<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, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
CONSOLIDATED FREIGHTWAYS, INC.
DBA
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION]
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Proxy Statement............................................................ 1
Board of Directors' Recommendations...................................... 1
Proxy Voting Procedures.................................................. 1
Voting Requirements...................................................... 1
Voting Shares Outstanding................................................ 1
Proxy Voting Convenience................................................. 2
Attendance at the Meeting................................................ 2
Election of Directors...................................................... 2
Stock Ownership by Directors and Executive Officers........................ 9
Information About the Board of Directors and Certain Board Committees...... 10
Compensation of Directors.................................................. 11
Compensation of Executive Officers......................................... 12
I. Summary Compensation Table.......................................... 12
II. Option/SAR Grants Table............................................. 14
III. Option/SAR Exercises and Year-End Value Table....................... 15
IV. Long-Term Incentive Plan Awards Table............................... 16
Compensation Committee Report on Executive Compensation.................... 16
Compensation Committee Interlocks and Insider Participation................ 20
A Comparison of Five-year Cumulative Total Shareholder Return.............. 20
Pension Plan Table......................................................... 22
Proposal to Amend the Company's Certificate of Incorporation to Change the
Name of the Company....................................................... 22
Proposal to Approve the CNF Transportation Inc. 1997 Equity and Incentive
Plan...................................................................... 23
Appointment of Auditors.................................................... 29
Principal Shareholders..................................................... 30
Compliance with Section 16 of the Exchange Act............................. 31
Confidential Voting........................................................ 31
Submission of Shareholder Proposals........................................ 31
Other Matters.............................................................. 32
</TABLE>
<PAGE>
CONSOLIDATED FREIGHTWAYS, INC.
DBA
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION
3240 HILLVIEW AVENUE TELEPHONE: 415/494-2900
PALO ALTO, CALIFORNIA 94304
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, April 28, 1997
9:00 A.M., Eastern Time
Du Barry Room, Hotel du Pont, 11th and Market Streets, Wilmington, Delaware
FELLOW SHAREHOLDER:
The Annual Meeting of Shareholders of Consolidated Freightways, Inc. dba CNF
Transportation Inc. will be held at 9:00 A.M., Eastern Time, on Monday, April
28, 1997, to:
1. Elect four Class III directors for a three-year term.
2. Act upon a proposal to amend the Company's Certificate of Incorporation,
changing the Company's name from "Consolidated Freightways, Inc." to
"CNF Transportation Inc."
3. Act upon a proposal to approve the Company's 1997 Equity and Incentive
Plan.
4. Ratify the appointment of auditors.
5. Transact any other business properly brought before the meeting.
Shareholders of record at the close of business on March 3, 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,
EBERHARD G.H. SCHMOLLER
Secretary
March 24, 1997
<PAGE>
CONSOLIDATED FREIGHTWAYS, INC.
DBA
CNF TRANSPORTATION INC.
3240 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
TELEPHONE: 415/494-2900
PROXY STATEMENT
March 24, 1997
The Annual Meeting of Shareholders of Consolidated Freightways, Inc. dba CNF
Transportation Inc. (the "Company") will be held on April 28, 1997.
Shareholders of record at the close of business on March 3, 1997 will be
entitled to vote at the meeting. This proxy statement and accompanying proxy
are first being sent to shareholders on or about March 24, 1997.
BOARD OF DIRECTORS' RECOMMENDATIONS
The Board of Directors of the Company is soliciting your proxy for use at
the meeting and any adjournment or postponement of the meeting. The Board
recommends a vote for the election of the nominees for directors described
below, for approval of the proposed amendment to the Company's Certificate of
Incorporation, for approval of the Company's 1997 Equity and Incentive Plan,
and for ratification of the appointment of Arthur Andersen LLP as independent
auditors.
PROXY VOTING PROCEDURES
To be effective, properly signed proxies must be returned to the Company
prior to the meeting. The shares represented by your proxy will be voted in
accordance with your instructions. However, if no instructions are given, your
shares will be voted in accordance with the recommendations of the Board.
VOTING REQUIREMENTS
A majority of the votes attributable to all voting shares must be
represented in person or by proxy at the meeting to establish a quorum for
action at the meeting. Directors are elected by a plurality of the votes cast,
and the four nominees who receive the greatest number of votes cast for
election of directors at the meeting will be elected directors for a three-
year term. Approval of the proposed amendment to the Company's Certificate of
Incorporation requires a favorable vote of the holders of a majority of the
voting power entitled to vote thereon. Approval of all other matters expected
to come before the meeting requires a favorable vote of the holders of a
majority of the voting power represented at the meeting.
In the election of directors, broker non-votes will be disregarded and have
no effect on the outcome of the vote. With respect to the proposed amendment
to the Certificate of Incorporation, abstentions and broker non-votes will
have the same effect as voting against the proposal. With respect to the other
matters, abstentions from voting will have the same effect as voting against
such matters and broker non-votes will be disregarded and have no effect on
the outcome of the vote.
VOTING SHARES OUTSTANDING
At the close of business on March 3, 1997, the record date for the Annual
Meeting, there were outstanding and entitled to vote 45,559,896 shares of
Common Stock and 873,078 shares of Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock"). Each share of Common Stock has the right
to one non-cumulative vote and each share of Series B Preferred Stock has the
right to 6.1 non-cumulative votes.
<PAGE>
Therefore, an aggregate of 50,885,672 votes are eligible to be cast at the
meeting.
PROXY VOTING CONVENIENCE
You are encouraged to exercise your right to vote by returning to the
Company a properly executed WHITE proxy in the enclosed envelope, whether or
not you plan to attend the meeting. This will ensure that your votes are cast.
You may revoke or change your proxy at any time prior to its use at the
meeting. There are three ways you may do so: (1) give the Company a written
direction to revoke your proxy; (2) submit a later dated proxy; or (3) attend
the meeting and vote in person.
ATTENDANCE AT THE MEETING
All shareholders are invited to attend the meeting. Due to the limited
seating capacity, persons who are not shareholders may attend only if invited
by the Board of Directors. IF YOU ARE A SHAREHOLDER BUT DO NOT OWN SHARES IN
YOUR NAME, YOU MUST BRING PROOF OF OWNERSHIP (E.G., A CURRENT BROKER'S
STATEMENT) IN ORDER TO BE ADMITTED TO THE MEETING.
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The following persons are the nominees of the Board of Directors for
election as Class III directors to serve for a three-year term until the 2000
Annual Meeting of Shareholders and until their successors are duly elected and
qualified:
Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
Unless you withhold authority to vote, your proxy will be voted for election
of the nominees named above. If a nominee becomes unable or unwilling to
serve, proxy holders are authorized to vote for election of such person or
persons as shall be designated by the Board of Directors; however, the
management knows of no reason why any nominee should be unable or unwilling to
serve.
The Company has three classes of directors, each of which is elected for a
three-year term. Class I directors will be elected in 1998 and Class II
directors will be elected in 1999. All directors have previously been elected
by the shareholders, except Margaret G. Gill who was appointed by the Board as
a Class III director in January 1995, Richard A. Clarke, who was appointed by
the Board as a Class I director in January 1996, W. Keith Kennedy, Jr., who
was appointed by the Board as a Class I director in December 1996, and William
J. Schroeder, who was appointed by the Board as a Class II director in
December 1996.
In December 1996, William D. Walsh, who had served as a Class II director
since 1994, and G. Robert Evans, who had served as a Class I director since
1990, resigned from the Board in order to join the Board of Directors of
Consolidated Freightways Corporation. Shares of Consolidated Freightways
Corporation were distributed to shareholders of the Company on December 2,
1996. In addition, in December 1996, Ronald E. Poelman, who had served as a
director since 1971 and as a Class II director since 1986, retired from the
Board.
2
<PAGE>
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CLASS III DIRECTORS
[PHOTO ROBERT ALPERT Director since 1976
OF
ROBERT ALPERT] Chairman of the Board,
The Empire A.B.,
a Swedish diversified metals company
Mr. Alpert is Chairman of the Board of The Empire A.B., a
Swedish group of companies dealing in aluminum, brass and
other metal products and services, and of Alpert
Corporation, a Dallas financial services and real estate
company formed in 1965. He is also Honorary Consul for
Sweden in Dallas. Mr. Alpert holds directorships with
Aladdin Industries, Inc., Texas Industries, Inc., and
Chaparral Steel Company. He is an advisory director for I.C.
Deal Companies, Heartland Capital Partners, Ltd. and Asia
Info Services. Additionally, he is a member of the Advisory
Council for the University of Texas at Austin, College of
Business Administration; a Trustee Emeritus for Colby
College in Maine; and director of the Dallas Foundation for
Health, Education and Research, a public charity. He is also
a member of the Chief Executive Forum, World Business
Council and Young Presidents' Organization. Mr. Alpert, age
65, is a member of the Director Affairs, the Executive and
the Finance Committees of the Company.
[PHOTO MARGARET G. GILL Director since 1995
OF
MARGARET G. GILL]
Senior Vice President-Legal, External Affairs
and Secretary,
AirTouch Communications
a wireless communications company
Mrs. Gill joined AirTouch Communications in 1994 following
a 20-year partnership in the law firm of Pillsbury, Madison
& Sutro in San Francisco. From 1983 to 1993, she served as
practice group manager and senior partner for the firm's
corporate and securities group, and as managing partner in
the Menlo Park, California office from 1991 to 1993. Mrs.
Gill earned her law degree in 1965 from Boalt Hall Law
School, University of California at Berkeley, and holds a
Bachelor of Arts degree from Wellesley College. She is a
fellow of the American Bar Foundation, serves on the
advisory board for the Institute for Corporate Counsel and
has served on several committees for the American Bar
Association and the California Bar Association. Mrs. Gill,
age 57, is also a member of the board of directors of the
Episcopal Diocese of California and a trustee and executive
committee member of the San Francisco Ballet. She is a
former director and general counsel for the United Way of
the Bay Area and a past trustee of St. Lukes Hospital
Foundation. Mrs. Gill is a member of the Audit and the
Director Affairs Committees of the Company.
3
<PAGE>
[PHOT0 ROBERT JAUNICH II Director since 1992
OF
ROBERT JAUNICH] Managing Director,
The Fremont Group,
a private investment corporation
Mr. Jaunich joined The Fremont Group, a private investment
corporation managing assets in excess of $6.0 billion, in
January 1991. He is Managing Director and member of the
Boards of Directors and the Executive Committees of the
Boards for Fremont's principal entities Fremont Group,
L.L.C. and Fremont Investors Inc. He is also General Partner
of Fremont Partners, L.P., a $605 million fund targeted to
make and oversee majority equity investment positions in
operating companies representing a broad spectrum of
industries. Additionally, he oversees Fremont's five
affiliated venture capital portfolios representing in excess
of $150 million committed capital (Trinity Venture, L.P.)
and is President of Fremont Capital, Inc., an SEC/NASD
registered broker/dealer. In addition to serving on the
board of the Company, Mr Jaunich serves as Chairman of the
Managing General Partner of Crown Pacific, Ltd., and is a
Trustee of the non-profit National Recreation Foundation. He
is a life member of the World Presidents Organization
(formerly World Business Council), and was a member of Young
Presidents Organization (1980-1990). Mr. Jaunich, age 57,
received a B.A. from Wesleyan University, Middletown,
Connecticut and an M.B.A. from Wharton Graduate School,
University of Pennsylvania. He is Chairman of the Directors
Affairs Committee, and a member of the Executive and Finance
Committees of the Company.
[PHOTO ROBERT P. WAYMAN Director since 1994
OF
ROBERT P. WAYMAN]
Executive Vice President,
Finance and Administration
and Chief Financial Officer,
Hewlett-Packard Company,
a computer-manufacturing company
Mr. Wayman joined Hewlett-Packard Company in 1969. After
serving in several accounting management positions, he was
elected Vice-President and Chief Financial Officer in 1984.
He became a Senior Vice President in 1987 and an Executive
Vice President in 1992. He assumed additional responsibility
for administration in 1992, and was elected to Hewlett-
Packard's Board of Directors in 1993. Mr. Wayman, age 51,
holds a bachelor's degree in science engineering and a
master's degree in business administration from Northwestern
University. He is a member of the Board of Directors of
Sybase Inc., and is a member of the Board of the Private
Sector Council, the Policy Council of the Tax Foundation,
the Financial Executives Institute, the Council of Financial
Executives of the Conference Board and the Advisory Board to
the Northwestern University School of Business. He is
Chairman of the Audit Committee and a member of the
Compensation Committee of the Company.
4
<PAGE>
--------------------------------------------
CLASS I DIRECTORS
[PHOTO EARL F. CHEIT Director since 1976
OF
EARL F. CHEIT] Dean Emeritus, Haas School of Business
University of California at Berkeley
Dr. Cheit has served on the University of California at
Berkeley faculty since 1957. He held a number of
administrative positions, both on and off the campus,
including Executive Vice Chancellor of the University. In
1976 he was named Dean of the Business School, after serving
as Associate Director and Senior Research Fellow of the
Carnegie Council on Policy Studies in Higher Education. In
1983, he resumed his teaching career at the University and
in 1990, he was again named Dean of the Business School for
the academic year 1990/1991. In 1993, he served as the
University's Interim Athletic Director. Dr. Cheit, age 70,
is a member of the Board of Shaklee Corporation, Simpson
Manufacturing Co. and a trustee of Mills College. He is a
graduate of the University of Minnesota, from which he holds
B.S., LL.B and Ph.D degrees. He is the author of numerous
books and articles and serves as a consultant to various
public and private organizations. Dr. Cheit serves on the
Audit, the Director Affairs, and the Executive Committees of
the Company.
[PHOTO RICHARD A. CLARKE Director since 1996
OF
RICHARD A. CLARKE]
Retired Chairman of the Board,
Pacific Gas and Electric Company,
one of the nation's largest utility companies
Mr. Clarke retired from PG&E in 1995 after serving as
chairman of the board for nine years. As chairman and CEO he
oversaw management of a $10 billion company that produces
electric power and gas and is involved with power plant
construction. Mr. Clarke began his association with PG&E as
an attorney and served in various managerial positions
leading to his appointment as Chairman and CEO. Between 1960
and 1969 he was a partner in the law firm of Rockwell,
Fulkerson & Clarke. He is a member of the boards of
directors of PG&E, Potlatch Corporation and BankAmerica
Corporation and is an Emeritus member of the President's
Council of Sustainable Development. He serves as director of
the Bay Area Council and the Business Council. He is a
Director of the Nature Conservancy of California and a
member of the Board of Trustees of the Boalt Hall Trust--
University of California, Berkeley, School of Law, and the
Advisory Board of the Walter A. Haas School of Business,
University of California, Berkeley. He is Chairman of the
Advisory Board of the Center for Organization and Human
Resource Effectiveness at the University of California,
Berkeley. Mr. Clarke has previously held Board or executive-
level posts with the California Business Roundtable,
California Chamber of Commerce, Edison Electric Institute
and the President's Council on Environmental Quality. A
native of San Francisco, Mr. Clarke, 66, earned his law
degree from the University of California, Boalt Hall, and
holds a bachelor's degree in political science. He is a
member of the Compensation and Finance Committees of the
Company.
5
<PAGE>
[PHOTO W. KEITH KENNEDY, JR. Director since 1996
OF
W. KEITH KENNEDY] President and Chief Executive
Officer,
Watkins-Johnson Company, a high-
technology corporation specializing
in semiconductor manufacturing
equipment and electronic products
for telecommunications and defense.
Dr. Kennedy was named President and Chief Executive
Officer of Watkins-Johnson Company in January 1988. Dr.
Kennedy joined Watkins-Johnson in 1968, and was a Division
Manager, Group Vice President and Vice President of Planning
Coordination and Shareowner Relations prior to becoming
President. Dr. Kennedy, age 53, is a graduate of Cornell
University from which he holds B.S.E.E., M.S. and Ph.D.
degrees. Dr. Kennedy is Director of the Joint Venture
Silicon Valley Network, the Defense Space Consortium, the
Santa Clara Valley Manufacturing Group; a member of the
Executive Board of The Center for Quality Management--West;
and is a senior member of the Institute of Electrical and
Electronics Engineers. He is a member of the Compensation
Committee of the Company.
[PHOTO RICHARD B. MADDEN Director since 1992
OF
RICHARD B. MADDEN]
Retired Chairman and Chief Executive Officer,
Potlatch Corporation,
a diversified forest products company
Mr. Madden was Chief Executive Officer of Potlatch
Corporation from 1971 and Chairman of the Board from 1977
until his retirement in May of 1994. He was previously
associated with Mobil Oil Corporation where he served in
various management capacities for fifteen years. Mr. Madden
is a director of Potlatch Corporation, PG&E Corporation and
URS Corporation. He is also a Trustee Emeritus of the
American Enterprise Institute for Public Policy Research.
His civic activities include the Board of Governors of the
San Francisco Symphony Association; Board of Directors of
the Smith-Kettlewell Eye Research Institute and Board of
Directors of the National Park Foundation. Mr. Madden, age
67, holds a B.S. degree in engineering from Princeton
University, a J.D. degree from the University of Michigan,
and a M.B.A. from New York University. He is Chairman of the
Compensation Committee and serves on the Executive and
Finance Committees of the Company.
[PHOTO]
6
<PAGE>
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CLASS II DIRECTORS
[PHOTO DONALD E. MOFFITT Director 1986-1988
OF Director since 1991
DONALD MOFFITT]
Chairman of the Board, President and Chief Executive
Officer, CNF Transportation Inc.
Mr. Moffitt was named President and Chief Executive
Officer of the Company in 1991, and Chairman of the Board of
Directors in 1995. He joined Consolidated Freightways
Corporation of Delaware, the Company's nationwide, full-
service trucking subsidiary, as an accountant in 1955 and
advanced to Vice President-Finance in 1973. In 1975, he
transferred to the Company as Vice President-Finance and
Treasurer and in 1981 was elected Executive Vice President-
Finance and Administration. In 1983 he assumed the
additional duties of President, CF International and Air,
Inc., where he directed the Company's international and air
freight businesses. Mr. Moffitt was elected Vice Chairman of
the Board of the Company in 1986. He retired as an employee
and as Vice Chairman of the Board of Directors in 1988 and
returned to the Company as Executive Vice President-Finance
and Chief Financial Officer in 1990. Mr. Moffitt, age 64, is
a member of the Boards of Directors of the U.S. Chamber of
Commerce, the California Business Roundtable, the Conference
Board and the Business Advisory Council of the Northwestern
University Transportation Center. He also serves on the
boards of the San Francisco Bay Area Council, Boy Scouts of
America and the American Red Cross, and is a member of the
Board of Trustees of the Automotive Safety Foundation and
the National Commission Against Drunk Driving. He is a
former member of the Board of Directors and the Executive
Committee of the Highway Users Federation. Mr. Moffitt is
Chairman of the Executive Committee and serves on the
Director Affairs Committee of the Company.
[PHOTO ROBERT D. ROGERS Director since 1990
OF
ROBERT D. ROGERS]
President and Chief Executive Officer, Texas Industries,
Inc.
a producer of steel, cement, aggregates and concrete
Mr. Rogers joined Texas Industries, Inc. in 1963 as
General Manager/European Operations. In 1964 he was named
Vice President-Finance; in 1968, Vice President-Operations,
and in 1970 he became President and Chief Executive Officer.
Mr. Rogers is also a director of Texas Industries, Inc. and
serves as a member and Chairman of Chaparral Steel Company's
Board of Directors. Mr. Rogers is a graduate of Yale
University and earned a M.B.A. from the Harvard Graduate
School of Business. He is a director of the American
Business Conference, British-North American Committee and
Texas Medical Resource, and is a member of the Executive
Board for Southern Methodist University's School of
Business. Mr. Rogers, age 60, served as Chairman of the
Federal Reserve Bank of Dallas from 1984 to 1986 and was
Chairman of the Greater Dallas Chamber of Commerce from 1986
to 1988. He is Chairman of the Finance Committee and a
member of the Compensation Committee of the Company.
7
<PAGE>
[PHOTO WILLIAM J. SCHROEDER Director since 1996
OF
WILLIAM SCHROEDER]
President & Chief Executive Officer,
Diamond Multimedia Systems, Inc.,
a leader in interactive multimedia and desktop connectivity
Mr. Schroeder joined Diamond Multimedia Systems, Inc. in
May, 1994 as President and Chief Executive Officer. Prior to
joining Diamond, Mr. Schroeder was employed by Conner
Peripherals, Inc., initially as President and Chief
Operating Officer (1986-1989), and later as Vice Chairman
(1989-1994). Before Conner, Mr. Schroeder was Chief
Executive Officer and co-founder of Priam Corporation, a
manufacturer of high-performance disk drives for
minicomputers and workstations. Mr. Schroeder also served in
various management or technical positions at Memorex
Corporation, McKinsey & Co., and Honeywell, Inc., and is on
the board of directors of Xircom Corporation and MetaTools,
Inc. Mr. Schroeder, age 52, holds the M.B.A. degree with
High Distinction from Harvard Business School, and the
M.S.E.E. and B.E.E. degrees from Marquette University. He is
a member of the Audit Committee of the Company.
8
<PAGE>
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock and Series B Preferred Stock, as of January 31,
1997, by the directors, the executive officers identified in the Summary
Compensation Table below, and by the directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------ ---------------------- ----------
<S> <C> <C>
Robert Alpert................................ 58,542 Common *
0 Series B Preferred
David I. Beatson(2).......................... 89,572 Common *
62 Series B Preferred
Earl F. Cheit................................ 6,792 Common *
0 Series B Preferred
Richard A. Clarke............................ 5,274 Common *
0 Series B Preferred
W. Roger Curry(3)............................ 416,105 Common *
0 Series B Preferred
Margaret G. Gill............................. 5,985 Common *
0 Series B Preferred
Robert Jaunich II............................ 12,992 Common *
0 Series B Preferred
W. Keith Kennedy, Jr. ....................... 2,185 Common *
0 Series B Preferred
Richard B. Madden............................ 8,492 Common *
0 Series B Preferred
Donald E. Moffitt(4)......................... 774,212 Common 1.7
0 Series B Preferred
Gregory L. Quesnel(5)........................ 243,335 Common *
114 Series B Preferred
Robert T. Robertson(6)....................... 335,160 Common *
127 Series B Preferred
Robert D. Rogers............................. 13,992 Common *
0 Series B Preferred
Eberhard G.H. Schmoller(7)................... 163,560 Common *
92 Series B Preferred
William J. Schroeder......................... 1,985 Common *
0 Series B Preferred
Robert P. Wayman............................. 6,992 Common *
0 Series B Preferred
All directors and executive officers as a
group....................................... 2,145,175 Common 4.7%
(16 persons) 395 Series B Preferred
</TABLE>
- --------
* Less than one percent of the Company's outstanding shares of Common Stock.
(1) Represents shares as to which the individual has sole voting and
investment power (or shares such power with his or her spouse). The shares
shown for non-employee directors include the following number of shares of
Restricted Stock, and shares which the non-employee director has
9
<PAGE>
the right to acquire within 60 days of January 31, 1997 because of vested
stock options: Mr. Alpert, 2,097 and 4,395; Dr. Cheit, 2,097 and 4,395; Mr.
Clarke, 1,063 and 3,211; Mrs. Gill, 1,590 and 4,395; Mr. Jaunich, 2,097 and
4,395; Dr. Kennedy, 1,110 and 875; Mr. Madden, 2,097 and 4,395; Mr. Rogers,
2,097 and 4,395; Mr. Schroeder, 1,110 and 875; and Mr. Wayman, 2,097 and
4,395. The Restricted Stock and stock options were awarded under and are
governed by the Amended and Restated Equity Incentive Plan for Non-Employee
Directors. In December 1996, all stock options outstanding as of December
2, 1996 were adjusted to reflect the spin-off of Consolidated Freightways
Corporation.
(2) The shares shown include 88,816 shares which Mr. Beatson has the right to
acquire within 60 days of January 31, 1997 because of vested stock
options.
(3) The shares shown include 391,479 shares which Mr. Curry has the right to
acquire within 60 days of January 31, 1997 because of vested stock
options. Mr. Curry resigned as an officer of the Company on December 2,
1996.
(4) The shares shown include 736,830 shares which Mr. Moffitt has the right to
acquire within 60 days of January 31, 1997 because of vested stock
options.
(5) The shares shown include 241,515 shares which Mr. Quesnel has the right to
acquire within 60 days of January 31, 1997 because of vested stock
options.
(6) The shares shown include 333,708 shares which Mr. Robertson has the right
to acquire within 60 days of January 31, 1997 because of vested stock
options.
(7) The shares shown include 159,217 shares which Mr. Schmoller has the right
to acquire within 60 days of January 31, 1997 because of vested stock
options.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 1996, the Board of Directors held nine meetings. Each incumbent
director attended at least 75% of all meetings of the Board and the committees
of the Board on which he or she served.
The Board of Directors currently has the following standing committees:
Audit Committee, Compensation Committee, Director Affairs Committee, Executive
Committee and Finance Committee. Descriptions of the Audit, Compensation and
Director Affairs Committees follow:
AUDIT COMMITTEE: The Audit Committee recommends independent public
accountants for appointment by the shareholders 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 Robert P. Wayman--Chairman, Earl F. Cheit, Margaret G. Gill and
William J. Schroeder. The Committee met three times during 1996.
COMPENSATION COMMITTEE: The Compensation Committee approves the salaries and
other compensation of executive officers and other key employees, except that
the Committee recommends to the Board for its approval the salary of the Chief
Executive Officer of the Company. The Committee also oversees the
administration of the Company's short-term and long-term incentive
compensation plans and grants of stock options under the Company's Stock
Option Plan of 1988 and 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 Richard B. Madden--Chairman,
Richard A. Clarke, W. Keith Kennedy, Jr., Robert D. Rogers and Robert P.
Wayman. The Committee met seven times during 1996.
DIRECTOR AFFAIRS COMMITTEE: The Director Affairs Committee reviews the
qualifications of candidates to serve on the Board of Directors, consults with
the management of the Company concerning potential candidates and recommends
to the Board of Directors nominees for membership on the Board. The Committee
also oversees directors' compensation, reviews and considers other
10
<PAGE>
matters pertaining to the functioning of the Board, and reviews and advises
the Board regarding corporate governance issues. Shareholders' proposals for
nominees will be given due consideration by the Committee for recommendation
to the Board based on the nominees' qualifications. Shareholder nominee
proposals should be submitted in writing to the Chairman of the Director
Affairs Committee in care of the Corporate Secretary. The members of the
Director Affairs Committee are Robert Jaunich II--Chairman, Robert Alpert,
Earl F. Cheit, Margaret G. Gill and Donald E. Moffitt. The Committee met twice
during 1996.
COMPENSATION OF DIRECTORS
During 1996, each non-employee director was paid an annual retainer of
$20,000 and accrued a retirement benefit of $20,000. Non-employee directors
were also paid $1,500 per Board meeting attended and $1,000 per Committee
meeting attended. Chairmen of the Board Committees received an additional
$3,000.
Directors may elect to defer payment of their fees. Payment of any deferred
amount and interest equivalents accrued thereon will be made in a lump sum or
in installments beginning no later than the year following the director's
final year on the Company's Board. Directors are also provided with certain
insurance coverages and, in addition, are reimbursed for travel expenses
incurred in attending Board and Committee meetings.
A director of the Company accrues a retirement benefit for each full
calendar month he or she is a non-employee director of the Company in an
amount equal to one-twelfth of the annual cash retainer. The retirement
benefit vests when a director has served on the Board for five years. The
amount accrued prior to 1994 was $30,000 per year of service. In 1994, $15,000
in retirement benefits accrued and in 1995, $20,000 in retirement benefits
accrued. Retirement payments continue for the director's number of years of
service as a non-employee director up to a maximum of 20 years, with the
earliest accruals paid first.
Awards of restricted stock and stock options have been made from time to
time to non-employee directors under the Equity Incentive Plan for Non-
Employee Directors, as amended and restated in 1995 (the "Plan"). The original
Plan was approved by the Company's shareholders in 1994, and the amended and
restated Plan was approved by the Company's shareholders in 1995.
A restricted stock grant having a fair market value of $12,500 was made to
each non-employee director then serving on the Board following approval of the
Plan by shareholders in 1994. Each non-employee director who joined the Board
thereafter received an equivalent grant upon joining the Board. In addition,
on January 1 of each year, commencing January 1, 1995, an additional
restricted stock grant having a fair market value of $12,500 was made to each
non-employee director then serving on the Board. Restrictions on all
restricted stock lapse five years from the date of grant.
Stock options were granted on January 1, 1995 to each non-employee director
then serving on the Board for 2,500 shares of Common Stock of the Company at
an exercise price of $22.375, the then fair market value of the Common Stock.
Each non-employee director who joined the Board thereafter received an
equivalent grant upon joining the Board, but at an exercise price equal to the
then fair market value of the Common Stock. On January 1 of each year
thereafter, commencing January 1, 1996, additional stock options were granted
to each non-employee director then serving on the Board for 1,000 shares of
Common Stock of the Company at an exercise price equal to the then fair market
value of the Common Stock. The exercise prices for the January 1, 1996 and
January 1, 1997 stock option grants were $26.50 and $22.25, respectively.
In December 1996, the 1995 and 1996 stock option grants were adjusted to
reflect the spin-off of Consolidated Freightways Corporation. As adjusted,
those stock option grants are for 2,961 and 1,184 shares, respectively, of the
Company's Common Stock, with exercise prices of $18.89 and $22.38,
respectively.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the four next most highly paid executive officers
for the three fiscal years ended December 31, 1996. The table also sets forth
the compensation received for those fiscal years by W. Roger Curry, who
resigned his position as Senior Vice President of the Company on December 2,
1996 and became President and Chief Executive Officer of Consolidated
Freightways Corporation. As used in this Proxy Statement, "Named Executives"
means the officers identified in this Summary Compensation Table, including
Mr. Curry.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(4)
---------------
AWARDS
ANNUAL COMPENSATION ---------------
-------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS(2) COMPENSATION OPTIONS/ COMPENSATION
PRINCIPAL POSITION(S) YEAR $ $ (3) ($) SAR'S (#) (5) (6) ($)
- ----------------------- ---- -------- ---------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald E. Moffitt 1996 $670,020 $1,041,884 $65,543 88,816/0 $84,960
Chairman of the Board 1995 650,000 30,999 3,538 207,237/0 84,398
President & Chief 1994 618,038 561,548 38,621 91,184/0 89,556
Executive Officer
W. Roger Curry(1) 1996 $380,352 $ 0 $66,926 35,526/0 $ 4,659(7)
Senior Vice President 1995 412,048 0 71,958 35,526/0 5,667
1994 363,944 419,740 83,648 124,786/0 9,455
Robert T. Robertson(1) 1996 $424,424 $ 206,952 $19,208 35,526/0 $ 3,552
Senior Vice President 1995 412,048 94,471 12,698 35,526/0 4,437
1994 363,944 357,849 23,826 35,971/0 6,955
Gregory L. Quesnel 1996 $360,828 $ 547,293 $39,682 35,526/0 $ 2,862
Exec. Vice President & 1995 350,272 12,850 2,960 35,526/0 3,306
Chief Financial Officer 1994 335,126 242,453 17,175 35,971/0 4,138
Eberhard G.H. Schmoller 1996 $278,616 $ 513,733 $26,394 27,237/0 $ 2,849
Senior Vice President, 1995 270,452 9,922 7,989 27,237/0 3,408
General Counsel and 1994 258,762 187,206 10,270 27,089/0 5,800
Secretary
David I. Beatson(1) 1996 $330,434 $ 79,343 $ 1,876 35,526/0 $ 2,943
Senior Vice President 1995 288,808 57,781 0 29,605/0 3,230
1994 223,872 221,404 2,101 59,211/0 3,198
</TABLE>
- --------
(1) Mr. Curry also served as President and Chief Executive Officer of CF
MotorFreight, the Company's nationwide, full-service trucking subsidiary.
Mr. Robertson is also President and Chief Executive Officer of Con-Way
Transportation Services, Inc., the Company's regional trucking subsidiary.
Mr. Beatson is also President and Chief Executive Officer of Emery Air
Freight Corporation, the Company's air freight subsidiary.
(2) The amounts shown in this column reflect payments under the Company's
short-term incentive compensation plans in which all regular, full-time,
non-contractual employees of the Company are eligible to participate. They
also reflect, in the case of Messrs. Moffitt, Quesnel, Schmoller and
Robertson, special incentive compensation awards of $700,000, $400,000,
$400,000 and $63,876, respectively.
(3) Amounts shown for 1996 in this column include: (a) Long-Term Incentive
Plan interest earned and deferred for Messrs. Curry, Robertson, Quesnel
and Schmoller of $66,926, $392, $242 and
12
<PAGE>
$5,428, respectively; (b) interest earned on deferred compensation accounts
above 120% of the applicable federal rate for Messrs. Moffitt, Robertson,
Quesnel, Schmoller and Beatson of $62,429, $18,816, $39,440, $20,966 and
$1,876, respectively; and (c) payments by the Company, on behalf of Mr.
Moffitt, totaling $3,114 for FICA tax liability. Perquisites and other
personal benefits for each named executive officer were below the lesser of
$50,000 or 10% of the total annual salary and bonus.
(4) There were no restricted stock awards and no long-term incentive payouts
in any of the three years.
(5) The amounts shown in this column reflect the number of securities
underlying the options as adjusted to reflect the December 2, 1996 spin-
off of Consolidated Freightways Corporation. The pre-adjustment share
amounts, originally granted in 1996, 1995 and 1994, respectively, for
Messrs. Moffitt, Curry, Robertson, Quesnel, Schmoller and Beatson were:
Moffitt, 75,000, 175,000 and 77,000; Curry, 30,000, 30,000 and 105,375;
Robertson, 30,000, 30,000 and 30,375; Quesnel, 30,000, 30,000 and 30,375;
Schmoller, 23,000, 23,000 and 22,875; and Beatson, 30,000, 25,000 and
50,000, respectively.
(6) Amounts shown for 1996 in this column include:
(a) Payments by the Company for premiums for taxable group life insurance
on behalf of Messrs. Moffitt, Curry, Robertson, Quesnel, Schmoller and
Beatson of $11,443, $2,409, $1,302, $612, $599 and $693, respectively.
(b) Company contributions to the Thrift and Stock Plan accounts of Messrs.
Curry, Robertson, Quesnel, Schmoller and Beatson of $2,250 each.
(c) Payments by the Company to Mr. Moffitt totaling $73,517, made pursuant
to the terms of his employment agreement with the Company as
compensation for retirement benefits no longer payable following his
return to the Company in 1990.
(7) In addition, the Company also agreed, as part of an arrangement with
Mr. Curry in connection with his resignation of employment with the
Company, to make monthly payments to Mr. Curry in the amount of
$22,035.36. Such monthly payments commenced in January 1997 and are to
continue until such time as Mr. Curry retires from Consolidated
Freightways Corporation. The Company's arrangement with Mr. Curry further
provides that amounts otherwise payable to Mr. Curry upon retirement under
the Company's Supplemental Retirement Plan will be reduced by the
aggregate amount of such monthly payments.
13
<PAGE>
II. OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------
NUMBER OF
SECURITIES GRANT
UNDERLYING % OF TOTAL DATE
OPTIONS/ OPTIONS/SARS EXERCISE PRESENT
SARS GRANTED TO OR BASE VALUE(3)
GRANTED EMPLOYEES IN PRICE EXPIRATION --------
(#)(2) FISCAL YEAR ($/SHARE) DATE ($)
---------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Donald E. Moffitt......... 88,816/0 14.82% $18.05 07/01/06 $754,048
W. Roger Curry............ 35,526/0 5.93% $18.05 07/01/06 $301,616
Robert T. Robertson....... 35,526/0 5.93% $18.05 07/01/06 $301,616
Gregory L. Quesnel........ 35,526/0 5.93% $18.05 07/01/06 $301,616
Eberhard G.H. Schmoller... 27,237/0 4.55% $18.05 07/01/06 $231,242
David I. Beatson.......... 35,526/0 5.93% $18.05 07/01/06 $301,616
</TABLE>
- --------
(1) No SARs were issued in 1996.
(2) All options are exercisable in whole or in part on the first anniversary
of the grant date or earlier upon a change in control of the Company. The
amounts shown in this column reflect the number of securities underlying
the options as adjusted to reflect the December 2, 1996 spin-off of
Consolidated Freightways Corporation. The pre-adjustment share amounts,
originally granted in 1996 for Messrs. Moffitt, Curry, Robertson, Quesnel,
Schmoller and Beatson were 75,000, 30,000, 30,000, 30,000, 23,000 and
30,000, respectively.
(3) Present value based on modified Black-Scholes option pricing model which
includes assumptions for the following variables: (i) option exercise
prices equal the fair market values on the dates of grant; (ii) option
term equals 10 years, based on the industry standard of ten years for the
term of an option; (iii) volatility equals 0.3500; (iv) risk-free interest
rate equals 6.67% for the July 1996 grant; and (v) estimated future
average dividend yield equals 1.68%.
The Company's use of this model should not be construed as an endorsement
of its accuracy in valuing options. The Company's executive stock options
are not transferable so the "present value" shown cannot be realized by the
executive. Future compensation resulting from option grants will ultimately
depend on the amount by which the market price of the stock exceeds the
exercise price on the date of exercise.
14
<PAGE>
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL-YEAR END OPTION/SAR VALUES
The following table provides information on option/SAR exercises in 1996 by
the Named Executives and the value of such officers' unexercised options/SARs
at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
VALUE (#)(1) ($)(1)(2)(3)(4)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
--------------- -------- -------------- ------------------
<S> <C> <C> <C> <C>
Donald E. Moffitt....... -- -- 736,830/88,816 $4,947,445/373,027
W. Roger Curry.......... -- -- 415,898/35,526 2,780,315/149,209
Robert T. Robertson..... -- -- 334,016/35,526 2,499,516/149,209
Gregory L. Quesnel...... -- -- 242,124/35,526 1,539,946/149,209
Eberhard G.H. Schmoller. -- -- 162,301/27,237 897,793/114,395
David I. Beatson........ 6,600 $73,012 88,816/35,526 251,151/149,209
</TABLE>
- --------
(1) Mr. Moffitt has 736,830 exercisable options valued at $4,947,445; 88,816
unexercisable options valued at $373,027; and 0 stock appreciation rights
(SARs). Mr. Curry has 391,479 exercisable options valued at $2,525,940;
35,526 unexercisable options valued at $149,209; and 24,419 SARs the
appreciation on which is valued at $254,375. Mr. Robertson has 333,708
exercisable options valued at $2,449,516; 35,526 unexercisable options
valued at $149,209; and 308 SARs the appreciation on which is valued at
$0. Mr. Quesnel has 241,515 exercisable options valued at $1,537,664;
35,526 unexercisable options valued at $149,209; and 609 SARs the
appreciation on which is valued at $2,282. Mr. Schmoller has 159,217
exercisable options valued at $883,611; 27,237 unexercisable options
valued at $114,395; and 3,084 SARs the appreciation on which is valued at
$14,182. Mr. Beatson has 88,816 exercisable options valued at $251,151;
35,526 unexercisable options valued at $149,209; and 0 SARs. The value of
outstanding SARs was fixed as described in footnote 4 below when the
Company's SAR plan was terminated on March 31, 1990.
(2) Based on the closing stock price of $22.25 on December 31, 1996.
(3) Numbers shown reflect the value of options granted at various times over a
ten-year period.
(4) The Company's Incentive Compensation Stock Appreciation Rights Plan ("SAR
Plan") was terminated on March 31, 1990. Under the SAR plan, selected key
employees were afforded the opportunity to convert cash awards under the
Company's short-term incentive compensation plans into SARs corresponding
in value to the Company's shares of Common Stock. The SARs fluctuated in
value as the price of the Common Stock increased or decreased and earned
amounts equal to dividends declared on the Common Stock. When the SAR Plan
was terminated, the value of all outstanding SARs was fixed as of that
date. Interest equivalents have been credited to outstanding balances of
participants since April 1, 1990. Payouts are made in cash and commence
upon a participant's prior election or termination of employment with the
Company.
15
<PAGE>
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth information regarding awards made to the
Named Executives in 1996 under the Company's Return on Equity Plan. Except for
such awards, no Long-Term Incentive Plan Awards were made to the Named
Executives in 1996.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
NUMBER OF PERFORMANCE OR THE RETURN ON EQUITY PLAN(1)
SHARES, UNITS OTHER PERIOD UNTIL -----------------------------
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ------------- ------------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Donald E. Moffitt....... 140,000 12/31/98 $0 $602,000 $1,204,000
W. Roger Curry(2)....... 56,000 12/31/98 0 0 0
Robert T. Robertson..... 56,000 12/31/98 0 240,800 481,600
Gregory L. Quesnel...... 56,000 12/31/98 0 240,800 481,600
Eberhard G.H. Schmoller. 43,000 12/31/98 0 184,900 369,800
David I. Beatson........ 46,600 12/31/98 0 200,380 400,760
</TABLE>
- --------
(1) Target payouts are made if the Return on Equity for the applicable award
period is equal to a specified target percentage. For Returns on Equity
below the target percentage, the payouts decrease in accordance with a
specified payout table, and drop to zero if the Return on Equity is less
than the target percentage by 5 or more percentage points. For Returns on
Equity above the target percentage, the payouts increase in accordance
with the payout table, up to a maximum of twice the target payout if the
Return on Equity exceeds the target percentage by 5 or more percentage
points.
(2) Under the terms of the Return on Equity Plan, Mr. Curry forfeited his
units when he left the Company on December 2, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To the Board of Directors:
As members of the Compensation Committee of the Board of Directors, it is
our duty to administer the Company's executive compensation program to ensure
the attraction, retention and appropriate reward of executive officers, to
motivate their performance in the achievement of the Company's business
objectives, and to align the interests of executive officers with the long-
term interests of the Company's shareholders. Because the Company's
compensation policy is to pay for performance, each executive's total
compensation is based on the performance of the Company, the executive's
business unit, and the executive individually.
Executive compensation consists of three components: base salary, short-term
incentive compensation and long-term incentive compensation. The Company has
put a significant portion of total potential compensation for all executives
"at risk" through short-term and long-term incentive compensation. It is the
Company's policy to tie a greater portion of an executive's total potential
compensation to performance of the Company and its subsidiaries, than is the
case for Company employees generally. In keeping with the general policy of
pay for performance, an even greater portion of the total potential
compensation for the executives named in the Summary Compensation Table on
page 12 ("Named Executives") is tied to performance than is the case for
Company executives generally.
BASE SALARY
The Company strives to pay base salaries that are competitive with those of
other companies in the freight transportation industry, taking into account
the Company's size compared to those companies. The companies used for this
comparison are some of the same as those included in the
16
<PAGE>
performance graph that follows this report with the addition of several other
transportation companies. These additions were made on the basis of comparable
size.
For 1996, we reviewed base salaries for executive officers against
competitive salary data for officers in similar positions at peer companies as
well as surveys of executive compensation for general industry. The Committee
determined that executive salaries were generally competitive. As to the Named
Executives, the increase for Mr. Beatson for 1996 over 1995 includes an
adjustment to bring his salary more in line with competitive levels. The base
salaries for all Named Executives, other than Mr. Moffitt, were approved by
the Committee. The approval of Mr. Moffitt's 1996 salary is discussed below
under "CEO Compensation."
SHORT-TERM INCENTIVE COMPENSATION
The Committee has delegated to the Chief Executive Officer and other
executive officers the responsibility and authority to design and administer
the Company's short-term incentive plans. These plans provide for annual
awards 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 or service. The parent Company
goals generally represent a compilation of the profit goals of the
subsidiaries. The final incentive compensation plans are reviewed and approved
by the Committee. The plans are then incorporated into the Company's business
plan for the ensuing year and presented to the Board of Directors for approval
and adoption. In 1996, the performance objective for Messrs. Moffitt, Quesnel
and Schmoller was based on pre-tax, pre-incentive income of the parent
Company, the performance objective for Mr. Robertson was based on the pre-
incentive operating income of Con-Way Transportation Services, Inc., the
performance objective for Mr. Curry was based on the pre-incentive operating
income of CF MotorFreight, and the performance objective for Mr. Beatson was
based on pre-incentive operating income of Emery Air Freight Corporation.
Upon attainment of the established performance goals, participants, other
than the Named Executives, may receive incentive compensation ranging from 5%
to 60% of base salary (the participant's "participation factor"), according to
a participant's level of responsibility, with the opportunity to double that
percentage for performance in excess of the stated goals. For 1996, the
participation factors for the Chief Executive Officer and the other Named
Executives were 75% and 60% of salary, respectively, also with the opportunity
to double that percentage to 150% and 120% respectively for extraordinary
results.
In 1996, no bonuses were earned by participants in the CF MotorFreight
incentive compensation plan, and the bonuses earned by participants in the
Con-Way, Emery and parent Company incentive compensation plans were only a
fraction of the participants' participation factors. As to the Named
Executives, Messrs. Moffitt, Quesnel and Schmoller earned incentive
compensation of 51%, 40.8% and 40.8% respectively, of their respective
salaries, under the parent Company plan. Similarly, Mr. Robertson earned
incentive compensation of 33.7% of his salary, under the Con-Way plan; and Mr.
Beatson earned incentive compensation of 24% of his salary, under the Emery
plan. Mr. Curry earned no incentive compensation under the CF MotorFreight
plan. Bonuses for the Named Executives are reflected in the Summary
Compensation Table for Compensation of Executive Officers.
In addition to the bonuses which were earned by Messrs. Moffitt, Quesnel and
Schmoller under the incentive compensation plan described above, in 1996 Mr.
Moffitt received a special incentive compensation award of $700,000, and
Messrs. Quesnel and Schmoller received special incentive compensation awards
of $400,000 each, in recognition of their contributions in connection with the
successful spin-off of Consolidated Freightways Corporation on December 2,
1996.
17
<PAGE>
Effective July 1, 1996, the Committee also instituted a new annual bonus
program for operating company executives, with bonus payments tied to the
achievement of targeted operating ratios. Among the Named Executives, Messrs.
Curry, Robertson and Beatson were eligible to participate in the new bonus
plan. Based upon results of operations for the second half of 1996, Mr.
Robertson earned a bonus of $63,876. Messrs. Curry and Beatson did not earn
bonuses under the program. The Committee has decided to continue the annual
bonus program in 1997.
LONG-TERM INCENTIVE COMPENSATION
We believe that executives should have a large stake in the risks and
rewards of long-term ownership of the Company. The Stock Option Plan of 1988
provides for the granting of options to purchase shares of the Company's
Common Stock to key employees of the Company and its subsidiaries.
In 1996, the Company engaged an independent executive compensation
consultant to reassess the competitiveness of the Company's compensation
programs for senior management. As part of this study, the consultant was
asked to analyze and compare the Company'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 Company's
compensation package deliver pay opportunity that is situated well within
competitive norms for base salary and annual bonuses. The consultant concluded
that the long-term incentive compensation was at the low end of the
competitive range.
As part of the 1996 engagement, the consultant was asked to review various
stock option allocation methodologies and to recommend a formula appropriate
for the Company and consistent with practices in comparable companies. The
allocation formula recommended by the consultant takes into consideration each
executive's organizational position, decision-making influence and
accountability over the strategic results of the Company. After reviewing
information and suggestions provided by the consultant and adjusting for
individual factors, the Committee granted options for 510,000 shares to
executives of the Company and its subsidiaries. These awards were effective
July 1, 1996.
As in 1995, the Committee in 1996 continued the policy of granting the first
4,000 options to each executive in the form of Incentive Stock Options
("ISOs") as that term is used in (S)422 of the Internal Revenue Code of 1986.
The use of ISOs, recommended by the Company's independent compensation
consultant, is consistent with the Company's desire to encourage long-term
accumulation of Company stock by executives.
In order to bring the Company's long-term incentive compensation to
competitive levels, the compensation consultant recommended, and the Committee
approved, a long-term bonus plan for executives based on the increase in the
Company's shareholder equity. The plan, entitled the Return on Equity Plan,
pays senior executives bonuses based on the percentage increase in the
Company's shareholder equity. Awards were made under the Plan for the first
time in 1996. Since the increase in shareholder equity is measured over a
three-year period, there were no bonus payments made under the Plan in 1996.
Should the increase in shareholder equity continue at the same rate as in
1996, no payments would be made in respect of the 1996 awards.
Under the Long-Term Incentive Plan of 1988 and its predecessor, the Long-
Term Incentive Plan of 1978, key employees of the Company and its
subsidiaries, including 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.
18
<PAGE>
CEO COMPENSATION
The Committee recommended, and the Board approved, a salary increase of
approximately 3% for Mr. Moffitt for 1996, as the Company continued to move
toward more performance-based compensation for its executive officers. As the
only member of the Board who is also an executive officer of the Company, Mr.
Moffitt did not participate in deliberations concerning his own salary.
For 1996, Mr. Moffitt earned short-term incentive compensation of $341,884,
based on the pre-tax, pre-incentive income objective for the parent Company
established at the beginning of 1996. In addition, Mr. Moffitt received a
special incentive compensation award of $700,000. For 1996, Mr. Moffitt
elected to defer $822,512 of his short-term incentive compensation until his
retirement from the Company.
As discussed under "Long-Term Incentive Compensation" on page 18, the
Company's independent executive compensation consultant was specifically asked
to recommend a formula for stock option allocations. Consistent with the
recommended formula, Mr. Moffitt was awarded options for shares having an
aggregate exercise price of approximately three times his annual salary.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The federal income tax law limits the deductibility of certain compensation
paid to the Chief Executive Officer and the four other most highly compensated
executives (the "covered employees") in excess of the statutory maximum of $1
million per covered employee. The Committee's general policy is, where
feasible, to structure compensation paid to the covered employees so as to
maximize the deductibility of such compensation for federal income tax
purposes; however, there may be circumstances where portions of such
compensation will not be deductible. In 1996, as in prior years, no covered
employee's compensation exceeded such deductibility limit.
Under the federal income tax law, certain compensation, including
"performance-based compensation," is excluded from the $1 million
deductibility limit. The Company's 1997 Equity and Incentive Plan (the
"Plan"), which is being voted on by shareholders at the 1997 Annual Meeting of
Shareholders, would allow the Committee to make certain short- and long-term
incentive compensation awards to covered employees that would qualify as
"performance-based compensation" but only if the Company's shareholders
approve the Plan. See "Proposal to Approve the Company's 1997 Equity and
Incentive Plan" on page 23. The Committee believes that shareholder approval
of the Plan will enable the Committee to carry out its general policy of
structuring compensation paid to the covered employees so as to maximize the
deductibility of such compensation.
COMMITTEE MEMBERSHIP
Effective January 1, 1997, the Committee was reorganized by adding Mr.
Richard A. Clarke and Dr. W. Keith Kennedy, Jr. to the Committee. As of that
date, Mrs. Margaret G. Gill ceased serving as a member of the Committee. In
addition, Mr. Ronald E. Poelman ceased serving as a member of the Committee on
December 31, 1996, upon his retirement from the Board of Directors. All
compensation decisions in 1996 were made by the Committee comprised of Messrs.
Madden, Poelman, Rogers and Wayman, and Mrs. Gill. The foregoing report is
approved by Mr. Poelman and Mrs. Gill, and by the current members of the
Committee identified below.
THE COMPENSATION COMMITTEE
Richard B. Madden, Chairman Robert D. Rogers
Richard A. Clarke Robert P. Wayman
W. Keith Kennedy, Jr.
19
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee are all independent directors of the
Company and have no other relationships with the Company and its subsidiaries.
A COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN*
CONSOLIDATED FREIGHTWAYS, INC., S & P 500 INDEX, S & P MID CAP 400 INDEX, PEER
GROUP INDICES
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Consolidated S&P(R) New Peer Old Peer
Measurement Period Freightways, MidCap Group Index S&P Group Index
(Fiscal Year Covered) Inc. 400 Index (7 Stocks) 500(R) (7 Stocks)
- --------------------- ------------ --------- ----------- ------ ----------
- -
<S> <C> <C> <C> <C> <C>
Measurement Pt- 4Q 91 $100 $100 $100 $100 $100
FYE 4Q 92 $115 $112 $126 $108 $120
FYE 4Q 93 $154 $128 $151 $118 $140
FYE 4Q 94 $146 $123 $133 $120 $123
FYE 4Q 95 $175 $161 $141 $165 $125
FYE 4Q 96 $176 $192 $148 $203 $128
</TABLE>
* Assumes $100 invested on December 31, 1991 in Consolidated Freightways,
Inc., S & P 500 Index, S & P Mid Cap 400 Index and the Peer Group Indices,
described below, and that any dividends were reinvested.
Shareholder return on the Company's common stock was adjusted to reflect the
December 2, 1996 spin-off of Consolidated Freightways Corporation ("CFC") by
assuming that the value of the CFC stock received as a dividend was reinvested
in Company common stock. Effective at the close of business on December 2,
1996, the Company's common stock was added to the S&P Mid-Cap 400 Index and no
longer included in the S&P 500 Index.
20
<PAGE>
The New Peer Group Index is a market-capitalization weighted index
consisting of the common stocks of the following companies: Airborne Freight
Corporation, American Freightways Corporation, Caliber Systems Inc., Federal
Express Corporation, Pittston Co.--Burlington Group, Ryder System Inc. and US
Freightways Corporation.
The Old Peer Group Index is a market- capitalization weighted index
consisting of the common stocks of the following companies: Airborne Freight
Corporation, Arkansas Best Corporation, Federal Express Corporation, Roadway
Services, Inc., TNT Freightways Corporation, Worldway Corporation (formerly
Carolina Freight Corporation) and Yellow Corporation.
The New Peer Group Index more accurately reflects the Company's peers
following the spin-off of the Company's long haul, less than truckload
businesses on December 2, 1996. The Old Peer Group Index contained a number of
companies engaged in the long haul, less than truckload market which is no
longer a principal market for the Company following the spin-off.
21
<PAGE>
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
The following table illustrates the approximate annual pension that may
become payable to an employee in the higher salary classifications under the
Company's retirement plans.
<TABLE>
<CAPTION>
AVERAGE FINAL TOTAL EARNINGS
DURING HIGHEST FIVE YEARS OF PLAN PARTICIPATION
CONSECUTIVE YEARS 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......................... 70,834 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
$ 900,000......................... 214,834 299,945 385,056 470,167 555,278
$1,000,000......................... 238,834 333,445 428,056 522,667 617,278
$1,100,000......................... 262,834 366,945 471,056 575,167 679,278
$1,200,000......................... 286,834 400,445 514,056 627,667 741,278
$1,300,000......................... 310,834 433,945 557,056 680,167 803,278
</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" as
such terms are used in the Summary Compensation Table on page 12. 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 non-qualified plans.
As of December 31, 1996, Messrs. Moffitt, Curry, Robertson, Schmoller,
Quesnel and Beatson had 29, 28, 25, 22, 21 and 14 years of plan participation,
respectively.
----------------
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO CHANGE
THE NAME OF THE COMPANY
The Board of Directors of the Company has unanimously approved a proposed
amendment to the Company's Certificate of Incorporation which, if adopted,
will change the name of the Company from "Consolidated Freightways, Inc." to
"CNF Transportation Inc." The text of the proposed amendment is set forth in
Exhibit A to this Proxy Statement. In connection with the spin-off of
Consolidated Freightways Corporation ("CFC") on December 2, 1996 (the
"Distribution Date"), CFC was assigned the right to the name "Consolidated
Freightways, Inc." and related names, subject to the right of the Company to
use such names for a period of nine months after the Distribution Date. It is
therefore necessary for the Company to change its name from "Consolidated
Freightways, Inc." to another name. The Board recommends the name "CNF
Transportation Inc.," which combines the word "transportation" with the
Company's long-time New York Stock Exchange ticker symbol "CNF." Since the
Distribution Date, the Company has been doing business as CNF Transportation
Inc., although its
22
<PAGE>
legal name remains Consolidated Freightways, Inc. pending shareholder approval
of the proposed name change.
The change of the Company's name will not affect in any way the validity of
currently outstanding stock certificates or the trading of the Company's
securities. Shareholders will not be required to surrender or exchange any
share certificates currently held by them.
Approval of the proposal requires the affirmative vote of the holders of a
majority of the voting power entitled to vote thereon. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
PROPOSAL TO APPROVE THE CNF TRANSPORTATION INC.
1997 EQUITY AND INCENTIVE PLAN
The Board has placed on the agenda of the meeting a proposal for the
shareholders of the Company to approve the CNF Transportation Inc. 1997 Equity
and Incentive Plan (the "Plan"). The Plan was adopted by the Board on January
27, 1997, subject to approval by the shareholders of the Company.
The Plan is being submitted for shareholder approval so that, among other
reasons, certain awards granted under the Plan that are intended to qualify as
"performance-based compensation" under Section 162(m) ("Section 162(m)") of
the Internal Revenue Code of 1986, as amended (the "Code"), may so qualify.
Section 162(m) denies a deduction by an employer for certain compensation in
excess of $1 million per year paid by a publicly traded corporation to the
following individuals who are employed at the end of the employer's taxable
year ("Covered Employees"): the chief executive officer, and the four most
highly compensated executive officers (other than the chief executive officer)
for whom compensation disclosure is required under the proxy rules. Certain
compensation, including compensation based on the attainment of performance
goals, is excluded from this deduction limit if certain requirements are met.
One of these requirements is that the material terms pursuant to which the
compensation is to be paid be disclosed to and approved by the shareholders
prior to payment. Accordingly, if the Plan is approved by shareholders and the
other conditions of Section 162(m) relating to the exclusion for performance-
based compensation are satisfied, certain compensation paid to Covered
Employees pursuant to the Plan will not be subject to the deduction limit of
Section 162(m).
The Plan will, if so approved, be substituted in part for the Company's
Stock Option Plan of 1988 (the "1988 Plan") and, therefore, shares of Common
Stock previously authorized under the 1988 Plan but not granted prior to the
adoption of the Plan will no longer be available under the 1988 Plan. Any
awards previously granted under the 1988 Plan will remain outstanding pursuant
to the terms of the 1988 Plan. If the Plan is not approved, the 1988 Plan will
remain in effect in its present form.
The following description of the Plan is qualified in its entirety by
reference to the complete text of the Plan, attached hereto as Exhibit B.
Capitalized terms used herein will, unless otherwise defined, have the
meanings assigned to them in the text of the Plan.
GENERAL
The purposes of the Plan are to afford an incentive to selected employees of
the Company and its Subsidiaries and Affiliates to continue as employees, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business.
23
<PAGE>
The Plan generally provides for the grant of various types of stock- and
cash-based compensation. The Plan includes both a Long-Term Incentive Program
and an Annual Incentive Bonus Program. Pursuant to the Long-Term Incentive
Program, the Plan provides for the granting of stock options ("Options"),
including incentive stock options ("ISOs") and non-qualified stock options
("NQSOs"); stock appreciation rights ("SARs"), which may be granted in tandem
with or independently of Options; restricted stock and restricted stock units
("Restricted Awards"); dividend equivalents; and other stock- and cash-based
awards ("Other Awards"). As more fully described below, the Annual Incentive
Bonus Program provides for the granting of short-term cash-based awards. The
Plan also authorizes the Committee (as defined below) to provide procedures
for the deferral of the receipt of awards. All awards will be evidenced by an
agreement (an "Award Agreement") setting forth the terms and conditions
applicable thereto.
PLAN ADMINISTRATION
The Plan will be administered by a committee of the Board (the "Committee"),
the composition of which will at all times satisfy the provisions of Rule 16b-
3 promulgated under the Securities Exchange Act of 1934, as amended, and
Section 162(m). The Plan provides that no member of the Board or the Committee
will be liable for any action or determination taken or made in good faith
with respect to the Plan.
Subject to the terms of the Plan, the Committee has the right, among other
things, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including the authority to grant awards; to
determine the persons to whom and the time or times at which awards shall be
granted; to determine the type and number of awards to be granted, the number
of shares of stock to which an award may relate and the terms, conditions,
restrictions and Performance Goals (as defined below) relating to any award;
to determine Performance Goals no later than such time as required to ensure
that an underlying award which is intended to comply with the requirements of
Section 162(m) so complies; to determine whether, to what extent, and under
what circumstances an award may be settled, canceled, forfeited, exchanged or
surrendered; to make adjustments in the terms and conditions (including
Performance Goals, if any) applicable to awards; to designate affiliates; to
construe and interpret the Plan and any award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the award agreements; and to make all other determinations
deemed necessary or advisable for the administration of the Plan. However, the
Committee shall not have the authority to lower the exercise price of any
outstanding Option or SAR, nor shall the Committee have the authority to
settle, cancel or exchange any outstanding Option or SAR in consideration for
the grant of a new award with a lower exercise price.
SHARES SUBJECT TO THE PLAN
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan is 2,200,000, subject to adjustment as provided in the
Plan. The per share market value of the Common Stock was $24.75 on March 3,
1997. No more than 900,000 shares of Common Stock may be awarded in the
aggregate in respect of Restricted Stock and Restricted Stock Units over the
term of the Plan, and no more than 550,000 shares may be awarded in the form
of stock-based awards (including Options, SARs, Restricted Awards, dividend
equivalents and stock-based Other Awards) to a single individual over the term
of the Plan, in each case subject to adjustment as described below. Shares
subject to an award that is forfeited, canceled, exchanged, surrendered or
terminated will again be available for issuance under the Plan, to the extent
of such forfeiture, cancellation, exchange, surrender or termination.
24
<PAGE>
The Plan provides that, in the event of any dividend or other distribution,
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, which affects the stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of
rights under the Plan, then the Committee shall make such equitable changes or
adjustments as it deems necessary or appropriate to any or all of (i) the
number and kind of shares of stock or cash that may thereafter be issued in
connection with awards, (ii) the number and kind of shares of stock or cash
issued or issuable in respect of outstanding awards, (iii) the exercise price,
grant price, or purchase price relating to any award, (iv) the Performance
Goals and (v) the individual limitations applicable to awards.
ELIGIBILITY
Discretionary grants of awards may be made to any employee of the Company or
its Subsidiaries or Affiliates who is determined by the Committee to be
eligible for participation in the Plan, consistent with the purposes of the
Plan.
LONG-TERM INCENTIVE PROGRAM
OPTIONS
Options will vest and become exercisable over the exercise period, at such
times and upon such conditions as the Committee determines and as set forth in
the Award Agreement. The Committee may accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it deems
appropriate. Options are generally exercisable during the optionee's lifetime
only by the optionee. The Award Agreements will contain provisions regarding
the exercise of Options following termination of employment with or service to
the Company, including terminations due to the death, disability or retirement
of an award recipient, or upon a Change in Control of the Company (as defined
in the Plan). In addition to the terms and conditions governing NQSOs, ISOs
awarded under the Plan must comply with the requirements set forth in Section
422 of the Code.
The purchase price per share of Common Stock subject to the exercise of an
Option will be as determined by the Committee but may not be less than the
Fair Market Value per share on the date of grant, subject to adjustment in
accordance with the antidilution provisions described in "Shares Subject to
the Plan," above. Upon the exercise of any Option, the purchase price may be
fully paid in cash, by delivery of Common Stock previously owned by the
optionee equal in value to the purchase price, or by having shares of Common
Stock with a fair market value (on the date of exercise) equal to the purchase
price withheld by the Company or sold by a broker-dealer under qualifying
circumstances (or in any combination of the foregoing).
STOCK APPRECIATION RIGHTS
Unless the Committee determines otherwise, an SAR (1) granted in tandem with
an NQSO may be granted at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only be granted at the
time of grant of the related ISO. A SAR will be exercisable only to the extent
the underlying Option is exercisable.
Upon exercise of a SAR, the grantee will receive, with respect to each share
subject thereto, an amount equal in value to the excess of (1) the Fair Market
Value of one share of Common Stock on the date of exercise over (2) the grant
price of the SAR (which in the case of a SAR granted in tandem with an Option
will be the purchase price of the underlying Option, and which in the case of
any other SAR will be the price determined by the Committee).
With respect to SARs that are granted in tandem with Options, each such SAR
will terminate upon the termination or exercise of the pertinent portion of
the related Option, and the pertinent portion of the related Option will
terminate upon the exercise of any such SAR.
25
<PAGE>
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
A Restricted Stock award is an award of Common Stock subject to such
restrictions on transferability and other restrictions as the Committee may
impose at the date of grant or thereafter. Each Restricted Stock award shall
be subject to restrictions, imposed at the date of grant, relating to either
or both of (1) the attainment of Performance Goals by the Company or (2) the
continued employment of the grantee with the Company, a Subsidiary or an
Affiliate. With respect to any shares of Restricted Stock subject to
restrictions which lapse solely based on the grantee's continuation of
employment with the Company, a Subsidiary or an Affiliate, such restrictions
shall lapse over a vesting schedule (so long as the grantee remains employed
with the Company, a Subsidiary or an Affiliate) no shorter in duration than
three years from the date of grant; provided that, such vesting schedule may
provide for partial or installment vesting from time to time during such
period. Unless an Award Agreement provides otherwise, a Restricted Stock
recipient will have all of the rights of a shareholder during the restriction
period, including the right to vote Restricted Stock and the right to receive
dividends thereon.
If the recipient of an award of Restricted Stock terminates employment with
the Company during the applicable restricted period, Restricted Stock and any
accrued but unpaid dividends or dividend equivalents that are at that time
still subject to restrictions will be forfeited (unless the applicable Award
Agreement or the Committee provide otherwise).
Recipients of Restricted Stock Units will be entitled to receive cash or
shares of Common Stock, as determined by the Committee, upon expiration of the
restricted period specified for such Restricted Stock Units in the related
Award Agreement. The Committee may place restrictions on Restricted Stock
units which lapse, in whole or in part, on the attainment of certain
Performance Goals.
Upon termination of employment with the Company during any applicable
deferral period to which forfeiture conditions apply, or upon failure to
satisfy any other conditions precedent to the delivery of cash or Common Stock
pursuant to a Restricted Stock Unit award, all such units that are subject to
deferral or restriction will be forfeited (unless the applicable Award
Agreement or the Committee provides otherwise).
DIVIDEND EQUIVALENTS
Dividend equivalents may be granted, which relate to Options, Rights or
other awards under the Plan, or may be granted as freestanding awards. The
Committee may provide, at the grant date or thereafter, that dividend
equivalents will be paid or distributed to a grantee when accrued with respect
to Options, Rights or other awards under the Plan, or will be deemed to have
been reinvested in additional shares of Common Stock (or such other investment
vehicles as the Committee may specify). Dividend equivalents which are not
freestanding will be subject to all conditions and restrictions applicable to
the underlying awards to which they relate.
OTHER AWARDS
The Committee may grant such other stock-based or cash-based awards under
the Long-Term Incentive Plan as it deems consistent with the purposes of the
Plan. Such awards may be granted with value and payment contingent upon the
attainment of specified individual or Company (or Subsidiary) Performance
Goals, so long as such goals relate to periods of performance in excess of one
calendar year. The maximum payment in respect of such Other Awards that a
grantee may receive under the Plan with respect to any performance period is
$3 million. Payments in respect of such Other Awards may be decreased (or,
with respect to any grantee who is not a Covered Employee, increased) in the
sole discretion of the Committee. The Committee must certify the achievement
of Performance Goals prior to the payment of Other Awards.
26
<PAGE>
ANNUAL INCENTIVE BONUS PROGRAM
The Committee is authorized to grant awards to grantees under the Annual
Incentive Bonus Program (the "Program"). Awards granted under the Program may
be contingent on the attainment by the Company of one or more Performance
Goals over a period of one year or less. The maximum payment that any grantee
may receive under the Annual Incentive Bonus Program with respect to any plan
year is $3 million. Payments may be decreased (or, with respect to any
participant who is not a Covered Employee, increased) in the sole discretion
of the Committee based on such factors as it deems appropriate. No payment
shall be made prior to the certification by the Committee that any applicable
Performance Goals have been attained.
PERFORMANCE GOALS
The Committee may provide that the payment of an award (or vesting thereof)
will be contingent on the attainment of Performance Goals. Performance Goals
are generally defined in the Plan as goals which are based on one or more of
the following criteria: (i) pre-tax income or after-tax income, (ii) operating
profit, (iii) return on equity, assets, capital or investment, (iv) earnings
or book value per share, (v) sales or revenues, (vi) operating expenses, (vii)
stock price appreciation, (viii) total shareholder return (i.e., stock price
appreciation plus dividends) and (ix) implementation or completion of critical
projects or processes.
Where applicable, Performance Goals will be expressed in terms of attaining
a specified level of the particular criteria or attaining a specified increase
or decrease in the particular criteria, and may be applied to one or more of
the Company, a Subsidiary or Affiliate, or a division or strategic business
unit of the Company, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a combination
thereof, all as determined by the Committee. Performance Goals may include a
threshold level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified payments will be
made (or specified vesting will occur), and a maximum level of performance
above which no additional payment will be made (or at which full vesting will
occur). Performance Goals will be determined in accordance with generally
accepted accounting principles and are subject to certification by the
Committee. The Committee has the authority to make equitable adjustments to
the Performance Goals in recognition of unusual or non-recurring events
affecting the Company or any Subsidiary or Affiliate or the financial
statements of the Company or any Subsidiary or Affiliate, in response to
changes in applicable laws or regulations, or to account for items of gain,
loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence or related to the disposal of a segment of a business
or related to a change in accounting principles.
AMENDMENT; TERMINATION
The Plan will terminate ten years after its adoption by the Board, unless
sooner terminated. The Board may at any time terminate or amend the Plan in
whole or in part. However, termination or amendment of the Plan may not
adversely affect the rights of any participant without his or her consent,
under awards previously granted under the Plan.
MISCELLANEOUS
The Company is authorized to withhold from any award granted, any payment
relating to an award under the Plan (including from a distribution of Common
Stock), or any other payment to a grantee, amounts of withholding and other
taxes due in connection with the award, and to take such other action as the
Committee may deem advisable to enable the Company and grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to the award. This authority includes the right to withhold or
receive Common Stock or other property and to make cash payments in respect
thereof in satisfaction of a grantee's tax obligations.
27
<PAGE>
Unless otherwise provided by the Committee in an Award Agreement, awards
granted under the Plan are not transferable, except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of certain federal income tax consequences
relating to awards that may be granted pursuant to the Plan.
STOCK OPTIONS
NON-QUALIFIED STOCK OPTIONS
In the case of an NQSO, an optionee generally will not be taxed upon the
grant of an option. Rather, at the time of exercise of such NQSO (and in the
case of an untimely exercise of an ISO), the optionee will generally recognize
ordinary income for federal income tax purposes in an amount equal to the
excess of the then fair market value of the shares purchased over the purchase
price. The Company will generally be entitled to a tax deduction at the time
and in the amount that the optionee recognizes ordinary income.
INCENTIVE STOCK OPTIONS
In the case of an ISO, an optionee will generally be in receipt of taxable
income upon the disposition of the shares acquired upon exercise of the ISO,
rather than upon the grant of the ISO or upon its timely exercise; in such
event, the Company will not be entitled to a tax deduction. If certain holding
period requirements have been satisfied with respect to outstanding shares so
acquired, taxable income will constitute long-term capital gain. The tax
consequences of any untimely exercise of an ISO will be determined in
accordance with the rules applicable to NQSOs. The amount by which the fair
market value of the stock on the exercise date of an ISO exceeds the option
price will generally be an item of tax preference for purposes of the
"alternative minimum tax" imposed by Section 55 of the Code.
EXERCISE WITH SHARES
An optionee who pays the purchase price upon exercise of an option, in whole
or in part, by delivering already owned shares of Common Stock will generally
not recognize gain or loss on the shares surrendered at the time of such
delivery, except under certain circumstances relating to ISOs. Rather, such
gain or loss recognition will generally occur upon disposition of the shares
acquired in substitution for the shares surrendered.
SARS
A grant of stock appreciation rights has no federal income tax consequences
at the time of grant. Upon the exercise of stock appreciation rights, the
value of the shares and cash received is generally taxable to the grantee as
ordinary income, and the Company will be entitled to a corresponding
deduction.
RESTRICTED STOCK
Generally, the grant of restricted stock has no federal income tax
consequences at the time of grant. Rather, at the time the shares are no
longer subject to a substantial risk of forfeiture (as defined in the Code),
the grantee will recognize ordinary income in an amount equal to the fair
market value of such shares. A grantee may, however, elect to be taxed at the
time of the grant. The Company generally will be entitled to a deduction at
the time and in the amount that the grantee recognizes ordinary income.
28
<PAGE>
RESTRICTED STOCK UNITS
In the case of Restricted Stock Units, a grantee generally will not be taxed
upon the grant of such units but, rather, will recognize ordinary income upon
the receipt of cash, shares or other property in payment of such Units. The
amount recognized as ordinary income will equal the amount of cash received
plus the value of shares and other property received. The Company will be
entitled to a deduction at the time and in the amount that the grantee
recognizes ordinary income.
The foregoing summary constitutes a brief overview of the principal federal
income tax consequences relating to the above-described awards based upon
current federal income tax laws. This summary is not intended to be exhaustive
and does not describe state, local or foreign tax consequences.
AMOUNTS AWARDED UNDER THE PLAN
Because participation in the Plan and the amount and terms of awards under
the Plan are at the discretion of the Committee (subject to the terms of the
Plan) and because Performance Goals may vary from award to award and from
grantee to grantee, benefits under the Plan are not presently determinable.
Compensation paid and other benefits granted to named executive officers of
the Company for the 1996 fiscal year are set forth in the Summary Compensation
Table appearing on page 12 of this Proxy Statement.
SHAREHOLDER APPROVAL; BOARD RECOMMENDATION
Approval of the proposal requires the affirmative vote of a majority of
votes cast with respect to the proposal at the meeting. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE CNF TRANSPORTATION INC. 1997
EQUITY AND INCENTIVE PLAN.
----------------
APPOINTMENT OF AUDITORS
At last year's annual meeting, shareholders approved the appointment of
Arthur Andersen LLP as independent public accountants to audit the
consolidated financial statements of the Company for the year ended December
31, 1996. The Board recommends that shareholders vote in favor of ratifying
the reappointment of Arthur Andersen LLP as the Company's independent auditors
for the year ending December 31, 1997. A representative of the firm will be
present at the Annual Meeting of Shareholders with the opportunity to make a
statement if he or she desires to do so and to respond to questions from
shareholders.
The Company has been informed by Arthur Andersen LLP that neither the firm
nor any of its members or their associates has any direct financial interest
or material indirect financial interest in the Company or its affiliates.
----------------
29
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----------------
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 15, 1997,
the only persons known to the Company to own beneficially an interest in 5% or
more of the shares of Common Stock or Series B Preferred Stock are set forth
below. All such information is as reported in the most recent Schedule 13G
filed by each such person with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- --------------------- --------
<S> <C> <C>
FMR Corp................................... 6,196,620 Common (1) 14.1%
82 Devonshire Street
Boston, MA 02109
J.P. Morgan & Co., Incorporated............ 5,979,397 Common (2) 13.5%
60 Wall Street
New York, NY 10260
The Goldman Sachs Group, L.P............... 3,664,184 Common (3) 8.3%
and Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
T. Rowe Price Associates, Inc.............. 724,542 Preferred (4) 7.2%
and T. Rowe Price Trust Company
100 East Pratt Street
Baltimore, MD 21202
</TABLE>
- --------
(1) FMR Corp., through its subsidiaries Fidelity Management & Research Company
and Fidelity Management Trust Company, and Fidelity International Limited,
an affiliate of FMR Corp., have, in the aggregate, sole voting power over
57,868 shares, shared voting power over 0 shares, sole dispositive power
over 6,196,620 shares and shared dispositive power over 0 shares.
(2) J.P. Morgan & Co., Incorporated has sole voting power over 3,796,904
shares, shared voting power over 30,540 shares, sole dispositive power
over 5,936,157 shares and shared dispositive power over 40,940 shares.
(3) The Goldman Sachs Group, L.P. and Goldman Sachs & Co. have sole voting
power over 0 shares, shared voting power over 3,557,584 shares, sole
dispositive power over 0 shares and shared dispositive power over
3,557,584 shares.
(4) T. Rowe Price Associates, Inc. ("Price Associates") has sole voting power
over 0 shares, shared voting power over 4,434,486 shares, sole dispositive
power over 0 shares and shared dispositive power over 3,411,143 shares. T.
Rowe Price Trust Company, the trustee under the Company's Thrift and Stock
Plan ("Trust Company"), has sole voting power over 0 shares, shared voting
power over 4,434,486 shares, sole dispositive power over 0 shares and
shared dispositive power over 3,4111,143 shares.
The holdings consist of 724,542 shares of Series B Preferred Stock (which
Preferred Stock is held pursuant to the Consolidated Freightways, Inc.
Thrift and Stock Plan). Such shares of Series B Preferred Stock represent
approximately 81% of all outstanding shares of Series B Preferred Stock.
Each share of Series B Preferred Stock has the right to 6.1 noncumulative
votes on each matter submitted to the meeting. The Series B Preferred Stock
is convertible at the Trust Company's option under certain circumstances
into 4.708 shares of Common Stock for each share of Series B Preferred
Stock. On a fully converted basis, these holdings represent approximately
7% of the Common Stock.
Price Associates serves as investment advisor with shared power to vote
these securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates
30
<PAGE>
and the Trust Company are deemed to be the beneficial owners of the Common
Stock and Series B Preferred Stock which has not been allocated to
participants' accounts under the Thrift and Stock Plan. However, Price
Associates and the Trust Company expressly disclaim that they are, in fact,
the beneficial owners of such securities.
----------------
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that during 1996 its executive officers and directors
have complied with all filing requirements under Section 16 of the Securities
Exchange Act of 1934, as amended.
----------------
CONFIDENTIAL VOTING
Under the confidential voting policy adopted by the Board of Directors, all
proxies, ballots and voting materials that identify the votes of specific
shareholders will be kept confidential from the Company except as may be
required by law or to assist in the pursuit or defense of claims or judicial
actions, and except in the event of a contested proxy solicitation. In
addition, comments written on proxies, ballots, or other voting materials,
together with the name and address of the commenting shareholder, will be made
available to the Company without reference to the vote of the shareholder,
except where such vote is included in the comment or disclosure is necessary
to understand the comment. Certain vote tabulation information may also be
made available to the Company, provided that the Company is unable to
determine how any particular shareholder voted.
Access to proxies, ballots and other shareholder voting records will be
limited to inspectors of election who are not employees of the Company and to
certain Company employees and agents engaged in the receipt, count and
tabulation of proxies.
----------------
SUBMISSION OF SHAREHOLDER PROPOSALS
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 Secretary at the Company's executive offices located
at 3240 Hillview Avenue, Palo Alto, California 94304, and must be received by
November 24, 1997.
31
<PAGE>
----------------
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 10, 1997.
Please direct your written request to the Secretary at the Company's executive
offices located at 3240 Hillview Avenue, Palo Alto, California 94304.
Your Board knows of no other matters to be presented at the meeting. If any
other matters come before the meeting, it is the intention of the proxy
holders to vote on such matters in accordance with their best judgment.
----------------
The expense of proxy solicitation will be borne by the Company. The
solicitation is being made by mail and may also be made by telephone,
telegraph, facsimile, or personally by directors, officers, and regular
employees of the Company who will receive no extra compensation for their
services. In addition, the Company has engaged the services of Georgeson &
Company, Inc., New York, New York, to assist in the solicitation of proxies at
a fee of $10,000, plus expenses. The Company has also engaged Chase Mellon
Shareholder Services to act as inspector of elections. The Company will
reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners of the Company's voting stock.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING WHITE PROXY CARD AS SOON AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
EBERHARD G.H. SCHMOLLER
Secretary
March 24, 1997
32
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION
WITH CHANGES INDICATED
The Certificate of Incorporation, as amended, of the Company is further
amended by changing Article FIRST to read as follows:
FIRST. The name of the corporation is Consolidated Freightways, Inc. CNF
Transportation Inc.
Exhibit A-1
<PAGE>
EXHIBIT B
CNF TRANSPORTATION INC.
1997 EQUITY AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purposes of the 1997 Equity and Incentive Plan of CNF Transportation
Inc. (the "Plan") are to afford an incentive to selected employees of CNF
Transportation Inc. (the "Company") or any Subsidiary or Affiliate that now
exists or hereafter is organized or acquired, to continue as employees, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business. Pursuant to the Long-Term Incentive Program described
herein, there may be granted stock options (including "incentive stock
options" and "nonqualified stock options"), stock appreciation rights (either
in connection with stock options granted under the Plan or independently of
stock options), restricted stock, restricted stock units, dividend equivalents
and other long-term stock- or cash-based Awards, and pursuant to the Annual
Incentive Bonus Program described herein, there may be granted short-term
stock- or cash-based Awards. The Plan is designed so that Awards granted
hereunder intended to comply with the requirements for "performance-based
compensation" under Section 162(m) of the Code may comply with such
requirements and insofar as may be applicable to such Awards, the Plan shall
be interpreted in a manner consistent with such requirements.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means an affiliate of the Company, as defined in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(b) "Annual Incentive Bonus Program" means the program described in Section
6(c) hereof.
(c) "Award" means any Option, SAR, Restricted Stock, Restricted Stock Unit,
Dividend Equivalent or Other Stock-Based Award or Other Cash-Based
Award granted under the Plan.
(d) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means a change in control of the Company, which
will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than (A) the Company, (B) any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company, and (C) any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of Stock), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its Affiliates)
representing 25% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) the following individuals cease for any reason to consitute a
majority of the number of directors then serving individuals who, on
the Effective Date, constitute the Board and
Exhibit B-1
<PAGE>
any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by
the Company's stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or
recommended;
(iii) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving or parent entity) more than 50% of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger
or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined), directly or
indirectly, acquired 25% or more of the combined voting power of the
Company's then outstanding securities (not including in the
securities beneficially owned by such person any securities acquired
directly from the Company or its Affiliates); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an agreement for
the sale or disposition by the Company of all or substantially all of
the Company's assets (or any transaction having a similar effect),
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 50%
of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to
such sale.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(h) "Committee" means the committee established by the Board to administer
the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3 and Section 162(m) of the Code; provided,
however, that the Board may, if it so chooses, retain authority to
administer all or any part of the Plan and, to the extent the Board does
so, references in the Plan to "Committee" shall mean and be references
to the Board.
(i) "Company" means CNF Transportation Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(j) "Dividend Equivalent" means a right, granted to a Grantee under Section
6(b)(v), to receive cash or Stock equal in value to dividends paid with
respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another
Award, and may be paid currently or on a deferred basis.
(k) "Effective Date" means January 27, 1997, the date that the Plan was
adopted by the Board.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(m) "Fair Market Value" per share of Stock as of a particular date means (i)
the closing sales price per share of Stock on the national securities
exchange on which the Stock is principally
Exhibit B-2
<PAGE>
traded, for the last preceding date on which there was a sale of such
Stock on such exchange, or (ii) if the shares of Stock are then traded
in an over-the-counter market, the average of the closing bid and asked
prices for the shares of Stock in such over-the- counter market for the
last preceding date on which there was a sale of such Stock in such
market, or (iii) if the shares of Stock are not then listed on a
national securities exchange or traded in an over-the-counter market,
such value as the Committee, in its sole discretion, shall determine.
(n) "Grantee" means a person who, as an employee of the Company, a
Subsidiary or an Affiliate, has been granted an Award under the Plan.
(o) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(p) "Long-Term Incentive Program" means the program described in Section
6(b) hereof.
(q) "NQSO" means any Option that is designated as a nonqualified stock
option.
(r) "Option" means a right, granted to a Grantee under Section 6(b)(i), to
purchase shares of Stock. An Option may be either an ISO or an NQSO;
provided that ISOs may be granted only to employees of the Company or a
Subsidiary.
(s) "Other Cash-Based Award" means an Award under the Annual Incentive Bonus
Program or the Long-Term Incentive Program, which Award is not
denominated or valued by reference to Stock, including an Award which is
subject to the attainment of Performance Goals or otherwise as permitted
under the Plan.
(t) "Other Stock-Based Award" means an Award under the Long-Term Incentive
Program that is denominated or valued in whole or in part by reference
to Stock, including, but not limited to (1) restricted or unrestricted
Stock awarded subject to the attainment of Performance Goals or
otherwise as permitted under the Plan, and (2) a right granted to a
Grantee to acquire Stock from the Company for cash.
(u) "Performance Goals" means performance goals based on one or more of the
following criteria: (i) pre-tax income or after-tax income, (ii)
operating profit, (iii) return on equity, assets, capital or investment,
(iv) earnings or book value per share, (v) sales or revenues, (vi)
operating expenses, (vii) Stock price appreciation, (viii) total
shareholder return (i.e., Stock price appreciation plus dividends) and
(ix) implementation or completion of critical projects or processes.
Where applicable, the Performance Goals may be expressed in terms of
attaining a specified level of the particular criteria or the attainment
of a percentage increase or decrease in the particular criteria, and may
be applied to one or more of the Company, a Subsidiary or Affiliate, or
a division or strategic business unit of the Company, or may be applied
to the performance of the Company relative to a market index, a group of
other companies or a combination thereof, all as determined by the
Committee. The Performance Goals may include a threshold level of
performance below which no payment will be made (or no vesting will
occur), levels of performance at which specified payments will be made
(or specified vesting will occur), and a maximum level of performance
above which no additional payment will be made (or at which full vesting
will occur). Each of the foregoing Performance Goals shall be determined
in accordance with generally accepted accounting principles and shall be
subject to certification by the Committee; provided that the Committee
shall have the authority to make equitable adjustments to the
Performance Goals in recognition of unusual
Exhibit B-3
<PAGE>
or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary
or Affiliate, in response to changes in applicable laws or regulations,
or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or
related to the disposal of a segment of a business or related to a
change in accounting principles.
(v) "Plan" means this CNF Transportation Inc. 1997 Equity and Incentive
Plan, as amended from time to time.
(w) "Plan Year" means a calendar year.
(x) "Restricted Stock" means an Award of shares of Stock to a Grantee under
Section 6(b)(iii) that may be subject to certain transferability and
other restrictions and to a risk of forfeiture (including by reason of
not satisfying certain Performance Goals).
(y) "Restricted Stock Unit" means a right granted to a Grantee under Section
6(b)(iv) to receive Stock or cash at the end of a specified deferral
period, which right may be conditioned on the satisfaction of certain
requirements (including the satisfaction of certain Performance Goals).
(z) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16
of the Exchange Act, including any successor to such Rule.
(aa) "Stock" means shares of the common stock, par value $.625 per share, of
the Company.
(bb) "SAR" or "Stock Appreciation Right" means the right, granted to a
Grantee under Section 6(b)(ii), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant
to the date of exercise of the right, with payment to be made in cash
or Stock as specified in the Award or determined by the Committee.
(cc) "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if, at the time of granting of an Award,
each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations
in the chain.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom
and the time or times at which Awards shall be granted; to determine the type
and number of Awards to be granted, the number of shares of Stock to which an
Award may relate and the terms, conditions, restrictions and Performance Goals
relating to any Award; to determine Performance Goals no later than such time
as is required to ensure that an underlying Award which is intended to comply
with the requirements of Section 162(m) of the Code so complies; to determine
whether, to what extent, and under what circumstances an Award may be settled,
canceled, forfeited, exchanged, or surrendered; to make adjustments in the
terms and conditions (including Performance Goals) applicable to Awards; to
designate Affiliates; to construe and interpret the Plan and any Award; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the Award Agreements (which need not be
identical for each Grantee); and to make all other determinations deemed
necessary or advisable for the administration of the Plan. Notwithstanding the
foregoing and except as otherwise provided in the second paragraph of Section
5 below, the Committee shall not have the authority to lower the exercise
price of any outstanding option or SAR, nor shall the Committee have the
authority to settle, cancel or exchange any outstanding option or SAR in
consideration for the grant of a new award with a lower exercise price.
Exhibit B-4
<PAGE>
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person
or participating by conference telephone at a meeting or by written consent.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.
4. ELIGIBILITY.
Awards may be granted to selected employees of the Company and its present
or future Subsidiaries and Affiliates, in the discretion of the Committee. In
determining the persons to whom Awards shall be granted and the type of any
Award (including the number of shares to be covered by such Award), the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN.
The maximum number of shares of Stock reserved for the grant or settlement
of Awards under the Plan shall be 2,200,000, subject to adjustment as provided
herein. No more than 550,000 shares of Stock may be awarded in the aggregate
in respect of stock-based awards (including Options, SARs, Restricted Stock
and Restricted Stock Units) to a single individual over the term of the Plan
and no more than 900,000 shares of Stock may be awarded in the aggregate in
respect of Restricted Stock and Restricted Stock Units to all Grantees over
the term of the Plan, in each case subject to adjustment as provided herein.
Determinations made in respect of the limitation set forth in the preceding
sentence shall be made in a manner consistent with Section 162(m) of the Code.
Such shares may, in whole or in part, be authorized but unissued shares or
shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise. If any shares subject to an
Award are forfeited, canceled, exchanged or surrendered or if an Award
otherwise terminates or expires without a distribution of shares to the
Grantee, the shares of stock with respect to such Award shall, to the extent
of any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for Awards under the Plan. Upon the exercise of
any Award granted in tandem with any other Awards or awards, such related
Awards or awards shall be canceled to the extent of the number of shares of
Stock as to which the Award is exercised and, notwithstanding the foregoing,
such number of shares shall no longer be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or recapitalization, Stock
split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Grantees under
the Plan, then the Committee shall make such equitable changes or adjustments
as it deems necessary or appropriate to any or all of (i) the number and kind
of shares of Stock or cash that may thereafter be issued in connection with
Awards, (ii) the number and kind of shares of Stock or cash issued or issuable
in respect of outstanding Awards, (iii) the exercise price, grant price, or
purchase price relating to any Award; provided that, with respect to ISOs,
such adjustment shall be made in accordance with Section 424(h) of the Code,
(iv) the Performance Goals and (v) the individual limitations applicable to
Awards.
Exhibit B-5
<PAGE>
6. SPECIFIC TERMS OF AWARDS.
(a) General. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made
in Stock or cash, or a combination thereof, as the Committee shall determine
at the date of grant or thereafter and may be made in a single payment or
transfer, in installments, or on a deferred basis. The Committee may make
rules relating to installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments.
In addition to the foregoing, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter, such additional terms
and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine.
(b) Long-Term Incentive Program. The Committee is authorized to grant to
Grantees the following Awards under the Long-Term Incentive Program, as deemed
by the Committee to be consistent with the purposes of the Plan. The Committee
shall determine the terms and conditions of such Awards at the date of grant
or thereafter.
(i) Options. The Committee is authorized to grant Options to Grantees
on the following terms and conditions:
(A) Type of Award. The Award Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an
NQSO.
(B) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the
Committee; provided that, such exercise price shall be not less
than the Fair Market Value of a share on the date of grant of
such Option. The exercise price for Stock subject to an Option
may be paid in cash or by an exchange of Stock previously owned
by the Grantee, or a combination of both, in an amount having a
combined value equal to such exercise price. A Grantee may also
elect to pay all or a portion of the aggregate exercise price by
having shares of Stock with a Fair Market Value on the date of
exercise equal to the aggregate exercise price withheld by the
Company or sold by a broker-dealer.
(C) Term and Exercisability of Options. Options shall be exercisable
over the exercise period (which shall not exceed ten years from
the date of grant), at such times and upon such conditions as
the Committee may determine, as reflected in the Award
Agreement; provided that, the Committee shall have the authority
to accelerate the exercisability of any outstanding Option at
such time and under such circumstances as it, in its sole
discretion, deems appropriate. An Option may be exercised to the
extent of any or all full shares of Stock as to which the Option
has become exercisable, by giving written notice of such
exercise to the Committee or its designated agent.
(D) Termination of Employment, etc. An Option may not be exercised
unless the Grantee is then in the employ of the Company or a
Subsidiary or an Affiliate (or a company or a parent or
subsidiary company of such company issuing or assuming the
Option in a transaction to which Section 424(a) of the Code
applies), and unless the Grantee has remained continuously so
employed since the date of grant of the Option; provided that,
the Award Agreement may contain provisions extending the
exercisability of Options, in the event of specified
terminations, to a date not later than the expiration date of
such Option.
(E) Other Provisions. Options may be subject to such other
conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such
Options, as the Committee may prescribe in its discretion or as
may be required by applicable law.
Exhibit B-6
<PAGE>
(ii) SARs. The Committee is authorized to grant SARs to Grantees on the
following terms and conditions:
(A) In General. Unless the Committee determines otherwise, an SAR
(1) granted in tandem with an NQSO may be granted at the time of
grant of the related NQSO or at any time thereafter or (2)
granted in tandem with an ISO may only be granted at the time of
grant of the related ISO. An SAR granted in tandem with an
Option shall be exercisable only to the extent the underlying
Option is exercisable.
(B) SARs. An SAR shall confer on the Grantee a right to receive an
amount with respect to each share subject thereto, upon exercise
thereof, equal to the excess of (1) the Fair Market Value of one
share of Stock on the date of exercise over (2) the grant price
of the SAR (which in the case of an SAR granted in tandem with
an Option shall be equal to the exercise price of the underlying
Option, and which in the case of any other SAR shall be such
price as the Committee may determine).
(iii) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Grantees on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as
the Committee may impose at the date of grant or thereafter,
which restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments, or
otherwise, as the Committee may determine; provided, however,
notwithstanding the foregoing, each Restricted Stock award shall
be subject to restrictions, imposed at the date of grant,
relating to either of both of (1) the attainment of Performance
Goals by the Company or (2) the continued employment of the
Grantee with the Company, a Subsidiary or an Affiliate. With
respect to any shares of Restricted Stock subject to
restrictions which lapse solely based on the Grantee's
continuation of employment with the Company, a Subsidiary or an
Affiliate, such restrictions shall lapse over a vesting schedule
(so long as the Grantee remains employed with the Company, a
Subsidiary or an Affiliate) no shorter in duration than three
years from the date of grant; provided that, such vesting
schedule may provide for partial or installment vesting from
time to time during such period. Except to the extent otherwise
provided in an Award Agreement, a Grantee granted Restricted
Stock shall have all of the rights of a stockholder including,
without limitation, the right to vote Restricted Stock and the
right to receive dividends thereon (subject to subsection (D)
below).
(B) Forfeiture. Upon termination of employment with the Company or a
Subsidiary or Affiliate, during the applicable restriction
period, Restricted Stock and any accrued but unpaid dividends or
Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; provided that, the Committee
may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted
Stock.
(C) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Grantee, such certificates shall
bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Restricted Stock, and the
Company shall retain physical possession of the certificate.
Exhibit B-7
<PAGE>
(D) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date, or deferred for payment to
such date as determined by the Committee, in cash or in shares
of unrestricted Stock having a Fair Market Value equal to the
amount of such dividends. Stock distributed in connection with a
stock split or stock dividend, and distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such
Stock or has been distributed.
(iv) Restricted Stock Units. The Committee is authorized to grant
Restricted Stock Units to Grantees, subject to the following terms
and conditions:
(A) Award and Restrictions. Delivery of Stock or cash, as determined
by the Committee, will occur upon expiration of the deferral
period specified for Restricted Stock Units by the Committee.
The Committee may condition the vesting and/or payment of
Restricted Stock Units, in whole or in part, upon the attainment
of Performance Goals.
(B) Forfeiture. Upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture
conditions apply, or upon failure to satisfy any other
conditions precedent to the delivery of Stock or cash to which
such Restricted Stock Units relate, all Restricted Stock Units
that are then subject to deferral or restriction shall be
forfeited; provided that, the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Stock Units will be waived in whole or in
part in the event of termination resulting from specified
causes, and the Committee may in other cases waive in whole or
in part the forfeiture of Restricted Stock Units.
(v) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Grantees. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested
in additional Stock, or other investment vehicles as the Committee
may specify, provided that Dividend Equivalents (other than
freestanding Dividend Equivalents) shall be subject to all
conditions and restrictions of the underlying Awards to which they
relate.
(vi) Other Stock- or Cash-Based Awards. The Committee is authorized to
grant Awards to Grantees in the form of Other Stock-Based Awards
or Other Cash-Based Awards, as deemed by the Committee to be
consistent with the purposes of the Plan. Awards granted pursuant
to this paragraph may be granted with value and payment contingent
upon the attainment of certain Performance Goals, so long as such
goals relate to periods of performance in excess of one calendar
year. The Committee shall determine the terms and conditions of
such Awards at the date of grant or thereafter. The maximum
payment that any Grantee may receive pursuant to an Award granted
under this paragraph in respect of any performance period shall be
$3,000,000. Payments earned hereunder may be decreased or, with
respect to any Grantee who is not a "covered employee" within the
meaning of Section 162(m) of the Code (a "Covered Employee"),
increased in the sole discretion of the Committee based on such
factors as it deems appropriate. No payment shall be made prior to
the certification by the Committee that any applicable Performance
Goals have been attained. The Committee may establish such other
rules applicable to the Other Stock- or Cash-Based Awards to the
extent not inconsistent with Section 162(m) of the Code.
Exhibit B-8
<PAGE>
(c) Annual Incentive Bonus Program. The Committee is authorized to grant
Awards to Grantees pursuant to the Annual Incentive Bonus Program in the form
of Other Cash-Based Awards, as deemed by the Committee to be consistent with
the purposes of the Plan. Grantees will be selected by the Committee with
respect to participation for a Plan Year. Each Award granted under the Annual
Incentive Bonus Program in respect of a Plan Year will be contingent on the
attainment by the Company of one or more Performance Goals. The maximum
payment that any Grantee may receive pursuant to an Award granted under the
Annual Incentive Bonus Program in respect of any Plan Year shall be
$3,000,000. Payments earned hereunder may be decreased or, with respect to any
Grantee who is not a Covered Employee, increased in the sole discretion of the
Committee based on such factors as it deems appropriate. No payment shall be
made prior to the certification by the Committee that any applicable
Performance Goals have been attained. The Committee may establish such other
rules applicable to the Annual Incentive Bonus Program to the extent not
inconsistent with Section 162(m) of the Code.
7. CHANGE IN CONTROL PROVISIONS.
Unless otherwise determined by the Committee and evidenced in an Award
Agreement, in the event of a Change of Control:
(a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested, and any
Performance Goals imposed with respect to Awards shall be deemed to be
fully achieved.
8. GENERAL PROVISIONS.
(a) Nontransferability. Unless otherwise provided in an Award Agreement,
Awards shall not be transferable by a Grantee except by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and shall be
exercisable during the lifetime of a Grantee only by such Grantee or
his guardian or legal representative.
(b) No Right to Continued Employment, etc. Nothing in the Plan or in any
Award granted or any Award Agreement, or other agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in
the employ of the Company, any Subsidiary or any Affiliate or to be
entitled to any remuneration or benefits not set forth in the Plan or
such Award Agreement or other agreement or to interfere with or limit
in any way the right of the Company or any such Subsidiary or Affiliate
to terminate such Grantee's employment.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under
the Plan, including from a distribution of Stock, or any other payment
to a Grantee, amounts of withholding and other taxes due in connection
with any transaction involving an Award, and to take such other action
as the Committee may deem advisable to enable the Company and Grantees
to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Grantee's tax
obligations.
Exhibit B-9
<PAGE>
(d) Stockholder Approval; Amendment and Termination. The Plan shall take
effect on the Effective Date but the Plan (and any grants of Awards
made prior to the stockholder approval mentioned herein) shall be
subject to the requisite approval of the stockholders of the Company,
which approval must occur within twelve (12) months of the date that
the Plan is adopted by the Board. In the event that the stockholders of
the Company do not ratify the Plan at a meeting of the stockholders at
which such issue is considered and voted upon, then upon such event the
Plan and all rights hereunder shall immediately terminate and no
Grantee (or any permitted transferee thereof) shall have any remaining
rights under the Plan or any Award Agreement entered into in connection
herewith. The Board may at any time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Grantee, without such Grantee's consent, under any Award theretofore
granted under the Plan. Unless earlier terminated by the Board pursuant
to the provisions of the Plan, the Plan shall terminate on the tenth
anniversary of its Effective Date. No Awards shall be granted under the
Plan after such termination date.
(e) No Rights to Awards; No Stockholder Rights. No Grantee shall have any
claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by the
Award until the date of the issuance of a stock certificate to him for
such shares.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect
to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any
rights that are greater than those of a general creditor of the
Company.
(g) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash or other Awards shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver Stock with respect
to any Award granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at any time the
Committee determines, in its absolute discretion, that the
listing, registration or qualification of Stock issuable pursuant
to the Plan is required by any securities exchange or under any
state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Award or the
issuance of Stock, no such Award shall be granted or payment made
or Stock issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected
or obtained free of any conditions not acceptable to the
Committee.
(iii) In the event that the disposition of Common Stock acquired
pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), and is not otherwise exempt from
such registration, such Stock shall be restricted against
transfer to the extent required by the Securities Act or
Exhibit B-10
<PAGE>
regulations thereunder, and the Committee may require a Grantee
receiving Stock pursuant to the Plan, as a condition precedent to
receipt of such Stock, to represent to the Company in writing that
the Stock acquired by such Grantee is acquired for investment only
and not with a view to distribution.
(i) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
Exhibit B-11
<PAGE>
[LOGO OF CNF TRANSPORTATION APPEARS HERE]
EBERHARD G.H. SCHMOLLER
Secretary
March 24, 1997
Dear Fellow Employee:
Enclosed is proxy material for the Consolidated Freightways, Inc. (dba CNF
Transportation Inc.) Annual Meeting of Shareholders to be held on April 28,
1997. This material is being sent to you as a participant in the Consolidated
Freightways, Inc. Common Stock Fund and includes (1) the Company's 1997 Proxy
Statement, (2) a card to instruct Mellon Bank, the Fund trustee, as to how you
wish the shares of Consolidated Freightways, Inc. credited to your account to
be voted, and (3) an envelope to send your instruction card to First Chicago
Trust Company of New York, the Company's stock transfer agent. A copy of our
1996 Annual Report is being sent to you under separate cover.
In order to vote the shares credited to your account, you must complete and
return the enclosed instruction card giving the trustee specific voting
instructions. If you wish, you may sign and return the card without giving
specific voting instructions in which case your shares will be voted as
recommended by the Consolidated Freightways, Inc. Board of Directors. Under
the terms of the Plan, the trustee votes any shares credited to your account
for which it does not receive a signed instruction card on a timely basis in
the same manner and proportion as the shares of stock for which it does
receive valid voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company of New York, the Company's stock transfer agent. It will be treated
confidentially by the transfer agent and the trustee.
THE EXERCISE OF SHAREHOLDER VOTING RIGHTS IS A VERY IMPORTANT FEATURE OF THE
COMMON STOCK FUND BECAUSE IT ALLOWS YOU TO PARTICIPATE DIRECTLY IN THE AFFAIRS
OF THE COMPANY. WE URGE YOU TO EXERCISE YOUR VOTING RIGHTS. IN ORDER FOR THE
TRUSTEE TO COMPLY WITH YOUR INSTRUCTIONS, FIRST CHICAGO TRUST COMPANY OF NEW
YORK MUST RECEIVE YOUR COMPLETED INSTRUCTION CARD NO LATER THAN APRIL 22,
1997.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 415-494-2900
<PAGE>
[LOGO OF CNF TRANSPORTATION APPEARS HERE]
EBERHARD G.H. SCHMOLLER
Secretary
March 24, 1997
Dear Fellow Employee:
Enclosed is proxy material for the Consolidated Freightways, Inc. (dba CNF
Transportation Inc.) Annual Meeting of Shareholders to be held on April 28,
1997. This material is being sent to you as a participant in the Consolidated
Freightways, Inc. Thrift and Stock Plan and includes (1) the Company's 1997
Proxy Statement, (2) a card to instruct T. Rowe Price Trust Company, the Plan
trustee, as to how you wish the shares of Consolidated Freightways, Inc.
credited to your account to be voted, (3) if you wish to instruct the Trustee
to vote the preferred shares of stock credited to your account differently
than the common shares, a direction form to instruct the Trustee as to how you
wish to vote such preferred shares, and (4) an envelope to forward your
instructions to First Chicago Trust Company of New York, the Company's stock
transfer agent. A copy of our 1996 Annual Report is being sent to you under
separate cover.
In order to vote the shares credited to your account, you must complete and
return the enclosed instruction card giving the trustee specific voting
instructions for the common and preferred shares. If you wish, you may sign
and return the card without giving specific voting instructions and the shares
will be voted as recommended by the Consolidated Freightways, Inc. Board of
Directors. The instruction card will direct the trustee to vote both the
common and preferred shares of stock credited to your account. If you wish to
vote the preferred shares of stock differently than the common shares, you
must also complete the preferred stock direction form and return it to First
Chicago Trust Company of New York with the instruction card. Under the terms
of the Plan, the trustee votes the shares of each class of stock credited to
your account for which it does not receive a signed instruction card on a
timely basis in the same manner and proportion as the shares in such class of
stock for which it does receive valid voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company of New York, the Company's stock transfer agent. It will be treated
confidentially by the transfer agent and the trustee.
THE EXERCISE OF SHAREHOLDER VOTING RIGHTS IS A VERY IMPORTANT FEATURE OF THE
PLAN BECAUSE IT ALLOWS YOU TO PARTICIPATE DIRECTLY IN THE AFFAIRS OF THE
COMPANY. WE URGE YOU TO EXERCISE YOUR VOTING RIGHTS. IN ORDER FOR THE TRUSTEE
TO COMPLY WITH YOUR INSTRUCTIONS, FIRST CHICAGO TRUST COMPANY OF NEW YORK MUST
RECEIVE YOUR COMPLETED INSTRUCTION CARD NO LATER THAN APRIL 22, 1997.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 415-494-2900
<PAGE>
[LOGO OF CNF TRANSPORTATION APPEARS HERE]
EBERHARD G.H. SCHMOLLER
Secretary
March 24, 1997
Dear CFC SASP Participant:
Enclosed is proxy material furnished by Consolidated Freightways, Inc. (dba
CNF Transportation Inc.) in connection with its Annual Meeting of Shareholders
to be held on April 28, 1997. This material is being sent to you as a
participant in the Consolidated Freightways Corporation Stock and Savings Plan
and includes (1) Consolidated Freightways, Inc.'s 1997 Proxy Statement, (2) a
card to instruct T. Rowe Price Trust Company, the Plan trustee, as to how you
wish the shares of Consolidated Freightways, Inc. credited to your account to
be voted, and (3) an envelope to forward your instructions to First Chicago
Trust Company of New York, our stock transfer agent. A copy of our 1996 Annual
Report is being sent to you under separate cover.
In order to vote the shares credited to your account, you must complete and
return the enclosed instruction card giving the trustee specific voting
instructions for the shares. If you wish, you may sign and return the card
without giving specific voting instructions and the shares will be voted as
recommended by the Consolidated Freightways, Inc. Board of Directors. Under
the terms of the Plan, the trustee votes the shares credited to your account
for which it does not receive a signed instruction card on a timely basis in
the same manner and proportion as the shares in such class of stock for which
it does receive valid voting instructions on a timely basis.
Your instruction card must be returned directly to First Chicago Trust
Company of New York, our stock transfer agent. It will be treated
confidentially by the transfer agent and the trustee.
WE URGE YOU TO EXERCISE YOUR VOTING RIGHTS. IN ORDER FOR THE TRUSTEE TO
COMPLY WITH YOUR INSTRUCTIONS, FIRST CHICAGO TRUST COMPANY OF NEW YORK MUST
RECEIVE YOUR COMPLETED INSTRUCTION CARD NO LATER THAN APRIL 22, 1997.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 415-494-2900
<PAGE>
DIRECTION FORM
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
DIRECTION TO TRUSTEE
(USE ONLY IF YOU WISH TO VOTE PREFERRED SHARES SEPARATELY)
The undersigned hereby directs the Trustee of the Consolidated Freightways,
Inc. Thrift and Stock Plan to vote all shares of Consolidated Freightways,
Inc. preferred stock credited to the individual account of the undersigned
under the Plan at the Annual Meeting of Shareholders of Consolidated
Freightways, Inc. to be held on Monday, April 28, 1997 at 9:00 A.M. or at any
adjournments or postponements thereof.
THIS DIRECTION CANNOT BE VOTED UNLESS IT IS PROPERLY SIGNED AND RETURNED. IF
PROPERLY SIGNED AND RETURNED, THE TRUSTEE WILL VOTE AS DIRECTED BY THE
UNDERSIGNED OR, IF NO CHOICE IS SPECIFIED, THE TRUSTEE WILL VOTE FOR THE
ELECTION OF DIRECTORS AND FOR ITEMS 2, 3 AND 4 BELOW AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
1.Election of Four Class III directors for a three-year term.
Nominees: Robert Alpert, Margaret G. Gill, Robert Jaunich II, Robert P.
Wayman
[_]Vote FOR all nominees listed above; except vote withheld from the
following nominees (if any):
----------------------------------------------------------------------------
----------------------------------------------------------------------------
[_]Vote WITHHELD from all nominees.
2.Approval of name change to CNF Transportation Inc.
FOR [_] AGAINST [_] ABSTAIN [_]
3.Approval of 1997 Equity and Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
4.Ratify appointment of Arthur Andersen LLP as the Company's auditors for the
year 1997.
FOR [_] AGAINST [_] ABSTAIN [_]
The Trustee is hereby directed to authorize the proxies to vote in their
discretion upon such other business as may properly come before the meeting
and any and all adjournments or postponements thereof.
, 1997
------------------------------------------
Signature of Participant
------------------------------------------
Name(Please Print)
------------------------------------------
Address(Please Print)
------------------------------------------
CityStateZip Code
<PAGE>
CONSOLIDATED FREIGHTWAYS, INC. THRIFT AND STOCK PLAN
Direction of Participant to Trustee of
Consolidated Freightways, Inc. Thrift and Stock Plan
(Common Stock and Preferred Stock)
The Undersigned hereby directs the Trustee of the Consolidated Freightways, Inc.
Thrift and Stock Plan to vote all shares of Consolidated Freightways, Inc.
common stock and preferred stock credited to the individual account of the
undersigned under the Plan at the Annual Meeting of Shareholders of Consolidated
Freightways, Inc. to be held on Monday, April 28, 1997 at 9:00 A.M. and at any
adjournments or postponements thereof. The Trustee is hereby directed to
authorize the proxies to vote in their discretion upon such other business as
may properly come before the meeting and any and all adjournments or
postponements thereof.
Election of four Class III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to direct the
Trustee to vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
<PAGE>
[X] Please mark your 7895
votes as in this
example.
This direction cannot be voted unless it is properly signed and returned.
If properly signed and returned, the Trustee will vote as directed by the
undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR items 2, 3 and 4 below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR Item 2, 3 and 4 below.
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of [_] [_] 2. Approval of name [_] [_] [_] 3. Approval of 1997 Equity and [_] [_] [_]
Directors change to CNF Incentive Plan.
(see reverse) Transportation Inc.
For, except vote withheld from 4. Ratify appointment of [_] [_] [_]
the following nominee(s): Independent Auditors.
- --------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Trustee is hereby directed to authorize the proxies to vote in
their discretion upon such other business as may properly come
before the meeting and any and all adjournments or postponements
thereof.
SIGNATURE(S)__________________________________ DATE _________ , 1997
NOTE: Please sign exactly as name appears hereon.
<PAGE>
CONSOLIDATED FREIGHTWAYS, INC. COMMON STOCK FUND
Direction of Participant to Trustee of
Consolidated Freightways, Inc. Common Stock Fund
The undersigned hereby directs the Trustee of the Consolidated Freightways, Inc.
Common Stock Fund to vote all shares of Consolidated Freightways, Inc. common
stock credited to the individual account of the undersigned under the Common
Stock Fund at the Annual Meeting of Shareholders of Consolidated Freightways,
Inc. to be held on Monday, April 28, 1997 at 9:00 A.M. and at any adjournments
or postponements thereof. The Trustee is hereby directed to authorize the
proxies to vote in their discretion upon such other business as may properly
come before the meeting and any and all adjournments or postponements thereof.
Election of four Class III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to direct the Trustee
to vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
<PAGE>
[X] Please mark your 7897
votes as in this
example.
This direction cannot be voted unless it is properly signed and returned.
If properly signed and returned, the Trustee will vote as directed by the
undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR items 2, 3 and 4 below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR Item 2, 3 and 4 below.
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of [_] [_] 2. Approval of name [_] [_] [_] 3. Approval of 1997 Equity and [_] [_] [_]
Directors change to CNF Incentive Plan.
(see reverse) Transportation Inc.
For, except vote withheld from the 4. Ratify appointment of [_] [_] [_]
following nominee(s): Independent Auditors.
- --------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Trustee is hereby directed to authorize the proxies to vote in
their discretion upon such other business as may properly come
before the meeting and any and all adjournments or postponements
thereof.
SIGNATURE(S)__________________________________ DATE __________, 1997
NOTE: Please sign exactly as name appears hereon.
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION STOCK AND SAVINGS PLAN
Direction of Participant to Trustee of
Consolidated Freightways Corporation Stock and Savings Plan
The undersigned hereby directs the Trustee of the Consolidated Freightways
Corporation Stock and Savings Plan to vote all shares of Consolidated
Freightways, Inc. common stock credited to the individual account of the
undersigned under the Plan at the Annual Meeting of Shareholders of Consolidated
Freightways, Inc. to be held on Monday, April 28, 1997 at 9:00 A.M. and at any
adjournments or postponements thereof. The Trustee is hereby directed to
authorize the proxies to vote in their discretion upon such other business as
may properly come before the meeting and any and all adjournments or
postponements thereof.
Election of four Class III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to direct the Trustee
to vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
<PAGE>
[X] Please mark your 7895
votes as in this
example.
This direction cannot be voted unless it is properly signed and returned.
If properly signed and returned, the Trustee will vote as directed by the
undersigned or, if no choice is specified, the Trustee will vote FOR the
election of directors and FOR items 2, 3 and 4 below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR Item 2, 3 and 4 below.
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of [_] [_] 2. Approval of name [_] [_] [_] 3. Approval of 1997 Equity and [_] [_] [_]
Directors change to CNF Incentive Plan.
(see reverse) Transportation Inc.
For, except vote withheld 4. Ratify appointment of [_] [_] [_]
from the following nominee(s): Independent Auditors.
- --------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Trustee is hereby directed to authorize the proxies to vote in
their discretion upon such other business as may properly come
before the meeting and any and all adjournments or postponements
thereof.
SIGNATURE(S)__________________________________ DATE __________, 1997
NOTE: Please sign exactly as name appears hereon.
<PAGE>
CONSOLIDATED FREIGHTWAYS, INC.
dba CNF TRANSPORTATION INC.
This Proxy is Solicited on Behalf of the Board of Directors
of Consolidated Freightways, Inc.
The undersigned appoints E.F. CHEIT, R.B. MADDEN, W.J. SCHROEDER and each
of them, the proxies of the undersigned, with full power of substitution,
P to vote the stock of CONSOLIDATED FREIGHTWAYS, INC., which the undersigned
R may be entitled to vote at the Annual Meeting of Shareholders to be held on
O Monday, April 28, 1997 at 9:00 A.M. and at any adjournments or
X postponements thereof. The proxies are authorized to vote in their
Y discretion upon such other business as may properly come before the meeting
and any and all adjournments or postponements thereof.
Election of four Class III directors for a three-year term.
Nominees: Robert Alpert
Margaret G. Gill
Robert Jaunich II
Robert P. Wayman
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
<PAGE>
[X] Please mark your
votes as in this
example.
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR the election
of directors and FOR Items 2, 3 and 4 below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR Item 2, 3 and 4 below.
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of [_] [_] For, except vote withheld from the 3. Approval of 1997 Equity and [_] [_] [_]
Directors following nominee(s): Incentive Plan.
(see reverse) FOR AGAINST ABSTAIN
---------------------------------- 4. Ratify appointment of [_] [_] [_]
FOR AGAINST ABSTAIN Independent Auditors.
<C> <C> <C> <C>
2. Approval of name [_] [_] [_]
change to CNF
Transportation Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The proxies are hereby authorized to vote in their discretion upon such other
matters as may properly come before the meeting and any adjournments or
postponements thereof.
Date: , 1997
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Signature(s)
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NOTE: Please sign exactly as name
appears hereon. Joint tenants
should each sign. When signing as
an attorney, executor,
administrator, trustee, or
guardian, please give full title
as such.
