96,000 394,973 25,000 1,500
Michael R. Claydon,.............. 1997 120,000 625,109 -0- 36,000
Senior Vice President- 1996 121,664 389,967 -0- 26,281
Europe and Africa 1995 122,433 279,788 25,000 23,619
</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. Except for Mr. Wang, all bonuses
accrued after July 1, 1997 were computed and paid according to the terms of
the 1997 Compensation Plan. 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 $1,500 per qualified employee, under
an employee savings plan intended to qualify under Section 401(k) of the
Code. The amounts shown for Mr. Claydon represent a 7.5% Company match of a
5% voluntary employee contribution made to a defined benefit plan
established for employees of the Company's United Kingdom subsidiary.
10
<PAGE>
OPTION GRANT TABLE
The following table sets forth certain information regarding options granted
during 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR(1)
------------------------------------------------------------------------------
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL EXERCISABLE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OR BASE PRICE OPTION TERM (3)
OPTIONS TO EMPLOYEES IN ($/SH) EXPIRATION --------------------
NAME GRANTED (1) FISCAL YEAR (3) DATE (2) 5% ($) 10% ($)
- ----------------------------------------- ----------- --------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Rose............................ 10,000 2.3 25.07 5/7/2007 157,700 399,600
30,000 7.0 30.08 5/7/2002 57,600 309,000
Kevin M. Walsh........................... 10,000 2.3 25.07 5/7/2007 157,700 399,600
30,000 7.0 30.08 5/7/2002 57,600 309,000
James L.K. Wang.......................... 10,000 2.3 25.07 5/7/2007 157,700 399,600
30,000 7.0 30.08 5/7/2002 57,600 309,000
Glenn M. Alger........................... 5,000 1.2 25.07 5/7/2007 78,850 199,800
Michael R. Claydon....................... -0- -0- -0- n/a -0- -0-
</TABLE>
- ------------------------
(1) The above grants were made on May 7, 1997 pursuant to the Company's 1997
Stock Option Plan (the "1997 Plan") which limits individual annual grants to
not more than 50,000 shares. All options granted in fiscal 1997 are subject
to a vesting schedule. Subject to earlier vesting under the conditions set
forth in the 1997 Plan and with respect to the first 10,000 options granted
to an individual in 1997, fifty percent of the options will be exercisable
commencing three years from the date of the grant and twenty-five percent
will be exercisable four and five years after the date of the grant,
respectively. Additional shares granted during 1997 will be fully
exercisable commencing three years from the date of the grant again subject
to earlier vesting under the conditions set forth in the 1997 Plan. See
"Change in Control Arrangements."
(2) The options for the first 10,000 shares granted to an individual in 1997
expire ten years after the date of the grant while options for any
additional shares expire five years after the date of the grant.
(3) Realizable values are reported net of the option exercise price and ignoring
tax consequences. The dollar amounts under these columns are the result of
calculations using the standard 5% and 10% rates set by the Securities and
Exchange Commission. Actual gains, if any, on stock option exercises are
dependent on future appreciation in value of all outstanding Common Stock.
The potential realizable value calculation assumes that the option holder
remains employed through the option term and waits until the end of this
period to exercise the option.
11
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table sets forth certain information as of December 31, 1997
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 1997 OPTIONS AT DECEMBER 31, 1997 (2)
ACQUIRED ON REALIZED ------------------------- ------------------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Rose.................. -0- -0- 160,000 120,000 $ 5,259,200 $ 2,566,900
Kevin M. Walsh................. -0- -0- 160,000 120,000 $ 5,259,200 $ 2,566,900
James L.K. Wang................ -0- -0- -0- 120,000 -0- $ 2,566,900
Glenn M. Alger................. -0- -0- 185,000 60,000 $ 6,052,800 $ 1,579,650
Michael R. Claydon............. 21,000 $ 364,770 64,000 55,000 $ 2,089,330 $ 1,512,500
</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, 1997, less the exercise price multiplied by the number
of in-the-money options held. The calculation ignores tax consequences.
There is no guarantee that if and when these options are exercised they will
have this value.
12
<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, 1992.
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 01/19/98 including data to 12/31/97
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRSP TOTAL RETURNS INDEX FOR:
<S> <C> <C> <C>
Expeditors Nasdaq Stock Nasdaq Trucking &
International Market Transportation Stocks
of Washington, (US & SIC 3700-3799, 4200-4299,
4400-4599, 4700-4799 US &
Inc. Foreign) Foreign
12/31/92 $100.0 $100.0 $100.0
1/29/93 109.6 102.9 103.2
2/26/93 94.3 99.2 102.9
3/31/93 93.5 102.2 107.6
4/30/93 80.6 98.1 106.5
5/28/93 89.4 104.0 109.4
6/30/93 85.8 104.7 109.7
7/30/93 82.5 104.9 111.6
8/31/93 85.8 110.3 114.8
9/30/93 93.0 113.4 114.6
10/29/93 101.1 116.1 118.5
11/30/93 89.3 112.4 118.9
12/31/93 97.5 115.8 121.5
1/31/94 104.8 119.4 129.4
2/28/94 123.4 118.1 129.3
3/31/94 115.3 110.9 121.4
4/29/94 103.1 109.4 120.6
5/31/94 114.0 109.5 116.8
6/30/94 112.4 105.2 112.4
7/29/94 117.3 107.7 117.7
8/31/94 132.0 114.3 120.9
9/30/94 130.3 114.1 115.9
10/31/94 135.2 116.1 115.7
11/30/94 142.1 112.0 108.3
12/30/94 142.1 112.3 110.2
1/31/95 140.4 112.6 109.9
2/28/95 143.7 118.4 117.4
3/31/95 137.2 122.1 115.3
4/28/95 150.2 126.1 120.6
5/31/95 145.7 129.2 119.6
6/30/95 147.3 139.6 125.7
7/31/95 160.4 149.5 129.8
8/31/95 152.3 152.5 128.7
9/29/95 176.8 156.2 129.0
10/31/95 171.9 155.0 123.1
11/30/95 167.4 158.6 132.6
12/29/95 171.5 157.7 128.5
1/31/96 155.9 158.7 124.1
2/29/96 192.0 164.9 132.0
3/29/96 172.3 165.3 140.4
4/30/96 195.3 178.8 143.1
5/31/96 203.2 187.0 143.7
6/28/96 204.0 178.1 139.3
7/31/96 189.2 162.0 127.0
8/30/96 215.6 171.3 132.6
9/30/96 232.0 184.2 133.4
10/31/96 275.6 182.2 131.6
11/29/96 293.2 193.3 141.9
12/31/96 303.1 193.1 141.8
1/31/97 284.9 206.9 142.1
2/28/97 329.4 195.8 139.6
3/31/97 316.2 183.2 139.6
4/30/97 329.4 188.7 140.1
5/31/97 381.2 210.0 153.3
6/30/97 374.6 216.5 159.7
7/31/97 500.0 239.1 170.4
8/31/97 483.5 238.5 171.2
9/30/97 552.8 253.4 187.9
10/31/97 485.1 239.7 183.4
11/30/97 514.7 240.2 179.5
12/31/97 508.9 236.2 181.6
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
12/31/92.
</TABLE>
13
<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 1998
Chairman and Chief Executive Officer
Kevin M. Walsh ........................................... US$110,000 May 1998
President and Chief Operating Officer
James L.K. Wang .......................................... US$100,000 May 1998
Executive Vice President and Director-Far East
Glenn M. Alger ........................................... US$96,000 May 1998
Executive Vice President and Director-North America
Michael R. Claydon ....................................... UKL77,500 April 1999
Senior Vice President-Europe and Africa
</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, Wang 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. 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 and the
1997 Plan vest at the rate of 50% three years after the date of grant, and an
additional 25% four years after the date of grant and the balance five years
after the date of grant. Certain options granted under the Company's 1997 Plan
vest 100% after three years. However, both the 1985 Plan and the 1997 Plan
provide that outstanding options
14
<PAGE>
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.
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 of 1934, as amended, 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 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 1997.
15
<PAGE>
SHAREHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals to be presented at the 1999 Annual Meeting of
Shareholders must be received by the Secretary at the Company's executive
offices by November 23, 1998, 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 23, 1998
16
<PAGE>
PROXY
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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, 1998, or at any
adjournment thereof. The undersigned directs that this proxy be voted as
follows:
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. IF NO SPECIFICATION IS MADE, ALL SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL OF SAID NOMINEES 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 revokes any proxy or proxies hereunto given for such
shares and ratifies all that said proxies or their substitutes may lawfully do
by virtue hereof.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
SEE REVERSE SIDE
<PAGE>
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. /X/
1. Election of Directors:
FOR all nominees (except as indicated to the contrary below). / /
WITHHOLD AUTHORITY to vote for all nominees named below. / /
Nominees:
P.J. Rose J.J. Casey
K.M. Walsh D.P. Kourkoumelis
J.L.K. Wang J.W. Meisenbach
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name in the following space:
____________________________________________________________________________
2. In their discretion, the holders of this proxy are authorized to vote upon
such other business as may properly come before the meeting.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD
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.
_____________________________________________________________
_____________________________________________________________
SIGNATURE(S) DATE
