NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF ARROW TRANSPORTATION CO.
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of Arrow
Transportation Co. will be held at 10:00 a.m. local time on June 24, 1997 at the
Multnomah Athletic Club, 1849 SW Salmon, Portland, Oregon 97205, for the
following purposes:
(1) To elect five directors for a one-year term;
(2) To ratify the selection of Deloitte & Touche LLP as independent auditors
for the Company for the current fiscal year; and
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 30, 1997, will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
The vote of each stockholder is important. Whether or not you plan to attend the
meeting, you are requested to date and sign the enclosed proxy card and return
it promptly.
By order of the Board of Directors,
ARROW TRANSPORTATION CO.
/s/ William J. Stanners, Jr.
-----------------------------------
William J. Stanners, Jr., Secretary
Portland, Oregon
April 30, 1997
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE VOTE ON THE MATTERS
TO BE CONSIDERED AT THE MEETING BY COMPLETING THE ENCLOSED PROXY AND MAILING IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
ARROW TRANSPORTATION CO.
10145 N. Portland Road
Portland, Oregon 97203
PROXY STATEMENT
INFORMATION REGARDING PROXIES
-----------------------------
This Proxy Statement and the accompanying proxy/voting instruction card (proxy
card) are being mailed on or about May 15, 1997, to holders of shares in
connection with the solicitation of proxies by the Board of Directors of Arrow
Transportation Co. ("Arrow" or "Company") for the 1997 Annual Meeting of
Shareholders. The meeting will be held on June 24, 1997, at 10:00 a.m. at the
Multnomah Athletic Club, 1849 S.W. Salmon Street, Portland, Oregon 97205.
Only stockholders of record at the close of business on April 30, 1997 will be
entitled to vote at the meeting. At the close of business on March 31, 1997
there were 4,217,274 outstanding shares of the Company's common stock ("Common
Stock"). Each share of Common Stock not in the treasury is entitled to one vote.
There is no provision in the Company's Certificate of Incorporation for
cumulative voting.
If shares are not voted in person, they cannot be voted on your behalf unless a
signed proxy is given. Even if you expect to attend the Annual Meeting in
person, in order to ensure your representation, please complete, sign and date
the enclosed proxy and mail it promptly in the enclosed envelope. A stockholder
giving a proxy pursuant to this solicitation may revoke it at any time before it
is exercised by giving a subsequent proxy or by delivering to the Secretary of
the Company a written notice of revocation prior to the voting of the proxy at
the Annual Meeting. If you attend the Annual Meeting and inform the Secretary of
the Company in writing that you wish to vote your shares in person, your proxy
will not be used. If you receive two or more proxy cards, please complete, sign,
date and return each to complete your representation. All shares represented by
each properly executed and unrevoked proxy, in the accompanying form, will be
voted unless the proxy is mutilated or otherwise received in such form or at
such time as to render it unusable.
If the enclosed proxy is properly executed and returned, it will be voted in
accordance with the instructions specified on the proxy. In the absence of
instructions to the contrary, it will be voted (i) for all of the nominees for
the Company's Board of Directors listed in this proxy statement, and (ii) to
ratify the appointment of Deloitte & Touche LLP as the independent auditors for
the Company for the year ending December 31, 1997.
Page 1 - PROXY STATEMENT
<PAGE>
Votes cast at the Annual Meeting will be tabulated by the persons appointed by
the Company to act as inspectors of election for the Annual Meeting. Shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. However, for purposes
of determining the outcome of any proposal as to which proxies reflect
abstentions or broker non-votes, shares represented by such proxies will be
treated as not present and not entitled to vote with respect to that proposal.
The cost of this solicitation will be borne by the Company. Solicitation will be
made by mail, by telegraph and telephone, and personally by officers and regular
employees of the Company who will not receive additional compensation for
solicitation. Brokers, nominees and fiduciaries will be reimbursed for
out-of-pocket expenses incurred in obtaining proxies or authorizations from the
beneficial owners of the Common Stock.
The purpose of the meeting and the matters to be acted upon are set forth in the
Notice of Annual Meeting of Stockholders. As of the date of this Proxy
Statement, management knows of no other business which will be presented for
consideration at the Annual Meeting. However, if any such other business shall
properly come before the meeting, votes will be cast pursuant to the proxies in
respect of any such other business in accordance with the best judgment of the
persons acting under the proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
---------------------
The Board of Directors consists of five members, each serving one-year terms.
Each Director will hold office until the first meeting of stockholders
immediately following expiration of his term of office and until his successor
is qualified and elected.
Although the Board of Directors anticipates that all of the nominees will be
available to serve as directors of the Company, if any of them do not accept the
nomination, or otherwise are unwilling or unable to serve, the proxies will be
voted for the election of a substitute nominee or nominees designated by the
Board of Directors.
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR ELECTION
-----------------------------------------------------
The names and ages of the nominees, the year in which each first became a
Director of the company, their principal occupations and certain other
information are as follows:
Page 2 - PROXY STATEMENT
<PAGE>
ROBERT H. CUTLER (1), age 77, Chairman and Chief Executive Officer, has been a
director of the Company since 1982. Mr. Cutler has over 50 years experience in
the transportation industry. Mr. Cutler served as President of the American
Trucking Association from 1967-1968. He served as Assistant to the President of
Consolidated Freightways from 1946-1949, Executive Vice President of Bekins Van
Lines from 1949-1952, President of Texas-Arizona Motor Freight from 1952-1962
and Chairman and Chief Executive Officer of Illinois-California Express from
1962 until his retirement in 1988. Mr. Cutler is Chairman of The Cutler
Corporation. He also serves as a director of R&K Industrial Products, Laurance
David, Inc. and Jen-Cel-Lite Co.
WILLIAM R. BLOSSER, age 52, became a Director of the Company in May 1993. He is
Manager of Planning and Environmental Sciences at CH2M Hill, one of the world's
largest environmental engineering and consulting firms, headquartered in Denver,
Colorado. Mr. Blosser is also the founder and owner of Sokol Blosser Winery, one
of Oregon's largest wineries. He has served as Chairman of the State of Oregon
Water Resources Commission, Chairman of the State of Oregon Land Conservation
and Development Commission, and as a member of the Western States Water Council.
JAMES N. CUTLER, Jr.(1), age 45, has been a director of the Company since
September 1982. He is the President and a director of The Cutler Corporation, a
holding company for two manufacturing firms. Mr. Cutler is also chairman of the
Elk Island Corporation, a director and President of R&K Industrial Products
Company of California and Chairman of Jen-Cel-Lite Corporation in Seattle,
Washington. He also serves as President of Mid-Pacific Leasing Corporation and
as a director of Hollywood Entertainment Corporation.
JERRY A. PARSONS, age 61, became a Director of the Company in May 1993. He is
the Executive Vice President Chief Financial Officer of Willamette Industries,
Inc., a Fortune 500, diversified, integrated forest products company
headquartered in Portland, Oregon.
THOMAS D. TAYLOR, age 80, was elected to the Board in June 1996. Mr. Taylor has
over 50 years experience in the transportation industry. He served as President
of Freightliner corporation from 1946-1959 and Senior Vice President of
Consolidated Freightways, from 1956-1960. He was Owner and Chairman of Cummins
Oregon Diesel, Cummins Northwest and Cummins Hawaii from 1961-1992. He is
currently Chairman of Palaau Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
- -------------------------------------------------
- ----------
(1) Mr. Robert Cutler is James Cutler, Jr.'s uncle.
Page 3 - PROXY STATEMENT
<PAGE>
During the fiscal year ended December 31, 1996, there were eight meetings of the
Board of Directors. Each director attended at least 63% of the total number of
meetings of the Board of Directors and committee on which the director served.
The members of the Audit Committee are Jerry Parsons, Chairman, Bill Blosser,
and James Cutler, Jr. The Audit Committee reviews with the Company's independent
auditors the scope, results and costs of the annual audit, and the Company's
accounting policies and financial reporting. There were two meetings of the
Audit Committee during the fiscal year ended December 31, 1997.
The Board of Directors does not have any other standing committees.
Security Ownership of Certain Beneficial Owners, Management and Directors.
- -------------------------------------------------------------------------
The following table sets forth information with respect to the ownership of
issued and outstanding shares of the Company by each director, executive
officer, and person known to the Company to be the beneficial owner of more than
5% of any class of the Company's voting securities as of March 31, 1997:
Common Shares
Name and Address Beneficially Percent
Beneficial Owner Owned2 Owned
- ---------------- ------------ -------
James N. Cutler, Jr. 651,000(3) 15.4%
1233 NW 12th, Ste. 200
Portland, OR 97228
Robert H. Cutler 516,760 12.3%
P.O. Box 685
Pauma Valley, CA 92061
Sal N. Cincotta 450,500(4) 10.7%
15324 Sherwood Forest Drive
Tampa, FL 33647
Thomas D. Taylor 20,000 0.5%
- ----------
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Includes 4,000 shares owned as trustee for Alexandra Merrill Cutler Trust.
(4) Includes 85,000 shares owned by Lottie M. Cincotta, spouse of Sal N.
Cincotta.
Page 4 - PROXY STATEMENT
<PAGE>
William J. Stanners, Jr. 11,138(5) 0.3%
John D. Erwin 2,258(6) 0.1%
William R. Blosser 2,000(7) ----
Jerry A. Parsons ----(7) ----
All executive officers and directors
as a group (7 persons) 28.6%
In May 1996, Mr. Thomas D. Taylor purchased 50,000 shares of Class A convertible
preferred stock with a par value of $5.00 per share under a Preferred Stock
Purchase and Option Agreement ("the Agreement"). The Agreement includes an
option to purchase an additional 50,000 shares of Class A convertible preferred
stock at an exercise price of $5.00 per share. The option expires on June 30,
2001. Each share of preferred stock is convertible at any time, at the option of
the holder, into ten shares of the Company's common stock. The preferred stock
bears a 7% annual dividend, payable each May at the Company's option either in
cash or in additional shares of preferred stock. The preferred stock will be
entitled to vote on an as-converted basis, and to a preference on any
liquidation of the company.
There are no arrangements which may result in a change of control of the
Company.
Compensation of Directors.
- -------------------------
Each director who is not an employee of the Company is paid $500 per meeting for
their attendance at Board meetings in addition to their out-of-pocket expenses
for attendance. In March 1997, Messrs. Parsons and Blosser were each granted
options to purchase 10,000 shares of common stock of the Company under the 1992
Incentive and Non-Statutory Stock Option Plan at an exercise price of $0.375 to
compensate them for their services as directors.
- ----------
(5) Owns options to purchase up to 100,000 shares under the Company's 1992
Incentive and Non-Statutory Stock Option Plan of which 60,000 are currently
exercisable.
(6) Owns options to purchase up to 100,000 shares under the Company's 1992
Incentive and Non-Statutory Stock Option Plan of which 65,000 are currently
exercisable.
(7) Owns options to purchase up to 20,000 shares under the Company's 1992
Incentive and Non-Statutory Stock Option Plan which are currently exercisable.
Page 5 - PROXY STATEMENT
<PAGE>
Executive Compensation.
- ----------------------
The following table sets forth the compensation paid or accrued by the Company
for services rendered during the year ended December 31, 1996 by the former
Chief Executive Officer of the Company and each of the other most highly
compensated executive officers of the Company whose total cash compensation for
the year ended December 31, 1996, exceeded $100,000.
Name of Individual Annual Compensation
Position Year Salary Bonus
-------- ---- ------ -----
Robert H. Cutler 1996 $ 2,000 -0-
Chairman, CEO 1995 $ 2,000 -0-
1994 $ 65,000 -0-
John D. Erwin 1996 $109,633 -0-
President, COO 1995 $109,093 -0-
1994 $102,799 -0-
Sal N. Cincotta 1996 $ 60,637 -0-
Former President, CEO 1995 $157,611 -0-
1994 $142,921 -0-
In December 1995, in conjunction with the Company's restructuring and profit
improvement plan, the board of directors placed Mr. Cincotta on an indefinite
leave of absence from the Company. In January 1996, Robert H. Cutler was elected
Chairman and in February 1996 was elected Interim Chief Executive Officer. On
April 3, 1996, the Board of Directors approved a resolution to terminate Mr.
Cincotta's contract. Mr. Cincotta was provided formal notice of the board of
directors decision on that day and payments under his contract terminated on May
3, 1996. Mr Cincotta resigned as an officer and a director of the Company on May
3, 1996. Mr. Cutler was elected Chief Executive Officer in June 1996. He
currently receives no compensation other than Board of the Directors fees for
his services as Chief Executive Officer.
Mr. Erwin joined the company in August 1993. The Company, on August 30, 1993,
entered into a three-year Employment Agreement with Mr. John Erwin, pursuant to
which he serves as Senior Vice President of the Company. Mr. Erwin's contract
was canceled by mutual agreement in March 1996. In November 1996, Mr. Erwin was
elected President and Chief Operating Officer.
Page 6 - PROXY STATEMENT
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Year
<S> <C> <C> <C> <C> <C>
Potential Realizable Value
at Assumed Annual Rates
Number of % of Total Options of Stock Price Appreciation
Securities Underlying Granted to Employee Exercise Expiration Five Year Option Term (2)
Name Options Granted (1) In Fiscal Year Price Date 5% 10%
- ------------- --------------------- ------------------- -------- ---------- --------- ---------
John D. Erwin 100,000 35.7% $ 0.50 11/20/02 63,814 80,525
</TABLE>
(1) Each of the options reflected in this table was granted
pursuant to Arrow Transportation Co.'s 1992 Non - Statutory
Stock Option Plan. The exercise price of each option is equal
to the fair market value of the Company's Common Stock on the
date of grant. The options have a 5 year term and vest over a
period of four years.
(2) These assumed rates of appreciation are provided in order to
comply with the requirements of the SEC and do not represent
the Company's expectation as to the actual rate of
appreciation of the Common Stock. These gains are based on
assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options were granted over the
full option term. The actual value of the options will depend
on the performance of the Common Stock and may be greater or
less than the amounts shown.
<TABLE>
<CAPTION>
Year - End Options Values
<S> <C> <C> <C> <C>
Value of Unexercised
Number of Unexercised In - The - Money Options
Options at Fiscal Year - End at Fiscal Year End
---------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------- ----------- ------------- ----------- -------------
John D. Erwin 65,000 35,000 0 0
</TABLE>
Stock Option Plan
- -----------------
Under the Company's 1992 Incentive and Non-Statutory Stock Option Plan (the
"Plan"), 350,000 shares of Common Stock are reserved for issuance upon exercise
of stock options. The Plan is designed as a means to retain and motivate key
employees, and to provide incentives or compensation to certain other
non-employees, including the independent directors of the Company. The Board of
Directors administers and interprets the Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers and
non-employee directors.
Page 7 - PROXY STATEMENT
<PAGE>
The Plan provides for the granting of both incentive stock options (as defined
in Section 422 of the Internal Revenue Code) and non-statutory stock options.
Options are granted under the Plan on such terms and at such prices as
determined by the Board of Directors, except that the per share exercise price
of incentive stock options cannot be less than the fair market value of the
Common Stock on the date of grant. Each option is exercisable after the period
or periods specified in the option agreement, but no option may be exercisable
after the expiration of ten years from the date of grant. Options granted under
the Plan are not transferable other than by will or by the laws of descent and
distribution.
STOCK PRICE PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative total shareholder
return on the Company's Common Stock with the Nasdaq Stock Market (U.S.) Index
and the Nasdaq Trucking and Transportation Index. This graph assumes that $100
was invested on July 22,1993, the date of the Company's initial public offering,
in the Company's Common Stock and in the other indices, and that all dividends
were reinvested. The stock price performance shown below is not necessarily
indicative of future price performance.
COMPARISON OF 41 MONTH CUMULATIVE TOTAL RETURN*
AMONG ARROW TRANSPORTATION CO., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ TRUCK & TRANSPORTATION INDEX
In printed document chart was inserted here. The plot points follow.
7/22/93 12/93 12/94 12/95 12/96
------- ----- ----- ----- -----
ARROW TRANSPORTAION CO. 100 135 84 23 10
NASDAQ STOCK MARKET-US 100 111 109 153 189
NASDAQ TRUCKING AND TRANSPORTAION 100 109 99 116 128
* $100 INVESTED ON 07/22/93 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
Page 8 - PROXY STATEMENT
<PAGE>
The stock price performance graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Acts, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the Acts.
RELATED PARTY TRANSACTIONS
- --------------------------
Messrs. Robert Cutler, James Cutler, Jr. and Sal Cincotta entered into a
shareholders agreement to provide that (i) Mr. Cincotta will have a right of
first refusal to purchase any shares sold by either Robert Cutler or James
Cutler, Jr. and (ii) Mr. Cincotta and Messrs. Robert Cutler and James Cutler,
Jr. will each have co-scale rights in the event of a sale of shares by the
other, unless such sale is made pursuant to Rule 144.
In January 1997, the Company entered a loan agreement ("the Agreement") with the
holder of the Company's preferred stock (the "Lender"). The Lender has agreed to
advance funds to the Company at the Company's request. The principal balance of
all funds advanced by the Lender shall bear interest at the rate of 10%, and all
amounts loaned under the Agreement (including interest) shall be payable within
ten days of written demand by Lender.
The Company borrowed $100,000 from the Lender in January 1997.
In May 1996, Mr. Thomas Taylor purchased 50,000 unregistered shares of Class A
convertible preferred stock with a par value of $5.00 per share under a
Preferred Stock Purchase and Option Agreement ("the Agreement"). The Agreement
includes an option to purchase an additional 50,000 shares of Class A
convertible preferred stock at an exercise price of $5.00 per share. The option
expires on June 30, 2001. Each share of preferred stock is convertible at any
time, at the option of the holder, into ten shares of the Company's common
stock. The preferred stock bears a 7% annual dividend, payable each May at the
Company's option either in cash or in additional shares of preferred stock. The
preferred stock will be entitled to vote on an as-converted basis, and to a
preference on any liquidation of the company.
PROPOSAL 2
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE
-------------------------------------------------------
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE YEAR ENDED
-------------------------------------------------------
DECEMBER 31, 1997
-----------------
The Board of Directors has selected the firm of Deloitte & Touche LLP to conduct
an audit in accordance with generally accepted accounting standards of the
Company's consolidated financial statements for the fiscal year ending December
31, 1997. A representative of that firm is expected to be present at the annual
meeting to respond to appropriate questions and will be given an opportunity to
make a statement if he or she so desires. Neither the firm nor any of the
Page 9 - PROXY STATEMENT
<PAGE>
partners has any direct financial interest in the Company or any of its
subsidiaries as independent auditors. This selection is being submitted for
ratification at the meeting. If not ratified, this selection will be
reconsidered by the Board, although the Board of Directors will not be required
to select different independent auditors for the Company. Deloitte & Touche LLP
has served the Company as its independent auditors since its inception, and has
served as independent auditors for its subsidiary, Arrow Transportation Co. of
Delaware, since 1988.
The Board of Directors unanimously recommend a vote for this proposal.
OTHER INFORMATION
-----------------
The 1996 annual report of the company (Form 10-K) for the fiscal year ended
December 31, 1996 was mailed to the stockholders prior to or together with the
mailing of this Proxy Statement. Stockholders who did not receive a copy of the
1996 annual report with their Proxy Statement may obtain a copy by writing to or
calling William J. Stanners, Jr., Secretary, Arrow Transportation Co., 10145 N.
Portland Road, Portland, Oregon 97203. His telephone number is (503) 286-3661.
SHAREHOLDERS' PROPOSALS
-----------------------
Proposals which shareholders intend to present at the 1998 Annual Meeting of
Shareholders must be received by the Company no later than November 30, 1997, to
be eligible for inclusion in the proxy material for that meeting.
OTHER BUSINESS
--------------
As of the date of this Proxy Statement, management knows of no other business
which will be presented for action at the meeting. If any other business
requiring a vote of the stockholders should come before the meeting, the persons
named in the enclosed proxy form will vote or refrain from voting in accordance
with their best judgment.
By order of the Board of Directors:
/s/ William J. Stanners, Jr.
-----------------------------------
William J. Stanners, Jr., Secretary
Portland, Oregon
Dated: April 30, 1997
Page 10 - PROXY STATEMENT
<PAGE>
