-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G8LbP05rTGRRsEUOvtanLodb/oPLd8nGI+EVvdEMNbaOUqP22rFaLOxNrcwlNIzQ AuLEiV/RA3ONvbIIOiHCPg== /in/edgar/work/0000950129-00-005547/0000950129-00-005547.txt : 20001115 0000950129-00-005547.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950129-00-005547 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EGL INC CENTRAL INDEX KEY: 0001001718 STANDARD INDUSTRIAL CLASSIFICATION: [4731 ] IRS NUMBER: 760094895 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27288 FILM NUMBER: 767816 BUSINESS ADDRESS: STREET 1: 15340 VICKERY DR CITY: HOUSTON STATE: TX ZIP: 77032 BUSINESS PHONE: 2816183100 MAIL ADDRESS: STREET 1: 15350 VICKERY DR STREET 2: SUITE 510 CITY: HOUSTON STATE: TX ZIP: 77032 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE USA AIRFREIGHT INC DATE OF NAME CHANGE: 19951002 10-Q 1 h81850e10-q.txt EGL, INC. - SEPTEMBER 30, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended SEPTEMBER 30, 2000 ------------------ or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ COMMISSION FILE NUMBER 0-27288 ------- EGL, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0094895 - -------------------------------------------------------------- --------------------------------------- (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
15350 VICKERY DRIVE, HOUSTON, TEXAS 77032 (281) 618-3100 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices, Including Registrant's Zip Code, and Telephone Number, Including Area Code) N/A - -------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the registrant's common stock as of October 31, 2000: 46,733,619 shares (net of 1,391,834 treasury shares). ================================================================================ 2 EGL, INC. INDEX TO FORM 10-Q
PAGE PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet as of.................................................................. 3 September 30, 2000 and December 31, 1999 Condensed Consolidated Statement of Income and Comprehensive Income for the Nine Months ended September 30, 2000 and 1999.............................................. 4 Condensed Consolidated Statement of Income and Comprehensive Income for the Three........................... 5 Months ended September 30, 2000 and 1999 Condensed Consolidated Statement of Cash Flows for.......................................................... 6 the Nine Months ended September 30, 2000 and 1999 Condensed Consolidated Statement of Shareholders'........................................................... 7 Equity for the Nine Months ended September 30, 2000 Notes to Condensed Consolidated Financial Statements........................................................ 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................................... 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................................. 20 PART II. OTHER INFORMATION.......................................................................................... 21 SIGNATURES........................................................................................................... 25 INDEX TO EXHIBITS.................................................................................................... 26
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EGL, INC. CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS, EXCEPT PAR VALUES)
September 30, December 31, 2000 1999 ------------- ------------ Assets Current assets: Cash and cash equivalents $ 6,458 $ 38,338 Short-term investments 5,894 Accounts receivable - trade, net 171,599 129,517 Prepaid expenses and other 5,693 5,431 Deferred income taxes 3,194 2,817 --------- --------- Total current assets 186,944 181,997 Property and equipment, net 49,616 30,443 Goodwill, net 38,105 12,121 Investments in unconsolidated affiliates 6,219 Other assets 3,207 1,654 --------- --------- Total assets $ 284,091 $ 226,215 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable - trade $ 25,859 $ 10,224 Accrued transportation costs 22,130 28,855 Accrued compensation and employee benefits 20,632 14,876 Other accrued liabilities 15,999 8,237 --------- --------- Total current liabilities 84,620 62,192 Long-term debt 15,553 Deferred income taxes 3,104 3,189 --------- --------- Total liabilities 103,277 65,381 --------- --------- Minority interest 354 --------- --------- Shareholders' equity: Preferred stock, $0.001 par value, 10,000 shares authorized Common stock, $0.001 par value, 200,000 shares authorized, 30,125 and 29,804 shares issued 30 30 Additional paid-in capital 95,790 88,018 Unearned compensation (1,446) Retained earnings 111,721 87,589 Accumulated other comprehensive loss (1,086) (587) Treasury stock, 1,392 and 1,022 shares, at cost (24,195) (14,570) --------- --------- 180,814 160,480 --------- --------- Commitments and contingencies (Note 7) --------- --------- Total liabilities and shareholders' equity $ 284,091 $ 226,215 ========= =========
See notes to unaudited condensed consolidated financial statements. 3 4 EGL, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Nine Months Ended September 30, ------------------------ 2000 1999 --------- --------- Revenues $ 644,278 $ 450,297 Cost of transportation 380,049 258,537 --------- --------- Net revenues 264,229 191,760 --------- --------- Operating expenses: Personnel costs 139,634 97,713 Other selling, general and administrative expenses 85,727 61,225 --------- --------- 225,361 158,938 --------- --------- Operating income 38,868 32,822 Interest and other income, net 1,321 1,941 --------- --------- Income before provision for income taxes 40,189 34,763 Provision for income taxes 16,057 14,013 --------- --------- Net income 24,132 20,750 Other comprehensive income: Foreign currency translation (499) (580) --------- --------- Comprehensive income $ 23,633 $ 20,170 ========= ========= Basic earnings per share $ 0.84 $ 0.73 ========= ========= Basic weighted-average common shares outstanding 28,693 28,341 ========= ========= Diluted earnings per share $ 0.81 $ 0.71 ========= ========= Diluted weighted-average common and common equivalent shares outstanding 29,762 29,341 ========= =========
See notes to unaudited condensed consolidated financial statements. 4 5 EGL, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended September 30, ------------------------ 2000 1999 --------- --------- Revenues $ 241,788 $ 166,749 Cost of transportation 142,549 96,635 --------- --------- Net revenues 99,239 70,114 --------- --------- Operating expenses: Personnel costs 51,150 34,987 Other selling, general and administrative expenses 30,997 21,738 --------- --------- 82,147 56,725 --------- --------- Operating income 17,092 13,389 Interest and other income, net 231 539 --------- --------- Income before provision for income taxes 17,323 13,928 Provision for income taxes 6,930 6,006 --------- --------- Net income 10,393 7,922 Other comprehensive income: Foreign currency translation (174) (437) --------- --------- Comprehensive income $ 10,219 $ 7,485 ========= ========= Basic earnings per share $ 0.36 $ 0.28 ========= ========= Basic weighted-average common shares outstanding 28,618 28,506 ========= ========= Diluted earnings per share $ 0.35 $ 0.27 ========= ========= Diluted weighted-average common and common equivalent shares outstanding 29,732 29,647 ========= =========
See notes to unaudited condensed consolidated financial statements. 5 6 EGL, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine Months Ended September 30, ---------------------- 2000 1999 -------- -------- Cash flows from operating activities $ 12,342 $ 19,889 -------- -------- Cash flows from investing activities: Acquisitions, net of cash acquired (26,441) Purchase of investments (22,088) Maturity of investments 5,894 17,766 Acquisition of property and equipment, net (26,115) (8,894) Payment of contingent consideration for acquisition (2,443) (891) Other (157) (342) -------- -------- Net cash used by investing activities (49,262) (14,449) -------- -------- Cash flows from financing activities: Issuance of common stock 653 Proceeds from exercises of stock options 3,132 6,834 Purchase of treasury stock (10,478) (9,057) Borrowings on line of credit, net of repayments 12,232 -------- -------- Net cash provided (used) by financing activities 5,539 (2,223) -------- -------- Effect of foreign currency translation on cash (499) (580) -------- -------- Net (decrease) increase in cash and cash equivalents (31,880) 2,637 Cash and cash equivalents, beginning of period 38,338 32,538 -------- -------- Cash and cash equivalents, end of period $ 6,458 $ 35,175 ======== ========
See notes to unaudited condensed consolidated financial statements. 6 7 EGL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS)
ACCUMULATED COMMON STOCK ADDITIONAL UNEARNED OTHER ------------------ PAID-IN COMPEN- RETAINED COMPREHENSIVE TREASURY SHARES AMOUNT CAPITAL SATION EARNINGS LOSS STOCK TOTAL ------ --------- ---------- --------- --------- ------------- --------- --------- Balance at December 31, 1999 29,804 $ 30 $ 88,018 $ 87,589 $ (587) $ (14,570) $ 160,480 Shares issued under stock option plans and restricted stock awards 321 5,037 $ (1,905) 3,132 Purchase of treasury stock (10,478) (10,478) Issuance of shares under stock purchase plan 653 653 Shares issued for acquisition related earnout 200 200 Tax benefit from exercise of stock options 2,735 2,735 Amortization of unearned compensation 459 459 Net income 24,132 24,132 Foreign currency translation adjustments (499) (499) ------ --------- --------- --------- --------- --------- --------- --------- Balance at September 30, 2000 30,125 $ 30 $ 95,790 $ (1,446) $ 111,721 $ (1,086) $ (24,195) $ 180,814 ====== ========= ========= ========= ========= ========= ========= =========
See notes to unaudited condensed consolidated financial statements. 7 8 EGL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The accompanying unaudited condensed consolidated financial statements have been prepared by EGL, Inc. (EGL or the Company) in accordance with the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial statements and accordingly do not include all information and footnotes required under generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with the accounting principles and practices disclosed in, and should be read in conjunction with, the annual financial statements of the Company included in the Company's Annual Report on Form 10-K (File No. 0-27288). In the opinion of management, these interim financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position at September 30, 2000 and the results of its operations for the nine and three months ended September 30, 2000 and 1999. Results of operations for the nine and three months ended September 30, 2000 are not necessarily indicative of the results that may be expected for EGL's full fiscal year. NOTE 1 - ORGANIZATION, OPERATIONS, AND SIGNIFICANT ACCOUNTING POLICIES: On February 21, 2000, the Company's shareholders approved a proposal to change the Company's name to EGL, Inc. in recognition of EGL's increasing globalization, broader spectrum of services and long-term growth strategy. EGL is a worldwide logistics company. The Company maintains operating facilities throughout the United States, Mexico, Canada, Hong Kong, the United Kingdom, Argentina, Brazil, Chile and Peru as well as a worldwide network of exclusive and nonexclusive agents. With the acquisition of Circle International Group, Inc. (Circle) as of October 2, 2000 (See Note 8), the Company expanded its operations to 100 countries on six continents. The Company operates in one principal industry segment. During the nine and three months ended September 30, 2000 and 1999, no individual geographic segment outside the United States exceeded more than 10% of the revenues, net income or assets of the combined amounts for all geographic segments. On July 12, 1999, the Board of Directors declared a three-for-two stock split of the Company's common stock, effected in the form of a stock dividend. All shares and per-share amounts have been restated retroactively to reflect the stock split, which was distributed August 30, 1999 to shareholders of record on August 23, 1999. On July 2, 2000, the Board of Directors of EGL determined to change its fiscal year ending on September 30th to a year ending on December 31st. As a result, EGL's 2000 fiscal year will end on December 31, 2000 and its next Annual Report on Form 10-K will include audited results for the twelve-month period ending December 31, 2000. References in this document to the first, second and third quarters of fiscal 2000 are to the quarters ended March 31, 2000, June 30, 2000 and September 30, 2000, respectively. On August 16, 2000, the Company filed a report on Form 10-Q with the Securities and Exchange Commission covering the three-month transition period from October 1, 1999 to December 31, 1999. NOTE 2 - EARNINGS PER SHARE: Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes potential dilution that could occur if securities to issue common stock were exercised. Stock options are the only potentially dilutive share equivalents the Company has outstanding for the periods presented. Incremental shares of 862,000 and 1.1 million were used in the calculation of diluted earnings per share for the nine months ended September 30, 2000 and 1999, respectively. Incremental shares of 742,000 and 1.2 million were used in the calculation of diluted earnings per share for the three months ended September 30, 2000 and 1999, respectively. For the nine months ended September 30, 2000 and 1999, 179,932 and 145,340 options, respectively, were excluded from the diluted earnings per share computation because their effect was antidilutive. For the three months ended September 30, 2000, 199,130 options were excluded from the diluted earnings per share computation because their effect was antidilutive. There were no antidilutive options for the three months ended September 30, 1999. 8 9 EGL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management is currently reviewing the provisions of SFAS 133 and does not believe that the Company's financial statements will be materially impacted by the adoption of SFAS 133. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements", to be effective the fourth fiscal quarter of fiscal years beginning after December 15, 1999 (EGL's quarter ending December 31, 2000 based on the change in year end). EGL has evaluated the provisions of SAB No. 101 and does not believe it will have an impact on its financial statements. NOTE 4 - ACQUISITIONS/INVESTMENTS: On January 7, 2000, the Company completed the acquisitions of two commonly-controlled freight forwarding companies operating in Canada for an aggregate purchase price of approximately $21.3 million in cash at closing and a total of approximately $4.9 million in cash payable in three equal, annual installments. The agreements also contemplate additional consideration not to exceed $7.8 million over the next three years payable in cash and Company common stock if certain earnings-based growth goals are achieved. Each of these acquisitions was accounted for as a purchase and the results of operations for the acquired businesses are included in the condensed consolidated statement of income and comprehensive income from the acquisition date forward. In June 2000, the Company paid $834,000 to buy out the minority interest under its joint venture agreement with its Hong Kong subsidiary and recorded goodwill of $684,000. In addition, during the quarter ended June 30, 2000, the Company paid an aggregate of $1.2 million and issued 8,802 shares of common stock valued at $200,000 in connection with contingent payments for acquisitions completed during the fiscal years ended September 30, 1998 and 1997. In July 2000, the Company purchased 24.5% of the outstanding common stock of Miami Air International, Inc. (Miami Air), a privately held domestic and international charter airline headquartered in Miami, Florida, for approximately $6.3 million in cash in a stock purchase transaction. The Company's primary objective for engaging in the transaction was to develop a business relationship with Miami Air in order to obtain access to an additional source of reliable freight charter capacity. In the transaction, certain stockholders of Miami Air sold 82% of the aggregate number of outstanding shares of Miami Air common stock to private investors, including the Company, James R. Crane, the Company's Chairman and President, and Frank J. Hevrdejs, a member of the Company's board of directors. Mr. Crane purchased 19.2% of the outstanding common stock for approximately $4.7 million in cash and Mr. Hevrdejs purchased 6.0% of the outstanding common stock for approximately $1.5 million in cash. The Company's Miami Air investment has been accounted for under the equity method. 9 10 EGL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In connection with the closing of the transaction, (i) Miami Air and the Company entered into an aircraft charter agreement whereby Miami Air agreed to convert certain of its passenger aircraft to cargo aircraft and to provide aircraft charter services to the Company for a three-year term, and (ii) the Company caused a $7 million standby letter of credit to be issued in favor of certain creditors of Miami Air to assist Miami Air in financing the conversion of its aircraft. Miami Air has agreed to pay the Company an annual fee equal to 3.0% of the face amount of the letter of credit and to reimburse the Company for any payments owed by the Company in respect of the letter of credit. Miami Air, each of the private investors and the continuing Miami Air stockholders also entered into a stockholders agreement under which (i) Mr. Crane and Mr. Hevrdejs are obligated to purchase up to approximately $1.7 million and $.5 million, respectively, worth of Miami Air's Series A preferred stock upon demand by the board of directors of Miami Air, (ii) each of the Company and Mr. Crane has the right to appoint one member of Miami Air's board of directors, and (iii) the other private investors in the stock purchase transaction, including Mr. Hevrdejs, collectively have the right to appoint one member of Miami Air's board of directors. As of September 30, 2000, board of directors appointed include Mr. Crane, Elijio Serrano (EGL's Chief Financial Officer), Ross Fischer and James Morgan. Appointment of an outside director is pending. The Series A preferred stock, if issued, (i) will not be convertible, (ii) will have a 15.0% annual dividend rate and (iii) will be mandatorily redeemable in July 2006 or upon the prior occurrence of specified events. NOTE 5 - SHAREHOLDERS' EQUITY: In January 2000, the Company's Board of Directors authorized the repurchase of up to one million shares of its outstanding Common Stock. In April 2000, the Company's Board of Directors increased the authorization to three million shares. On July 2, 2000, the Company's Board of Directors terminated the remaining share repurchase authorization, at which time the Company had repurchased an aggregate of 449,500 shares for a total of $10.5 million under the authorization. Unearned compensation relates to awards of restricted stock and is recorded at the date of award based on the market value of the shares and is amortized to expense over the vesting period of three years. NOTE 6 - REVOLVING CREDIT FACILITY: On January 13, 2000, the Company entered into an agreement (the Credit Agreement) with Bank of America, N.A. (the Bank) as administrative agent. The Credit Agreement (as amended on May 31, 2000 and September 29, 2000) provides a $75 million revolving line of credit and includes a $10 million sublimit for the issuance of letters of credit. The Company is currently in discussion with the Bank to replace the line of credit with a new line of credit up to $150 million, although there can be no assurance that this will be effected. $12.2 million was outstanding under the Credit Agreement as of September 30, 2000. This amount has been classified as long-term as of September 30, 2000 due to the Company's present intent and ability to refinance this amount on a long-term basis. The revolving line of credit matures on January 11, 2001. For each tranche of principal, the Company elects an interest rate calculation based on either LIBOR (a LIBOR Tranche) or either the prime rate announced by the Bank or the federal funds rate plus 50 basis points (a Prime Rate Tranche), plus an applicable margin based on a ratio of consolidated debt to consolidated EBITDA (earnings before interest, taxes, depreciation and amortization). The interest for a LIBOR Tranche is due at periods of one, two, three or six months, as the Company may select at the time it requests the funds. The interest for a Prime Rate Tranche is due quarterly. The weighted average interest rate for the line of credit balance outstanding at September 30, 2000 was 8.03%. The revolving line of credit includes unused commitment fees and letter of credit fees, each of which is calculated on the basis of a ratio of consolidated debt to consolidated EBITDA. The Company is subject to certain covenants under the terms of the Credit Agreement, including, but not limited to, maintenance at the end of any fiscal quarter of (a) minimum specified consolidated net worth, (b) a ratio of consolidated funded debt to total capitalization of no greater than .50 to 1.00, (c) a ratio of consolidated funded debt to consolidated EBITDA of no greater than 2.50 to 1.00 and (d) a consolidated fixed charge coverage ratio of no less than 2.00 to 1.00. The Credit Agreement also places restrictions on additional indebtedness, liens, investments, change of control and other matters. 10 11 EGL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 7 - COMMITMENTS AND CONTINGENCIES: In May 2000, the Company received a Letter of Determination and Conciliation Proposal from the Equal Employment Opportunity Commission relating to a Commissioner's Charge issued in the first quarter of fiscal 1998. Following the issuance of the EEOC's Determination a lawsuit was filed in Philadelphia, Pennsylvania by three former EGL employees and one individual who had unsuccessfully applied for a position. Four additional plaintiffs joined the suit in late July 2000. The lawsuit alleges discrimination and adopts in their entirety the EEOC's conclusions. Although the named plaintiffs seek to represent a class of individuals, no class action has yet been approved by the Court. The lawsuit seeks unspecified damages. The Company initiated a mediation process with both the EEOC and the plaintiffs in the Philadelphia lawsuit in an effort to resolve this matter. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 1. Legal Proceedings." NOTE 8 - SUBSEQUENT EVENT: On October 2, 2000, EGL completed the acquisition of Circle pursuant to the terms and conditions of the Agreement and Plan of Merger dated as of July 2, 2000 (the Merger Agreement) among EGL, EGL Delaware I, Inc., a wholly owned subsidiary of EGL (Merger Sub) and Circle. Pursuant to the Merger Agreement, Merger Sub was merged with and into Circle, with Circle surviving as a wholly owned subsidiary of EGL. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and as a pooling of interests for accounting and financial reporting purposes. As a result of the Merger, each share of Circle's common stock, par value $1.00 per share (Circle Common Stock), issued and outstanding immediately prior to the effective time of the Merger (other than shares owned by Circle, EGL or Merger Sub) has been converted to the right to receive one validly issued, fully paid and nonassessable share of EGL's common stock, par value $0.001 per share (EGL Common Stock). In the aggregate, EGL issued approximately 17,933,160 shares of EGL Common Stock in exchange for issued and outstanding shares of Circle Common Stock and assumed options exercisable for 1,094,052 shares of EGL Common Stock. The exchange ratio of one share of EGL Common Stock for each share of Circle Common Stock was determined by arms-length negotiations between EGL and Circle. Circle, the common stock of which was previously publicly traded, is a leader in providing transportation and integrated logistics services for international movement of goods and the furnishing of value-added information, distribution and inventory management services to customers worldwide. Circle is principally engaged in international air and ocean freight forwarding, customs brokerage and logistics. Circle's global services are supplied through its network of over 300 offices, agents and distribution centers located in over 100 countries on six continents. As the merger was completed subsequent to September 30, 2000, Circle's results of operations have not been reflected in these financial statements. The following unaudited pro forma condensed combined financial information has been included for informational purposes only to reflect the combination of EGL and Circle and excludes the effects of transaction and merger-related costs. The Company expects to incur a significant restructuring charge in the fourth quarter of 2000 in connection with the acquisition.
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (in thousands, except per share data) STATEMENT OF INCOME DATA: Revenues ........................................ $1,346,407 $1,033,259 $ 490,716 $ 371,644 Net revenues .................................... 532,673 432,959 191,895 153,697 Net income ...................................... 41,750 34,206 18,311 14,682 Basic earnings per share ......................... $ 0.52 $ 0.46 $ 0.22 $ 0.17 Diluted earnings per share ...................... $ 0.88 $ 0.73 $ 0.38 $ 0.31 September 30, December 31, 2000 1999 ------------- ------------ (in thousands) BALANCE SHEET DATA: Current assets ............................. $550,473 $540,031 Total assets ............................... 840,060 771,607 Current liabilities ........................ 322,337 312,585 Total liabilities .......................... 390,686 363,989 Shareholders' equity ....................... 439,787 401,455
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected certain aspects of the Company's financial position and operating results during the periods included in the accompanying unaudited condensed consolidated financial statements. This discussion should be read in conjunction with the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations," the annual financial statements included in the Company's Annual Report on Form 10-K (File No. 0-27288), the accompanying unaudited condensed consolidated financial statements and the notes thereto and the pro forma financial information of the Company giving effect to the merger with Circle, which was included as Exhibit 20.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2000. 11 12 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OVERVIEW On February 21, 2000, the Company's shareholders approved a proposal to change the Company's name to EGL, Inc. in recognition of the Company's increasing globalization, broader spectrum of services and long-term growth strategy. The Company's revenues have increased to $595.2 million for the twelve months ended September 30, 1999 from $291.8 million for the twelve months ended September 30, 1997, and its operating income has increased to $45.0 million for the twelve months ended September 30, 1999 from $25.7 million for the twelve months ended September 30, 1997. Historically, the Company has grown primarily through internal expansion, including developing its terminal network, expanding its service offerings and sales force and increasing its customer base. The Company has also made acquisitions on a limited basis. Since October 1, 1996, the Company has added 47 terminals, increasing the total to 94 at September 30, 2000. The opening of a new terminal generally has an initial short-term negative impact on profitability due to operating losses of the new terminal. However, the opening of a new terminal generally does not require significant capital expenditures. Additionally, personnel costs are contained at the time of the opening of a new terminal because commissions are generally not paid until salesmen achieve minimum sales levels and until managers achieve terminal profitability. Although future new terminals may be opened in cities smaller than those in which the Company's more mature terminals are located, the Company believes the results of new terminals should benefit from a ready base of business provided by its existing customers. The Company maintains international operating facilities in Mexico, Canada, Hong Kong, the United Kingdom, Argentina, Brazil, Chile and Peru as well as a worldwide network of exclusive and nonexclusive agents. With the acquisition of Circle, as discussed below, the Company expanded its operations to 100 countries on six continents. On October 2, 2000, EGL completed and the acquisition of Circle pursuant to the terms and conditions of the Agreement and Plan of Merger dated as of July 2, 2000 (the Merger Agreement) among EGL, EGL Delaware I, Inc., a wholly owned subsidiary of EGL (Merger Sub) and Circle. Pursuant to the Merger Agreement, Merger Sub was merged with and into Circle, with Circle surviving as a wholly owned subsidiary of EGL. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and as a pooling of interests for accounting and financial reporting purposes. The results of Circle are not included in this discussion of financial condition and results of operations as the merger was not completed at September 30, 2000. Trends, results of operations and financial condition of the combined company may differ from those described herein. Additionally, the Company expects to incur a significant restructuring charge in the fourth quarter of 2000 in connection with the acquisition. As a result of the Merger, each share of Circle's common stock, par value $1.00 per share (Circle Common Stock), issued and outstanding immediately prior to the effective time of the Merger (other than shares owned by Circle, EGL or Merger Sub) has been converted to the right to receive one validly issued, fully paid and nonassessable share of EGL's common stock, par value $0.001 per share (EGL Common Stock). In the aggregate, EGL is issuing approximately 17,933,160 shares of EGL Common Stock in exchange for issued and outstanding shares of Circle Common Stock and assumed options exercisable for 1,094,052 shares of EGL Common Stock. The exchange ratio of one share of EGL Common Stock for each share of Circle Common Stock was determined by arms-length negotiations between EGL and Circle. Circle, the common stock of which was previously publicly traded, is a leader in providing transportation and integrated logistics services for international movement of goods and the furnishing of value-added information, distribution and inventory management services to customers worldwide. Circle is principally engaged in international air and ocean freight forwarding, customs brokerage and logistics. 12 13 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) In May 2000, as a result of recent industry consolidation, the Company announced plans to accelerate its international expansion efforts beginning in the quarter ended June 30, 2000 with the addition of seasoned international airfreight employees worldwide. The new staff and related infrastructure costs was expected to increase international operating expenses over the next two quarters by approximately $4.0 to $5.0 million, or $0.08 to $0.10 cents per diluted shares, net of tax. The Company's merger with Circle effectively ends the Company's previously announced $4.0 to $5.0 million expenditure for international staff and infrastructure costs. The Company expects to utilize the staff and infrastructure acquired prior to the merger in connection with its international operations. On January 7, 2000, the Company completed the acquisition of Commercial Transport International (Canada) Ltd. (CTI) and Fastair Cargo System Ltd. (Fastair) for an aggregate purchase price of approximately $21.3 million in cash at closing and a total of approximately $4.9 million in cash payable in three equal annual installments. The acquisition agreement also contemplates additional consideration not to exceed $7.8 million over the next three years payable in cash and Company common stock if certain earnings-based growth goals are achieved. Fastair is a leading forwarder in the intra-Canada freight forwarding market. CTI, its sister company, primarily serves the international freight forwarding market with offices coast-to-coast throughout Canada. CTI and Fastair were privately-held and under common control and have eight locations in Canada. Both companies are based in Toronto, Canada. The acquisitions were accounted for as a purchase and the acquired operations were integrated with the Company's existing Canadian operations. The Company also intends to continue the growth of its local pickup and delivery operations. By providing local pickup and delivery services for its freight forwarding shipments, the Company has been able to increase its gross margin for these shipments because it captures margins that were previously paid to third parties. However, the Company's local pickup and delivery services provided to other non-forwarding customers generate a lower gross margin than the Company's domestic forwarding operations due to their higher transportation costs as a percentage of revenues. Historically, the Company's operating results have been subject, to a limited degree, to seasonal trends when measured on a quarterly basis. The quarter ending March 31st has traditionally been the weakest and the quarter ending September 30th has traditionally been the strongest. RESULTS OF OPERATIONS The following table presents certain statement of income data as a percentage of revenues and operating data for the periods indicated.
Nine Months Ended September 30, Three Months Ended September 30, --------------------------------- --------------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenues 100.0% 100.0% 100.0% 100.0% Cost of transportation 59.0 57.4 59.0 58.0 ----------- ----------- ----------- ----------- Net revenues 41.0 42.6 41.0 42.0 Personnel costs 21.7 21.7 21.2 21.0 Other selling, general and administrative expenses 13.3 13.6 12.8 13.0 ----------- ----------- ----------- ----------- Operating expenses 35.0 35.3 34.0 34.0 ----------- ----------- ----------- ----------- Operating income 6.0% 7.3% 7.1% 8.0% ----------- ----------- ----------- ----------- Net income 3.7% 4.6% 4.3% 4.8% =========== =========== =========== =========== Freight forwarding terminals at end of period 94 78 94 78 Local delivery locations at end of period 73 67 73 67 Freight forwarding shipments 1,929,108 1,088,553 686,283 401,823 Average weight (lbs.) per freight forwarding 771 678 643 704 shipment
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Revenues increased 43.1% to $644.3 million in the first nine months of fiscal 2000 from $450.3 million in the same period of fiscal 1999 primarily due to increases in the number of shipments and the total weight of cargo shipped. These 13 14 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) increases primarily resulted from an increase in the number of terminals open during such period, an increase in penetration in existing airfreight and pickup and delivery markets, the addition of significant national account customers and the effect of acquisitions completed after the quarter ended September 30, 1999. Revenues for the nine months ended September 30, 2000 were comprised of $603.0 million of forwarding revenues and $41.3 million of local pickup and delivery revenues, as compared to $411.8 million and $38.5 million, respectively, for the nine months ended September 30, 1999. Of the Company's forwarding revenues for the nine months ended September 30, 2000, $162.8 million were attributable to international shipments (defined as shipments that cross a U.S. national border or originated outside the U.S.) compared to $84.4 million for the nine months ended September 30, 1999. The acquisitions completed in Canada, as described in Note 4, added approximately $40.4 million in international revenue during the nine months ended September 30, 2000. The Company's total local pickup and delivery revenues for the nine months ended September 30, 2000 were $161.7 million. This amount includes $120.4 million of intercompany sales that were eliminated upon consolidation and $41.3 million in services to third-party (non-forwarding) customers. Cost of transportation increased during the first nine months of fiscal 2000 as a percentage of revenues to 59.0% from 57.4% in the comparable period in fiscal 1999. The increase was primarily attributable to increased international freight shipping volumes, which carry a higher cost of transportation per shipment than domestic freight. Cost of transportation increased in absolute terms by 47.0% to $380.0 million for the nine months ended September 30, 2000 from $258.5 million in the same period in fiscal 1999 as a result of increases in freight shipped. Net revenue margin decreased to 41.0% in the first nine months of fiscal 2000 from 42.6% in the same period in fiscal 1999. The primary reason for the margin decline was increased international freight shipping volumes which carry a higher cost of transportation per shipment than domestic freight and a temporary shift in January and February 2000 from overnight air shipments to lower-margin economy ground shipments by the technology and manufacturing sectors as a result of the Year 2000 transition. Net revenues increased 37.8% to $264.2 million in the first nine months of fiscal 2000 from $191.8 million in the same period in fiscal 1999. Operating expenses decreased as a percentage of revenues to 35.0% in the first nine months of fiscal 2000 from 35.3% for the same period in fiscal 1999. The $66.4 million increased costs in absolute terms was attributable primarily to continued growth in the level of operations, costs from additional terminals, acquisitions and expansion of local delivery operations. Personnel costs as a percentage of revenues remained constant at 21.7% in the first nine months of fiscal 2000 as compared to the same period in fiscal 1999 and increased in absolute terms by 42.9% to $139.6 million in the fiscal 2000 period from $97.7 million in the fiscal 1999 period. This increase was due to increased staffing needs associated with the opening of new terminals and local delivery locations, the effect of acquisitions, expanded operations at existing terminals and increased commissions resulting from higher revenues and expanded corporate infrastructure. Such personnel costs include all compensation expenses, including those relating to sales commissions and salaries and to headquarters employees and executive officers. The Company has added personnel to build corporate infrastructure particularly in international operations, to keep pace with its recent significant growth, to deepen the staff at its terminals and to prepare for growth during fiscal 2000 and beyond. Other selling, general and administrative expenses decreased as a percentage of revenues to 13.3% in the first nine months of fiscal 2000 from 13.6% in the first nine months of fiscal 1999, and increased in absolute terms by 40.0% to $85.7 million in the fiscal 2000 period from $61.2 million in the fiscal 1999 period. The absolute increases in selling, general and administrative expenses were due to overall increases in the level of the Company's activities in the fiscal 2000 period, increased expenses attributable to the Company's acquisitions, the Company's headquarters facility and a $1.1 million charge for legal fees recorded in the quarter ended March 31, 2000. Operating income increased 18.4% to $38.9 million in the first nine months of fiscal 2000 from $32.8 million in the comparable period in fiscal 1999. Operating margin decreased to 6.0% for nine months ended September 30, 2000 compared to 7.3% for the nine months ended September 30, 1999. Interest and other income decreased to $1.3 million from $1.9 million as a result of a decline in interest income from decreased levels of investments during the nine months ended 14 15 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) September 30, 2000 compared to the nine months ended September 30, 1999, partially offset by rental income of $546,000 from a sublease that began in May 1999. Income before provision for income taxes increased 15.6% to $40.2 million in the first nine months of fiscal 2000 from $34.8 million in the comparable period of fiscal 1999. Provision for income taxes increased 14.6% to $16.1 million for the nine months ended September 30, 2000 from $14.0 million for the nine months ended September 30, 1999. Net income increased 16.3% to $24.1 million in the first nine months of fiscal 2000 from net income of $20.8 million in the same period in fiscal 1999. Diluted earnings per share increased 14.1% to $0.81 per share for the nine months ended September 30, 2000 from $0.71 in the same period in fiscal 1999. THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenues increased 45.0% to $241.8 million in the third quarter of fiscal 2000 from $166.7 million in the same period of fiscal 1999 primarily due to increases in the number of shipments and the total weight of cargo shipped. These increases resulted from an increase in the number of terminals open during such period, an increase in penetration in existing airfreight and pickup and delivery markets, the addition of significant national account customers and the effect of acquisitions completed during the after the quarter ended September 30, 1999. Revenues for the three months ended September 30, 2000 were comprised of $226.7 million of forwarding revenues and $15.1 million of local pickup and delivery revenues, as compared to $154.2 million and $12.5 million, respectively, for the three months ended September 30, 1999. Of the Company's forwarding revenues for the third quarter of fiscal 2000, $65.0 million were attributable to international shipments (defined as shipments that cross a U.S. national border or originated outside the U.S.) compared to $34.8 million for the third quarter of fiscal 1999. The acquisitions completed in Canada, as described in Note 4, added approximately $14.6 million in international revenue during the third quarter of fiscal 2000. The Company's total local pickup and delivery revenues for the third quarter of fiscal 2000 were $45.9 million. This amount includes $30.8 million of intercompany sales that were eliminated upon consolidation and $15.1 million in services to third-party (non-forwarding) customers. Cost of transportation increased during the third quarter of fiscal 2000 as a percentage of revenues to 59.0% from 58.0% in the comparable period in fiscal 1999. The increase was primarily attributable to increased international freight shipping volumes, which carry a higher cost of transportation per shipment than domestic freight. Cost of transportation increased in absolute terms by 47.5% to $142.5 million in the third quarter of fiscal 2000 from $96.6 million in the third quarter of fiscal 1999 as a result of increases in freight shipped. Net revenue margin decreased to 41.0% in the third quarter of fiscal 2000 from 42.0% in the same period in fiscal 1999. The primary reason for the margin decline was increased international freight shipping volumes which carry a higher cost of transportation per shipment than domestic freight. Net revenues increased 41.5% to $99.2 million in the third quarter of fiscal 2000 from $70.1 million in the same period in fiscal 1999. Operating expenses as a percentage of revenues remained constant at 34% in the third quarter of fiscal 2000 as compared to the same period in fiscal 1999. The $25.4 million increased costs in absolute terms for the third quarter of fiscal 2000 was attributable primarily to continued growth in the level of operations, costs from additional terminals, acquisitions and expansion of local delivery operations. Personnel costs increased as a percentage of revenues to 21.2% in the third quarter of fiscal 2000 from 21.0% in the same period in fiscal 1999 and increased in absolute terms by 46.2% to $51.1 million. This increase was due to increased staffing needs associated with the opening of new terminals and local delivery locations, the effect of acquisitions, expanded operations at existing terminals and increased commissions resulting from higher revenues and expanded corporate infrastructure. Such personnel costs include all compensation expenses, including those relating to sales commissions and salaries and to headquarters employees and executive officers. The Company has added personnel to build corporate infrastructure particularly in international operations, to keep pace with its recent significant growth, to deepen the staff at its terminals and to prepare for growth during fiscal 2000 and beyond. Other 15 16 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) selling, general and administrative expenses decreased as a percentage of revenues to 12.8% in the third quarter of fiscal 2000 from 13.0% in the third quarter of fiscal 1999, and increased in absolute terms by 42.6% to $31.0 million in the fiscal 2000 period from $21.7 million in the fiscal 1999 period. The absolute increases in selling, general and administrative expenses were due to overall increases in the level of the Company's activities in the fiscal 2000 period, increased expenses attributable to the Company's acquisitions and the Company's headquarters facility. Operating income increased 27.7% to $17.1 million in the third quarter of fiscal 2000 from $13.4 million in the comparable period in fiscal 1999. Operating margin decreased to 7.1% for the quarter ended September 30, 2000 from 8.0% for the quarter ended September 30, 1999. Interest and other income decreased to $231,000 from $539,000 as a result of decreased levels of investments during the quarter ended September 30, 2000 compared to the quarter ended September 30, 1999. Income before provision for income taxes increased 24.4% to $17.3 million in the third quarter of fiscal 2000 from $13.9 million in the comparable period of fiscal 1999. Provision for income taxes increased 15.4% to $6.9 million for the three months ended September 30, 2000 from $6.0 million for the three months ended September 30, 1999. Net income increased 31.2% to $10.4 million in the third quarter of fiscal 2000 from net income of $7.9 million in the same period in fiscal 1999. Diluted earnings per share increased 29.6% to $0.35 per share for the quarter ended September 30, 2000 from $0.27 in the same period in fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and short-term investments decreased $37.8 million to $6.4 million at September 30, 2000 from $44.2 million at December 31, 1999. At September 30, 2000, the Company had working capital of $102.3 million and a current ratio of 2.21 compared to working capital of $119.8 million and a current ratio of 2.93 at December 31, 1999. The Company's working capital decreased during this period primarily as a result of cash used for business acquisitions and share repurchases. The combined pro forma working capital and current ratio of EGL and Circle was $228.1 million and 1.71, respectively, at September 30, 2000 compared to combined pro forma working capital and current ratio of $227.4 million and 1.73, respectively, at December 31, 1999. Capital expenditures for the nine months ended September 30, 2000 were approximately $26.6 million. Other than its public offerings, the Company's cash generated from operations has been its primary source of liquidity, although it has from time to time made use of bank borrowing and lease or purchase arrangements. The Company does not anticipate paying any cash dividends on its common stock in the foreseeable future. In January 2000, the Company's Board of Directors authorized the repurchase of up to one million shares of its outstanding Common Stock. In April 2000, the Company's Board of Directors increased the authorization to three million shares. The Company's intention has been that repurchases would help to offset increases in the number of shares outstanding resulting from previous and future stock option exercises. On July 2, 2000, the Company's Board of Directors terminated the share repurchase authorization, at which time the Company had repurchased an aggregate of 449,500 shares for a total of $10.5 million under the authorization. On January 13, 2000, the Company entered into the Credit Agreement with Bank of America, N.A. (the Bank), as administrative agent. The Credit Agreement (as amended on May 31, 2000 and September 29, 2000) provides a $75 million revolving line of credit and includes a $10 million sublimit for the issuance of letters of credit. The Company is currently in discussion with the Bank to replace the line of credit with a new line of credit up to $150 million, although there can be no assurance that this will be effected. $66.0 million was outstanding under the Credit Agreement as of November 10, 2000. In connection with the completion of the acquisition of Circle, the Company utilized proceeds from borrowings under its revolving line of credit to repay $27.0 million of Circle's outstanding debt and to fund working capital needs. The revolving line of credit matures on January 11, 2001. For each tranche of principal, the Company elects an interest rate calculation based on either LIBOR (a LIBOR Tranche) or either the prime rate announced by the Bank or the federal funds rate plus 50 basis points (a Prime Rate Tranche), plus an applicable margin based on a ratio of consolidated debt to consolidated EBITDA (earnings before interest, taxes, depreciation and amortization). The interest for a LIBOR 16 17 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Tranche is due at periods of one, two, three or nine months, as the Company may select at the time it requests the funds. The interest for a Prime Rate Tranche is due quarterly. The weighted average interest rate for the line of credit balance outstanding at September 30, 2000 was 8.03%. The revolving line of credit includes unused commitment fees and letters of credit fees, each of which is calculated on the basis of a ratio of consolidated debt to consolidated EBITDA. The Company is subject to certain covenants under the terms of the Credit Agreement, including, but not limited to, maintenance at the end of any fiscal quarter of (a) minimum specified consolidated net worth, (b) a ratio of consolidated funded debt to total capitalization of no greater than .50 to 1.00, (c) a ratio of consolidated funded debt to consolidated EBITDA of no greater than 2.50 to 1.00 and (d) a consolidated fixed charge coverage ratio of no less than 2.00 to 1.00. The Credit Agreement also places certain restrictions on additional indebtedness, liens, investments, change of control and other matters. The Company and certain of its subsidiaries maintain bank lines of credit for purposes of securing customs bonds and bank letters of credit for purposes of guaranteeing some transportation expenses. These credit lines and letters of credit are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks. At September 30, 2000, the Company was contingently liable for approximately $10.4 million under outstanding letters of credit and guarantees related to these obligations. As of September 30, 2000, the Company had outstanding non-qualified stock options to purchase an aggregate of 4,222,617 shares of common stock at exercise prices ranging from $0.83 to $32.69, which equaled the fair market value of the underlying common stock on the dates of grant. At the time a non-qualified stock option is exercised, the Company will generally be entitled to a deduction for federal and state income tax purposes equal to the difference between the fair market value of the common stock on the date of exercise and the option price. As a result of exercises for the nine months ended September 30, 2000 of non-qualified stock options to purchase an aggregate of 320,827 shares of common stock, the Company is entitled to a federal income tax deduction of approximately $6.8 million. The Company has recognized a reduction of its federal and state income tax liability of approximately $2.7 million with respect to the nine months ended September 30, 2000. Accordingly, the Company recorded an increase in additional paid-in capital and a reduction to current taxes payable pursuant to the provisions of SFAS No. 109, "Accounting for Income Taxes." Any exercises of non-qualified stock options in the future at exercise prices below the then fair market value of the common stock may also result in tax deductions equal to the difference between those amounts. There is uncertainty as to whether or not the exercises will occur, the amount of any deductions or the Company's ability to fully utilize any deductions. On January 10, 1997, the Company entered into a five-year operating lease agreement with two unrelated parties for financing the construction of its Houston terminal, warehouse and headquarters facility (the Houston Facility). The cost of the Houston Facility was approximately $8.5 million. Under the terms of the lease agreement, average monthly lease payments are approximately $59,000, which includes monthly interest costs based upon LIBOR rate plus 145 basis points, beginning on July 1, 1998 through October 2, 2002. A balloon payment equal to the outstanding lease balance, which was initially equal to the cost of the facility, is due on October 2, 2002. As of September 30, 2000, the lease balance was approximately $8.1 million. On April 3, 1998, the Company entered into a five-year $20 million master operating lease agreement with two unrelated parties for financing the construction of terminal and warehouse facilities throughout the United States designated by the Company. Under the terms of the master operating lease agreement, average monthly lease payments, including monthly interest costs based upon LIBOR rate plus 145 basis points, begin upon the completion of the construction of each financed facility. The monthly lease obligation will continue for a term of 52 months. A balloon payment equal to the outstanding lease balances, which were initially equal to the cost of each facility, is due at the end of each lease term. Construction began during fiscal 1999 on five terminal facilities. As of September 30, 2000, the aggregate lease balance was approximately $15.4 million under the master operating lease agreement. 17 18 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The operating lease agreements contain restrictive financial covenants requiring the maintenance of a fixed charge coverage ratio of at least 1.5 to 1.0 and specified amounts of consolidated net worth and consolidated tangible net worth. In addition, the master operating lease agreement restricts the Company from incurring debt in an amount greater than $10 million, except pursuant to a single credit facility involving a commitment of not more than $75 million. The Company has an option, exercisable at anytime during the lease term, and under particular circumstances may be obligated, to acquire the Houston terminal and each of its other financed facilities for an amount equal to the outstanding lease balance. If the Company does not exercise the purchase option, and does not otherwise meet its obligations, it is subject to a deficiency payment computed as the amount equal to the outstanding lease balance minus the then current fair market value of each financed facility within limits. The Company expects that the amount of any deficiency payment would be expensed. As of September 30, 2000, the Company has entered into commitments to construct office, warehouse and terminal facilities for an aggregate cost of approximately $2.0 million. Payment for the construction of the facilities is being made from cash balances. Construction of the facilities is estimated to be completed during 2001. ACQUISITIONS On January 7, 2000, the Company completed the acquisitions of CTI and Fastair for an aggregate purchase price of approximately $21.3 million paid at closing from cash and cash equivalents on hand. Additionally, a total of approximately $4.9 million will be paid in cash over the next three years in annual installments. The agreements also contemplate additional consideration not to exceed $7.8 million over the next three years payable in cash and Company common stock if certain earnings-based growth goals are achieved. In June 2000, the Company paid $834,000 to buy out the minority interest under its joint venture agreement with its Hong Kong subsidiary and recorded goodwill of $684,000. In addition, during the second quarter of fiscal 2000 the Company paid an aggregate of $1.2 million and issued 8,802 shares of common stock valued at $200,000 in connection with contingent payments for acquisitions completed during the years ended September 30, 1998 and 1997. In July 2000, the Company purchased 24.5% of the outstanding common stock of Miami Air International, Inc. (Miami Air), a privately held domestic and international charter airline headquartered in Miami, Florida, for approximately $6.3 million in cash in a stock purchase transaction. The Company's primary objective for engaging in the transaction was to develop a business relationship with Miami Air in order to obtain access to an additional source of reliable freight charter capacity. In the transaction, certain stockholders of Miami Air sold 82% of the aggregate number of outstanding shares of Miami Air common stock to private investors, including the Company, James R. Crane, the Company's Chairman and President, and Frank J. Hevrdejs, a member of the Company's board of directors. Mr. Crane purchased 19.2% of the outstanding common stock for approximately $4.7 million in cash and Mr. Hevrdejs purchased 6.0% of the outstanding common stock for approximately $1.5 million in cash. The Company's Miami Air investment has been accounted for under the equity method. In connection with the closing of the transaction, (i) Miami Air and the Company entered into an aircraft charter agreement whereby Miami Air agreed to convert certain of its passenger aircraft to cargo aircraft and to provide aircraft charter services to the Company for a three-year term, and (ii) the Company caused a $7 million standby letter of credit to be issued in favor of certain creditors of Miami Air to assist Miami Air in financing the conversion of its aircraft. Miami Air has agreed to pay the Company an annual fee equal to 3.0% of the face amount of the letter of credit and to reimburse the Company for any payments owed by the Company in respect of the letter of credit. Miami Air, each of the private investors and the continuing Miami Air stockholders also entered into a stockholders agreement under which (i) Mr. Crane and Mr. Hevrdejs are obligated to purchase up to approximately $1.7 million and $.5 million, respectively, worth of Miami Air's Series A preferred stock upon demand by the board of directors of Miami Air, (ii) each of the Company and Mr. Crane has the right to appoint one member of Miami Air's board of directors, and (iii) the other private investors in the stock purchase 18 19 EGL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) transaction, including Mr. Hevrdejs, collectively have the right to appoint one member of Miami Air's board of directors. As of September 30, 2000, board of directors appointed include Mr. Crane, Elijio Serrano (EGL's Chief Financial Officer), Ross Fischer and James Morgan. Appointment of an outside director is pending. The Series A preferred stock, if issued, will (i) not be convertible, (ii) have a 15.0% annual dividend rate and (iii) will be mandatorily redeemable in July 2006 or upon the prior occurrence of specified events. COMMISSIONER'S CHARGE As discussed in "Part II, Item 1. Legal Proceedings", the Company has received a Letter of Determination and Conciliation Proposal from the EEOC relating to the Commissioner's Charge described in that section. Following the issuance of the EEOC's Determination in May 2000, a lawsuit was filed in Philadelphia, Pennsylvania by three former EGL employees and one individual who had unsuccessfully applied for a position. Four additional plaintiffs joined the suit in late July 2000. The lawsuit alleges discrimination and adopts in their entirety the EEOC's conclusions. Although the named plaintiffs on the Philadelphia lawsuit seek to represent a class of individuals, no class action has yet been approved by the Court. The lawsuit seeks unspecified damages. Any relief sought in these lawsuits would be in addition to and not limited by the relief sought by the EEOC. In the first quarter of fiscal 2000, the Company accrued a $1.1 million charge ($700,000 after-tax) for its estimated future litigation expenses to defend this matter. There can be no assurance as to what will be the amount of time it will take to resolve the Commissioner's Charge, the other lawsuits and related issues or the degree of any adverse effect these matters may have on the Company and its financial condition and results of operation. A substantial settlement payment or judgment could result in a significant decrease in the Company's working capital and liquidity. RELATED PARTY TRANSACTIONS In May 1999, the Company began subleasing a portion of its warehouse space in Houston, Texas and London, England to a customer pursuant to a five-year sublease. The customer is partially owned by James R. Crane, the Company's Chairman and President. Rental income was approximately $546,000 during the first nine months of fiscal 2000 and $303,000 during fiscal 1999. In addition, the Company billed the customer approximately $298,000 for freight forwarding services during the first nine months of fiscal 2000 and $281,000 during fiscal 1999. The Company believes the rental rates set forth in the sublease agreement approximate market rates. See also the discussion regarding the Miami Air acquisition above. NEW ACCOUNTING PRONOUNCEMENTS See Note 3 of the Notes to Condensed Consolidated Financial Statements for a description and management's discussion and analysis of new accounting pronouncements. 19 20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of September 30, 2000, Company has $12.2 million outstanding under its line of credit. The Company's lease payments on certain financed facilities are tied to market interest rates. At September 30, 2000, a 10% rise in the base rate for these financing arrangements would not have a material impact on operating income for fiscal 2000. The Company's earnings are affected by fluctuations in the value of the U.S. dollar as it relates to the earnings of its United Kingdom, Canada, Mexico, Hong Kong and Latin America operations, as a result of transactions in foreign markets. At September 30, 2000, the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which these operations are denominated would not have a material impact on operating income for fiscal 2000. The Company has not purchased any futures contracts nor has it purchased or held any derivative financial instruments for trading purposes during fiscal 2000. In the quarter ended March 1999, the Company entered into contracts for the purpose of hedging the costs of a portion of anticipated jet fuel purchases for chartered aircraft during the following twelve months. These contracts matured during the quarter ended March 2000. In May 2000, the Company entered into two additional contracts to hedge the cost of jet fuel purchases during the following twelve months. Such contracts are nominally insignificant. 20 21 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time, the Company is a party to various legal claims and proceedings arising in the ordinary course of business. Except as described below, the Company is not currently a party to any material litigation and is not aware of any litigation threatened against it, which it believes would have a material adverse effect on its business. In December 1997, the U.S. Equal Employment Opportunity Commission (EEOC) issued a Commissioner's Charge against the Company and certain of its subsidiaries (the Commissioner's Charge) pursuant to Sections 706 and 707 of Title VII of the Civil Rights Act of 1964, as amended (Title VII). The Company continues to vigorously defend against allegations contained in the Commissioner's Charge. In the Commissioner's Charge, the EEOC charged the Company and certain of its subsidiaries with violations of Section 703 of Title VII, as amended, the Age Discrimination in Employment Act of 1967, and the Equal Pay Act of 1963, resulting from (i) engaging in unlawful discriminatory hiring, recruiting and promotion practices and maintaining a hostile work environment, based on one or more of race, national origin, age and gender, (ii) failures to investigate, (iii) failures to maintain proper records and (iv) failures to file accurate reports. The Commissioner's Charge states that the persons aggrieved include all African-Americans, Hispanics, Asians and females who are, have been or might be affected by the alleged unlawful practices. In May 2000, the Houston District Office of the EEOC provided to the Company its "Letter of Determination and Conciliation Proposal" with respect to the investigation pertaining to the Commissioner's Charge and made a final determination that there is a sufficient evidentiary basis to sustain all allegations in the Commissioner's Charge, except as to certain charges relating to Asian Americans. The Conciliation Proposal "invites [the Company] to actively engage in conciliation to resolve this matter," and proposes certain monetary and non-monetary remedies to "serve to facilitate confidential discussions which, hopefully, will eventuate in an appropriate settlement." That proposed relief includes, the following: (i) backpay and benefits for a class of minorities in the amount of $6,000,000 (this is a $950,000 reduction from the amount claimed under the preliminary assessment); (ii) compensation for certain incumbent minorities and women who were allegedly underpaid relative to white male counterparts in the amount of $5,000,000; (iii) compensation for certain minority and female employees who were allegedly not promoted at rates comparable to their respective employment rates in the amount of $2,950,000; and (iv) financial compensation for certain other employees as a result of alleged "disparate discipline" in the amount of $745,000, all exclusive of interest, compensatory and punitive damages and costs. The specific monetary relief as outlined above is $950,000 less than that amount proposed in its preliminary assessment. The Conciliation Proposal stated, however, that "the EEOC agreed that this claim [for monetary relief] could be resolved for $20,000,000." The EEOC also sought non-monetary relief, including hiring 244 minorities, certain upward adjustments to salaries, reinstatement of up to 15 employees and required promotion of 30 employees. The Conciliation Proposal also sought other non-monetary relief, including (a) reformation of the Company's policies and practices with respect to record keeping, recruiting, hiring and placement, reinstatement, promotion and transfer, and corporate governance, (b) revision of certain job descriptions, (c) institution of employee and supervisory training, and (d) the institution of specified procedures and steps with respect to such matters. The Company believes that the Houston District Office's May 2000 Determination finding systemic discrimination is unsupported by any credible evidence and was rendered by the agency in part due to agency bias against the Company and its Chief Executive Officer because of the Company's vigorous defense of this matter. The Company accepted the EEOC's offer to conciliate this matter and has participated in numerous conciliation conferences with the EEOC during the past few months. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Certain individual employees have brought charges of this nature against the Company in the ordinary course of business. Additionally, following the issuance of the EEOC's Determination in May 2000, a lawsuit was filed on May 12, 2000 in the United States District Court for the Eastern District of Pennsylvania (Civil Action No. 00-CV-2461) by Augustine Dube, Noelle Davis, Kshanti Morris and Ruben Capaletti who are former EGL employees or had unsuccessfully applied for a position. Four additional plaintiffs joined the suit in late July 2000. The lawsuit alleges discrimination and adopts in their entirety the EEOC's conclusions. Although the named plaintiffs on the Philadelphia lawsuit seek to represent a class of individuals, no class action has yet been approved by the Court. The lawsuit seeks unspecified damages that are not limited by the relief sought by the EEOC. Because the lawsuit is essentially based upon the contested EEOC allegations described above, the Company fully intends to defend itself in both matters but would consider a settlement with both the plaintiffs and the EEOC that the Company believes is reasonable in both monetary and non-monetary terms. The Company initiated a mediation process with both the EEOC and the plaintiffs in the Philadelphia lawsuit in an effort to resolve this matter but results to date have been unsuccessful. There can be no assurance as to what will be the amount of time it will take to resolve the Commissioner's Charge, the other lawsuits and related issues or the degree of any adverse effect these matters may have on the Company and its financial condition and results of operation. A substantial settlement payment or judgment could result in a significant decrease in the Company's working capital and liquidity. 21 22 ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS At a meeting held on September 18, 2000, the Company's stockholders approved an amendment to the Company's Second Amended and Restated Articles of Incorporation to increase the authorized number of shares of EGL Common Stock from 100,000,000 to 200,000,000, a proposal to amend the Company's long-term incentive plan to increase the number of shares authorized for issuance under the plan by 3,000,000 shares and a proposal to amend the Company's employees stock purchase plan to increase the number of shares authorized for issuance under the plan by 250,000. On September 18, 2000, the Company filed Articles of Amendment to its Second Amended and Restated Articles of Incorporation with the Secretary of the State of Texas. The Second Amended and Restated Articles of Incorporation, as so amended, are filed as an exhibit to this report. ITEM 3. DEFAULTS UPON SENIOR SECURITIES, NONE ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY-HOLDERS (a) SPECIAL MEETING OF SHAREHOLDERS ON SEPTEMBER 18, 2000
(c) PROPOSALS FOR AGAINST WITHHELD ABSTAIN BROKER NONVOTES --------- --- -------- -------- ------- --------------- Approval of the issuance of EGL 23,557,661 7,386 -- 1,717 1,193,200 Common shares pursuant to the proposed merger. Approval of an amendment to EGL's 23,766,967 989,132 -- 3,865 -- second amended and restated articles of incorporation to increase the authorized number of EGL common shares from 100,000,000 to 200,000,000. Approval of an amendment to EGL's 16,435,256 7,124,882 -- 6,626 1,193,200 long-term incentive plan to increase the number of EGL common shares authorized for issuance under the plan by 3,000,000 shares. Approval of an amendment to EGL's 23,526,434 17,708 -- 22,622 1,193,200 employee stock purchase plan to increase the number of EGL common shares authorized for issuance under the plan by 250,000 shares.
22 23 ITEM 5. OTHER INFORMATION FORWARDING LOOKING STATEMENTS The statements contained in all parts of this document, including, but not limited to, those relating to the effect and benefits of the Circle merger, accounting treatment of the merger, the Company's plans for international air freight forwarding services; the future expansion and results of the Company's terminal network; plans for local delivery services; expected growth; future marketing; construction of new facilities; the results, timing, outcome or effect of matters relating to the Commissioner's Charge or other litigation; future operating expenses; any seasonality of the Company's business; future margins; future dividend plans; use of Revolver proceeds; new credit facilities; fluctuations in currency valuations; fluctuations in interest rates; future acquisitions and any effects, benefits, results, terms or other aspects of such acquisitions; fluctuations in the price of jet fuel; ability to continue growth and implement growth and business strategy; the ability of expected sources of liquidity to support working capital and capital expenditure requirements; the tax benefit of any stock option exercises; and any other statements regarding future growth, cash needs, terminals, operations, business plans and financial results and any other statements which are not historical facts are forward-looking statements. When used in this document, the words *anticipate,* *estimate,* *expect,* *may,* *plans,* *project,* and similar expressions are intended to be among the statements that identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the Circle merger, including the integration of its systems, operations and other businesses; the Company's dependence on its ability to attract and retain skilled managers and other personnel; the intense competition within the freight industry; the uncertainty of the Company's ability to manage and continue its growth and implement its business strategy; the Company's dependence on the availability of cargo space to serve its customers; the potential for liabilities if certain independent owner/operators that serve the Company are determined to be employees; effects of regulation; results of litigation (including the results and outcome of the Commissioner's Charge); the Company's vulnerability to general economic conditions and dependence on its principal customers; the control by the Company's principal shareholder; the Company's potential exposure to claims involving its local pickup and delivery operations; risk of international operations; risks relating to acquisitions; the Company's future financial and operating results, cash needs and demand for its services; and the Company's ability to maintain and comply with permits and licenses; as well as other factors detailed in the Company's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The Company undertakes no responsibility to update for changes related to these or any other factors that may occur subsequent to this filing. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) EXHIBITS. *2(i) Agreement and Plan of Merger, dated as of July 2, 2000 among EGL, Inc., EGL Delaware I, Inc. and Circle International Group, Inc. (Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 5, 2000). *3(i) Second Amended and Restated Articles of Incorporation of the Company, as amended. (Filed as Exhibit 3(i) to the Company's Form 8-A/A filed with the Securities and Exchange Commission on September 29, 2000). *3(ii) Amended and Restated Bylaws of the Company, as amended (Exhibit 3(ii) to the Company's Form 10-Q for the fiscal quarter ended June 30, 2000). 10(i) Second Amendment to Credit Agreement dated September 29, 2000 among the Company, the financial institutions named therein and Bank of America, N.A. +10(ii) EGL, Inc. Long-Term Incentive Plan. +10(iii) EGL, Inc. Employee Stock Purchase Plan. 27 Financial Data Schedule. 23 24 - ---------- * Incorporated by reference as indicated. + Management contract or compensatory plan or arrangement. (b) REPORTS ON FORM 8-K. The Company filed a report on Form 8-K on July 5, 2000 related to the merger with Circle. The Company filed a report on Form 8-K dated July 17, 2000 related to a change in fiscal year. 24 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EGL, INC. --------------------------------- (Registrant) Date: November 14, 2000 BY: /s/ James R. Crane --------------------------- --------------------------------- James R. Crane President Date: November 14, 2000 BY: /s/ Elijio V. Serrano --------------------------- --------------------------------- Elijio V. Serrano Chief Financial Officer 25 26 INDEX TO EXHIBITS
EXHIBITS DESCRIPTION - -------- ----------- *2(i) Agreement and Plan of Merger, dated as of July 2, 2000 among EGL, Inc., EGL Delaware I, Inc. and Circle International Group, Inc. (Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 5, 2000). *3(i) Second Amended and Restated Articles of Incorporation of the Company, as amended. (Filed as Exhibit 3(i) to the Company's Form 8-A/A filed with the Securities and Exchange Commission on September 29, 2000). *3(ii) Amended and Restated Bylaws of the Company, as amended (Exhibit 3(ii) to the Company's Form 10-Q for the fiscal quarter ended June 30, 2000). 10(i) Second Amendment to Credit Agreement dated September 29, 2000 among the Company, the financial institutions named therein and Bank of America, N.A. +10(ii) EGL, Inc. Long-Term Incentive Plan. +10(iii) EGL, Inc. Employee Stock Purchase Plan. 27 Financial Data Schedule.
- ---------- * Incorporated by reference as indicated. + Management contract or compensatory plan or arrangement. 26 EX-10.I 2 h81850ex10-i.txt SECOND AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10(i) SECOND AMENDMENT TO CREDIT AGREEMENT This Second Amendment to Credit Agreement (this "SECOND AMENDMENT") is made and entered into as of the 29th day of September, 2000, by and among EGL, INC., a Texas corporation ("BORROWER"), formerly known as Eagle USA Airfreight, Inc., and BANK OF AMERICA, N.A., a national banking association, as a Bank, Swing Line Lender, Issuing Bank, and Administrative Agent for the Banks, and SOUTHTRUST BANK, an Alabama state chartered bank, as a Bank. WITNESSETH WHEREAS, pursuant to that certain Credit Agreement (as heretofore amended, the "CREDIT AGREEMENT") dated as of January 13, 2000, the Banks agreed to make certain loans to Borrower upon the terms and conditions therein contained; and WHEREAS, pursuant to a First Amendment dated as of May 31, 2000, Borrower and Lender modified and amended certain terms and provisions of the Loan Agreement; and WHEREAS, the parties hereto desire to further modify and amend certain terms and provisions of the Credit Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Administrative Agent, and each Bank agree as follows: 1. Defined Terms. Words and terms used herein which are defined in the Credit Agreement are used herein as defined therein, except as specifically modified by the terms of this Second Amendment. 2. Conditions Precedent. The obligations of Administrative Agent, the Swing Line Lender, the Issuing Bank, and the Banks under this Second Amendment, and the effectiveness of the amendments to the Credit Agreement set forth herein, are subject to the full, complete, and timely satisfaction of each of the following conditions precedent: (a) The Administrative Agent shall have received and approved a fully executed original of this Second Amendment, executed by authorized officers of Borrower and each Subsidiary of Borrower and by each Bank; (b) The Administrative Agent shall have received replacement Revolving Loan Notes for each Bank holding a Revolving Loan Commitment, executed by an authorized officer of Borrower; (c) Borrower shall have reimbursed the Administrative Agent and Banks for all their reimbursable costs and expenses (including without 2 limitation, attorneys' fees) incurred in connection with the preparation, negotiation, review, and execution of this Second Amendment and the transaction described herein, and have paid the Administrative Agent for all other amounts then due and owing by Borrower to Banks under the Credit Agreement and the Revolving Loan Notes; and (d) The representations and warranties contained in Section 4 of the Credit Agreement shall be true and unbreached and no Event of Default shall have occurred and be then existing (after giving effect to this Second Amendment). 3. Amendments to Agreement. Upon the full and complete satisfaction of each of the conditions precedent listed in numerical section 2, the Credit Agreement is amended and modified as follows: 3.1 The definitions of the following terms are deleted in their entirety and the following are substituted in place thereof: "MAJORITY BANKS" means (a) so long as Borrower may make Revolving Loan Borrowings under this Agreement, Banks holding more than 66-2/3% of the Revolving Loan Commitments at such time, and (b) upon and after the expiration of the commitment of the Banks to advance Revolving Loan Borrowings under this Agreement, Banks holding more than 66-2/3% of the then aggregate unpaid balances of the Revolving Notes, plus the Letter of Credit Exposure of the Banks, at such time. Without limiting the foregoing, in no event shall the Majority Banks constitute less than two Banks. "PERMITTED DEBT" of Borrower or any Subsidiary of Borrower means: (a) the Debt included in the Credit Obligations; (b) the Subsidiary Guaranties; (c) Debt of any Subsidiary of Borrower owing to Borrower or any other Subsidiary of Borrower or Debt of Borrower to any of its Subsidiaries; (d) any Interest Hedge Agreements not entered into for speculative purposes; (e) Debt of Borrower or any Subsidiary incurred in connection with an Acquisition to the sellers (or their representatives), including, without limitation, contingent earn-out payments, but only to the extent such Debt is unsecured; -2- 3 (f) Debt assumed by Borrower (or a Subsidiary) in its acquisition of Circle International Group, Inc., together with additional Debt (including, without limitation, purchase money indebtedness and secured trade payables and any Debt assumed by Borrower in connection with an Acquisition) of Borrower and its Subsidiaries not to exceed at any time an outstanding aggregate principal amount of such additional Debt equal to $30,000,000.00; (g) Debt constituting reimbursement obligations to sureties issuing payment and performance bonds in the ordinary and usual course of Borrower's and its Subsidiaries' business operations; and (h) extensions and renewals of any of the foregoing (to the extent otherwise permitted under this Agreement). 3.2 The aggregate Revolving Loan Commitment is hereby increased from$50,000,000.00 to $75,000,000.00. Each Bank's Revolving Loan Commitment is amended to be the amount next to that Bank's name in the signature page of this Second Amendment. 3.3 Schedule I to the Credit Agreement is deleted in its entirety and replaced for all purposes with the Schedule I attached to this Second Amendment. 4. Approval. Subject to the satisfaction of the conditions listed in numerical paragraph 2, the Banks approve the Acquisition of Circle International Group, Inc. Nothing herein shall limit the obligations of Borrower with respect to that acquisition under Section 5.21 of the Credit Agreement. 5. Note Status. Nothing herein shall in any manner diminish, impair or extinguish the Revolving Loan Notes or the Swing Loan Note. Borrower agrees that the indebtedness evidenced by the Revolving Loan Notes and the Swing Loan Note is just, due, owing and unpaid, and is subject to no offsets, deductions, credits, charges or claims of whatsoever kind or character, and further agrees that all offsets, credits, charges and claims of whatsoever kind or character are fully settled and satisfied. This Second Amendment is a Credit Document under and for purposes of the Credit Agreement. 6. Representations and Warranties. The representations and warranties made by Borrower in Article 4 of the Credit Agreement are true and correct as of the date of this Second Amendment. 7. NO CONTROL BY BANKS AND ADMINISTRATIVE AGENT. BORROWER AGREES AND ACKNOWLEDGES THAT ALL OF THE COVENANTS AND AGREEMENTS PROVIDED FOR AND MADE BY BORROWER IN THIS SECOND AMENDMENT, THE CREDIT AGREEMENT, AND IN THE OTHER LOAN DOCUMENTS -3- 4 ARE THE RESULT OF EXTENSIVE AND ARMS-LENGTH NEGOTIATIONS AMONG BORROWER, ADMINISTRATIVE AGENT, AND BANKS. BANKS' RIGHTS AND REMEDIES PROVIDED FOR IN THE CREDIT AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE INTENDED TO PROVIDE BANK WITH A RIGHT TO OVERSEE BORROWER'S ACTIVITIES AS THEY RELATE TO THE LOAN TRANSACTIONS PROVIDED FOR IN THE CREDIT AGREEMENT, WHICH RIGHT IS BASED ON BANKS' VESTED INTEREST IN BORROWER'S ABILITY TO PAY THE RESPECTIVE NOTES EXECUTED BY BORROWER AND PERFORM THE OTHER CREDIT OBLIGATIONS. NONE OF THE COVENANTS OR OTHER PROVISIONS CONTAINED IN THE CREDIT AGREEMENT SHALL, OR SHALL BE DEEMED TO, GIVE BANKS OR ADMINISTRATIVE AGENT THE RIGHT OR POWER TO EXERCISE CONTROL OVER, OR OTHERWISE IMPAIR, THE DAY-TO-DAY AFFAIRS, OPERATIONS, AND MANAGEMENT OF BORROWER. 8. ARBITRATION. (a) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THE CREDIT AGREEMENT (AS HEREBY AMENDED) OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS SECOND AMENDMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THE CREDIT AGREEMENT (AS HEREBY AMENDED) APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. (b) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE BORROWER'S DOMICILE AT THE TIME OF THIS SECOND AMENDMENT'S EXECUTION AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE -4- 5 COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. (c) RESERVATION OF RIGHTS. NOTHING IN THIS SECOND AMENDMENT SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF A BANK (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLAT ERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OR POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANKS MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. 9. Miscellaneous. 9.1 Preservation of the Credit Agreement. Except as specifically amended and modified by the terms of this Second Amendment, all of the terms, provisions, covenants, warranties, and agreements contained in the Credit Agreement and in the other Loan Documents shall remain in full force and effect (any irreconcilable conflicts or inconsistencies between the terms of this Second Amendment and the Credit Agreement, or any other Loan Document, shall be governed and controlled by this Second Amendment). 9.2 Counterparts. This Second Amendment may be executed in two or more counterparts, and it shall not be necessary that any one of the counterparts be executed by all of the parties hereto. Each fully or partially executed counterpart shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. -5- 6 9.3 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 9.4 Joinder by Subsidiaries. Each Subsidiary of Borrower joins in the execution and delivery of this Second Amendment to agree to the modification of the Guaranty as provided for in Section 2 above and to evidence that each of their obligations under the Guaranty remains in full force and effect and are not impaired or adversely affected in any way by the execution and delivery of this Second Amendment by Borrower and that they continue to secure all indebtedness, and obligations of Borrower to Banks, whether now existing or hereafter created. -6- 7 IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first above written. BORROWER: EGL, INC. By: /s/ DOUGLAS A. SECKEL ------------------------------------------- Douglas A. Seckel, Treasurer ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent By: /s/ WILLIAM B. BORUS ------------------------------------------- William B. Borus, Senior Vice President BANKS: Revolving Loan Commitment: BANK OF AMERICA, N.A. $50,000,000.00 By: /s/ WILLIAM B. BORUS ------------------------------------------- William B. Borus, Senior Vice President Revolving Loan Commitment: SOUTHTRUST BANK $25,000,000.00 By: /s/ JOHN E. ELAM, JR. ------------------------------------------- John E. Elam, Jr., Group Vice President -7- 8 THE UNDERSIGNED JOIN IN THE EXECUTION OF THIS INSTRUMENT FOR THE PURPOSES DESCRIBED ABOVE: EGL EAGLE GLOBAL LOGISTICS, LP, a Delaware limited partnership By: EGL Management, LLC, Managing Partner By: /s/ JAMES R. CRANE -------------------------------------------- James R. Crane, Chief Executive Officer EGL MANAGEMENT, LLC, a Delaware corporation By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, Chief Executive Officer EGL DELAWARE LIMITED LIABILITY COMPANY, a Delaware limited liability company By: /s/ E. JOSEPH BENTO ----------------------------------------------------- E. Joseph Bento, President EAGLE FREIGHT SERVICES, INC., a Texas corporation By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, President EAGLE FREIGHT SERVICES, INC., a California corporation By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, President -8- 9 EAGLE USA TRANSPORTATION SERVICES, INC., a Texas corporation By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, Chief Executive Officer EAGLE MARITIME SERVICES, INC., a Texas corporation By: /s/ VITTORIO FAVATI ----------------------------------------------------- Vittorio Favati, President FREIGHT SERVICES MANAGEMENT, INC., a Texas corporation By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, Chief Executive Officer EAGLE USA IMPORT BROKERS, INC., a Texas corporation By: /s/ STEPHEN CARATTINI ----------------------------------------------------- Stephen Carattini, President EAGLE URBAN RENEWAL CORPORATION, a New Jersey Urban Renewal Entity By: /s/ JAMES R. CRANE ----------------------------------------------------- James R. Crane, Chief Executive Officer -9- 10 EAGLE INTERNATIONAL HOLDINGS, INC., a Delaware corporation By: /s/ VITTORIO FAVATI ----------------------------------------------------- Vittorio Favati, President EUSA PARTNERS, INC., a Delaware corporation By: /s/ KELLY BIAR ----------------------------------------------------- Kelly Biar, President EUSA HOLDINGS, INC., a Delaware corporation By: /s/ KELLY BIAR ----------------------------------------------------- Kelly Biar, President EAGLE PARTNERS, a Texas general partnership By: EUSA PARTNERS, INC., General Partner By: /s/ KELLY BIAR -------------------------------------------- Kelly Biar, President - and - By: EUSA HOLDINGS, INC., General Partner By: /s/ KELLY BIAR -------------------------------------------- Kelly Biar, President -10- 11 Schedule I NOTICE INFORMATION 1. Eagle USA Airfreight, Inc. 15350 Vickery Drive Houston, Texas 77032 Attention: Douglas A. Seckel Telephone No: (281) 618-3420 Telecopy No.: (281) 618-3429 2. Bank of America, N.A. 700 Louisiana 7th Floor Houston, Texas 77002 Attention: William B. Borus Telephone No.: (713) 247-7756 Telecopy No.: (713) 247-7748 3. SouthTrust Bank One Riverway, Suite 400 Houston, Texas 77056 Attention: John E. Elam, Jr. Telephone No.: (713) 402-3603 Telecopy No.: (713) 627-1492 EX-10.II 3 h81850ex10-ii.txt LONG-TERM INCENTIVE PLAN 1 EXHIBIT 10(ii) EGL, INC. LONG-TERM INCENTIVE PLAN (As Amended and Restated Effective July 26, 2000 and as further amended on September 18, 2000) 1. OBJECTIVES. The EGL, Inc. Long-Term Incentive Plan (the "Plan") is designed to retain selected employees of EGL, Inc. (the "Company") and its Subsidiaries and reward them for making significant contributions to the success of the Company and its Subsidiaries. These objectives are to be accomplished by making awards under the Plan and thereby providing Participants with a proprietary interest in the growth and performance of the Company and its Subsidiaries. 2. DEFINITIONS. As used herein, the terms set forth below shall have the following respective meanings: "AWARD" means the grant of any form of stock option, stock appreciation right, stock award or cash award, whether granted singly, in combination or in tandem, to a Participant pursuant to any applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan. "AWARD AGREEMENT" means a written agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable to an Award. "BOARD" means the Board of Directors of the Company. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITTEE" means such committee of two or more members of the Board as is designated by the Board to administer the Plan. "COMMON STOCK" means the Common Stock, par value $.001 per share, of the Company. "DIRECTOR" means an individual serving as a member of the Board. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "FAIR MARKET VALUE" means, as of a particular date, (a) if the shares of Common Stock are listed on a national securities exchange, the mean between the 1 2 highest and lowest sales price per share of Common Stock on the consolidated transaction reporting system for the principal such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (b) if the shares of Common Stock are not so listed but are quoted on the Nasdaq National Market, the mean between the highest and lowest sales price per share of Common Stock on the Nasdaq National Market on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation Bureau, Inc. or (d) if none of the above is applicable, such amount as may be determined by the Board (or an Independent Third Party, should the Board elect in its sole discretion to instead utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. "INDEPENDENT THIRD PARTY" means an individual or entity independent of the Company (and any transferor or transferee of Common Stock acquired upon the exercise of an option under the Plan, if applicable) with experience in providing investment banking appraisal or valuation services and with expertise generally in the valuation of securities or other property of the type at issue, that is chosen by the Board, in its sole discretion, to value securities or other property for purposes of this Plan. The Company's independent accountants shall be deemed to satisfy the criteria for an Independent Third Party if selected by the Board for that purpose. The Board may utilize one or more Independent Third Parties. "PARTICIPANT" means an employee of the Company or any of its Subsidiaries to whom an Award has been made under this Plan. "RESTRICTED STOCK" means Common Stock that is restricted or subject to forfeiture provisions. "SUBSIDIARY" means (i) with respect to any Awards other than incentive stock options within the meaning of Code Section 422, any corporation, limited liability company, general or limited partnership, or similar entity of which the Company directly or indirectly owns shares representing more than 50% of the voting power of all classes or series of equity securities of such entity, which have the right to vote generally on matters submitted to a vote of the holders of equity interests in such entity, and (ii) with respect to Awards of incentive stock options, any subsidiary within the meaning of Section 424(f) of the Code or any successor provision. 3. ELIGIBILITY. All employees consultants and independent contractors of the Company and its Subsidiaries are eligible for Awards under this Plan. The Committee 2 3 shall select the Participants in the Plan from time to time by the grant of Awards under the Plan. 4. COMMON STOCK AVAILABLE FOR AWARDS. There shall be available for Awards granted wholly or partly in Common Stock (including rights or options which may be exercised for or settled in Common Stock) during the term of this Plan an aggregate of 12,150,000 shares of Common Stock, subject to adjustment as provided in Paragraph 14. The Board and the appropriate officers of the Company shall from time to time take whatever actions are necessary to file required documents with governmental authorities and stock exchanges and transaction reporting systems to make shares of Common Stock available for issuance pursuant to Awards. Common Stock related to Awards that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock or in a manner such that all or some of the shares covered by an Award are not issued to a Participant, or are exchanged for Awards that do not involve Common Stock, shall immediately become available for Awards hereunder. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum as it may deem appropriate. 5. ADMINISTRATION. This Plan shall be administered by the Committee, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to carry it into effect. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. No member of the Committee or officer of the Company to whom it has delegated authority in accordance with the provisions of Paragraph 6 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute. 6. DELEGATION OF AUTHORITY. The Committee may delegate to the President and to other senior officers of the Company its duties under this Plan pursuant to such conditions or limitations as the Committee may establish, except that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who are subject to Section 16 of the Exchange Act. 7. AWARDS. The Committee shall determine the type or types of Awards to be made to each Participant under this Plan. Each Award made hereunder shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and shall be signed by the Participant and by the President or any Vice President of the Company for and on behalf of the Company. An Award Agreement may include provisions for the 3 4 repurchase by the Company of Common Stock acquired pursuant to the Plan and the repurchase of a Participant's option rights under the Plan. Awards may consist of those listed in this Paragraph 7 and may be granted singly, in combination or in tandem. Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to grants or rights (a) under this Plan or any other employee plan of the Company or any of its Subsidiaries, including the plan of any acquired entity, or (b) made to any Company or Subsidiary employee by the Company or any Subsidiary. An Award may provide for the granting or issuance of additional, replacement or alternative Awards upon the occurrence of specified events, including the exercise of the original Award. Notwithstanding anything herein to the contrary, no Participant may be granted Awards consisting of stock options or stock appreciation rights exercisable for more than 620,000 shares of Common Stock, subject to adjustment as provided in Paragraph 14 (i.e., 20% of the shares of Common Stock originally authorized for Awards under this Plan, as previously adjusted pursuant to Paragraph 14). In the event of an increase in the number of shares authorized under the Plan, the 20% limitation will apply to the number of shares authorized. (i) STOCK OPTION. An Award may consist of a right to purchase a specified number of shares of Common Stock at a price specified by the Committee in the Award Agreement or otherwise. A stock option may be in the form of an incentive stock option ("ISO") which, in addition to being subject to applicable terms, conditions and limitations established by the Committee, complies with Section 422 of the Code. Notwithstanding the foregoing, no ISO can be granted under the Plan more than ten years following the February 23, 1998 amendment and restatement of the Plan. (ii) STOCK APPRECIATION RIGHT. An Award may consist of a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the stock appreciation right ("SAR") is exercised over a specified strike price as set forth in the applicable Award Agreement. (iii) STOCK AWARD. An Award may consist of Common Stock or may be denominated in units of Common Stock. All or part of any stock Award may be subject to conditions established by the Committee and set forth in the Award Agreement, which conditions may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attaining specified growth rates and other comparable measurements of performance. Such Awards may be based on Fair Market Value or other specified valuations. The certificates evidencing shares of Common Stock issued in connection with a stock Award shall contain appropriate legends and restrictions describing the terms and conditions of the restrictions applicable thereto. (iv) CASH AWARD. An Award may be denominated in cash with the amount of the eventual payment subject to future service and such other 4 5 restrictions and conditions as may be established by the Committee and set forth in the Award Agreement, including, but not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attaining specified growth rates and other comparable measurements of performance. 8. PAYMENT OF AWARDS. (a) GENERAL. Payment of Awards may be made in the form of cash or Common Stock or combinations thereof and may include such restrictions as the Committee shall determine including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. (b) DEFERRAL. The Committee may, in its discretion, (i) permit selected Participants to elect to defer payments of some or all types of Awards in accordance with procedures established by the Committee or (ii) provide for the deferral of an Award in an Award Agreement or otherwise. Any such deferral may be in the form of installment payments or a future lump sum payment. Any deferred payment, whether elected by the Participant or specified by the Award Agreement or by the Committee, may be forfeited if and to the extent that the Award Agreement so provides. (c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights may be extended to and made part of any Award denominated in Common Stock or units of Common Stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents for deferred payment denominated in Common Stock or units of Common Stock. (d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a Participant may be offered an election to substitute an Award for another Award or Awards of the same or different type. 9. STOCK OPTION EXERCISE. The price at which shares of Common Stock may be purchased under a stock option shall be paid in full at the time of exercise in cash or, if permitted by the Committee, by means of tendering Common Stock, including Restricted Stock, that has been held by the Participant for at least six months and that is valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for tendering Common Stock to exercise a stock option as it deems appropriate. The Committee may provide for procedures to permit the exercise or purchase of Awards by (a) loans from the Company or (b) use of the proceeds to be received from the sale by a third party of Common Stock issuable pursuant to an Award in a broker-assisted transaction. Unless otherwise provided in the applicable Award Agreement, in the event shares of Restricted Stock are tendered as consideration for the exercise of a stock option, a number of the shares issued upon the exercise of the stock option, equal to the number of shares of Restricted Stock used as consideration 5 6 therefor, shall be subject to the same restrictions as the Restricted Stock so submitted as well as any additional restrictions that may be imposed by the Committee. 10. TAX WITHHOLDING. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made. 11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law except that (a) no amendment or alteration that would impair the rights of any Participant under any Award previously granted to such Participant shall be made without such Participant's consent and (b) no amendment or alteration shall be effective prior to approval by the Company's shareholders to the extent such approval is required by applicable laws, regulations, stock exchange or quotation system requirements. 12. TERMINATION OF EMPLOYMENT. Upon the termination of employment by a Participant, any unexercised, deferred or unpaid Awards shall be treated as provided in the specific Award Agreement evidencing the Award. Each Award granted pursuant to this Plan which is a stock option shall provide that if the Participant ceases to be employed by the Company or its affiliates for any reason whatsoever, the option shall immediately terminate to the extent the option is not vested (or does not become vested as a result of such termination of employment) on the date the Participant terminates employment. 13. ASSIGNABILITY. Unless otherwise determined by the Committee and provided in the Award Agreement, no Award or any other benefit under this Plan constituting a derivative security within the meaning of Rule 16a-1(c) under the Exchange Act shall be assignable or otherwise transferable except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. The Committee may prescribe and include in applicable Award Agreements other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this Paragraph 13 shall be null and void. 14. ADJUSTMENTS. (a) The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its shareholders to make or authorize any or all 6 7 adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above. (b) In the event of any subdivision or consolidation of outstanding shares of Common Stock or declaration of a dividend payable in shares of Common Stock or capital reorganization or reclassification or other transaction involving an increase or reduction in the number of outstanding shares of Common Stock, the Committee may adjust proportionally (i) the number of shares of Common Stock reserved under this Plan and covered by outstanding Awards denominated in Common Stock or units of Common Stock; (ii) the exercise or other price in respect of such Awards; and (iii) the appropriate Fair Market Value and other price determinations for such Awards. Notwithstanding the foregoing, no adjustment is required for the stock split effected or to be effected shortly before the initial grant of Options under this Plan. In the event of any consolidation or merger of the Company with another corporation or entity or the adoption by the Company of a plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Committee shall make such adjustments or other provisions as it may deem equitable, including adjustments to avoid fractional shares, to give proper effect to such event. Additionally, and without limiting the generality of the foregoing, there shall be no adjustment for any dividend or distribution of cash, debt or other property in respect of the Company's earnings or its accumulated adjustments account as defined in Section 1368(e)(1) of the Code (including any estimated amount of such account) in respect of the period in which the Company is an "S" corporation within the meaning of Section 1361 of the Code. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized, in its discretion, (i) to issue or assume stock options, regardless of whether in a transaction to which Section 424(a) of the Code applies, by means of substitution of new options for previously issued options or an assumption of previously issued options, (ii) to make provision, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, Awards and the termination of options that remain unexercised at the time of such transaction or (iii) to provide for the acceleration of the vesting and exercisability of the options and the cancellation thereof in exchange for such payment as shall be mutually agreeable to the Participant and the Committee. 15. RESTRICTIONS. No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. It is the intent of the Company that this Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange Act unless otherwise provided herein or in an Award Agreement, that any ambiguities or inconsistencies in the 7 8 construction of this Plan be interpreted to give effect to such intention and that, if any provision of this Plan is found not to be in compliance with Rule 16b-3, such provision shall be null and void to the extent required to permit this Plan to comply with Rule 16b-3. Certificates evidencing shares of Common Stock delivered under this Plan may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed and any applicable federal and state securities law. The Committee may cause a legend or legends to be placed upon any such certificates to make appropriate reference to such restrictions. 16. UNFUNDED PLAN. Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to a grant of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. None of the Company, the Board or the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. 17. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas. 18. EFFECTIVE DATE OF PLAN. This Plan was originally adopted by the Board of Directors and Shareholders in 1994. The Plan was subsequently amended and restated effective February 23, 1998 and thereafter amended and restated effective July 26, 2000. The Plan was subsequently amended by the Shareholders on September 18, 2000. Attested to by the Secretary of EGL, Inc. as adopted by the Board of Directors of EGL, Inc. effective as of the 18th day of September, 2000. /s/ MICHAEL D. SLAUGHTER -------------------------------------------- Michael D. Slaughter Secretary 8 EX-10.III 4 h81850ex10-iii.txt EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10(iii) EGL, INC. EMPLOYEE STOCK PURCHASE PLAN (AMENDED AND RESTATED EFFECTIVE JULY 26, 2000 AND AS FURTHER AMENDED ON SEPTEMBER 18, 2000) 1. PURPOSE The EGL, Inc. Employee Stock Purchase Plan (the "Plan") is designed to encourage and assist all employees of EGL, Inc., a Texas corporation ("Eagle") and Subsidiaries (as defined in Section 4) (hereinafter collectively referred to as the "Company"), where permitted by applicable laws and regulations, to acquire an equity interest in Eagle through the purchase of shares of common stock, .001 par value, of Eagle ("Common Stock"). It is intended that this Plan shall constitute an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. ADMINISTRATION OF THE PLAN The Plan shall be administered and interpreted by the Compensation Committee (the "Committee") appointed by the Board of Directors of Eagle (the "Board"), which Committee shall consist of at least two (2) persons. The Committee shall supervise the administration and enforcement of the Plan according to its terms and provisions and shall have all powers necessary to accomplish these purposes and discharge its duties hereunder including, but not by way of limitation, the power to (i) employ and compensate agents of the Committee for the purpose of administering the accounts of participating employees; (ii) construe or interpret the Plan; (iii) determine all questions of eligibility; and (iv) compute the amount and determine the manner and time of payment of all benefits according to the Plan. The Committee may act by decision of a majority of its members at a regular or special meeting of the Committee or by decision reduced to writing and signed by all members of the Committee without holding a formal meeting. 3. NATURE AND NUMBER OF SHARES The Common Stock subject to issuance under the terms of the Plan shall be shares of Eagle's authorized but unissued shares, previously issued shares reacquired and held by Eagle or shares purchased on the open market. The aggregate number of shares which may be issued under the Plan shall not exceed five hundred fifty thousand (550,000) shares of Common Stock. All shares purchased under the Plan, regardless of source, shall be counted against the five hundred fifty thousand (550,000) share limitation. In the event of any reorganization, stock split, reverse stock split, stock dividend, combination of shares, merger, consolidation, offering of rights or other similar change in the capital structure of Eagle, the Committee may make such adjustment, if any, as it deems appropriate in the number, kind and purchase price of the shares available for purchase under the Plan and in the maximum number of shares which may be issued under the Plan, subject to the approval of the Board and in accordance with Section 19. 4. ELIGIBILITY REQUIREMENTS Each "Employee" (as hereinafter defined), except as described in the next following paragraph, shall become eligible to participate in the Plan in accordance with Section 5 on the first "Enrollment Date" (as defined therein) following employment by the Company. Participation in the Plan is voluntary. 2 The following Employees are not eligible to participate in the Plan: (i) Employees who would, immediately upon enrollment in the Plan, own directly or indirectly, or hold options or rights to acquire, an aggregate of five percent (5%) or more of the total combined voting power or value of all outstanding shares of all classes of the Company or any subsidiary (in determining stock ownership of an individual, the rules of Section 424(d) of the Code shall be applied, and the Committee may rely on representations of fact made to it by the employee and believed by it to be true); (ii) Employees who are customarily employed by the Company less than twenty (20) hours per week or less than five (5) months in any calendar year; and (iii) Employees who have not completed at least six (6) months of service with the Company as of an Enrollment Date. "Employee" shall mean any individual employed full-time by Eagle or any Subsidiary (as hereinafter defined). "Subsidiary" shall mean Eagle Freight Services, Inc. and any other corporation (a) which is in an unbroken chain of corporations beginning with Eagle if, on or after the Effective Date, each of the corporations other than the last corporation in the chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain and (b) which has adopted the Plan with the approval of the Committee. 5. ENROLLMENT Each eligible Employee of Eagle or any Subsidiary as of July 1, 1998 (the "Effective Date" herein) may enroll in the Plan as of the Effective Date. Each other eligible Employee of Eagle or a participating Subsidiary who thereafter becomes eligible to participate may enroll in the Plan on the first to occur of January 1 or July 1 following the date he first meets the eligibility requirements of Section 4. Any eligible Employee not enrolling in the Plan when first eligible may enroll in the Plan any subsequent January 1 or July 1. Any eligible Employee may enroll or re-enroll in the Plan on the dates hereinabove prescribed or such other specific dates established by the Committee from time to time ("Enrollment Dates"). In order to enroll, an eligible Employee must complete, sign and submit the appropriate form to the person designated by the Committee. 6. METHOD OF PAYMENT Payment for shares is to be made as of the applicable "Purchase Date" (as defined in Section 9) through payroll deductions on an after-tax basis (with no right of prepayment) over the Plan's designated purchase period (the "Purchase Period"), with the first such deduction commencing with the first payroll period ending after the Enrollment Date. Each Purchase Period under the Plan shall be a period of six (6) calendar months beginning on each January 1 and ending on the following June 30 and on each July 1 and ending on the following December 31 or such other period as the Committee may prescribe; provided, however, that the Purchase Period beginning on the Effective Date shall commence on the Effective Date and end on December 31, 1998. Each participating Employee (hereinafter referred to as a "Participant") will authorize such deductions from his pay for each month during the Purchase Period and such amounts will be deducted in conformity with his employer's payroll deduction schedule. Each Participant may elect to make contributions each pay period in amounts not less than $10, not to exceed an annual contribution equal to $20,000 (or such other dollar amounts as the Committee may establish from time to time before an Enrollment Date for all purchases to occur during the relevant Purchase Period). In establishing other dollar amounts of permitted contributions, the Committee may take into account the 3 "Maximum Share Limitation" (as defined in Section 8). The rate of contribution shall be designated by the Participant in the enrollment form. A Participant may elect to increase or decrease the rate of contribution effective as of the first day of the Purchase Period by giving prior written notice to the person designated by the Committee on the appropriate form. A Participant may not elect to increase or decrease the rate of contribution during a Purchase Period. A Participant may suspend payroll deductions at any time during the Purchase Period, by giving prior written notice to the person designated by the Committee on the appropriate form. If a Participant elects to suspend his payroll deductions, such Participant's account will continue to accrue interest and will be used to purchase stock at the end of the Purchase Period. A Participant may also elect to withdraw his entire contributions for the current Purchase Period in accordance with Section 8 by giving prior written notice to the person designated by the Committee on the appropriate form. Any Participant who withdraws his contributions will receive, as soon as practicable, his entire account balance, including interest and dividends, if any. Any Participant who suspends payroll deductions or withdraws contributions during any Purchase Period cannot resume payroll deductions during such Purchase Period and must re-enroll in the Plan in order to participate in the next Purchase Period. Except in case of cancellation of election to purchase, death, resignation or other terminating event, the amount in a Participant's account at the end of the Purchase Period will be applied to the purchase of the shares. 7. CREDITING OF CONTRIBUTIONS, INTEREST AND DIVIDENDS Contributions shall be credited to a Participant's account as soon as administratively feasible after payroll withholding. Unless otherwise prohibited by laws and regulations, Participant contributions will receive interest at a rate realized for the investment vehicle or vehicles designated by the Committee for purposes of the Plan. Interest will be credited to a Participant's account from the first date on which such Participant's contributions are deposited with the investment vehicle until the earlier of (i) the end of the Purchase Period or (ii) in the event of cancellation, death, resignation or other terminating event, the last day of the month prior to the date on which such contributions are returned to the Participant. Dividends on shares held in a Participant's account in the Plan will also be credited to such Participant's account. Any such contributions, interest and dividends shall be deposited in or held by a bank or financial institution designated by the Committee for this purpose (the "Custodian"). 8. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT Enrollment in the Plan by an Employee on an Enrollment Date will constitute the grant by the Company to the Participant of the right to purchase shares of Common Stock under the Plan. Re-enrollment by a Participant in the Plan will constitute a grant by the Company to the Participant of a new opportunity to purchase shares on the Enrollment Date on which such re-enrollment occurs. A Participant who has not (a) terminated employment, (b) withdrawn his contributions from the Plan, or (c) notified the Company in writing, by such date as the Committee shall establish (which date shall not be later than June 1 or December 1, as applicable), of his election to withdraw his payroll deductions plus interest as of the applicable of June 30 or December 31 will have shares of Common Stock purchased for him on the applicable Purchase Date, and he will automatically be re-enrolled in the Plan on the Enrollment Date immediately following the Purchase Date on which such purchase has occurred, unless each Participant notifies the person designated by the Committee on the appropriate form that he elects not to re-enroll. Each right to purchase shares of Common Stock under the Plan during a Purchase Period shall have the following terms: 4 (i) the right to purchase shares of Common Stock during a particular Purchase Period shall expire on the earlier of: (A) the completion of the purchase of shares on the Purchase Date occurring in the Purchase Period, or (B) the date on which participation of such Participant in the Plan terminates for any reason; (ii) payment for shares purchased will be made only through payroll withholding and the crediting of interest and dividends, if applicable, in accordance with Sections 6 and 7; (iii) purchase of shares will be accomplished only in accordance with Section 9; (iv) the price per share will be determined as provided in Section 9; (v) the right to purchase shares (taken together with all other such rights then outstanding under this Plan and under all other similar stock purchase plans of Eagle or any Subsidiary) will in no event give the Participant the right to purchase a number of shares during a calendar year in excess of the number of shares of Common Stock derived by dividing $25,000 by the fair market value of the Common Stock (the "Maximum Share Limitation") on the applicable Grant Date determined in accordance with Section 9; (vi) shares purchased under this Plan may not be sold within six (6) months of the Purchase Date, unless the Compensation Committee, in its sole discretion, waives this requirement; and (vii) the right to purchase shares will in all respects be subject to the terms and conditions of the Plan, as interpreted by the Committee from time to time. 9. PURCHASE OF SHARES The right to purchase shares of Common Stock granted by the Company under the Plan is for the term of a Purchase Period. The fair market value of the Common Stock ("Fair Market Value") to be purchased during such Purchase Period will be the final closing sales price per share of the Common Stock on the NASDAQ National Market System on the first trading day of the calendar month of January or July, as applicable, or such other trading date designated by the Committee (the "Grant Date"). The Fair Market Value of the Common Stock will again be determined in the same manner on the last trading day of the calendar month of June or December, as applicable, or such other trading date designated by the Committee (the "Purchase Date"); however, in no event shall the Committee, in the exercise of its discretion, designate a Purchase Date beyond twenty-seven (27) months from the related Enrollment Date or otherwise fail to meet the requirements of Section 423(b)(7) of the Code. These dates constitute the date of grant and the date of exercise for valuation purposes of Section 423 of the Code. As of the Purchase Date, the Committee shall apply the funds then credited to each Participant's account to the purchase of whole shares of Common Stock. The cost to the Participant for the shares purchased during a Purchase Period shall be the lower of: (i) eighty-five percent (85%) of the Fair Market Value of Common Stock on the Grant Date; or (ii) eighty-five percent (85%) of the Fair Market Value of Common Stock on the Purchase Date. Certificates evidencing shares purchased shall be delivered to the Custodian or to any other bank or financial institution designated by the Committee for this purpose or delivered to the Participant (if the Participant has elected by written notice to the Committee to receive the certificate) as soon as administratively feasible after the Purchase Date; however, certificates shall not be delivered to the Participant within six (6) 5 months of the Purchase Date of the underlying shares, except as otherwise provided herein. Notwithstanding the foregoing, Participants shall be treated as the record owners of their shares effective as of the Purchase Date. Shares that are held by the Custodian or any other designated bank or financial institution shall be held in book entry form. Any cash equal to less than the price of a whole share of Common Stock shall be credited to a Participant's account on the Purchase Date and carried forward in his account for application during the next Purchase Period. Any Participant (i) who purchases stock at the end of a Purchase Period and is not re-enrolled in the Plan for the next Purchase Period or (ii) who withdraws his contributions from the Plan prior to the next Purchase Date will receive a certificate for the number of shares held in his account for at least six (6) months as of the most recent Purchase Date and any cash, dividends or interest remaining in his account. Such Participant may elect to receive a certificate for the remaining number of shares held in his account six (6) months after such shares were purchased or, if earlier, upon such Participant's termination of employment. This six-month holding requirement may be waived by the Compensation Committee, in its sole discretion. Until such certificates are distributed to the Participant, the Participant will not be permitted to transfer ownership of the certificates except as contemplated by Section 14 of the Plan. Any Participant who terminates employment will receive a certificate for the number of shares held in his account and a cash refund attributable to amounts equal to less than the price of a whole share, and any accumulated contributions, dividends and interest. If for any reason the purchase of shares with a Participant's allocations to the Plan exceeds or would exceed the Maximum Share Limitation, such excess amounts shall be refunded to the Participant as soon as practicable after such excess has been determined to exist. If as of any Purchase Date the shares authorized for purchase under the Plan are exceeded, enrollments shall be reduced proportionately to eliminate the excess. Any funds that cannot be applied to the purchase of shares due to excess enrollment shall be refunded as soon as administratively feasible, including interest determined in accordance with Section 7. The Committee in its discretion may also provide that excess enrollments may be carried over to the next Purchase Period under this Plan or any successor plan according to the regulations set forth under Section 423 of the Code. 10. MANNER OF WITHDRAWAL A Participant may elect to withdraw at any time (without withdrawing from participation in the Plan) shares which have been held in his account for at least six (6) months by giving notice to the person designated by the Committee on the appropriate form. Upon receipt of such notice from the person designated by the Committee, the Custodian, bank or other financial institution designated by the Committee for this purpose will arrange for the issuance and delivery of such shares held in the Participant's account as soon as administratively feasible. 11. TERMINATION OF PARTICIPATION The right to participate in the Plan terminates immediately when a Participant ceases to be employed by the Company for any reason whatsoever (including death, unpaid disability or when the Participant's employer ceases to be a Subsidiary) or the Participant otherwise becomes ineligible. Participation also terminates immediately when the Participant voluntarily withdraws his contributions from the Plan. Participation terminates immediately after the Purchase Date if the Participant is not re-enrolled in the Plan for the next Purchase Period or if the Participant has suspended payroll deductions during any Purchase Period and has not re-enrolled in the Plan for the next Purchase Period. As soon as administratively feasible after termination of participation, the Committee shall pay to the Participant or his beneficiary or legal representative all amounts credited to his account, including interest and dividends, if applicable, determined in accordance with Section 7, and shall cause a certificate for the number of shares held in his account to be delivered to the Participant, subject to the restrictions in Section 9. For purposes of the Plan, a Participant is not deemed to have terminated his employment if he transfers employment from Eagle to a Subsidiary, or vice versa, or transfers employment between Subsidiaries. 6 12. UNPAID LEAVE OF ABSENCE Unless the Participant has voluntarily withdrawn his contributions from the Plan, shares will be purchased for his account on the Purchase Date next following commencement of an unpaid leave of absence by such Participant, provided such leave does not constitute a termination of employment. The number of shares to be purchased will be determined by applying to the purchase the amount of the Participant's contributions made up to the commencement of such unpaid leave of absence plus interest on such contributions and dividends, if applicable, both determined in accordance with Section 7. If the Participant's unpaid leave of absence both commences and terminates during the same Purchase Period and he has resumed eligible employment prior to the Purchase Date related to that Purchase Period, he may also resume payroll deductions immediately, and shares will be purchased for him on such Purchase Date as otherwise provided in Section 9. 13. DESIGNATION OF BENEFICIARY Each Participant may designate one or more beneficiaries in the event of death and may, in his sole discretion, change such designation at any time. Any such designation shall be effective upon receipt by the person designated by the Committee and shall control over any disposition by will or otherwise. As soon as administratively feasible after the death of a Participant, amounts credited to his account, including interest and dividends, if applicable, determined in accordance with Section 7, shall be paid in cash and a certificate for any shares shall be delivered to the Participant's designated beneficiaries or, in the absence of such designation, to the executor, administrator or other legal representative of the Participant's estate. Such payment shall relieve the Company of further liability to the deceased Participant with respect to the Plan. If more than one beneficiary is designated, each beneficiary shall receive an equal portion of the account unless the Participant has given express contrary instructions. 14. ASSIGNMENT Except as provided in Section 13, the rights of a Participant under the Plan will not be assignable or otherwise transferable by the Participant, other than by will or the laws of descent and distribution or pursuant to a "qualified domestic relations order," as defined in Section 414(p) of the Code. No purported assignment or transfer of such rights of a Participant under the Plan, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the purported assignee or transferee any interest or right therein whatsoever, but immediately upon such assignment or transfer, or any attempt to make the same, such rights shall terminate and become of no further effect. If this provision is violated, the Participant's election to purchase Common Stock shall terminate, and the only obligation of the Company remaining under the Plan will be to pay to the person entitled thereto the amount then credited to the Participant's account. No Participant may create a lien on any funds, securities, rights or other property held for the account of the Participant under the Plan, except to the extent that there has been a designation of beneficiaries in accordance with the Plan, and except to the extent permitted by will or the laws of descent and distribution if beneficiaries have not been designated. A Participant's right to purchase shares under the Plan shall be exercisable only during the Participant's lifetime and only by him. 15. COSTS All costs and expenses incurred in administering this Plan shall be paid by the Company. Any brokerage fees for the sale of shares purchased under the Plan shall be paid by the Participant. 7 16. REPORTS At the end of each Purchase Period, the Company shall provide or cause to be provided to each Participant a report of his contributions, including interest earned, and the number of whole shares of Common Stock purchased with such contributions by that Participant on each Purchase Date. 17. EQUAL RIGHTS AND PRIVILEGES All eligible Employees shall have equal rights and privileges with respect to the Plan so that the Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provision of the Code and related regulations. Any provision of the Plan which is inconsistent with Section 423 or any successor provision of the Code shall without further act or amendment by the Company be reformed to comply with the requirements of Section 423. This Section 17 shall take precedence over all other provisions in the Plan. 18. RIGHTS AS SHAREHOLDERS A Participant will have no rights as a stockholder under the election to purchase until he becomes a stockholder as herein provided. A Participant will become a stockholder with respect to shares for which payment has been completed as provided in Section 9 at the close of business on the last business day of the Purchase Period. 19. MODIFICATION AND TERMINATION The Board may amend or terminate the Plan at any time insofar as permitted by law. No amendment shall be effective unless within one (1) year after it is adopted by the Board it is approved by the holders of Eagle's outstanding shares if and to the extent such amendment is required to be approved by shareholders in order to cause the rights granted under the Plan to purchase shares of Common Stock to meet the requirements of Section 423 of the Code (or any successor provision). The Plan shall terminate after all Common Stock issued under the Plan has been purchased, unless terminated earlier by the Board or unless additional Common Stock is issued under the Plan with the approval of the shareholders. In the event the Plan is terminated, the Committee may elect to terminate all outstanding rights to purchase shares under the Plan either immediately or upon completion of the purchase of shares on the next Purchase Date, unless the Committee has designated that the right to make all such purchases shall expire on some other designated date occurring prior to the next Purchase Date. If the rights to purchase shares under the Plan are terminated prior to expiration, all funds contributed to the Plan which have not been used to purchase shares shall be returned to the Participants as soon as administratively feasible, including interest and dividends, if applicable, determined in accordance with Section 7. 20. EFFECTIVE DATE This Plan was originally adopted by the Board and the Shareholders on February 23, 1998. This Plan was subsequently amended and restated by the Board effective July 26, 2000 and further amended by action of the Shareholders on September 18, 2000. 21. GOVERNMENTAL APPROVALS OR CONSENTS This Plan and any offering or sale made to Employees under it are subject to any governmental approvals or consents that may be or become applicable in connection therewith. Subject to the provisions of Section 19, the Board may make such changes in the Plan and include such terms in any offering under the Plan as may be desirable to comply with the rules or regulations of any governmental authority. 8 22. LISTING OF SHARES AND RELATED MATTERS If at any time the Board or the Committee shall determine, based on opinion of legal counsel, that the listing, registration or qualification of the shares covered by the Plan upon any national securities exchange or reporting system or under any state or federal law is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares under the Plan, no shares will be sold, issued or delivered unless and until such listing, registration or qualification shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to legal counsel. 23. EMPLOYMENT RIGHTS The Plan shall neither impose any obligation on Eagle or on any Subsidiary to continue the employment of any Participant, nor impose any obligation on any Participant to remain in the employ of Eagle or of any Subsidiary. 24. WITHHOLDING OF TAXES The Committee may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with the purchase of Common Stock under the Plan. 25. GOVERNING LAW The Plan and rights to purchase shares that may be granted hereunder shall be governed by and construed and enforced in accordance with the laws of the state of Texas. 26. USE OF GENDER The gender of words used in the Plan shall be construed to include whichever may be appropriate under any particular circumstances of the masculine, feminine or neuter genders. 27. OTHER PROVISIONS The agreements to purchase shares of Common Stock under the Plan shall contain such other provisions as the Committee and the Board shall deem advisable, provided that no such provision shall in any way be in conflict with the terms of the Plan. ADOPTED effective September 18, 2000. EGL, INC. EX-27 5 h81850ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF EGL, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 6,458 0 175,442 3,843 0 186,944 71,303 21,687 284,091 84,620 0 0 0 30 180,784 284,091 0 644,278 0 380,049 225,361 0 0 40,189 16,057 0 0 0 0 24,132 0.84 0.81
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