<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
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 Section 240.14a-11(c) or Section
240.14a-12
Celadon Group, 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>
CELADON GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of CELADON GROUP, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Celadon Group, Inc. ('Celadon' or the 'Company') will be held at the Company's
Corporate Headquarters located at One Celadon Drive, Indianapolis, Indiana
46235-4207 on Friday, November 22, 1999 at 10:00 a.m. (local time) for the
following purposes:
1. Election of Directors for the ensuing year;
2. To approve an amendment to the Celadon Group, Inc. 1994 Stock
Option Plan;
3. Approval of the appointment of Independent Auditors for 2000, and
4. To transact such other business as may properly be brought before
the meeting.
The Board of Directors has fixed the close of business on October 8,
1999, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting.
By order of the Board of Directors
Paul A. Will
Secretary
October 29, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO INSURE THAT YOUR SHARES ARE VOTED.
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Proxy Statement......................................................... 1
Directors and Executive Officers........................................ 1
Compensation of Directors and Executive Officers.................... 5
Employment Agreements............................................... 8
Stock Price Performance Chart....................................... 11
Security Ownership of Principal Stockholders and Management......... 12
Certain Relationships and Related Transactions...................... 14
Compensation Plans...................................................... 15
Approval of Amendment to the Celadon Group, Inc.
1994 Stock Option Plan.............................................. 15
Ratification of Appointment of Ernst & Young LLP........................ 22
Stockholders' Proposals................................................. 22
General................................................................. 22
</TABLE>
<PAGE>
CELADON GROUP, INC.
One Celadon Drive
Indianapolis, Indiana 46235
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Celadon Group, Inc. (the
'Company') to be voted at the Annual Meeting of Stockholders of the Company (the
'Meeting') to be held on November 22, 1999, at the Company's corporate
headquarters located at One Celadon Drive, Indianapolis, Indiana 46235. If not
otherwise specified, all proxies received pursuant to this solicitation will be
voted in the election of directors FOR the persons named below, FOR the
amendment to the Celadon Group, Inc. 1994 Stock Option Plan (the 'Stock Option
Plan') and FOR the ratification of the appointment of Ernst & Young LLP as
independent auditors for the current fiscal year.
Stockholders who execute proxies may revoke them at any time before they
are exercised by giving written notice to the Secretary of the Company at the
address of the Company, by executing a subsequent proxy and presenting it to the
Secretary of the Company, or by attending the meeting and voting in person.
As of October 8, 1999, the record date for the Meeting, the Company had
outstanding 7,776,557 shares of Common Stock which are entitled to vote at the
meeting, each share being entitled to one vote. Only stockholders of record at
the close of business on October 8, 1999 will be entitled to vote at the
Meeting, and this Proxy Statement and the accompanying proxy are being sent to
such stockholders on or about October 29, 1999.
DIRECTORS AND EXECUTIVE OFFICERS
At the Meeting, five directors are to be elected to hold office until
the Annual Meeting of Stockholders in 2001 and until their respective successors
have been elected and qualified. It is the intention of the persons named in the
enclosed form of proxy to vote for the election as directors of the Company,
Stephen Russell, Paul A. Biddelman, Anthony Heyworth, Michael Miller and Kilin
To. All of the individuals are currently directors of the Company, and all of
the named individuals are nominees of the Board of Directors. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF ALL FIVE
NOMINEES.
1
<PAGE>
The directors and executive officers of the Company and its subsidiaries
are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Stephen Russell 59 President, Chief Executive Officer and Chairman
Robert Goldberg 47 Executive Vice President - Chief Operating Officer
Paul A. Will 33 Vice President - Chief Financial Officer and Secretary
Michael W. Dunlap 37 Vice President - Treasurer
Paul A. Biddelman(1) 53 Director of the Company
Michael Miller(2) 54 Director of the Company
Joel E. Smilow(3) 66 Director of the Company
Anthony Heyworth(1) 55 Director of the Company
Kilin To (2) 56 Director of the Company
</TABLE>
(1) Members of the Audit Committee
(2) Members of the Compensation Committee
(3) Resigned effective June 30, 1999
Mr. Russell has been Chairman of the Board and Chief Executive Officer
of the Company since its inception in July 1986. He is also a director of the
American Trucking Association ('ATA'), a director of the Truckload Carriers
Association ('TCA'), chairman of the International committees of both the ATA
and TCA, and a member of the North American Transportation Alliance advisory
board. Mr. Russell has been a member of the Board of Advisors of the Cornell
University Johnson Graduate School of Management since 1983.
Mr. Goldberg has been Executive Vice President - Chief Operating Officer
of the Company since December 1998. He was Executive Vice President - Chief
Financial Officer of the Company from February 1998 to December 1998. From
November 1993 to December 1997, Mr. Goldberg was President of Tran-Star, Inc., a
refrigerated trucking company. From October 1992 to October 1993, Mr. Goldberg
was Vice President - Chief Financial Officer of Proline Carriers, Inc., a van
trucking company. Mr. Goldberg is a certified public accountant.
Mr. Will has been Vice President - Chief Financial Officer and Secretary
of the Company since December 1998. He was Vice President-Secretary and
Controller of the Company from September 1996 to December 1998. He was Vice
President-Controller for Celadon Trucking Services, Inc. from January 1996 to
September 1996 and Controller from September 1993 to January 1996. He served as
Controller for American Hi-Lift, a company engaged in the business of renting
aerial work platform equipment, from February 1992 to September 1993. Mr. Will
is a certified public accountant.
2
<PAGE>
Mr. Dunlap has been Vice President - Treasurer of the Company since July
1996. He served as Vice President of Finance for National Freight, Inc., a
regional truckload transportation company, from October 1993 to July 1996, and
as Vice President - Treasurer for Burlington Motor Carriers, Inc., from October
1989 to July 1993.
Mr. Biddelman has been a director of the Company since October 1992. Mr.
Biddelman has been President of Hanseatic Corporation, a private investment
company, since December 1997, and served as Treasurer of that company from April
1992 to December 1997. He is also a director of Premier Parks, Inc., Star Gas
Corporation (the General Partner of Star Gas Partners L.P.), and Insituform
Technologies, Inc.
Mr. Miller has been a director of the Company since February 1992. Mr.
Miller has been Chairman of the Board and Chief Executive Officer of Aarnel
Funding Corporation, a venture capital/real estate company since 1974, a partner
of Independence Realty, an owner and manager of real estate properties, since
1989, and President and Chief Executive Officer of Miller Investment Company,
Inc., a private investment company, since 1990.
Mr. Smilow resigned as a director of the Company effective June 30,
1999. Mr. Smilow had been a director of the Company since December 1996. Mr.
Smilow served as Chief Executive Officer of Playtex Products, Inc. and its
predecessors ('Playtex') from 1969 until July 10, 1995 and served as Chairman of
Playtex from 1969 until June 1995.
Mr. To has been a director of the Company since 1988. He has been a
managing partner of Sycamore Management, Inc., since 1995. He also had been a
Vice President of Citicorp Venture Capital, Ltd. ('CVC'), a subsidiary of
Citicorp N.A., from 1984 to 1995.
Mr. Heyworth has been appointed as a director of the Company to fill the
vacancy left by Mr. Smilow's resignation. Mr. Heyworth has been Chairman of
KeyBank Central Indiana, a major commercial banking market of KeyBank N.A. since
1991. He joined the former Central National Bank in 1965 and was Executive Vice
President when the bank merged with Society National Bank of Cleveland in 1986.
All directors of the Company hold office until the next annual meeting
of stockholders or the Company or until their successors are elected and
qualified or they resign. Mr. Russell and Hanseatic Corporation are parties to a
stockholders agreement pursuant to which they have agreed to vote their shares
of Common Stock for the other's designee. Those designees are Messrs. Russell
and Biddelman. See 'Security Ownership of Principal Stockholders and Management'
and 'Certain Relationships and Related Transactions--Transactions with Directors
and Stockholders'. Executive officers hold office until their successors are
chosen and qualified, subject to their removal by the Board of Directors, to any
employment agreements or their resignation. See 'Compensation of Directors and
Executive Officers--Employment Agreements.'
3
<PAGE>
Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
full extent permitted by law, indemnify all directors, officers, incorporators,
employees, or agents of the Company against liability for certain of their acts.
The Company's Certificate of Incorporation provides that, with a number of
exceptions, no director of the Company shall be liable to the Company for
damages for breach of his fiduciary duty as a director.
The Audit Committee consists of Paul A. Biddelman and Anthony Heyworth.
The Audit Committee meets with management and the Company's independent auditors
to determine the adequacy of internal controls and other financial reporting
matters. The Compensation Committee consists of Michael Miller and Kilin To. The
Compensation Committee reviews general policy matters relating to compensation
and benefits of employees and officers of the Company, administers the Company's
Employee Stock Purchase Plan and administers the Company's Stock Option Plan.
The Company does not have a nominating committee or a committee performing
similar functions.
The Board of Directors of the Company met four times during the fiscal
year ended June 30, 1999. In addition, on two occasions, the Board of Directors
took action pursuant to unanimous written consent. No current director, while he
was an elected director, failed to attend at least 75% of those meetings plus
any committee meeting of the Board of which he was a member. The Company's Audit
Committee met two times during the year ended June 30, 1999. The Compensation
Committee met two times during the year ended June 30, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's
directors, officers, and any persons owning more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes in
that ownership, on a timely basis, to the Securities and Exchange Commission.
Based on material provided to the Company, all such required reports were filed
on a timely basis in fiscal 1999.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid or
accrued by the Company for services rendered during fiscal 1999, 1998 and 1997
to the Chief Executive Officer of the Company, each of the four other most
highly paid executive officers of the Company whose annual cash compensation
exceeded $100,000, (collectively, the 'Named Executive Officers').
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
SECURITIES
FISCAL ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
<S> <C> <C> <C> <C> <C>
Stephen Russell 1999 $ 520,794 $ --- --- $88,939(1)(2)(3)
President 1998 498,858 339,077 --- 75,576(1)(2)(3)
1997 482,143 236,957 --- 81,642(1)(2)(3)
Robert Goldberg 1999 $ 162,508 $ --- 20,000 $31,639(2)(3)(4)(5)
Executive Vice President 1998 43,783 18,790 20,000 2,282(3)(4)(5)
Chief Operating Officer
Paul A. Will 1999 $ 114,782 $ --- 10,000 $ 7,164(2)(3)(4)
Executive Vice President 1998 102,167 42,341 5,000 5,547(2)(3)(4)
Chief Financial Officer 1997 96,923 5,000 2,500 1,021(2)
Michael W. Dunlap 1999 $ 119,535 $ --- 5,000 $ 4,102(2)(3)(4)
Vice President, Treasurer 1998 110,681 46,683 5,000 3,645(2)(3)(4)
1997 99,121 20,000 5,000 10,302(3)(4)(5)
Ronald S. Roman(6) 1999 $ 208,072 $ --- 10,000 $ 5,429(2)(3)(4)
Executive Vice President, 1998 155,815 67,753 10,000 6,546(2)(3)(4)
Special Projects 1997 137,837 7,500 35,000 33,125(3)(4)(5)
- ------------
(1) Includes the premiums paid by the Company for term insurance and
split-dollar insurance for which the Company has an assignment against
the cash value for premiums paid, as follows: $79,194 in fiscal 1999,
$71,239 in fiscal 1998 and $69,478 in fiscal 1997.
5
<PAGE>
(2) Includes the Company's contribution under the Company's 401(k) Profit
Sharing Plan, as follows: Stephen Russell - $2,500 in fiscal 1999,
$2,500 in fiscal 1998 and $2,375 in fiscal 1997; Robert Goldberg - $423
in fiscal 1999; Paul A. Will - $1,345 in fiscal 1999, $1,195 in fiscal
1998 and $1,021 in fiscal 1997; Michael W. Dunlap - $1,532 in fiscal
1999 and $1,023 in fiscal 1998; Ronald Roman - $1,178 in fiscal 1999 and
$1,210 in fiscal 1998.
(3) Includes premiums and reimbursement under an Executive health and
disability benefit program as follows, Stephen Russell - $7,245 in
fiscal 1999, $1,837 in fiscal 1998, and $9,789 in fiscal 1997; Robert
Goldberg - $2,601 in fiscal 1999 and $53 in fiscal 1998; Paul A. Will -
$5,600 in fiscal 1999 and $4,133 in fiscal 1998; Michael W. Dunlap -
$2,064 in fiscal 1999, $1,611 in fiscal 1998 and $413 in fiscal 1997;
Ronald S. Roman - $2,938 in fiscal 1999, $2,709 in fiscal 1998 and $634
in fiscal 1997.
(4) Includes premiums on the employee portion of split dollar life insurance
premiums as follows: Robert Goldberg - $465 in fiscal 1999 and $250 in
fiscal 1998; Paul A. Will - $219 in fiscal 1999 and fiscal 1998; Michael
W. Dunlap - $506 in fiscal 1999, $1,011 in fiscal 1998 and $379 in
fiscal 1997; Ronald S. Roman - $1,313 in fiscal 1999, $2,627 in fiscal
1998 and $985 in fiscal 1997.
(5) Includes relocation related expense reimbursements as follows: Robert
Goldberg - $28,150 in fiscal 1999 and $1,979 in fiscal 1998; Michael W.
Dunlap - $9,510 in fiscal 1997; Ronald S. Roman - $31,506 in fiscal
1997.
(6) Ron Roman served as the Company's Chief Operating Officer from June 1997
to December 1999 and resigned as Executive Vice President of Special
Projects effective October 2, 1999.
STOCK OPTIONS
The following table contains information concerning the grant of stock options
to the named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
</TABLE>
<TABLE>
<CAPTION>
Individual Grants Potential
----------------------------------------------------- Realizable
Number of Value at Assumed
Securities % of total Annual Rates of
Underlying Options Stock Price
Options Granted to Exercise or Appreciation For
Granted Employees Base Price Expiration Option Term(1)
Name (Shares) In Fiscal Year Per Share Date 5% 10%
- ----------------- ----------- -------------- ----------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert Goldberg 20,000 (2) 21% $10.25 2/8/09 $128,900 $326,700
Paul A. Will 10,000 (3) 11% $10.25 2/8/09 $ 64,500 $163,400
Michael W. Dunlap 5,000 (4) 5% $10.25 2/8/09 $ 32,000 $ 81,700
</TABLE>
6
<PAGE>
- ----------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock over the term of the options. These numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the option holder.
(2) Options for 6,667 shares will become exercisable on each of February 8,
2000 and February 8, 2001 and options for 6,666 shares will become
exercisable on February 8, 2002.
(3) Options for 3,334 shares will become exercisable on February 8, 2000 and
options for 3,333 shares will become exercisable on each of February 8,
2001 and February 8, 2002.
(4) Options for 1,667 shares will become exercisable on each of February 8,
2000 and February 8, 2001 and options for 1,666 shares will become
exercisable on February 8, 2002.
REPORT ON REPRICING OF OPTIONS
<TABLE>
<CAPTION>
Length of
Market Exercise Original Term
Number Price at Price at New Remaining at
of Options Time of Time of Exercise Date of
Name Date Repriced Repricing(1) Repricing Price Repricing
---- ---- -------- ------------ --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen Russell 8/1/97 25,000 $12.00 $20.00 $12.00 7 yrs, 1 mos
</TABLE>
The repricing was a component of Mr. Russell's renegotiated employment
agreement. The repricing in lieu of additional cash compensation to be paid
pursuant to the terms of the amended agreement. See 'Executive
Compensation-Employment Agreements.'
7
<PAGE>
REPORT ON OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held at June 30, 1999. There were no options
exercised during fiscal 1999.
AGGREGATED OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1999 at June 30, 1999 (1)
-------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C>
Stephen Russell 70,000 --- $ --- $ ---
Robert Goldberg 6,667 33,333 --- ---
Paul A. Will 10,001 14,999 1,250 ---
Michael W. Dunlap 5,001 9,999 1,667 ---
</TABLE>
- -------------
(1) Fair market value of underlying securities was $8.00 per share based on the
closing price of the Company's Common Stock on June 30, 1999.
DIRECTORS COMPENSATION
Non-employee directors of the Company receive an annual fee of $15,000,
payable quarterly, for serving as a director of the Company. Such directors
receive $1,250 per quarter for serving on committees. Board members are
reimbursed for their reasonable, documented expenses for each meeting attended.
EMPLOYMENT AGREEMENTS
The Company had a four-year employment agreement expiring January 21, 1998
with Stephen Russell, Chairman and Chief Executive Officer of the Company,
providing for an initial annual salary of $395,000, which salary was to be
increased 7.5% annually during the term of the agreement, plus a bonus computed
annually. Effective October 1, 1996, the Committee agreed to amend Mr. Russell's
contract to reflect his assumption of increased responsibilities following the
resignation of Leonard R. Bennett, the former President of the Company, on July
3, 1996. The amendment provided that Mr. Russell would receive five percent of
profit before tax in excess of $3,000,000 in lieu of the bonus computed under
his original contract. On August 1, 1997, the Compensation Committee of the
Board of Directors renegotiated the general terms of Mr. Russell's
8
<PAGE>
current employment contract. As amended, the employment contract was extended
for three years to January 21, 2001. In lieu of a fixed percentage annual base
salary increase, Mr. Russell will receive an annual base salary increase equal
to the change in the Consumer Price Index, and stock options awarded to Mr.
Russell on September 9, 1994 to acquire 25,000 shares of Common Stock at an
exercise price of $20.00 per share were repriced to the closing sale price on
the NASDAQ National Market August 1, 1997 of $12.00. In replacement of a bonus
based on a stipulated percentage of pretax income above a minimum level, Mr.
Russell will participate in an incentive bonus program designed for all members
of the Company's senior management. Depending upon the Company's performance
compared with goals established by the Compensation Committee annually, Mr.
Russell will earn a bonus as a percentage of his base salary of between 0% and
105%. The agreement also provides that in the event of termination: (i) as a
result of a change in control of the Company, Mr. Russell, will receive a lump
sum severance allowance in an amount equal to two times his annual compensation;
(ii) without cause or by Mr. Russell for cause, Mr. Russell will be entitled to
receive his salary for the remainder of the term of the agreement or one year,
whichever is greater; and (iii) as a result of the disability of Mr. Russell, he
will be entitled to receive 50% of his salary during the two-year period
commencing on the date of his termination. The agreement also includes a
two-year non-compete covenant commencing on termination of employment. As
consideration for such non-compete covenant, the Company has agreed to pay Mr.
Russell 50% of his salary during the two years following the termination of the
employment agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
'Committee') was formed in September 1993 and is currently comprised of two
non-employee directors of the Company. The Committee is responsible for
approving all executive employment contracts, changes in compensation (base
salary and bonus), and other forms of compensation paid to the Company's
executive officers in general. Until November 1996, the Committee also was
responsible for approving the issuance of all employee stock options. The policy
of the Committee is to consider on a subjective basis the executive's ability,
contribution and dedication toward the enhancement of stockholder value. For
fiscal year 2000, the Committee adopted a formal management incentive plan for
senior employees of the Company. Awards under the Plan will only be made after
achieving predetermined levels of profitability. The plan is designed to
attract, retain and motivate individuals who are responsible for enhancing
shareholder value through increased profitability of the Company.
In Fiscal 1994, the Committee approved a four-year employment contract for
Stephen Russell, President and Chief Executive Officer which provides for a base
salary of $395,000 with annual increases of 7.5%. The Committee believed this
base compensation was competitive as compared to a range of base salaries of
executives in similar positions with companies in the Company's peer group. In
addition, the Employment contract provided for a bonus determined on the basis
of three percent of profit before tax in excess of $3,000,000, not to exceed
$360,000. Effective October 1, 1996, the Committee agreed to amend Mr. Russell's
contract to reflect his assumption of increased responsibilities following the
resignation of Leonard R. Bennett, the former President of the
9
<PAGE>
Company, on July 3, 1996. The amendment provided that Mr. Russell would receive
five percent of profit before tax in excess of $3,000,000. On August 1, 1997,
the Compensation Committee of the Board of Directors renegotiated the general
terms of Mr. Russells current employment contract which expires January 21,
1998. The employment contract was extended for three years to January 21, 2001.
In lieu of a fixed percentage annual base salary increase, Mr. Russell will
receive an annual base salary increase equal to the change in the Consumer Price
Index, and stock options awarded to Mr. Russell on September 9, 1994 to acquire
25,000 shares of Common Stock at an exercise price of $20.00 per share were
repriced to the closing sale price on the NASDAQ National Market on August 1,
1997 of $12.00. In replacement of a bonus based on a stipulated percentage of
pretax income above a minimum level, Mr. Russell will participate in an
incentive bonus program designed for all members of the Company's senior
management. Depending upon the Company's performance compared with goals
established by the Compensation Committee annually, Mr. Russell will earn a
bonus as a percentage of his base salary of between 0% and 105%. The Committee
believes this provides a direct link between the executive's compensation and
Company performance and resulting enhancement of stockholder value.
Stock option grants were awarded on a discretionary, case by case basis,
after consideration of an individual's position, contribution to the Company,
length of service with the Company, number of options held, if any, and other
compensation.
The Company has not formulated a policy with respect to qualifying
compensation paid to executive officers for deductibility under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the 'Code') regarding the
deductibility of compensation exceeding $1 million in a taxable year paid to an
executive officer. However, the amendments to the Stock Option Plan set forth
under 'Compensation Plans' are intended to meet the requirements of Section
162(m) of the Code.
COMPENSATION COMMITTEE
Michael Miller
Anthony Heyworth
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company and Citicorp Venture Capital, Ltd. ('CVC'), of which Mr. To was
an officer, are parties to a registration rights agreement relating to the
Common Stock owned by CVC. The Company, Mr. Russell and Hanseatic, a corporation
of which Paul A. Biddelman, a director of the Company, is an officer, are all
parties to a stockholders' agreement relating to the election of Mr. Russell and
a Hanseatic designee to the Board of Directors.
For a further description of the foregoing transactions, see 'Security
Ownership of Principal Stockholders and Management'and 'Certain Relationships
and Related Transactions.'
10
<PAGE>
STOCK PRICE PERFORMANCE
The following graph is a comparison of the cumulative total return to
stockholders of the Company from the date its Common Stock commenced trading on
the NASDAQ NATIONAL MARKET to June 30, 1999 to the cumulative total returns of
the NASDAQ Stock Market - U.S. and the NASDAQ Truck and Transportation Index for
that period.
Under the rules of the Securities and Exchange Commission ('SEC'), this
graph is not deemed 'Soliciting Material' and is not incorporated by reference
in any filings with the SEC under the Securities Act of 1993 or the Securities
Exchange Act of 1934.
11
<PAGE>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CELADON GROUP, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TRUCKING & TRANSPORTATION INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------
6/94 6/95 6/96 6/97 6/98 6/99
<S> <C> <C> <C> <C> <C> <C>
CELADON GROUP, INC. 100 111 56 84 138 62
NASDAQ STOCK MARKET (U.S.) 100 133 171 208 274 393
NASDAQ TRUCKING & TRANSPORTATION 100 112 124 142 172 162
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information furnished to the Company
regarding the beneficial ownership of Common Stock (i) by each person who, to
the knowledge of the Company, based upon filings with the Securities and
Exchange Commission, beneficially owns more than five percent of the outstanding
shares of the Common Stock, (ii) by each director of the Company, (iii) by each
of the executive officers named in the Summary Compensation Table, and (iv) by
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF COMMON STOCK
AS OF SEPTEMBER 16, 1999 (1)
--------------------------------------
NAME AND POSITION SHARES %
- ---------------------- ---------------------- ------------
<S> <C> <C>
Stephen Russell............................. 989,804(2)(3) 12.7%
Chairman of the Board, President and Chief
Executive Officer of the Company
Robert Goldberg............................. 7,000 *
Executive Vice President, Chief Operating
Officer
Paul A. Will................................ 10,000(3) *
Vice President, Chief Financial Officer
Michael W. Dunlap........................... 8,334(3) *
Vice President - Treasurer
Ron Roman................................... 18,333(3) *
Executive Vice President Special Projects
Paul A. Biddelman........................... 1,019,435(3)(4) 13.1%
Director of the Company
Michael Miller.............................. 46,500(3) *
Director of the Company
Joel E. Smilow.............................. 119,200 1.6%
Director of the Company
Kilin To.................................... 60,585(3) *
Director of the Company
Citicorp Venture Capital Ltd................ 438,358(8) 5.8%
Hanseatic Corporation....................... 982,935(4) 13.1%
Wolfgang Traber............................. 982,935(4) 13.1%
Brinson Partners, Inc (6)................... 422,900(7) 5.4%
FSIP, LLC (10).............................. 446,700(7) 5.7%
Dimensional Fund Advisors, Inc. (9)......... 497,300(7) 6.4%
All executive officers and directors as a group
(ten persons)............................. 1,296,256(5) 16.7%
</TABLE>
- -------------
*Represents beneficial ownership of not more than one percent of the outstanding
Common Stock.
(footnotes continued on next page)
12
<PAGE>
(footnotes continued from previous page)
(1) Based upon 7,776,557 shares of Common Stock outstanding at September 16,
1999.
(2) Excludes 982,935 shares of Common Stock reported as beneficially owned
by Hanseatic Corporation ('Hanseatic') in filings with the Securities
and Exchange Commission, all of which may be deemed to be beneficially
owned by Mr. Russell by virtue of a stockholders agreement among Mr.
Russell, Hanseatic and the Company. Mr. Russell disclaims beneficial
ownership of such shares. Mr. Russell's address is One Celadon Drive,
Indianapolis, IN 46235-4207.
(3) Includes shares of Common Stock which the directors and executive
officers had the right to acquire through the exercise of options within
60 days of September 16, 1999, as follows: Stephen Russell - 70,000
shares; Paul A. Will - 5,000 shares; Michael W. Dunlap - 8,334 shares;
Ron Roman - 18,333 shares; Paul A. Biddelman - 36,500 shares; Michael
Miller - 36,500 shares; and Kilin To - 36,500 shares.
(4) Of such shares, 946,021 shares of Common Stock are held by Hanseatic
Americas LDC, a Bahamian limited duration company in which the sole
managing member is Hansabel Partners LLC, a Delaware limited liability
company in which Hanseatic is the sole managing member. The remaining
shares are held by Hanseatic for discretionary customer accounts. Mr.
Biddelman is the Treasurer of Hanseatic and holds shared voting and
investment power with respect to the shares held by Hanseatic. In
addition, Mr. Wolfgang Traber is the holder of a majority of the shares
of capital stock of Hanseatic. Excludes 919,804 shares of Common Stock
owned by Mr. Russell that are subject to a stockholders agreement among
Mr. Russell, Hanseatic and the Company. The address of Hanseatic, Mr.
Traber and Mr. Biddelman is 450 Park Avenue, New York, New York 10022.
(5) Does not include 982,935 shares of Celadon Stock reported as
beneficially owned by Hanseatic in filings with the Commission, all of
which are deemed to be beneficially owned by Mr. Biddelman. Mr.
Biddelman is the President of Hanseatic and holds shared investment and
voting power with respect to the shares held by Hanseatic. Also, see
footnote (3) above.
(6) Brinson Partners, Inc. ('BPI') is a registered investment adviser deemed
to have beneficial ownership of 442,900 shares of Celadon Common Stock
(the 'BPI shares') as of December 31, 1998. BPI is an indirect
wholly-owned subsidiary of UBSAG, which is classified as a bank pursuant
to Section 3(a)(b) of the Securities Act of 1933, as amended. UBS AG has
reported indirect beneficial ownership if the BPI Shares by reason of
its ownership of BPI and intermediate holding companies. The address of
Brinson Partners is 209 South LaSalle, Chicago, IL 60604-1295. The
address of UBS AG is Banhofstrasse 45 8021, Zurich, Switzerland.
(7) This information is based upon Schedules 13G filed with the Securities
and Exchange Commission.
(8) The address of Citicorp Venture Capital, Ltd. is 399 Park Avenue, New
York, New York. Citicorp Venture Capital, Ltd. is a wholly-owned
subsidiary of Citigroup, Inc. ('Citigroup'). The address of Citigroup is
153 East 53rd Street, New York, New York 10043.
(9) Dimensional Fund Advisors, Inc. ('Dimensional'), a registered investment
advisor, is deemed to have beneficial ownership of 497,300 shares of
Celadon Common Stock as of December 31, 1998, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors, Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all
such shares. The address of Dimensional Fund Advisors, Inc. is 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(10) The address of FSIP, LLC is 230 Park Avenue, New York, New York.
13
<PAGE>
Except as otherwise indicated, the Company has been advised that the
beneficial holders listed in the table above have sole voting and investment
power regarding the shares shown as being beneficially owned by them. Except as
noted in the footnotes, none of such shares is known by the Company to be shares
with respect to which the beneficial owner has the right to acquire beneficial
ownership.
The Company, Stephen Russell and Hanseatic are parties to a stockholders
agreement which provides that, as long as Hanseatic and Mr. Russell each
beneficially own at least five percent of the outstanding shares of Common
Stock, the Company shall use its best efforts to insure that one member of the
Company's board of directors is a designee of Hanseatic and that another member
of the Company's board of directors is a designee of Mr. Russell. In addition,
Mr. Russell and Hanseatic have agreed to vote all shares of Common Stock owned
by them in favor of the election of such nominees or, upon the death of Mr.
Russell, for the designee of the holder of a majority of Mr. Russell's shares of
Common Stock on the date of death.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND STOCKHOLDERS
The Company and Hanseatic, a corporation of which Paul Biddelman, a
director of the Company, is an officer, entered into a registration rights
agreement, dated as of October 8, 1992, in connection with Hanseatic's purchase
of a 9.25% Senior Subordinated Convertible Note (the 'Hanseatic Note') for an
aggregate purchase price of $8,000,000. The Hanseatic Note was converted in
February 1994 into 739,371 shares of Common Stock (equivalent to a conversion
price of $10.82 per share). In connection with the purchase of the Hanseatic
Note, the Company paid Hanseatic a $160,000 facility fee and issued to Hanseatic
a warrant to purchase, 12,121 shares of Common Stock. This warrant to purchase
12,121 shares of Common Stock expired on September 30, 1998. Until October 1998,
Hanseatic and its permitted transferees have the right to require the Company to
file, subject to certain terms and conditions, a registration statement in
respect of any or all of the shares of Common Stock (subject to a minimum of
363,636 shares) covered by such agreement which are then held by the requesting
holders. In addition, Hanseatic and its permitted transferees have the right to
require the Company to include, subject to certain exceptions, any or all shares
of Common Stock covered by such agreement in any registration statement filed by
the Company. Such 'piggyback' rights, terminate on September 30, 2001.
The Company, Hanseatic and Stephen Russell are parties to a
stockholders' agreement, dated as of October 8, 1992, which was amended on July
3, 1996. The agreement provides that each party shall vote its shares of Common
Stock for the election as director of one designee of the other party. See
'Security Ownership of Principal Stockholders and Management.'
14
<PAGE>
The Company and CVC, a principal stockholder of the Company, and of
which Kilin To, a director of the Company, was an officer, entered into a
registration rights agreement, dated as of April 7, 1988, in connection with
CVC's purchase of 1,000,000 shares of Series F Convertible Preferred Stock and
warrants (all of which have been converted or exercised, as the case may be, at
a weighted average price of $3.08 per share into shares of Common Stock). Under
the terms of such agreement, CVC and its permitted transferees have the right to
require the Company to file, subject to certain terms and conditions, a
registration statement for any or all of the 476,894 shares of Common Stock
covered by such agreement which are then held by the requesting holders. In
addition, CVC and its permitted transferees have the right to require the
Company to include, subject to certain exceptions, any or all of the shares of
Common Stock covered by such agreement in any registration statement filed by
the Company.
COMPENSATION PLANS
APPROVAL OF
AMENDMENT TO THE CELADON GROUP, INC. 1994 STOCK OPTION PLAN
The affirmative vote of at least a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote on this
matter at the meeting is required to approve the amendment to the Celadon Group,
Inc. 1994 Stock Option Plan. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS
THAT THE STOCKHOLDERS VOTE THEIR SHARES FOR THE AMENDMENT TO THE CELADON GROUP,
INC. 1994 STOCK OPTION PLAN.
AMENDMENT TO 1994 STOCK OPTION PLAN
On October 8, 1999, the Board of Directors approved the amendment to the
Celadon Group, Inc. 1994 Stock Option Plan (the 'Stock Option Plan'), subject to
stockholder approval, to provide (i) that the aggregate number of shares of
Common Stock subject to awards under the Stock Option Plan be increased from
650,000 to 800,000; and (ii) that shares of Common Stock used by a participant
as payment of withholding or other taxes or the purchase price will not count
toward the 800,000 limit, other than with respect to incentive stock options.
The following description of the Stock Option Plan is a summary of the
principal provisions of the Stock Option Plan and is qualified in its entirety
by reference to the Stock Option Plan, a copy of which may be obtained upon
written request to the Company's Investor Relations Department at the Company's
principal business address.
15
<PAGE>
PURPOSE OF THE PLAN
The purposes of the Stock Option Plan are to enable the Company to
attract, retain, and motivate selected management and other key employees who
are important to the Company and to create a long-term mutuality of interest
between such persons and the Company's stockholders by granting stock options to
purchase Common Stock ('Options'), stock appreciation rights ('SARs') and
restricted stock awards (collectively, Options, SARs and restricted stock awards
are referred to herein as 'Awards').
ADMINISTRATION
The Stock Option Plan is administered by a committee (the 'Committee')
of the Board of Directors, appointed from time to time by the Board of
Directors. The committee is intended to consist of two or more directors, each
of whom will be a non-employee director as defined in Rule 16b-3 promulgated
under Section 16(b) of the Exchange Act and an outside director as defined under
Section 162(m) of the Code. If no Committee exists which has the authority to
administer the Stock Option Plan, the functions of the Committee will be
exercised by the Board of Directors. The Committee has full authority to
interpret the Stock Option Plan and decide any questions under the Stock Option
Plan and to make such rules and regulations and establish such processes for
administration of the Stock Option Plan as it deems appropriate subject to the
provisions of the Stock Option Plan. Any interpretation and decision made by the
Committee is final and conclusive.
AVAILABLE SHARES
The Stock Option Plan authorizes the issuance of up to 800,000 shares of
Common Stock upon the exercise of Options, SARs and restricted stock awards. As
of September 30, 1999, there were outstanding Options to acquire 437,716 shares
of Common Stock and 825 shares of restricted stock under the Stock Option Plan.
No SARs have been issued under the Stock Option Plan. In general, if Awards are
for any reason canceled, or expire or terminate unexercised, the shares covered
by such Awards will again be available for the grant of Awards, except that
shares subject to a restricted stock award that are forfeited after the optionee
has received dividends or other benefits of ownership (excluding voting rights)
will not be available for the grant of Awards. In the event that an optionee
delivers shares of Common Stock as payment of withholding or other taxes or
purchase price of shares of common Stock acquired upon the exercise of an
Option, such shares will not count against the maximum aggregate limit or shares
of Common Stock that are available under the Stock Option Plan, except with
respect to incentive stock options. The maximum number of shares of Common Stock
with respect to which Awards could be granted to any individual under the Stock
Option Plan during any fiscal year of the Company may not exceed 75,000.
The Stock Option Plan provides that appropriate adjustments will be made
in the number and kind of securities subject to outstanding Awards and the
purchase price to prevent dilution of or enlargement of an optionee's rights in
the event of a stock split, stock dividend, merger, consolidation or
reorganization that satisfies the requirements set forth in the Stock Option
Plan.
16
<PAGE>
ELIGIBILITY
Selected management and other key employees who are employed by the
Company or a parent or subsidiary corporation of the Company, as defined in
Sections 424(e) and 424(f) of the Code, are eligible to be granted Awards under
the Stock Option Plan.
GRANT OF AWARDS
The Committee determines, subject to the provisions of the Stock Option
Plan, the persons to whom and the time or times at which grants shall be made,
the number of shares of Common Stock subject to an Option or restricted stock
award, the number of Options which will be treated as incentive stock options
('ISOs') or nonqualified stock options, the duration of each Option, the
specific restrictions applicable to restricted stock awards, and other terms and
provisions of the Awards. In determining persons who are to receive Awards and
the number of shares of Common Stock to be covered by each Award, the Board of
Directors will consider the person's position, responsibilities, service,
accomplishments, present and future value to the Company, the anticipated length
of his future service, and other relevant factors.
The purchase price for the Options will be at least 100 percent of the
fair market value (as defined in the Stock Option Plan) of the Common Stock at
the time of the grant of the Options. In the case of an ISO granted to an
optionee owning more than 10 percent of the combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation of the Company
(as defined in Sections 424(e) and 424(f) of the Code) at the time the ISO is
granted, the purchase price for the ISO will be at least 110 percent of the fair
market value of the Common Stock at the time the ISO is granted.
Shares purchased pursuant to the exercise of Options will be paid for at
the time of exercise as follows: (i) cash, (ii) by delivery of unencumbered
shares of Common Stock held for at least 6 months, or (iii) a combination
thereof. If the Common Stock is traded on a national securities exchange or
system sponsored by the National Association of Securities Dealers, payment in
full or in part may also be made through a 'cashless exercise' procedure whereby
the optionee delivers irrevocable instructions to a broker to deliver promptly
to the Company an amount equal to the purchase price.
The Stock Option Plan also permits the Board of Directors in its
discretion, to provide for further nonqualified stock options for a number of
shares equal to the number of shares surrendered ('Reload Options'), if an
optionee exercises an Option by surrendering other shares of Common Stock held
by the optionee for at least six months prior to such date of surrender. The
purchase price of a Reload Option shall be equal to the fair market value of the
Common Stock on the date of exercise of the original Option and may be exercised
in accordance with the terms and conditions as the Committee may determine.
17
<PAGE>
Except where an Option expires earlier (as described below), if not
previously exercised, each Option will expire upon the tenth anniversary of the
grant hereof (five years in the case of a 10 percent stockholder). No Options
may be granted after January 4, 2004.
The aggregate fair market value (determined at the time of grant) of the
Common Stock with respect to which ISOs are exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000.
The Stock Option Plan permits the Board of Directors to grant to all
eligible person's shares of Common Stock, subject to such restrictions as the
Board of Directors may determine (a restricted stock award). The Board of
Directors may grant SARs under the Plan. SARs may be granted either alone or in
addition to other Awards, and may, but need not, relate to a specific Option. A
SAR may be exercised only at a time when the fair market value of a share of the
Common Stock exceeds the fair market value on the date of grant of the SAR and
the SAR is otherwise exercisable. If a SAR relates to a specific Option, at the
time of its exercise, the employee must surrender the privilege of exercising
the related Option to the extent that the employee exercises the SAR. If a SAR
is exercised, the holder is entitled to receive, in cash or in shares of Common
Stock, or a combination thereof, at the discretion of the Committee, the excess
of the fair market value of shares for which the right is exercised over the
fair market value on the date of grant of the SAR. The exercise of SARs is
subject to certain restrictions set forth in the Stock Option Plan.
The Committee may at any time accelerate the vesting of Options and SARs
and the removal of restrictions from restricted stock awards. In the event of a
merger or other type of corporate transaction which results in a change of
control of the Company (as defined in the Stock Option Plan), Options granted
pursuant to the Stock Option Plan automatically vest and become immediately
exercisable in full, and any forfeiture restrictions contained in any restricted
stock award automatically terminate, under certain circumstances.
If the employment of any optionee terminates for cause (as defined in
the Stock Option Plan), any Options or SARs held by the optionee terminate. If
the employment of an optionee otherwise terminates, any Options or SARs held by
the optionee may be exercised during a period of 30 days after such termination,
unless such termination of employment occurs by reasons of retirement with the
consent of the Committee, disability or death. If the employment of any optionee
terminates by reason of retirement with the consent of the Committee or
disability, nonqualified stock options or SARs exercisable at the time of such
termination may be exercised for a period of up to three years after such
termination; ISOs exercisable at the time of such termination may be exercised
for a period of up to three months after retirement with the consent of the
committee and up to twelve months after disability. If the employment of any
optionee terminates by reason of death or if an optionee dies during the period
which Option or SARs are otherwise exercisable after retirement or disability,
Options or SARs exercisable at the time of termination of employment or such
later date, may be exercised by the executor or administrator of such optionee's
estate within one year of death.
18
<PAGE>
AMENDMENT AND TERMINATION OF PLAN
The Stock Option Plan provides that it may be amended or terminated by
the Board of Directors of the Committee at any time; provided, however, that (i)
no such action shall affect or in any way impair an optionee's rights under any
Award previously granted under the Stock Option Plan and (ii) no amendment or
change shall, without stockholder approval, increase the maximum number of
shares of Common Stock which may be issued or transferred under the Stock Option
Plan, change the provisions of the Stock Option Plan regarding the purchase
price of Options, extend the period during which Awards may be granted or
exercised, or change the eligible class of employees under the Stock Option
Plan.
MISCELLANEOUS
Optionees may be limited under Section 16(b) of the Exchange Act to
certain specific exercise, election or holding periods with respect to the
Awards granted to them under the Stock Option Plan. Options granted under the
Stock Option Plan are subject to restrictions on transfer and exercise. No
Option granted under the Stock Option Plan may be exercised prior to the time
period for exercisability, subject to acceleration in the event of a change in
control of the Company (as defined in the Stock Option Plan). Although Options
will generally be nontransferable (except by will or the laws of descent and
distribution), the Committee may determine at the time of grant or thereafter
that a nonqualified stock option that is otherwise nontransferable is
transferable in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to Options under the Stock Option Plan is based on
statutory authority and judicial and administrative interpretations as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect) and may vary in individual circumstances. Therefore,
the following is designed to provide only a general understanding of the feral
income tax consequences (state and local income tax and estate tax consequences
are not addressed below). This discussion is limited to the U.S. federal income
tax consequences to individuals who are citizens or residents of the U.S., other
than those individuals who are taxed on a residence basis in a foreign country.
NONQUALIFIED STOCK OPTIONS. In general, an optionee will realize no
taxable income upon the grant of nonqualified stock options and the Company will
not receive a deduction at the time of such grant, unless the nonqualified stock
option has a readily ascertainable fair market value (as determined under
applicable tax law) at the time of grant. Upon exercise of a nonqualified stock
option, an optionee generally will recognize ordinary income in an amount equal
to the excess of the fair market value of the stock on the date of exercise over
the purchase price, but such amount will not be subject to federal wage
withholding or employment taxes. Upon a subsequent sale of the stock by the
optionee, the optionee will recognize short-term or long-term capital gain or
loss, depending upon his or her holding period for the stock. Subject to the
limitation under Section 162(m) of the Code (as described below), the Company
will generally be allowed a deduction equal to the amount recognized by the
optionee as ordinary income in connection with the exercise of the nonqualified
stock option.
19
<PAGE>
INCENTIVE STOCK OPTIONS. Options granted under the Stock Option Plan may
be ISOs, provided that such Options satisfy the requirements of the Code
therefor. In general, neither the grant nor the exercise of an ISO will result
in taxable income to the optionee or a deduction to the Company. The sale of
Common Stock received pursuant to the exercise of an ISO which satisfied the
requirement of an ISO, as well as the holding period requirement described
below, will result in long-term capital gain or loss to the optionee equal to
the difference between the amount realized on the sale and the purchase price
and will not result in a tax deduction to the Company. To receive ISO treatment,
the optionee must not dispose of the Common Stock purchased pursuant to the
exercise of an ISO either (i) within two years after the ISO is granted or (ii)
within one year after the date of exercise and must exercise the ISO within
certain time periods (generally, no later than 3 months after the optionee's
termination of employment).
If all requirements for ISO treatment other than the holding period
requirement are satisfied, the recognition of income by the optionee is deferred
until disposition of the Common Stock, but, in general, any gain in an amount
equal to the lesser of (i) the fair market value of the Common Stock on the date
of exercise or, with respect to officers and directors, the date that sale of
such stock would not create liability under Section 16(b) of the Exchange Act)
minus the purchase price of (ii) the amount realized on the disposition minus
the purchase price is treated as ordinary income. Any remaining gain is treated
as long-term or short-term capital gain depending on the optionee's holding
period for the stock disposed of. Subject to the limitation under Section 162(m)
of the Code (as described below), the Company will be entitled to a deduction at
that time equal to the amount of ordinary income realized by the optionee.
CERTAIN OTHER TAX ISSUES. In general, Section 162(m) of the Code denies
a publicly held corporation a deduction for federal income tax purposes for
compensation in excess of $1,000,000 per year per person to its chief executive
officer and the four other officers whose compensation is disclosed in its proxy
statement, subject to certain exceptions. Options will generally qualify under
one of these exceptions if they are granted under a plan that states the maximum
number of shares with respect to which Options may be granted to any employee
during a specified period and the plan under which Options are granted is
approved by stockholders and is administered by a compensation committee
comprised of outside directors. The Stock Option Plan is intended to satisfy
these requirements with respect to Options. Awards of restricted stock that are
granted or vest upon the attainment of preestablished performance goals
generally satisfy the exception for performance based compensation under Section
162(m) of the Code; awards of restricted stock (not subject to the attainment of
performance goals) generally do not satisfy the exception for performance based
compensation under Section 162(m) of the Code.
In addition, any entitlement to a tax deduction on the part of the
Company is subject to the applicable federal tax rules, and in the event that
the exercisability of an Option is accelerated because of a change in control,
payments relating to the Options, either alone or together with certain other
payments may constitute parachute payments under Section 280G of the Code, which
excess amounts may be subject to excise taxes and be nondeductible by the
Company.
20
<PAGE>
The Company has the right under the Stock Option Plan to deduct from any
payment to be made to an optionee, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to the Stock Option Plan, payment by the optionee of any federal, state
or local taxes required by law to be withheld. An optionee may generally satisfy
such withholding obligation by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already owned.
The Stock Option Plan is not subject to any of the requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Stock Option
Plan is not, nor is it intended to be, qualified under Section 401(a) of the
Code.
NEW PLAN BENEFITS
As of September 30, 1999, options to acquire 591,052 of the 800,000
shares of Common Stock authorized under the Stock Option Plan had been granted.
Under the existing Stock Option Plan, Stephen Russell has been granted
nonqualified options to acquire 70,000 shares at exercise prices ranging from
$10.00 to $13.625, expiring between September, 2004 and March, 2006; Robert
Goldberg has been granted an ISO to acquire 20,000 shares at an exercise price
of $8.00 expiring August, 2009, a nonqualified option to acquire 20,000 shares
at an exercise price of $10.25 per share expiring February, 2009; Paul A. Will
has been granted incentive stock options to acquire 25,000 shares at exercise
prices ranging from $7.50 to $10.25, expiring between March, 2006 and August,
2009 and Michael Dunlap has been granted incentive stock options to acquire
15,000 shares at exercise prices ranging from $7.50 to $12.625, expiring between
August, 2006 and February, 2009. Additionally, under the Stock Option Plan the
non-employee directors as a group have been granted nonqualified options to
purchase 73,500 shares at exercise prices ranging from $10.00 to $20.00,
expiring between January, 2004 and March, 2006. All current executive officers
as a group have been granted ISOs and nonqualified options to purchase a total
of 150,000 shares at exercise prices ranging from $7.50 to $13.625, expiring
between September, 2004 and August, 2009.
All other current employees of the Company have been granted ISOs for a
total of 214,216 shares at prices ranging from $7.50 to $15.25 expiring between
January, 2004 and August, 2009.
On October 1, 1999, the closing sale price of the Common Stock on the
NASDAQ National Market was $7.375 per share.
The Board of Directors believes that the Company's ability to grant
additional stock options, SARs, and restricted stock awards is important to the
Company's ability to recruit and retain qualified personnel.
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP
The Board of Directors has appointed Ernst & Young LLP as the
independent auditors for the Company for the current fiscal year. A
representative of Ernst & Young LLP is expected to be present at the Meeting
with the opportunity to make a statement if such representative desires to do
so, and is expected to respond to appropriate questions. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS AUDITORS.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders to be presented at the next annual meeting
must be received for inclusion in the Company's proxy statement and form of
proxy by June 19, 2000.
GENERAL
The Board of Directors does not know of any matters other than those
specified in the Notice of Annual Meeting of Stockholders that will be presented
for consideration at the meeting. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed proxy to
vote thereon in accordance with their judgement. In the event that any nominee
is unable to serve as a director at the date of the meeting, the enclosed form
of proxy will be voted for any nominee who shall be designated by the Board of
Directors to fill such vacancy.
Under Delaware Law and the Company's Certificate of Incorporation and
By-laws, if a quorum is present, directors are elected by a plurality of the
votes cast by the holders of shares entitled to vote thereon. A majority of the
outstanding shares entitled to vote, present in person or represented by proxy
constitutes a quorum. Shares represented by proxies withholding votes from
nominees will be counted only for purposes of determining a quorum. Under
Delaware law and the rules of the Securities and Exchange Commission, if a
quorum is present, the affirmative vote of a majority of the shares present in
person or represented by proxy at the Meeting and entitled to vote on the matter
is required to approve and adopt the proposed amendment to the 1994 Stock Option
Plan. Shares abstaining will be considered present and have the effect of a vote
against the proposal. Any share held by a broker as a nominee and not voted in
accordance with stock exchange rules will not be considered present or entitled
to vote on the proposal.
The entire cost of soliciting proxies hereunder will be borne by the
Company. Proxies will be solicited by mail, and may be solicited personally by
directors, officers or regular employees of the Company who will not be
compensated for their services. The Company will reimburse brokers and banks for
their reasonable expenses for forwarding material to beneficial owners for whom
they hold stock.
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The Company intends to furnish to its stockholders a copy of the
Company's 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
Indianapolis, Indiana
October 29, 1999
23
<PAGE>
APPENDIX 1
[1268 - CELADON GROUP] [FILE NAME: CEL19B.ELX] [VERSION - 2] [10/20/99]
[orig. 10/19/99]
CEL19B DETACH HERE
PROXY
CELADON GROUP
9503 East 33rd Street
One Celadon Drive
Indianapolis, Indiana 46235-4207
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen Russell, Paul Biddelman and Paul A.
Will and each of them with full power of substitution, proxies of the
undersigned, to vote all shares of Common Stock of Celadon Group, Inc. (the
"Company") that the undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders of the Company to be held on Monday,
November 22, 1999 at 10:00 a.m., (local time) at the Company's Corporate
Headquarters located at One Celadon Drive, Indianapolis, Indiana 46235, and at
any adjournments thereof. The undersigned hereby revokes any proxy heretofore
given with respect to such shares.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the election of the nominees named in Proposal 1 and FOR Proposals
2 and 3. If more than one of said proxies or their substitutes shall be present
and vote at said meeting, or any adjournment thereof, a majority of them so
present and voting (or if only one to be present and vote, then that one) will
have and may exercise all the powers hereby granted.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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[1268 - CELADON GROUP] [FILE NAME: CEL19A.ELX] [VERSION - 1]
[10/19/99] [orig. 10/19/99]
DETACH HERE
CEL19A
[X] Please mark
votes as in
this example.
This Proxy when properly executed and returned will be voted in the manner
directed below. If no direction is made, this Proxy will be voted FOR all
nominees and the proposals listed below.
1. Election of Directors.
NOMINEES: Stephen Russell, Paul A. Biddelman,
Michael Miller, Anthony Heyworth, Kilin To
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] _________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Ratification of an amendment to the [ ] [ ] [ ]
Celadon Group, Inc. 1994 Stock
Option Plan.
3. Ratification of appointment of Ernst [ ] [ ] [ ]
& Young LLP as auditors.
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. [ ]
Please mark, sign, date and return the Proxy Card promptly using the enclosed
envelope which requires no postage when mailed in the USA.
Please sign below exactly as your name appears. When shares are held by joint
tenants, both shall sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature:__________________________________________ Date: ____________________
