UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 6, 2005
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Date of Report (Date of earliest event reported)
CNF Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-5046 94-1444798
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
3240 Hillview Avenue, Palo Alto, California 94304
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(Address of principal executive offices)
(zip code)
Registrant's telephone number, including area code:
(650) 494-2900
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant
under any of the following provisions (see General Instruction A.2
below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
A. Changes to Compensation for David S. McClimon and Bryan M. Millican
In connection with the organizational alignment described below under
"Departure of Directors or Principal Officers; Elections of Directors;
Appointment of Principal Officers," on June 3, 2005, the Company's
Compensation Committee approved the following changes to the compensation
paid to David S. McClimon and Bryan M. Millican:
David S. McClimon
Senior Vice President, CNF Inc.
President, Con-Way Transportation Services, Inc.
1. Increase in annual base salary from $343,096 to $395,044.
2. Increase in target 2005 incentive compensation award from 60% to
75% of annual base salary (subject to a maximum equal to 150% of
annual base salary). Actual payout (i) to be determined based upon
actual 2005 pre-tax, pre-incentive income of Con-Way Transportation
Services, Inc. and (ii) to be prorated based upon 60% target award
for the period from January 1, 2005 until June 4, 2005, and 75%
target award for the period from June 5, 2005 through
December 31, 2005.
3. Grant of 15,000 stock options.
4. Target Value Management Plan award equal to 115% of annual base
salary for three-year cycles commencing after January 1, 2005.
Bryan M. Millican
Senior Vice President of Sales and Marketing, CNF Inc.
1. Increase in annual base salary from $268,112 to $295,000.
2. Increase in target 2005 incentive compensation award from 60% to
75% of annual base salary (subject to a maximum equal to 150% of
annual base salary). Actual payout to be pro rated and determined
based upon (i) 60% target award and actual 2005 pre-tax,
pre-incentive income of Con-Way Transportation Services, Inc.,
for the period from January 1, 2005 until June 4, 2005, and (ii)
75% target award and actual 2005 pre-tax, pre-incentive income of
CNF Inc., for the period from June 5, 2005 through
December 31, 2005, based on 75% factor.
3. Grant of 7,100 stock options.
4. Target Value Management Plan award equal to 115% of annual base
salary for three-year cycles commencing after January 1, 2005.
In addition, each of Mr. McClimon and Mr. Millican is entitled to receive
severance benefits under agreements to be entered into with the Company, and
Mr. McClimon is entitled to receive benefits under an agreement to be entered
into with Con-Way Transportation Services, Inc. These severance agreements
will replace the existing agreements that these officers have with the
Company and with Con-Way Transportation Services, Inc.
Each severance agreement with the Company will provide that if such officer's
employment is actually or constructively terminated within two years of a
change in control (as defined in the severance agreement) of the Company or
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 from the Company, 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 officer's average annual bonus over
the three years prior to the termination of employment; and (iii) life,
disability, health, dental, and accidental insurance benefits
for three years.
Mr. McClimon's severance agreement with Con-Way Transportation Services, Inc.
will provide generally that he will be entitled to receive from that company
the payments and benefits described above if his employment is actually or
constructively terminated with two years following a sale or other
disposition of Con-Way Transportation Services, Inc. by the Company.
B. Employment Agreement with John H. Williford
On April 25, 2005, the Company announced that John H. Williford would no
longer serve as President and Chief Executive Officer of Menlo Worldwide, LLC
or as Senior Vice President of the Company, but would continue to serve as an
advisor to the Company. The press release announcing these events was
attached to the Company's Report on Form 8-K that was filed on April 28,
2005.
On June 6, 2005, Mr. Williford entered into an Employment Agreement with the
Company, pursuant to which Mr. Williford has agreed to serve as an advisor to
the Company until January 6, 2006. The Employment Agreement is effective
as of June 4, 2005.
As compensation for his services, Mr. Williford is entitled (i) to receive an
annual base salary of $526,240; (ii) to participate in the incentive
compensation plans of Menlo Worldwide, LLC (for the period from January 1,
2005 until June 4, 2005) and of the Company (for the period from June 5, 2005
until December 31, 2005), with a target payout equal to 100% of his 2005
salary (i.e., performance at target levels under both plans would entitle Mr.
Williford to receive an aggregate payment under the two plans equal to his
2005 salary); and (iii) to receive certain other benefits, as described in
the Employment Agreement.
The Company also agreed to pay to Mr. Williford a lump sum payment equal to
$3,150,000 at the end of the term of the Agreement. Mr. Williford would
forfeit his right to this payment if he was to terminate the Employment
Agreement prior to the end of its term other than for good reason, or if he
breached his obligations under the Employment Agreement. These obligations
include non-solicitation of employees of the Company and its subsidiaries for
a period of one year, commencing on the date of the Employment Agreement.
Mr. Williford currently holds approximately 130,000 stock options and 86,500
restricted stock grants that are not vested. Under the terms of the
applicable award agreements, approximately 93,000 of the unvested stock
options and 55,500 shares of the unvested restricted stock will vest on or
before January 1, 2006, provided Mr. Williford remains an employee of the
Company. The balance of the unvested stock options and restricted stock
grants will be forfeited when the Employment Agreement terminates on January
6, 2006, unless such grants have vested pursuant to their terms for other
reasons (e.g., death, disability, change in control).
The Employment Agreement also provides that the Company's Board of Directors
may, in its sole discretion, release Mr. Williford from his obligations under
the Employment Agreement in order to obtain employment with another company,
provided that the Board determines that such other company does not compete
with the Company or its affiliates. If this were to occur, Mr. Williford
would be entitled to the lump sum payment of $3,150,000, but would forfeit
any other ongoing benefits available to him under the Employment Agreement.
A copy of the Employment Agreement is filed with this report as Exhibit
99.1 and is incorporated herein by reference. The foregoing description of
the Employment Agreement is qualified in its entirety by reference to such
exhibit.
C. Mortgage Subsidy for Kevin C. Schick
On January 24, 2005, Kevin C. Schick was appointed Senior Vice President and
Chief Financial Officer of the Company, effective March 31, 2005. On March
1, 2005, the Company's Compensation Committee approved Mr. Schick's
compensation, including an annual base salary of $310,000, a target incentive
compensation award equal to 75% of base salary, and stock option grants.
These events were reported in the Company's Reports on Form 8-K filed on
January 28, 2005 and March 4, 2005.
On June 3, 2005, the Company's Compensation Committee approved a mortgage
subsidy to be provided by the Company to Mr. Schick, who is relocating from
Michigan to California in connection with his promotion to Senior Vice
President and Chief Financial Officer. The mortage subsidy was established
for a period of six years, as follows:
Years 1 and 2 $ 8,000 per month
Years 3 and 4 $ 6,000 per month
Years 5 and 6 $ 4,000 per month
The mortgage subsidy will likely commence in 2006, at which time Mr. Schick
expects to acquire a residence in California. It is expected that the
mortgage subsidy will be paid annually in advance to Mr. Schick's mortgage
lender, on a present value basis. For example, in year 1 the Company will
pay to the mortgage lender the present value of 12 monthly payments of $8,000
each. The value of the mortgage subsidy will be includable in Mr. Schick's
gross income for tax purposes.
Item 1.02 Termination of a Material Definitive Agreement
A. Severance Agreement Between Con-Way Transportation Services, Inc. and
Douglas W. Stotlar
On June 3, 2005, the Severance Agreement dated March 1, 2005 between Con-Way
Transportation Services, Inc. and Douglas W. Stotlar was terminated, since
Mr. Stotlar is no longer employed by that company. The Severance Agreement
dated March 1, 2005 between the Company and Mr. Stotlar remains in effect.
B. Employment Agreement with Gerald L. Detter
On December 6, 2004, Gerald L. Detter retired from his position as President
and Chief Executive Officer of Con-Way Transportation Services, Inc. and
entered into an Employment Agreement with the Company, pursuant to which Mr.
Detter agreed to serve as an advisor to the Company until January 31, 2006.
These events were reported in, and a copy of the Employment Agreement was
filed as an exhibit to, the Company's Report on Form 8-K filed on December 8,
2004.
Mr. Detter subsequently elected to retire from the Company, effective May 31,
2005. Effective upon his retirement, Mr. Detter's obligation to serve as an
advisor ceased, as did the Company's obligation to pay Mr. Detter the salary
specified in the Employment Agreement.
In addition, effective upon Mr. Detter's retirement:
(1) under the terms of his restricted stock agreements with the Company,
all of his restricted stock grants that were unvested as of May 31,
2005 lapsed;
(2) under the terms of his stock option agreements with the Company, and
because he retired pursuant to the terms of the Company's defined
benefit pension plan, all of his outstanding stock options that were
unvested as of May 31, 2005 vested, and Mr. Detter will have a period
of three years following his retirement in which to exercise his
stock options;
(3) under the terms of the Company's incentive compensation plan, and
because he retired pursuant to the terms of the Company's defined
benefit pension plan, Mr. Detter is entitled to receive a pro rata
portion of the 2005 incentive compensation award payment (if any)
that he would have received had he remained employed by the Company
for all of 2005;
(4) under the terms of the Company's value management plan, and because
he retired pursuant to the terms of the Company's defined benefit
pension plan, Mr. Detter is entitled to receive, for each of the 2003
and 2004 value management award cycles, the payment (if any) called
for under the value management plan based on the performance of Con-
Way Transportation Services, Inc. from the beginning of the
applicable award cycle through the end of 2005; and
(5) under the terms of the Employment Agreement, Mr. Detter received
title to his Company automobile.
Item 5.02 Departure of Directors or Principal Officers; Elections of
Directors; Appointment of Principal Officers.
On June 3, 2005, the Company's Board of Directors approved an organizational
alignment. pursuant to which David S. McClimon was named Senior Vice
President of the Company and President of Con-Way Transportation Services,
Inc., and Bryan M. Millican was named Senior Vice President, Sales and
Marketing of the Company.
Mr. McClimon, 49, will have management responsibility for Con-Way
Transportation Services, Inc.'s three regional, less-than-truckload motor
carriers, Con-Way Central Express, Con-Way Southern Express and Con-Way
Western Express. He joined Con-Way Central Express as one of its first
employees in 1983 as an account manager in Cincinnati and has more than 25
years experience in transportation. Mr. McClimon is a graduate of Miami
University in Oxford, Ohio and will work from Con-Way's headquarters in Ann
Arbor, Michigan.
Mr. Millican, 55, will have overall responsibility for the Company's sales
performance, strategic sales planning and training, branding, marketing,
public relations and communications. Mr. Millican joined the Company in 1983
as general sales manager for Con-Way Central Express, and served as Executive
President of Sales and Marketing for Con-Way Transportation Services, Inc.
since 1997. He will be based at Con-Way headquarters in Ann Arbor, Michigan.
He is a graduate of the University of Waterloo in Ontario, Canada and holds
an MBA from the University of Western Ontario.
A copy of the press release announcing the organizational alignment is filed
with this report as Exhibit 99.2 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Description
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99.1 Employment Agreement with John H. Williford effective
June 4, 2005.
99.2 Press release dated June 6, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
CNF Inc.
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(Registrant)
June 6, 2005 /s/ Jennifer W. Pileggi
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Jennifer W. Pileggi
Senior Vice President,
General Counsel & Secretary