<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
Consolidated Freightways Corporation
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(Name of Registrant as Specified In Its Charter)
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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(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:
<PAGE>
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NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1997
[LOGO OF CONSOLIDATED FREIGHTWAYS CORPORATION]
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<PAGE>
[LOGO OF CONSOLIDATED FREIGHTWAYS CORPORATION]
175 Linfield Drive Telephone: 415/326-1700
Menlo Park, California 94025
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, May 12, 1997
10:00 A.M., Pacific Time
Hyatt Rickey's in Palo Alto, 4219 El Camino Real, Palo Alto, California
FELLOW SHAREHOLDER:
The Annual Meeting of Shareholders of the Company will be held at 10:00 A.M.,
Pacific Time, on Monday, May 12, 1997 to:
1. Elect three Group 1 directors for a three-year term.
2. Transact any other business properly brought before the meeting.
Shareholders of record at the close of business on March 17, 1997, 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,
/s/ MARYLA R. BOONSTOPPEL
MARYLA R. BOONSTOPPEL
Vice President and Secretary
April 1, 1997
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
175 Linfield Drive
Menlo Park, California 94025
Telephone: 415/326-1700
PROXY STATEMENT
April 1, 1997
The Annual Meeting of Shareholders of Consolidated Freightways Corporation
(the "Company") will be held on May 12, 1997. Shareholders of record at the
close of business on March 17, 1997 will be entitled to vote at the meeting.
This proxy statement and accompanying proxy are first being sent to
shareholders on or about April 1, 1997.
NEW INDEPENDENT COMPANY
On December 2, 1996, Consolidated Freightways, Inc. (renamed CNF
Transportation Inc., and referred to in this proxy statement as "CNF") made a
distribution ("Distribution") to its shareholders of all shares of the
Company. The Company thereby became an independent, publicly held company. The
Company is a full service trucking company, whose subsidiaries compete
primarily in the North American less-than-truckload segment of the general
freight industry.
BOARD OF DIRECTORS' RECOMMENDATION
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 three nominees for directors
described below.
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 favor of the three directors nominated. The Board of
Directors does not know of any other matters to be presented at the meeting.
If any other matters are properly presented, the persons named on the
accompanying proxy will vote according to their best judgment.
VOTING REQUIREMENTS
The holders of a majority of the outstanding shares of Common Stock of the
Company must be represented in person or by proxy at the meeting to establish
a quorum for action at the meeting. The three 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. Abstentions and "non-votes" are
counted as present in determining whether the quorum requirement is satisfied.
They have the same effect as votes against proposals presented to shareholders
other than election of directors. In the election of directors, "non-votes"
will be disregarded and have no effect on the outcome of the vote. A "non-
vote" occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
<PAGE>
VOTING SHARES OUTSTANDING
At the close of business on March 17, 1997, the record date for the Annual
Meeting, there were outstanding and entitled to vote 22,025,323 shares of
Common Stock. Each share of Common Stock has the right to one non-cumulative
vote.
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.
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
Pursuant to the Bylaws, the Board of Directors of the Company has determined
that the number of Directors of the Company shall be nine. Three directors are
elected each year.
The following persons are the nominees of the Board of Directors for
election as Group 1 directors to serve for a three-year term until the Annual
Meeting of Shareholders to be held in the year 2000 and until their successors
are duly elected and qualified:
W. Roger Curry
G. Robert Evans
James B. Malloy
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. The Board of Directors knows of no
reason why any nominee should be unable or unwilling to serve.
The Company has three groups of directors, each of which is elected for a
three-year term. Group 2 directors will be elected in 1998 and Group 3
directors will be elected in 1999. All directors were previously elected by
CNF as the sole shareholder prior to the Distribution.
NOMINEES WITH TERMS EXPIRING IN 2000
W. ROGER CURRY -- age 58
President and Chief Executive Officer of the Company since December 2, 1996.
He also served as President and Chief Executive Officer of the Company's
trucking subsidiary, Consolidated Freightways Corporation of Delaware, since
July 1994. He served as a Senior Vice President of CNF (a diversified
transportation company), from 1986 to December 1996 and as President of CNF's
subsidiary, Emery Air Freight Corporation (an air freight company), from 1991
to July 1994.
G. ROBERT EVANS -- age 65
Chairman of the Board of Material Sciences Corporation (a developer of
materials and technologies for emerging markets) since 1991. He is a director
of Fibreboard Corporation and Swift Energy Company. Mr. Evans is Chairman of
the Company's Audit Committee.
2
<PAGE>
JAMES B. MALLOY -- age 69
He served as President and Chief Executive Officer of Jefferson Smurfit
Corporation and its affiliate, Container Corporation of America, (integrated
multinational paper and packaging manufacturers) from 1980 to 1993. Mr. Malloy
is a director of Mercantile Bancorporation and The Jefferson Smurfit Group
plc. He is a member of the Company's Compensation Committee.
DIRECTORS WITH TERMS EXPIRING IN 1998
PAUL B. GUENTHER -- age 56
Retired President of PaineWebber Group, Inc. (a full service securities
firm). He served as President of PaineWebber Group, Inc. from 1994 to 1995 and
President of PaineWebber Incorporated (a full service securities firm) from
1988 to 1995. Mr. Guenther is a member of the Company's Audit Committee.
J. FRANK LEACH -- age 76
Partner of Sequoia Associates (a private investment firm) since 1982. He is
Chairman of the Board of Acme Fixtures and Casework, Inc., and a director of
the Clayton Group, Inc., Material Sciences Corporation, Basic American Foods,
Inc., Newell Industrial Corporation, Champion Road Machinery Limited and
Golden Valley Produce, Inc. Mr. Leach is Chairman of the Company's
Compensation Committee.
WILLIAM D. WALSH -- age 66
Partner of Sequoia Associates (a private investment firm) since 1982. He is
Chairman of the Board of Champion Road Machinery Limited, the Clayton Group,
Inc., Newell Manufacturing Corporation, Newell Industrial Corporation, Golden
Valley Produce LLC, and a director of Basic Vegetable Products, Inc., Newcourt
Credit Group Inc., National Education Corporation, URS Corporation, and Crown
Vantage, Inc. Mr. Walsh is Chairman of the Board of the Company and a member
of the Company's Audit Committee.
DIRECTORS WITH TERMS EXPIRING IN 1999
ROBERT W. HATCH -- age 58
Chairman and Chief Executive Officer of Cereal Ingredients, Inc. (a
specialty ingredient manufacturer and laboratory, providing fat-free and high
fiber products) since 1991. He also served as Chairman of the Board of
Chromcraft Revington (a diversified furniture manufacturer) from 1992 to 1993,
and Chairman, President, and Chief Executive Officer of Mohasco (a
manufacturer of upholstered and case goods furniture) from 1989 to 1992. Mr.
Hatch is a member of the Company's Compensation Committee.
JOHN M. LILLIE -- age 60
Chairman of The Epic Team (a manufacturer of premium bicycles and
accessories) since 1996. He also served as President and Chief Operating
Officer of American Presidents Companies (a provider of global container
transportation) from 1990 to 1992, and as Chairman, President and Chief
Executive Officer of that company from 1992 to 1995. Mr. Lillie is a director
of Vons, Inc., The Gap, Inc., The Harper Group and Walker Interactive
Corporation. Mr. Lillie is a member of the Company's Audit Committee.
RAYMOND F. O'BRIEN -- age 74
Chairman Emeritus of CNF since 1995. He served as President of CNF (a
diversified transportation services company) from 1975 through 1988 and as
Chief Executive Officer of CNF from 1977 to 1988 and from 1990 to 1991. Mr.
O'Brien also served as Chairman of the Board of CNF from 1979 through 1995. He
is a director of Watkins-Johnson Company and Champion Road Machinery Limited.
Mr. O'Brien is a member of Company's Compensation Committee.
3
<PAGE>
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock, as of February 28, 1997, by the directors, the six
most highly compensated executive officers and by the directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
- ------------------------ ----------------------- ----------
<S> <C> <C>
Patrick H. Blake............................ 150,377 Common *
W. Roger Curry.............................. 311,736 Common 1.40%
G. Robert Evans............................. 21,768 Common *
Paul B. Guenther............................ 40,000 Common *
Robert W. Hatch............................. 21,500 Common *
J. Frank Leach.............................. 32,000 Common *
John M. Lillie.............................. 30,000 Common *
James B. Malloy............................. 20,000 Common *
David F. Morrison........................... 150,156 Common *
Raymond F. O'Brien.......................... 45,145 Common *
Stephen D. Richards......................... 125,457 Common *
Phillip W. Seeley........................... 9,674 Common *
William D. Walsh............................ 225,796 Common 1.02%
Robert E. Wrightson......................... 125,371 Common *
All directors and executive officers as a
group (14 persons).......................... 1,308,980 Common 5.69%
</TABLE>
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* 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 spouse). The shares shown
include awards of restricted stock made in connection with the
Distribution pursuant to the Company's 1996 Stock Option and Incentive
Plan, as follows: 300,000 shares to Mr. Curry, 150,000 shares each to
Messrs. Blake and Morrison, 125,000 shares each to Messrs. Richards, Walsh
and Wrightson, and 20,000 shares each to the remaining persons named,
except Mr. Seeley. Mr. Seeley resigned from the Company on December 28,
1996, and forfeited his restricted stock award. Shares will not be issued
until restrictions lapse at which time the holders will have the right to
vote such stock. No restrictions have yet lapsed.
(2) The percent is calculated based on shares of Common Stock outstanding on
February 28, 1997, except that restricted stock is deemed outstanding for
the purpose of calculating the percentage of outstanding securities owned
by a person, but is not deemed outstanding for calculating the percentage
owned by another person.
4
<PAGE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 1996, the Board of Directors held one meeting, which was attended by
all of the incumbent directors.
The Board of Directors has standing Audit and Compensation Committees which
were formed at the time of the Distribution on December 2, 1996. The
Compensation Committee held one meeting in 1996. All Committee members
attended. The Audit Committee did not meet in 1996.
AUDIT COMMITTEE: The Audit Committee recommends to the Board of Directors
the appointment of independent public accountants to perform the audit of the
Company's accounting records and authorizes the performance of services by the
accountants so appointed. The Committee reviews the annual audit of the
Company by the independent public accountants, 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 G. Robert Evans--Chairman, Paul B. Guenther, John M. Lillie and
William D. Walsh.
COMPENSATION COMMITTEE: The Compensation Committee recommends to the Board
the salaries and other compensation of the officers of the Company. The
Committee determines the compensation policies and programs for officers and
key personnel and incentive compensation for employees of the Company and its
domestic subsidiaries. It oversees the administration of the Company's short-
term and long-term incentive compensation plans and grants awards under the
Company's 1996 Stock Option and Incentive Plan. The Committee also oversees
the administration of the retirement and benefit plans of the Company and its
domestic subsidiaries for non-contractual employees. The members of the
Compensation Committee are J. Frank Leach--Chairman, Robert W. Hatch, James B.
Malloy and Raymond F. O'Brien.
COMPENSATION OF DIRECTORS
During 1996, each non-employee director was paid a meeting fee of $1,250. In
addition, a restricted stock award of 20,000 shares of the Company's Common
Stock was made to each non-employee director on December 2, 1996, except the
Chairman of the Board who received a restricted stock award of 125,000 shares
of the Company's Common Stock. Awards are restricted and subject to forfeiture
until continued service and stock price appreciation requirements are met.
One-third of the award vests if the director serves the Company for one year
from the grant date and the Company's Common Stock thereafter trades for ten
consecutive trading days at an average price that is 20% higher than the base
price. The base price is $7.475, representing the average closing price of the
Common Stock over the first five trading days as a publicly held company. Each
additional one-third of the award vests based on two and three years of
service and thereafter the stock trades at 40% and 60% above the base price,
respectively. Prior to vesting, awards are forfeited upon voluntary
termination of service or termination for cause, and within one year from
termination because of death or disability or termination of service other
than for cause. All awards will be forfeited on December 2, 2001 if the
required stock price appreciation has not been achieved.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the next five most highly
compensated officers ("the Named Executives") for the three years ended
December 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION(4)
---------------------------------- ---------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) ($)(5) (#)(6) ($)(7)
- ------------------ ---- -------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W.R. CURRY(1)........... 1996 $412,048 -- $73,348 $2,242,500 35,526 $5,478
President & Chief 1995 412,048 -- 71,958 -- 35,526 6,667
Executive Officer 1994 363,944 419,740 83,648 -- 124,786 10,455
P.H. BLAKE.............. 1996 231,764 -- 847 1,121,250 9,474 2,707
Exec. Vice President 1995 231,764 -- 1,134 -- 9,474 3,356
Operations 1994 193,022 -- 27,711 -- 37,954 2,632
D.F. MORRISON (1)....... 1996 211,510 57,959 1,009 1,121,250 8,882 2,783
Exec. Vice President 1995 187,564 5,383 -- -- 7,697 3,031
& Chief Fin. Officer 1994 175,480 95,216 -- -- 7,460 2,980
S.D. RICHARDS (1)....... 1996 199,992 -- 47,370 934,375 5,921 3,114
Senior Vice President 1995 181,372 5,136 -- -- -- 3,187
& General Counsel 1994 164,872 52,308 -- -- -- 3,717
P.W. SEELEY (1) (7)..... 1996 250,692 -- 710 934,375 9,474 66,569
Exec. Vice President 1995 250,692 -- 50,551 -- 9,474 3,456
Sales and Marketing 1994 230,940 125,246 153 ---- 41,447 3,674
R.E. WRIGHTSON (1)...... 1996 234,884 -- 18,797 934,375 9,474 3,396
Senior Vice President 1995 234,884 -- 18,443 -- 9,474 4,433
& Controller 1994 216,395 117,358 14,383 -- 40,026 5,081
</TABLE>
- -------
(1) Mr. Curry served as President and CEO of Emery Worldwide, a subsidiary of
CNF, to July, 1994; Mr. Morrison served as Vice President and Treasurer of
CNF to September, 1996; Mr. Richards served as Deputy General Counsel of
CNF to September, 1995; Mr. Seeley served as Vice President-Administration
and Technology of CNF to July, 1994; and Mr. Wrightson served as Vice
President and Controller of CNF to July, 1994. Compensation for such
periods was paid by CNF.
(2) The amounts shown in this column reflect payments under short-term
incentive compensation plans in which all regular, full-time, non-
contractual employees of CNF and the Company were eligible to participate.
(3) Includes: (a) relocation expense of $27,346 in 1994 for Mr. Blake,
relocation expense of $49,900 in 1995 for Mr. Seeley and relocation
expense of $46,354 in 1996 for Mr. Richards; (b) interest earned and
deferred under CNF's long-term incentive plan equal to $73,348, $71,958
and $56,121 in 1996, 1995, 1994, respectively, for Mr. Curry; $202, $197
and $153 in 1996, 1995 and 1994, respectively, for Mr. Seeley; and
$18,797, $18,443, and $14,383 in 1996, 1995 and 1994, respectively, for
Mr. Wrightson; and (c) above market deferred compensation interest equal
to $27,527 for Mr. Curry in 1994; $847, $1,134 and $365 for Mr. Blake in
1996, 1995 and 1994, respectively; $1,009 for Mr. Morrison in 1996; $508
and $454 for Mr. Seeley in 1996 and 1995, respectively, and $1,016 for Mr.
Richards in 1996.
4) There were no long-term incentive payouts in 1996, 1995 or 1994.
6
<PAGE>
(5) The following restricted stock awards were made on December 2, 1996, under
the Company's Stock Option and Incentive Plan: Mr. Curry, 300,000 shares;
Mr. Blake and Mr. Morrison, 150,000 shares each; and Mr. Richards, Mr.
Seeley and Mr. Wrightson, 125,000 shares each. The dollar amount was
calculated by multiplying the number of restricted stock shares awarded by
$7.475, representing the average closing price of the Company's Common
Stock over the first five trading days as a publicly held company.
Dividends, if any, will be credited on the restricted share awards. See
the preceding "Compensation of Directors" for the vesting and forfeiture
provisions of the grants. As of December 31, 1996, the value of these
shares was: Mr. Curry, $2,662,500; Mr. Blake, $1,331,250; Mr. Morrison,
$1,331,250; Mr. Richards, $1,109,375; and Mr. Wrightson, $1,109,375. Mr.
Seeley forfeited his shares with his resignation, effective December 28,
1996.
The Company's 1996 Stock Option and Incentive Plan provides that all
restrictions on awards under the Plan will lapse upon a change in control.
However, the Compensation Committee may decide to revoke this provision at
any time prior to the change in control. Generally, a change in control
occurs if: (a) someone becomes the beneficial owner of more than 50% of the
voting power of the Company; (b) over two consecutive years, directors in
office at the beginning of such period and new directors approved by at
least a two-thirds vote of the directors then still in office cease to be
at least a majority of the directors of the Company; (c) the shareholders
approve a merger under which voting securities of the Company would
represent less than 50% of the combined voting power of the surviving
entity; or (d) the shareholders approve a plan of liquidation.
(6) Represents CNF stock options granted to the Named Executives by CNF prior
to the Distribution.
(7) Amounts shown for 1996 in this column include: (a) payments for taxable
group life insurance on behalf of Messrs. Curry, Blake, Morrison,
Richards, Seeley, and Wrightson, equal to $2,628, $157, $233, $564, $382
and $846 and; (b) employer contributions to the 401(k) plan equal to
$2,250 for each of the Named Executives; (c) $63,637 for Mr. Seeley
represents final compensation for 1996 vacation and previously accrued
vacation time payable as a result of Mr. Seeley's resignation from the
Company, effective December 28, 1996; and (d) Directors' fees for serving
on Boards of CNF subsidiaries and on the CNF executive administrative
committee.
7
<PAGE>
II. OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS VALUATION
----------------------------------------------------- --------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED RATES
OF STOCK PRICE
NUMBERS OF EXERCISE APPRECIATION FOR REALIZED
SECURITIES % OF TOTAL OPTIONS OR BASE OPTION TERM(2) VALUE(3)
UNDERLYING GRANTED TO EMPLOYEES PRICE EXPIRATION ----------------- --------
NAME OPTIONS(2) IN FISCAL YEAR ($/SHARES) DATE(1) 5%($) 10%($) ($)
- ---- ---------- -------------------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
W.R. CURRY.............. 35,526 5.93% $18.05 12/02/99 $101,076 $212,252 $ --
P.H. BLAKE.............. 9,474 1.58% 18.05 03/02/97 -- -- 77,687
D.F. MORRISON........... 8,882 1.48% 18.05 03/02/97 -- -- 57,733
S.D. RICHARDS........... 5,921 0.99% 18.05 03/02/97 -- -- 28,568
P.W. SEELEY............. 9,474 1.58% 18.05 03/02/97 -- -- 55,627
R.E. WRIGHTSON.......... 9,474 1.58% 18.05 12/09/99 26,955 56,602 --
</TABLE>
- -------
(1) No SARs were granted in 1996. The options were granted under CNF's Stock
Option Plan prior to the Distribution. As part of the Distribution, stock
options granted to Messrs. Blake, Morrison, Richards and Seeley became
fully vested and were required to be exercised within 90 days of the
Distribution. As part of their severance from CNF, Messrs. Curry and
Wrightson were given three years to exercise their CNF options under the
terms of the CNF Stock Option Plan.
(2) Options granted to Messrs. Curry and Wrightson are valued based upon
assumed 5% and 10% annualized increases over grant price, which was the
market value of the stock on the date of the grant adjusted for the
Distribution.
(3) All options were exercised on or prior to March 2, 1997. Amounts indicate
actual value realized.
8
<PAGE>
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table provides information on option/SAR exercises in 1996 by
the Named Executives and the value of such officers' unexercised options/SARs
at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FY-END #(1) FY-END ($)(1)(2)
VALUE -------------- ------------------
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- -------- -------------- ------------------
<S> <C> <C> <C> <C>
W. R. CURRY......... -- $ -- 415,898/35,526 $2,780,315/149,209
P.H. BLAKE.......... -- -- 56,902/0 175,912/0
D.F. MORRISON....... 8,421 112,516 31,087/0 152,667/0
S.D. RICHARDS....... 5,921 28,568 0/0 0/0
P.W. SEELEY......... 13,000 121,988 113,254/0 615,397/0
R.E. WRIGHTSON...... 5,000 62,500 82,090/9,474 419,010/39,791
</TABLE>
- --------
(1) At December 31, 1996, Mr. Curry had 391,479 exercisable options valued at
$2,525,940 and 24,419 exercisable SAR's valued at $254,375; and 35,526
unexercisable options valued at $149,209. Mr. Wrightson had 76,987
exercisable options valued at $351,235 and 5,103 exercisable SAR's valued
at $67,775; and 9,474 unexercised options valued at $34,791. The value of
unexercised stock options is based on the closing price of CNF Common
Stock of $22.25 on December 31, 1996.
(2) The SAR's were granted to Messrs. Curry, Seeley and Wrightson under CNF's
Incentive Compensation Stock Appreciation Right Plan (SAR Plan). Under the
SAR Plan, selected key employees were afforded the opportunity to convert
cash awards under CNF's short-term incentive compensation plans into SAR's
corresponding in value to CNF's Common Stock. The SAR's 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 SAR's was fixed as of that
date. Interest equivalents at the prime rate have been paid on outstanding
balances credited to participants since April 1, 1990. Payouts are made in
cash and commence upon a participant's prior election or termination of
employment. Subsequent to the Distribution, the Company assumed CNF's
obligations with respect to the SARs.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
One of the Compensation Committee's responsibilities is to determine the
compensation of executive officers. The Committee is composed of four non-
employee directors.
Compensation for the Company's executive officers prior to the Distribution
on December 2, 1996 was approved by the CNF Compensation Committee. CNF's
general compensation policy is to pay for performance, with a major portion of
total potential compensation at risk through short-term and long-term
incentive compensation.
The Company's Compensation Committee intends to continue this general
compensation philosophy and the compensation policies discussed below. During
1997, the Committee will reassess the Company's compensation program and
policies with the assistance of an independent compensation consultant.
The executive compensation program consists of three key elements: salary,
annual cash bonus and long-term incentives. In 1995, CNF engaged an
independent compensation consultant to reassess the competitiveness of its
compensation programs for senior management, including the executive officers
of the Company. As part of this study, the consultant was asked to analyze and
compare CNF's base salaries, annual bonuses and long-term incentive awards
with competitive practices and levels. The consultant concluded that, taken
together, the elements of the CNF's compensation package deliver pay
opportunity that is situated well within competitive norms for base salary and
annual bonuses. The consultant also concluded that the long-term incentive
compensation was at the low end of the competitive range.
BASE SALARY
For 1996, the CNF Compensation Committee sought to pay base salaries that
were competitive with those of other companies in the freight transportation
industry, taking into account CNF's size compared to those companies. It
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
executive salaries were generally competitive.
No salary increases were granted to the Named Executives in 1996, except Mr.
Morrison. In his prior position, as Vice President and Treasurer of CNF, the
CNF Compensation Committee approved a merit increase on January 1, 1996. The
Company's Compensation Committee approved an additional increase in salary
effective December 1, 1996, when he was promoted to Executive Vice President
and Chief Financial Officer of the Company, in recognition of his increased
responsibilities and new position.
SHORT-TERM INCENTIVE COMPENSATION
The CNF Compensation Committee delegated to the Chief Executive Officer and
other executive officers the responsibility and authority to design and
administer CNF's short-term incentive plans. These plans provide for annual
cash bonuses to regular, full-time, non-contractual employees.
At the end of the year, each major subsidiary develops goals which reflect
its business objectives for the following year. These goals represent
measurable performance objectives based on such criteria as profits, revenue,
returns on equity, assets or capital, expenses, cash flow or service. The
final incentive compensation plans are reviewed and approved by the CNF
Compensation Committee.
Upon attainment of the established performance goals, participants may
receive incentive compensation based on a percentage of base salary (the
participant's "participation factor"), with the opportunity to increase that
percentage for performance in excess of the stated goals. The participation
factors were 50% of salary for Mr. Curry and 35% of salary for the other Named
Executives in 1996.
10
<PAGE>
The Named Executives, except Mr. Morrison, participated in the Company's
plan which was based on the Company's pre-incentive operating income. Since
Mr. Morrison then worked for CNF, he participated in the CNF plan which
generally represented a compilation of the profit goals of all of CNF's major
subsidiaries, including the Company. Officers participating in the Company's
plan also had the opportunity to be paid a bonus of 5% of salary based on
improvement in accounts receivable.
Since performance objectives were not attained, no bonuses were paid in 1996
to the Named Executives participating in the Company's incentive compensation
plan. As a participant in the CNF incentive compensation plan, Mr. Morrison
received a bonus of 27% of his salary, as shown in the preceding "Summary
Compensation Table".
LONG-TERM INCENTIVE COMPENSATION
CNF believes that executives should have a large stake in the risks and
rewards of long-term ownership of CNF. The Stock Option Plan of 1988 provides
for the granting of options to purchase shares of CNF's Common Stock to key
employees of CNF and its subsidiaries.
As part of the 1995 engagement of the compensation consultant referred to
earlier, the consultant was asked to review various stock option allocation
methodologies and to recommend a formula appropriate for CNF 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 CNF. After reviewing information and suggestions provided by the
consultant and adjusting for individual factors, the CNF Compensation
Committee granted options to officers of CNF and its subsidiaries, including
78,751 shares to the Named Executives, effective July 1, 1996 as shown in the
preceding "Option/SAR Grants Table". As part of the Distribution, the CNF
Compensation Committee waived the vesting requirement of continued employment
for one year with CNF. However, the period for exercising these options and
options previously granted by CNF to the Named Executives was shortened to
March 2, 1997, except for Messrs. Curry and Wrightson. Pursuant to a severance
agreement with CNF, the date by which their options must be exercised was
accelerated to on or before December 2, 1999.
In order to bring CNF's long-term incentive compensation to competitive
levels, the compensation consultant recommended, and the CNF Compensation
Committee approved, the Return on Equity Plan for executives based on the
increase in CNF's shareholder equity over three years. As part of the
Distribution, the Named Executives forfeited the opportunity to earn such
bonuses.
Under the CNF Long-Term Incentive Plan of 1988 and its predecessor, the
Long-Term Incentive Plan of 1978, key employees of CNF and its subsidiaries,
including some of the Named Executives, have previously been awarded growth
units entitling them to certain cash benefits upon such units vesting and
appreciating in value. No such growth awards have been awarded since 1990.
Prior to the Distribution, the Board of Directors of the Company adopted and
CNF, as the sole shareholder of the Company, approved, the Company's 1996
Stock Option and Incentive Plan, effective as of the Distribution on December
2, 1996. The CNF Compensation Committee reviewed and approved the number of
shares to be made available under the plan, the initial grant of restricted
stock awards for the Company's executive officers and directors, and the
lapsing of restrictions and vesting of the restricted shares. In making its
determination, the CNF Compensation Committee obtained the advice of an
independent compensation consultant. This plan was adopted in lieu of the CNF
Stock Option Plan of 1988 and the CNF Return on Equity Plan as the sole long-
term incentive plan for the Company.
In determining the amount of the share awards, the CNF Compensation
Committee, with the advice of a compensation consultant, first determined that
the Stock Option and Incentive Plan should provide for awards of up to 15% of
the Company's outstanding Common Stock. Next, the Committee
11
<PAGE>
determined that approximately half the awards should be granted to officers
(including the Named Executives) and directors as the initial grant in order
to maximize the incentive for a return to profitability and rapid growth of
profits as soon as possible.
The Company's Compensation Committee reviewed and approved the
recommendation of the CNF Compensation Committee, and made the recommended
grants on December 2, 1996, the date of the Distribution. The grants were in
keeping with the general policy of pay for performance and the policy that an
even greater portion of the total potential compensation for officers
generally, and even more so for the Named Executives, should be tied to
performance. The grants were also consistent with the objective of aligning
the interests of officers with the long-term interests of the Company's
shareholders. The shares vest ratably over three years and are contingent upon
increases in the stock price over the average stock price during the first
five trading days after the Distribution. The restrictions and performance
measures are more fully described under the preceding discussion of
"Compensation of Directors".
The amount of share awards made was based on the principles that the
officers were the key executives who could return the Company to profitability
and thereafter grow profits, thereby benefitting the Company's shareholders,
and that the officers should have a significant incentive tied to an increase
in shareholder value reflecting the magnitude of the challenge in turning
around the Company. Allocation among officers was based on a judgment of the
relative contribution that would be made by the individual executives. The
awards to the Named Executives are disclosed in the preceding "Summary
Compensation Table".
CEO COMPENSATION
Like the other executive officers of the Company, Mr. Curry's 1996 salary
was approved by the CNF Compensation Committee taking into consideration
competitive salary data provided by CNF's independent consultant. He received
no salary increase in 1996 and earned no bonus under the short-term incentive
compensation plan.
Effective July 1, 1996, the CNF Committee also instituted a new annual bonus
program for operating company chief executives, with bonus payments tied to
the achievement of targeted operating ratios. Mr. Curry did not receive bonus
payments under the program.
As discussed earlier, the independent executive compensation consultant was
specifically asked to recommend a formula for stock option allocations.
Consistent with the recommended formula, Mr. Curry was awarded options for
shares having an aggregate exercise price of approximately one and one-half
times his annual salary.
The Company's Compensation Committee granted Mr. Curry a restricted stock
award on December 2, 1996 for 300,000 shares of the Company's Common Stock.
Mr. Curry was granted the largest share, of two times the next highest award,
based on the Committee's judgment of the relative importance of his position.
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 as of the end of the fiscal year (the "covered employees") in
excess of the statutory maximum of $1 million per covered employee. The
Company's Compensation Committee has adopted the general policy that, where
feasible, compensation paid to the covered employees should be structured 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.
12
<PAGE>
THE COMPENSATION COMMITTEE
<TABLE>
<S> <C>
J. Frank Leach, Chairman James B. Malloy
Robert W. Hatch Raymond F. O'Brien
</TABLE>
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.
Mr. O'Brien previously served as an officer of the Company's principal
operating subsidiary from 1962 to 1975. He subsequently served at various
times as President, Chief Executive Officer and Chairman of the Board of CNF
before retiring in 1995.
PERFORMANCE GRAPH
CONSOLIDATED FREIGHTWAYS CORPORATION, S & P MIDCAP 400 INDEX, AND
S & P SMALL CAP TRUCKING INDEX
The graph assumes that $100 was invested on November 13, 1996, the date on
which "when-issued" trading commenced in the Company's Common Stock, in each
of: the Company's Common Stock ("CFWY"), the S & P 400 Index and the S & P
Small Cap Trucking Index, and that dividends in the two indexes were
reinvested.
<TABLE>
<CAPTION>
S&P S&P
Measurement Period MIDCAP SMALL CAP
(Fiscal Year Covered) CFWY 400 INDEX TRUCK INDEX
------------------- ---------- --------- -----------
<S> <C> <C> <C>
Measurement Pt-11/13/96 $100 $100 $100
FYE 11/19/96 $117.857 $101.372 $100.866
FYE 11/26/96 $114.286 $102.211 $102.465
FYE 12/03/96 $101.786 $105.831 $102.749
FYE 12/17/96 $105.357 $106.115 $ 98.913
FYE 12/24/96 $116.071 $105.077 $100.66
FYE 12/31/96 $126.786 $107.506 $102.248
</TABLE>
13
<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 Pension Plan.
<TABLE>
<CAPTION>
AVERAGE FINAL TOTAL EARNINGS DURING YEARS OF PLAN PARTICIPATION
HIGHEST FIVE CONSECUTIVE YEARS --------------------------------------------
OF LAST TEN YEARS OF EMPLOYMENT 20 25 30 35
- ----------------------------------- 15 -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000......................... $ 46,834 $ 65,445 $ 84,056 $102,667 $121,278
$300,000......................... $ 70,334 $ 98,945 $127,056 $155,167 $183,278
$400,000......................... $ 94,834 $132,445 $170,056 $207,667 $245,278
$500,000......................... $118,834 $165,945 $213,056 $260,167 $307,278
$600,000......................... $142,834 $199,445 $256,056 $312,667 $369,278
$700,000......................... $166,834 $232,945 $299,056 $365,167 $431,278
$800,000......................... $190,834 $266,445 $342,056 $417,667 $493,278
</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"
shown in the preceding Summary Compensation Table. 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 $120,000 per year currently, and prevents pension
accruals for compensation in excess of $150,000 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 nonqualified plans.
As of December 31, 1996, Messrs. Curry, Blake, Morrison, Richards, Seeley
and Wrightson had approximately 28, 21, 10, 5, 23, and 29 years of plan
participation, respectively.
14
<PAGE>
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 14, 1997,
the only persons known to the Company to own beneficially an interest in 5% or
more of the shares of Common 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>
J.P. Morgan & Co., Incorporated................... 2,992,917 Common(1) 13.6%
60 Wall Street
New York, NY 10260
The Goldman Sachs Group, L.P. .................... 2,012,622 Common(2) 9.1%
and Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
FMR Corp. ........................................ 1,963,560 Common(3) 8.9%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
(1) J.P. Morgan & Co., Incorporated has sole voting power over 1,894,038
shares, shared voting power over 15,019 shares, sole dispositive power
over 2,971,423 shares and shared dispositive power over 20,344 shares.
(2) The Goldman Sachs Group, L.P. and Goldman Sachs & Co. have sole voting
power over 0 shares, shared voting power over 2,006,622 shares, sole
dispositive power over 0 shares and shared dispositive power over
2,006,622 shares.
(3) FMR Corp., through its subsidiaries Fidelity Management & Research Company
and Fidelity Management Trust Company, has sole voting power over 22,384
shares, shared voting power over 0 shares, sole dispositive power over
1,963,560 shares and shared dispositive power over 0 shares.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that, during 1996 its executive officers and directors
have complied with all Section 16 filing requirements.
CONFIDENTIAL VOTING
The Board of Directors has adopted a confidential voting policy. Under this
policy, 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.
15
<PAGE>
SUBMISSION OF SHAREHOLDER PROPOSALS
Under the rules of the Securities and Exchange Commission now in effect,
shareholder proposals intended for inclusion in next year's proxy statement
must be directed to the Corporate Secretary, Consolidated Freightways
Corporation, at 175 Linfield Drive, Menlo Park, California 94025, and must be
received by December 1, 1997.
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The report will be available for mailing after April 11, 1997.
Please direct your written request to the Corporate Secretary, Consolidated
Freightways Corporation, 175 Linfield Drive, Menlo Park, California 94025.
The expense of proxy solicitation will be paid by the Company. The
solicitation is being made by mail and may also be made by telephone,
facsimile, or personally by directors, officers, and regular employees of the
Company who will receive no extra compensation for their services. The Company
has engaged The Bank of New York to act as inspector of elections. The Company
does not expect to pay any compensation for the solicitation of proxies, but it
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 Common Stock.
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
/s/ MARYLA R. BOONSTOPPEL
MARYLA R. BOONSTOPPEL
Vice President and Secretary
April 1, 1997
16
<PAGE>
[LOGO OF RECYCLED PAPER]
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
of Consolidated Freightways Corporation
The undersigned appoints D.F. MORRISON, S.D. RICHARDS, W.D. WALSH and each
of them, the proxies of the undersigned, with full power of substitution, to
vote the stock of CONSOLIDATED FREIGHTWAYS CORPORATION, which the undersigned
may be entitled to vote at the Annual Meeting of Shareholders to be held on
Monday, May 12, 1997 at 10:00 A.M. or 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.
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.
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.
(Continued and to be signed on other side)
CONSOLIDATED FREIGHTWAYS CORPORATION
P.O. BOX 11313
NEW YORK, N.Y. 10203-0313
<PAGE>
The Board of Directors recommends a vote FOR the election of directors.
1. Election of three Group I directors for a three-year term
[_] FOR all nominees [_] WITHHOLD AUTHORITY [_] EXCEPTIONS*
listed below. to vote for all
nominees listed below.
Nominees: W. Roger Curry, G. Robert Evans, James B. Malloy
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and strike a line through that nominee's name.)
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.
Change of Address and/or
Comments Mark Here
Note: Please sign exactly as name appears
hereon. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full title
as such.
Dated ______________________________, 1997
Signature ________________________________
Signature _________________________________
Votes must be indicated
(X) in Black or Blue ink. [X]
Please Mark, Sign Date and Return the Proxy Card
Promptly Using the Enclosed Envelope.
