UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CNF TRANSPORTATION INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notice of Annual Meeting
and
Proxy Statement
Annual Meeting of Shareholders
APRIL 24, 2001
CNF TRANSPORTATION INC.
[LOGO OF CNF]
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CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION INC.]
3240 HILLVIEW AVENUE TELEPHONE: 650/494-2900
PALO ALTO, CALIFORNIA 94304
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 24, 2001
9:00 A.M., local time
Knowles Room, Hotel du Pont, 11th and Market Streets, Wilmington, Delaware
FELLOW SHAREHOLDER:
The Annual Meeting of Shareholders of CNF Transportation Inc. will be held
at 9:00 A.M., local time, on Tuesday, April 24, 2001, to:
1.Elect four Class I directors for a three-year term.
2. Act upon a proposal to amend the Company's Certificate of Incorporation,
changing the Company's name from "CNF Transportation Inc." to "CNF Inc."
3.Ratify the appointment of auditors.
4.Transact any other business properly brought before the meeting.
Shareholders of record at the close of business on March 1, 2001, are
entitled to notice of and to vote at the meeting.
Your vote is important. Whether or not you plan to attend, I urge you to
SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE PROVIDED,
in order that as many shares as possible will be represented at the meeting.
If you attend the meeting and prefer to vote in person, you will be able to do
so and your vote at the meeting will revoke any proxy you may submit.
Sincerely,
EBERHARD G.H. SCHMOLLER
Secretary
March , 2001
TABLE OF CONTENTS
Proxy Statement............................................................ 1
Board of Directors' Recommendations...................................... 1
Proxy Voting Procedures.................................................. 1
Voting Requirements...................................................... 1
Voting Shares Outstanding................................................ 1
Proxy Voting Convenience................................................. 2
Attendance at the Meeting................................................ 2
Election of Directors...................................................... 2
Stock Ownership by Directors and Executive Officers........................ 10
Information about the Board of Directors and Certain Board Committees...... 12
Compensation of Directors.................................................. 13
Compensation of Executive Officers......................................... 14
I.Summary Compensation Table............................................. 14
II.Option/SAR Grants Table............................................... 16
III.Option/SAR Exercises and Year-End Value Table........................ 17
IV.Long-Term Incentive Plan Awards Table................................. 18
Compensation Committee Report on Executive Compensation.................... 19
Compensation Committee Interlocks and Insider Participation................ 23
Comparison of Five-Year Cumulative Total Shareholder Return................ 23
Pension Plan Table......................................................... 24
Change in Control Arrangements............................................. 25
Audit Committee Report..................................................... 25
Proposal to Amend the Company's Certificate of Incorporation to Change the
Name of the Company....................................................... 26
Appointment of Auditors.................................................... 26
Principal Shareholders..................................................... 27
Compliance with Section 16 of the Exchange Act............................. 27
Confidential Voting........................................................ 28
Submission of Shareholder Proposals........................................ 28
Other Matters.............................................................. 28
Appendix A: Proposed Amendment to Certificate of Incorporation with Changes
Indicated................................................................. A-1
Appendix B: CNF Transportation Inc. Audit Committee Charter................ B-1
CNF TRANSPORTATION INC.
3240 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
TELEPHONE: 650/494-2900
PROXY STATEMENT
March , 2001
The Annual Meeting of Shareholders of CNF Transportation Inc. (the
"Company") will be held on Tuesday, April 24, 2001. Shareholders of record at
the close of business on March 1, 2001 will be entitled to vote at the
meeting. This proxy statement and accompanying proxy are first being sent to
shareholders on or about March , 2001.
Board of Directors Recommendations
The Board of Directors of the Company is soliciting your proxy for use at
the meeting and any adjournment or postponement of the meeting. The Board
recommends a vote for the election of the nominees for directors described
below, for approval of the proposed amendment to the Company's Certificate of
Incorporation, and for ratification of the appointment of Arthur Andersen LLP
as independent auditors.
Proxy Voting Procedures
To be effective, properly signed proxies must be returned to the Company
prior to the meeting. The shares represented by your proxy will be voted in
accordance with your instructions. However, if no instructions are given, your
shares will be voted in accordance with the recommendations of the Board.
Voting Requirements
A majority of the votes attributable to all voting shares must be
represented in person or by proxy at the meeting to establish a quorum for
action at the meeting. Directors are elected by a plurality of the votes cast,
and the four nominees who receive the greatest number of votes cast for
election of directors at the meeting will be elected directors for a three-
year term. Approval of the proposed amendment to the Company's Certificate of
Incorporation requires a favorable vote of the holders of a majority of the
voting power entitled to vote thereon. The ratification of the appointment of
auditors requires a favorable vote of the holders of a majority of the voting
power represented at the meeting.
In the election of directors, broker non-votes, if any, will be disregarded
and have no effect on the outcome of the vote. With respect to the proposed
amendment to the Certificate of Incorporation, abstentions and broker non-
votes will have the same effect as voting against the proposal. With respect
to the ratification of the appointment of auditors, abstentions from voting
will have the same effect as voting against such matter and broker non-votes,
if any, will be disregarded and have no effect on the outcome of such vote.
Voting Shares Outstanding
At the close of business on March 1, 2001, the record date for the Annual
Meeting, there were outstanding and entitled to vote shares of Common
Stock and shares of Series B Cumulative Convertible Preferred Stock
("Series B Preferred Stock"). Each share of Common Stock
has the right to one non-cumulative vote and each share of Series B Preferred
Stock has the right to 6.1 non-cumulative votes. Therefore, an aggregate of
votes are eligible to be cast at the meeting.
Proxy Voting Convenience
You are encouraged to exercise your right to vote by returning to the
Company a properly executed WHITE proxy in the enclosed envelope, whether or
not you plan to attend the meeting. This will ensure that your votes are cast.
You may revoke or change your proxy at any time prior to its use at the
meeting. There are three ways you may do so: (1) give the Company a written
direction to revoke your proxy; (2) submit a later dated proxy; or (3) attend
the meeting and vote in person.
Attendance at the Meeting
All shareholders are invited to attend the meeting. Persons who are not
shareholders may attend only if invited by the Board of Directors. If you are
a shareholder but do not own shares in your name, you must bring proof of
ownership (e.g., a current broker's statement) in order to be admitted to the
meeting.
ELECTION OF DIRECTORS
The Board of Directors Recommends a Vote "For" All Nominees.
The Board of Directors of the Company, pursuant to the By-Laws, has
determined that the number of directors of the Company shall be twelve. Unless
you withhold authority to vote, your proxy will be voted for election of the
nominees named below.
The following persons are the nominees of the Board of Directors for
election as Class I directors to serve for a three-year term until the 2004
Annual Meeting of Shareholders and until their successors are duly elected and
qualified:
Richard A. Clarke
W. Keith Kennedy, Jr.
Richard B. Madden
Gregory L. Quesnel
If a nominee becomes unable or unwilling to serve, proxy holders are
authorized to vote for election of such person or persons as shall be
designated by the Board of Directors; however, the management knows of no
reason why any nominee should be unable or unwilling to serve.
The Company has three classes of directors, each of which is elected for a
three-year term. Class II directors will be elected in 2002 and Class III
directors will be elected in 2003. All directors have previously been elected
by the shareholders, except Gregory L. Quesnel, who was appointed by the Board
as a Class I director in May 1998.
2
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CLASS I DIRECTORS
[PHOTO OF RICHARD A. CLARKE Director since 1996
RICHARD A. CLARKE
APPEARS HERE] Retired Chairman of the Board,
Pacific Gas and Electric Company,
one of the nation's largest utility companies
Mr. Clarke retired from PG&E in 1995, after serving as
chairman of the board for nine years. As chairman and CEO he
oversaw management of a $10 billion company that produces
electric power and gas and is involved with power plant
construction. Mr. Clarke began his association with PG&E as
an attorney and served in various managerial positions
leading to his appointment as Chairman and CEO. Between 1960
and 1969, he was a partner in the law firm of Rockwell,
Fulkerson & Clarke. He is a member of the boards of
directors of PG&E and Potlatch Corporation and is an
Emeritus member of the President's Council of Sustainable
Development. He served as a former Director of Bank of
America and as a member of the Business Council. He is a
Director of the Nature Conservancy of California and the
Advisory Board of the Walter A. Haas School of Business,
University of California, Berkeley. He is Chairman of the
Advisory Board of the Center for Organization and Human
Resource Effectiveness at the University of California,
Berkeley, Co-Chairman of the University of California
Outreach Advisory Board, and Trustee of the University of
California Berkeley Foundation. Mr. Clarke has previously
held Board or executive-level posts with the California
Business Roundtable, California Chamber of Commerce, Bay
Area Council, Bay Area Economic Forum, Edison Electric
Institute, and the President's Council on Environmental
Quality. A native of San Francisco, Mr. Clarke, age 70,
earned his law degree from the University of California,
Boalt Hall, and holds a bachelor's degree in political
science. He is a member of the Audit and Finance Committees
of the Board.
[PHOTO OF W. KEITH KENNEDY, JR. Director since 1996
W. KEITH KENNEDY,
JR. APPEARS HERE] Retired President and Chief Executive Officer,
Watkins-Johnson Company, a high-technology corporation
specializing in semiconductor manufacturing equipment and
electronic products for telecommunications and defense
Dr. Kennedy retired as President and Chief Executive
Officer of Watkins-Johnson Company in January 2000. He had
held that position since January 1998. Dr. Kennedy joined
Watkins-Johnson in 1968 and was a Division Manager, Group
Vice President, and Vice President of Planning Coordination
and Shareowner Relations prior to becoming President. Dr.
Kennedy, age 57, is a graduate of Cornell University from
which he holds B.S.E.E., M.S., and Ph.D. degrees. Dr.
Kennedy is a senior member of the Institute of Electrical
and Electronics Engineers. He is Chairman of the
Compensation Committee and a member of the Director Affairs
Committee of the Board.
3
[PHOTO OF RICHARD B. MADDEN Director since 1992
RICHARD B. MADDEN
APPEARS HERE] Retired Chairman and Chief Executive Officer,
Potlatch Corporation, a diversified
forest products company
Mr. Madden was Chief Executive Officer of Potlatch
Corporation, from 1971, and Chairman of the Board, from
1977, until his retirement in May of 1994. He was previously
associated with Mobil Oil Corporation where he served in
various management capacities for fifteen years. Mr. Madden
is a director of URS Corporation. He retired as a director
of Potlatch on December 31, 1999 and PG&E Corporation on
February 16, 2000. He is also a Trustee Emeritus of the
American Enterprise Institute, a Senior Advisor for the
Boston Consulting Group, Inc., and an Honorary Trustee for
the Committee for Economic Development. His civic activities
include the Board of Governors of the San Francisco Symphony
Association; Board of Directors of the Smith-Kettlewell Eye
Research Institute; a Trustee Emeritus of the San Francisco
Foundation and the Corporation of Fine Arts Museums; and
Director of the Order of Malta, Western Association. Mr.
Madden, age 71, holds a B.S. degree in engineering from
Princeton University, a J.D. degree from the University of
Michigan, an M.B.A. from New York University, and a PhD,
honoris causa from the College of St. Scholastica. He is a
member of the Compensation, Executive, and Finance
Committees of the Board.
[PHOTO OF GREGORY L. QUESNEL Director since 1998
GREGORY L.
QUESNEL APPEARS President and Chief Executive Officer
HERE] CNF Transportation Inc.
Mr. Quesnel, 52, was named President and Chief Executive
Officer of the Company in May 1998. At that time, he was
also elected as a member of the Company's Board of
Directors. As part of a planned succession, Mr. Quesnel was
elected President and Chief Operating Officer in July 1997.
Prior to that, Mr. Quesnel was Executive Vice President and
Chief Financial Officer of the Company. Mr. Quesnel has more
than 25 years of experience in the transportation industry.
He joined the Company as director of accounting in 1975,
following several years of professional experience with
major corporations in the petroleum and wood products
industries. Mr. Quesnel advanced through increasingly
responsible positions and, in 1986, was promoted to the top
financial officer position at the Company's largest
subsidiary. In 1990, Mr. Quesnel was elected Vice President
and Treasurer of the Company; in 1991, he was elected Senior
Vice President and Chief Financial Officer; and he was
promoted to Executive Vice President and Chief Financial
Officer in 1994. Mr. Quesnel is a member of the Bay Area
Council, the California Business Roundtable, and the
Conference Board. He also serves as a member of the
Executive Committee of the Bay Area Council of the Boy
Scouts of America and is a member of the Board of Directors
of Potlatch Corporation. Mr. Quesnel earned a bachelor's
degree in finance from the University of Oregon and holds a
master's degree in business administration from the
University of Portland. Mr. Quesnel is a member of the
Executive Committee of the Board.
4
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CLASS II DIRECTORS
[PHOTO OF DONALD E. MOFFITT Director 1986-1988
DONALD E. Director since 1991
MOFFITT APPEARS
HERE] Chairman of the Board,
CNF Transportation Inc.
Mr. Moffitt was named President and Chief Executive
Officer of the Company in 1991 and Chairman of the Board of
Directors in 1995. He served as President until June 1997
and as Chief Executive Officer through April 1998. He joined
Consolidated Freightways Corporation of Delaware, a former
Company subsidiary, as an accountant in 1955 and advanced to
Vice President-Finance in 1973. In 1975, he transferred to
the Company as Vice President-Finance and Treasurer and, in
1981, was elected Executive Vice President-Finance and
Administration. In 1983, he assumed the additional duties of
President, CF International and Air, Inc., where he directed
the Company's international and air freight businesses. Mr.
Moffitt was elected Vice Chairman of the Board of the
Company in 1986. He retired as an employee and as Vice
Chairman of the Board of Directors in 1988 and returned to
the Company as Executive Vice President-Finance and Chief
Financial Officer in 1990. Mr. Moffitt, age 68, is a member
of the Board of Directors of the U.S. Chamber of Commerce
and is a regional Vice Chairman, Willis Lease Finance Inc.,
and the Business Advisory Council of the Northwestern
University Transportation Center. He also serves on the
boards of the San Francisco Bay Area Council and Boy Scouts
of America and is a member of the Board of Trustees of the
Automotive Safety Foundation and the National Commission
Against Drunk Driving. He is a former member of the Board of
Directors and the Executive Committee of the Highway Users
Federation. Mr. Moffitt is Chairman of the Executive
Committee and serves on the Director Affairs Committee of
the Board.
[PHOTO OF MICHAEL J. MURRAY Director since 1997
MICHAEL J. MURRAY
APPEARS HERE] Retired President, Global Corporate and Investment Banking
Bank of America Corporation
Mr. Murray retired July 2000 as president of Global
Corporate and Investment Banking at Bank of America
Corporation and as a member of the corporation's Policy
Committee. From March 1997 to the BankAmerica-Nations Bank
merger in September 1998, Mr. Murray headed BankAmerica
Corporation's Global Wholesale Bank and was responsible for
its business with large corporate, international, and
government clients around the world. Mr. Murray was named a
BankAmerica vice chairman and head of the U.S. and
International Groups in September 1995. He had been
responsible for BankAmerica's U.S. Corporate Group since
BankAmerica's merger with Continental Bank Corporation in
September 1994. Prior to the BankAmerica-Continental merger,
Murray was vice chairman and head of Corporate Banking for
Continental Bank which he joined in 1969. Mr. Murray is a
member of the Board of Directors of the eLoyalty Corporation
in Lake Forest,
5
Illinois and Neoforma.com in San Jose, CA. He is Chairman of
the United Way of the Bay Area, serves on the board of the
California Academy of Sciences in San Francisco, and is a
member of the Advisory Council for the College of Business
of the University of Notre Dame. Mr. Murray, age 56,
received his BBA from the University of Notre Dame in 1966
and his MBA from the University of Wisconsin in 1968.
[PHOTO OF ROBERT D. ROGERS Director since 1990
ROBERT D. ROGERS
APPEARS HERE] President and Chief Executive Officer,
Texas Industries, Inc.
a producer of steel, cement, aggregates and concrete
Mr. Rogers joined Texas Industries, Inc. in 1963 as
General Manager/European Operations. In 1964, he was named
Vice President-Finance; in 1968, Vice President-Operations;
and in 1970, he became President and Chief Executive
Officer. He is also a director of Texas Industries, Inc. Mr.
Rogers is a graduate of Yale University and earned an M.B.A.
from the Harvard Graduate School of Business. He is a member
of the Executive Board for Southern Methodist University Cox
School of Business and a member of the British North
American Committee, serving as its Vice Chairman from 1998
to 2000. Mr. Rogers, age 64, served as Chairman of the
Federal Reserve Bank of Dallas from 1984 to 1986 and was
Chairman of the Greater Dallas Chamber of Commerce from 1986
to 1988. He is Chairman of the Finance Committee and a
member of the Compensation Committee of the Board.
[PHOTO OF WILLIAM J. SCHROEDER Director since 1996
WILLIAM J.
SCHRODER APPEARS Silicon Valley Entrepreneur
HERE]
Mr. Schroeder was President and CEO of CyberIQ Systems,
Inc., a private start-up company in the Internet traffic and
content management market, during 2000. Prior to joining
CyberIQ, Schroeder was employed by Diamond Multimedia
Systems, Inc. as President and CEO (1994-1999) and before
that by Conner Peripherals, Inc., initially as President and
Chief Operating Officer (1986-1989) and later as Vice
Chairman (1989-1994). Mr. Schroeder also served in various
management or technical positions at Priam Corporation,
Memorex Corporation, McKinsey & Co., and Honeywell, Inc. and
is on the board of directors of Xircom Corporation. Mr.
Schroeder, age 56, holds the M.B.A. degree with High
Distinction from the Harvard Business School and the
M.S.E.E. and B.E.E. degrees from Marquette University. He is
a member of the Audit and Finance Committees of the Board.
6
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CLASS III DIRECTORS
[PHOTO OF ROBERT ALPERT Director since 1976
ROBERT ALPERT
APPEARS HERE] The Alpert Companies
private investment group
Robert Alpert has managed his own portfolio of companies
since 1965. His business career includes 40 years in
banking, finance, real estate, and entertainment
investments. Mr. Alpert is currently Chairman of the Board
of Argo Funding Company in Dallas, a private equity
investment group. He is also Vice Chairman of The Empire AB
in Stockholm, Sweden, a large public company involved in the
fabrication and distribution of metal related materials for
the construction industry. He has served as Honorary Consul
for Sweden in Dallas since 1987. Mr. Alpert was awarded a
medal of honor from King Carl Gustaf H.M. of Sweden when he
made him an "Officer First Class" of the Royal Order of the
Polar Star. He is a member of the Royal Round Table of
Swedish Council of America, a group of Swedish-American
business, government, and cultural leaders from around the
world. He has served on numerous boards as a director and
currently serves on the boards of Texas Industries Inc. and
Aladdin Industries LLC. He is an advisory director for I.C.
Deal Companies and Argo Capital Partners in Dallas, Texas.
Alpert is also a Director for Med Images Inc. in Knoxville,
Tennessee. Additionally, he is a member of the Advisory
Council for the University of Texas at Austin, College of
Business Administration; an ex-Trustee for Colby College in
Maine and former Chairman for the Dallas Foundation for
Health, Education and Research, a public charity. Alpert
serves as a consultant to La Paloma Films, Inc., which has
been financially involved in several highly successful film
ventures and Broadway plays. Alpert is a member of theWorld
President's Organization. Mr. Alpert, age 69, is a member of
the Director Affairs, the Executive, and the Finance
Committees of the Board.
[PHOTO OF MARGARET G. GILL Director since 1995
MARGARET G. GILL
APPEARS HERE] Former Senior Vice President-Legal, External Affairs
and Secretary,
AirTouch Communications, a wireless communications company
Mrs. Gill served as Senior Vice President-Legal, External
Affairs and Secretary of AirTouch Communications from
January 1994 until July 1999 when AirTouch was acquired by
Vodafone PLC. Prior to joining AirTouch she was, for 20
years, a partner in the law firm of Pillsbury, Madison &
Sutro in San Francisco. From 1983 to 1993, she served as
practice group manager and senior partner for the firm's
corporate and securities group. Mrs. Gill earned her law
degree in 1965 from Boalt Hall Law School, University of
California at Berkeley, and holds a Bachelor of Arts degree
from Wellesley College. Mrs. Gill, age 61, manages the Gill
Family Foundation, of which she is Board Chair and
President. She is also a member of the board of directors of
the Episcopal Diocese of California and Episcopal Charities
and a trustee and executive committee member of the San
Francisco Ballet. Mrs. Gill is a member of the Audit and the
Director Affairs Committees of the Board.
7
[PHOTO OF ROBERT JAUNICH II Director since 1992
ROBERT JAUNICH II
APPEARS HERE] Managing Director,
The Fremont Group,
a private investment corporation
Mr. Jaunich joined The Fremont Group, a private investment
corporation managing assets in excess of $12 billion, in
January 1991. He is Managing Director and member of the
Boards of Directors and the Executive Committees of the
Boards for Fremont's principal entities: Fremont Group,
L.L.C. and Fremont Investors Inc. Among his
responsibilities, he is General Partner of Fremont Partners,
L.P., a $605 million fund targeted to make and oversee
majority equity investment positions in operating companies
representing a broad spectrum of industries. Additionally,
he oversees Fremont's seven affiliated venture capital
portfolios representing over $500 million of committed
capital (Trinity Ventures, L.P.) and is President of Fremont
Capital, Inc., an SEC/NASD registered broker/dealer. In
addition to serving on the board of the Company, Mr Jaunich
is Chairman of the managing General Partner of Crown
Pacific, Ltd., Kinetic Concepts, Inc., Tapco International
Corporation, Juno Lighting, Inc., and Software Architects,
Inc. and serves on the board of Kerr Group, Inc. He has
served as Chairman of Coldwell Banker Corporation
(residential real estate and relocation services), Chairman
of Petro Stopping Centers (truck stopping centers), on the
board of Sara Lee Corporation (NYSE), on the Supervisory
Board of Douwe Egberts, Utrecht, Netherlands (number two
coffee company in Europe), and the boards of The Wine Group
(beverages), Brach Van Houten Holding, Inc. (worldwide
confectionery), and Nabob Foods (largest roast coffee
company in Canada). Prior to joining The Fremont Group, Bob
had a broad range of domestic and international operating
and investing experience. He was Member, Chief Executive
Office, and Executive Vice President of Swiss-based Jacobs
Suchard AG (global top four chocolate, sugar confectionery
and coffee company) (1986-1990). Previously, he was
President of Osborne Computer Corporation (1983), President
of Sara Lee Corporation, formerly Consolidated Foods (1978-
1982), and earlier, Executive Vice President of Memorex
Corporation (1970-1978). He started his career at Procter &
Gamble Company (1964-1970). Bob currently serves as a
Trustee of the non-profit National Recreation Foundation. He
is a charter life member of the World Presidents
Organization (WPO) and was a member of Young Presidents
Organization (YPO) (1980-1990). Mr. Jaunich, age 61,
received a B.A. from Wesleyan University, Middletown,
Connecticut and an M.B.A. from Wharton Graduate School,
University of Pennsylvania where he later served for five
years on the Graduate School Advisory Board. He is Chairman
of the Directors Affairs Committee and a member of the
Executive and Finance Committees of the Board.
8
[PHOTO OF ROBERT P. WAYMAN Director since 1994
ROBERT P. WAYMAN
APPEARS HERE] Executive Vice President,
Finance and Administration
and Chief Financial Officer,
Hewlett-Packard Company,
a computer-manufacturing company
Mr. Wayman joined Hewlett-Packard Company in 1969. After
serving in several accounting management positions, he was
elected Vice-President and Chief Financial Officer in 1984.
He became a Senior Vice President in 1987 and an Executive
Vice President in 1992. He assumed additional responsibility
for administration in 1992 and was elected to Hewlett-
Packard's Board of Directors in 1993. Mr. Wayman, age 55,
holds a bachelor's degree in science engineering and a
master's degree in business administration from Northwestern
University. He is a member of the Board of Directors of
Sybase Inc. and Portal Software Inc. and is a member of the
Board of the Private Sector Council, the Policy Council of
the Tax Foundation, the Financial Executives Institute, the
Council of Financial Executives of the Conference Board, and
the Advisory Board to the Northwestern University School of
Business. He is Chairman of the Audit Committee and a member
of the Compensation Committee of the Board.
9
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock and Series B Preferred Stock, as of February 1,
2001, by the directors, the executive officers identified in the Summary
Compensation Table below and by the directors and executive officers as a
group.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------------ ----------------------- --------
Robert Alpert ................................ 73,583 Common *
0 Series B Preferred
Richard A. Clarke ............................ 15,534 Common *
0 Series B Preferred
Gerald L. Detter(2) .......................... 203,247 Common *
0 Series B Preferred
Margaret G. Gill ............................. 15,272 Common *
0 Series B Preferred
Robert Jaunich II ............................ 28,815 Common *
0 Series B Preferred
W. Keith Kennedy, Jr.......................... 15,869 Common *
0 Series B Preferred
Richard B. Madden ............................ 18,995 Common *
0 Series B Preferred
Donald E. Moffitt ............................ 539,892 Common 1.1%
0 Series B Preferred
Michael J. Murray ............................ 19,712 Common *
0 Series B Preferred
Roger Piazza(3) .............................. 166,666 Common *
123 Series B Preferred
Gregory L. Quesnel(4) ........................ 429,135 Common *
188 Series B Preferred
Sanchayan C. Ratnathicam(5) .................. 121,693 Common *
152 Series B Preferred
Robert D. Rogers ............................. 22,760 Common *
0 Series B Preferred
Eberhard G.H. Schmoller(6) ................... 224,630 Common *
158 Series B Preferred
William J. Schroeder ......................... 11,593 Common *
0 Series B Preferred
Robert P. Wayman ............................. 15,637 Common *
0 Series B Preferred
John H. Williford (7) ........................ 159,443 Common *
132 Series B Preferred
All directors and executive officers as a
group (17 persons)........................... 2,082,475 Common 4.3%
952 Series B Preferred
- --------
* Less than one percent of the Company's outstanding shares of Common Stock.
10
(1) Represents shares as to which the individual has sole voting and
investment power (or shares such power with his or her spouse). The shares
shown for non-employee directors include the following number of shares of
restricted stock and number of shares which the non-employee director has
the right to acquire within 60 days of February 1, 2001 because of vested
stock options: Mr. Alpert, 10,811 and 9,186; Mr. Clarke, 4,030 and 8,002;
Mrs. Gill, 1,946 and 12,297; Mr. Jaunich, 1,946 and 13,833; Mr. Kennedy,
2,495 and 9,174; Mr. Madden, 6,273 and 9,186; Mr. Moffitt, 6,384 and
479,254; Mr. Murray, 1,806 and 7,906; Mr. Rogers, 1,946 and 16,778; Mr.
Schroeder, 2,495 and 5,598; and Mr. Wayman, 1,946 and 11,655. The
restricted stock and stock options were awarded under and are governed by
the Amended and Restated Equity Incentive Plan for Non-Employee Directors,
except for 5,000 shares of Restricted Stock and 471,829 stock options that
were awarded Mr. Moffitt in his capacity as an executive officer of the
Company prior to his retirement. 5,000 shares of restricted stock, granted
to Mr. Moffitt as an executive officer in 1997, were forfeited on July 10,
2000 when the performance criteria applicable to the grant were not met.
(2) The shares shown include 151,737 shares which Mr. Detter has the right to
acquire within 60 days of February 1, 2001, because of vested stock
options. In addition to the holdings described in the above table, Mr.
Detter also holds 28,994 phantom stock units under the Company's Deferred
Compensation Plan for Executives.
(3) The shares shown include 147,928 shares which Mr. Piazza has the right to
acquire within 60 days of February 1, 2001 because of vested stock
options.
(4) The shares shown include 364,420 shares which Mr. Quesnel has the right to
acquire within 60 days of February 1, 2001 because of vested stock
options. In addition to the holdings described in the above table, Mr
Quesnel also holds 7,248 phantom stock units under the Company's Deferred
Compensation Plan for Executives.
(5) The shares shown include 98,705 shares which Mr. Ratnathicam has the right
to acquire within 60 days of February 1, 2001 because of vested stock
options.
(6) The shares shown include 200,129 shares which Mr. Schmoller has the right
to acquire within 60 days of February 1, 2001 because of vested stock
options.
(7) The shares shown include 74,368 shares which Mr. Williford has the right
to acquire within 60 days of February 1, 2001 because of vested stock
options.
11
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 2000, the Board of Directors held eight meetings. Each incumbent
director attended at least 75% of all meetings of the Board and the committees
of the Board on which he or she served.
The Board of Directors currently has the following standing committees:
Audit Committee, Compensation Committee, Director Affairs Committee, Executive
Committee and Finance Committee. Descriptions of the Audit, Compensation and
Director Affairs Committees follow:
Audit Committee: The Audit Committee provides assistance to the Board in
fulfilling its obligations with respect to matters involving the accounting,
auditing, financial reporting, and internal control functions of the Company.
The Committee receives reports on the audit efforts of the Company's outside
auditors and internal auditors, and reviews with them the adequacy and
effectiveness of the Company's accounting and internal control policies and
procedures. The Company's Board of Directors has adopted a written charter for
the Audit Committee, a copy of which is attached hereto as Appendix B. The
members of the Audit Committee are Robert P. Wayman--Chairman, Richard A.
Clarke, Margaret G. Gill, Michael J. Murray, and William J. Schroeder. All
members of the Audit Committee are independent, as independence is defined in
Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing
standards. The Committee met three times during 2000.
Compensation Committee: The Compensation Committee approves the salaries and
other compensation of executive officers and other key employees, except that
the Committee recommends to the Board for its approval the salary of the Chief
Executive Officer of the Company. The Committee also oversees the
administration of the Company's short-term and long-term incentive
compensation plans and grants of stock options and other awards under the
Company's 1997 Equity and Incentive Plan and reviews the retirement and
benefit plans of the Company and its domestic subsidiaries for non-contractual
employees. The members of the Compensation Committee are W. Keith Kennedy,
Jr.--Chairman, Richard B. Madden, Michael J. Murray, Robert D. Rogers, and
Robert P. Wayman. The Committee met seven times during 2000.
Director Affairs Committee: The Director Affairs Committee reviews the
qualifications of candidates to serve on the Board of Directors, consults with
the management of the Company concerning potential candidates, and recommends
to the Board of Directors nominees for membership on the Board. The Committee
also oversees directors' compensation, reviews and considers other matters
pertaining to the functioning of the Board, and reviews and advises the Board
regarding corporate governance issues. Shareholders' proposals for nominees
will be given due consideration by the Committee for recommendation to the
Board based on the nominees' qualifications. Shareholder nominee proposals
should be submitted in writing to the Chairman of the Director Affairs
Committee in care of the Corporate Secretary. The members of the Director
Affairs Committee are Robert Jaunich II--Chairman, Robert Alpert, Margaret G.
Gill, W. Keith Kennedy, Jr., and Donald E. Moffitt. The Committee met twice
during 2000.
12
COMPENSATION OF DIRECTORS
During 2000, each non-employee director was paid an annual retainer of
$20,000. Non-employee directors were also paid $1,500 per Board meeting
attended and $1,000 per Committee meeting attended. Board Committee
Chairpersons received an additional $750 per quarter.
Directors may elect to defer payment of their fees. Payment of any deferred
amount and interest equivalents accrued thereon will be made in a lump sum or
in installments beginning no later than the year following the director's
final year on the Company's Board. Directors are also provided with certain
insurance coverages and, in addition, are reimbursed for travel expenses
incurred in attending Board and Committee meetings.
For years prior to the year 2000, each director of the Company accrued a
retirement benefit for each full calendar month he or she was a non-employee
director of the Company in an amount equal to one-twelfth of the annual cash
retainer. The retirement benefit vests when a director has served on the Board
for five years. The amount accrued prior to 1994 was $30,000 per year of
service. In 1994, $15,000 in retirement benefits accrued, and from 1995
through 1999, $20,000 in retirement benefits accrued per year of service.
Retirement payments continue for the director's number of years of service as
a non-employee director up to a maximum of 20 years, with the earliest
accruals paid first.
The Company terminated the directors' retirement plan, effective December
31, 1999. In connection with the termination, eight directors received stock
options and four directors received restricted stock in cancellation of their
accrued retirement benefits under the plan. A total of 24,258 stock options
and 24,404 shares of restricted stock were granted in cancellation of
directors' retirement benefits.
Awards of restricted stock and stock options are made from time to time to
non-employee directors under the Equity Incentive Plan for Non-Employee
Directors, as amended and restated in 1995 (the "Plan"). The original Plan was
approved by the Company's shareholders in 1994, and the amended and restated
Plan was approved by the Company's shareholders in 1995.
Under the Plan, each non-employee director receives a restricted stock grant
having a fair market value of $12,500 upon joining the Board and on each
January 1 thereafter. In addition, each non-employee director receives a grant
of options for 2,500 shares of the Company's Common Stock upon joining the
Board and for additional shares on each January 1 thereafter as follows: prior
to January 1, 2000, the additional option grant was for 1,000 shares; and
commencing January 1, 2000, the additional option grant was increased from
1,000 shares to 1,500 shares to compensate directors for the additional
retirement benefits that would have accrued under the Director's Retirement
Plan had that Plan not been terminated.
13
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the four next most highly paid executive officers
for the three fiscal years ended December 31, 2000. The table also sets forth
the compensation received for those years by Roger Piazza, who resigned his
position as Senior Vice President of the Company and as President and Chief
Executive Officer of Emery Air Freight Corporation, the Company's air freight
subsidiary, in September 2000. As used in this Proxy Statement, "Named
Executives" means the officers identified in this Summary Compensation Table,
including Mr. Piazza.
Annual Compensation Long Term Compensation
--------------------------------- ------------------------------
Awards Payouts
--------------------- --------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position(s) Year ($) (3)($) (4)($) (5)($) SAR'S(#) (6)($) (7)($)
- ------------------ ---- -------- -------- ------------ ---------- ---------- -------- ------------
Gregory L. Quesnel 2000 $712,504 $278,915 $27,746 $ 0 335,000/0 $478,392 $2,550
President & Chief 1999 724,523 823,133 33,973 0 160,000/0 627,600 2,853
Executive Officer 1998 598,071 344,224 23,315 1,838,438 92,500/0 450,296 2,686
Gerald L. Detter(1) 2000 $495,092 $687,198 $ 4,198 $0 112,000/0 $363,578 $4,074
Senior Vice President 1999 503,746 615,794 682 611,250 60,000/0 321,122 2,694
1998 449,047 802,088 79,293 543,750 42,500/0 217,107 2,682
Sanchayan Ratnathicam 2000 $390,020 $114,507 $10,892 $ 0 177,000/0 $363,578 $2,550
Senior Vice President(1) 1999 381,376 346,074 11,651 0 42,000/0 162,130 2,400
1998 358,894 176,752 8,243 462,047 35,000/0 112,574 2,400
Eberhard G.H. Schmoller 2000 $359,008 $105,402 $23,076 $ 0 93,000/0 $325,307 $3,586
Senior Vice President, 1999 365,643 331,800 19,559 0 40,000/0 512,540 2,400
General Counsel and 1998 343,743 169,374 20,254 402,938 30,000/0 345,763 2,400
Secretary
John H. Williford (1) 2000 $400,036 $381,629 $ 2,962 $ 0 112,000/0 $325,307 $2,550
Senior Vice President 1999 406,767 197,816 1,264 916,875 50,000/0 313,800 2,558
1998 308,291 88,382 597 430,172 32,500/0 74,781 2,572
Roger Piazza (1) Senior 2000 $522,984(2) $282,094 $12,204 $ 0 50,000/0 $311,471 $5,162
Vice President 1998 419,741 228,848 19,202 0 40,000/0 162,130 3,720
1999 304,583 27,496 5,237 425,797 40,500/0 112,574 3,572
- --------
(1) Mr. Detter is also President and Chief Executive Officer of Con-Way
Transportation Services, Inc., the Company's regional full-service
trucking subsidiary. As of September 2000, Mr. Ratnathicam is also Chief
Executive Officer of Emery Air Freight Corporation, the Company's full-
service air freight subsidiary. Mr. Williford is also President and Chief
Executive Officer of Menlo Logistics, Inc., the Company's full-service
logistics management company. Mr. Piazza also served as President and
Chief Executive Officer of Emery Air Freight Corporation, the Company's
full-service air freight subsidiary, until his resignation as an officer
in September 2000. Mr. Piazza retired as an employee of the Company on
December 31, 2000.
(2) This amount includes salary and accrued vacation pay of $110,936 earned by
Mr. Piazza in his capacity as President and Chief Executive Officer of
Emery Air Freight Corporation.
(3) The amounts shown in this column reflect payments under the Company's
short-term incentive compensation plans in which all regular, full-time,
non-contractual employees of the Company are eligible to participate. They
also reflect, in the case of Messrs. Detter and Williford (for 2000 only)
special incentive compensation payments made under the Company's short-
term incentive
14
compensation plans in which only operating company executives participate.
In the case of Mr. Piazza, the amount for 2000 reflects a special bonus
payment awarded in connection with his retirement.
(4) Amounts shown for 2000 in this column include: (a) Long-Term Incentive Plan
interest earned and deferred for Messrs. Quesnel and Schmoller of $383 and
$8,593, respectively; (b) interest earned on deferred compensation accounts
above 120% of the applicable federal rate for Messrs. Quesnel, Detter,
Ratnathicam, Schmoller, Williford and Piazza of $26,519, $2,569, $10,892,
$10,195, $2,962 and $12,204, respectively; and (c) interest earned on
deferred Stock Appreciation Rights accounts above 120% of the applicable
federal rate for Messrs. Quesnel, Detter, and Schmoller of $844, $1,629,
and $4,288, respectively.
(5) At the end of 2000, based upon the closing price of the Company's common
stock on December 29, 2000 ($33.8125), Mr. Quesnel held 42,001 restricted
shares valued at $1,420,159; Mr. Detter held 34,250 restricted shares
valued at $1,158,078; Mr. Ratnathicam held 12,000 restricted shares valued
at $405,750; Mr. Schmoller held 12,834 restricted shares valued at
$433,950; Mr. Williford held 68,584 restricted shares valued at $2,318,997;
and Mr. Piazza held 11,083 restricted shares valued at $374,744. Dividends
are paid on all shares of restricted stock. All restricted stock held by
the Named Executives is performance restricted stock, with the exception of
20,000 shares of restricted stock held by Mr. Detter, which are not subject
to performance criteria and which will vest on January 1, 2004 and 25,000
shares of restricted stock held by Mr. Williford which are not subject to
performance criteria and which will vest on July 1, 2002. On July 10, 2000,
Messrs. Quesnel, Schmoller, and Williford forfeited 2,833, 2,333 and 2,333
shares of restricted stock, respectively, as a result of the performance
criteria applicable to a July 1, 1997 grant not being met. For all
performance restricted stock held by each Named Executive, one-third of the
shares are eligible for vesting at the end of the first award year and an
additional one-third are eligible for vesting at the end of the second and
third award years, provided in each case that applicable performance
criteria are met.
(6) Amounts shown in this column reflect payments earned by the Named
Executives for awards granted under the Company's Return on Equity Plan.
Payments shown for 2000 are for the three year award cycle commencing
January 1, 1998 and ending December 31, 2000. Payments shown for 1999 are
for the three-year award cycle commencing January 1, 1997 and ending
December 31, 1999. Payments shown for 1998 are for the three-year award
cycle commencing January 1, 1996 and ending December 31, 1998.
In the case of Mr. Piazza, these payments are for two different award
cycles under the Return on Equity Plan (the cycle commencing January 1,
1998 and ending December 31, 2000 and the cycle commencing January 1, 1999
and ending December 31, 2001) and one award cycle under the Value
Management Plan (the cycle commencing January 1, 2000 and ending December
31, 2002). All of Mr. Piazza's awards under the Return on Equity and Value
Management Plans vested and became payable as a result of his retirement
from the Company.
(7) Amounts shown for 2000 in this column include:
(a) Payments by the Company for premiums for taxable group life insurance
on behalf of Messrs. Detter, Schmoller, and Piazza of $1,524, $1,036,
and $3,263, respectively.
(b) Company contributions to the Thrift and Stock Plan accounts of Messrs.
Quesnel, Detter, Ratnathicam, Schmoller, and Williford of $2,550 each,
and Company contributions to the Thrift and Stock Plan account of Mr.
Piazza of $1,899.
15
II. OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year
Individual Grants(1)
-----------------------------------------------
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/ SARs Employees in Price Expiration Present
Granted(#)(2) Fiscal Year ($/Share) Date Value(3)($)
------------- ------------ --------- ---------- -----------
Gregory L. Quesnel...... 175,000/0 10.33% $25.44 08/01/10 $3,127,250
160,000/0 9.44% 27.06 12/06/10 3,139,200
Gerald L. Detter........ 60,000/0 3.54% 25.44 08/01/10 1,072,200
52,000/0 3.07% 27.06 12/06/10 1,020,240
Sanchayan C. Ratnathicam 50,000/0 2.95% 25.44 08/01/10 893,500
....................... 75,000/0 4.43% 22.25 10/01/10 1,177,500
52,000/0 3.07% 27.06 12/06/10 1,020,240
Eberhard G.H. Schmoller 50,000/0 2.95% 25.44 08/01/10 893,500
....................... 43,300/0 2.55% 27.06 12/06/10 849,546
John H. Williford....... 60,000/0 3.54% 25.44 08/01/10 1,072,200
52,000/0 3.07% 27.06 12/06/10 1,020,240
Roger Piazza............ 50,000/0 2.95% 25.44 08/01/10 893,500
- --------
(1) No SARs were issued in 2000
(2) All options become exercisable at the times described below, or earlier
upon a change in control of the Company: (i) options granted to Mr.
Ratnathicam on October 1, 2000 become exercisable 1/4 per year, on October
1, 2001 and on the first, second and third anniversaries of that date;
(ii) options granted on August 1, 2000 become exercisable on August 1,
2005, or earlier if certain performance goals are met; and (iii) options
granted on December 6, 2000 become exercisable 1/4 per year, on January 1,
2002 and on the first, second and third anniversaries of that date.
(3) Present value based on modified Black-Scholes option pricing model which
includes assumptions for the following variables: (i) option exercise
prices equal the fair market values on the dates of grant; (ii) option
term equals 5.8 years (based on historical option exercise experience,
rather than actual option term of 10 years); (iii) volatility equals 0.60;
(iv) risk-free interest rate equals 6.92%; and (v) estimated future
average dividend yield equals 1.44%.
The Company's use of this model should not be construed as an endorsement
of its accuracy in valuing options. The Company's executive stock options
are not transferable so the "present value" shown is not currently
realizable by the executive. Future compensation resulting from option
grants will ultimately depend on the amount by which the market price of
the stock exceeds the exercise price on the date of exercise.
16
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal-Year End Option/SAR Values
The following table provides information on option/SAR exercises in 2000 by
the Named Executives and the value of such officers' unexercised options/SARs
at December 31, 2000.
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Value Options/SARs at In-the-Money Options/SARs
on Exercise Realized FY-End (#)(2) at FY-End ($)(2)(3)(4)(5)
(#)(1) ($) Exercisable/Unexercisable Exercisable/ Unexercisable
----------- -------- ------------------------- --------------------------
Gregory L. Quesnel...... 0 $ 0 313,779/545,417 $3,327,835/3,035,625
Gerald L. Detter........ 0 0 129,237/194,500 1,253,208/1,037,250
Sanchayan C.
Ratnathicam............ 4,737 57,989 82,580/235,875 616,427/128,625
Eberhard G.H. Schmoller. 4,737 60,673 188,213/148,300 2,479,657/833,525
John H. Williford....... 0 0 56,243/178,875 315,499/153,125
Roger Piazza............ 4,737 66,673 33,553/114,375 202,522/450,156
- --------
(1) The shares shown in this column for Messrs. Ratnathicam, Schmoller, and
Piazza were acquired upon exercise and held.
(2) Mr. Quesnel has 313,170 exercisable options valued at $3,325,553; 545,417
unexercisable options valued at $3,035,625; and 609 SARs the appreciation
on which is valued at $2,282. Mr. Detter has 129,237 exercisable options
valued at $1,253,208;194,500 unexercisable options valued at $1,037,250;
and no SARs. Mr. Ratnathicam has 82,580 exercisable options valued at
$616,427; 235,875 unexercisable options valued at $128,625; and no SARs.
Mr. Schmoller has 185,129 exercisable options valued at $2,465,475;148,300
unexercisable options valued at $833,525; and 3,084 SARs, the appreciation
on which is valued at $14,182. Mr. Williford has 56,243 exercisable
options valued at $315,499; 178,875 unexercisable options valued at
$153,125; and no SARs. Mr. Piazza has 33,553 exercisable options valued at
$202,522; 114,375 unexercisable options valued at $450,156; and no SARs
(all options became exercisable on January 1, 2001, following his
retirement). The value of outstanding SARs was fixed as described in
footnote 5 below when the Company's SAR plan was terminated on March 31,
1990.
(3) Based on the closing stock price of $33.8125 on December 29, 2000.
(4) Numbers shown reflect the value of options granted at various times over a
ten-year period.
(5) The Company's Incentive Compensation Stock Appreciation Rights Plan ("SAR
Plan") was terminated on March 31, 1990. Under the SAR plan, selected key
employees were afforded the opportunity to convert cash awards under the
Company's short-term incentive compensation plans into SARs corresponding
in value to the Company's shares of Common Stock. The SARs fluctuated in
value as the price of the Common Stock increased or decreased and earned
amounts equal to dividends declared on the Common Stock. When the SAR Plan
was terminated, the value of all outstanding SARs was fixed as of that
date. Interest equivalents have been credited to outstanding balances of
participants since April 1, 1990. Payouts are made in cash and commence
upon a participant's prior election or termination of employment with the
Company.
17
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth information regarding awards made to the
Named Executives in 2000 under the Company's Value Management Plan. Except for
such awards, no Long-Term Incentive Plan Awards were made to the Named
Executives in 2000.
Estimated Future Payouts under
Target Number Performance or the Value Management Plan (1)
of Shares, Units Other Period ---------------------------------
or Other Rights Until Maturation Target Maximum
Name (% of Salary) or Payout Threshold ($) ($) ($)
---- ---------------- ---------------- ------------- -------- ----------
Gregory L. Quesnel...... 116% 12/31/02 $ 0 $826,505 $1,653,009
Gerald L. Detter........ 103% 12/31/02 0 509,945 1,019,890
Sanchayan C.
Ratnathicam............ 70% 12/31/02 0 262,116 524,233
Eberhard G.H. Schmoller. 72% 12/31/02 0 258,486 516,972
John H Williford........ 97% 12/31/02 0 388,035 776,070
Roger Piazza(2)......... 89% 12/31/02 0 366,723 733,445
- --------
(1) Target payouts are made if the Total Business Return (TBR) for the
applicable award period is equal to a specified target percentage (differs
by executive). For TBR below the target percentage, the payouts decrease
on a pro rata basis and drop to zero if the TBR is less than one-half of
the target percentage. For TBR above the target percentage, the payouts
increase on a pro rata basis, up to a maximum of twice the target payout,
if the TBR exceeds the target percentage by 1.25 times.
(2) All awards received by Mr. Piazza under the Return on Equity Plan and the
Value Management Plan, including the award he received in 2000 under the
Value Management Plan, vested and became payable as a result of his
retirement from the Company. Mr. Piazza received payments of $81,327 and
$230,144 with respect to Return on Equity awards that he received in 1998
and 1999, respectively and $0 with respect to the Value Management award
that he received in 2000.
18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To the Board of Directors:
The members of the Compensation Committee of the Board of Directors
administer the Company's executive compensation program, the purpose of which
is to: a) align the Company's rewards strategy with its business objectives;
b) support a culture of strong performance; and c) attract, retain and
motivate highly talented executives. Executive compensation consists of three
components: base salary, short-term incentive compensation, and long-term
incentive compensation. The Company has put a significant portion of total
compensation for all executives "at risk" through short-term and long-term
incentive compensation. It is the Company's policy to tie a greater portion of
an executive's total compensation to performance of the Company and its
subsidiaries than is the case for Company employees generally. In keeping with
the general policy of pay for performance, an even greater portion of the
total compensation for the executives named in the Summary Compensation Table
on page 14 ("Named Executives") is tied to performance than is the case for
Company executives generally.
Each year the Committee reviews a report by an independent executive
compensation consultant engaged by the Company. That consultant compares the
Company's executive compensation to the compensation of similar executives at
companies considered to be the Company's most direct competitors for executive
talent. The comparison covers all aspects of compensation: base salaries,
annual bonuses and long-term incentive awards. In 1999 (for 2000
compensation), the executive compensation paid to the Named Executives was
compared to compensation paid to top executives by the companies that comprise
the Dow Jones Transportation Average ("DJTA"), while the executive
compensation paid to the Company's other executives was reviewed against
surveys of executive compensation paid to similar executives in general
industry, taking into account the Company's size compared to those companies.
These groups of companies are referred to in this Report as the Company's
"compensation peer group." The Compensation Committee believes that this
compensation peer group, and not the companies comprising the peer group index
in the Comparison of Five Year Cumulative Total Return graph included in this
Proxy Statement, better reflects the Company's most direct competitors for
executive talent.
As part of the 1999 engagement (for 2000 compensation), the consultant
concluded that, taken together, the elements of the Company's executive
compensation package deliver pay opportunities that are within the competitive
norm. In addition, the consultant was asked to review various long-term
incentive allocation methodologies and to recommend a formula appropriate for
the Company and consistent with practices in comparable companies. The
allocation formula recommended by the consultant takes into consideration each
executive's organizational position, decision-making influence, and
accountability over the strategic results of the Company.
Base Salary
The Company's policy is to pay base salaries that are at the 50th percentile
of salaries paid by companies in the compensation peer group. For 2000, the
Committee determined that because the executive's salaries were generally in
line with this goal, no salary increases should be made. As a result, at the
beginning of 2000, Messrs. Detter, Ratnathicam, Schmoller, Williford and
Piazza received no salary increases.
The base salaries for all Named Executives, other than the Chief Executive
Officer, were approved by the Committee. The 2000 salary of Mr. Quesnel was
approved by the Board of Directors as discussed below under "CEO
Compensation."
19
Short-Term Incentive Compensation
The Company's policy is to pay short-term incentive compensation that is at
the 60th percentile of short-term incentive compensation paid by companies in
the compensation peer group. The Company's short-term incentive compensation
plans are reviewed and approved annually by the Committee. The plans are then
incorporated into the Company's business plan for the ensuing year and
presented to the Board of Directors for approval and adoption. These plans
provide for annual awards to regular, full-time, non-contractual employees.
The Committee has delegated to the Chief Executive Officer and other executive
officers the responsibility and authority to administer the Company's short-
term incentive plans for non-executive employees.
At the end of the year, each major operating subsidiary develops goals which
reflect its business objectives for the following year. These goals represent
measurable performance objectives such as profits, revenue, returns on equity,
assets or capital, expenses and service. The parent Company goals generally
represent a compilation of the profit goals of the subsidiaries.
In 2000, the performance objective for Messrs. Quesnel, Ratnathicam, and
Schmoller was based on pre-tax, pre-incentive income of the parent Company;
the performance objective for Mr. Detter was based on the pre-incentive
operating income of Con-Way Transportation Services, Inc.; the performance
objective for Mr. Piazza was based on the pre-incentive operating income of
Emery Worldwide; and the performance objective for Mr. Williford was based on
pre-incentive operating income of Menlo Logistics, Inc. and on the cost per
piece for priority mail operations of Emery Worldwide Airlines, Inc.
Upon attainment of the established performance goals, each plan participant
(including the Named Executives) earns incentive compensation determined as a
percentage of base salary, with the actual incentive varying depending upon
the level of attainment of the established performance goals, against a
"target incentive" tied to the participant's level of responsibility. In
addition, each participant's incentive compensation is capped at an amount
equal to twice the target incentive. In 2000, operating income of Con-Way and
Menlo increased 0% and 49.6%, respectively, over 1999 operating income, and
the Company's net income applicable to common shareholders decreased 30.4%
compared to 1999 levels. As a result, Messrs. Quesnel, Detter, Ratnathicam,
Schmoller, and Williford earned incentive compensation under the plan of
$278,915, $348,909, $114,507, $105,402 and $362,142, respectively.
In 2000, the Committee also continued the annual bonus for operating company
executives, with bonus payments tied to the achievement of targeted operating
ratios. Among the Named Executives, Messrs. Detter, Piazza, and Williford were
eligible to participate in the bonus program. Based upon results of operations
for 2000, Mr. Piazza did not receive an operating bonus and Messrs. Detter and
Williford received operating bonuses of $338,289 and $19,487, respectively.
Long-Term Incentive Compensation
The Committee believes that executives should have a large stake in the
risks and rewards of long-term ownership of the Company. The CNF
Transportation Inc. Equity and Incentive Plan, which was approved at the
Company's 1997 Annual Meeting of Shareholders and re-approved at the Company's
2000 Annual Meeting of Shareholders, provides for the granting of restricted
stock awards, options to purchase shares of the Company's Common Stock, and
other types of long-term awards to key employees of the Company and its
subsidiaries. The Company's goal is to provide long-term incentive
compensation that is at the 50th percentile of long-term incentive
compensation paid by companies in the compensation peer group.
After reviewing information and recommendations provided by the above-
mentioned executive compensation consultant and adjusting for individual
factors, in 2000 the Committee granted non-
20
qualified and incentive stock options for a total of 1,694,800 shares to
executives of the Company and its subsidiaries. The first broad-based awards,
made effective August 1, 2000, consisted of options for 896,000 shares. These
special grants of performance accelerated options were made to promote greater
focus on increasing shareholder value, to provide enhanced motivation for the
Company's key management group, and to increase retention of key management in
a tight labor market. Also in December, the Committee made its customary
annual grants of non-qualified and incentive stock options for 712,800 shares
to executives of the Company and its subsidiaries. In addition to the grants
made in August and December, non-qualified options for 86,000 shares were
granted to various executive officers during the year upon hiring or
promotion, including 75,000 options which were made to Mr. Ratnathicam upon
his appointment as Chief Executive Officer of Emery Worldwide. The stock
options granted in 2000 to the Named Executives are set forth in the
Option/SAR Grants Table on page 16.
The Committee elected not to make long-term compensation awards in the form
of restricted stock in 2000.
In order to maintain the Company's overall long-term incentive compensation
at competitive levels, in 2000, the Committee made awards to senior executives
under a new long-term incentive plan called Value Management, which replaced
the Company's Return on Equity Plan. Under the Value Management Plan, which
has rolling three year cycles with a new cycle beginning each year, long-term
incentive awards are paid on a criterion called "total business return" which
is, in turn, based on cash generation and capital efficiency. Bonus payments
for the 1998 award cycle under the Return on Equity Plan, which ended on
December 31, 2000, were made in January 2001. Among the Named Executives,
Messrs. Quesnel, Detter, Ratnathicam, Schmoller, Williford, and Piazza earned
bonus payments of $478,392, $363,578, $363,578, $325,307, $325,307, and
$81,327, respectively.
Under the Long-Term Incentive Plan of 1988 and its predecessor, the Long-
Term Incentive Plan of 1978, key employees of the Company and its subsidiaries
were previously awarded growth units entitling them to certain cash benefits
upon such units vesting and appreciating in value. All awards made under these
plans are now fully vested. Among the Named Executives, only Messrs. Quesnel
and Schmoller currently hold such growth units. No new awards have been made
under these plans since 1990.
Long-term incentive compensation awards made to Mr. Quesnel during 2000 are
discussed in more detail below under "CEO Compensation."
CEO Compensation
The Committee recommended, and the Board approved, a 2000 annualized base
salary for Mr. Quesnel of $712,504, which is the same salary as Mr. Quesnel
received in 1999. This amount was recommended by the Committee and approved by
the Board based on Mr. Quesnel's experience, on the comparative salaries paid
to chief executive officers of companies within the compensation peer group,
and on the recommendation of the Company's independent executive compensation
consultant.
In 2000, Mr. Quesnel earned short-term incentive compensation of $278,915,
based on the pre-tax, pre-incentive income objective for the parent Company
established at the beginning of 2000.
As discussed under "Long-Term Incentive Compensation" on page 20, in 2000,
Mr. Quesnel and the other Named Executives received as long-term compensation
a combination of stock options and awards under the new Value Management Plan
discussed above. Based upon the recommendation of the Company's independent
executive compensation consultant, in December 2000, Mr. Quesnel received
long-term compensation awards valued at the 50th percentile of long-term
compensation paid to chief executive officers of companies in the DJTA if the
Company achieves its goals relating to total
21
business return and shareholder value. In addition, Mr. Quesnel participated
in the special grant of performance accelerated stock options made in August
2000.
Policy on Deductibility of Compensation
The federal income tax law limits the deductibility of certain compensation
paid to the Chief Executive Officer and the four other most highly compensated
executives (the "covered employees") in excess of the statutory maximum of $1
million per covered employee. The Committee's general policy is, where
feasible, to structure compensation paid to the covered employees so as to
maximize the deductibility of such compensation for federal income tax
purposes; however, there may be circumstances where portions of such
compensation will not be deductible. In 2000, as in prior years, no covered
employee received compensation which was not deductible.
Under the federal income tax law, certain compensation, including
"performance-based compensation," is excluded from the $1 million
deductibility limit. The Company's 1997 Equity and Incentive Plan, which was
approved at the Company's 1997 Annual Meeting of Shareholders, allows the
Committee to make certain short- and long-term incentive compensation awards
to covered employees that qualify as "performance-based compensation." The
Committee intends to use such awards, where feasible, to carry out its general
policy of providing a competitive compensation package which also structures
compensation paid to the covered employees so as to maximize the deductibility
of such compensation for federal income tax purposes.
THE COMPENSATION COMMITTEE
W. Keith Kennedy, Jr., Chairman Robert D. Rogers
Richard B. Madden Robert P. Wayman
Michael J. Murray
22
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee are all independent directors of the
Company and have no other relationships with the Company and its subsidiaries.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN*
CNF Transportation Inc., S & P Mid Cap 400 Index, Peer Group Index, Dow Jones
Transportation Average
Cumulative Total Return
-----------------------------------------
4Q95 4Q96 4Q97 4Q98 4Q99 4Q00
------ ------ ------ ------ ------ ------
CNF $100.0 $ 98.6 $173.7 $170.3 $158.1 $157.4
S&P Midcap 400 $100.0 $119.2 $157.6 $187.8 $215.4 $253.1
Custom Peer Group $100.0 $117.5 $160.6 $199.9 $186.8 $170.7
Dow Jones Transportation
Average $100.0 $115.2 $172.2 $168.0 $160.4 $161.0
* Assumes $100 invested on December 31, 1995 in CNF Transportation Inc.
(then known as Consolidated Freightways, Inc.), S & P Mid Cap 400 Index, the
Peer Group Index (described below), and the Dow Jones Transportation Average
and that any dividends were reinvested.
The Company has selected the Dow Jones Transportation Average ("DJTA") as a
published industry index to replace the custom Peer Group Index used last year
and in prior years. The number of companies in the Peer Group Index has
decreased from eight to five over the last two years, as a result of
consolidation within the industry and the elimination of the Pittston-
Burlington tracking stock. As a result, the Company believes that the DJTA
provides a a better comparative index than the custom Peer Group Index. In
addition, when setting the compensation to be paid to the Company's top
executives, the Company's Compensation Committee considers compensation paid
to executives of the companies that comprise the DJTA.
23
The Peer Group Index is a market-capitalization weighted index consisting of
the common stocks of the following corporations: Airborne Freight Corporation,
American Freightways Corporation, FedEx Corporation, Ryder System Inc., and US
Freightways Corporation. This Peer Group Index is the same as in last year's
Proxy Statement, except that Pittson Co.-Burlington Group was omitted from the
Peer Group Index for 2000 due to the elimination of the tracking stock for
Pittson Co.-Burlington Group, effective January 4, 2000. American Freightways
Corporation, which was included in the Peer Group Index for 2000, has since
been acquired by FedEx Corporation.
----------------
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
The following table illustrates the approximate annual pension that may
become payable to an employee in the higher salary classifications under the
Company's retirement plans.
Average
Final Total
Earnings
During
Highest
Five
Consecutive
Years
of Last Ten Years of Plan Participation
Years of ------------------------------------------------
Employment 15 20 25 30 35
----------- -------- -------- -------- ---------- ----------
$ 200,000 $ 43,430 $ 62,343 $ 81,256 $ 100,170 $ 119,083
$ 300,000 $ 65,954 $ 94,593 $123,232 $ 151,872 $ 180,511
$ 400,000 $ 88,477 $126,843 $165,208 $ 203,573 $ 241,939
$ 500,000 $111,001 $159,092 $207,184 $ 255,275 $ 303,367
$ 600,000 $133,525 $191,342 $249,160 $ 306,977 $ 364,795
$ 700,000 $156,048 $223,592 $291,135 $ 358,679 $ 426,223
$ 800,000 $178,572 $255,841 $333,111 $ 410,381 $ 487,651
$ 900,000 $201,095 $288,091 $375,087 $ 462,083 $ 549,079
$1,000,000 $223,619 $320,341 $417,063 $ 513,785 $ 610,507
$1,100,000 $246,143 $352,591 $459,039 $ 565,487 $ 671,935
$1,200,000 $268,666 $384,840 $501,014 $ 617,189 $ 733,363
$1,300,000 $291,190 $417,090 $542,990 $ 668,891 $ 794,791
$1,400,000 $313,713 $449,340 $584,966 $ 720,592 $ 856,219
$1,500,000 $336,237 $481,589 $626,942 $ 772,294 $ 917,647
$1,600,000 $358,761 $513,839 $668,918 $ 823,996 $ 979,075
$1,700,000 $381,284 $546,089 $710,893 $ 875,698 $1,040,503
$1,800,000 $403,808 $578,338 $752,869 $ 927,400 $1,101,931
$1,900,000 $426,331 $610,588 $794,845 $ 979,102 $1,163,359
$2,000,000 $448,855 $642,838 $836,821 $1,030,804 $1,224,787
Compensation covered for the Named Executives is the highest five-year
average over the last ten years of employment of the "Salary" and "Bonus", as
such terms are used in the Summary Compensation Table on page 14, and of
certain other compensation. Retirement benefits shown are payable at or after
age 65 in the form of a single life annuity, using the current level of Social
Security benefits to compute the adjustment for such benefits.
Applicable law limits the annual benefits which may be paid from a tax-
qualified retirement plan to $130,000 per year currently, and prevents pension
accruals for compensation in excess of $170,000 per year and for deferred
compensation. The Company has adopted non-qualified plans to provide for
payment out of the Company's general funds of benefits not covered by the
qualified plans. The table above represents total retirement benefits which
may be paid from a combination of qualified and non-qualified plans.
As of December 31, 2000, Messrs. Quesnel, Detter, Ratnathicam, Schmoller,
Williford, and Piazza had 25, 32, 23, 26, 19, and 22 years of plan
participation, respectively.
----------------
24
CHANGE IN CONTROL ARRANGEMENTS
Messrs. Quesnel, Detter, Ratnathicam, Schmoller, and Williford, have entered
into severance agreements with the Company and, if applicable, the subsidiary
by which they are employed. Each severance agreement provides that if such
officer's employment is actually or constructively terminated within two years
of a change in control (as defined in the severance agreement) of the Company
or the subsidiary or prior to a change in control at the direction of a person
or entity which subsequently acquires control of the Company or the
subsidiary, the officer generally will receive, among other things, (i) a lump
sum cash payment equal to three times the officer's base salary as of the date
of termination (or as of the change of control, if higher); (ii) a lump sum
cash payment equal to three times the highest of (a) the officer's average
annual bonus over the three years prior to the termination of employment, (b)
the officer's average annual bonus over the three years prior to the change in
control, or (c) the officer's target bonus for the year of the termination of
employment; (iii) life, disability, health, dental, and accidental insurance
benefits for three years; and (iv) a lump sum payment reflecting the value of
three additional years of retirement benefits. The executives will also be
entitled to receive additional payments to the extent necessary to compensate
them for any excise taxes payable by them under the federal laws applicable to
excess parachute payments.
----------------
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors provides assistance to the
Board in fulfilling its obligations with respect to matters involving the
accounting, auditing, financial reporting, and internal control functions of
the Company. Among other things, the Audit Committee reviews and discusses
with management and with the Company's outside auditors the results of the
year-end audit of the Company, including the audit report and audited
financial statements.
All members of the Audit Committee are independent directors, qualified to
serve on the Audit Committee pursuant to the requirements of the New York
Stock Exchange. The Board of Directors has adopted a written charter of the
Audit Committee, which is included as Appendix B to this Proxy Statement.
In connection with its review of the audited financial statements of the
Company for the fiscal year ended December 31, 2000, the Audit Committee
reviewed and discussed the audited financial statements with management, and
discussed with Arthur Andersen LLP, the Company's independent auditors, the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU 380). In addition, the Audit Committee received the
written disclosures and the letter from Arthur Andersen LLP required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with Arthur Andersen LLP their independence
from the Company.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 2000, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Robert P. Wayman, Chairman Michael J. Murray
Richard A. Clarke William J. Schroeder
Margaret G. Gill
----------------
25
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY
The Board of Directors of the Company has unanimously approved a proposed
amendment to the Company's Certificate of Incorporation which, if adopted,
will change the name of the Company from "CNF Transportation Inc." to "CNF
Inc." The text of the proposed amendment is set forth in Appendix A to this
Proxy Statement.
In March 2000, the Company began doing business as "CNF Inc." in order to
reflect the evolution of the Company from a pure transportation company to a
global supply chain services company. Later in the year, the Company's shares
began trading on the New York Stock Exchange under the name CNF Inc. In order
to avoid confusion as to the correct name of the Company, the Board recommends
that shareholders approve the amendment to the Certificate of Incorporation
changing the Company's legal name to "CNF Inc."
The change of the Company's name will not affect in any way the validity of
currently outstanding stock certificates or the trading of the Company's
securities. Shareholders will not be required to surrender or exchange any
stock certificates currently held by them.
Approval of the proposal requires the affirmative vote of the holders of a
majority of the voting power entitled to vote thereon. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
---------------
APPOINTMENT OF AUDITORS
At last year's annual meeting, shareholders approved the appointment of
Arthur Andersen LLP as independent public accountants to audit the
consolidated financial statements of the Company for the year ended December
31, 2000. The Board recommends that shareholders vote in favor of ratifying
the reappointment of Arthur Andersen LLP as the Company's independent auditors
for the year ending December 31, 2001. A representative of the firm will be
present at the Annual Meeting of Shareholders with the opportunity to make a
statement if he or she desires to do so and to respond to appropriate
questions from shareholders.
The Company has been informed by Arthur Andersen LLP that neither the firm
nor any of its members or their associates has any direct financial interest
or material indirect financial interest in the Company or its affiliates.
During the Company's fiscal year ended December 31, 2000, the Company was
billed the following aggregate fees by Arthur Andersen LLP:
Audit Fees. The aggregate fees billed by Arthur Andersen LLP to the
Company for professional services rendered for the audit of the Company's
annual financial statements for the Company's fiscal year ended December
31, 2000 and the reviews of the financial statements included in the
Company's Forms 10-Q for that fiscal year was $1,107,000.
Financial Information Systems Design and Implementation Fees. No fees
were billed by Arthur Andersen LLP to the Company for the professional
services described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X
(financial information systems design and implementation services). No such
services were rendered by Arthur Andersen LLP to the Company for the
Company's fiscal year ended December 31, 2000.
All Other Fees. The aggregate fees billed by Arthur Andersen LLP to the
Company for professional services rendered to for the Company for its
fiscal year ended December 31, 2000, other than the Audit Fees and
Financial Information Systems Design and Implementation Fees described in
the preceding two paragraphs, was $3,704,500.
The Audit Committee of the Company's Board of Directors has concluded that
the provision of these non-audit services is compatible with maintaining
Arthur Andersen LLP's independence.
---------------
26
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 14, 2001,
the only persons known to the Company to own beneficially an interest in 5% or
more of the shares of Common Stock or Series B Preferred Stock are set forth
below. All such information is as reported in the most recent Schedule 13G
filed by each such person with the Securities and Exchange Commission.
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
---------------- --------------------- --------
T. Rowe Price Associates, Inc. 393,600 Common (1) *%
and T. Rowe Price Trust Company 543,293 Preferred (1) 5.0%
100 East Pratt Street
Baltimore, MD 21202
FMR Corp.
82 Devonshire Street
Boston, MA 02109 4,009,510 Common (2) 8.2%
- --------
*Less than 1%
(1) T. Rowe Price Associates, Inc. ("Price Associates") has sole voting power
over 39,400 shares, shared voting power over 3,325,170 shares, sole
dispositive power over 393,600 shares and shared dispositive power over
3,325,170 shares. T. Rowe Price Trust Company, the trustee under the
Company's Thrift and Stock Plan ("Trust Company"), has sole voting power
over 0 shares, shared voting power over 3,325,170 shares, sole dispositive
power over 0 shares and shared dispositive power over 3,325,170 shares.
The holdings include 543,293 shares of Series B Preferred Stock (which
Preferred Stock is held pursuant to the CNF Transportation Inc. Thrift and
Stock Plan). Such shares of Series B Preferred Stock represent 64.6% of all
outstanding shares of Series B Preferred Stock. Each share of Series B
Preferred Stock has the right to 6.1 noncumulative votes on each matter
submitted to the meeting. The Series B Preferred Stock is convertible at
the Trust Company's option under certain circumstances into 4.708 shares of
Common Stock for each share of Series B Preferred Stock. On a fully
converted basis, these holdings represent 5.0% of the Common Stock.
Price Associates serves as investment advisor with shared power to vote
these securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates and the Trust Company are
deemed to be the beneficial owners of the Common Stock and Series B
Preferred Stock which has not been allocated to participants' accounts
under the Thrift and Stock Plan. However, Price Associates and the Trust
Company expressly disclaim that they are, in fact, the beneficial owners of
such securities.
(2) FMR Corp., through its subsidiaries Fidelity Management & Research Company
and Fidelity Management Trust Company has in the aggregate, sole voting
power over 306,500 shares, shared voting power over 0 shares, sole
dispositive power over 4,009,510 shares and shared dispositive power over
0 shares.
----------------
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that, during 2000, its executive officers and directors
have complied with all filing requirements under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
----------------
27
CONFIDENTIAL VOTING
Under the confidential voting policy adopted by the Board of Directors, all
proxies, ballots, and voting materials that identify the votes of specific
shareholders will be kept confidential from the Company except as may be
required by law or to assist in the pursuit or defense of claims or judicial
actions and except in the event of a contested proxy solicitation. In
addition, comments written on proxies, ballots, or other voting materials,
together with the name and address of the commenting shareholder, will be made
available to the Company without reference to the vote of the shareholder,
except where such vote is included in the comment or disclosure is necessary
to understand the comment. Certain vote tabulation information may also be
made available to the Company, provided that the Company is unable to
determine how any particular shareholder voted.
Access to proxies, ballots, and other shareholder voting records will be
limited to inspectors of election who are not employees of the Company and to
certain Company employees and agents engaged in the receipt, count, and
tabulation of proxies.
----------------
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the next year's proxy
statement pursuant to Rule 14a-8 under the Exchange Act must be directed to
the Corporate Secretary, CNF Transportation Inc., at 3240 Hillview Avenue,
Palo Alto, California 94304, and must be received by November 8, 2001. In
order for proposals of shareholders made outside of Rule 14a-8 under the
Exchange Act to be considered "timely" within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposals must be received by the Corporate
Secretary at the above address by January 24, 2002. The Company's Bylaws
require that proposals of shareholders made outside of Rule 14a-8 under the
Exchange Act must be submitted, in accordance with the requirements of the
Bylaws, not later than January 24, 2002 and not earlier than December 25,
2001.
----------------
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 2000 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The report will be available for mailing after April 10, 2001.
Please direct your written request to the Corporate Secretary, CNF
Transportation Inc., 3240 Hillview Avenue, Palo Alto, California 94304.
Your Board knows of no other matters to be presented at the meeting. If any
other matters come before the meeting, it is the intention of the proxy
holders to vote on such matters in accordance with their best judgment.
----------------
The expense of proxy solicitation will be borne by the Company. The
solicitation is being made by mail and may also be made by telephone,
telegraph, facsimile, or personally by directors, officers, and regular
employees of the Company who will receive no extra compensation for their
services. In addition, the Company has engaged the services of Innisfree M&A
Incorporated, New York, New York, to assist in the solicitation of proxies at
a fee of $10,000, plus expenses. The Company has also engaged Chase Mellon
Shareholder Services to act as inspector of elections. The Company will
reimburse banks, brokerage firms and other custodians, nominees, and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners of the Company's voting stock.
28
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING WHITE PROXY CARD AS SOON AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
EBERHARD G.H. SCHMOLLER
Secretary
March , 2001
29
APPENDIX A
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION
WITH CHANGES INDICATED
The Certificate of Incorporation, as amended, of the Company is further
amended by changing Article FIRST to read as follows:
FIRST, The name of the corporation is [*CNF Transportation Inc.,] CNF Inc.
-------
* CNF Transportation Inc., is the old name of CNF Inc.
A-1
APPENDIX B
CNF TRANSPORTATION INC.
AUDIT COMMITTEE CHARTER
Purpose
The purpose of the Audit Committee (the "Committee") of the Board of
Directors of CNF Transportation Inc. (the "Company") is to provide assistance
to the Board in fulfilling its obligations with respect to matters involving
the accounting, auditing, financial reporting, and internal control functions
of the Company. The Committee shall receive reports on the audit efforts of
the Company's outside auditors and internal auditors, and review with them the
adequacy and effectiveness of the Company's accounting and internal control
policies and procedures.
Membership
The Committee is a permanent committee of the Board of Directors consisting
of at least three members appointed by the Board. Each member of the Committee
shall be qualified to serve on the Committee pursuant to the requirements of
the NYSE.
Meetings
The Committee shall meet with such frequency and at such intervals as it
shall determine is necessary to carry out its duties and responsibilities. As
part of its purpose to foster open communications, the Committee shall meet at
least annually with the Company's outside auditors in a separate executive
session, without the presence of Company management, to discuss any matters
that the Committee or the Company's outside auditors believe should be
discussed.
Responsibilities
In carrying out its duties and responsibilities, the Committee's policies
and procedures should remain flexible, so that it may be in a position to
react or respond to changing circumstances or conditions. While there is no
"blueprint" to be followed by the Committee in carrying out its duties and
responsibilities, the following should be considered within the authority of
the Committee.
1. Make recommendations to the Board as to the selection of the firm of
outside auditors to audit the books and accounts of the Company and its
subsidiaries for each fiscal year;
2. Review and approve the Company's outside auditors' annual engagement
letter, including the proposed fees contained therein;
3. Oversee the independence of the Company's outside auditors by, among
other things, requiring the outside auditors to submit on a periodic
basis to the Audit Committee a formal written statement delineating all
relationships between the outside auditors and the Company, and
discussing with the outside auditors any relationships that may affect
the auditors' objectivity and independence and recommending that the
Board of Directors take appropriate action in response to the outside
auditors' statement to satisfy itself of the auditors' independence;
4. Instruct the Company's outside auditors that they are ultimately
accountable to the Board of Directors and the Audit Committee, and that
the Board of Directors and the Audit Committee have the ultimate
authority and responsibility to select (subject to shareholder
approval), evaluate and, where appropriate, replace the Company's
outside auditors;
5. Review the performance of the Company's outside auditors and make
recommendations to the Board regarding the replacement or termination of
the outside auditors when circumstances warrant;
B-1
6. Review and discuss with management and with the outside auditors the
results of the year-end audit of the Company, including the audit
report and the audited financial statements, and receive confirmation
from the outside auditors that such discussions have covered all
matters required to be discussed by Statement on Auditing Standards No.
61;
7. Query management and the outside auditors regarding any significant
disagreement between management and the outside auditors in connection
with the preparation of the annual financial statements; and, if
unresolved, report to the Board for resolution;
8. Include in each annual proxy statement, commencing with the Company's
2001 proxy statement, a report of the Audit Committee in accordance
with the applicable rules of the SEC;
9. Review and reassess the adequacy of this Charter on an annual basis;
10. Perform such additional activities, and consider such other matters
within the scope of its responsibilities, as the Board of Directors or
the Audit Committee deems necessary or appropriate.
With respect to the duties and responsibilities listed above, the Committee
should report regularly to the Board on its activities, as appropriate, and
provide management and the Company's outside auditors with appropriate
opportunities to meet privately with the Committee. While the Committee has
the duties and responsibilities set forth in this Charter, the Committee is
not responsible for planning or conducting the audit or for determining
whether the Company's financial statements are complete and accurate and are
in accordance with generally accepted accounting principles. Similarly, it is
not the responsibility of the Committee to resolve disagreements, if any,
between management and the outside auditors or to ensure that the Company
complies with all laws and regulations.
B-2
[RECYCLED PAPER LOGO]
DIRECTION FORM (TASP)
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
Direction to Trustee
(USE ONLY IF YOU WISH TO VOTE PREFERRED SHARES SEPARATELY)
The undersigned hereby directs the Trustee of the CNF Transportation Inc.
Thrift and Stock Plan to vote all shares of CNF Transportation Inc. preferred
stock credited to the individual account of the undersigned under the Plan at
the Annual Meeting of Shareholders of CNF Transportation Inc. to be held on
Tuesday, April 24, 2001 at 9:00 A.M. or at any adjournments or postponements
thereof.
This direction cannot be voted unless it is properly signed and returned. If
properly signed and returned, the Trustee will vote as directed by the
undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR Items 2 and 3 below, as described in the
accompanying proxy statement.
1.Election of Four Class I directors for a three-year term.
Nominees: Richard A. Clarke, W. Keith Kennedy, Jr., Richard B. Madden, Gregory
L. Quesnel.
[_] Vote FOR all nominees listed above; except vote withheld from the
following nominees (if any):
-------------------------------------------------------------------------
-------------------------------------------------------------------------
[_] Vote WITHHELD from all nominees.
2.Approval of name change to CNF Inc.
FOR[_] AGAINST[_] ABSTAIN[_]
3.Ratify appointment of Arthur Andersen LLP as the Company's auditors for the
year 2001.
FOR[_] AGAINST[_] ABSTAIN[_]
The Trustee is hereby directed to authorize the proxies to vote in their
discretion upon such other business as may properly come before the meeting
and any and all adjournments or postponements thereof.
,
2001
_____________________________________
Signature of Participant
_____________________________________
Name (Please Print)
_____________________________________
Address (Please Print)
_____________________________________
City State Zip Code
DIRECTION FORM (EWW SAVINGS PLAN)
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
Direction to Trustee
(USE ONLY IF YOU WISH TO VOTE PREFERRED SHARES SEPARATELY)
The undersigned hereby directs the Trustee of the EWW Savings Plan CNF to vote
all shares of CNF Transportation Inc. preferred stock credited to the
individual account of the undersigned under the Plan at the Annual Meeting of
Shareholders of CNF Transportation Inc. to be held on Tuesday, April 24, 2001
at 9:00 A.M. or at any adjournments or postponements thereof.
This direction cannot be voted unless it is properly signed and returned. If
properly signed and returned, the Trustee will vote as directed by the
undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR Items 2 and 3 below, as described in the
accompanying proxy statement.
1. Election of Four Class I directors for a three-year term.
Nominees: Richard A. Clarke, W. Keith Kennedy, Jr., Richard B. Madden,
Gregory L. Quesnel.
[_]Vote FOR all nominees listed above; except vote withheld from the
following nominees (if any):
________________________________________________________________________
________________________________________________________________________
[_]Vote WITHHELD from all nominees.
2. Approval of name change to CNF Inc.
FOR[_] AGAINST[_] ABSTAIN[_]
3. Ratify appointment of Arthur Andersen LLP as the Company's auditors for the
year 2001.
FOR[_] AGAINST[_] ABSTAIN[_]
The Trustee is hereby directed to authorize the proxies to vote in their
discretion upon such other business as may properly come before the meeting
and any and all adjournments or postponements thereof.
, 2001
_____________________________________
Signature of Participant
_____________________________________
Name (Please Print)
_____________________________________
Address (Please Print)
_____________________________________
City State Zip Code
CNF Logo
Eberhard G.H. Schmoller
Secretary
March , 2001
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 24, 2001. This material is being sent to you
as a participant in the CNF Transportation Inc. Common Stock Fund and includes
(1) the Company's 2001 Proxy Statement and 2000 Annual Report, (2) a card to
instruct Mellon Bank, the Fund trustee, as to how you wish the shares of CNF
Transportation Inc. credited to your account to be voted, and (3) an envelope
to send your instruction card to First Chicago Trust Company, the Company's
stock transfer agent.
In order to vote the shares credited to your account, you must complete and
return the enclosed instruction card giving the trustee specific voting
instructions. If you wish, you may sign and return the card without giving
specific voting instructions in which case your shares will be voted as
recommended by the CNF Transportation Inc. Board of Directors. Under the terms
of the Plan, the trustee votes any shares credited to your account for which
it does not receive a signed instruction card on a timely basis in the same
manner and proportion as the shares of stock for which it does receive valid
voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company, the Company's stock transfer agent. It will be treated confidentially
by the transfer agent and the trustee.
The exercise of shareholder voting rights is a very important feature of the
Common Stock Fund because it allows you to participate directly in the affairs
of the Company. We urge you to exercise your voting rights. In order for the
trustee to comply with your instructions, First Chicago Trust Company must
receive your completed instruction card no later than April 18, 2001.
Sincerely,
CNF Logo
Eberhard G.H. Schmoller
Secretary
March , 2001
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 24, 2001. This material is being sent to you
as a participant in the CNF Transportation Inc. Thrift and Stock Plan and
includes (1) the Company's 2001 Proxy Statement and 2000 Annual Report, (2) a
card to instruct T. Rowe Price Trust Company, the Plan Trustee, as to how you
wish the shares of Company stock credited to your account to be voted, (3) if
you wish to instruct the Trustee to vote the preferred shares of Company stock
credited to your account differently than the common shares, a direction form
to instruct the Trustee as to how you wish to vote such preferred shares, and
(4) an envelope to forward your instructions to First Chicago Trust Company,
the Company's stock transfer agent.
In order to vote the Company shares credited to your account, you must
complete and return the enclosed instruction card giving the Trustee specific
voting instructions for the common and preferred shares. If you wish, you may
sign and return the card without giving specific voting instructions and the
shares will be voted as recommended by the CNF Transportation Inc. Board of
Directors. The instruction card will direct the Trustee to vote both the
common and preferred shares of Company stock credited to your account. If you
wish to vote the preferred shares of stock differently than the common shares,
you must also complete the preferred stock direction form and return it to
First Chicago Trust Company with the instruction card. Under the terms of the
Plan, the Trustee votes the shares of each class of Company stock credited to
your account for which it does not receive a signed instruction card on a
timely basis in the same manner and proportion as the shares in such class of
stock for which it does receive valid voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company, the Company's stock transfer agent. It will be treated confidentially
by the transfer agent and the Trustee.
The exercise of shareholder voting rights is a very important feature of the
Plan because it allows you to participate directly in the affairs of the
Company. We urge you to exercise your voting rights. In order for the Trustee
to comply with your instructions, First Chicago Trust Company must receive
your completed instruction card no later than April 18, 2001.
Sincerely,
CNF Logo
Eberhard G.H. Schmoller
Secretary
March , 2001
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 24, 2001. This material is being sent to you
as a participant in the EWW Savings Plan and includes (1) the Company's 2001
Proxy Statement and 2000 Annual Report, (2) a card to instruct T. Rowe Price
Trust Company, the Plan Trustee, as to how you wish the shares of Company
stock credited to your account to be voted, (3) if you wish to instruct the
Trustee to vote the preferred shares of Company stock credited to your account
differently than the common shares, a direction form to instruct the Trustee
as to how you wish to vote such preferred shares, and (4) an envelope to
forward your instructions to First Chicago Trust Company, the Company's stock
transfer agent.
In order to vote the Company shares credited to your account, you must
complete and return the enclosed instruction card giving the Trustee specific
voting instructions for the common and preferred shares. If you wish, you may
sign and return the card without giving specific voting instructions and the
shares will be voted as recommended by the CNF Transportation Inc. Board of
Directors. The instruction card will direct the Trustee to vote both the
common and preferred shares of Company stock credited to your account. If you
wish to vote the preferred shares of stock differently than the common shares,
you must also complete the preferred stock direction form and return it to
First Chicago Trust Company with the instruction card. Under the terms of the
Plan, the Trustee votes the shares of each class of Company stock credited to
your account for which it does not receive a signed instruction card on a
timely basis in the same manner and proportion as the shares in such class of
stock for which it does receive valid voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company, the Company's stock transfer agent. It will be treated confidentially
by the transfer agent and the Trustee.
The exercise of shareholder voting rights is a very important feature of the
Plan because it allows you to participate directly in the affairs of the
Company. We urge you to exercise your voting rights. In order for the Trustee
to comply with your instructions, First Chicago Trust Company must receive
your completed instruction card no later than April 18, 2001.
Sincerely,
================================================================================
CNF TRANSPORTATION INC. THRIFT AND STOCK PLAN
Direction of Participant to Trustee of
CNF Transportation Inc. Thrift and Stock Plan
(Common Stock and Preferred Stock)
The undersigned hereby directs the Trustee of the CNF Transportation Inc. Thrift
and Stock Plan to vote all shares of CNF Transportation Inc. common stock and
preferred stock credited to the individual account of the undersigned under the
Plan at the Annual Meeting of Shareholders of CNF Transportation Inc. to be
held on Tuesday, April 24, 2001 at 9:00 A.M. and at any adjournments or
postponements thereof. The Trustee is hereby directed to authorize the proxies
to vote in their discretion upon such other business as may properly come before
the meeting and any and all adjournments or postponements thereof.
Election of four Class I directors for a three-year term.
Nominees: Richard A. Clarke
W. Keith Kennedy, Jr.
Richard B. Madden
Gregory L. Quesnel
You are encouraged to specify your choice by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to direct the Trustee
to vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE.
CNF TRANSPORTATION INC. COMMON STOCK FUND
Direction of Participant to Trustee of
CNF Transportation Inc. Common Stock Fund
The undersigned hereby directs the Trustee of the CNF Transportation Inc. Common
Stock Fund to vote all shares of CNF Transportation Inc. common stock credited
to the individual account of the undersigned under the Common Stock Fund at the
Annual Meeting of Shareholders of CNF Transportation Inc. to be held on Tuesday,
April 24, 2001 at 9:00 A.M. and at any adjournments or postponements thereof.
The Trustee is hereby directed to authorize the proxies to vote in their
discretion upon such other business as may properly come before the meeting and
any and all adjournments or postponements thereof.
Election of four Class I directors for a three-year term.
Nominees: Richard A. Clarke
W. Keith Kennedy, Jr.
Richard B. Madden
Gregory L. Quesnel
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to direct the Trustee
to vote in accordance with the Board of Directors recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
EWW SAVINGS PLAN
Direction of Participant of Trustee of
EWW Savings Plan
(Common Stock and Preferred Stock)
The undersigned hereby directs the Trustee of the EWW Savings Plan to vote all
shares of CNF Transportation Inc. common stock and preferred stock credited to
the individual account of the undersigned under the Plan at the Annual Meeting
of Shareholders of CNF Transportation Inc. to be held on Tuesday, April 24, 2001
at 9:00 A.M. and at any adjournments or postponements thereof. The Trustee is
hereby directed to authorize the proxies to vote in their discretion upon such
other business as may properly come before the meeting and any and all
adjournments or postponements thereof.
Election of four Class I directors for a three-year term.
Nominees: Richard A. Clarke
W. Keith Kennedy, Jr.
Richard B. Madden
Gregory L. Quesnel
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to direct the Trustee
to vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
[X] Please mark your
votes as in this
example.
This direction cannot be voted unless it is properly signed and
returned. If properly signed and returned, the Trustee will vote as directed by
the undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR Items 2 and 3 below.
________________________________________________________________________________
The Board of Directors recommends a vote FOR the election of directors
and FOR Items 2 and 3 below.
________________________________________________________________________________
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of 2. Approval of name 3. Ratify appointment of
Directors. change of CNF Inc. Independent Auditors.
(See reverse)
For, except vote withheld from the following nominee(s):
________________________________________________________
________________________________________________________________________________
The Trustee is hereby directed to authorize
the proxies to vote in their discretion
upon such other business as may properly
come before the meeting and any and all
adjournments or postponements thereof.
Please sign exactly as name appears hereon.
___________________________________________
Signature Date
CNF TRANSPORTATION INC.
This Proxy Is Solicited on Behalf of the Board of Directors
of CNF Transportation Inc.
The undersigned appoints M. G. GILL, R. JAUNICH II AND R. P. WAYMAN and
each of them, the proxies of the undersigned, with full power of
substitution, to vote the stock of CNF TRANSPORTATION INC., which the
undersigned may be entitled to vote at the Annual Meeting of Shareholders
to be held on Tuesday, April 24, 2001 at 9:00 A.M. and at any
P adjournments or postponements thereof. The proxies are authorized to vote
in their discretion upon such other business as may properly come before
R the meeting and any and all adjournments or postponements thereof.
Election of four Class I directors for a three-year term.
O
Nominees: Richard A. Clarke
W. Keith Kennedy, Jr.
X Richard B. Madden
Gregory L. Quesnel
Y You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
[X] Please mark your
vote as in this
example
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of directors
and FOR Items 2 and 3 below.
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR Items 2 and 3 below.
- ------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors FOR WITHHELD 2. Approval of name change FOR AGAINST ABSTAIN
(see reverse) For, except vote witheld to CNF Inc.
[_] [_] from the following [_] [_] [_]
nominee(s).
_________________________ FOR AGAINST ABSTAIN
3. Ratify appointment of
Independent Auditors [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------------------
The proxies are hereby authorized to vote in their
discretion upon such other matters as may properly
come before the meeting and any adjournments or
postponements thereof.
DATE:______________________________________ , 2001
SIGNATURES(S): ___________________________________
___________________________________________________
NOTE: Please sign exactly as your name appears
hereon. Joint owners should each sign. When
signing as an attorney, executor,
administrator, trustee or guardian, please
give full title as such.