<PAGE>
================================================================================
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)
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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
MAY 11, 1998
[CONSOLIDATED FREIGHTWAYS LOGO APPEARS HERE]
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<PAGE>
CONSOLIDATED FREIGHTWAYS LOGO APPEARS HERE]
175 Linfield Drive Telephone: 650/326-1700
Menlo Park, California 94025
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, May 11, 1998
10:00 A.M., Pacific Time
The Stanford Park Hotel, 100 El Camino Real, Menlo Park, California
DEAR SHAREHOLDER:
The Annual Meeting of Shareholders of Consolidated Freightways Corporation
("the Company") will be held at 10:00 A.M., Pacific Time, on Monday, May 11,
1998 to:
1. Elect two Group 2 directors for a three-year term.
2. Transact any other business properly brought before the meeting and any
adjournment or postponement of the meeting.
Shareholders of record at the close of business on March 18, 1998, are
entitled to notice of and to vote at the meeting. A list of the shareholders
entitled to vote at the Annual Meeting will be open to examination by any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, at the offices of the Company, 175 Linfield Drive, Menlo Park, CA
94025, from May 1, 1998 until the date of the Annual Meeting.
Your vote is important. Whether or not you plan to attend, I urge you to
SIGN, DATE AND RETURN THE ENCLOSED 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. FITCH
MARYLA R. FITCH
Vice President and Secretary
March 30, 1998
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
175 Linfield Drive
Menlo Park, California 94025
Telephone: 650/326-1700
PROXY STATEMENT
The Annual Meeting of Shareholders of Consolidated Freightways Corporation
will be held on May 11, 1998. Shareholders of record at the close of business
on March 18, 1998 will be entitled to notice of and to vote at the meeting or
any adjournment or postponement of the meeting. This proxy statement and
accompanying proxy are first being sent to shareholders on or about March 30,
1998.
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 two 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 two 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 in 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 two 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.
VOTING SHARES OUTSTANDING
At the close of business on March 18, 1998, the record date for the Annual
Meeting, there were outstanding and entitled to vote 23,042,991 shares of
Common Stock. Each share of Common Stock has the right to one vote.
PROXY VOTING CONVENIENCE
You are encouraged to exercise your right to vote by returning to the
Company a properly executed proxy in the enclosed envelope, whether or not you
plan to attend the meeting. This will ensure that your votes are cast.
REVOCABILITY OF PROXIES
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; or (2) submit a later dated proxy, in either
case to the Secretary of the Company at the Company's principal office,
<PAGE>
175 Linfield Drive, Menlo Park, CA 94025; or (3) attend the meeting and vote
in person. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
IN MEMORIAM
It is with deep sorrow that the Board reports the death of J. Frank Leach on
August 5, 1997. Mr. Leach was a director since December 2, 1996 and Chairman
of the Compensation Committee of the Board of Directors. Mr. Leach had a long
and supportive association with the Company, having served as a director of
CNF Transportation Inc., former parent of the Company, for 18 years, as well
as President and Vice Chairman of the Board of that organization. Mr. Leach
will be particularly remembered for taking a leadership role in implementing a
creative and unprecedented stock ownership program for all of the Company's
employees.
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 eight. Two directors will
be elected this year; three directors will be elected in each of the following
two years.
The following persons are the nominees of the Board of Directors for election
as Group 2 directors to serve for a three-year term until the Annual Meeting
of Shareholders to be held in the year 2001 and until their successors are
duly elected and qualified:
Paul B. Guenther
William D. Walsh
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 either 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 3 directors will be elected in 1999 and Group 1
directors will be elected in the year 2000. Vacancies that occur prior to the
expiration of a three-year term may be filled by the remaining directors. All
directors have served as directors of the Company since December 2, 1996.
NOMINEES FOR TERMS EXPIRING IN 2001
PAUL B. GUENTHER -- age 57
Retired President of Paine Webber Group, Inc. (a full service securities
firm). He served as President of Paine Webber Group, Inc. from 1994 to 1995
and President of Paine Webber Incorporated (a full service securities firm)
from 1988 to 1995. Mr. Guenther is a member of the Company's Audit Committee.
WILLIAM D. WALSH -- age 67
Partner of Sequoia Associates (a private investment firm) since 1982. He is
Chairman of the Board of 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., URS
Corporation, Crown Vantage, Inc. and UNOVA, Inc. Mr. Walsh is Chairman of the
Board of the Company and a member of the Company's Compensation Committee.
2
<PAGE>
DIRECTORS FOR TERMS EXPIRING IN 1999
ROBERT W. HATCH -- age 59
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 Chairman of the Company's Compensation Committee.
JOHN M. LILLIE -- age 61
Chairman of The Epic Team (designs and distributes 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 The Gap, Inc., Circle International and Walker Interactive Corporation. Mr.
Lillie is a member of the Company's Audit Committee.
RAYMOND F. O'BRIEN -- age 75
Chairman Emeritus of CNF Transportation Inc. ("CNF") since 1995. He served
as President of CNF (a diversified transportation services company), the
former parent of the 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. Mr. O'Brien is a member of Company's
Compensation Committee.
DIRECTORS FOR TERMS EXPIRING IN 2000
W. ROGER CURRY -- age 59
President and Chief Executive Officer of the Company since December 2, 1996.
He has 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 66
Effective January 1, 1998, Mr. Evans retired as Chairman of Material
Sciences Corporation having held that position since 1991. Material Sciences
Corporation develops and commercializes continuously processed, coated
materials technologies. He remains a director of Material Sciences Corporation
and is a director of Swift Energy Company. Mr. Evans is Chairman of the
Company's Audit Committee.
JAMES B. MALLOY -- age 70
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.
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, 1998, by the directors, the five
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............................ 150,542 *
W. Roger Curry.............................. 311,919 1.36%
G. Robert Evans............................. 20,768 *
Paul B. Guenther............................ 40,000 *
Robert W. Hatch............................. 21,500 *
John M. Lillie.............................. 30,000 *
James B. Malloy............................. 21,000 *
David F. Morrison........................... 142,047 *
Raymond F. O'Brien.......................... 42,112 *
Stephen D. Richards......................... 125,621 *
William D. Walsh............................ 235,796 1.02%
Robert E. Wrightson......................... 125,536 *
All directors and executive officers as a
group (13 persons) ........................ 1,391,841 6.05%
</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 813,333 shares of restricted stock which remain
restricted and subject to forfeiture, including: 200,000 shares for Mr.
Curry, 100,000 shares each for Messrs. Blake and Morrison, 83,334 shares
each for Messrs. Richards and Wrightson, 83,333 shares for Mr. Walsh, and
13,333 shares each for the remaining persons named. Restricted shares are
not issued until restrictions lapse, at which time the holders will have
the right to vote such stock, unless receipt of the shares is deferred.
(2) The percent is calculated based on shares of Common Stock outstanding on
February 28, 1998, except that restricted stock subject to forfeiture 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. All restricted
stock is deemed outstanding for the purpose of calculating the percentage
of outstanding securities owned by all directors and executive officers as
a group.
4
<PAGE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 1997, the Board of Directors held four meetings. Each director
attended at least 75% of all the meetings of the Board and the Committees of
the Board on which he served.
The Board of Directors has standing Audit and Compensation Committees. The
Board does not have a standing Nominated Committee. The Audit Committee and
the Compensation Committee each held three meetings in 1997.
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 and John M. Lillie.
William D. Walsh was a member of the Audit Committee until August 1997, when
he was elected to the Compensation Committee to fill the vacancy left upon the
death of J. Frank Leach.
COMPENSATION COMMITTEE: The Compensation Committee approves 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 Robert W. Hatch--Chairman, James B. Malloy, Raymond
F. O'Brien and William D. Walsh.
COMPENSATION OF DIRECTORS
During 1997, non-employee directors were paid meeting fees of $1,000 for
each Board meeting attended and $500 for each Committee meeting attended. 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.
The shares vest and are issued over three years if the Company's Common
Stock trades for ten consecutive trading days at an average price that is 20%,
40%, and 60% higher than the base price after each anniversary date of the
grant, respectively. The base price is $7.475, representing the average
closing price of the Common Stock over the first five trading days after
becoming a publicly-held company on December 2, 1996. Prior to vesting, awards
are forfeited upon voluntary termination of service or termination for cause,
and within one year from termination because of death or disability or
termination of service other than for cause. Restrictions on these awards will
lapse upon a change in control. However, the Compensation Committee may decide
to revoke this provision at any time prior to the change in control.
Restricted stock awards entitle the person receiving the award to credit for
any dividends, but carry no voting rights until vested. All remaining awards
will be forfeited on December 2, 2001 if the required stock price appreciation
has not been achieved. The first one-third of these awards vested on December
16, 1997.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation of the
Company's chief executive officer and the next four most highly compensated
executive officers (the "Named Executives") for the three years ended December
31, 1997(1).
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ---------------- ALL OTHER
NAME AND PRINCIPAL RESTRICTED STOCK COMPENSATION
POSITIONS YEAR SALARY ($) BONUS ($) AWARDS ($) (3) ($) (4)
------------------ ---- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
W.R. Curry.............. 1997 412,048 225,417 -- 41,631
President, Chief 1996 412,048 -- 2,242,500 20,695
Executive Officer 1995 412,048 -- -- 31,121
and Director
P.H. BLAKE.............. 1997 231,764 126,790 -- 5,554
Executive Vice 1996 231,764 -- 1,121,250 3,554
President--Operations 1995 231,764 -- -- 4,490
D.F. MORRISON (2)....... 1997 231,764 126,790 -- 4,781
Executive Vice 1996 46,525 -- 1,121,250 1,058
President and 1995 -- -- -- --
Chief Financial Officer
S.D. RICHARDS (2)....... 1997 199,992 109,409 -- 7,112
Senior Vice President 1996 199,992 -- 934,375 50,484
and General Counsel 1995 65,382 -- -- 241
R.E. WRIGHTSON.......... 1997 234,884 128,497 -- 7,877
Senior Vice President 1996 234,884 -- 934,375 7,016
and Controller 1995 234,884 -- -- 10,061
</TABLE>
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(1) Prior to December 2,1996, the Company was a subsidiary of CNF
Transportation Inc. ("CNF") from which it was spun-off effective December
2, 1996 ("the spin-off'). The Table excludes compensation paid by CNF
prior to the spin-off.
(2) Mr. Morrison was compensated by CNF as its Vice President and Treasurer
until joining the Company in October 1996. Mr. Richards was compensated by
CNF as its Deputy General Counsel until joining the Company in September
1995. Only compensation for the partial year worked at the Company is
shown, including salary at an annual rate of $231,764 for Mr. Morrison and
$199,992 for Mr. Richards.
(3) The restricted stock awards have the same terms as restricted stock awards
made to directors. See "Compensation of Directors." The number and value
of the unvested, restricted stock awards, based upon the closing price of
the Company's Common Stock on December 31, 1997, were: Mr. Curry--200,000
shares, $2,725,000; Mr. Blake and Mr. Morrison--100,000 shares, $1,362,500
each; and Mr. Richards and Mr. Wrightson--83,334 shares, $1,135,426 each.
(4) For 1997, All Other Compensation consists of the following:
(a) Life Insurance: premiums paid for taxable group life insurance for Mr.
Curry--$ 63; Mr. Morrison--$ 143; and Mr. Richards--$ 98.
(b) 401(k) match: matching contributions in the Company's Common Stock
under the Company's Stock and Savings Plan: $2,400 for each Named
Executive.
(c) Deferred Compensation: above market interest credited on deferred
salary and/or bonus for Mr. Curry--$ 15,918; Mr. Blake--$ 3,154; Mr.
Morrison--$ 2,238; and Mr. Richards--$ 4,614, and above market interest
credited on deferred compensation under CNF long-term incentive plans
for Mr. Curry--$ 23,250 and Mr. Wrightson--$ 5,477. The Company assumed
CNF's obligations for this deferred compensation in connection with the
spin-off. Excludes interest credited on salary and/or bonus deferred
prior to the spin-off which will be paid by CNF.
6
<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
HIGHEST FIVE CONSECUTIVE
YEARS YEARS OF PLAN PARTICIPATION
OF LAST TEN YEARS OF --------------------------------------------
EMPLOYMENT 15 20 25 30 35
---------------------------- -------- -------- -------- -------- --------
<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 executives, named in the preceding "Summary
Compensation Table," is the highest five-year average over the last ten years
of employment of the "Salary" and "Bonus" shown in that 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.
Federal law places certain limitations on the amount of compensation that
may be taken into account in calculating pension benefits and on the amount of
pension payments that may be paid under federal income tax qualified plans.
The Company has adopted a non-qualified plan to provide for payment out of the
Company's general funds of benefits not covered by the qualified plan. The
table above represents total retirement benefits which may be paid from a
combination of the qualified and non-qualified plan.
As of December 31, 1997, Messrs. Curry, Blake, Morrison, Richards and
Wrightson had approximately 29, 22, 11, 6 and 30 years of plan participation,
respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
One of the Compensation Committee's responsibilities is to determine the
compensation of officers, including the chief executive officer and the four
most highly compensated executive officers shown in the preceding "Summary
Compensation Table" (the "Named Executives"). The Committee is composed of
four non-employee directors.
1997 OFFICER COMPENSATION
Compensation for the Company's executive officers prior to the spin-off of
the Company as an independent, publicly-owned company on December 2, 1996 (the
"spin-off") was approved by the Compensation Committee of CNF Transportation
Inc. ("CNF"), the former parent of the Company. CNF's general compensation
policy has been to pay for performance, with a major portion of total
potential compensation at risk through short-term and long-term incentive
compensation. Pending a reassessment of the compensation program for officers
established by the CNF Compensation Committee, the Committee decided on
December 2, 1996 to continue the existing program in 1997, except as noted
below.
7
<PAGE>
BASE SALARY
No salary increases were granted to officers for 1997. The Committee decided
to freeze salaries pending a review of 1997 performance, review of peer
compensation information, and advice from an independent compensation
consultant.
Most of these salaries were previously approved by the CNF Compensation
Committee when the Company was a subsidiary of CNF, with the assistance of
independent compensation consultants. Certain of the officers transferred to
the Company around the time of the spin-off and were given an increase in
salary in 1996 in recognition of increased responsibilities. Finally, two
officers, hired in 1997, were given salaries consistent with their
responsibilities and the salary structure of the Company.
SHORT-TERM INCENTIVE COMPENSATION
The Compensation Committee approved a 1997 cash incentive plan for all
regular, full-time, non-contractual employees based on measurable performance
objectives. Bonuses were targeted at 35% of salary for all officers, and
included the opportunity to exceed that target for exceeding performance
objectives. With the exception of the Company's chief executive officer, this
was the same percentage bonus target provided to the Company's officers prior
to the spin-off. However, the percentage was substantially lower for the Named
Executives than the percentage target provided by CNF to its five highest paid
executives.
Target bonuses for officers, including the Named Executives, were based
primarily on the operating ratio (expenses before taxes and incentives) of the
Company in the U.S. and also on U.S. collections as a percent of revenue.
Performance objectives were determined by the Committee based on the operating
objectives of the Company for 1997. The target bonus for the officer managing
Canadian operations was based on the operating profit of the Canadian
operations.
Incentives were earned in 1997 as the operating ratio decreased and
collections as a percent of revenue increased. Because the operating ratio
goal was exceeded, officers earned bonuses in excess of target bonuses. Named
Executives earned bonuses of 55% of salary as shown in the preceding "Summary
Compensation Table." Bonuses were earned strictly on the basis of the
performance criteria established at the beginning of the year.
LONG-TERM INCENTIVE COMPENSATION
The Company's 1996 Stock Option and Incentive Plan and the initial grants of
restricted stock of the Company to officers were approved by the CNF
Compensation Committee prior to the spin-off with the advice of an independent
compensation consultant. The Compensation Committee reviewed and approved this
action and the restricted stock grants were made on December 2, 1996 to
officers and senior managers. The Committee subsequently gave restricted stock
awards on the same terms to all full-time employees.
The grants were consistent with the objective of aligning the interests of
officers with the long-term interests of the Company's shareholders. The
grants were also 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 shares vest ratably over three years and are contingent upon increases
in the stock price of 20%, 40% and 60% over the $7.475 average closing stock
price during the first five trading days after the spin-off. Except under
limited circumstances, the executive must be a full-time employee at the time
the stock vests. The first one-third vested on December 16, 1997 upon
attainment of the stock performance objective.
8
<PAGE>
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 benefiting 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.
No new long-term incentive awards were made to officers in 1997, except
initial grants to two newly-appointed officers consistent with grants to other
officers. The awards to the Named Executives are disclosed in the preceding
"Summary Compensation Table".
CEO COMPENSATION
Like the other executive officers of the Company, no salary increase was
given to Mr. Curry in 1997. His salary remained at the level established by
the CNF Compensation Committee for 1995.
As was the case for other officers, Mr. Curry's cash incentive for 1997 was
based on the operating ratio and collections. At his request, his target bonus
was set at 35% of salary, the same as the rest of the officers, instead of the
60% level assigned by CNF to him in 1996 prior to the spin-off. Target
operating profits were exceeded and Mr. Curry earned a cash incentive of
$225,417.
Mr. Curry received a restricted stock award on December 2, 1996, for 300,000
shares of the Company's Common Stock, based on the action taken by the CNF
Compensation Committee and the ratification of the Company's Compensation
Committee. Mr. Curry was granted the largest share of two times the next
highest award based on the Committees' judgment of the relative importance of
his position.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits the
deductibility of certain compensation paid to the chief executive officer or
any of the four other most highly compensated executives as of the end of the
fiscal year in excess of $1 million annually. There is an exception for
certain performance-based compensation established and administered by
"outside directors" defined in Section 162(m). Because Mr. O'Brien was an
officer of the Company's principal operating subsidiary more than twenty years
ago, he may not qualify as an outside director. Accordingly, a separate
Compensation Committee, which excludes Mr. O'Brien, acts on all matters
(including restricted stock grants to executive officers referred to earlier)
which may qualify for the performance-based compensation exemption under
Section 162(m).
The Company's Compensation Committee has adopted the general policy that
compensation paid to the officers subject to the deductibility limitation
should be structured so as to maximize the deductibility of such compensation
for federal income tax purposes. Currently, the Committee expects that all
compensation paid to executive officers will be deductible. However, there may
be circumstances where portions of an executive officer's compensation will
not be deductible. In such circumstances, the Committee intends to require
such executive to defer receipt of any compensation in excess of the statutory
maximum for deductibility until such executive is no longer covered by the
limitation. The Committee, however, reserves the discretion to pay
compensation to executive officers which may not be deductible under special
circumstances.
OFFICER COMPENSATION FOR 1998 AND BEYOND
During 1997, the Committee reassessed the Company's compensation program for
officers, including the Named Executives, with the assistance of an
independent compensation consultant. In
9
<PAGE>
so doing, it adopted a compensation philosophy and policies as a guideline for
compensation of officers in 1998 and beyond.
PHILOSOPHY
The Committee established "pay-for-performance" as the guiding principle of
compensation, with a major portion of total compensation "at risk" through
short and long-term incentives. The greater the executive's responsibilities,
the higher the percentage of total potential compensation should be "at risk."
The Committee also determined that the Company should pay competitive base
salaries and above average incentive compensation for achievement of
objectives, under a compensation program designed to attract and retain the
highest quality executives for the long-term success and competitiveness of
the Company. Short-term incentives should be tied to Company performance and
include an individual or team performance component. Long-term incentives
should closely align the interests of executives with the long-term interests
of the Company and its shareholders.
POLICIES
The Committee believes that compensation, including salary, should be
measured and evaluated against a peer compensation group taking into account
compensation outside the peer group where the Company may compete for
executive talent. The peer compensation group is not the same as the companies
included in the S&P SmallCap Trucking Index used later in the "Performance
Graph," but rather a more narrow group of transportation companies selected by
the Committee which it believes is representative of the market in which the
Company may compete for executive talent. In general, the Committee will
target salaries between the 50th and 75th percentile of the peer compensation
group. However, the Committee determined that subjective factors should also
be considered, with individual adjustment for experience, responsibilities,
performance and value to the Company. As to the subjective factors, the
Committee will consider the report and recommendations of the chief executive
officer for officers other than himself.
The Committee believes that annual bonuses together with salary should be
targeted at the 75th percentile for the peer compensation group, subject to
adjustments for individual subjective factors mentioned earlier. It has
established the policy that short-term incentives should be based on
measurable performance goals established at the beginning of the year.
However, the Committee has reserved the discretion to increase or award
bonuses for significant corporate accomplishments, superior performance
relative to comparable companies, and to take into account external factors
that may adversely affect performance such as general economic conditions.
Long-term incentives for 1997 to 1999 were previously established by the CNF
Compensation Committee and approved by the Committee. For future awards, the
Committee has established the guideline that long-term incentives, together
with salary and short-term incentives, should be targeted at the 75th
percentile of the peer compensation group, subject to modification for
individual subjective factors mentioned earlier.
THE COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Robert W. Hatch, Chairman Raymond F. O'Brien
James B. Malloy William D. Walsh
</TABLE>
Mr. Walsh joined the Compensation Committee after the death of former
chairman, J. Frank Leach, in August 1997, and consequently did not take part
in the Committee's deliberation regarding compensation of officers prior to
that time.
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee have been independent directors of the
Company and have had 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.
PERFORMANCE GRAPH
CONSOLIDATED FREIGHTWAYS CORPORATION, S & P MIDCAP 400 INDEX, S & P SMALLCAP
600 INDEX AND S & P SMALLCAP TRUCKING INDEX
<TABLE>
<CAPTION>
Measurement Period S&P MIDCAP S&P SMALLCAP TRUCKERS-
(Fiscal Year Covered) CONSOLIDATED 400 INDEX 600 INDEX SMALL
- ------------------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Measurement Pt-11/13/96 $100 $100 $100 $100
FYE 12/96 $147.92 $101.96 $104.24 $102.83
FYE 03/97 $197.92 $100.45 $98.45 $105.65
FYE 06/97 $272.92 $115.21 $116.29 $120.98
FYE 09/97 $293.76 $133.73 $135.09 $147.43
FYE 12/97 $227.09 $134.85 $130.91 $129.54
</TABLE>
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 MidCap 400 Index, the S & P
SmallCap 600 Index and the S & P SmallCap Trucking Index, and that dividends
in the three indexes were reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
The Company has selected the S & P SmallCap 600 Index as the appropriate
market index on a going-forward basis, instead of the S&P MidCap 400 Index.
The Company believes that this index is a more representative stock
performance peer group given its market capitalization. The S & P SmallCap
Trucking Index, included in the performance graph last year, is the industry
subset of the S & P SmallCap 600 Index. Because the Company used the S & P
MidCap 400 Index in its performance graph last year, its performance relative
to that index is provided this year as well.
11
<PAGE>
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 18, 1998,
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>
Alliance Capital Management, L.P.,............... 1,910,050(1) 8.3%
a subsidiary of The Equitable Companies
Incorporated
1345 Avenue of the Americas
New York, NY 10105
FMR Corp. ....................................... 1,308,100(2) 5.7%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
(1) The Equitable Companies Incorporated, through its subsidiary, Alliance
Capital Management, L.P., has sole voting power of 4,500 shares, shared
voting power of 1,904,200 shares, sole dispositive power over 1,910,050
shares and shared dispositive power over 0 shares.
(2) FMR Corp., through its subsidiaries Fidelity Management & Research Company
and Management Trust Company, has sole voting power over 35,900 shares,
shared voting power over 0 shares, sole dispositive power over 1,308,100
shares and shared dispositive power over 0 shares.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that, during 1997 its executive officers and directors
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.
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 November 30, 1998.
12
<PAGE>
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The report will be available for mailing after April 6, 1998.
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 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. FITCH
MARYLA R. FITCH
Vice President and Secretary
March 30, 1998
13
<PAGE>
[RECYCLED PAPER LOGO APPEARS HERE]
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CONSOLIDATED FREIGHTWAYS CORPORATION
The undersigned appoints W.R. CURRY, D.F. MORRISON, S.D. RICHARDS 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 11, 1998 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 choice by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors recommendation.
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 SET FORTH ON THE REVERSE SIDE OF THIS CARD.
FOR PARTICIPANTS IN THE COMPANY'S 401k PLAN AND STOCK AND SAVINGS PLAN
AND IN THE CNF TRANSPORTATION INC. THRIFT AND STOCK PLAN, ANY SHARES HELD IN THE
SHARE OWNER'S ACCOUNTS ON THE RECORD DATE WILL BE VOTED BY THE APPLICABLE
TRUSTEE OF THE APPLICABLE PLAN IN ACCORDANCE WITH THE PARTICIPANT'S INSTRUCTIONS
OR IF NO INSTRUCTIONS ARE GIVEN, SUCH SHARES WILL BE VOTED IN THE SAME
PROPORTION AS ALL OTHER SHARES IN THE PLAN FOR WHICH INSTRUCTIONS ARE RECEIVED.
THE TRUSTEES WILL VOTE IN THEIR DISCRETION UPON OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
(Continued and to be signed on other side)
CONSOLIDATED FREIGHTWAYS CORPORATION
P.O. BOX 11147
NEW YORK, N.Y. 10203-0147
________________________________________________________________________________
The Board of Directors recommends a vote FOR the election of directors.
1. Election of two Group 2 directors for a three-year term.
[_] FOR all nominees listed below.
[_] WITHHOLD AUTHORITY to vote for all nominees listed below.
[_] *EXCEPTIONS
Nominees: Paul B. Guenther, William D. Walsh
(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
matter 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:___________________________________, 1998
Signature______________________________________
Signature______________________________________
PLEASE MARK, SIGN DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK
