<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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Notice of Annual Meeting
and
Proxy Statement
Annual Meeting of Shareholders
APRIL 25, 2000
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION INC.]
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<PAGE>
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION INC.]
3240 HILLVIEW AVENUE TELEPHONE: 650/494-2900
PALO ALTO, CALIFORNIA 94304
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 25, 2000
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 25, 2000, to:
1. Elect four Class III directors for a three-year term.
2. Act upon a proposal to approve certain amendments to the Company's 1997
Equity and Incentive Plan and to re-approve the Plan, as amended, in its
entirety.
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 6, 2000, 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 20, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
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...... 11
Compensation of Directors.................................................. 12
Compensation of Executive Officers......................................... 13
I. Summary Compensation Table.......................................... 13
II. Option/SAR Grants Table............................................. 15
III. Option/SAR Exercises and Year-End Value Table....................... 16
IV. Long-Term Incentive Plan Awards Table............................... 17
Compensation Committee Report on Executive Compensation.................... 18
Compensation Committee Interlocks and Insider Participation................ 22
Comparison of Five-Year Cumulative Total Shareholder Return................ 22
Pension Plan Table......................................................... 23
Change in Control Arrangements............................................. 23
Proposal to Approve Certain Amendments to the CNF Transportation Inc. 1997
Equity and Incentive Plan, and to Re-approve the Plan as Amended.......... 24
Appointment of Auditors.................................................... 31
Principal Shareholders..................................................... 32
Compliance with Section 16 of the Exchange Act............................. 32
Confidential Voting........................................................ 33
Submission of Shareholder Proposals........................................ 33
Other Matters.............................................................. 33
Exhibit A.................................................................. A-1
</TABLE>
<PAGE>
CNF TRANSPORTATION INC.
3240 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
TELEPHONE: 650/494-2900
PROXY STATEMENT
March 20, 2000
The Annual Meeting of Shareholders of CNF Transportation Inc. (the
"Company") will be held on Tuesday, April 25, 2000. Shareholders of record at
the close of business on March 6, 2000 will be entitled to vote at the
meeting. This proxy statement and accompanying proxy are first being sent to
shareholders on or about March 20, 2000.
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 amendments to the Company's 1997 Equity
and Incentive Plan and re-approval of the Plan as amended, 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 all other matters expected to come before the meeting
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 all other
matters, 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 6, 2000, the record date for the Annual
Meeting, there were outstanding and entitled to vote 48,496,199 shares of
Common Stock and 836,592 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 53,599,410 votes
are eligible to be cast at the meeting.
<PAGE>
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 III directors to serve for a three-year term until the 2003
Annual Meeting of Shareholders and until their successors are duly elected and
qualified:
Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
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 I directors will be elected in 2001 and Class II
directors will be elected in 2002. 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 III DIRECTORS
ROBERT ALPERT Director since
1976
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 public company with 11 subsidiary
companies primarily 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. In 1999, 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 current member of the Royal Round Table of
Swedish Council of America, an exclusive group of Swedish
and Swedish-American business, government and cultural
leaders. 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. Additionally, he
is a member of the Advisory Council for the University of
Texas at Austin, College of Business Administration; a
Trustee Emeritus 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 a series of film ventures over the years from family
movies ("Benji The Hunted") as well as several of Horton
Foote's movies ("1918" and "Valentine's Day"). La Paloma
Films was also involved with the Tony Award and Olivier
Award winning hit musical "Crazy for You" in New York and
London as well as the US performances of the same
production. They are presently involved in the musical hit
"Kiss Me Kate", which recently opened on Broadway. Alpert is
a member of the Chief Executive Organization and World
President's Organization. Mr. Alpert, age 68, is a member of
the Director Affairs, the Executive, and the Finance
Committees of the Board.
[PHOTOGRAPH OF ROBERT ALPERT]
3
<PAGE>
MARGARET G. GILL Director since
1995
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. She is a fellow of the American Bar Foundation and
serves on the advisory boards for the Institute for
Corporate Counsel and the Berkeley Center for Law and
Technology. Mrs. Gill, age 60, is also a member of the board
of directors of the Episcopal Diocese of California,
Episcopal Charities, a trustee and executive committee
member of the San Francisco Ballet and Chair of the Gill
Family Foundation. Mrs. Gill is a member of the Audit and
the Director Affairs Committees of the Board.
[PHOTOGRAPH OF MARGARET G. GILL]
ROBERT JAUNICH II Director since
1992
Managing Director,
The Fremont Group,
a private investment corporation
Mr. Jaunich joined The Fremont Group, a private investment
corporation managing assets 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. He is also General Partner of Fremont
Partners, L.P., a $605 million fund targeted to make and
oversee majority equity investments in operating companies
representing a broad spectrum of industries. Additionally,
he oversees Fremont's five affiliated venture capital
portfolios, representing in excess of $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 serves as Chairman of several
corporations including Crown Pacific, Ltd., Kinetic
Concepts, Inc., Tapco International Corporation, Juno
Lighting, Inc. and serves on the board of Kerr Group, Inc.
He is a Trustee of the non-profit National Recreation
Foundation. He is a life member of the World Presidents
Organization and was a member of Young Presidents
Organization (1980-1990). Mr. Jaunich, age 60, received a
B.A. from Wesleyan University, Middletown, Connecticut and a
M.B.A. from Wharton Graduate School, University of
Pennsylvania. He is Chairman of the Directors Affairs
Committee and a member of the Executive and Finance
Committees of the Board.
[PHOTOGRAPH OF ROBERT JAUNICH II]
4
<PAGE>
ROBERT P. WAYMAN Director since
1994
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 54,
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 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.
[PHOTOGRAPH OF ROBERT P. WAYMAN]
5
<PAGE>
--------------------------------------------
CLASS I DIRECTORS
RICHARD A. CLARKE Director since 1996
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 a
member of the Board of Trustees of the Boalt Hall Trust--
University of California, Berkeley School of Law, 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 69,
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.
[PHOTOGRAPH OF RICHARD A. CLARKE]
W. KEITH KENNEDY, JR. Director since 1996
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 56, 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.
[PHOTOGRAPH OF W. KEITH KENNEDY, JR.]
6
<PAGE>
RICHARD B. MADDEN Director since 1992
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; and a Trustee Emeritus of the San
Francisco Foundation and the Corporation of Fine Arts
Museums. Mr. Madden, age 70, holds a B.S. degree in
engineering from Princeton University, a J.D. degree from
the University of Michigan, and a M.B.A. from New York
University. He is a member of the Compensation, Executive
and Finance Committees of the Board.
[PHOTOGRAPH OF RICHARD B. MADDEN]
GREGORY L. QUESNEL Director since 1998
President and Chief Executive Officer
CNF Transportation Inc.
Mr. Quesnel, 51, 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 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. 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 and
Director Affairs Committees of the Board.
[PHOTOGRAPH OF GREGORY L. QUESNEL]
7
<PAGE>
--------------------------------------------
CLASS II DIRECTORS
DONALD E. MOFFITT Director 1986-1988
Director since 1991
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 67, is a member
of the Boards 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, Boy Scouts of
America, and the American Red Cross 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.
[PHOTOGRAPH OF DONALD E. MOFFITT]
MICHAEL J. MURRAY Director since 1997
President, Global Corporate and Investment Banking
Bank of America Corporation
Mr. Murray is president of Global Corporate and Investment
Banking at Bank of America Corporation and a member of the
corporation's Policy Committee. Bank of America has more
corporate relationships than any other U.S. bank and
maintains offices in 38 countries that represent 93% of the
world's gross domestic product. Mr. Murray has
responsibility for all corporate client relationships
worldwide. In addition, he manages all products and services
delivered to clients including traditional corporate credit,
risk management, treasury management, and debt and equity
capital raising. From March 1997 until the BankAmerica-
NationsBank 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
[PHOTOGRAPH OF MICHAEL J. MURRAY]
8
<PAGE>
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, Mr. Murray was vice chairman
and head of Corporate Banking for Continental Bank, which he
joined in 1969. Mr. Murray, age 55, is a director on the
boards of the Technology Solutions Company in Chicago and
the Institute of International Finance in Washington, D.C.
He also serves on the boards of the Coalition of Service
Industries, Washington D.C. and the California Academy of
Sciences, San Francisco. Mr. Murray received his BBA from
the University of Notre Dame in 1966 and his MBA from the
University of Wisconsin in 1968. He is a member of the Audit
and Compensation Committees of the Board.
ROBERT D. ROGERS Director since 1990
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 a M.B.A. from
the Harvard Graduate School of Business. He is Vice Chairman
of the British-North American Committee and is a member of
the Executive Board for Southern Methodist University Cox
School of Business. Mr. Rogers, age 63, 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.
[PHOTOGRAPH OF ROBERT D. ROGERS]
WILLIAM J. SCHROEDER Director since 1996
President & Chief Executive Officer,
HolonTech Corporation,
a private company specializing in Internet traffic and
content management
solutions for mission critical websites
Mr. Schroeder joined HolonTech Corporation in February
2000 as President and Chief Executive Officer. Prior to
joining HolonTech, 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, S3 Incorporated and Sync Research, Inc. Mr.
Schroeder, age 55, holds the M.B.A. degree with High
Distinction from 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.
[PHOTOGRAPH OF WILLIAM J. SCHROEDER]
9
<PAGE>
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 January 31,
2000, by the directors, the executive officers identified in the Summary
Compensation Table below and by the directors and executive officers as a
group.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Percent
Name of Beneficial Owner Ownership(1) of Class
- ------------------------ ---------------------- --------
<S> <C> <C>
Robert Alpert.................................. 71,548 Common *
0 Series B Preferred
Richard A. Clarke.............................. 12,585 Common *
0 Series B Preferred
Gerald L. Detter(2)............................ 179,661 Common *
178 Series B Preferred
Margaret G. Gill............................... 10,904 Common *
0 Series B Preferred
Robert Jaunich II.............................. 18,295 Common *
0 Series B Preferred
W. Keith Kennedy, Jr. ......................... 8,609 Common *
0 Series B Preferred
Richard B. Madden.............................. 15,061 Common *
0 Series B Preferred
Donald E. Moffitt.............................. 543,444 Common 1.1%
0 Series B Preferred
Michael J. Murray.............................. 16,653 Common *
0 Series B Preferred
Roger Piazza(3)................................ 48,479 Common *
110 Series B Preferred
Gregory L. Quesnel(4).......................... 372,302 Common *
169 Series B Preferred
Sanchayan C. Ratnathicam(5).................... 105,490 Common *
135 Series B Preferred
Robert D. Rogers............................... 15,031 Common *
0 Series B Preferred
Eberhard G.H. Schmoller(6)..................... 211,880 Common *
141 Series B Preferred
William J. Schroeder........................... 8,390 Common *
0 Series B Preferred
Robert P. Wayman............................... 11,750 Common *
0 Series B Preferred
All directors and executive officers as a group
(16 persons).................................. 1,650,082 Common 3.3%
733 Series B Preferred
</TABLE>
- --------
* Less than one percent of the Company's outstanding shares of Common Stock.
(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
10
<PAGE>
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 January
31, 2000 because of vested stock options: Mr. Alpert, 10,913 and 7,520; Mr.
Clarke, 2,079 and 7,506; Mrs. Gill, 2,048 and 8,298; Mr. Jaunich, 2,048 and
8,682; Mr. Kennedy, 2,126 and 6,283; Mr. Madden, 2,048 and 9,948; Mr.
Moffitt, 11,015 and 476,175; Mr. Murray, 1,437 and 5,216; Mr. Rogers, 2,048
and 9,418; Mr. Schroeder, 2,126 and 2,764; and Mr. Wayman, 2,048 and 8,137.
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 10,000 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.
(2) The shares shown include 129,237 shares which Mr. Detter has the right to
acquire within 60 days of January 31, 2000, because of vested stock
options.
(3) The shares shown include 34,540 shares which Mr. Piazza has the right to
acquire within 60 days of January 31, 2000 because of vested stock options.
(4) The shares shown include 304,837 shares which Mr. Quesnel has the right to
acquire within 60 days of January 31, 2000 because of vested stock options.
(5) The shares shown include 87,317 shares which Mr. Ratnathicam has the right
to acquire within 60 days of January 31, 2000 because of vested stock
options.
(6) The shares shown include 189,866 shares which Mr. Schmoller has the right
to acquire within 60 days of January 31, 2000 because of vested stock
options.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 1999, the Board of Directors held six 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 recommends to the Board the independent
auditors for appointment by the shareholders to perform the annual audit of the
Company's accounting records and authorizes the performance of services by the
auditors so appointed. The Committee reviews the annual audit of the Company by
the independent auditors, and, in addition, annually reviews the results of the
examinations of accounting procedures and controls performed by the Company's
internal auditors. The members of the Audit Committee are Robert P. Wayman--
Chairman, Richard A. Clarke, Margaret G. Gill, Michael J. Murray and William J.
Schroeder. The Committee met four times during 1999.
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 three times during 1999.
11
<PAGE>
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., Donald E. Moffitt and Gregory L. Quesnel. The
Committee met twice during 1999.
COMPENSATION OF DIRECTORS
During 1999, each non-employee director was paid an annual retainer of
$20,000 and accrued a retirement benefit 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 in 1995 and
subsequent years, $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. Concurrent with termination, most directors received stock options
in cancellation of their accrued retirement benefits under the plan. The two
directors who had already accrued the maximum benefits available under the
plan received restricted stock instead of stock options. A total of 38,650
stock options and 17,993 shares of restricted stock were granted in
cancellation of directors' retirement benefits. In addition, commencing
January 1, 2000, directors receive additional annual grants of options to
acquire 500 shares of the Company's stock, as a substitute for retirement
benefits that would have accrued under the plan had it not been terminated.
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 $12,500 upon joining the Board and on each
January 1 thereafter. In addition, each non-employee director receives a grant
of options for 2,500 shares of the Company's Common Stock upon joining the
Board and for 1,500 shares on each January 1 thereafter.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the four next most highly paid executive officers
for the three fiscal years ended December 31, 1999. As used in this Proxy
Statement, "Named Executives" means the officers identified in this Summary
Compensation Table.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ ------------------------------
Awards Payouts
--------------------- --------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position(s) Year ($) (2)($) (3)($) (4)($) SAR'S (#) (5)($) (6)($)
- ------------------ ---- -------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gregory L. Quesnel 1999 $724,523 $823,133 $33,973 $ 0 160,000/0 $627,600 $2,853
President & Chief 1998 598,071 344,224 23,315 1,838,438 92,500/0 450,296 2,686
Executive
Officer 1997 430,430 450,825 587 289,000 75,000/0 0 2,943
Gerald L. Detter(1) 1999 $503,746 $615,794 $ 682 $ 611,250 60,000/0 $321,122 $2,694
Senior Vice President 1998 449,047 802,088 79,293 543,750 42,500/0 217,107 2,682
1997 330,320 566,147 31,398 0 37,000/0 0 3,282
Roger Piazza(1) 1999 $419,741 $228,848 $19,202 $ 0 40,000/0 $162,130 $3,720
Senior Vice President 1998 304,583 27,496 5,237 425,797 40,500/0 112,574 3,572
1997 218,504 294,980 18,389 0 6,000/0 0 2,535
Sanchayan Ratnathicam 1999 $381,376 $346,074 $11,651 $ 0 42,000/0 $162,130 $2,400
Senior Vice President & 1998 358,894 176,752 8,243 462,047 35,000/0 112,574 2,400
Chief Financial Officer 1997 244,684 266,576 476 0 31,000/0 0 2,886
Eberhard G.H. Schmoller 1999 $365,643 $331,800 $19,559 $ 0 40,000/0 $512,540 $2,400
Senior Vice President, 1998 343,743 169,374 20,254 402,938 30,000/0 345,763 2,400
General Counsel and 1997 278,616 247,896 18,678 238,000 20,000/0 0 2,400
Secretary
</TABLE>
- --------
(1) Mr. Detter is also President and Chief Executive Officer of Con-Way
Transportation Services, Inc., the Company's regional full-service
trucking subsidiary. Mr. Piazza is also President and Chief Executive
Officer of Emery Air Freight Corporation, the Company's full-service air
freight subsidiary.
(2) 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. Quesnel (for 1997 only) and Detter,
special incentive compensation payments made under the Company's short-
term incentive compensation plans in which only operating company
executives participate.
(3) Amounts shown for 1999 in this column include: (a) Long-Term Incentive
Plan interest earned and deferred for Messrs. Quesnel and Schmoller of
$302 and $6,791, respectively; (b) interest earned on deferred
compensation accounts above 120% of the applicable federal rate for
Messrs. Quesnel, Piazza, Ratnathicam and Schmoller of $33,518, $19,202,
$11,651 and $11,989, 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 $153, $682 and $779,
respectively.
(4) At the end of 1999, based upon the closing price of the Company's common
stock on December 31, 1999 ($34.50), Mr. Quesnel held 44,834 restricted
shares valued at $1,546,773; Mr. Detter held 34,250 restricted shares
valued at $1,181,625; Mr. Piazza held 11,083 restricted shares valued at
$382,364; Mr. Ratnathicam held 12,000 restricted shares valued at
$414,000; and Mr. Schmoller held 15,167 restricted shares valued at
$523,262. Dividends are paid on all
13
<PAGE>
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 is not subject to
performance criteria and which will vest on January 1, 2004. 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.
(5) 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 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.
(6) Amounts shown for 1999 in this column include:
(a) Payments by the Company for premiums for taxable group life insurance
on behalf of Messrs. Quesnel, Detter and Piazza of $453, $294 and
$1,320, respectively.
(b) Company contributions to the Thrift and Stock Plan accounts of Messrs.
Quesnel, Detter, Piazza, Ratnathicam and Schmoller of $2,400 each.
14
<PAGE>
II. OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants(1)
-----------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise Grant
Options/ Granted to or Base Date
SARs Employees in Price Expiration Present
Granted(#)(2) Fiscal Year ($/Share) Date Value(3)($)
------------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Gregory L. Quesnel...... 160,000/0 21.65% $30.75 12/08/09 $2,492,800
Gerald L. Detter........ 60,000/0 8.12% 30.75 12/08/09 934,800
Roger Piazza............ 40,000/0 5.41% 30.75 12/08/09 623,200
Sanchayan C.
Ratnathicam............ 42,000/0 5.68% 30.75 12/08/09 654,360
Eberhard G.H. Schmoller. 40,000/0 5.41% 30.75 12/08/09 623,200
</TABLE>
- --------
(1) No SARs were issued in 1999.
(2) One-fourth of all options become exercisable on January 1, 2001 and an
additional one-fourth on the second, third and fourth anniversaries of
that date; or earlier upon a change in control of the Company.
(3) Present value based on modified Black-Scholes option pricing model which
includes assumptions for the following variables: (i) option exercise
prices equal the fair market values on the dates of grant; (ii) option
term equals 5.8 years (based on historical option exercise experience,
rather than actual option term of 10 years); (iii) volatility equals 0.50;
(iv) risk-free interest rate equals 6.49%; and (v) estimated future
average dividend yield equals 1.03%.
The Company's use of this model should not be construed as an endorsement of
its accuracy in valuing options. The Company's executive stock options are
not transferable so the "present value" shown is not currently realizable by
the executive. Future compensation resulting from option grants will
ultimately depend on the amount by which the market price of the stock
exceeds the exercise price on the date of exercise.
15
<PAGE>
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal-Year End Option/SAR Values
The following table provides information on option/SAR exercises in 1999 by
the Named Executives and the value of such officers' unexercised options/SARs
at December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-
Acquired Value Options/SARs at the-Money Options/SARs
on Exercise Realized FY-End (#)(2) at FY-End ($)(2)(3)(4)(5)
(#)(1) ($) Exercisable/Unexercisable Exercisable/Unexercisable
----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gregory L. Quesnel...... 4,737 $ 47,035 294,196/230,000 $3,585,260/600,000
Gerald L. Detter........ 26,763 618,609 123,555/90,000 1,337,173/225,000
Roger Piazza............ 0 0 28,915/73,750 286,408/204,844
Sanchayan C.
Ratnathicam............ 0 0 81,692/64,500 730,556/157,500
Eberhard G.H. Schmoller. 0 0 187,950/60,000 2,723,018/150,000
</TABLE>
- --------
(1) The shares shown in this column for Mr. Quesnel were acquired upon
exercise and held, and the shares shown for Mr. Detter were sold following
exercise.
(2) Mr. Quesnel has 293,587 exercisable options valued at $3,582,978; 230,000
unexercisable options valued at $600,000; and 609 SARs the appreciation on
which is valued at $2,282. Mr. Detter has 121,737 exercisable options
valued at $1,337,173; 90,000 unexercisable options valued at $225,000; and
1,818 SARs, the appreciation on which is valued at $0. Mr. Piazza has
28,915 exercisable options valued at $286,408; 73,750 unexercisable
options valued at $204,844; and no SARs. Mr. Ratnathicam has 81,692
exercisable options valued at $730,556; 64,500 unexercisable options
valued at $157,500; and no SARs. Mr. Schmoller has 184,866 exercisable
options valued at $2,708,836; 60,000 unexercisable options valued at
$150,000; and 3,084 SARs, the appreciation on which is valued at $14,182.
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 $34.50 on December 31, 1999.
(4) Numbers shown reflect the value of options granted at various times over a
ten-year period.
(5) The Company's Incentive Compensation Stock Appreciation Rights Plan ("SAR
Plan") was terminated on March 31, 1990. Under the SAR plan, selected key
employees were afforded the opportunity to convert cash awards under the
Company's short-term incentive compensation plans into SARs corresponding
in value to the Company's shares of Common Stock. The SARs fluctuated in
value as the price of the Common Stock increased or decreased and earned
amounts equal to dividends declared on the Common Stock. When the SAR Plan
was terminated, the value of all outstanding SARs was fixed as of that
date. Interest equivalents have been credited to outstanding balances of
participants since April 1, 1990. Payouts are made in cash and commence
upon a participant's prior election or termination of employment with the
Company.
16
<PAGE>
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth information regarding awards made to the
Named Executives in 1999 under the Company's Return on Equity Plan. Except for
such awards, no Long-Term Incentive Plan Awards were made to the Named
Executives in 1999.
<TABLE>
<CAPTION>
Number of Performance or Estimated Future Payouts under
Shares, Units Other Period the Return on Equity Plan (1)
or Other Until Maturation ------------------------------------
Name Rights (#) or Payout Threshold ($) Target ($) Maximum ($)
---- ------------- ---------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Gregory L. Quesnel...... 45,000 12/31/01 $ 0 $447,750 $895,500
Gerald L. Detter........ 27,500 12/31/01 0 273,625 547,250
Roger Piazza............ 22,500 12/31/01 0 223,875 447,750
Sanchayan C.
Ratnathicam............ 22,500 12/31/01 0 223,875 447,750
Eberhard G.H. Schmoller. 21,000 12/31/01 0 208,950 417,900
</TABLE>
- --------
(1) Target payouts are made if the Return on Equity for the applicable award
period is equal to a specified target percentage. For Returns on Equity
below the target percentage, the payouts decrease in accordance with a
specified payout table and drop to zero if the Return on Equity is less
than the target percentage by 5 or more percentage points. For Returns on
Equity above the target percentage, the payouts increase in accordance
with the payout table, up to a maximum of twice the target payout if the
Return on Equity exceeds the target percentage by 5 or more percentage
points.
17
<PAGE>
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 13 ("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
peer companies as well as in general industry. The comparison covers all
aspects of compensation: Base salaries, annual bonuses and long-term incentive
awards. As part of the 1998 engagement (for 1999 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. In 1999, after
review and consideration, the Committee decided that starting in the year
2000, the Company's executive compensation will be compared to executive
compensation paid by the companies that comprise the Dow Jones Transportation
Average ("DJTA") which includes some of the peer companies.
Base Salary
In 1999, the Company continued its practice of paying base salaries that are
competitive with those of other companies in the freight transportation and
supply chain management industry, taking into account the Company's size
compared to those companies. For 1999, we reviewed base salaries for executive
officers against competitive salary data for officers in similar positions at
peer companies as well as surveys of executive compensation for general
industry. The Committee determined that several executive's base salaries were
somewhat low in comparison to those of comparable officers in other companies,
and that executive salaries of other officers, while generally in line with
those of comparable officers at other companies, should be nominally
increased. As a result, at the beginning of 1999, Messrs. Quesnel, Detter,
Piazza, Ratnathicam and Schmoller received salary increases of 14%, 10%, 3%,
4% and 4.1%, respectively.
The base salaries for all Named Executives, other than the Chief Executive
Officer, were approved by the Committee. The 1999 salary of Mr. Quesnel was
approved by the Board of Directors as discussed below under "CEO
Compensation."
Short-Term Incentive Compensation
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
18
<PAGE>
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 1999, 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.; and the performance
objective for Mr. Piazza was based on pre-incentive operating income of Emery.
Upon attainment of the established performance goals, each plan participant
(including the Named Executives) earns incentive compensation determined as a
percentage of base salary ("target incentive"), with the target incentive
varying depending upon the level of attainment of the established performance
goals and 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 1999, operating income of Con-Way and Emery increased 11%
and 17%, respectively, over 1998 operating income, and the Company's net
income applicable to common shareholders increased 39% over 1998 levels. Under
the plans, Messrs. Quesnel, Detter, Piazza, Ratnathicam and Schmoller earned
incentive compensation of $823,133, $248,011, $228,848, $346,074 and $331,800,
respectively.
In 1999 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 and Piazza were eligible to
participate in the bonus program. Based upon results of operations for 1999,
Mr. Piazza did not receive an operating bonus and Mr. Detter received an
operating bonus of $367,783.
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, 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.
After reviewing information and recommendations provided by the above-
mentioned executive compensation consultant and adjusting for individual
factors, in 1999 the Committee granted non-qualified and incentive stock
options for a total of 735,100 shares to executives of the Company and its
subsidiaries, effective December 8, 1999. The stock options granted in 1999 to
the Named Executives are set forth in the Option/SAR Grants Table on page 15.
In 1999, the Committee also elected to make a long-term compensation award
in the form of restricted stock to one of the Named Executives. In that
regard, Mr. Detter received an award for 20,000 shares that will vest on
January 1, 2004. This award was granted in order to provide additional
incentive to Mr. Detter to remain with the Company.
In order to maintain the Company's overall long-term incentive compensation
at competitive levels, in 1999 the Committee made awards to senior executives
under the Company's Return on Equity Plan, which provides for the payments of
cash bonuses based on exceeding specified increases in the
19
<PAGE>
Company's shareholder equity. Awards were made under the Plan for the first
time in 1996. Bonus payments for the 1997 award cycle, which ended on December
31, 1999, were made in January 2000. Among the Named Executives, Messrs.
Quesnel, Detter, Piazza, Ratnathicam and Schmoller earned bonus payments of
$627,600, $321,122, $162,130, $162,130 and $512,540, respectively.
As part of its review of executive compensation, the Committee decided,
based on management's recommendation, to make no further awards under the
Return on Equity Plan, but for the year 2000, to make awards under a new long-
term incentive plan called the Value Management Plan. Under that 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.
Long-term incentive compensation awards made to Mr. Quesnel during 1999 are
discussed in more detail below under "CEO Compensation."
Stock Ownership Guidelines
The Committee established stock ownership guidelines in 1998 for senior
executive officers as a way to further align their financial interests with
those of shareholders. The officers are expected to make continuing progress
towards compliance with these guidelines, with a goal of full compliance with
the guidelines by June 2001. The guidelines are as follows: Chief Executive
Officer--five times base salary; a group of five other senior executive
officers, consisting of the Chief Financial Officer, the General Counsel, and
the President of each of the Company's three major business units--three times
base salary.
For purposes of determining compliance with these guidelines, officers
receive ownership credit for all Company stock owned, directly or indirectly,
over which they (or their spouses) have the power to dispose, all Company
stock held in retirement plans (including 401(k) plans), and one-half of the
value of vested "in-the-money" stock options. Each of the officers subject to
the guidelines has made progress towards meeting the goals established by
guidelines.
CEO Compensation
In May 1998, GregoryL. Quesnel, formerly President and Chief Operating
Officer of the Company, succeeded Donald E. Moffitt, and now holds the title
of President and Chief Executive Officer of the Company. The Committee
recommended, and the Board approved, a 1999 annualized base salary for Mr.
Quesnel of $712,500. This amount was recommended by the Committee and approved
by the Board based on Mr. Quesnel's experience and on the recommendation of
the Company's independent executive compensation consultant.
In 1999, Mr. Quesnel earned short-term incentive compensation of $823,133,
based on the pre-tax, pre-incentive income objective for the parent Company
established at the beginning of 1999.
As discussed under "Long-Term Incentive Compensation" on page 19, for 1999
Mr. Quesnel and the other Named Executives received as long-term compensation
a combination of stock options, restricted stock grants, and awards under the
Return on Equity Plan. Based upon the recommendation of the Company's
independent executive compensation consultant, the long-term awards made to
Mr. Quesnel for 1999 have an aggregate projected value of approximately three
and one-half times his annual salary if the Company achieves its goals
relating to profit, return on equity and shareholder value.
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")
20
<PAGE>
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
1999, 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
<TABLE>
<C> <S>
W. Keith Kennedy, Jr., Chairman Robert D. Rogers
Richard B. Madden Robert P. Wayman
Michael J. Murray Richard A. Clarke*
</TABLE>
* Mr. Clarke was a member of the Committee until May 3, 1999. He reviewed and
approved this report.
21
<PAGE>
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
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------
4Q94 4Q95 4Q96 4Q97 4Q98 4Q99
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CNF $100.0 $120.1 $118.4 $208.8 $204.4 $189.8
S&P Midcap 400 $100.0 $130.9 $156.1 $206.4 $245.9 $282.1
Custom Peer Group $100.0 $105.7 $109.7 $159.7 $188.8 $176.6
</TABLE>
* Assumes $100 invested on December 31, 1994 in CNF Transportation Inc.
(then known as Consolidated Freightways, Inc.), S & P Mid Cap 400 Index and
the Peer Group Index, described below, and that any dividends were reinvested.
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, Federal Express Corporation, Pittston Co.--
Burlington Group, Ryder System Inc. and US Freightways Corporation. This Peer
Group Index is the same as in last year's Proxy Statement, although Caliber
Systems, Inc., which last year was listed as a separate member of the Peer
Group, is now a part of Federal Express Corporation.
22
<PAGE>
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.
<TABLE>
<CAPTION>
Average Final Total Earnings During Years of Plan Participation
Highest Five Consecutive Years ------------------------------------------------
of Last Ten Years of Employment 15 20 25 30 35
- ----------------------------------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 43,599 $ 62,132 $ 80,665 $ 99,198 $ 117,732
$ 300,000 $ 66,099 $ 94,132 $122,165 $ 150,198 $ 178,232
$ 400,000 $ 88,599 $126,132 $163,665 $ 201,198 $ 238,732
$ 500,000 $111,099 $158,132 $205,165 $ 252,198 $ 299,232
$ 600,000 $133,599 $190,132 $246,665 $ 303,198 $ 359,732
$ 700,000 $156,099 $222,132 $288,165 $ 354,198 $ 420,232
$ 800,000 $178,599 $254,132 $329,665 $ 405,198 $ 480,732
$ 900,000 $201,099 $286,132 $371,165 $ 456,198 $ 541,232
$1,000,000 $223,599 $318,132 $412,665 $ 507,198 $ 601,732
$1,100,000 $246,099 $350,132 $454,165 $ 558,198 $ 662,232
$1,200,000 $268,599 $382,132 $495,665 $ 609,198 $ 722,732
$1,300,000 $291,099 $414,132 $537,165 $ 660,198 $ 783,232
$1,400,000 $313,599 $446,132 $578,665 $ 711,198 $ 843,732
$1,500,000 $336,099 $478,132 $620,165 $ 762,198 $ 904,232
$1,600,000 $358,599 $510,132 $661,665 $ 813,198 $ 964,732
$1,700,000 $381,099 $542,132 $703,165 $ 864,198 $1,025,232
$1,800,000 $403,599 $574,132 $744,665 $ 915,198 $1,085,732
$1,900,000 $426,099 $606,132 $786,165 $ 966,198 $1,146,232
$2,000,000 $448,599 $638,132 $827,665 $1,017,198 $1,206,732
</TABLE>
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 13, 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, 1999, Messrs. Quesnel, Detter, Piazza, Ratnathicam and
Schmoller had 24, 31, 21, 22 and 25 years of plan participation, respectively.
----------------
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into severance agreements with each of Messrs.
Quesnel, Detter, Piazza, Ratnathicam and Schmoller. Each severance agreement
provides that if such officer's employment with the Company is actually or
constructively terminated within two years of a change in control (as defined
in the severance agreement), or prior to a change in control at the direction
of a person or entity which subsequently acquires control of the Company, the
officer generally will receive,
23
<PAGE>
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.
----------------
PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO THE CNF TRANSPORTATION INC.
1997 EQUITY AND INCENTIVE PLAN, AND TO RE-APPROVE THE PLAN AS AMENDED
The Board of Directors of the Company has placed on the agenda of the
meeting a proposal for the shareholders of the Company to approve certain
amendments to the CNF Transportation Inc. 1997 Equity and Incentive Plan (the
"Plan"), and to re-approve the Plan, as amended, in its entirety. The proposed
amendments to the Plan would increase by 4,000,000 (from 2,200,000 to
6,200,000) the maximum number of shares reserved for issuance under the Plan,
and would increase by 1,000,000 (from 550,000 to 1,550,000) the maximum number
of shares that may be awarded to a single individual over the term of the
Plan. The term of the Plan is 10 years, and unless terminated earlier by the
Board the Plan will terminate on January 17, 2007. The Board of Directors has
unanimously approved the amendments to the Plan, subject to approval by the
shareholders of the Company. A copy of the Plan, as amended, is attached
hereto as Exhibit A.
The Plan was adopted by the Board of Directors on January 17, 1997, subject
to approval by the shareholders of the Company, and was approved by
shareholders at the Company's Annual Meeting of Shareholders held on April 28,
1997. The Plan was put in place to assist the Company in attracting, retaining
and motivating highly talented executives, and to help align the interests of
those executives with the interests of the Company's shareholders by providing
for the grant of awards that pay off only if the price of the Company's common
stock increases or specified performance goals are achieved. As discussed more
fully in the "Compensation Committee Report on Executive Compensation"
starting on page 18, the Compensation Committee maintains a policy of "pay for
performance" for executives, and in accordance with that policy has made stock
options and other performance-based awards an integral part of the total
compensation payable to the Company's executives. For example, for the year
2000 over 80% of the Chief Executive Officer's compensation, and over 70% of
the compensation of the other Named Executives, has been placed "at risk"
through the grant of stock options and other performance-based awards under
the Plan.
Because of the emphasis on stock options and other performance-based awards
as a part of executive compensation, as of March 6, 2000 only 128,917 shares
of Stock remained available for issuance under the Plan. In order to make it
possible for the Committee to make additional awards under the Plan, and
thereby continue its policy of pay for performance, the Board is seeking
shareholder approval to increase the total number of shares authorized for
issuance under the Plan from 2,200,000 to 6,200,000. The Company estimates
that the additional 4,000,000 shares will be sufficient to cover awards made
under the Plan for at least five years, and expects that issuance of the
additional shares will result in dilution generally in line with historical
levels and transportation industry norms.
The Plan is being submitted for re-approval by shareholders so that, among
other reasons, certain awards granted under the Plan that are intended to
qualify as "performance-based compensation" under Section 162(m) ("Section
162(m)") of the Internal Revenue Service Code of 1986, as amended,
24
<PAGE>
(the "Code") may so qualify. Section 162(m) denies a deduction by an employer
for certain compensation in excess of $1 million per year paid by a publicly
traded corporation to the following individuals who are employed at the end of
the employer's taxable year ("Covered Employees"): the chief executive
officer, and the four most highly compensated executive officers (other than
the chief executive officer) for whom compensation disclosure is required
under the proxy rules. Certain compensation, including compensation based on
the attainment of performance goals, is excluded from this deduction limit if
certain requirements are met.
One of these requirements is that the material terms (including the
performance goals) pursuant to which the compensation is to be paid be
disclosed to and approved by shareholders prior to payment. This requirement
was originally met when the Company's shareholders approved the Plan in 1997.
However, Section 162(m) requires under certain circumstances that shareholders
periodically re-approve the Plan. In addition, Section 162(m) requires that
shareholders approve any increase in the individual limit on awards under the
Plan. The Plan, as amended, increases the limit on the number of shares of
Stock that may be awarded to a single individual over the term of the Plan
from 550,000 to 1,550,000. This increase in the number of shares is being
proposed so that the same percentage (25%) of the total shares available for
issuance under the Plan may be issued to a single individual (i.e., 550,000 is
25% of 2,200,000; 1,550,000 is 25% of 6,200,000). As is the case in many other
companies, the individual serving as the Company's Chief Executive Officer
typically receives the largest awards under the Plan. To date, approximately
17% of the total shares of Stock awarded under the Plan have been awarded to
individuals serving as Company's Chief Executive Officer when the awards were
made. Accordingly, if the Plan is re-approved by shareholders and the other
conditions of Section 162(m) relating to the exclusion for performance-based
compensation are satisfied, certain compensation paid to Covered Employees
pursuant to the Plan will not be subject to the deduction limit of Section
162(m). If the Plan is not re-approved by shareholders, the Plan as previously
in effect will continue and the Company will consider alternative means by
which to compensate executives.
The following description of the Plan, is qualified in its entirety by
reference to the complete text of the Plan, attached hereto as Exhibit A. The
text of the Plan incorporates the proposed amendments described above.
Capitalized terms used herein will, unless otherwise defined, have the
meanings assigned to them in the text of the Plan.
General
The purposes of the Plan are to afford an incentive to selected employees of
the Company and its Subsidiaries and Affiliates to continue as employees, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business.
The Plan generally provides for the grant of various types of stock- and
cash-based compensation. The Plan includes both a Long-Term Incentive Program
and an Annual Incentive Bonus Program. Pursuant to the Long-Term Incentive
Program, the Plan provides for the granting of stock options ("Options"),
including incentive stock options ("ISOs") and non-qualified stock options
("NQSOs"); stock appreciation rights ("SARs"), which may be granted in tandem
with or independently of Options; restricted stock and restricted stock units
("Restricted Awards"); dividend equivalents; and other stock- and cash-based
awards ("Other Awards"). As more fully described below, the Annual Incentive
Bonus Program provides for the granting of short-term cash-based awards. The
Plan also authorizes the Committee (as defined below) to provide procedures
for the deferral of the receipt of awards. All awards will be evidenced by an
agreement (an "Award Agreement") setting forth the terms and conditions
applicable thereto.
Plan Administration
The Plan will be administered by a committee of the Board (the "Committee"),
the composition of which will at all times satisfy the provisions of Rule 16b-
3 promulgated under the Securities Exchange
25
<PAGE>
Act of 1934, as amended, and Section 162(m). The Plan provides that no member
of the Board or the Committee will be liable for any action or determination
taken or made in good faith with respect to the Plan.
Subject to the terms of the Plan, the Committee has the right, among other
things, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including the authority to grant awards; to
determine the persons to whom and the time or times at which awards shall be
granted; to determine the type and number of awards to be granted, the number
of shares of stock to which an award may relate and the terms, conditions,
restrictions and Performance Goals (as defined below) relating to any award;
to determine Performance Goals no later than such time as required to ensure
that an underlying award which is intended to comply with the requirements of
Section 162(m) so complies; to determine whether, to what extent, and under
what circumstances an award may be settled, canceled, forfeited, exchanged or
surrendered; to make adjustments in the terms and conditions (including
Performance Goals, if any) applicable to awards; to designate affiliates; to
construe and interpret the Plan and any award; to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the award agreements; and to make all other determinations
deemed necessary or advisable for the administration of the Plan. However, the
Committee shall not have the authority to lower the exercise price of any
outstanding Option or SAR (other than in connection with stock splits, stock
dividends and similar capital adjustments described below), nor shall the
Committee have the authority to settle, cancel or exchange any outstanding
Option or SAR in consideration for the grant of a new award with a lower
exercise price.
Shares Subject to the Plan
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan is 6,200,000, subject to adjustment as provided in the
Plan. The per share market value of the Common Stock was $30.38 on March 6,
2000. No more than 900,000 shares of Common Stock may be awarded in the
aggregate in respect of Restricted Stock and Restricted Stock Units over the
term of the Plan, and no more than 1,550,000 shares may be awarded in the form
of stock-based awards (including Options, SARs, Restricted Awards, dividend
equivalents and stock-based Other Awards) to a single individual over the term
of the Plan, in each case subject to adjustment as described below. Shares
subject to an award that is forfeited, canceled, exchanged, surrendered or
terminated will again be available for issuance under the Plan, to the extent
of such forfeiture, cancellation, exchange, surrender or termination.
The Plan provides that, in the event of any dividend or other distribution,
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, which affects the stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of
rights under the Plan, then the Committee shall make such equitable changes or
adjustments s it deems necessary or appropriate to any or all of (i) the
number and kind of shares of stock or cash that may thereafter be issued in
connection with awards, (ii) the number and kind of shares of stock or cash
issued or issuable in respect of outstanding awards, (iii) the exercise price,
grant price, or purchase price relating to any award, (iv) the Performance
Goals and (v) the individual limitations applicable to awards.
Eligibility
Discretionary grants of awards may be made to any employee of the Company or
its Subsidiaries or Affiliates who is determined by the Committee to be
eligible for participation in the Plan, consistent with the purposes of the
Plan.
26
<PAGE>
Long-Term Incentive Program
Options
Options will vest and become exercisable over the exercise period, at such
times and upon such conditions as the Committee determines and as set forth in
the Award Agreement. The Committee may accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it deems
appropriate. Options are generally exercisable during the optionee's lifetime
only by the optionee. The Award Agreements will contain provisions regarding
the exercise of Options following termination of employment with or service to
the Company, including terminations due to the death, disability or retirement
of an award recipient, or upon a Change in Control of the Company (as defined
in the Plan). In addition to the terms and conditions governing NQSOs, ISOs
awarded under the Plan must comply with the requirements set forth in Section
422 of the Code.
The purchase price per share of Common Stock subject to the exercise of an
Option will be as determined by the Committee but may not be less than the
Fair Market Value per share on the date of grant, subject to adjustment in
accordance with the antidilution provisions described in "Shares Subject to
the Plan", above. Upon the exercise of any Option, the purchase price may be
fully paid in cash, by delivery of Common Stock previously owned by the
optionee equal in value to the purchase price, or by having shares of Common
Stock with a fair market value (on the date of exercise) equal to the purchase
price withheld by the Company or sold by a broker-dealer under qualifying
circumstances (or in any combination of the foregoing).
Stock Appreciation Rights
Unless the Committee determines otherwise, an SAR (1) granted in tandem with
an NQSO may be granted at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only be granted at the
time of grant of the related ISO. A SAR will be exercisable only to the extent
the underlying Option is exercisable.
Upon exercise of an SAR, the grantee will receive, with respect to each
share subject thereto, an amount equal in value to the excess of (1) the Fair
Market Value of one share of Common Stock on the date of exercise over (2) the
grant price of the SAR (which in the case of a SAR granted in tandem with an
Option will be the purchase price of the underlying Option, and which in the
case of any other SAR will be the price determined by the Committee).
With respect to SARs that are granted in tandem with Options, each such SAR
will terminate upon the termination or exercise of the pertinent portion of
the related Option, and the pertinent portion of the related Option will
terminate upon the exercise of any such SAR.
Restricted Stock and Restricted Stock Units
A Restricted Stock award is an award of Common Stock subject to such
restrictions on transferability and other restrictions as the Committee may
impose at the date of grant or thereafter. Each Restricted Stock award shall
be subject to restrictions, imposed at the date of grant, relating to either
or both of (1) the attainment of Performance Goals by the Company or (2) the
continued employment of the grantee with the Company, a Subsidiary or an
Affiliate. All performance-based Restricted Stock Awards will have a minimum
vesting period of one year. With respect to any shares of Restricted Stock
subject to restrictions which lapse solely based on the grantee's continuation
of employment with the Company, a Subsidiary or an Affiliate, such
restrictions shall lapse over a vesting schedule (so long as the grantee
remains employed with the Company, a Subsidiary or an Affiliate ) no shorter
in duration than three years from the date of grant; provided that, such
vesting schedule may provide for partial or installment vesting from time to
time during such period. Unless an Award Agreement provides otherwise, a
Restricted Stock recipient will have all of the rights of a shareholder during
the restriction period, including the right to vote Restricted Stock and the
right to receive dividends thereon.
27
<PAGE>
If the recipient of an award of Restricted Stock terminates employment with
the Company during the applicable restricted period, Restricted Stock and any
accrued but unpaid dividends or dividend equivalents that are at that time
still subject to restrictions will be forfeited (unless the applicable Award
Agreement or the Committee provide otherwise).
Recipients of Restricted Stock Units will be entitled to receive cash or
shares of Common Stock, as determined by the Committee, upon expiration of the
restricted period specified for such Restricted Stock Units in the related
Award Agreement. The Committee may place restrictions on Restricted Stock
units which lapse, in whole or in part, on the attainment of certain
Performance Goals.
Upon termination of employment with the Company during any applicable
deferral period to which forfeiture conditions apply, or upon failure to
satisfy any other conditions precedent to the delivery of cash or Common Stock
pursuant to a Restricted Stock Unit award, all such units that are subject to
deferral or restriction will be forfeited (unless the applicable Award
Agreement or the Committee provides otherwise).
Dividend Equivalents
Dividend equivalents may be granted, which relate to Options, Rights or
other awards under the Plan, or may be granted as freestanding awards. The
Committee may provide, at the grant date or thereafter, that dividend
equivalents will be paid or distributed to a grantee when accrued with respect
to Options, Rights or other awards under the Plan, or will be deemed to have
been reinvested in additional shares of Common Stock (or such other investment
vehicles as the Committee may specify). Dividend equivalents which are not
freestanding will be subject to all conditions and restrictions applicable to
the underlying awards to which they relate.
Other Awards
The Committee may grant such other stock-based or cash-based awards under
the Long-Term Incentive Plan as it deems consistent with the purposes of the
Plan. Such awards may be granted with value and payment contingent upon the
attainment of specified individual or Company (or Subsidiary) Performance
Goals, so long as such goals relate to periods of performance in excess of one
calendar year. The maximum payment in respect of such Other Awards that a
grantee may receive under the Plan with respect to any performance period is
$3 million. Payments in respect of such Other Awards may be decreased (or,
with respect to any grantee who is not a Covered Employee, increased) in the
sole discretion of the Committee. The Committee must certify the achievement
of Performance Goals prior to the payment of Other Awards.
Annual Incentive Bonus Program
The Committee is authorized to grant awards to grantees under the Annual
Incentive Bonus Program (the "Program"). Awards granted under the Program may
be contingent on the attainment by the Company of one or more Performance
Goals over a period of one year or less. The maximum payment that any grantee
may receive under the Annual Incentive Bonus Program with respect to any plan
year is $3 million. Payments may be decreased (or, with respect to any
participant who is not a Covered Employee, increased) in the sole discretion
of the Committee based on such factors as it deems appropriate. No payment
shall be made prior to the certification by the Committee that any applicable
Performance Goals have been attained.
Performance Goals
The Committee may provide that the payment of an award (or vesting thereof)
will be contingent on the attainment of Performance Goals. Performance Goals
are generally defined in the Plan as goals
28
<PAGE>
which are based on one or more of the following criteria: (i) pre-tax income
or after-tax income, (ii) operating profit, (iii) return on equity, assets,
capital or investment, (iv) earnings or book value per share, (v) sales or
revenues, (vi) operating expenses, (vii) stock price appreciation, (viii)
total shareholder return (i.e., stock price appreciation plus dividends) and
(ix) implementation or completion of critical projects or processes.
Where applicable, Performance Goals will be expressed in terms of attaining
a specified level of the particular criteria or attaining a specified increase
or decrease in the particular criteria, and may be applied to one or more of
the Company, Subsidiary or Affiliate, or a division or strategic business unit
of the Company, or may be applied to the performance of the Company relative
to a market index, a group of other companies or a combination thereof, all as
determined by the Committee. Performance Goals may include a threshold level
of performance below which no payment will be made (or no vesting will occur),
levels of performance at which specified payments will be made (or specified
vesting will occur), and maximum level of performance above which no
additional payment will be made (or at which full vesting will occur).
Performance Goals will be determined in accordance with generally accepted
accounting principles and are subject to certification by the Committee. The
Committee has the authority to make equitable adjustments to the Performance
Goals in recognition of unusual or non-recurring events affecting the Company
or any Subsidiary or Affiliate or the financial statements of the Company or
any Subsidiary or Affiliate, in response to changes in applicable laws or
regulations, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to
the disposal of a segment of a business or related to a change in accounting
principles.
Amendment; Termination
The Plan will terminate ten years after its adoption by the Board, unless
sooner terminated. The Board may at any time terminate or amend the Plan in
whole or in part. However, termination or amendment of the Plan may not
adversely affect the rights of any participant without his or her consent,
under awards previously granted under the Plan.
Miscellaneous
The Company is authorized to withhold from any award granted, any payment
relating to an award under the Plan (including from a distribution of Common
Stock), or any other payment to a grantee, amounts of withholding and other
taxes due in connection with the award, and to take such other action as the
Committee may deem advisable to enable the Company and grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to the award. This authority includes the right to withhold or
receive Common Stock or other property and to make cash payments in respect
thereof in satisfaction of a grantee's tax obligations.
Unless otherwise provided by the Committee in an Award Agreement, awards
granted under the Plan are not transferable, except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order.
----------------
29
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of certain federal income tax consequences
relating to awards that may be granted pursuant to the Plan.
Stock Options
Non-Qualified Stock Options
In the case of an NQSO, an optionee generally will not be taxed upon the
grant of an option. Rather, at the time of exercise of such NQSO (and in the
case of an untimely exercise of an ISO), the optionee will generally recognize
ordinary income for federal income tax purposes in an amount equal to the
excess of the then fair market value of the shares purchased over the purchase
price. The Company will generally be entitled to a tax deduction at the time
and in the amount that the optionee recognizes ordinary income.
Incentive Stock Options
In the case of an ISO, an optionee will generally be in receipt of taxable
income upon the disposition of the shares acquired upon exercise of the ISO,
rather than upon the grant of the ISO or upon its timely exercise. If certain
holding period requirements have been satisfied with respect to outstanding
shares so acquired, taxable income will constitute long-term capital gain and
the Company will not be entitled to a tax deduction. The tax consequences of
any untimely exercise of an ISO will be determined in accordance with the
rules applicable to NQSOs. The amount by which the fair market value of the
stock on the exercise date of an ISO exceeds the option price will generally
be an item of tax preference for purposes of the "alternative minimum tax"
imposed by Section 55 of the Code.
Exercise with Shares
An optionee who pays the purchase price upon exercise of an option, in whole
or in part, by delivering already owned shares of Common Stock will generally
not recognize gain or loss on the shares surrendered at the time of such
delivery, except under certain circumstances relating to ISOs. Rather, such
gain or loss recognition will generally occur upon disposition or the shares
acquired in substitution for the shares surrendered.
SARs
A grant of stock appreciation rights has no federal income tax consequences
at the time of grant. Upon the exercise of stock appreciation rights, the
value of the shares and cash received is generally taxable to the grantee as
ordinary income, and the Company generally will be entitled to a corresponding
deduction.
Restricted Stock
Generally, the grant of restricted stock has no federal income tax
consequences at the time of grant. Rather, at the time the shares are no
longer subject to a substantial risk of forfeiture (as defined in the Code),
the grantee will recognize ordinary income in an amount equal to the fair
market value of such shares. A grantee may, however, elect to be taxed at the
time of the grant. The Company generally will be entitled to a deduction at
the time and in the amount that the grantee recognizes ordinary income.
30
<PAGE>
Restricted Stock Units
In the case of Restricted Stock Units, a grantee generally will not be taxed
upon the grant of such units but, rather, will recognize ordinary income upon
the receipt of cash, shares or other property in payment of such Units. The
amount recognized as ordinary income will equal the amount of cash received
plus the value of shares and other property received. The Company generally
will be entitled to a deduction at the time and in the amount that the grantee
recognizes ordinary income.
The foregoing summary constitutes a brief overview of the principal federal
income tax consequences relating to the above-described awards based upon
current federal income tax laws. This summary is not intended to be exhaustive
and does not describe state, local or foreign tax consequences.
Amounts Awarded Under the Plan
Because participation in the Plan and the amount and terms of awards under
the Plan are at the discretion of the Committee (subject to the terms of the
Plan) and because Performance Goals may vary from award to award and from
grantee to grantee, benefits under the Plan are not presently determinable.
Compensation paid and other benefits granted to named executive officers of
the Company for the 1999 fiscal year are set forth in the Summary Compensation
Table appearing on page 13 of this Proxy Statement.
Shareholder Approval; Board Recommendation
Approval of the proposal requires the affirmative vote of a majority of the
voting power represented at the meeting. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO THE CNF TRANSPORTATION
INC. 1997 EQUITY AND INCENTIVE PLAN, AND FOR RE-APPROVAL OF THE PLAN AS
AMENDED.
----------------
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, 1999. 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, 2000. 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 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.
----------------
31
<PAGE>
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 14, 2000,
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.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
---------------- -------------------- --------
<S> <C> <C>
T. Rowe Price Associates, Inc. 258,500 Common (1) *%
and T. Rowe Price Trust Company 588,738 Preferred (1) 5.4%
100 East Pratt Street
Baltimore, MD 21202
FMR Corp. 6,126,356 Common (2) 12.7%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
*Less than 1%
(1) T. Rowe Price Associates, Inc. ("Price Associates") has sole voting power
over 6,600 shares, shared voting power over 3,603,311 shares, sole
dispositive power over 258,500 shares and shared dispositive power over
3,603,311 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 3,603,311 shares, sole dispositive
power over 0 shares and shared dispositive power over 3,603,311 shares.
The holdings include 588,738 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 70% 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 5.4% 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, and Fidelity International Limited,
an affiliate of FMR Corp., have, in the aggregate, sole voting power over
173,666 shares, shared voting power over 0 shares, sole dispositive power
over 6,126,356 shares and shared dispositive power over 0 shares.
----------------
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that during 1999, 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").
----------------
32
<PAGE>
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 form 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 20, 2000. 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 25, 2001. The Company's Bylaws
require that proposals of shareholder 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 25, 2001 and not earlier than December 26,
2000.
----------------
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The report will be available for mailing after April 10, 1999.
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.
33
<PAGE>
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 20, 2000
34
<PAGE>
EXHIBIT A
CNF TRANSPORTATION INC.
1997 EQUITY AND INCENTIVE PLAN
(AS AMENDED AS OF JANUARY 31, 2000)
1. Purpose; Types of Awards; Construction.
The purposes of the 1997 Equity and Incentive Plan of CNF Transportation
Inc. (the "Plan") are to afford an incentive to selected employees of CNF
Transportation Inc. (the "Company") or any Subsidiary or Affiliate that now
exists or hereafter is organized or acquired, to continue as employees, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business. Pursuant to the Long-Term Incentive Program described
herein, there may be granted stock options (including "incentive stock
options" and "non-qualified stock options"), stock appreciation rights (either
in connection with stock options granted under the Plan or independently of
stock options), restricted stock, restricted stock units, dividend equivalents
and other long-term stock- or cash-based Awards, and pursuant to the Annual
Incentive Bonus Program described herein, there may be granted short-term
stock-or cash-based Awards. The Plan is designed so that Awards granted
hereunder intended to comply with the requirements for "performance-based
compensation" under Section 162(m) of the Code may comply with such
requirements and insofar as may be applicable to such Awards, the Plan shall
be interpreted in a manner consistent with such requirements.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(b) "Annual Incentive Bonus Program" means the program described in Section
6(c) hereof.
(c) "Award" means any Option, SAR, Restricted Stock, Restricted Stock Unit,
Dividend Equivalent or Other Stock-Based Award or Other Cash-Based
Award granted under the Plan.
(d) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means a change in control of the Company, which
will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than (A) the Company or its affiliates, (B) any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company or its affiliates, and (C) any corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of the common
stock, par value $0.625 per share, of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such person any securities
acquired directly from the Company or its affiliates) representing 25%
or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who,
on the Effective Date, constitute the Board and any new director
(other than a director whose initial assumption of office is in
connection with an actual or threatened election contest,
including but not limited to a consent
A-1
<PAGE>
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or
recommended;
(iii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving or parent entity) more than 50% of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as defined above), directly or
indirectly, acquired 25% or more of the combined voting power of
the Company's then outstanding securities (not including in the
securities beneficially owned by such person any securities
acquired directly from the Company or its affiliates); or
(iv) the stockholders of the Company approve a plan of complete liquidation
of the Company or there is consummated an agreement for the sale or
disposition by the Company of assets having an aggregate book value at
the time of such sale or disposition of more than 75% of the total
book value of the Company's assets on a consolidated basis (or any
transaction having a similar effect), other than any such sale or
disposition by the Company (including by way of spin-off or other
distribution) to an entity, at least 50% of the combined voting power
of the voting securities of which are owned immediately following such
sale or disposition by stockholders of the Company in substantially
the same proportions as their ownership of the Company immediately
prior to such sale or disposition.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(h) "Committee" means the committee established by the Board to administer
the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3 and Section 162(m) of the Code; provided,
however, that the Board may, if it so chooses, retain authority to
administer all or any part of the Plan and, to the extent the Board
does so, references in the Plan to "Committee" shall mean and be
references to the Board.
(i) "Company" means CNF Transportation Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(j) "Dividend Equivalent" means a right, granted to a Grantee under Section
6(b)(v), to receive cash or Stock equal in value to dividends paid with
respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another
Award, and may be paid currently or on a deferred basis.
(k) "Effective Date" means January 27, 1997, the date that the Plan was
adopted by the Board.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(m) "Fair Market Value" per share of Stock as of a particular date means
(i) the closing sales price per share of Stock on the national
securities exchange on which the Stock is principally traded, for the
last preceding date on which there was a sale of such Stock on such
exchange, or (ii) if the shares of Stock are then traded in an over-
the-counter market, the average of the closing bid and asked prices for
the shares of Stock in such over-the-counter
A-2
<PAGE>
market for the last preceding date on which there was a sale of such Stock
in such market, or (iii) if the shares of Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such
value as the Committee, in its sole discretion, shall determine.
(n) "Grantee" means a person who, as an employee of the Company, a
Subsidiary or an Affiliate, has been granted an Award under the Plan.
(o) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(p) "Long-Term Incentive Program" means the program described in Section
6(b) hereof.
(q) "NQSO" means any Option that is designated as a non-qualified stock
option.
(r) "Option" means a right, granted to a Grantee under Section 6(b)(i), to
purchase shares of Stock. An Option may be either an ISO or an NQSO;
provided that ISOs may be granted only to employees of the Company or a
Subsidiary.
(s) "Other Cash-Based Award" means an Award under the Annual Incentive
Bonus Program or the Long-Term Incentive Program, which Award is not
denominated or valued by reference to Stock, including an Award which
is subject to the attainment of Performance Goals or otherwise as
permitted under the Plan.
(t) "Other Stock-Based Award" means an Award under the Long-Term Incentive
Program that is denominated or valued in whole or in part by reference
to Stock and is payable in cash.
(u) "Performance Goals" means performance goals based on one or more of the
following criteria: (i) pre-tax income or after-tax income, (ii)
operating profit, (iii) return on equity, assets, capital or
investment, (iv) earnings or book value per share, (v) sales or
revenues, (vi) operating expenses, (vii) Stock price appreciation,
(viii) total shareholder return (i.e., Stock price appreciation plus
dividends) and (ix) implementation or completion of critical projects
or processes. Where applicable, the Performance Goals may be expressed
in terms of attaining a specified level of the particular criteria or
the attainment of a percentage increase or decrease in the particular
criteria, and may be applied to one or more of the Company, a
Subsidiary or Affiliate, or a division or strategic business unit of
the Company, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a combination
thereof, all as determined by the Committee. The Performance Goals may
include a threshold level of performance below which no payment will be
made (or no vesting will occur), levels of performance at which
specified payments will be made (or specified vesting will occur), and
a maximum level of performance above which no additional payment will
be made (or at which full vesting will occur). Each of the foregoing
Performance Goals shall be determined in accordance with generally
accepted accounting principles and shall be subject to certification by
the Committee; provided that the Committee shall have the authority to
make equitable adjustments to the Performance Goals in recognition of
unusual or non-recurring events affecting the Company or any Subsidiary
or Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, in response to changes in applicable laws or
regulations, or to account for items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent in
occurrence or related to the disposal of a segment of a business or
related to a change in accounting principles.
(v) "Plan" means this CNF Transportation Inc. 1997 Equity and Incentive
Plan, as amended from time to time.
(w) "Plan Year" means a calendar year.
A-3
<PAGE>
(x) "Restricted Stock" means an Award of shares of Stock to a Grantee under
Section 6(b)(iii) that may be subject to certain transferability and
other restrictions and to a risk of forfeiture (including by reason of
not satisfying certain Performance Goals).
(y) "Restricted Stock Unit" means a right granted to a Grantee under
Section 6(b)(iv) to receive Stock or cash at the end of a specified
deferral period, which right may be conditioned on the satisfaction of
certain requirements (including the satisfaction of certain Performance
Goals).
(z) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16
of the Exchange Act, including any successor to such Rule.
(aa) "Stock" means shares of the common stock, par value $.625 per share,
of the Company.
(bb) "SAR" or "Stock Appreciation Right" means the right, granted to a
Grantee under Section 6(b)(ii), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant
to the date of exercise of the right, with payment to be made in cash
or Stock as specified in the Award or determined by the Committee.
(cc) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of
an Award, each of the corporations (other than the last corporation in
the unbroken chain) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom
and the time or times at which Awards shall be granted; to determine the type
and number of Awards to be granted, the number of shares of Stock to which an
Award may relate and the terms, conditions, restrictions and Performance Goals
relating to any Award; to determine Performance Goals no later than such time
as is required to ensure that an underlying Award which is intended to comply
with the requirements of Section 162(m) of the Code so complies; to determine
whether, to what extent, and under what circumstances an Award may be settled,
canceled, forfeited, exchanged, or surrendered; to make adjustments in the
terms and conditions (including Performance Goals) applicable to Awards; to
designate Affiliates; to construe and interpret the Plan and any Award; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the Award Agreements (which need not be
identical for each Grantee); and to make all other determinations deemed
necessary or advisable for the administration of the Plan. Notwithstanding the
foregoing and except as otherwise provided in the second paragraph of Section
5 below, the Committee shall not have the authority to lower the exercise
price of any outstanding option or SAR, nor shall the Committee have the
authority to settle, cancel or exchange any outstanding option or SAR in
consideration for the grant of a new award with a lower exercise price.
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person
or participating by conference telephone at a meeting or by written consent.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. All decisions, determinations and
interpretations
A-4
<PAGE>
of the Committee shall be final and binding on all persons, including the
Company, and any Subsidiary, Affiliate or Grantee (or any person claiming any
rights under the Plan from or through any Grantee) and any stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.
4. Eligibility.
Awards may be granted to selected employees of the Company and its present
or future Subsidiaries and Affiliates, in the discretion of the Committee. In
determining the persons to whom Awards shall be granted and the type of any
Award (including the number of shares to be covered by such Award), the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant or settlement
of Awards under the Plan shall be 6,200,000, subject to adjustment as provided
herein. No more than 1,550,000 shares of Stock may be awarded in the aggregate
in respect of stock-based awards (including Options, SARs, Restricted Stock
and Restricted Stock Units) to a single individual over the term of the Plan
and no more than 900,000 shares of Stock may be awarded in the aggregate in
respect of Restricted Stock and Restricted Stock Units to all Grantees over
the term of the Plan, in each case subject to adjustment as provided herein.
Determinations made in respect of the limitation set forth in the preceding
sentence shall be made in a manner consistent with Section 162(m) of the Code.
Such shares may, in whole or in part, be authorized but unissued shares or
shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise. If any shares subject to an
Award are forfeited, canceled, exchanged or surrendered or if an Award
otherwise terminates or expires without a distribution of shares to the
Grantee, the shares of stock with respect to such Award shall, to the extent
of any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for Awards under the Plan. Upon the exercise of
any Award granted in tandem with any other Awards or awards, such related
Awards or awards shall be canceled to the extent of the number of shares of
Stock as to which the Award is exercised and, notwithstanding the foregoing,
such number of shares shall no longer be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or recapitalization, Stock
split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Grantees under
the Plan, then the Committee shall make such equitable changes or adjustments
as it deems necessary or appropriate to any or all of (i) the number and kind
of shares of Stock or cash that may thereafter be issued in connection with
Awards, (ii) the number and kind of shares of Stock or cash issued or issuable
in respect of outstanding Awards, (iii) the exercise price, grant price, or
purchase price relating to any Award; provided that, with respect to ISOs,
such adjustment shall be made in accordance with Section 424(h) of the Code,
(iv) the Performance Goals and (v) the individual limitations applicable to
Awards.
6. Specific Terms of Awards.
(a) General. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an
Award may be made in Stock or cash, or a combination thereof, as the
A-5
<PAGE>
Committee shall determine at the date of grant or thereafter and may be
made in a single payment or transfer, in installments, or on a deferred
basis. The Committee may make rules relating to installment or deferred
payments with respect to Awards, including the rate of interest to be
credited with respect to such payments. In addition to the foregoing, the
Committee may impose on any Award or the exercise thereof, at the date of
grant or thereafter, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall
determine.
(b) Long-Term Incentive Program. The Committee is authorized to grant to
Grantees the following Awards under the Long-Term Incentive Program, as
deemed by the Committee to be consistent with the purposes of the Plan.
The Committee shall determine the terms and conditions of such Awards
at the date of grant or thereafter.
(i) Options. The Committee is authorized to grant Options to Grantees on
the following terms and conditions:
(A) Type of Award. The Award Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an
NQSO.
(B) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee; provided
that, such exercise price shall be not less than the Fair Market
Value of a share on the date of grant of such Option. The
exercise price for Stock subject to an Option may be paid in cash
or by an exchange of Stock previously owned by the Grantee, or a
combination of both, in an amount having a combined value equal
to such exercise price. A Grantee may also elect to pay all or a
portion of the aggregate exercise price by having shares of Stock
with a Fair Market Value on the date of exercise equal to the
aggregate exercise price withheld by the Company or sold by a
broker-dealer.
(C) Term and Exercisability of Options. Options shall be exercisable
over the exercise period (which shall not exceed ten years from
the date of grant), at such times and upon such conditions as the
Committee may determine, as reflected in the Award Agreement;
provided that, the Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such
time and under such circumstances as it, in its sole discretion,
deems appropriate. An Option may be exercised to the extent of
any or all full shares of Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the
Committee or its designated agent.
(D) Termination of Employment, etc. An Option may not be exercised
unless the Grantee is then in the employ of the Company or a
Subsidiary or an Affiliate (or a company or a parent or
subsidiary company of such company issuing or assuming the Option
in a transaction to which Section 424(a) of the Code applies),
and unless the Grantee has remained continuously so employed
since the date of grant of the Option; provided that, the Award
Agreement may contain provisions extending the exercisability of
Options, in the event of specified terminations, to a date not
later than the expiration date of such Option.
(E) Other Provisions. Options may be subject to such other conditions
including, but not limited to, restrictions on transferability of
the shares acquired upon exercise of such Options, as the
Committee may prescribe in its discretion or as may be required
by applicable law.
A-6
<PAGE>
(ii) SARs. The Committee is authorized to grant SARs to Grantees on the
following terms and conditions:
(A) In General. Unless the Committee determines otherwise, an SAR (1)
granted in tandem with an NQSO may be granted at the time of
grant of the related NQSO or at any time thereafter or (2)
granted in tandem with an ISO may only be granted at the time of
grant of the related ISO. An SAR granted in tandem with an Option
shall be exercisable only to the extent the underlying Option is
exercisable.
(B) SARs. An SAR shall confer on the Grantee a right to receive an
amount with respect to each share subject thereto, upon exercise
thereof, equal to the excess of (1) the Fair Market Value of one
share of Stock on the date of exercise over (2) the grant price
of the SAR (which in the case of an SAR granted in tandem with an
Option shall be equal to the exercise price of the underlying
Option, and which in the case of any other SAR shall be such
price as the Committee may determine).
(iii) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Grantees on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as
the Committee may impose at the date of grant or thereafter,
which restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments, or
otherwise, as the Committee may determine; provided, however,
notwithstanding the foregoing, each Restricted Stock award shall
be subject to restrictions, imposed at the date of grant,
relating to either of both of (1) the attainment of Performance
Goals by the Company or (2) the continued employment of the
Grantee with the Company, a Subsidiary or an Affiliate. All
performance based Restricted Stock Awards will have a minimum
vesting period of one year. With respect to any shares of
Restricted Stock subject to restrictions which lapse solely based
on the Grantee's continuation of employment with the Company, a
Subsidiary or an Affiliate, such restrictions shall lapse over a
vesting schedule (so long as the Grantee remains employed with
the Company, a Subsidiary or an Affiliate) no shorter in duration
than three years from the date of grant; provided that, such
vesting schedule may provide for partial or installment vesting
from time to time during such period. Except to the extent
otherwise provided in an Award Agreement, a Grantee granted
Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock
and the right to receive dividends thereon (subject to subsection
(D) below).
(B) Forfeiture. Upon termination of employment with the Company or a
Subsidiary or Affiliate, during the applicable restriction
period, Restricted Stock and any accrued but unpaid dividends or
Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; provided that, the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole
or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(C) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in
the name of the Grantee, such certificates shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company
shall retain physical possession of the certificate.
A-7
<PAGE>
(D) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date, or deferred for payment to
such date as determined by the Committee, in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount
of such dividends. Stock distributed in connection with a stock
split or stock dividend, and distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock
or has been distributed.
(iv) Restricted Stock Units. The Committee is authorized to grant
Restricted Stock Units to Grantees, subject to the following terms
and conditions:
(A) Award and Restrictions. Delivery of Stock or cash, as determined
by the Committee, will occur upon expiration of the deferral
period specified for Restricted Stock Units by the Committee. The
Committee may condition the vesting and/or payment of Restricted
Stock Units, in whole or in part, upon the attainment of
Performance Goals.
(B) Forfeiture. Upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture conditions
apply, or upon failure to satisfy any other conditions precedent
to the delivery of Stock or cash to which such Restricted Stock
Units relate, all Restricted Stock Units that are then subject to
deferral or restriction shall be forfeited; provided that, the
Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted
Stock Units will be waived in whole or in part in the event of
termination resulting from specified causes, and the Committee
may in other cases waive in whole or in part the forfeiture of
Restricted Stock Units.
(v) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Grantees. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock, or other investment vehicles as the Committee may
specify, provided that Dividend Equivalents (other than freestanding
Dividend Equivalents) shall be subject to all conditions and
restrictions of the underlying Awards to which they relate.
(vi) Other Stock- or Cash-Based Awards. The Committee is authorized tosed
Awards or Other Cash-Based Awards, as deemed by the Committee to be
consistent with the purposes of the Plan. Awards granted pursuant to
this paragraph may be granted with value and payment contingent upon
the attainment of certain Performance Goals, so long as such goals
relate to periods of performance in excess of one calendar year. The
Committee shall determine the terms and conditions of such Awards at
the date of grant or thereafter. The maximum payment that any Grantee
may receive pursuant to an Award granted under this paragraph in
respect of any performance period shall be $3,000,000. Payments earned
hereunder may be decreased or, with respect to any Grantee who is not
a "covered employee" within the meaning of Section 162(m) of the Code
(a "Covered Employee"), increased in the sole discretion of the
Committee based on such factors as it deems appropriate. No payment
shall be made prior to the certification by the Committee that any
applicable Performance Goals have been attained. The Committee may
establish such other rules applicable to the Other Stock- or Cash-
Based Awards to the extent not inconsistent with Section 162(m) of the
Code.
(c) Annual Incentive Bonus Program. The Committee is authorized to grant Awards
to Grantees pursuant to the Annual Incentive Bonus Program in the form of
Other Cash-Based Awards, as deemed by the Committee to be consistent with
the purposes of the Plan. Grantees will
A-8
<PAGE>
be selected by the Committee with respect to participation for a Plan
Year. Each Award granted under the Annual Incentive Bonus Program in
respect of a Plan Year will be contingent on the attainment by the
Company of one or more Performance Goals. The maximum payment that any
Grantee may receive pursuant to an Award granted under the Annual
Incentive Bonus Program in respect of any Plan Year shall be $3,000,000.
Payments earned hereunder may be decreased or, with respect to any
Grantee who is not a Covered Employee, increased in the sole discretion
of the Committee based on such factors as it deems appropriate. No
payment shall be made prior to the certification by the Committee that
any applicable Performance Goals have been attained. The Committee may
establish such other rules applicable to the Annual Incentive Bonus
Program to the extent not inconsistent with Section 162(m) of the Code.
7. Change in Control Provisions.
Unless otherwise determined by the Committee and evidenced in an Award
Agreement, in the event of a Change of Control:
(a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested, and any
Performance Goals imposed with respect to Awards shall be deemed to be
fully achieved.
8. General Provisions.
(a) Nontransferability. Unless otherwise provided in an Award Agreement,
Awards shall not be transferable by a Grantee except by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and shall be
exercisable during the lifetime of a Grantee only by such Grantee or
his guardian or legal representative.
(b) No Right to Continued Employment, etc. Nothing in the Plan or in any
Award granted or any Award Agreement or other agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in
the employ of the Company, any Subsidiary or any Affiliate or to be
entitled to any remuneration or benefits not set forth in the Plan or
such Award Agreement, or other agreement or to interfere with or limit
in any way the right of the Company or any such Subsidiary or Affiliate
to terminate such Grantee's employment.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under
the Plan, including from a distribution of Stock, or any other payment
to a Grantee, amounts of withholding and other taxes due in connection
with any transaction involving an Award, and to take such other action
as the Committee may deem advisable to enable the Company and Grantees
to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Grantee's tax
obligations.
(d) Stockholder Approval; Amendment and Termination. The Plan shall take
effect on the Effective Date but the Plan (and any grants of Awards
made prior to the stockholder approval mentioned herein) shall be
subject to the requisite approval of the stockholders of the Company,
which approval must occur within twelve (12) months of the date that
the Plan is adopted by the Board. In the event that the stockholders of
the Company do not ratify the Plan at a meeting of the stockholders at
which such issue is considered and voted upon, then
A-9
<PAGE>
upon such event the Plan and all rights hereunder shall immediately
terminate and no Grantee (or any permitted transferee thereof) shall have
any remaining rights under the Plan or any Award Agreement entered into in
connection herewith. The Board may at any time and from time to time
alter, amend, suspend, or terminate the Plan in whole or in part.
Notwithstanding the foregoing, no amendment shall affect adversely any of
the rights of any Grantee, without such Grantee's consent, under any Award
theretofore granted under the Plan. Unless earlier terminated by the Board
pursuant to the provisions of the Plan, the Plan shall terminate on the
tenth anniversary of its Effective Date. No Awards shall be granted under
the Plan after such termination date.
(e) No Rights to Awards; No Stockholder Rights. No Grantee shall have any
claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by the
Award until the date of the issuance of a stock certificate to him for
such shares.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect
to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any
rights that are greater than those of a general creditor of the
Company.
(g) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash or other Awards shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver Stock with respect
to any Award granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at any time the
Committee determines, in its absolute discretion, that the listing,
registration or qualification of Stock issuable pursuant to the Plan
is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with,
the grant of an Award or the issuance of Stock, no such Award shall
be granted or payment made or Stock issued, in whole or in part,
unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions not acceptable to
the Committee.
(iii) In the event that the disposition of Common Stock acquired pursuant
to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
and is not otherwise exempt from such registration, such Stock shall
be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may
require a Grantee receiving Stock pursuant to the Plan, as a
condition precedent to receipt of such Stock, to represent to the
Company in writing that the Stock acquired by such Grantee is
acquired for investment only and not with a view to distribution.
(i) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
A-10
<PAGE>
CNF TRANSPORTATION INC.
This Proxy is Solicited on Behalf of the Board of Directors
of CNF Transportation Inc.
P R O X Y
The undersigned appoints R.A. CLARKE, W.K. KENNEDY, JR. AND R.B. MADDEN 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 25,
2000 at 9:00 A.M. and at any adjournments or postponements thereof. The proxies
are authorized 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 III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
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
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[x] Please mark your
votes 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 For, except vote withheld from the 2. Amendment and approval FOR AGAINST ABSTAIN
(see reverse) ---- ---- nominee(s). of the Company's 1997 ---- ---- ----
| | | | Equity and Incentive | | | | | |
---- ---- ---------------------------------- Plan ---- ---- ----
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: , 2000
--------------------------------
SIGNATURE(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.
</TABLE>
<PAGE>
================================================================================
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 25, 2000 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 III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
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
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[x] Please mark your |7897
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. Amendment and ---- ---- ---- 3. Ratify appointment of ---- ---- ----
Directors. | | | | approval of the | | | | | | Independent Auditors. | | | | | |
(see reverse) ---- ---- Company's 1997 ---- ---- ---- ---- ---- ----
Equity and
Incentive Plan.
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(S) DATE
</TABLE>
<PAGE>
================================================================================
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 25, 2000 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 III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
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
<PAGE>
[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
1. Election of [_] [_] 2. Amendment and [_] [_] [_]
Directors. approval of the
(see reverse) Company's 1997
Equity and
Incentive Plan.
For, except vote withheld from the
following nominee(s):
- ---------------------------------
FOR AGAINST ABSTAIN
3. Ratify appointment of [_] [_] [_]
Independent Auditors.
- --------------------------------------------------------------------------------
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(S) DATE
<PAGE>
DIRECTION FORM
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 25, 2000 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 III directors for a three-year term.
Nominees: Robert Alpert, Margaret G. Gill, Robert Jaunich II, Robert P.
Wayman.
[_] Vote FOR all nominees listed above; except vote withheld from the
following nominees (if any):
----------------------------------------------------------------------------
----------------------------------------------------------------------------
[_] Vote WITHHELD from all nominees.
2. Amendment and approval of the CNF Transportation Inc. 1997 Equity and
Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Ratify appointment of Arthur Andersen LLP as the Company's auditors for the
year 2000.
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.
, 2000
_____________________________________
Signature of Participant
_____________________________________
Name(Please Print)
_____________________________________
Address(Please Print)
_____________________________________
City State Zip Code
<PAGE>
[LOGO OF CNF TRANSPORTATION]
Eberhard G.H. Schmoller
Secretary
March 20, 2000
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 25, 2000. 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 2000 Proxy Statement and 1999 Annual Report, (2) a
card to instruct T. Rowe Price Trust Company, the Plan trustee, as to how you
wish the shares credited to your account to be voted, (3) if you wish to
instruct the Trustee to vote the preferred shares of 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 of New York, 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 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 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 of New York with the instruction card. Under the terms
of the Plan, the trustee votes the shares of each class of 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 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 of New York, 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 of New York must
receive your completed instruction card no later than April 20, 2000.
Sincerely,
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 650-494-2900
<PAGE>
[LOGO OF CNF TRANSPORTATION]
Eberhard G.H. Schmoller
Secretary
March 20, 2000
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 25, 2000. This material is being sent to you
as a participant in the CNF Transportation Inc. Common Stock Fund and includes
(1) the Company's 2000 Proxy Statement and 1999 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 of New York, 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 of New York, 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 of New
York must receive your completed instruction card no later than April 20,
2000.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 650-494-2900
