<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_Confidential,]for Use of the
[_]Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CNF Transportation Inc.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notice of Annual Meeting
and
Proxy Statement
Annual Meeting of Shareholders
APRIL 26, 1999
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION INC.]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CNF TRANSPORTATION INC.
[LOGO OF CNF TRANSPORTATION INC.]
3240 HILLVIEW AVENUE TELEPHONE: 650/494-2900
PALO ALTO, CALIFORNIA 94304
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, April 26, 1999
9:00 A.M., local time
Knowles Room, Hotel du Pont, 11th and Market Streets, Wilmington, Delaware
FELLOW SHAREHOLDER:
The Annual Meeting of Shareholders of CNF Transportation Inc. will be held at
9:00 A.M., local time, on Monday, April 26, 1999, to:
1. Elect four Class II directors for a three-year term.
2. Ratify the appointment of auditors.
3. Transact any other business properly brought before the meeting.
Shareholders of record at the close of business on March 1, 1999, 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 22, 1999
<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......................... 10
Information About the Board of Directors and Certain Board Committees....... 11
Compensation of Directors................................................... 12
Compensation of Executive Officers.......................................... 13
I.Summary Compensation Table.............................................. 13
II.Option/SAR Grants Table................................................ 15
III.Option/SAR Exercises And Year-End Value Table......................... 16
IV.Long-Term Incentive Plan Awards Table.................................. 17
Compensation Committee Report on Executive Compensation..................... 18
Compensation Committee Interlocks and Insider Participation................. 23
Comparison of Five-year Cumulative Total Shareholder Return................. 23
Pension Plan Table.......................................................... 24
Change in Control Arrangements.............................................. 24
Appointment of Auditors..................................................... 25
Principal Shareholders...................................................... 25
Compliance With Section 16 of the Exchange Act.............................. 26
Confidential Voting......................................................... 26
Submission of Shareholder Proposals......................................... 26
Other Matters............................................................... 27
</TABLE>
<PAGE>
CNF TRANSPORTATION INC.
3240 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
TELEPHONE: 650/494-2900
PROXY STATEMENT
March 22, 1999
The Annual Meeting of Shareholders of CNF Transportation Inc. (the "Company"
or "CNF") will be held on April 26, 1999. Shareholders of record at the close
of business on March 1, 1999 will be entitled to vote at the meeting. This
proxy statement and accompanying proxy are first being sent to shareholders on
or about March 22, 1999.
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 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. The ratification of the appointment of auditors 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, if any, will be disregarded
and have no effect on the outcome of the vote. With respect to the
ratification of the appointment of auditors, abstentions from voting will have
the same effect as voting against such matter and broker non-votes, if any,
will be disregarded and have no effect on the outcome of such vote.
Voting Shares Outstanding
At the close of business on March 1, 1999, the record date for the Annual
Meeting, there were outstanding and entitled to vote 48,109,315 shares of
Common Stock and 850,674 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. Therefore, an aggregate of 53,298,426 votes
are eligible to be cast at the meeting.
<PAGE>
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. 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 Board of Directors of the Company, pursuant to the By-Laws, has
determined that the number of directors of the Company shall be thirteen.
Unless you withhold authority to vote, your proxy will be voted for election
of the nominees named below.
The following persons are the nominees of the Board of Directors for
election as Class II directors to serve for a three-year term until the 2002
Annual Meeting of Shareholders and until their successors are duly elected and
qualified:
Donald E. Moffitt
Michael J. Murray
Robert D. Rogers
William J. Schroeder
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 III directors will be elected in 2000 and Class I
directors will be elected in 2001. All directors have previously been elected
by the shareholders, except William J. Schroeder, who was appointed by the
Board as a Class II director in December 1996, Michael J. Murray, who was
appointed by the Board as a Class II director in May 1997, and Gregory L.
Quesnel, who was appointed by the Board as a Class I director in May 1998.
2
<PAGE>
--------------------------------------------
CLASS II DIRECTORS
DONALD E. MOFFITT Director 1986-
1988
Director since 1991
Chairman of the Board,
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 served as President until June 1997
and as Chief Executive Officer until May 1998. He joined
Consolidated Freightways Corporation of Delaware, the
Company's former 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 66, is a member
of the Boards of Directors of the U.S. Chamber of Commerce,
Willis Lease Finance Inc., 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 Board.
[PHOTOGRAPH OF DONALD E. MOFFITT]
MICHAEL J. MURRAY Director since 1997
President, Global Corporate and Investment Banking
Bank of America Corporation
Mr. Murray is president of Global Corporate and Investment
Banking at Bank of America Corporation and a member of the
corporation's Policy Committee. Reporting to Mr. Murray are
the Global Capital Raising and Global Markets; International
Corporate Banking Group, U.S. and Canada Group, and
Principal Investing. From March 1997 until the BankAmerica-
NationsBank merger in September 1998, Mr. Murray headed
BankAmerica Corporation's Global Wholesale Bank and was
responsible for its business with large corporate,
international, and government clients around the world. Mr.
Murray was named a BankAmerica vice chairman and head of the
U.S. and International Groups in September 1995. He had been
responsible for BankAmerica's U.S. Corporate Group since
BankAmerica's merger with Continental Bank Corporation in
September 1994. Prior to the BankAmerica-Continental merger,
Mr. Murray was vice chairman and head of Corporate
[PHOTOGRAPH OF MICHAEL J. MURRAY]
3
<PAGE>
Banking for Continental Bank, which he joined in 1969. Mr.
Murray, age 54, is a director on the boards of the
Technology Solutions Company in Chicago and the Institute of
International Finance in Washington, D.C. He also serves on
the boards of the Coalition of Service Industries,
Washington D.C. and the California Academy of Sciences, San
Francisco. Mr. Murray received his BBA from the University
of Notre Dame in 1966 and his MBA from the University of
Wisconsin in 1968. He is a member of the Audit and
Compensation Committees of the Board.
ROBERT D. ROGERS Director since 1990
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.
He is also a director of Texas Industries, Inc. Mr. Rogers
is a graduate of Yale University and earned a M.B.A. from
the Harvard Graduate School of Business. He is Vice Chairman
of the British-North American Committee and is a member of
the Executive Board for Southern Methodist University Cox
School of Business. Mr. Rogers, age 62, 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 Board.
[PHOTOGRAPH OF ROBERT D. ROGERS]
WILLIAM J. SCHROEDER Director since 1996
President & Chief Executive Officer,
Diamond Multimedia Systems, Inc.,
a leader in PC multimedia and Internet connectivity
Mr. Schroeder joined Diamond Multimedia Systems, Inc. in
May 1994 as President and Chief Executive Officer and was
appointed Chairman in 1998. 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 Sync
Research, Inc. Mr. Schroeder, age 54, 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 and Finance
Committees of the Board.
[PHOTOGRAPH OF WILLIAM J. SCHROEDER]
4
<PAGE>
--------------------------------------------
CLASS III DIRECTORS
ROBERT ALPERT Director since 1976
The Alpert Companies
private investment group
Mr. Alpert has managed his own portfolio of companies
since 1965. His business career includes 40 years in
banking, finance and real estate related activities. He is
currently Chairman of the Board of Argo Funding Company in
Dallas, a private equity investment group. He is also Vice
Chairman of The Empire AB in Stockholm, Sweden, a public
company with 9 subsidiary companies primarily involved in
the fabrication and distribution of metal related materials
for the construction industry. He has served as Honorary
Consul for Sweden in Dallas since 1987. He has served on
numerous boards as a director and currently serves on the
boards of Texas Industries, Inc. and Aladdin Industries,
Inc. He is an advisory director for I.C. Deal Companies,
Argo Capital Partners, and Asia Info Services. Additionally,
he is a member of the Advisory Council for the University of
Texas at Austin College of Business Administration and a
Trustee Emeritus for Colby College in Maine. He is also a
member of the Chief Executive Organization and World
Presidents Organization (formerly World Business Council).
Mr. Alpert, age 67, is a member of the Director Affairs, the
Executive and the Finance Committees of the Board.
[PHOTOGRAPH OF ROBERT ALPERT]
MARGARET G. GILL Director since 1995
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. 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 and serves on the
advisory boards for the Institute for Corporate Counsel and
the Berkeley Center for Law and Technology. Mrs. Gill, age
59, 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. Mrs. Gill is a
member of the Audit and the Director Affairs Committees of
the Board.
[PHOTOGRAPH OF MARGARET G. GILL]
5
<PAGE>
ROBERT JAUNICH II Director since 1992
Managing Director,
The Fremont Group,
a private investment corporation
Mr. Jaunich joined The Fremont Group, a private investment
corporation managing assets of $10 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 investments in operating companies
representing a broad spectrum of industries. Additionally,
he oversees Fremont's five affiliated venture capital
portfolios, representing in excess of $200 million of
committed capital (Trinity Ventures, L.P.), and is President
of Fremont Capital, Inc., an SEC/NASD registered
broker/dealer. Mr Jaunich serves as Chairman of the Managing
General Partner of Crown Pacific, Ltd. and of Kinetic
Concepts, Inc. 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 59, received a B.A. from Wesleyan
University, Middletown, Connecticut and a 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 Board.
[PHOTOGRAPH OF ROBERT JAUNISH II]
ROBERT P. WAYMAN Director since 1994
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 53,
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 Board.
[PHOTOGRAPH OF ROBERT P. WAYMAN]
6
<PAGE>
--------------------------------------------
CLASS I DIRECTORS
EARL F. CHEIT Director since 1976
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 has 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 72,
is a member of the Boards of Shaklee Corporation and Simpson
Manufacturing Co. and is 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 Board.
[PHOTOGRAPH OF EARL F. CHEIT]
RICHARD A. CLARKE Director since 1996
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 and Potlatch Corporation and is an
Emeritus member of the President's Council of Sustainable
Development. He serves as a member of 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, Bay Area Council, Bay Area
Economic Forum, Edison Electric Institute, and the
President's Council on Environmental Quality. A native of
San Francisco, Mr. Clarke, 68, 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 Board.
[PHOTOGRAPH OF RICHARD A. CLARKE]
7
<PAGE>
W. KEITH KENNEDY, JR. Director since 1996
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 55, is a graduate of
Cornell University from which he holds B.S.E.E., M.S., and
Ph.D. degrees. Dr. Kennedy is a Director of the Joint
Venture Silicon Valley Network and the Santa Clara Valley
Manufacturing Group; a member of the State Chamber of
Commerce; and a senior member of the Institute of Electrical
and Electronics Engineers. He is a member of the
Compensation and Director Affairs Committees of the Board.
[PHOTOGRAPH OF W. KEITH KENNEDY, JR.]
RICHARD B. MADDEN Director since 1992
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, and URS
Corporation. He is also a Trustee Emeritus of the American
Enterprise Institute, a Senior Advisor for the Boston
Consulting Group, Inc., and an Honorary Trustee for the
Committee for Economic Development. 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 a Trustee Emeritus of the San
Francisco Foundation and the Corporation of Fine Arts
Museums. Mr. Madden, age 69, 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 Board.
[PHOTOGRAPH OF RICHARD B. MADDEN]
8
<PAGE>
GREGORY L. QUESNEL Director since 1998
President and Chief Executive Officer,
CNF Transportation Inc.
Mr. Quesnel, 50, was named President and Chief Executive
Officer of the Company in May 1998. At that time, he was
also elected as a member of the CNF Board of Directors. As
part of a planned succession, Mr. Quesnel was elected
President and Chief Operating Officer in July 1997. Prior to
that, Mr. Quesnel was Executive Vice President and Chief
Financial Officer of the Company. In that capacity, he was
responsible for corporate finance, business planning,
technology development, and financial reporting, as well as
several operating units, including Menlo Logistics. Mr.
Quesnel has 24 years of experience in the transportation
industry. He joined the CNF organization as director of
accounting in 1975, following several years of professional
experience with major corporations in the petroleum and wood
products industries. Mr. Quesnel advanced through
increasingly responsible positions and in 1986 was promoted
to the top financial officer position at the Company's
largest subsidiary. In 1990, Mr. Quesnel was elected Vice
President and Treasurer of CNF; in 1991, he was elected
Senior Vice President and Chief Financial Officer; and he
was promoted to Executive Vice President and Chief Financial
Officer in 1994. Mr. Quesnel is a member of the Financial
Executives Institute, the California Business Roundtable,
and the Conference Board. He also serves as a member of the
Executive Committee of the Bay Area Council of the Boy
Scouts of America. Mr. Quesnel earned a bachelor's degree in
finance from the University of Oregon and holds a master's
degree in business administration from the University of
Portland. Mr. Quesnel is a member of the Executive and
Director Affairs Committees of the Board.
[PHOTOGRAPH OF GREGORY L. QUESNEL]
9
<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,
1999, 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
Name of Beneficial Owner Ownership(1) of Class
- ------------------------ ---------------------- --------
<S> <C> <C>
Robert Alpert.................................. 61,196 Common *
0 Series B Preferred
Earl F. Cheit.................................. 9,446 Common *
0 Series B Preferred
Richard A. Clarke.............................. 8,928 Common *
0 Series B Preferred
Gerald L. Detter(2)............................ 107,148 Common *
160 Series B Preferred
Margaret G. Gill............................... 8,639 Common *
0 Series B Preferred
Robert Jaunich II.............................. 15,646 Common *
0 Series B Preferred
W. Keith Kennedy, Jr........................... 6,714 Common *
0 Series B Preferred
Richard B. Madden.............................. 11,146 Common *
0 Series B Preferred
Donald E. Moffitt(3)........................... 541,278 Common 1.1%
0 Series B Preferred
Michael J. Murray.............................. 14,825 Common *
0 Series B Preferred
Gregory L. Quesnel(4).......................... 338,489 Common *
151 Series B Preferred
Sanchayan C. Ratnathicam(5).................... 87,305 Common *
121 Series B Preferred
Robert D. Rogers............................... 11,646 Common *
0 Series B Preferred
Eberhard G.H. Schmoller(6)..................... 196,817 Common *
126 Series B Preferred
William J. Schroeder........................... 6,514 Common *
0 Series B Preferred
Robert P. Wayman............................... 9,646 Common *
0 Series B Preferred
John H. Williford(7)........................... 97,510 Common *
104 Series B Preferred
All directors and executive officers as a group
(17 persons).................................. 1,532,893 Common 3.1%
662 Series B Preferred
</TABLE>
- --------
* Less than one percent of the Company's outstanding shares of Common Stock.
10
<PAGE>
(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 number of shares which the non-employee director has
the right to acquire within 60 days of January 31, 1999 because of vested
stock options: Mr. Alpert, 2,751 and 6,395; Mr. Cheit, 2,751 and 6,395;
Mr. Clarke, 1,717 and 5,211; Mrs. Gill, 2,244 and 6,395; Mr. Jaunich,
2,751 and 6,395; Mr. Kennedy, 1,764 and 4,750; Mr. Madden, 2,751 and
6,395; Mr. Moffitt, 653 and 2,542; Mr. Murray, 1,075 and 3,750;
Mr. Rogers, 2,751 and 6,395; Mr. Schroeder, 1,764 and 1,250; and Mr.
Wayman, 2,751 and 6,395. The Restricted Stock and stock options were
awarded under and are governed by the Amended and Restated Equity
Incentive Plan for Non-Employee Directors.
(2) The shares shown include 76,789 shares which Mr. Detter has the right to
acquire within 60 days of January 31, 1999, because of vested stock
options.
(3) The shares shown include 474,371 shares which Mr. Moffitt has the right to
acquire within 60 days of January 31, 1999 because of vested stock
options.
(4) The shares shown include 275,824 shares which Mr. Quesnel has the right to
acquire within 60 days of January 31, 1999 because of vested stock
options.
(5) The shares shown include 69,192 shares which Mr. Ratnathicam has the right
to acquire within 60 days of January 31, 1999 because of vested stock
options.
(6) The shares shown include 174,866 shares which Mr. Schmoller has the right
to acquire within 60 days of January 31, 1999 because of vested stock
options.
(7) The shares shown include 40,618 shares which Mr. Williford has the right
to acquire within 60 days of January 31, 1999 because of vested stock
options.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
During 1998, the Board of Directors held six 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,
Michael J. Murray and William J. Schroeder. The Committee met three times
during 1998.
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 and other awards under the
Company's 1997 Equity and Incentive Plan 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.,
Michael J. Murray, Robert D. Rogers and Robert P. Wayman. The Committee met
seven times during 1998.
11
<PAGE>
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 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, W. Keith Kennedy, Jr., Donald E. Moffitt and Gregory
L. Quesnel. The Committee met three times during 1998.
COMPENSATION OF DIRECTORS
During 1998, 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. Board Committee Chairpersons received an additional $750 per
quarter.
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 and subsequent years, $20,000 in
retirement benefits accrued per year of service. 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.
The Company has decided to terminate the directors' retirement plan,
effective December 31, 1999. Concurrent with termination, most directors will
receive stock options in lieu of their accrued retirement benefits under the
plan. The two directors who have already accrued the maximum benefits
available under the plan will receive restricted stock instead of stock
options. In addition, commencing January 1, 2000, directors will receive
additional annual grants of options to acquire 500 shares of the Company's
stock, as a substitute for retirement benefits that would have accrued under
the plan had it not been terminated.
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.
Under the Plan, each non-employee director receives a restricted stock grant
having a fair market value of $12,500 upon joining the Board and on each
January 1 thereafter. In addition, each non-employee director receives a grant
of options for 2,500 shares of the Company's Common Stock upon joining the
Board and for 1,000 shares on each January 1 thereafter.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the four next most highly paid executive officers
for the three fiscal years ended December 31, 1998. The table also sets forth
the compensation received for those fiscal years by Donald E. Moffitt, who
served as Chief Executive Officer until May 4, 1998. As used in this Proxy
Statement, "Named Executives" means the officers identified in this Summary
Compensation Table, including Mr. Moffitt.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------- --------------------------------
Awards Payouts
--------------------- ----------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position(s) Year ($) (5)($) (6)($) (7)($) SAR'S (#) (8)($) (9)($)
- ------------------ ---- -------- --------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald E. Moffitt(1) 1998 $626,109(4) $169,935 $12,874 $12,500 2,500/0 $3,770,260 $290,523
Chairman of the Board 1997 670,020 745,179 66,374 510,000 45,000/0 0 85,718
1996 670,020 1,041,884 65,543 0 88,816/0 0 84,960
Gregory L. Quesnel(2) 1998 $598,071 $344,224 $23,315 $1,838,438 92,500/0 $450,296 $2,686
President & Chief 1997 430,430 450,825 587 289,000 75,000/0 0 2,943
Executive Officer 1996 360,828 547,293 39,682 0 35,526/0 0 2,862
Gerald L. Detter (3) 1998 $449,047 $802,088 $79,293 $543,750 42,500/0 $217,107 $2,682
Senior Vice President 1997 330,320 566,147 31,398 0 37,000/0 0 3,282
1996 257,556 223,875 6,089 0 17,763/0 0 2,964
Sanchayan Ratnathicam 1998 $358,894 $176,752 $8,243 $462,047 35,000/0 $112,574 $2,400
Senior Vice President & 1997 244,684 266,576 476 0 31,000/0 0 2,886
Chief Financial Officer 1996 191,156 34,490 1,505 0 8,290/0 0 2,570
Eberhard G.H. Schmoller 1998 $343,743 $169,374 $20,254 $402,938 30,000/0 $345,763 $2,400
Senior Vice President, 1997 278,616 247,896 18,678 238,000 20,000/0 0 2,400
General Counsel and 1996 278,616 513,733 26,394 0 27,737/0 0 2,849
Secretary
John H. Williford (3) 1998 $308,291 $88,382 $597 $430,172 32,500/0 $74,781 $2,572
Senior Vice President 1997 220,967 130,939 1,942 0 20,000/0 0 2,505
1996 190,112 187,736 2,732 0 23,684/0 0 2,368
</TABLE>
- --------
(1) Mr. Moffitt served as Chief Executive Officer of the Company until May 4,
1998. Mr. Moffitt continues to serve as Chairman of the Company's Board of
Directors.
(2) Mr. Quesnel served as President and Chief Operating Officer of the Company
until May 4, 1998, when he was appointed Chief Executive Officer of the
Company.
(3) Mr. Detter is also President and Chief Executive Officer of Con-Way
Transportation Services, Inc., the Company's regional full-service
trucking subsidiary. Mr. Williford is also President and Chief Executive
Officer of Menlo Logistics, Inc., the Company's full service logistics
management company.
(4) This amount includes salary and accrued vacation pay of $440,588 earned by
Mr. Moffitt in his capacity as Chief Executive Officer, and retainer and
meeting fees of $185,521 earned by Mr. Moffitt in his capacity as Chairman
of the Board following his retirement from the Company.
(5) 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 Mr. Detter, a special incentive compensation
payment made under the Company's short-term incentive compensation plan in
which only operating company executives participate.
13
<PAGE>
(6) Amounts shown for 1998 in this column include: (a) Long-Term Incentive
Plan interest earned and deferred for Messrs. Quesnel, Detter, and
Schmoller of $285, $60 and $6,405, respectively; (b) interest earned on
deferred compensation accounts above 120% of the applicable federal rate
for Messrs. Moffitt, Quesnel, Detter, Ratnathicam, Schmoller and Williford
of $12,177, $22,276, $73,521, $8,243, $10,022 and $597, respectively; (c)
interest earned on deferred Stock Appreciation Rights accounts above 120%
of the applicable federal rate for Messrs. Quesnel, Detter and Schmoller
of $754, $5,712 and $3,827, respectively; and (d) payments by the Company,
on behalf of Mr. Moffitt, totaling $697 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.
(7) At the end of 1998, based upon the closing price of the Company's common
stock on December 31, 1998 ($37.56), Mr. Moffitt held 10,321 restricted
shares valued at $387,657; Mr. Quesnel held 53,167 restricted shares
valued at $1,996,953; Mr. Detter held 14,250 restricted shares valued at
$535,230; Mr. Ratnathicam held 12,000 restricted shares valued at
$450,720; Mr. Schmoller held 15,167 restricted shares valued at $569,673;
and Mr. Williford held 40,917 restricted shares valued at $1,536,843.
Dividends are paid on all shares of restricted stock. All restricted stock
held by the Named Executives is performance restricted stock, with the
exception of 25,000 shares of restricted stock held by Mr. Williford and
321 shares of restricted stock held by Mr. Moffitt, which are not subject
to performance criteria and which vest on the fifth anniversary of the
grant date. For all performance restricted stock held by each Named
Executive, one-third of the shares are eligible for vesting at the end of
the first award year and an additional one-third are eligible for vesting
at the end of the second and third award years, provided in each case that
applicable performance criteria are met.
(8) Amounts shown for 1998 in this column reflect payments earned by the Named
Executives for awards granted under the Company's Return on Equity Plan.
In the case of all of the Named Executives other than Mr. Moffitt, these
payments are for the three-year award cycle commencing January 1, 1996 and
ending December 31, 1998. In the case of Mr. Moffitt, these payments are
for three different award cycles under the Return on Equity Plan: the
award cycle commencing January 1, 1996 and ending December 31, 1998; the
award cycle commencing January 1, 1997 and ending December 31, 1999; and
the award cycle commencing January 1, 1998 and ending December 31, 2000.
All of Mr. Moffitt's awards under the Return on Equity Plan vested and
became payable as a result of his retirement as an officer of the Company.
(9) Amounts shown for 1998 in this column include:
(a) Payments by the Company for premiums for taxable group life insurance
on behalf of Messrs. Moffitt, Quesnel, Detter and Williford of $9,030,
$286, $282, and $172, respectively.
(b) Company contributions to the Thrift and Stock Plan accounts of Messrs.
Quesnel, Detter, Schmoller, Ratnathicam and Williford of $2,400 each.
(c) Payments in the amount of $24,506 made to Mr. Moffitt prior to his
retirement under the terms of his employment agreement with the
Company, and retirement benefits in the amount of $245,849 paid to Mr.
Moffitt under the Company's pension plan following his retirement.
14
<PAGE>
II. OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants(1)
--------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Granted (#)(2) Fiscal Year ($/Share) Date Value(3)($)
-------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Donald E. Moffitt....... 2,500/0(4) 0.36% $38.88 05/01/08 $ 45,050
Gregory L. Quesnel...... 25,000/0 3.58 39.00 05/04/08 452,250
22,500/0 3.22 43.06 06/30/08 445,275
45,000/0 6.45 36.56 12/09/08 735,750
Gerald L. Detter........ 12,500/0 1.79 43.06 06/30/08 247,375
30,000/0 4.30 36.56 12/09/08 490,500
Sanchayan C.
Ratnathicam............ 12,500/0 1.79 43.06 06/30/08 247,375
22,500/0 3.22 36.56 12/09/08 367,875
Eberhard G.H. Schmoller. 10,000/0 1.43 43.06 06/30/08 197,900
20,000/0 2.87 36.56 12/09/08 327,000
John H. Williford....... 10,000/0 1.43 43.06 06/30/08 197,900
22,500/0 3.22 36.56 12/09/08 367,875
</TABLE>
- --------
(1) No SARs were issued in 1998.
(2) All options become exercisable at the times described below, or earlier
upon a change in control of the Company: (i) options granted to Mr.
Moffitt become exercisable 1/12 per month, so as to be fully exercisable
on the first anniversary of the grant date; (ii) options granted to Mr.
Quesnel on May 4, 1998 become exercisable 1/3 per year, on the second,
third and fourth anniversaries of the grant date; (iii) options granted on
June 30, 1998 become exercisable on the first anniversary of the grant
date; and (iv) options granted on December 9, 1998 become exercisable 1/4
per year, on January 1, 2000 and on the first, second and third
anniversaries of that date.
(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 5.9 years (based on historical option exercise experience,
rather than actual option terms of 10 years); (iii) volatility equals
0.45; (iv) risk-free interest rate equals 5.89% for the May 1998 grants;
5.62% for the June 1998 grant; and 4.83% for the December 1998 grant; and
(v) estimated future average dividend yield equals 1.10%.
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 may not 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.
(4) These stock options were granted to Mr. Moffitt in his capacity as a non-
employee director of the Company following his retirement. Mr. Moffitt did
not receive any stock option grants in 1998 in his capacity as Chief
Executive Officer of the Company.
15
<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 1998 by
the Named Executives and the value of such officers' unexercised options/SARs
at December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-
Acquired Value Options/SARs at the-Money Options/SARs at
on Exercise Realized FY-End (#)(2) FY-End ($)(2)(3)(4)(5)
(#)(1) ($) Exercisable/Unexercisable Exercisable/Unexercisable
----------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Donald E. Moffitt....... 83,511 $2,954,256 473,496/833 $ 8,167,417/0
Gregory L. Quesnel...... 0 0 276,433/92,500 4,500,394/45,000
Gerald L. Detter........ 0 0 80,307/101,711 860,257/1,307,229
Sanchayan C.
Ratnathicam............ 0 0 69,192/35,000 917,456/22,500
Eberhard G.H. Schmoller. 0 0 177,950/30,000 3,258,545/20,000
John H. Williford....... 0 0 40,618/32,500 506,684/22,500
</TABLE>
- --------
(1) The amount shown in this column for Mr. Moffitt includes 69,300 shares
which were sold promptly following exercise, and 14,211 shares which were
acquired upon exercise and held.
(2) Mr. Moffitt has 471,829 exercisable officer granted options valued at
$8,167,417 and 1,667 director granted options valued at $0; 833
unexercisable options valued at $0; and no stock appreciation rights
(SARs). Mr. Quesnel has 275,824 exercisable options valued at $4,498,112;
92,500 unexercisable options valued at $45,000; and 609 SARs, the
appreciation on which is valued at $2,282. Mr. Detter has 76,789
exercisable options valued at $853,671; 101,711 unexercisable options
valued at $1,307,229; and 3,518 SARs, the appreciation on which is valued
at $6,586. Mr. Ratnathicam has 69,192 exercisable options valued at
$917,456; 35,000 unexercisable options valued at $22,500; and no SARs. Mr.
Schmoller has 174,866 exercisable options valued at $3,244,363; 30,000
unexercisable options valued at $20,000; and 3,084 SARs, the appreciation
on which is valued at $14,182. Mr. Williford has 40,618 exercisable
options valued at $506,684; 32,500 unexercisable options valued at
$22,500; and no SARs. The value of outstanding SARs was fixed as described
in footnote 5 below when the Company's SAR plan was terminated on March
31, 1990.
(3) Based on the closing stock price of $37.56 on December 31, 1998.
(4) Numbers shown reflect the value of options granted at various times over a
ten-year period.
(5) The Company's Incentive Compensation Stock Appreciation Rights Plan ("SAR
Plan") was terminated on March 31, 1990. Under the SAR plan, selected key
employees were afforded the opportunity to convert cash awards under the
Company's short-term incentive compensation plans into SARs corresponding
in value to the Company's shares of Common Stock. The SARs fluctuated in
value as the price of the Common Stock increased or decreased and earned
amounts equal to dividends declared on the Common Stock. When the SAR Plan
was terminated, the value of all outstanding SARs was fixed as of that
date. Interest equivalents have been credited to outstanding balances of
participants since April 1, 1990. Payouts are made in cash and commence
upon a participant's prior election or termination of employment with the
Company.
16
<PAGE>
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table sets forth information regarding awards made to the
Named Executives in 1998 under the Company's Return on Equity Plan. Except for
such awards, no Long-Term Incentive Plan Awards were made to the Named
Executives in 1998.
<TABLE>
<CAPTION>
Estimated Future Payouts under
Number of Performance or the Return on Equity Plan (1)
Shares, Units Other Period ---------------------------------
or Other Until Maturation Target Maximum
Name Rights (#) or Payout Threshold ($) ($) ($)
---- ------------- ---------------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Donald E. Moffitt(2).... 75,000 12/31/00 0 $558,000 $1,116,000
Gregory L. Quesnel...... 50,000 12/31/00 0 372,000 744,000
Gerald L. Detter........ 38,000 12/31/00 0 282,720 565,440
Sanchayan C.
Ratnathicam............ 38,000 12/31/00 0 282,720 565,440
Eberhard G.H. Schmoller. 34,000 12/31/00 0 252,960 505,920
John H. Williford....... 34,000 12/31/00 0 252,960 505,920
</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) All awards received by Mr. Moffitt under the Return on Equity Plan,
including the awards he received in 1998, vested and became payable as a
result of his retirement from the Company. Mr Moffitt received payments of
$1,125,740, $1,673,600 and $970,920, with respect to the Return on Equity
awards that he received in 1996, 1997 and 1998, respectively.
17
<PAGE>
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 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 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 compensation for the
executives named in the Summary Compensation Table on page 13 ("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 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 1998, 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 below those of comparable
officers at other companies, in part due to the fact that at the beginning of
1997 the Company's executive officers received no or nominal salary increases
following the spin-off of Consolidated Freightways Corporation. As a result,
Messrs. Moffitt, Quesnel, Detter, Ratnathicam, Schmoller and Williford
received salary increases of 19.4%, 10%, 12.5%, 20%, 23.8% and 13.3%,
respectively, at the beginning of 1998. In addition, during the year Mr.
Williford received additional salary increases of 17.7% and 16.7%, in
recognition of his performance and additional responsibilities. Mr. Quesnel
also received an additional salary increase during the year, as discussed
below under "CEO Compensation."
The base salaries for all Named Executives, other than the Chief Executive
Officer, were approved by the Committee. The 1998 salaries of Messrs. Moffitt
and Quesnel were approved by the Board of Directors as discussed below under
"CEO Compensation."
Short-Term Incentive Compensation
The incentive compensation plans are annually 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. These plans provide for annual awards to regular, full-time, non-
contractual employees. The Committee has delegated to the Chief Executive
Officer and other executive officers the responsibility and authority to
administer the Company's short-term incentive plans.
18
<PAGE>
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.
In 1998, the performance objective for Messrs. Moffitt, Quesnel, Ratnathicam
and Schmoller was based on pre-tax, pre-incentive income of the parent
Company; the performance objective for Mr. Detter was based on the pre-
incentive operating income of Con-Way Transportation Services, Inc.; and the
performance objective for Mr. Williford was based on pre-incentive operating
income of Menlo Logistics, Inc. and CNF's priority mail operations.
Upon attainment of the established performance goals, each plan participant
(including the Named Executives) earns incentive compensation determined as a
percentage of base salary, with the applicable percentage varying depending
upon the level of attainment of the established performance goals and the
participant's level of responsibility. In addition, each participant's
incentive compensation is capped at an amount equal to a specified multiple of
that participant's base salary. In 1998, operating income of Con-Way and Menlo
increased 41% and 13%, respectively, over 1997 operating income, and the
Company's net income applicable to common shareholders increased 16% over 1997
levels. As a result, Messrs. Moffitt, Quesnel, Detter, Ratnathicam, Schmoller
and Williford earned incentive compensation under the plan of $169,935,
$344,224, $403,516, $176,752, $169,374 and $88,382, respectively.
In 1998 the Committee also continued the annual bonus for operating company
executives, with bonus payments tied to the achievement of targeted operating
ratios. Among the Named Executives, Messrs. Quesnel, Detter and Williford were
eligible to participate in the bonus program. Based upon results of operations
for 1998, Messrs. Quesnel and Williford did not receive operating bonuses and
Mr. Detter received an operating bonus of $398,572.
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 CNF Transportation Inc.
Equity and Incentive Plan, which was approved at the Company's 1997 Annual
Meeting of Shareholders, provides for the granting of restricted stock awards,
options to purchase shares of the Company's Common Stock, and other types of
long-term awards to key employees of the Company and its subsidiaries.
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, and long term incentives.
As part of the 1998 engagement, the consultant was asked to review various
long-term incentive 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, in 1998 the Committee granted non-qualified
options for a total of 697,850 shares to executives of the Company and its
subsidiaries. The first broadbased awards, made effective June 30,
19
<PAGE>
1998, consisted of options for 196,850 shares, or approximately one-half the
size of the awards made in 1997. These reduced option awards, designed as
"bridge" grants for the period from June through December 1998, were made in
light of the Committee's decision to change the date of annual stock option
grants to executive officers from June to December. The Committee then made
additional grants of non-qualified options for 444,000 shares to executives of
the Company and its subsidiaries, effective December 9, 1998. In addition to
the scheduled grants of stock options made in June and December, non-qualified
options for 57,000 shares were issued to various executive officers during the
year upon hiring or promotion. The stock options granted in 1998 to the Named
Executives are set forth in the Option/SAR Grants Table on page 15.
In 1998, the Committee also elected to make certain long term compensation
awards in the form of performance-based restricted stock. The restricted stock
grants were made to six Company executives (including five of the Named
Executives) in order to tie their compensation to the Company's performance,
and were made in lieu of additional stock option grants that otherwise would
have been made to those executives. In total, the Committee granted 108,250
shares of such performance restricted stock in 1998, which will only vest if
the Company meets certain prescribed levels of performance.
As in the case of the stock option grants, "bridge" awards for 23,000 shares
of performance restricted stock (approximately one-half the size of the awards
made in 1997) were made effective June 30, 1998. The Committee also awarded
55,250 shares of performance restricted stock to six Company executives
(including five of the Named Executives), effective December 9, 1998. In
addition to the scheduled grants of restricted stock in June and December, an
additional 30,000 shares of performance-based restricted stock were issued to
two other Company executives during the year upon promotion of those
executives. Of the total number of shares of performance-restricted stock
granted to Company executives in 1998, Messrs. Quesnel, Detter, Ratnathicam,
Schmoller and Williford received 47,500, 14,250, 12,000, 10,500 and 11,250
shares, respectively.
In order to maintain the Company's overall long-term incentive compensation
at competitive levels, in 1998 the Committee once again made awards to senior
executives under the Company's Return on Equity Plan, which provides for the
payments of cash 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 for each award cycle the increase in shareholder equity is
measured over a three-year period, there were no bonus payments made under the
Plan during the period from 1996 through 1998. Bonus payments for the 1996
award cycle, which ended on December 31, 1998, were made in January 1999.
Among the Named Executives, Messrs. Moffitt, Quesnel, Detter, Ratnathicam,
Schmoller and Williford earned bonus payments of $1,125,740, $450,296,
$217,107, $112,574, $345,763 and $74,781, respectively.
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
were previously awarded growth units entitling them to certain cash benefits
upon such units vesting and appreciating in value. All awards made under these
plans are now fully vested. Among the Named Executives, only Messrs. Quesnel
and Schmoller currently hold such growth units. No new awards have been made
under these plans since 1990.
Long-term incentive compensation awards made to Messrs. Moffitt and Quesnel
during 1998 are discussed in more detail below under "CEO Compensation."
Stock Ownership Guidelines
The Committee established stock ownership guidelines in 1998 for senior
executive officers as a way to further align their financial interests with
those of shareholders. The officers are expected to
20
<PAGE>
make continuing progress towards compliance with these guidelines, with a goal
of full compliance with the guidelines by June 2001. The guidelines are as
follows: Chief Executive Officer--five times base salary; a group of five
other senior executive officers, consisting of the Chief Financial Officer,
the General Counsel, and the President of each of the Company's three major
business units--three times base salary.
For purposes of determining compliance with these guidelines, officers
receive ownership credit for all Company stock owned, directly or indirectly,
over which they (or their spouses) have the power to dispose, all Company
stock held in retirement plans (including 401(k) plans), and one-half of the
value of vested "in-the-money" stock options. Each of the officers subject to
the guidelines has made substantial progress towards meeting the guidelines.
CEO Compensation
In May 1998, Donald E. Moffitt stepped down as Chief Executive Officer of
the Company, but agreed to continue as Chairman of the Board of Directors.
Gregory L. Quesnel, formerly President and Chief Operating Officer of the
Company, succeeded Mr. Moffitt and now holds the title of President and Chief
Executive Officer. The 1998 compensation of Messrs. Moffitt and Quesnel is
discussed below.
The Committee recommended, and the Board approved, a 1998 annual base salary
for Mr. Moffitt equal to $800,000, of which he earned $271,353 prior to
stepping down as Chief Executive Officer in May 1998. This significant
increase in base salary (a 19.4% increase over his 1997 base salary) reflected
in part the Committee's recognition of the extraordinary effort that would be
required of Mr. Moffitt in guiding the Company through the period of
transition to a new chief executive officer. In addition, the salary increase
was based upon the Committee's evaluation of the CEO's performance, the
Company's performance, total shareholder return, and competitive salary data
provided by the Company's independent compensation consultant. As the only
member of the Board who was also an executive officer of the Company, Mr.
Moffitt did not participate in deliberations concerning his own salary.
During his tenure as both Chief Executive Officer and Chairman of the Board,
Mr. Moffitt received a salary in his capacity as Chief Executive Officer but
did not receive additional compensation in his capacity as Chairman of the
Board. Effective upon his retirement as Chief Executive Officer, the Committee
approved an annual retainer of $250,000 for Mr. Moffitt as compensation for
his services as Chairman of the Company's Board of Directors. Mr. Moffitt
earned $166,667 of this retainer during the period from May through December
1998.
For 1998, Mr. Moffitt earned short-term incentive compensation of $169,935,
based on the pre-tax, pre-incentive income objective for the parent Company
established at the beginning of 1998.
Upon Mr. Quesnel's election as Chief Executive Officer in May 1998, the
Committee recommended, and the Board approved, an annual salary of $625,000.
This amount was recommended by the Committee and approved by the Board based
on Mr. Quesnel's experience and on the recommendation of the Company's
independent compensation consultant. Subsequently, based upon the Committee's
review of Mr. Quesnel's performance since becoming Chief Executive Officer,
the Committee recommended, and the Board approved, an additional increase in
Mr. Quesnel's base salary from $625,000 to $712,500, effective January 4,
1999.
In 1998, Mr. Quesnel earned short-term incentive compensation of $344,224,
based on the pre-tax, pre-incentive income objective for the parent Company
established at the beginning of 1998.
21
<PAGE>
As discussed under "Long-Term Incentive Compensation" on page 19, in 1998,
Mr. Quesnel and the other Named Executives (other than Mr. Moffitt) received
as long-term compensation a combination of stock options, restricted stock
grants, and awards under the Return on Equity Plan.
Because Mr. Moffitt retired from the Company during the first half of the
year, he did not receive any grants of stock options or restricted stock
during 1998 in his capacity as an executive of the Company, although he did
receive grants of stock options and restricted stock in his capacity as a non-
employee director of the Company following his retirement. Mr. Moffitt also
received an award of 75,000 units under the Return on Equity Plan in 1998,
having a target value of $558,000 and a maximum value of $1,116,000. The
awards vested and became payable as a result of his retirement from the
Company, and in January 1999 Mr. Moffitt received a payment in the amount of
$970,920 with respect to such award.
Based upon the recommendation of the Company's independent executive
compensation consultant, the long-term awards made to Mr. Quesnel in 1998 have
an aggregate projected value of approximately two and one-half times his
annual salary if the Company achieves its goals relating to total profit,
return on equity, and shareholder value, and included special grants of 25,000
shares of performance restricted stock, and options to acquire 25,000 shares
of the Company's stock, which were made effective upon his appointment as
Chief Executive Officer.
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 1998, as in prior years, no covered
employee received compensation which was not deductible.
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, which was
approved at the Company's 1997 Annual Meeting of Shareholders, allows the
Committee to make certain short- and long-term incentive compensation awards
to covered employees that qualify as "performance-based compensation." The
Committee intends to use such awards, where feasible, to carry out its general
policy of providing a competitive compensation package which also structures
compensation paid to the covered employees so as to maximize the deductibility
of such compensation for federal income tax purposes.
THE COMPENSATION COMMITTEE
<TABLE>
<C> <S>
Richard B. Madden, Chairman Michael J. Murray
Richard A. Clarke Robert D. Rogers
W. Keith Kennedy, Jr. Robert P. Wayman
</TABLE>
22
<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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN*
CNF Transportation Inc., S & P Mid Cap 400 Index, Peer Group Index
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
4Q93 4Q94 4Q95 4Q96 4Q97 4Q98
------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CNF $100.00 $94.71 $113.70 $112.10 $197.52 $193.63
S&P Midcap 400 100.00 96.42 126.25 150.49 199.03 237.06
Custom Peer Group 100.00 87.41 92.36 95.94 139.57 165.02
</TABLE>
* Assumes $100 invested on December 31, 1993 in CNF Transportation Inc.
(then known as Consolidated Freightways, Inc.), S & P Mid Cap 400 Index and
the Peer Group Index, described below, and that any dividends were reinvested.
The Peer Group Index is a market-capitalization weighted index consisting of
the common stocks of the following corporations: Airborne Freight Corporation,
American Freightways Corporation, Caliber Systems, Inc., Federal Express
Corporation, Pittston Co.--Burlington Group, Ryder System Inc. and US
Freightways Corporation. This Peer Group Index is the same as in last year's
Proxy Statement. Because Caliber Systems, Inc. was acquired by Federal Express
Corporation in January 1998, shareholder return data for Caliber was available
only through 1997.
23
<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
Consecutive
Years
of Last Ten Years of Plan Participation
Years of --------------------------------------------
Employment 15 20 25 30 35
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000 $ 44,681 $ 63,242 $ 81,802 $100,363 $118,923
$300,000 $ 67,681 $ 95,742 $123,802 $151,863 $179,923
$400,000 $ 90,681 $128,242 $165,802 $203,363 $240,923
$500,000 $113,681 $160,742 $207,802 $254,863 $301,923
$600,000 $136,681 $193,242 $249,802 $306,363 $362,923
$700,000 $159,681 $225,742 $291,802 $357,863 $423,923
$800,000 $182,681 $258,242 $333,802 $409,363 $484,923
$900,000 $205,681 $290,742 $375,802 $460,863 $545,923
$1,000,000 $228,681 $323,242 $417,802 $512,363 $606,923
$1,100,000 $251,681 $355,742 $459,802 $563,863 $667,923
$1,200,000 $274,681 $388,242 $501,802 $615,363 $728,923
$1,300,000 $297,681 $420,742 $543,802 $666,863 $789,923
$1,400,000 $320,681 $453,242 $585,802 $718,363 $850,923
$1,500,000 $343,681 $485,742 $627,802 $769,863 $911,923
</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 13, and of
certain other compensation. 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 $130,000 per year currently, and prevents pension
accruals for compensation in excess of $160,000 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, 1998, Messrs. Quesnel, Detter, Ratnathicam, Schmoller and
Williford had 23, 30, 21, 24 and 17 years of plan participation, respectively.
Mr. Moffitt retired from the Company in 1998 with 30 years of plan
participation.
----------------
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into severance agreements with each of Messrs.
Quesnel, Detter, Ratnathicam, Schmoller and Williford. Each severance
agreement provides that if such officer's employment with the Company is
actually or constructively terminated within two years of a change in control
(as defined in the severance agreement), or prior to a change in control at
the direction of a person or entity which subsequently acquires control of the
Company, the officer generally will receive, among other things, (i) a lump
sum cash payment equal to three times the officer's base salary as of the date
of termination (or as of the change in control, if higher); (ii) a lump sum
cash payment equal to three times the highest of (a) the officer's average
annual bonus over the three years prior to the termination of employment, (b)
the officer's average annual bonus over the three years prior to the
24
<PAGE>
change in control, or (c) the officer's target bonus for the year of the
termination of employment; (iii) life, disability, health, dental and
accidental insurance benefits for three years; and (iv) a lump sum payment
reflecting the value of three additional years of retirement accruals. The
executives will also be entitled to receive additional payments to the extent
necessary to compensate them for any excise taxes payable by them under the
federal tax laws applicable to excess parachute payments.
----------------
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, 1998. 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, 1999. 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.
----------------
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 14, 1999,
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>
T. Rowe Price Associates, Inc. 3,400 Common (1) *%
and T. Rowe Price Trust Company 635,246 Preferred (1) 5.9%
100 East Pratt Street
Baltimore, MD 21202
FMR Corp. 5,339,155 Common (2) 11.1%
82 Devonshire Street
Boston, MA 02109
Loomis, Sayles & Company, L.P. 2,588,025 Common (3) 5.4%
One Financial Center
Boston, MA 02111
</TABLE>
- --------
* Less than 1%
(1) T. Rowe Price Associates, Inc. ("Price Associates") has sole voting power
over 3,000 shares, shared voting power over 3,887,959 shares, sole
dispositive power over 3,400 shares and shared dispositive power over
3,887,959 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 3,887,959 shares, sole dispositive
power over 0 shares and shared dispositive power over 3,887,959 shares.
The holdings include 635,246 shares of Series B Preferred Stock (which
Preferred Stock is held pursuant to the CNF Transportation Inc. Thrift and
Stock Plan). Such shares of Series B Preferred Stock represent 75% 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
25
<PAGE>
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 5.9% 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 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.
(2) 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
729,900 shares, shared voting power over 0 shares, sole dispositive power
over 5,339,155 shares and shared dispositive power over 0 shares.
(3) Loomis Sayles & Company , L.P. has sole voting power over 1,789,425
shares, shared voting power over 36,100 shares, sole dispositive power
over 0 shares and shared dispositive power over 2,588,025 shares.
----------------
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Company believes that, during 1998 its executive officers and directors
have complied with all filing requirements under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
----------------
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
Shareholder proposals intended for inclusion in the next year's proxy
statement pursuant to Rule 14a-8 under the Exchange Act must be directed to
the Corporate Secretary, CNF Transportation Inc., at 3240 Hillview Avenue,
Palo Alto, California 94304, and must be received by November 23, 1999. In
order for proposals of shareholders made outside of Rule 14a-8 under the
Exchange Act to be considered "timely" within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposals must be received by the Corporate
Secretary at the above address by January 27, 2000. The Company's Bylaws
require that proposals of shareholders made outside of Rule 14a-8 under the
Exchange Act must be submitted, in accordance with the requirements of the
Bylaws, not later than January 27, 2000 and not earlier than December 28,
1999.
26
<PAGE>
----------------
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 1998 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The report will be available for mailing after April 10, 1999.
Please direct your written request to the Corporate Secretary, CNF
Transportation Inc., 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 Innisfree M&A
Incorporated, 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 22, 1999
27
<PAGE>
[RECYCLED PAPER LOGO APPEARS HERE]
RECYCLED PAPER
<PAGE>
[LETTERHEAD OF CNF TRANSPORTATION INC.]
EBERHARD G.H. SCHMOLLER
Secretary
March 22, 1999
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 26, 1999. This material is being sent to you
as a participant in the CNF Transportation Inc. Thrift and Stock Plan and
includes (1) the Company's 1999 Proxy Statement and 1998 Annual Report, (2) a
card to instruct T. Rowe Price Trust Company, the Plan trustee, as to how you
wish the shares of CNF Transportation 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.
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 CNF Transportation 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 20, 1999.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 650-494-2900
<PAGE>
[LETTERHEAD OF CNF TRANSPORTATION INC.]
EBERHARD G.H. SCHMOLLER
Secretary
March 22, 1999
Dear Fellow Employee:
Enclosed is proxy material for the CNF Transportation Inc. Annual Meeting of
Shareholders to be held on April 26, 1999. This material is being sent to you
as a participant in the CNF Transportation Inc. Common Stock Fund and includes
(1) the Company's 1999 Proxy Statement and 1998 Annual Report, (2) a card to
instruct Mellon Bank, the Fund trustee, as to how you wish the shares of CNF
Transportation 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.
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 CNF Transportation 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 20,
1999.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 650-494-2900
<PAGE>
[LETTERHEAD OF CNF TRANSPORTATION INC.]
EBERHARD G.H. SCHMOLLER
Secretary
March 22, 1999
Dear CFC SASP Participant:
Enclosed is proxy material furnished by CNF Transportation Inc. in
connection with its Annual Meeting of Shareholders to be held on April 26,
1999. This material is being sent to you as a participant in the Consolidated
Freightways Corporation Stock and Savings Plan and includes (1) CNF
Transportation Inc.'s 1999 Proxy Statement and 1998 Annual Report, (2) a card
to instruct T. Rowe Price Trust Company, the Plan trustee, as to how you wish
the shares of CNF Transportation Inc. credited to your account to be voted,
and (3) an envelope to forward your instructions to First Chicago Trust
Company of New York, the Company's stock transfer agent.
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 CNF Transportation 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, the Company's 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 20, 1999.
Sincerely,
/s/ Eberhard G.H. Schmoller
3240 HILLVIEW AVENUE, PALO ALTO, CA 94304, 650-494-2900
<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 CNF Transportation Inc.
Thrift and Stock Plan to vote all shares of CNF Transportation Inc. preferred
stock credited to the individual account of the undersigned under the Plan at
the Annual Meeting of Shareholders of CNF Transportation Inc. to be held on
Monday, April 26, 1999 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 item 2 below, as described in the accompanying
proxy statement.
1.Election of Four Class II directors for a three-year term.
Nominees: Donald E. Moffitt, Michael J. Murray, Robert D. Rogers, William
J. Schroeder
[_]Vote FOR all nominees listed above; except vote withheld from the
following nominees (if any):
----------------------------------------------------------------------------
----------------------------------------------------------------------------
[_]Vote WITHHELD from all nominees.
2.Ratify appointment of Arthur Andersen LLP as the Company's auditors for the
year 1999.
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.
, 1999
------------------------------------------
Signature of Participant
------------------------------------------
Name(Please Print)
------------------------------------------
Address(Please Print)
------------------------------------------
CityStateZip Code
<PAGE>
CNF TRANSPORTATION INC. COMMON STOCK FUND
Direction of Participant to Trustee of
CNF Transportation Inc. Common Stock Fund
The undersigned hereby directs the Trustee of the CNF Transportation Inc. Common
Stock Fund to vote all shares of CNF Transportation Inc. common stock credited
to the individual account of the undersigned under the Common Stock Fund at the
Annual Meeting of Shareholders of CNF Transportation Inc. to be held on Monday,
April 26, 1999 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 II directors for a three-year term.
Nominees: Donald E. Moffitt
Michael J. Murray
Robert D. Rogers
William J. Schroeder
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 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 item 2 below.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of
directors and FOR item 2 below.
- -------------------------------------------------------------------------------
1. Election of Directors.
(see reverse)
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
2. Ratify appointment of Independent Auditors.
[ ] 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.
SIGNATURE(S)________________________________________ DATE___________, 1999
NOTE: Please sign exactly as name appears hereon.
<PAGE>
CNF TRANSPORTATION INC. THRIFT AND STOCK PLAN
Direction of Participant to Trustee of
CNF Transportation Inc. Thrift and Stock Plan
(Common Stock and Preferred Stock)
The undersigned hereby directs the Trustee of the CNF Transportation Inc. Thrift
and Stock Plan to vote all shares of CNF Transportation Inc. common stock and
preferred stock credited to the individual account of the undersigned under the
Plan at the Annual Meeting of Shareholders of CNF Transportation Inc. to be held
on Monday, April 26, 1999 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 II directors for a three-year term.
Nominees: Donald E. Moffitt
Michael J. Murray
Robert D. Rogers
William J. Schroeder
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 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 item 2 below.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of
directors and FOR item 2 below.
- -------------------------------------------------------------------------------
1. Election of Directors.
(see reverse)
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
2. Ratify appointment of Independent Auditors.
[ ] 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.
SIGNATURE(S)_____________________________________ DATE______________, 1999
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 CNF Transportation Inc.
common stock credited to the individual account of the undersigned under the
Plan at the Annual Meeting of Shareholders of CNF Transportation Inc. to be held
on Monday, April 26, 1999 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 II directors for a three-year term.
Nominees: Donald E. Moffitt
Michael J. Murray
Robert D. Rogers
William J. Schroeder
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 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 item 2 below.
- -----------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of
directors and FOR item 2 below.
- -----------------------------------------------------------------------------
1. Election of Directors.
(see reverse)
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------
2. Ratify appointment of Independent Auditors.
[ ] 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.
SIGNATURE(S)________________________________________ DATE____________, 1999
NOTE: Please sign exactly as name appears hereon.
<PAGE>
CNF TRANSPORTATION INC.
This Proxy Is Solicited on Behalf of the Board of Directors
of CNF Transportation Inc.
The undersigned appoints M.G. GILL, R. JAUNICH II AND R.B. MADDEN and each
of them, the proxies of the undersigned, with full power of substitution,
P to vote the stock of CNF TRANSPORTATION INC., which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders to be held on
R Monday, April 26, 1999 at 9:00 A.M. and at any adjournments or
postponements thereof. The proxies are authorized to vote in their
O discretion upon such other business as may properly come before the meeting
and any and all adjournments or postponements thereof.
X
Election of four Class II directors for a three-year term.
Y
Nominees: Donald E. Moffitt
Michael J. Murray
Robert D. Rogers
William J. Schroeder
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 item 2 below.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors and FOR
item 2 below.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors [_] [_]
For, except vote withheld from the following
nominee(s).
- --------------------------------------------
FOR AGAINST ABSTAIN
2. Ratify appointment of [_] [_] [_]
independent Auditors
- --------------------------------------------------------------------------------
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: , 1999
------------------------
SIGNATURE (S):
---------------------
-----------------------------------
NOTE: Please sign exactly as your name
appears hereon. Joint owners
should each sign. When signing as
an attorney, executor,
administrator, trustee or
guardian, please give full title
as such.
