UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FROZEN FOOD EXPRESS INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
FROZEN FOOD EXPRESS INDUSTRIES, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 22, 1999
TO THE SHAREHOLDERS OF
FROZEN FOOD EXPRESS INDUSTRIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Frozen Food Express Industries, Inc. (the "Company"), a Texas
corporation, will be held on Thursday, April 22, 1999, at 3:30 p.m., Dallas,
Texas time, in NationsBank Plaza, 70th Floor, 901 Main Street, Dallas, Texas
75201 for the following purposes:
1. Electing nine (9) directors to serve until the next Annual Meeting of
Shareholders and until their respective successors are elected and
qualified;
2. Considering and voting upon an amendment to the Company's 1992
Incentive and Non-Statutory Stock Option Plan, as amended.
3. Considering and voting upon the reapproval of the FFE Transportation
Services, Inc. 1994 Incentive Bonus Plan and the performance goal included
therein.
4. Considering and voting upon the reapproval of the FFE Transportation
Services, Inc. 1999 Executive Bonus and Phantom Stock Plan and the
performance goal included therein.
5. Transacting such other business as may properly be brought before the
Annual Meeting or any adjournment thereof.
You are encouraged to attend the Annual Meeting in person. Whether or not you
plan to attend the Annual Meeting, please complete, date, sign and return the
accompanying proxy at your earliest convenience. A reply envelope is provided
for this purpose, which needs no postage if mailed in the United States. Your
immediate attention is requested in order to save your Company additional
solicitation expense.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement attached to this Notice.
Only shareholders of record at the close of business on March 2, 1999 are
entitled to notice of and to vote at such meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Leonard W. Bartholomew
Leonard W. Bartholomew
Secretary
Dallas, Texas
March 30, 1999
FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 22, 1999
FROZEN FOOD EXPRESS INDUSTRIES, INC.
1145 Empire Central Place
P. O. Box 655888
Dallas, Texas 75265-5888
Telephone: (214) 630-8090
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 22, 1999
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the management of Frozen Food Express
Industries, Inc. (the "Company") for use at the Annual Meeting of Shareholders
to be held at Dallas, Texas, on the 22nd day of April, 1999 (the "Annual
Meeting"), and at any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement
and accompanying proxy are being mailed or delivered to shareholders on or
about March 29, 1999. Solicitations of proxies may be made by personal
interview, mail, telephone or telegram by directors, officers and regular
employees of the Company. The Company may also request banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward
solicitation material to the beneficial owners of the Company's $1.50 par
value Common Stock (the "Common Stock") held of record by such persons and may
reimburse such forwarding expenses. All costs of preparing, printing,
assembling and mailing the form of proxy and the material used in the
solicitation thereof and all clerical and other expenses of solicitation will
be borne by the Company.
ANNUAL REPORT
The Company's Annual Report to Shareholders, covering the fiscal year ended
December 31, 1998, including audited financial statements, is also being
mailed to the shareholders entitled to notice of and vote at the Annual
Meeting in the envelope containing this Proxy Statement. The Annual Report
does not form any part of the material for solicitation of proxies.
SIGNATURES OF PROXIES IN CERTAIN CASES
If a shareholder is a corporation, the accompanying proxy should be signed
in its full corporate name by the President or another authorized officer who
should indicate his title. If a shareholder is a partnership, the proxy should
be signed in the partnership name by an authorized person. If stock is
registered in the name of two or more trustees or other persons, the proxy
should be signed by each of them. If stock is registered in the name of a
decedent, the proxy should be signed by an executor or an administrator. The
executor or administrator should attach to the proxy appropriate instruments
showing his qualification and authority. Proxies signed by a person as agent,
attorney, administrator, executor, guardian or trustee should indicate such
person's full title following his signature.
REVOCATION OF PROXY
All shares represented by a valid proxy will be voted. A proxy may be
revoked at any time before it is voted by the giving of written notice to that
effect to the Secretary of the Company, by executing and delivering a later-
dated proxy or by attending the Annual Meeting and voting in person.
OUTSTANDING CAPITAL STOCK; PRINCIPAL SHAREHOLDERS
At the close of business on the 2nd day of March, 1999, the record date for
determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting, there were outstanding and entitled to be voted 16,477,126
shares of Common Stock. The following table sets forth certain information, as
of March 2, 1999, with respect to each person known to the management of the
Company to be a beneficial owner of more than five percent of the outstanding
Common Stock.
Name and Address Amount and Nature Percent
Of Beneficial Owner of Beneficial Ownership (1) of Class
------------------- --------------------------- --------
FFE Transportation Services, Inc.(/2/)... 2,484,754 15.08%
Employee Stock Ownership Trust
Chase Bank of Texas, NA, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Savings Plan For Employees of............ 2,035,075 12.35%
Frozen Food Express Industries, Inc
Chase Bank of Texas, NA, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Stoney M. Stubbs, Jr.(/4/)............... 1,450,433(/4/) 8.68%
158 Jellico Circle
Southlake, Texas 76092
Sarah M. Daniel(/3/)..................... 1,445,010 8.77%
612 Linda
El Paso, Texas 79922
Lucile B. Fielder(/3/)................... 1,327,924 8.06%
Countrywide Abstract & Title, Inc.
100 East Market Street, #212
Lockhart, Texas 78644
Royce & Associates, Inc.................. 1,208,933(/6/) 7.34%
and Royce Management Company
1414 Avenue of the Americas
New York, New York 10019
Dimensional Fund Advisors, Inc........... 1,079,011(/7/) 6.55%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
- --------
(1) Except as otherwise noted, each beneficial owner has sole voting and
investment power with respect to all shares owned by him, and all shares
are directly held by the person named.
(2) FFE Transportation Services, Inc., ("FFE") is the principal operating
subsidiary of the Company.
(3) Mr. Stubbs holds, and has held for the past nineteen years, the offices of
Chairman of the Board, President and Chief Executive Officer of the
Company and FFE. Mr. Stubbs is the nephew of Edgar O. Weller, a director
of the Company.
(4) Includes 228,555 shares Mr. Stubbs has the right to acquire pursuant to
options exercisable within 60 days, 145,111 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock Ownership
Plan, 44,941 shares allocated to his account in the Savings Plan for
Employees of Frozen Food Express Industries, Inc., and 769,387 shares held
in family partnerships controlled by Mr. Stubbs.
(5) Information concerning the number of shares beneficially owned by Sarah M.
Daniel and Lucile B. Fielder was based upon a Schedule 13D, dated November
22, 1996, which was jointly filed with the Securities and Exchange
Commission and has been adjusted to reflect the sale during 1998 of 1,000
shares as to which Ms. Daniel had sole voting and dispositive power and
1,200 shares as to which Ms. Daniel had joint voting and dispositive power
with her husband and 10,000 shares owned by Weller Investment, Ltd. as to
which
2
Ms. Daniel and Ms. Fielder have joint voting and dispositive power. Ms.
Daniel has sole voting and dispositive power over 62,047 shares, of which
730 shares are held as custodian for her daughter, and joint voting and
dispositive power with her husband over 59,631 shares, and shared voting
and dispositive power with Ms. Fielder over 1,323,332 shares owned by
Weller Investment Ltd. Ms. Fielder has sole voting and dispositive power
over 4,592 shares, of which 730 shares are held as custodian for her
daughter and 950 shares are held as custodian for her niece, and shared
voting and dispositive power with Ms. Daniel over 1,323,332 shares owned by
Weller Investment Ltd.
(6) Information concerning the number of shares beneficially owned by Royce &
Associates, Inc. ("Royce") and Royce Management Company ("RMC") is as of
December 31, 1998, and was obtained from a Schedule 13G, dated February
10, 1999, jointly filed by Royce, RMC and Charles M. Royce with the
Securities and Exchange Commission (the "SEC"). The Schedule 13G confirms
that Royce and RMC are both investment advisers and members of a "group".
Royce has sole voting and dispositive power over 1,118,193 shares and RMC
has sole voting and dispositive power over 90,470 shares. Mr. Royce may be
deemed to be a controlling person of Royce and RMC and as such may be
deemed to beneficially own the shares beneficially owned by Royce and RMC.
The Schedule 13G indicates that Mr. Royce does not own any shares outside
of Royce and RMC and disclaims beneficial ownership of the shares held by
Royce and RMC.
(7) Information concerning the number of shares owned by Dimensional Fund
Advisors, Inc. ("Dimensional") is as of December 31, 1998 and was obtained
from a schedule 13G dated February 11, 1999.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute
a quorum at the Annual Meeting. Abstentions and broker non-votes will be
counted in determining the presence of a quorum. A "broker non-vote" occurs
when a nominee holding shares for a beneficial owner has voted on certain
matters at the Annual Meeting pursuant to discretionary authority or
instructions from the beneficial owner but may not have received instructions
or exercised discretionary voting power with respect to other matters.
Each holder of Common Stock will be entitled to one vote, in person or by
proxy, for each share of such stock owned of record at the close of business
on March 2, 1999. As to the election of directors, a shareholder may, by
checking the appropriate box on the proxy: (i) vote for all director nominees
as a group; (ii) withhold authority to vote for all director nominees as a
group; or (iii) vote for all director nominees as a group except those
nominees identified by the shareholder in the appropriate area. With respect
to each other proposal, a shareholder may, by checking the appropriate box on
the proxy: (a) vote "FOR" the proposal; (b) vote "AGAINST" the proposal; or
(c) "ABSTAIN" from voting on the proposal. Cumulative voting for directors is
not permitted.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying proxy, if properly executed and returned, will be voted (i)
unless otherwise specified thereon, (i) FOR the election of the nine nominees,
named in the next succeeding table, as directors of the Company, (ii) FOR the
approval of an amendment to the Company's 1992 Incentive and Non-Statutory
Stock Option Plan, as amended, (iii) FOR the reapproval of the FFE
Transportation Services, Inc. 1994 Incentive Bonus Plan and performance goal
included therein, (iv) FOR the approval of the FFE Transportation Services,
Inc. 1999 Executive Bonus and Phantom Stock Plan and the performance goal
included therein, and (v) in the transaction of such other business as may
properly come before the Annual Meeting or any adjournment thereof in
accordance with the judgment of the proxies. The management of the Company
does not know of any such other matter or business. Should any nominee named
herein for the office of director become unable or be unwilling to accept
nomination for or election to such position, the persons acting under the
proxy will vote for the election, in his stead, of such other person as the
management of the Company may recommend. The management of the Company has no
reason to believe that any of the nominees will be unable or unwilling to
serve if elected to office. To be elected, each director must receive the
affirmative vote of the holders of a plurality of the issued and outstanding
shares of Common Stock represented in person or by proxy at the Annual
Meeting. Approvals of Proposals Two, Three and Four will require the
affirmative vote of the holders of the majority of the issued and outstanding
shares of Common Stock entitled to vote at the Annual Meeting. Abstentions and
broker non-votes will have no effect in the election of directors, but will
have the effect of a vote against Proposals Two, Three and Four.
3
NOMINEES FOR DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist of a
minimum of seven and a maximum of fifteen directors. Nine directors will be
elected at the Annual Meeting. Each director elected will serve until the next
Annual Meeting of Shareholders and until his successor has been elected and
qualified.
The persons named below are the Board of Directors' nominees for election as
directors. Each nominee has served continuously as a director since the date
of his first election to the Board. Further items of information with respect
to the nominees and all directors and officers of the Company as a group,
including the beneficial ownership of Common Stock as of March 2, 1999 by such
persons and group, are set forth below:
Amount
Principal Occupation First and Nature Percent
During Past Five Years Became a of Beneficial of
Name Age and Directorships Director Ownership(1) Class
- ---- --- ---------------------- -------- ------------- -------
Stoney M. (Mit) Chairman of the Board, President 1977 1,450,433(/2/) 8.68%
Stubbs, Jr............. 62 and Chief Executive Officer of
the Company
Edgar O. Weller......... 81 Vice Chairman of the Board of the 1969 552,310 3.35%
Company
W. Grogan Lord.......... 84 Senior Chairman of the Board, 1975 7,500(/3/) *
First Texas Bancorp, Inc.
Leroy Hallman........... 83 Attorney, Retired 1975 22,400(/4/) *
Brian R. Blackmarr...... 57 President, B.R. Blackmarr & 1990 27,500(/5/) *
Associates Inc.
T. Michael O'Connor..... 44 Chief Executive Officer, 1992 26,428(/6/) *
Ecosource, Inc., Managing
Partner T. J. O'Connor Cattle
Co. and Member of Texas A & M
University Board of Regents
W. Mike Baggett......... 52 Chairman, President and CEO 1998 1,489(/7/) *
Winstead Sechrest & Minick, P.C.
Charles G. 57 Executive Vice President of the 1982 546,726(/9/) 3.29%
Robertson(/8/)......... Company
F. Dixon McElwee, 52 Senior Vice President of the 1998 -- *
Jr.(/8/)............... Company and FFE since September
1998. Executive Vice President
and Chief Financial Officer for
Cameron-Ashley Building Products
(CAB) from May 1995 until July
1998. Prior thereto, Principal
for Meridian Capital, investment
bankers
All directors and 2,634,786(/10/) 15.58%
executive officers, as
a group (9 people).....
- --------
* less than 1%
(1) Except as otherwise noted, all shares are held directly, and the owner has
sole voting and investment power.
(2) Includes 228,555 shares Mr. Stubbs has the right to acquire pursuant to
options exercisable within 60 days, 145,111 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock Ownership
Plan, 44,941 shares allocated to his account in the Savings Plan for
Employees of Frozen Food Express Industries, Inc., and 769,387 shares held
in family partnerships controlled by Mr. Stubbs.
(3) Represents 7,500 shares which Mr. Lord has the right to acquire pursuant
to options exercisable within 60 days.
(4) Includes 1,875 shares which Mr. Hallman has the right to acquire pursuant
to options exercisable within 60 days and 6,975 shares held by a trust of
which Mr. Hallman is the Trustee.
4
(5) Includes 7,500 shares which Mr. Blackmarr has the right to acquire
pursuant to options exercisable within 60 days.
(6) Represents 26,428 shares which Mr. O'Connor has the right to acquire
pursuant to options exercisable within 60 days.
(7) Includes 1,339 shares which Mr. Baggett has the right to acquire pursuant
to options exercisable within 60 days.
(8) Mr. Robertson is also Executive Vice President and a director of FFE. Mr.
McElwee is also Senior Vice President and a director of FFE.
(9) Includes 156,297 shares Mr. Robertson has the right to acquire pursuant to
options exercisable within 60 days, 82,342 shares allocated to his account
in the FFE Transportation Services, Inc., Employee Stock Ownership Plan,
38,236 shares allocated to his account in the Savings Plan for Employees
of Frozen Food Express Industries, Inc., and 192,236 shares held by a
family partnership which is controlled by Mr. Robertson.
(10) Includes 429,494 shares which executive officers and directors have the
right to acquire pursuant to options exercisable within 60 days, 227,453
shares allocated to the accounts of executive officers pursuant to the
FFE Transportation Services, Inc., Employee Stock Ownership Plan, 83,177
shares allocated to the accounts of executive officers pursuant to the
Savings Plan for Employees of Frozen Food Express Industries, Inc., and
961,623 shares held by family partnerships controlled by directors and
executive officers, and 6,975 shares held by a trust controlled by a
director.
The Company's Board of Directors held five meetings during 1998. Each
incumbent director attended during 1998 at least 84% of the aggregate of (i)
the total number of meetings of the Board of Directors held during the period
that he was a director and (ii) the total number of meetings held by all
committees of the Board on which he served (during the periods that he
served).
The Company's Board of Directors has standing compensation, audit and
information services committees, but does not have a standing nominating
committee.
The Compensation Committee consists of Messrs. Blackmarr, Chairman, Baggett,
and Lord. The Committee is charged with recommending compensation arrangements
for the directors and executive officers of the Company and recommending
compensation programs for FFE. The Committee met once during 1998.
The Audit Committee of the Board of Directors consists of Messrs. Hallman,
Chairman, Weller and O'Connor. During 1998, the Committee held two meetings at
which it reviewed with representatives of Arthur Andersen LLP the results of
its 1997 annual audit, and plans for the 1998 annual audit and reviewed other
services provided by the Company's Independent Public Accountants.
The Information Services Committee of the Board of Directors consists of
Messrs. Stubbs, Chairman, Blackmarr, McElwee and Robertson. The Committee is
charged with reviewing the Company's information systems and making
recommendations to the Board of Directors regarding possible improvements to
such systems. The Committee held twelve meetings during 1998.
5
DIRECTOR COMPENSATION
As consideration for services as a director, each director who is not an
executive officer of the Company receives fees of $1,000 for each meeting
attended and $500 for each telephonic meeting in which he participates.
Members of the Audit, Compensation and Information Services Committees who are
not executive officers of the Company receive fees of $500 for each committee
meeting attended which does not occur on the same day as a Board meeting.
On April 27, 1995, the shareholders adopted the Frozen Food Express
Industries, Inc., 1995 Non-Employee Director Stock Option Plan (the "1995
Director Plan"). The purpose of the 1995 Director Plan is to advance the
interest of the Company and its shareholders by strengthening the Company's
ability to attract and retain experienced and able individuals to serve as
independent directors of the Company and to furnish additional incentive to
such individuals to expend their best efforts on behalf of the Company.
On the day of a non-employee director's initial appointment or election
(whichever comes first) to the Board, such individual will be granted, without
any further action on the part of the Board or such individual, an option to
purchase 9,375 shares of Common Stock (subject to adjustment to reflect
certain changes in capitalization). Upon the reelection of any non-employee
director to the Board (including the non-employee director's first election by
shareholders if such director was initially appointed to the Board) such
individual will be granted, without any further action on the part of the
Board or such individual, an option to purchase 1,875 shares of Common Stock
(subject to adjustment to reflect certain changes in capitalization). No
option shall be granted pursuant to the 1995 Director Plan after March 3,
2005.
To the extent that a non-employee director has served as a director for one
or more years prior to the grant of an option, the option is immediately
exercisable for the number of shares equal to the product of one-seventh (
1/7) of the number of shares subject to the option multiplied by the number of
full years such non-employee director has served as a director. Thereafter,
one-seventh of the number of shares subject to the option become exercisable
on each anniversary of the date of grant until the option becomes fully
exercisable. No option granted under the 1995 Director Plan may be exercised
after the tenth anniversary of its grant. In the event that an optionee dies
while serving on the Board of Directors, all options granted to such optionee
under the 1995 Director Plan become fully exercisable as of the date of his or
her death and may be exercised by the beneficiary under the optionee's will or
the executor of such optionee's estate at any time prior to the second
anniversary of his or her death, and his or her unexercised options expire at
the end of such period. In the event that an optionee ceases to be a director
for any reason other than death, such optionee may exercise the vested portion
of his or her option at any time prior to the second anniversary of the date
he or she ceases to be a director, and his or her unexercised options expire
at the end of such period. Should an optionee die during the first six months
from the date such optionee ceases to be a director, his or her option may be
exercised by the beneficiary under the optionee's will or the executor of such
optionee's estate for two years after death and unexercised options expire at
the end of such period. In no event, however, shall the period during which
options may be exercised extend beyond the terms of the options. No shares
underlying the options, however, may be sold until the expiration of six
months after the date of grant.
The exercise price under each option is fifty percent (50%) of the fair
market value of the Common Stock at the close of business on the last business
day prior to the date the option is granted. Options may be exercised by
tendering to the Company the purchase price in cash, check, or shares of
Common Stock already owned by the non-employee director having a fair market
value equal to the purchase price.
In accordance with the 1995 Director Plan, each of the Company's non-
employee directors (with the exception of Mr. Baggett) was granted an option
to purchase 1,875 shares of Common Stock for $5.03 per share on April 23,
1998. Mr. Baggett upon his appointment to the Board of Directors on February
11, 1998 was granted an option to purchase 9,375 shares of Common Stock for
$5.00 per share.
6
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Blackmarr, Baggett and Lord.
The Committee is charged with recommending compensation arrangements for the
directors and executive officers of the Company and recommending compensation
programs for FFE. No payments other than director fees were made to
Compensation Committee members during 1998, and no member of the Compensation
Committee had any relationships during 1998 requiring disclosure according to
applicable rules and regulations of the Securities and Exchange Commission.
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the Media General Industry Group Index
#774 (formerly #221)--Trucking Companies, consisting of the Company and 48
other trucking companies (assuming the investment of $100 in the Company's
Common Stock, the S&P 500 Index and the Media General Index on January 1, 1994,
and reinvestment of all dividends).
COMPARISON OF FIVE-YEAR TOTAL RETURN AMONG
FROZEN FOOD EXPRESS INDUSTRIES, INC.,
MEDIA GENERAL INDUSTRY GROUP #774 (Formerly #221)--TRUCKING COMPANIES
AND S&P 500 INDEX
[PERFORMANCE GRAPH APPEARS HERE]
FISCAL YEAR ENDING
----------------------------------------------------
COMPANY 1993 1994 1995 1996 1997 1998
- ------- ---- ---- ---- ---- ---- ----
FROZEN FOOD EXPRESS
INDUSTRIES, INC. 100.00 85 64 66 66 58
MG INDUSTRY GROUP INDEX 100.00 91 76 78 103 95
S&P 500 INDEX 100.00 98 132 159 208 264
7
EXECUTIVE COMPENSATION
Summary Compensation Table:
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the fiscal years ended
December 31, 1998, 1997 and 1996, to each executive officer (collectively, the
"Executive Officers") of the Company:
Long-Term Compensation
Annual Compensation Awards
-------------------------- -----------------------------
Restricted Securities
Name and Principal Stock Underlying All Other
Position Year Salary Bonus Total(1) Awards $(2) Options/SARs #(3) Compensation(4)
- ------------------ ---- -------- -------- -------- ----------- ----------------- ---------------
Stoney M. Stubbs, Jr... 1998 $302,866 $176,746 $479,612 $ 75,029 38,000 $27,883
Chairman of the Board 1997 $291,175 $121,648 $412,823 $107,007 10,500 $23,078
President and Chief 1996 $263,495 $110,582 $374,077 $ 88,556 25,000 $25,877
Executive Officer of
the Company and FFE
Charles G. Robertson... 1998 $233,998 $122,900 $356,898 $ 59,446 28,000 $19,143
Executive Vice 1997 $221,019 $ 92,317 $313,336 $ 82,266 10,500 $13,535
President of the
Company and FFE 1996 $198,842 $ 83,446 $282,288 $ 61,820 20,000 $16,904
Burl G. Cott........... 1998 $123,688 $ 50,688 $174,376 $ 29,437 7,000 $ 3,000
Former Senior Vice 1997 $137,801 $ 57,238 $195,039 $ 51,057 10,500 $ 2,800
President of the
Company and FFE(/5/)
1996 $123,269 $ 51,734 $175,003 $ 35,134 10,000 $ 6,000
F. Dixon McElwee, Jr... 1998 $ 47,316 $ 70,463 $117,779 $ 30,484 25,000 --
Senior Vice President 1997 -- -- -- -- -- --
Of the Company and 1996 -- -- -- -- -- --
FFE(/5/)
- --------
(1) Personal benefits provided to each of the named individuals under various
Company programs do not exceed the disclosure thresholds established under
SEC rules and are not included in this total.
(2) The awards reported in this column include restricted phantom stock units
and, with regard to 1998, also include amounts awarded to executive
officers which will be converted to phantom stock units during 1999,
relating to the achievement of performance goals under the FFE
Transportation Services, Inc. Executive Bonus and Phantom Stock Plan (the
"Executive Plan") or in accordance with the Company's Supplemental
Executive Retirement Plan (the "SERP") or FFE Transportation Services,
Inc. 401(k) Wrap Plan (the "Wrap Plan"). Amounts reported represent the
sum of the amounts to be converted in 1999 plus the product of the
aggregate number of phantom stock units awarded and the market price of a
share of Common Stock at December 31, 1998. The number of phantom stock
units allocated to an officer generally will be adjusted to prevent
dilution in the event of certain cash and non-cash dividends,
recapitalizations and similar transactions affecting the Common Stock. An
officer may generally elect to "cash out" any number or all of the phantom
stock units allocated to such officer between December 1 and December 15
of any calendar year, in which event an amount equal to the fair market
value of a share of Common Stock on the last business day of the year in
which such election is made multiplied by the number of phantom stock
units that the officer elected to "cash out" shall be paid to the officer.
Additionally, in the event of certain mergers, the sale of all or
substantially all of the Company's assets and certain similar transactions
(a "Reorganization") within six months after the date an officer has been
paid for phantom stock units and as a result of such Reorganization the
holders of Common Stock receive cash for each share so held in an amount
in excess of the amount paid to such officer for such phantom stock units,
then such excess shall be paid to the officer. As of the date hereof, none
of the executive officers have elected to "cash out" any of the phantom
stock units. No further awards will be made under the Existing Executive
Plan. See "Proposal to Approve the FFE Transportation Services, Inc. 1999
Executive Bonus and Phantom Stock Plan and the Performance Goal Included
Therein."
8
The following table sets forth the total number of phantom stock units
awarded under the Executive Plan, the SERP and the Wrap Plan for services
rendered during the fiscal years ended December 31, 1998, 1997 and 1996, to
each executive officer of the Company:
1998 1997 1996
----- ------ -----
Stoney M. Stubbs, Jr................................... 9,526 10,674 8,145
Charles G. Robertson................................... 7,548 8,215 5,595
Burl G. Cott........................................... 3,738 3,077 3,096
F. Dixon McElwee, Jr................................... 3,871 -- --
As of December 31, 1998, the total number of phantom stock units allocated
to the accounts of Messrs. Stubbs, Robertson, Cott, and McElwee was 90,744,
58,449, 30,458 and 3,871, respectively. The total value of such accounts,
based upon the market price of a share of Common Stock on December 31, 1998
was $714,609, $460,289, $239,859, and $30,480, respectively, for Messrs.
Stubbs, Robertson, Cott and McElwee.
(3) Options to acquire shares of the Company's Common Stock.
(4) Company contributions to the FFE Employee Stock Ownership Plan (the
"ESOP") and the Savings Plan for Employees of Frozen Food Express
Industries, Inc. (the "Savings Plan") and the value of benefits, as
determined under a methodology required by the SEC for valuing such
benefits, ascribed to life insurance policies whose premiums are paid by
the Company for the benefit of the persons indicated below. Set forth
below is a summary of such compensation:
Split Dollar
Name Year ESOP Savings Plan Life Insurance
---- ---- ---- ------------ --------------
Stoney M. Stubbs, Jr................. 1998 -- $6,500 $21,383
1997 -- $2,800 $20,278
1996 -- $6,000 $19,877
Charles G. Robertson................. 1998 -- $6,500 $12,643
1997 -- $2,800 $10,735
1996 -- $6,000 $10,904
Burl G. Cott......................... 1998 -- $3,000 --
1997 -- $2,800 --
1996 -- $6,000 --
F. Dixon McElwee, Jr................. 1998 -- -- --
1997 -- -- --
1996 -- -- --
(5) Mr. Cott served as Senior Vice President and Chief Financial Officer of
the Company and FFE from October, 1989, until his retirement from that
position in September, 1998, at which time Mr. McElwee became employed by
the Company in Mr. Cott's former capacity.
9
Option/SAR Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options to the Executive Officers in the last fiscal year under the Company's
1992 Incentive and Nonstatutory Stock Option Plan:
Individual Grants
--------------------------------------------------
% of Total Potential Realizable Value at
Number of Options/SARs Assumed Annual Rates
Securities Granted to of Stock Price Appreciation
Underlying Employees Exercise or For Option Term (1)
Options/SARs in Fiscal Base Price Expiration ------------------------------
Name Granted (#)(2) Year ($/Sh) Date 10%
- ---- -------------- ------------ ----------- ---------- 5% ---------------
Stoney M. Stubbs, Jr. .. 3,500 0.2% $9.125 01/01/08 $ 20,085 $ 50,900
3,500 0.2% $9.875 07/01/08 $ 21,736 $ 55,084
31,000 1.8% $7.875 08/04/08 $ 153,529 $ 389,072
Charles G. Robertson.... 3,500 0.2% $9.125 01/01/08 $ 20,085 $ 50,900
3,500 0.2% $9.875 07/01/08 $ 21,736 $ 55,084
21,000 1.3% $7.875 08/04/08 $ 104,003 $ 263,565
Burl G. Cott............ 3,500 0.2% $9.125 01/01/08 $ 20,085 $ 50,900
3,500 0.2% $9.875 07/01/08 $ 21,736 $ 55,084
F. Dixon McElwee, Jr. .. 25,000 1.5% $6.063 09/28/08 $ 95,317 $ 241,552
All Holders of Common
Stock(/3/)............. N/A N/A $6.063 N/A $ 62,827,086 $ 159,216,171
- --------
(1) These amounts represent assumed rates of appreciation only. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent
on the future performance of the Common Stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this
table will be achieved.
(2) All options granted to Executive Officers were granted on January 1, July
1, August 4, and September 28, 1998, under the 1992 Incentive and
Nonstatutory Stock Option Plan, first become exercisable one year from the
date of grant, and are exercisable for a period of ten years from the date
of grant. All options were granted with an exercise price equal to 100% of
the market price of the Common Stock on the date of grant of such stock
option.
(3) Assumes a total of 16,477,126 shares of Common Stock outstanding with a
value of $6.063 (the closing sales price of the Common Stock on September
28, 1998) per share held from July 1, 1998, until July 1, 2008.
10
Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR
Values
The following table provides information, with respect to each Executive
Officer, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year ending December 31,
1998:
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal Yearend at Fiscal Yearend
(#) ($)(2)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise (#) Realized ($)(1) Unexercisable Unexercisable
---- --------------- --------------- ----------------- -----------------
Stoney M. Stubbs, Jr.... 13,500 $131,625 228,555/34,500 $17,248/$--
Charles G. Robertson.... 6,750 $ 65,813 156,297/24,500 $ 8,732/$--
Burl G. Cott............ -- $ -- 74,172/ 3,500 $ 6,704/$--
F. Dixon McElwee, Jr. .. -- $ -- --/25,000 --/$ 45,313
- --------
(1) Value is calculated on the basis of the difference between the closing
price for the Company's Common Stock on the date of exercise and the
option exercise price multiplied by the number of shares of Common Stock
underlying the option exercised.
(2) The closing price for the Company's Common Stock as reported by the Nasdaq
Stock Market on December 31, 1998, was $7.875. Value is calculated on the
basis of the difference between $7.875 and the option exercise price of an
"in-the-money" option multiplied by the number of shares of Common Stock
underlying the option.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report on the compensation policies, programs, and decisions relating
to the Company's executive officers has been prepared by Messrs. Brian R.
Blackmarr, Chairman, W. Mike Baggett and W. Grogan Lord, serving as the
Company's Compensation Committee (the "Committee") during 1998. The Committee
has been delegated the responsibility to oversee the development and
administration of all compensation policies and programs for executive
officers of the Company.
The Committee seeks to design compensation programs that align the interests
of the executive officers with the Company's shareholders. Accordingly, the
Committee has implemented compensation programs it believes will enhance the
profitability of the Company, and based on such profitability reward executive
officers for efforts resulting in such enhanced profitability. The Committee
believes the compensation programs allow the Company to attract, motivate, and
retain the services of its key executive officers.
The Company's executive compensation package is designed to retain senior
management by providing total compensation comparable to the compensation
packages offered to the top executives at the Company's competitors. In an
effort to better align the interests of the Company's executives with the
interests of shareholders, a substantial portion of each executive's total
compensation is provided through annual and long-term incentive plans. The
incentive plans place a substantial portion of the executives' compensation
packages at risk and serve as an integral component of the Company's executive
compensation philosophy. The Company believes the executives' attentions are
better balanced between achieving short-term business goals and increasing the
long-term value of the Company with a "pay-at-risk" policy (tying payments to
the Company's performance). The annual and long-term executive compensation
programs appropriately reward executive officers for successful leadership
when certain levels of Company performance are achieved. In addition to the
pay-at-risk components, the Company's executive officer compensation program
provides base salary, supplemental retirement benefits, and other benefits,
including medical and retirement plans generally available to all Company
employees.
As part of the Committee's process of administering the executive officers'
compensation programs, the Committee periodically retains the services of an
outside consulting firm to review the Company's executive compensation
practices. An evaluation of the executive compensation program is currently
being assessed and recommendations for base salary, short term bonus, and
long-term incentive are being developed for the executive positions. These
recurring periodic reviews also cover retirement benefits for the Company's
executive officers as measured against the competitive pay practices of a peer
group of publicly-traded trucking companies.
The major components of executive compensation are detailed below.
Base Salary
As part of the compensation review performed for the Company by outside
consultants, the base salary levels of the executives are reviewed to ensure
the base salary available to each executive is comparable to salaries provided
to executives in comparable positions within publicly-traded trucking
companies selected as its peer group. Base salary levels of executive officers
have been set below the market median of the amounts paid to comparable
executives within the peer group in the past and the base salary levels set
for 1998 are consistent with this philosophy. The Committee believes that many
of the 47 companies included in the market index for the five-year shareholder
return comparison are substantially different from the Company in size and
nature of services provided. Therefore, the Committee has directed its outside
consultants to compare compensation practices with a peer group of eleven
publicly traded companies with operations similar to the Company's.
Annual Incentive/Bonus Compensation
The Company's shareholders approved the incentive compensation program at
its 1994 annual meeting. The program is designed to reward key employees for
the Company's performance based on the achievement of
12
performance goals established prior to the particular year. Components of
annual incentive compensation include an Incentive Bonus Plan (the "Incentive
Plan") covering all full-time FFE employees (including executive officers) and
the Company's Executive Bonus and Phantom Stock Plan (the "Executive Plan"),
which covers only the key executive leadership. Both plans focus on
operational efficiencies, with Incentive Plan pay-outs based upon a formula
tied to the Company's operating ratio, and Executive Plan payouts based upon a
calculated percentage of an individual's annual base salary (provided targeted
operating ratios are met). Each executive officer's total cash compensation
opportunity rises above the peer group market median as the Company's
performance rises above the median performance of the Company's peer group.
For the 1998 fiscal year, reflecting Company performance, total cash bonuses
averaged approximately 59% of each executive officer's base salary as compared
to 42% in 1997, and 42% in 1996.
Long-Term Incentive Compensation
The Company's long-term incentive compensation is comprised of awards from
the stock option and phantom equity programs. These programs serve to align
the interests of the executive officers and other key employees participating
in the programs with the interests of shareholders by linking executive pay
with shareholder return. These programs also act as a counter-balance to the
short-term goals and responsibilities of the Incentive Plan and Executive
Plan.
The 1992 Incentive and Nonstatutory Stock Option Plan (the "1992 Plan")
allows for the grant of both incentive stock options and nonstatutory stock
options, as approved by the Company's shareholders at its 1994 annual meeting.
The exercise price for incentive stock options granted may not be less than
100% of the fair market value of the Company's Common Stock on the date of
grant.
The Committee or the Board determines the exercise price of nonstatutory
stock options under the 1992 Plan. However, the exercise price may not be less
than 50% of the fair market value of a share of the Company's Common Stock on
the date of grant. Options granted under the 1992 Plan may not be outstanding
for a period of greater than ten years as determined by the Committee or the
Board at the time of grant. Fiscal year 1998 awards were determined by the
Committee with consideration given to the value of the awards and each
executive's performance and the predicted level of awards provided to
comparable executives from the peer group analysis completed during 1996 by an
outside compensation consultant.
Supplemental Executive Retirement and 401(k) Wrap Plans
In order to provide supplemental retirement benefits to select members of
the Company's senior management, the Company maintains the FFE Transportation
Services, Inc. Supplemental Executive Retirement Plan (the"SERP") and the FFE
Transportation Services, Inc. 401(k) Wrap Plan (the "Wrap Plan"), as adopted
in 1993 and 1996, respectively. The Company's SERP is designed to provide
select members of senior management with benefits limited by Sections
401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended (the
"Code") by awarding phantom stock units. The Wrap Plan is designed to
supplement the Company's 401(k) Plan by allowing a select group of senior
management to supplement those benefits limited by Sections 401(k) and 401(m)
of the Code.
Both the SERP and the Wrap Plan are operated as unfunded deferred
compensation arrangements that are not subject to the annual reporting and
disclosure requirements of the Employee Retirement Income Security Act of 1974
("ERISA"). Amounts awarded under both the SERP and the Wrap Plan for fiscal
year 1997 are disclosed in the Summary Compensation Table.
Compensation for the Chief Executive Officer
During the Company's fiscal year 1998, Mr. Stoney M. Stubbs, Jr. served as
the Chairman of the Board, President, and Chief Executive Officer. For 1998,
the Committee adjusted Mr. Stubbs' base salary to $302,866 as compared to
$291,175 and $263,495 for 1997 and 1996,respectively. In keeping with the
Company's philosophy of aligning the financial interests of executives with
the interests of shareholders, Mr. Stubbs received payments totaling $126,746
under the Company's Incentive Plan and Executive Plan for performance measured
13
against pre-established criteria. In addition, the Board of Directors, at the
recommendation of the committee approved, in 1998, the payment of a
discretionary bonus to Mr. Stubbs in the amount of $50,000, citing his
achievement in directing the company's operating results for 1997 to a record
second best in its 52-year history.
During 1998, Mr. Stubbs also received grants of options to purchase a total
of 38,000 shares of the Company's Common Stock under the 1992 Plan. In
determining the number of options to grant to Mr. Stubbs, consideration was
given to the value of annual long-term incentive awards to chief executive
officers in the peer group study, recent Company performance, and the
Committee's subjective review of Mr. Stubbs' individual performance and value
to the Company. All options granted to Mr. Stubbs have an exercise price equal
to the fair market value of the Company's Common Stock as of the date of
grant.
The Committee evaluates Mr. Stubbs' performance by the same criteria
established for all Company executives to determine his total compensation.
Ultimately, the Committee made a subjective assessment of Mr. Stubbs'
contributions to enhancing the Company's performance, his individual
performance, and the compensation paid to chief executive officers of the
Company's peer group to set the level of Mr. Stubbs' total compensation
package.
Deductibility of Executive Compensation
In 1993, Section 162(m) was added to the Code pursuant to the Omnibus Budget
Reconciliation Act of 1993. This section generally limits the corporate
deduction for compensation paid to the chief executive officer and certain
other high paid executive officers as listed in the Summary Compensation Table
to $1 million per year unless certain requirements are met. The Committee has
analyzed the effect of section 162(m) and anticipates no financial impact for
1998. The Company will continue to reevaluate this issue and recommend changes
to the compensation program where appropriate in order to maximize earnings
and shareholder value.
Brian R. Blackmarr, Chairman
W. Grogan Lord
W. Mike Baggett
Members of the Compensation Committee
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
During 1996, 1997 and 1998, a subsidiary of the Company was party to lease
agreements whereby Stoney M. Stubbs, Jr., Chairman of the Board, President and
Chief Executive Officer of the Company, Charles G. Robertson, the Executive
Vice President and a director of the Company, and a family partnership
controlled by Mr. Stubbs leased certain tractors to the subsidiary. Lease
payments were determined by reference to amounts the subsidiary was paying to
unaffiliated lessors for similar equipment leased under similar terms. Each
tractor is leased under a non-cancelable operating lease for a period of
thirty-six months. As of December 31, 1998, the subsidiary was also renting
certain trailers from these officers. Trailer leases in effect on such date
were cancelable without notice by either party and are continuing on a month-
to-month basis.
Total tractor and trailer rentals paid during 1998 by the subsidiary
pursuant to the lease agreements were as follows: Mr. Stubbs and the family
partnership--$1,130,457 and Mr. Robertson--$631,544. The leases are triple-net
leases which require the lessee to pay directly to third parties all taxes,
insurance and maintenance expenses. The leases grant the subsidiary an option
to purchase the leased equipment at the end of the lease term for its fair
market value. Fair market value is determined by reference to prices at which
the subsidiary is able to buy and sell similar equipment of similar age and
condition. During 1998, the Company purchased tractors and trailers valued at
$208,699 from Mr. Stubbs and the family partnership and $120,723 from Mr.
Robertson. The aggregate future minimum lease payments to Mr. Stubbs and the
family partnership and Mr. Robertson under the tractor leases are $784,000 and
$387,000, respectively in 1999, and $535,000 and $233,000, respectively, in
2000.
14
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S
1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN, AS AMENDED
The Company's 1992 Incentive and Nonstatutory Stock Option Plan (the "1992
Plan") was previously approved by the shareholders in April 1992 and April
1994.
At its regular meeting in February 1999, the Board authorized an increase in
the number of shares of Common Stock reserved for issuance under the 1992
Plan, subject to shareholder approval, and authorized the Company's
compensation committee to consider the actions required to meet the OBRA
requirements.
General
The objective of the 1992 Plan is to provide an incentive for key employees,
including officers and directors who may be employees, and certain non-
employees, of the Company or its subsidiaries to remain in the service of the
Company by providing them with opportunities to acquire an economic interest
in the future success and prosperity of the Company and its subsidiaries. At
the Annual Meeting, the shareholders will be requested to approve an amendment
to the 1992 Plan which will increase the number of shares of Common Stock
reserved for issuance under the 1992, Plan as set forth below.
The 1992 Plan initially reserved 355,555 shares (adjusted for all stock
splits) of the Company's Common Stock for issuance pursuant to stock options
to be granted under the 1992 Plan.
The 1992 Plan was amended, effective February 4, 1994, to: (i) increase the
number of shares of Common Stock reserved for issuance under the 1992 Plan to
1,005,555 shares and (ii) establish a provision in the 1992 Plan providing
that no employee of the Company or its subsidiaries may receive in any one
year options under the 1992 Plan to acquire in excess of 100,000 shares of
Common Stock.
The 1992 Plan was further amended, effective February 12, 1997, to increase
the number of shares of Common Stock reserved for issuance under the 1992 Plan
to 2,006,944 shares.
Approximately 377,961 shares (adjusted for all stock splits) remain
available under the 1992 Plan for future grants. The Board believes this
number of shares is not sufficient to achieve the purpose of the 1992 Plan,
which is to promote Company success by aligning key employee financial
interests with long-term shareholder value. If approved by the shareholders,
the amendment to the 1992 Plan will increase the number of shares of Common
Stock reserved for issuance under the 1992 Plan by 300,000 shares for a total
of 2,306,944 shares.
The following table summarizes options granted under the 1992 Plan to the
individuals specified below in fiscal year 1998 and options under the 1992
Plan held by the individuals specified below as of March 25, 1999:
Number of
Options Granted Number of Options
Name and Position In 1998 Outstanding
----------------- --------------- -----------------
Stoney M. (Mit) Stubbs, Jr. ................ 38,000 263,055
Chairman of the Board, President and Chief
Executive Officer
Charles G. Robertson........................ 28,000 180,797
Executive Vice President
Burl G. Cott................................ 7,000 77,672
Senior Vice President
F. Dixon McElwee, Jr. ...................... 25,000 25,000
Senior Vice President
All Executive Officers as a Group........... 98,000 546,524
All Non-Executive Directors as a Group...... -- --
All Non-Executive Officer Employees as a
Group...................................... 593,700 785,616
15
On March 19, 1999, the closing sale price of the Company's Common Stock as
reported by the Nasdaq stock market was $7.00.
Options may be granted under the 1992 Plan to employees and consultants of
the Company or its subsidiaries. Both incentive and nonstatutory stock options
may be granted under the 1992 Plan. However, no incentive stock option may be
granted to any individual who is not an employee of the Company or one of its
subsidiaries on the date of grant. The Company and its subsidiaries currently
have approximately 2,630 employees, 3 of which are also serving as directors
of the Company. Any employee-director or consultant-director is eligible to
receive options under the 1992 Plan, unless such person serves on the
Committee. Actual participation in the 1992 Plan is determined in the sole
discretion of the Committee. Therefore, the number of participants
participating in the 1992 Plan in the next fiscal year cannot be determined
precisely nor can the benefits or amounts that will be received by or
allocated to any participant.
Each option granted under the 1992 Plan is evidenced by a written option
agreement; the terms and provisions of which are determined by the Committee
or Board of Directors at the time of the granting of such option. The exercise
price for incentive stock options granted under the 1992 Plan may not be less
than 100% of the fair market value of a share of the Company's Common Stock at
the time of the grant. The exercise price for nonstatutory stock options
granted under the 1992 Plan is determined by the Committee or Board of
Directors at the time of the grant; provided, however, that the exercise price
may not be less than 50% of the fair market value of the Company's Common
Stock at the time of the grant. However, a particular nonstatutory option will
satisfy the "performance-based" requirements of OBRA only if the exercise
price is not less than the fair market value of the stock at the time of the
grant of the particular nonstatutory option. The grant of an option at fair
market value constitutes a performance goal under OBRA. The term of the
options granted under the 1992 Plan is determined by the Committee or the
Board of Directors; provided that the term of stock options may not exceed ten
years.
In addition to such other terms and restrictions as may be included in a
particular option agreement, options granted under the 1992 Plan are not
transferable other than by will or the laws of descent and distribution and
automatically terminates upon the severance of the option holder's
relationship with the Company or its subsidiaries; provided that the portion
of the option which is exercisable at the time of such severance may be
exercised until the earlier of expiration of the term of the option or (A) in
the case of an employee, (i) ninety days after (a) the severance of the
employment relationship or (b) the employee's retirement or (ii) one year
after severance of the employment relationship by reason of disability of the
employee or (b) the death of such employee during the employment relationship;
or (B) in the case of a non-employee, (i) 90 days after the severance of the
relationship between such non-employee and the Company or (ii) one year after
the death of such non-employee.
The option exercise price may be paid in cash or, at the discretion of the
Committee or the Board of Directors or if the related option agreement so
provides, partially or entirely in issued and outstanding Common Stock, valued
at the fair market value of the Common Stock on the date the option is
exercised.
Option agreements under the 1992 Plan may, in the discretion of the
Committee or Board of Directors, require an optionee to return the Profit (as
defined herein) that such optionee received upon the exercise of options
granted under the 1992 Plan if the optionee exercises such options within six
months before or after the termination of such optionee's relationship with
the Company and within one year of such termination engages, directly or
indirectly, in any activity that, in the good faith determination of the Board
of Directors of the Company, competes with the business of the Company or its
subsidiaries. For purposes of this provision, "Profit" is defined as the
difference between the fair market value of the shares of Common Stock
received upon the exercise of an option and the aggregate exercise price for
the number of shares so purchased.
The 1992 Plan provides that if the Company subdivides as a whole (by
reclassification, stock split, stock dividend or otherwise) the number of
shares of Common Stock then outstanding or consolidates as a whole (by
reclassification, reverse stock split or otherwise) the number of shares of
Common Stock then outstanding, the
16
maximum number of shares of Common Stock authorized for issuance under the
1992 Plan, the number of shares of Common Stock issuable under any stock
option granted under the 1992 Plan and the exercise price of any such stock
option shall be adjusted. Similarly, the 1992 Plan provides that the
limitation on the number of shares of Common Stock that may underly options
granted to an employee of the Company or any of its subsidiaries in any one
year will be adjusted in the event of any such subdivision or combination.
Administration
With respect to individuals subject to Rule 16b-3 ("Rule 16b-3") promulgated
under the Securities Exchange Act of 1934, as amended, the 1992 Plan is
administered by a committee ("the Committee") consisting of directors of the
Company, each of whom is a non-employee director within the meaning of Rule
16b-3. The members of the Committee are appointed by and serve at the pleasure
of the Board of Directors. With respect to individuals not subject to Rule
16b-3, the 1992 Plan may be administered by the Board of Directors of the
Company, or if the Board of Directors so decides, by the Committee. The
Committee, or the Board of Directors, as applicable, has full authority,
subject to the provisions of the 1992 Plan, to determine the individuals to
whom options are to be granted, the number of shares of Common Stock
represented by each option, the time or times at which options shall be
granted and exercisable, and the exercise price of the options.
Termination and Amendment
The 1992 Plan will expire by its terms on February 12, 2002. The Board of
Directors of the Company has the right to revise, amend or terminate the 1992
Plan; provided, however, that shareholder approval is necessary to (a)
materially increase the aggregate number of shares of Common Stock that may be
issued under the 1992 Plan, (b) materially increase the benefits accruing to
eligible individuals under the 1992 Plan or (c) materially modify the
requirements for eligibility for participation in the 1992 Plan. The
amendments described in (a)--(c) above may, however, be made without
shareholder consent to the extent certain changes in the law would so permit.
Accounting Treatment
The Company applies Accounting Principles Board Opinion 25 (APB 25) and
related interpretations in accounting for stock options. Because incentive
stock options granted pursuant to the plan cannot be priced at less than
market, no expense will be recorded by the Company when such incentive stock
options are granted. Statement of Financial Accounting Standards No. 123
requires that companies which use APB 25 accounting to disclose the impact, if
any, that use of a fair value option valuation model would have on net income.
Because the 1992 Plan permits the exercise of nonstatutory options granted
under the 1992 Plan to be less than the fair market value of the Company's
Common Stock on the date of grant, charges to earnings will be made at the
time of the grant of any options to the extent, if any, that the aggregate
fair market value of the Common Stock on the date of grant exceeds the
exercise price.
Tax Treatment
Nonstatutory Options. Under current federal tax law, upon the grant of a
nonstatutory option under the 1992 Plan, no taxable income will be realized by
a participant and the Company will not be entitled to any deduction. Upon
exercise of a nonstatutory stock option, a participant will realize ordinary
taxable income on the date of exercise. Such taxable income will equal the
difference between the option exercise price and the fair market value of the
Common Stock on the date of exercise (the "bargain element"). The Company will
be entitled to a corresponding deduction for income subject to federal income
tax.
Incentive Options. Upon the grant of an incentive stock option, no taxable
income will be realized by a participant and the Company will not be entitled
to any deduction. If a participant exercises an option, without having ceased
to be an employee of the Company or any of its subsidiaries at any time during
the period from the grant of the option until ninety days before its exercise,
then, generally, no taxable income will result at the
17
time of the exercise of such option. If no "disqualifying disposition" of the
stock transferred to a participant upon exercise of the option is made by him
or her (i.e., a disposition within the period that ends on the last to occur
of one year after such stock is so transferred and two years after the grant
of the option), any profit (or loss) realized by a participant from a sale or
exchange of such stock will be treated as long-term capital gain (or capital
loss), and no deduction will be allowable to the Company with respect thereto.
When a participant exercises an incentive stock option, he or she will realize
an item of "tax preference" for purposes of the "alternative minimum tax"
equal to the amount by which the fair market value of the Common Stock at the
time of exercise exceeds the option exercise price. If a disqualifying
disposition of such stock is made by a participant, the disposition generally
will result in ordinary income at the time of the disposition in any amount
equal to the lesser of (1) the gain on the sale or (2) the bargain element. If
the gain exceeds the bargain element, the excess is a short-term or long-term
capital gain depending upon how long the shares are held prior to the sale. If
the stock is sold for less than the exercise price, failure to meet the
holding period requirement generally will result in a short-term or long-term
capital loss, again depending upon how long the shares are held prior to the
sale, equal to the difference between the exercise price and the sale price.
At the Committee's or the Board of Directors' discretion, both incentive
stock options and nonstatutory stock options may be exercised by a participant
by tendering shares of the Company's Common Stock which he or she then owns;
in addition, at the Committee's or the Board of Directors' discretion, any
resulting withholding tax may be paid to the Company with Common Stock
acquired pursuant to the exercise of the options. The use of previously-owned
Common Stock has no tax consequences to the Company.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND MAY NOT BE APPLICABLE TO ALL
INDIVIDUALS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A
DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
Shareholder Approval
Shareholder approved of the amendment to the 1992 Plan is required. The
regulations governing OBRA provide that once the material terms of a
performance goal are disclosed to and approved by shareholders, no additional
disclosure or approval is required unless the compensation committee changes
the material terms of the performance goal. The proposed amendment to the 1992
Plan will increase the number of shares of Common Stock reserved for issuance
under the 1992 Plan by 300,000 shares. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE PROPOSAL.
18
PROPOSAL TO REAPPROVE THE FFE TRANSPORTATION SERVICES, INC.
1994 INCENTIVE BONUS PLAN AND THE PERFORMANCE GOAL INCLUDED THEREIN
The FFE Transportation Services, Inc. 1994 Incentive Bonus Plan ("the
Incentive Plan") is being submitted for shareholder reapproval in response to
regulations governing OBRA with respect to executive compensation. Under OBRA,
which became law in August 1993, publicly-held companies may be limited as to
income tax deductions to the extent total remuneration (including cash and/or
stock bonuses) for certain executive officers exceeds $1 million in any one
year. However, OBRA provides an exception for "performance-based"
remuneration, including amounts paid under qualifying bonus plans. OBRA
requires that certain actions be taken by a compensation committee of two or
more outside directors and that the material terms of such remuneration be
approved by a majority vote of the shareholders in order for compensation paid
under bonus plans to qualify as "performance-based" remuneration. After such
approval, no additional approval is required unless the compensation committee
changes the material terms of the performance goal. If, however, the
compensation committee has authority to change the targets under a performance
goal after shareholder approval of the goal, material terms of the performance
goal must be disclosed to and reapproved by shareholders no later than the
first shareholder meeting that occurs in the fifth year following the year in
which shareholders previously approved the performance goal.
General
The Incentive Plan is designed to promote the interests of the Company and
its shareholders by stimulating the efforts of the participants on behalf of
the Company by giving them a direct interest in the performance of FFE (the
primary operating subsidiary of the Company). All employees of FFE (including
officers and directors of the Company employed by FFE), other than those
either employed in a job classified as temporary or those whose employment is
intended by FFE to last not more than six months, will be eligible to
participate. Currently, there are approximately 630 persons who are eligible
to participate in the Incentive Plan, including the Executive Officers. The
Incentive Plan provides for incentive compensation based upon a formula giving
effect to the efficiencies of operation as evidenced by the Operating Ratio
(as defined in the Incentive Plan) for the bonus year. The term "Operating
Ratio" is defined in the Incentive Plan to mean the ratio of (i) operating
expenses of the division of FFE providing motor carrier services using
refrigerated equipment to (ii) operating revenue of the division of FFE
providing motor carrier services using refrigerated equipment, both as
established from information derived from FFE's annual financial statements,
and as further adjusted by the committee administering the Incentive Plan for
such specific items, if any, that such committee in its discretion determines
are appropriate. Bonuses are payable in cash and shares of Common Stock if the
Operating Ratio for the bonus year meets prescribed targets. For fiscal year
1999, bonuses are payable under the Incentive Plan only if the Operating Ratio
is below 95 percent and, if payable, will range from one week's pay payable in
cash to one week's pay payable in cash plus Common Stock with a value equal to
two week's pay contributed to the participant's fully vested account in the
Savings Plan for Employees of Frozen Food Express Industries, Inc. ("Savings
Plan"). For subsequent fiscal years, the committee administering the Incentive
Plan may, in its sole discretion, redetermine the target Operating Ratios and
the number of weeks pay as the bonus for meeting the specified target
Operating Ratios. If the committee fails to redetermine the number of weeks
pay and target Operating Ratios, the prior year's targets and pay will remain
in effect. Employees with less than one year of service will receive the pro
rata portion of the bonus that they would have received if they were employed
for the full year. Rights and benefits granted under the Incentive Plan may
not be transferred, assigned, pledged or hypothecated in any manner, by
operation of law or otherwise, other than by will or by the laws of descent
and distribution, or by a qualified domestic relations order, as defined in
Section 414(p) of the Code. No bonus may be granted under the Incentive Plan
if, as a result of such grant, the aggregate number of shares of Common Stock
granted pursuant to the Incentive Plan would exceed five percent of the total
outstanding shares of Common Stock at the time in question.
The Operating Ratio formula described above constitutes a performance goal
under OBRA for which the Company seeks shareholder reapproval.
19
The following table summarizes the incentive bonuses awarded under the
Incentive Plan for 1998 and since inception of the Incentive Plan.
Cash Bonus Cash Bonus
Name and Position 1998 Since Inception
----------------- ---------- ---------------
Stoney M.(Mit) Stubbs, Jr.......................... $ 5,600 $ 30,239
Chairman of the Board, President and Chief
Executive Officer
Charles G. Robertson............................... $ 4,300 $ 22,781
Executive Vice President
Burl G. Cott....................................... $ 1,213 $ 12,681
Senior Vice President
F. Dixon McElwee, Jr............................... $ 793 $ 793
Senior Vice President
All Executive Officers as a Group.................. $ 11,906 $ 66,494
All Non-Executive Officer Employees as a Group..... $339,179 $1,687,662
Administration
The Incentive Plan will be administered by a committee of the Board of
Directors of the Company, which shall consist of not less than two persons who
are non-employee directors as defined in Rule 16b-3(c)(i) of the Securities
Exchange Act of 1934, as amended, and meet such additional criteria as the
Board of Directors of the Company shall determine so that any incentive
bonuses paid pursuant to the Incentive Plan shall be exempt from the
limitation set forth in Section 162(m) of the Code.
Termination and Amendment
The Board of Directors of FFE may amend or terminate the Incentive Plan in
its sole discretion; provided, however, that the provisions of the Incentive
Plan may not be amended more than once every six months, other than to comport
with changes of the Code, ERISA, or the rules thereunder.
Tax Consequences
Under federal tax law, taxable income will be realized by each eligible
employee upon the payment of cash bonuses to each such employee in the taxable
year of the payment. The taxable income will be equal to the cash payment. No
taxable income will be recognized currently for that part of the bonus payable
in Common Stock and contributed to the Savings Plan. FFE will be entitled to a
deduction in an amount equal to the cash payments plus the fair market value
of the Company's Common Stock contributed to the Savings Plan.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND MAY NOT BE APPLICABLE TO ALL
INDIVIDUALS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A
DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
Shareholder Reapproval
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company entitled to vote at the meeting is required to reapprove
the Incentive Plan and the performance goal included therein. If the Incentive
Plan is not reapproved by the shareholders, the Incentive Plan will no longer
be effective. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
20
PROPOSAL TO APPROVE THE FFE TRANSPORTATION SERVICES, INC.
1999 EXECUTIVE BONUS AND PHANTOM STOCK PLAN AND
THE PERFORMANCE GOAL INCLUDED THEREIN
The FFE Transportation Services, Inc. 1999 Executive Bonus and Phantom Stock
Plan (the "1999 Executive Plan") is being submitted for shareholder approval
in response to regulations under OBRA. With respect to executive compensation
under OBRA, publicly-held companies may be limited as to income tax deductions
to the extent total remuneration (including awards paid out under bonus plans)
for certain executive officers exceeds $1 million in any one year. However,
OBRA provides an exception for "performance-based" remuneration, including
amounts paid under qualifying bonus plans. To qualify as "performance-based"
remuneration, generally certain actions must be taken by a compensation
committee of two or more non-employee directors and the material terms under
which such remuneration must be approved by a majority vote of the
shareholders. The 1999 Executive Plan will replace the Existing Executive
Plan, and no further awards will be made under the Existing Executive Plan.
The following summary of the 1999 Executive Plan does not purport to be
complete and is subject in all respects to, and qualified by, the provisions
of the 1999 Executive Plan, a copy of which is attached hereto as Exhibit B.
General
The 1999 Executive Plan is designed to promote the interests of the Company
and its shareholders by helping the Company retain the services of
participants in the 1999 Executive Plan and stimulating the efforts of the
participants on behalf of the Company by giving them a direct interest in the
performance of the Company.
Under the 1999 Executive Plan, participants can earn an annual cash bonus
calculated as a percentage of their base compensation if the Operating Ratio
(as defined in the 1999 Executive Plan) meets prescribed targets and will be
allocated an additional award of a certain number of units (called "Phantom
Shares"), the value of which is tied to the value of a share of the Company's
Common Stock. The number of Phantom Shares awarded is equal to the quotient of
fifty percent of such cash bonus divided by the dollar amount that is the
lower of (i) the fair market value of a share of the Company's Common Stock as
of the last business day of the fiscal year for which the bonus was awarded
and (ii) the average of the fair market values of a share of Common Stock as
of the last business day of each calendar month of the fiscal year for which
the participant's bonus was awarded. The term "Operating Ratio" is defined in
the 1999 Executive Plan to mean, with respect to any particular participant,
the ratio of the Company's, or one or more of its operating entities' or
groups', operating expenses to operating revenues, as adjusted by the
committee administering the 1999 Executive Plan for such specific items, if
any, that such committee deems appropriate.
For fiscal year 1999, bonuses will be payable under the 1999 Executive Plan
only if the Company's Operating Ratio for 1999 is 96 percent or less and, if
payable, will range from 10 percent to 100 percent of the participants' base
compensation payable in cash, plus an allocation to the participant of that
number of Phantom Shares as is equal to the quotient of fifty percent of such
cash bonus divided by the dollar amount that is the lower of (i) the fair
market value of a share of the Company's Common Stock as of last business day
of fiscal year 1999 and (ii) the average of the fair market values of a share
of Common Stock as of the last business day of each calendar month of fiscal
year 1999. The committee administering the 1999 Executive Plan may, in its
sole discretion, redetermine the target Operating Ratios and percentages of
base compensation to be used to calculate the participants' bonus for each
subsequent fiscal year. Additionally, if the Operating Ratio applicable to a
participant for fiscal year 1999 is less than 96 percent, then such
participant will be entitled to receive a "special unit." The special unit
will entitle the participant to receive an amount (simultaneously with any
payment under the Existing Plan in respect of a phantom share ("Existing Plan
Phantom Share") previously issued under the Existing Plan to such participant)
equal to the difference between the amount that would have been paid for an
allocated phantom share pursuant to this 1999 Executive Plan and the amount
paid for such Existing Plan Phantom Share under the Existing Plan. (See
"Executive Compensation--Summary Compensation Table."
21
The 1999 Executive Plan provides that the number of Phantom Shares allocated
to a participant will be adjusted upon certain events, including (i) the
declaration of a dividend or the making of a distribution on outstanding
shares of Common Stock in additional shares of Common Stock, (ii) the
subdivision or reclassification of the outstanding shares of Common Stock into
a greater number of shares of Common Stock, (iii) the combination or
reclassification of the outstanding shares of Common Stock into a lesser
number of shares of Common Stock, and (iv) the issuance of rights or warrants
to holders of Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the fair market value of a
share of Common Stock as of the date of the issuance of such rights or
warrants. Additionally, if the Company fixes a record date for the payment of
a cash dividend to holders of Common Stock, and if the Operating Ratio
applicable to a participant for the year which includes such record date is
less than 96 percent, then the number of Phantom Shares allocated to the
participant will be increased by an amount equal to the quotient of (a) the
product of the number of Phantom Shares allocated to such participant on the
record date and the amount of such dividend payable on one share of Common
Stock divided by (b) the fair market value of a share of Common Stock on such
record date. Also, if the Operating Ratio applicable to a participant for
fiscal year 1999 is less than 96 percent, the number of the participant's
Phantom Shares will be increased by the amount set forth on Exhibit B to the
1999 Executive Plan.
The Operating Ratio formula described above constitutes a performance goal
under OBRA for which the Company seeks shareholder approval.
The 1999 Executive Plan provides that at each calendar year-end, unless the
participant elects to defer any number or all of the Phantom Shares held for
one year or longer, the Company will pay to the participant the product of the
greater of (i) the fair market value of a share of Common Stock as of the last
business day of such calendar year and (ii) the average of the fair market
values of a share of Common Stock as of the last business day of each calender
month of the calendar year multiplied by the number of Phantom Shares
allocated to the participant that the participant did not elect to defer. In
addition, the 1999 Executive Plan provides that in the event that a
participant dies or becomes disabled, the Company will pay to the participant
or the participant's estate, as the case may be, the product of the greater of
(i) the fair market value of a share of Common Stock as of the last business
day of the calendar year in which such event occurs and (ii) the average of
the fair market values of a share of Common Stock as of the last business day
of each calendar month of the calendar year in which such event occurs
multiplied by the number of Phantom Shares allocated to such participant. In
the event that the Company consummates a Reorganization (as defined in the
1999 Executive Plan) within six months after the date that a participant has
been paid for some or all of the Phantom Shares allocated to such participant
and as a result of such Reorganization the holders of Common Stock receive for
each share so held cash in an amount in excess of the amount paid to such
participant for such Phantom Shares, then such excess shall be paid to the
participant.
The initial participants in the 1999 Executive Plan are each of the
Executive Officers and one officer of FFE. The 1999 Executive Plan provides
that, on or before the last day of any fiscal year, the committee
administering the 1999 Executive Plan may, in its sole discretion, redetermine
who will be a participant (provided that such person must be an officer of
FFE) for the subsequent fiscal year. Neither the rights and benefits nor
Phantom Shares and special units granted under the 1999 Executive Plan may be
transferred, assigned, pledged or hypothecated other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code, or Title I of ERISA or the rules thereunder. No
Phantom Share may be allocated to any participant under the 1999 Executive
Plan if, as a result of such allocation, the aggregate number of Phantom
Shares allocated to such participant under the 1999 Executive Plan would
exceed a number representing five percent of the total outstanding shares of
Common Stock at the time in question. No more than one special unit will be
allocated to any participant, and such special unit may not relate to Existing
Plan Phantom Shares that in the aggregate exceed a number representing five
percent of the total outstanding shares of Common Stock at the time in
question.
22
The following table summarizes the awards that would have been granted under
the 1999 Executive Plan in fiscal year 1998 if the 1999 Executive Plan had
been in effect with the performance goal described above:
1999 Executive Bonus and Phantom Stock Plan
-----------------------------------------------------
Cash Phantom Share Special Unit
Name and Position Bonus Bonus Bonus
----------------- ----------------- ----------------- ----------------
Stoney M. (Mit) Stubbs,
Jr....................... $ 121,146 962 1
Chairman of the Board,
President and Chief
Executive Officer
Charles G. Robertson $ 93,599 743 1
Executive Vice
President...............
F. Dixon McElwee, Jr...... $ 69,669 552 1
All Executive Officers as
a Group.................. $ 284,414 2,257 3
All Non-Executive Officer
Employees as a Group..... $ 42,209 335 1
Administration
The 1999 Executive Plan will be administered by a committee of the Board of
Directors of the Company, which shall consist of not less than two persons who
are "Non-Employee Directors" as defined in Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934, as amended, and who meet such additional
criteria as the Board of Directors of the Company shall determine so that any
incentive bonuses paid pursuant to the 1999 Executive Plan shall be exempt
from the limitation set forth in Section 162(m) of the Code.
Termination and Amendment
The Board of Directors may amend or terminate the 1999 Executive Plan in its
sole discretion.
Tax Consequences
Under current tax law, no taxable income will be realized by an employee
upon receipt of awards made in the form of Phantom Shares, and the Company
will not be entitled to any deduction in relation to such awards until such
time as the value of the Phantom Shares allocated to any employee is actually
or constructively received by the employee. At such time, the employee will
recognize ordinary taxable income equal to the value of the Phantom Shares
actually or constructively received by him, and the Company will be entitled
to a corresponding deduction. Amounts of the bonus under the 1999 Executive
Plan distributed in cash at the time of the award will be taxable income to
the eligible employee at the time of distribution and will be deductible by
the Company at that time.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND MAY NOT BE APPLICABLE TO ALL
INDIVIDUALS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A
DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
Shareholder Approval
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company entitled to vote at the meeting is required to approve
the 1999 Executive Plan and the performance goal included therein. If the
Executive Plan is not approved by the shareholders, it will not become
effective. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
23
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent public
accountants for fiscal year 1998. It is expected that representatives of
Arthur Andersen LLP will be present at the Annual Meeting, with the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions. The Company intends to select its
independent public accountant to review and report on the financial statements
of the Company for the 1999 fiscal year after receiving the recommendation of
the Audit Committee of the Board of Directors expected at the Audit
Committee's May 1999 meeting.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Rules promulgated under Section 16(a) of the Securities Exchange Act of
1934, as amended, require the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and Nasdaq. Officers and directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of such forms received by it, or written
representations from certain reporting persons that no Form 5 filings were
required for those persons, the Company believes that, during the year ended
December 31, 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were
complied with except for a late filed report of Edgar O. Weller, a director of
the Company, covering the grant of an option to purchase 1,875 shares and the
acquisition by stock option exercise of 3,750 shares of Company stock and a
late filed report of Leroy Hallman, a director of the Company covering the
acquisition by stock option exercise of 1,875 shares of Company stock.
SHAREHOLDER PROPOSALS AT 2000 ANNUAL MEETING
Shareholders intending to present proposals at the 2000 Annual Meeting of
Shareholders and desiring to have those proposals included in the Company's
proxy statement and form of proxy relating to that meeting must submit such
proposals, in compliance with Rule 14a-8 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to the Secretary of the Company on or
before November 30, 1999. For proposals that shareholders intend to present at
the 2000 Annual Meeting of Shareholders outside the processes of Rule 14a-8 of
the Exchange Act, unless the shareholder notifies the Secretary of the Company
of such intent by February 12, 2000, any proxy solicited by the Company for
such Annual Meeting will confer on the holder of the proxy discretionary
authority to vote on the proposal so long as such proposal is properly
presented at the Annual Meeting.
By Order of the Board of Directors
Dallas, TX LEONARD W. BARTHOLOMEW
March 30, 1999 Secretary
THE COMPANY WILL PROVIDE, UPON WRITTEN REQUEST AND WITHOUT CHARGE, A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, WHICH IT
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY RECORD OR
BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK AT THE CLOSE OF BUSINESS ON
MARCH 2, 1999. REQUESTS SHOULD BE DIRECTED TO LEONARD W. BARTHOLOMEW,
SECRETARY OF THE COMPANY, P. O. BOX 655888, DALLAS, TEXAS 75265-5888.
24
Exhibit A
FFE TRANSPORTATION SERVICES, INC.
1999 EXECUTIVE BONUS AND PHANTOM STOCK PLAN
This Executive Bonus and Phantom Stock Plan (hereafter this "Plan"), dated
as of January 1, 1999 (the "Effective Date"), by FFE Transportation Services,
Inc., a Delaware corporation ("FFE") which is a wholly-owned subsidiary of
FFE, Inc. ("Inc."), a Delaware corporation which is a wholly-owned subsidiary
of Frozen Food Express Industries, Inc. ("Industries"), a Texas corporation,
for the benefit of certain officers of FFE.
PURPOSE
FFE has established this Plan for the benefit of specified officers of FFE
in order to enhance the benefits to the covered officers, allow the officers
to share in the growth of FFE through the appreciation in the value of the
common stock of Industries, and to provide the officers with greater incentive
to promote the growth of Industries' shareholder value. The purpose of the
Plan is to align the financial interests of key officers of FFE with those of
Industries' shareholders through the use of awards, payable in cash and units
tied to the value of the common stock of Industries, upon the attainment of
predetermined performance goals.
TERMS
1. Definitions. For the purposes of this Plan, the following terms shall
have the meanings set forth below:
(a) The term "Allocated Phantom Shares" shall mean all Phantom Shares
allocated by FFE to the Participants as herein provided.
(b) The term "Committee" shall mean a committee of the Board of Directors of
Industries, which shall consist of not less than two persons who are "Non-
Employee Directors" as defined in Rule 16b-3(b)(3) under the Securities
Exchange Act of 1934 and who meet such additional criteria as the Board of
Directors of Industries shall determine so that any incentive bonuses paid
pursuant to this Plan shall be exempt from the limitation set forth in Section
162(m) of the Internal Revenue Code of 1986, as amended.
(c) The term "Compensation" shall mean a Participant's base compensation (as
determined by the Committee) for the specified period and shall exclude any
non-recurring compensation such as bonus payments.
(d) The term "Disability" shall mean any condition which causes the
Participant to fail to devote his full time and reasonable best efforts to the
performance of his duties and responsibilities for a period of in excess of
ninety (90) consecutive days.
(e) The term "Election Period" shall mean the period of June 1 to June 15
inclusive for each year.
(f) The term "Fair Market Value" shall mean such amount as the Board of
Directors of Industries, in its sole discretion, shall determine; provided,
however, that if there is a public market for the securities, the Fair Market
Value shall be the closing sales price of the securities per share or unit, as
the case may be, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation System) as of the date in question or, in the
event the securities are listed on a stock exchange, the Fair Market Value
shall be the closing sales price of the securities per share or unit, as the
case may be, on such exchange, as reported in the Wall Street Journal, as of
the date in question.
(g) The term "Operating Ratio" shall mean with respect to any particular
Participant, the ratio of Industries', or one or more of its operating
entities' or groups', as set forth on Exhibit A attached to this Plan,
A-1
operating expenses to operating revenues for the applicable fiscal year, as
adjusted by the Committee for such specific items, if any, that the Committee
in its sole discretion deems appropriate.
(h) The term "Participant" shall mean each officer of FFE, including without
limitation any officer of Industries that is an officer of FFE, whose name is
set forth on Exhibit A.
(i) The term "Participant's Allocated Phantom Shares" shall mean the
Allocated Phantom Shares allocated by FFE to a specific Participant's account
as provided in this Plan.
(j) The term "Participant's Relative Percentage" shall mean at any point in
time the fraction, expressed as a percentage, in which the numerator is the
number of the Participant's Allocated Phantom Shares at such time and the
denominator is the sum of the total number of shares of issued and outstanding
Stock at such point in time plus the total number of Allocated Phantom Shares
at such point in time.
(k) The term "Phantom Share" shall mean a unit the value of which is tied to
the value of a share of Stock which will carry with it certain rights and
benefits as described more particularly herein but which will not entitle the
holder thereof either to equity rights in FFE, Inc. or Industries or to any
type of voting rights in FFE, Inc. or Industries.
(1) The term "Reorganization" shall mean any capital reorganization of
Industries, other than pursuant to a transaction provided for in Section 4
below, or the consolidation or merger of Industries with or into another
corporation (other than a consolidation or merger in which Industries is the
continuing corporation and which does not result in any reclassification of
the outstanding shares of Stock or the conversion of such outstanding shares
of Stock into shares of other stock or other securities or property), or the
sale of the property of Industries as an entirety or substantially as an
entirety.
(m) The term "Triggering Event" shall mean any one of the following:
(i) The termination of the Participant's employment.
(ii) The death of the Participant or the Participant becoming subject to
a Disability.
(iii) The close of a calendar year for those Phantom Shares held for one
year or longer, unless the Participant has made a written election to defer
within the Election Period.
(iv) A Change in Control (as defined in Treasury regulations promulgated
under Internal Revenue Code Section 280G) with respect to Industries.
(n) The term "Stock" shall mean the common stock of Industries and shall not
include any Phantom Shares.
2. Determination of Bonus. With respect to each fiscal year commencing with
fiscal year 1999, each Participant shall be entitled to an incentive bonus
("Bonus") calculated pursuant to a formula determined on the basis of such
Participant's Operating Ratio targets and specified percentages of such
Participant's Compensation, if the Committee certifies that the applicable
target has been obtained. The targets and percentages for all Participants are
shown on Exhibit A attached to this Plan. On or before the last day of any
fiscal year, the Committee may, in its sole discretion, redetermine who will
be a Participant (provided that such person must be an officer of FFE) for the
subsequent fiscal year and the Operating Ratio targets and percentages to be
used to calculate the Participants' Bonuses for the subsequent fiscal year by
amending Exhibit A attached to this Plan.
3. Payment of Bonus and Phantom Shares.
(a) Each Participant's Bonus for any fiscal year shall be paid by FFE to
such Participant as soon as practicable after the consolidated financial
statements of Industries for such fiscal year have been prepared.
(b) In addition to the payment of any Bonus to a Participant, FFE shall
allocate, for the benefit of each Participant, Phantom Shares. The number of
Phantom Shares shall be equal to 50% of the amount of the
A-2
Participant's Bonus for that fiscal year divided by the applicable Phantom
Share Value. The applicable Phantom Share Value shall mean the amount that is
the lower of (i) the Fair Market Value of a share of Stock as of the last
business day of the fiscal year for which the Participant's Bonus was awarded
and (ii) the average of the Fair Market Values of a share of Stock as of the
last business day of each calendar month of the fiscal year for which the
Participant's Bonus was awarded.
(c) Each Phantom Share shall be allocated to a Participant as of the last
business day of the fiscal year for which the Participant's Bonus was awarded
and shall be allocated to his individual Participant account and held and
maintained by FFE as an Allocated Phantom Share for the benefit of the
Participant.
(d) If the specified bonus percentage for a Participant's Operating Ratio
for any fiscal year is a negative number, no award for that fiscal year will
be made. Rather, the Committee shall have the option to reduce each
Participant's Compensation for the next calendar year, or for such other
period as the Committee may determine, by such percentage.
4. Adjustment to Number of Phantom Shares.
(a) For the purpose of this Plan, the number of the Participant's Allocated
Phantom Shares shall be the number of Phantom Shares held and maintained by
FFE for such Participant as provided in Section 3 above, as said number may be
adjusted from time to time in accordance with the provisions of this Section
4.
(b) In case Industries shall (i) declare a dividend or make a distribution
on the outstanding shares of Stock in additional shares of Stock, (ii)
subdivide or reclassify the outstanding shares of Stock into a greater number
of shares of Stock, or (iii) combine or reclassify the outstanding shares of
Stock into a lesser number of shares of Stock, the number of the Participant's
Allocated Phantom Shares shall be adjusted immediately after the record date
for such dividend or distribution or the effective date of such subdivision,
combination, or reclassification, so that such number is increased or
decreased by multiplying such number as it existed immediately before such
record date or effective date by a fraction, the numerator of which shall be
the number of shares of Stock outstanding immediately after such dividend,
distribution, subdivision, combination, or reclassification, and the
denominator of which shall be the number of shares of Stock outstanding
immediately before such dividend, distribution, subdivision, combination, or
reclassification.
(c) In case Industries shall issue rights or warrants to all holders of
Stock entitling them to subscribe for or purchase shares of Stock at a price
per share less than the Fair Market Value of a share of Stock as of the date
of the issuance of such rights or warrants, the number of the Participant's
Allocated Phantom Shares shall be increased by an amount equal to the
Participant's Relative Percentage of the total number of Bonus Shares
(hereafter defined) that would be acquired upon exercise of such rights or
warrants. For the purposes hereof, Bonus Shares shall mean the total number of
shares of Stock that would be acquired upon exercise of such rights or
warrants less the number of shares of Stock that could have been purchased for
the amount expended in exercise of such rights or warrants if such shares of
Stock were purchased at a price per share equal to the Fair Market Value of a
share of Stock as of the date of the issuance of such rights or warrants.
(d) In case Industries shall sell or issue shares of Stock, other types of
equity securities, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Stock or other types of equity securities in any transaction other
than those described above in this Section 4, the Participant shall not have
any right by virtue of this Plan to purchase or acquire any such shares of
Stock or other types of equity securities, or any such rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Stock or other types of equity securities,
and such sale or issuance shall not result in any adjustment in the number of
the Participant's Allocated Phantom Shares, notwithstanding that as a result
of such sale or issuance such Participant's Relative Percentage may then or
thereafter be reduced.
(e) In case Industries shall fix a record date for the payment of a cash
dividend to all holders of shares of Stock, then, if the Operating Ratio
applicable to such Participant for the fiscal year which includes such record
A-3
date is less than 96 percent, the number of the Participant's Allocated
Phantom Shares shall be increased as of the end of such fiscal year by an
amount equal to the quotient of (a) the product of the number of such
Participant's Allocated Phantom Shares on such record date and the amount of
such dividend payable on one share of Stock and (b) the Fair Market Value of a
share of Stock on such record date.
(f) If the Operating Ratio applicable to such Participant for the fiscal
year ended December 31, 1999 is less than 96 percent and the Committee
certifies thereto, the number of the Participant's Allocated Phantom Shares
shall be increased as of the end of such fiscal year by the amount set forth
opposite the name of such Participant on Exhibit B attached to this Plan.
5. Payment of Phantom Share Value.
(a) In the event of the occurrence of a Triggering Event described in clause
(i), (iii), or (iv) of Subsection 1(m) above (an "Optional Triggering Event"),
FFE shall, unless the Participant elects in writing prior to June 15 of the year
in which the Optional Triggering Event occurs for those Optional Triggering
Events described in clause (iii) and the 30th day after the date on which the
Optional Triggering Event occurs for those Optional Triggering Events described
in clauses (i) and (iv), pay to the Participant, within thirty (30) days
following the close of the calendar year in which the Optional Triggering Event
occurs, the product of the greater of (i) the Fair Market Value of a share of
Stock as of the last business day of the calendar year in which such Triggering
Event occurs and (ii) the average of the Fair Market Values of a share of Stock
as of the last business day of each calendar month of the calendar year in which
such Triggering Event occurs multiplied by the number of such Participant's
Allocated Phantom Shares (or, in the case of a Triggering Event specified in
clause (iii) of Subsection 1(m), such lesser number of the Participant's
Allocated Phantom Shares as the Participant did not elect to defer in writing
within the Election Period). In the event of the occurrence of a Triggering
Event described in clause (ii) of Subsection 1(m) above (a "Mandatory Triggering
Event"), FFE shall, within thirty (30) days following the close of the calendar
year in which the Mandatory Triggering Event occurs, terminate all rights of the
Participant under this Plan by paying to the Participant the product of the
greater of (i) the Fair Market Value of a share of Stock as of the last business
day of the calendar year in which such Triggering Event occurs and (ii) the
average of the Fair Market Values of a share of Stock as of the last business
day of each calendar month of the calendar year in which such Triggering Event
occurs multiplied by the number of such Participant's Allocated Phantom Shares.
In any event, such payment shall be made in a single lump sum, and, except as
contemplated by Subsection 5(b) below, all rights of the Participant with
respect to the Phantom Shares for which he received payment pursuant to this
Subsection 5(a) shall terminate.
(b) In the event that Industries consummates a Reorganization within six (6)
months after the date that the Participant elects to be paid or FFE becomes
obligated (other than due to the death of the Participant or the Participant
becoming subject to a Disability) to pay the Participant for some or all of
such Participant's Allocated Phantom Shares in accordance with Subsection 5(a)
above, and as a result of such Reorganization all holders of Stock receive
cash for each share of Stock held immediately prior to consummation of the
Reorganization in excess of the amount which FFE is obligated to pay to the
Participant for the Participant's Allocated Phantom Shares pursuant to
Subsection 5(a) above, then the amount payable to the Participant pursuant to
Subsection 5(a) above shall be increased by an amount equal to the product of
such excess and the number of such Participant's Allocated Phantom Shares (or
such lesser number as the Participant did not elect to defer in accordance
with Subsection 5(a)), and such increase shall be paid to the Participant.
(c) If the Operating Ratio applicable to a Participant for the fiscal year
ending December 31, 1999 is less than 96 percent and the Committee certifies
thereto, then such Participant will be entitled to receive a special unit
("Special Unit"). The Special Unit will entitle the holder thereof to receive
an amount payable by FFE to such Participant (simultaneously with any payment
under the FFE Transportation Services Inc. Executive Bonus and Phantom Stock
Plan dated as of January 1, 1994 (the "Old Plan") in respect of a Phantom
Share ("Old Plan Phantom Share") previously issued under the Old Plan to such
Participant) equal to the difference between the amount that would have been
paid by FFE for an Allocated Phantom Share pursuant to this Plan and the
amount paid by FFE to the Participant for such Old Plan Phantom Share under
the Old Plan.
A-4
6. Non-Transferability. Neither the Phantom Shares, the Special Units nor
any rights and benefits granted in this Plan may be transferred, assigned,
pledged, or hypothecated in any manner, by operation of law or otherwise,
other than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"), or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder,
and shall not be subject to execution, attachment, or similar process.
7. No Fiduciary Relationship. The Boards of Directors and the officers of
FFE, Industries and Inc. shall have no duty to manage or operate in order to
maximize the benefits granted to the Participants hereunder, but rather shall
have full discretionary power to make all management and operational decisions
based on their determination of their respective best interest. This Plan
shall not be construed to create a fiduciary relationship between such Boards
or the officers of FFE, Industries or Inc. and the Participant.
8. Governing Law. This Plan shall be governed by and construed in accordance
with the laws of the State of Texas.
9. No Employment Guarantee. Nothing in this Plan shall be construed as an
employment contract or a guarantee of continued employment. The rights of any
Participant shall only be those as are expressly set forth in this Plan.
10. Administration. The Committee shall administer this Plan and shall have
the authority, in its sole and absolute discretion, (a) to adopt, amend and
rescind administrative and interpretative rules and regulations relating to
the Plan, (b) to determine the Participants and the terms under which they may
participate in this Plan, (c) to make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate.
11. Taxes. FFE shall be entitled to deduct from amounts payable hereunder
any sums required by federal, state, or local tax law to be withheld with
respect to such payments.
12. Maximum Number of Phantom Shares. Notwithstanding any provision of this
Plan to the contrary, no Phantom Share or Special Unit may be allocated to any
Participant if, as a result of such allocation, the aggregate number of
Allocated Phantom Shares and Special Units exceeds (and FFE shall have no
obligation to allocate Phantom Shares or Special Units to a Participant if
such allocation would cause such number to exceed) a number representing five
percent of the total outstanding shares of Stock at the time in question.
13. Amendment. In addition to the amendments to this Plan contemplated by
Section 2, the Board of Directors may amend or terminate this Plan in its sole
discretion.
14. General Creditor Status. The Participants shall, in no event, be
regarded as standing in any position, if at all, other than as a general
creditor of FFE with respect to any rights derived from the existence of this
Plan and shall receive only FFE's unfunded and unsecured promise to pay
benefits under this Plan.
15. Captions. The captions in this Plan are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Plan or any of the provisions hereof.
16. Severability. If any provision of this Plan is held to be illegal,
invalid or unenforceable under present or future laws, such provision shall be
fully severable and shall not invalidate the remaining provisions of this
Plan, and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Plan.
17. Costs. All expenses and costs incurred in connection with the operation
of this Plan shall be borne by FFE.
A-5
EXHIBIT A
INCENTIVE BONUS CALCULATION
Participants: Stoney M. (Mit) Stubbs, Jr., Charles G. Robertson, F. Dixon
McElwee, Jr. and John T. Bailey.
Operating Ratio Targets and Bonus Percentages Applicable to all Participants:
Operating Participant's
Ratio Bonus Percentage
of Industries for 1999
------------- ----------------
100.0 or more............... -15%
99.9-96.1.................. 0
96.0-95.6.................. 10
95.5-95.1.................. 20
95.0-94.6.................. 30
94.5-94.1.................. 40
94.0-93.6.................. 50
93.5-93.1.................. 60
93.0-92.6.................. 70
92.5-92.1.................. 80
92.0-91.6.................. 90
91.5 or less............... 100
A-6
EXHIBIT B
PHANTOM SHARES
Stoney M. (Mit) Stubbs, Jr. .................. 961.4793
Charles G. Robertson.......................... 742.8519
F. Dixon McElwee, Jr. ........................ 552.9309
John T. Bailey................................ 334.9945
A-7
2440-1999-PS
APPENDIX
--------
AMENDMENT NO. 3
TO
FROZEN FOOD EXPRESS INDUSTRIES, INC.
1992 INCENTIVE AND NONSTATUTORY OPTION PLAN
1. Paragraph 2.1 of the Frozen Food Express Industries, Inc. 1992 Incentive
and Nonstatutory Option Plan (the "Plan") is hereby amended by replacing the
phrase "2,006,944 shares" in Paragraph 2.1 of the Plan with the phrase
"2,306,904 shares."
This Amendment No. 3 shall become effective as of February 11, 1999 if the Plan,
as amended hereby, is approved by the affirmative vote of the holders of the
majority of the shares of Common Stock of Frozen Food Express Industries, Inc.
at its April 22, 1999 meeting of shareholders.
DETACH HERE
PROXY
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Annual Meeting of Shareholders - April 22, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the notice, dated
March 30, 1999, of the Annual Meeting of Shareholders of Frozen Food Express
Industries, Inc. (herein called the "Company") to be held on Thursday, April 22,
1999, at 3:30 p.m., Dallas, Texas time, in NationsBank Plaza, 901 Main Street,
70th Floor, Dallas, Texas 75201, and the Proxy Statement, also dated March 30,
1999, in connection therewith (herein called the "Proxy Statement"), and (2)
constitutes and appoints Stoney M. Stubbs, Jr., and F. Dixon McElwee, Jr., and
each of them (if only one be present, then by that one alone), his attorneys and
proxies, with full power of substitution and revocation to each, for and in the
name, place and stead of the undersigned, to vote, and act with respect to, all
of the shares of capital stock of the Company standing in the name of the
undersigned, or with respect to which the undersigned is entitled to vote and
act, at said meeting and at any adjournment thereof. The Board of Directors
recommends a vote FOR each of the Company's proposals set forth on the reverse.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR all nominees listed in Proposal 1 and FOR Proposals 2, 3 and 4.
- --------------- ---------------
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
- --------------- ---------------
FROZEN FOOD EXPRESS
INDUSTRIES INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
FFE38A DETACH HERE
[X] Please mark
votes as in
this example -----
|
|
Please mark in blue or black ink.
1. ELECTION OF DIRECTORS
Nominees: Stoney M. (Mit) Stubbs, Jr., Edgar Q. Weller,
W. Grogan Lord, Leroy Hallman, Brian R. Blackmarr,
T. Michael O'Connor, W. Mike Baggett, Charles G.
Robertson and F. Dixon McElwee, Jr.
FOR WITHHELD
ALL [_] [_] FROM ALL
NOMINEES NOMINEES
MARK HERE
[_] FOR ADDRESS [_]
CHANGE AND
-------------------------------------- NOTE BELOW
for all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to the [_] [_] [_]
Company's 1992 Incentive and
Non-Statutory Stock Option Plan, as
amended,
3. Proposal to reapprove the FFE [_] [_] [_]
Transportation Services, Inc. 1994
Incentive Bonus Plan, and the performance
goal included therein.
4. Proposal to approve the FFE [_] [_] [_]
Transportation Services, Inc. 1999
Executive Bonus and Phantom Stock Plan
and the performance goal included therein.
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please promptly complete, date, sign and return this proxy using the enclosed
envelope.
When shares are held by joint tenants, both should sign. When signing as an
agent, attorney, administrator, executor, guardian or trustee, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer who should indicate his title. If a
partnership, please sign in partnership name by authorized person. Please
date, sign and mail this proxy card in the enclosed envelope. No postage is
required if mailed in the United States.
Signature:________________ Date:_______ Signature:________________ Date:_______