NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF ARROW TRANSPORTATION CO.
NOTICE IS HEREBY GIVEN that the annual meeting of the
stockholders of Arrow Transportation Co. will be held at 10:00 am
local time on June 18, 1996 at the Multnomah Athletic Club, 1849
S.W. Salmon Street, Portland, OR 97205, for the following
purposes:
(1) To elect five directors for a one-year term;
(2) To consider and vote upon a proposal to amend the Arrow
Transportation Co. Employee Stock Purchase Plan to
increase the number of Shares of common stock available
for issuance from 100,000 to 200,000;
(3) To ratify the selection of Deloitte & Touche LLP as
independent auditors for the Company for the current
fiscal year; and
(4) To transact such other business as may properly come
before the meeting.
Stockholders of record at the close of business on April 30,
1996, will be entitled to notice of and to vote at the meeting
and any adjournment thereof. The vote of each stockholder is
important. Whether or not you plan to attend the meeting, you
are requested to date and sign the enclosed proxy card and return
it promptly.
By order of the Board of Directors,
ARROW TRANSPORTATION CO.
/s/ William J. Stanners, Jr.
William J. Stanners, Jr., Secretary
Portland, Oregon
April 30, 1996
1
ARROW TRANSPORTATION CO.
10145 N. Portland Road
Portland, OR 97203
PROXY STATEMENT
INFORMATION REGARDING PROXIES
This Proxy Statement and the accompanying proxy/voting
instruction card (proxy card) are being mailed on or about May
15, 1996, to holders of shares in connection with the
solicitation of proxies by the Board of Directors of Arrow
Transportation Co. ("Arrow" or "Company") for the 1996 Annual
Meeting of Shareholders. The meeting will be held on June 18,
1996 at 10:00 am at the Multnomah Athletic Club, 1849 S.W. Salmon
Street, Portland, Oregon 97205.
Only stockholders of record at the close of business on April 30,
1996 will be entitled to vote at the meeting. At the close of
business on March 31, 1996 there were 4,150,314 outstanding
shares of the Company's common stock ("Common Stock"). Each
share of Common Stock not in the treasury is entitled to one
vote. There is no provision in the Company's Certificate of
Incorporation for cumulative voting.
If shares are not voted in person, they cannot be voted on your
behalf unless a signed proxy is given. Even if you expect to
attend the Annual Meeting in person, in order to ensure your
representation, please complete, sign and date the enclosed proxy
and mail it promptly in the enclosed envelope. A stockholder
giving a proxy pursuant to this solicitation may revoke it at any
time before it is exercised by giving a subsequent proxy or by
delivering to the Secretary of the Company a written notice of
revocation prior to the voting of the proxy at the Annual
Meeting. If you attend the Annual Meeting and inform the
Secretary of the Company in writing that you wish to vote your
shares in person, your proxy will not be used. If you receive
two or more proxy cards, please complete, sign date and return
each to complete your representation. All shares represented by
each properly executed and unrevoked proxy, in the accompanying
form, will be voted unless the proxy is mutilated or otherwise
received in such form or at such time as to render it unusable.
If the enclosed proxy is properly executed and returned, it will
be voted in accordance with the instructions specified on the
proxy. In the absence of instructions to the contrary, it will
be voted (i) for all of the nominees for the Company's Board of
Directors listed in this proxy statement, (ii) for approval of
the amendment of the Employee Stock Purchase Plan to increase the
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number of shares of common stock available for issuance from
100,000 to 200,000, and (iii) to ratify the appointment of
Deloitte & Touche LLP as the independent auditors for the Company
for the year ending December 31, 1996.
Votes cast at the Annual Meeting will be tabulated by the persons
appointed by the Company to act as inspectors of election for the
Annual Meeting. Shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e., shares held by a broker
or nominee which are represented at the meeting, but with respect
to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of
a quorum. However, for purposes of determining the outcome of
any proposal as to which proxies reflect abstentions or broker
non-votes, shares represented by such proxies will be treated as
not present and not entitled to vote with respect to that
proposal.
The cost of this solicitation will be borne by the Company.
Solicitation will be made by mail, by telegraph and telephone,
and personally by officers and regular employees of the Company
who will not receive additional compensation for solicitation.
Brokers, nominees and fiduciaries will be reimbursed for out-of-
pocket expenses incurred in obtaining proxies or authorizations
from the beneficial owners of the Common Stock.
The purpose of the meeting and the matters to be acted upon are
set forth in the Notice of Annual Meeting of Stockholders. As of
the date of this Proxy Statement, management knows of no other
business which will be presented for consideration at the Annual
Meeting. However, if any such other business shall properly come
before the meeting, votes will be cast pursuant to the proxies in
respect of any such other business in accordance with the best
judgment of the persons acting under the proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of five members, each serving
one-year terms. Each Director will hold office until the first
meeting of stockholders immediately following expiration of his
term of office and until his successor is qualified and elected.
Although the Board of Directors anticipates that all of the
nominees will be available to serve as directors of the Company,
if any of them do not accept the nomination, or otherwise are
willing or unable to serve, the proxies will be voted for the
election of a substitute nominee or nominees designated by the
Board of Directors.
3
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR ELECTION
The names and ages of the nominees, the year in which each first
became a Director of the company, their principal occupations and
certain other information are as follows:
ROBERT H. CUTLER(1), age 76, Chairman and Interim Chief Executive
Officer, has been a director of the Company since 1982. Mr.
Cutler was elected Chairman if January in 1996 and Interim Chief
Executive Officer in February 1996. Mr. Cutler has over 50 years
experience in the transportation industry. Mr. Cutler served as
President of the American Trucking Association from 1967-1968.
He served as Assistant to the President of Consolidated
Freightways from 1946-1949, Executive Vice President of Bekins
Van Lines from 1949-1952, President of Texas-Arizona Motor
Freight from 1952-1962 and Chairman and Chief Executive Officer
of Illinois-California Express from 1962 until his retirement in
1988. Mr. Cutler is Chairman of The Cutler Corporation. He also
serves as director of R&K Industrial Products, Laurance David,
Inc. and Jen-Cel-Lite Co.
WILLIAM R. BLOSSER, age 51 became a Director of the Company in
May 1993. He is Manager of Planning and Environmental Sciences
at CH2M Hill, one of the world's largest environmental
engineering and consulting firms, headquartered in Denver,
Colorado. Mr. Blosser is also the founder and owner of Sokol
Blosser Winery, one of Oregon's largest wineries. He has served
as Chairman of the State of Oregon Water Resources Commission,
Chairman of the State of Oregon Land Conservation and Development
Commission, and as a member of the Western States Water Council.
JAMES N. CUTLER, JR.<F1>, age 44, has been a director of the
Company since September 1982. He is the President and a director
of The Cutler Corporation, a holding company for two
manufacturing firms. Mr. Cutler is also chairman of the Elk
Island Corporation, a director and President of R&K Industrial
Products Company of California and Chairman of Jen-Cel-Lite
Corporation in Seattle, Washington. He also serves as President
of Mid-Pacific Leasing Corporation and as a director of Hollywood
Entertainment Corporation.
[FN]
- ----------------------
<F1> Mr. Robert Cutler is James Cutler, Jr.'s uncle.
[/FN]
JERRY A. PARSONS, age 60, became a Director of the Company in May
1993. He is the Executive Vice President - Chief Financial
Officer of Willamette Industries, Inc., a Fortune 500,
diversified, integrated forest products company headquartered in
4
Portland, Oregon. Mr. Parsons has served as a national director
of the Financial Executives institute and is a member of the
American Institute of Certified Public Accountants.
THOMAS D. TAYLOR, age 80, was nominated by the Board in April
1996. Mr. Taylor has over 50 years experience in the
transportation industry. He served as President of Freightliner
Corporation from 1946-1959 and Senior Vice President of
Consolidated Freightways, from 1956-1960. He was Owner and
Chairman of Cummins Oregon Diesel, Cummins Northwest and Cummins
Hawaii from 1961- 1992. He is currently Chairman of Palau
Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 1995, there were six
meetings of the Board of Directors. Each director attended at
least 83% of the total number of meetings of the Board of
Directors and committee on which the director served.
The members of the Audit Committee are Jerry Parsons, Chairman,
Bill Blosser, and James Cutler, Jr. The Audit Committee reviews
with the Company's independent auditors the scope, results and
costs of the annual audit, and the Company's accounting policies
and financial reporting. There were two meetings of the Audit
Committee during the fiscal year ended December 31, 1995.
The Board of Directors does not have any other standing
committees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND
DIRECTORS.
The following table sets forth information with respect to the
ownership of issued and outstanding shares of the Company by each
director, executive officer, and person known to the Company to
be the beneficial owner of more than 5% of any class of the
Company's voting securities as of March 31, 1996:
Common Shares
Name and Address Beneficially Percent
Beneficial Owner Owned<F2> Owned
- ---------------- ------------- -------
Sal N. Cincotta 695,000<F3><F4> 16.8%
15324 Sherwood Forest Drive
Tampa, FL 33647
5
James N. Cutler, Jr. 651,000<F5> 15.7%
1233 NW 12th, Ste. 200
Portland, OR 97228
Robert H. Cutler 516,760 12.5%
P.O. Box 685
Pauma Valley, CA 92061
Wasatch Advisors, Inc. 274,355 6.6%
68 South Main St., Ste. 400
Salt Lake City, UT 84101
William J. Stanners, Jr. 11,094<F6> 0.3%
Jerry A. Parsons 10,000<F7> 0.2%
John D. Erwin 697<F8> ----
William R. Blosser 2,000<F7> ----
All executive officers and directors
as a group (6 persons) 45.5%
<FN>
<F2> The persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
<F3> Includes 85,000 shares owned by Lottie M. Cincotta, spouse
of Sal N. Cincotta.
<F4> In addition, John and Daniel Cincotta, sons of Sal Cincotta,
each own 98,500 shares.
<F5> includes 4,000 shares owned as trustee for the Alexander
Merrill Cutler Trust.
<F6> Owns options to purchase up to 67,000 shares under the
Company's 1992 Incentive and Non-Statutory Stock Option Plan
of which 60,000 are currently exercisable.
<F7> Owns options to purchase up to 10,000 shares under the
Company's 1992 Incentive and Non-statutory Stock Option Plan
which are currently exercisable.
<F8> Owns options to purchase up to 72,000 shares under the
Company's 1992 Incentive and Non-Statutory Stock Option Plan
of which 43,333 are currently exercisable.
</FN>
There are no arrangements which may result in a change of control
of the Company.
6
COMPENSATION OF DIRECTORS.
Each director who is not an employee of the Company is paid $500
per meeting for their attendance at Board meetings in addition to
their out-of-pocket expenses for attendance. In May 1995,
Messrs. Parsons and Blosser were each granted options to purchase
5,000 shares of common stock of the Company under the 1992
Incentive and Non-Statutory Stock Option Plan at an exercise
price of $3 to compensate them for their services as directors.
Executive Compensation.
The following table sets forth the total compensation paid or
accrued by the Company for services rendered during the year
ended December 31, 1995 by the former Chief Executive Officer of
the Company and each of the other most highly compensated
executive officers of the Company whose total cash compensation
for the year ended December 31, 1995, exceeded $100,000.
Name of Individual Annual Compensation
Position Year Salary Bonus
-------- ---- ------ -----
Sal N. Cincotta 1995 $157,611 -0-
President 1994 $142,921 -0-
1993 $136,433 -0-
John D. Erwin 1995 $109,093 -0-
Senior Vice President 1994 $102,799 -0-
1993 $ 37,308 -0-
The Company, on August 12, 1991, entered into a five year
employment agreement with Mr. Sal N. Cincotta pursuant to which
he serves as President and Chief Executive Officer of the
Company. The employment agreement was subsequently extended to
December 31, 1998 and if, at the expiration of the agreement, Mr.
Cincotta continues to be a guarantor of obligations of the
Company in excess of $150,000, the agreement will be
automatically extended for a period of a year. This will
continue on a year by year basis as long as Mr. Cincotta is a
guarantor on obligations in excess of such amount at year end.
Mr. Cincotta currently receives compensation at the rate of
$163,296 per year with minimum annual increases of 8% for the
term of the agreement. So long as his Employment Agreement is in
effect and for a period of five years thereafter, Mr. Cincotta
has agreed not to compete with the Company. In the event his
employment is terminated by the Company for any reason other than
breach of contract or cause (as defined), he will be entitled to
7
receive at severance a lump sum payment equal to the base salary
he would have received during the remainder of the employment
term and all medical, life and disability insurance and other
benefits being received by him on the date of termination through
the remaining term of the Agreement. Mr. Erwin joined the
Company in August 1993. The Company, on August 30, 1993, entered
into a three-year Employment agreement with Mr. John D. Erwin,
pursuant to which he serves as Senior Vice President of the
Company. Mr. Erwin's contract was cancelled by mutual agreement
in March 1996.
In December 1995, in conjunction with the Company's restructuring
and profit improvement plan, the board of directors placed Mr.
Cincotta on an indefinite leave of absence from the Company.
In January 1996, Robert H. Cutler was elected chairman and in
February 1996 was elected Interim Chief Executive Officer. On
April 3, 1996, the board of directors approved a resolution to
terminate Mr. Cincotta's contract. Mr Cincotta was provided
formal notice of the board of directors decision on that day and
payments under his contract will be terminated on May 3, 1996.
Mr. Cincotta resigned as a director of the Company on May 3,
1996. Mr. Cutler currently receives no compensation for his
services as Interim Chief Executive Officer.
OPTION GRANTS IN LAST YEAR
Percent of
Number of Total Options
Securities Granted to
Underlying Employees in Exercise
Name Options Granted(1) Fiscal Year Price
- ---- ------------------ ------------- --------
John D. Erwin 7,000 10.77% $3.25
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for
Ten Year Option Term(2)
------------------------------
- -
Name Expiration Date 5% 10%
- ----- --------------- ---- ----
John D. Erwin 3/31/05 37,057 59,008
8
(1) Each of the options reflected in this table was granted
pursuant to Arrow Transportation Co.'s 1992 Non-Statutory
Stock Option Plan. The exercise price of each option is
equal to the fair market value of the Company's Common Stock
on the date of grant. The options have a 10-year term and
vest on March 31, 2002.
(2) These assumed rates of appreciation are provided in order to
comply with the requirements of the SEC and do not represent
the Company's expectation as to the actual rate of
appreciation of the Common Stock. These gains are based on
assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options were granted over the
full option term. The actual value of the options will
depend on the performance of the Common Stock and may be
greater or less than the amounts shown.
YEAR - END OPTIONS VALUES
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year End
-------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
John D. Erwin 43,333 28,667 0 0
STOCK OPTION PLAN
Under the Company's 1992 Incentive and Non-Statutory stock Option
Plan (the "Plan"), 350,000 shares of Common stock are reserved
for issuance upon exercise of stock options. The Plan is
designed as a means to retain and motivate key employees, and to
provide incentives or compensation to certain other non-
employees, including the independent directors of the Company.
The Board of Directors administrates and interprets the Plan and
is authorized to grant options thereunder to all eligible
employees of the Company, including officers and non-employee
directors.
The Plan provides for the granting of both incentive stock
options (as defined in Section 422 of the Internal Revenue Code)
and non-statutory stock options. Options are granted under the
Plan on such terms and at such prices as determined by the Board
of Directors, except that the per share exercise price of
9
incentive stock options cannot be less than the fair market value
of the Common Stock on the date of grant. Each option is
exercisable after the period or periods specified in the option
agreement, but no option may be exercised after the expiration of
ten years from the date of grant. Options granted under the Plan
are not transferable other than by will or by the laws of descent
and distribution.
STOCK PRICE PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative total
shareholder return on the Company's Common Stock with the Nasdaq
Stock Market (U.S.) Index and the CRSP Trucking and
Transportation Index. This graph assumes that $100 was invested
on July 22, 1993, the date of the Company's initial public
offering, in the Company's Common Stock and in the other indices,
and that all dividends were reinvested. The stock price
performance shown below is not necessarily indicative of future
price performance.
The stock price performance graph shall not be deemed
incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Acts,
except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed
filed under the Acts.
RELATED PARTY TRANSACTIONS
Messrs. Robert Cutler, James Cutler, Jr. and Sal Cincotta entered
into a shareholders agreement to provide that (i) Mr. Cincotta
will have a right of first refusal to purchase any shares sold by
either Robert Cutler of James Cutler, Jr. and (ii) Mr. Cincotta
and Messrs. Robert Cutler and James Cutler, Jr. will each have
co-sale rights in the event of a sale of shares by the other,
unless such sale is made pursuant to Rule 144.
There were no consulting fees paid to any director or related
party in 1995 and there are no arrangements to pay any further
consulting fees.
In 1990, the Company leased ten trailers from C&C Joint Venture,
a partnership consisting of Robert H. Cutler and James N. Cutler,
Jr. The trailer lease, which was dated July 10, 1990, expired
June 13, 1995, and provided for a monthly rental of $10,813. At
the expiration of the lease the Company had the option to
purchase the trailers for an amount equal to nine months
additional rental. In 1995, the Company exercised its option and
purchased the trailers for $97,317 from C&C Joint Venture.
10
PROPOSAL 2
TO AMEND THE EMPLOYEE
STOCK PURCHASE PLAN
The Board of Directors has approved, subject to stockholder
approval at the annual meeting, an amendment to the Arrow
Transportation Co. Employee Stock Purchase Plan ("ESPP") to
increase from 100,000 to 200,000 the number of shares of common
stock available for purchase under the ESPP. At April 20, 1996,
61,341 shares had been issued under the ESPP and totals of 38,659
shares remained available for purchase before giving effect to
the amendment. Copies of the proposed amendment and the ESPP are
available from the Company at no charge upon request
The purpose of the ESPP is to provide a convenient and practical
means through which employees of the Company may participate in
stock ownership of the Company. The Directors believe that
promoting such stock ownership will benefit both the employees
and the Company by creating a community of interest between the
Company, stockholders and its employees and by giving the Company
an additional benefit with which to obtain and retain the service
of valued employees.
The following is a summary of the ESPP:
The ESPP is administered by the Board of Directors, unless the
Board authorizes and appoints a committee to serve as Plan
Administrator. Under the ESPP, the Company is currently
authorized to issue up to 100,000 shares of its Common Stock.
The shares are available to all employees of the Company who work
more than 20 hours per week and five months out of the calendar
year. Shares are not available to employees who already own 5%
or more of the Company's stock. Under the ESPP, employees can
elect payroll deductions of up to 10% of their regular
compensation, with the accumulated monies used to purchase the
shares.
The purchase price for shares under the ESPP is 95% of the lesser
of the fair market value of a share on the first business day of
any applicable period or the fair market value of a share on the
last day of the applicable period. Participating employees may
withdraw from the ESPP and cease participation by notifying the
Company, and similarly may increase or reduce the amount of their
withholding by written notice.
The company has registered the shares presently approved to be
issued under the ESPP with the Securities and Exchange Commission
and intends to register the additional shares if this proposal is
approved. Therefore, the shares purchased are freely tradable.
The ESPP is intended to qualify as an employee stock purchase
11
plan under Section 423 of the Internal Revenue Code. The
affirmative vote of the holders of record of a majority of the
shares of voting stock present in person or represented by proxy
at the annual meeting is necessary to approve the increase in the
number of shares available for issuance under the ESPP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDED A VOTE FOR THIS
PROPOSAL.
PROPOSAL 3
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE YEAR ENDED
DECEMBER 31, 1996
The Board of Directors has selected the firm of Deloitte & Touche
LLP to conduct an audit in accordance with generally accepted
accounting standards of the Company's consolidated financial
statements for the fiscal year ending December 31,1996. A
representative of that firm is expected to be present at the
annual meeting to respond to appropriate questions and will be
given an opportunity to make a statement if he or she so desires.
Neither the firm nor any of the partners has any direct financial
interest in the Company or any of its subsidiaries as independent
auditors. This selection is being submitted for ratification at
the meeting. If not ratified, this selection will be
reconsidered by the Board, although the Board of Directors will
not be required to select different independent auditors for the
Company. Deloitte & Touche LLP has served the Company as its
independent auditors since its inception, and has served as
independent auditors for its subsidiary, Arrow Transportation Co.
of Delaware, since 1988.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THIS
PROPOSAL.
OTHER INFORMATION
The 1995 annual report of the company for the fiscal year ended
December 31, 1995 was mailed to the stockholders prior to or
together with the mailing of this Proxy Statement. Stockholders
who did not receive a copy of the 1995 annual report with their
Proxy Statement may obtain a copy by writing to or calling
William J. Stanners, Jr., Secretary, Arrow Transportation Co.,
10145 N. Portland Road, Portland, Oregon 97203. His telephone
number is (503) 286-3661.
SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 1997 Annual
Meeting of Shareholders must be received by the Company no later
12
than November 30, 1996, to be eligible for inclusion in the proxy
material for that meeting.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no
other business which will be presented for action at the meeting.
If any other business requiring a vote of the stockholders should
come before the meeting, the persons named in the enclosed proxy
form will vote or refrain from voting in accordance with their best
judgment.
By order of the Board of Directors:
/s/ William J. Stanners, Jr.
William J. Stanners, Jr., Secretary
Portland, Oregon
Dated: April 30, 1996
13