SECURITIES AND EXCHANGE COMMISSION
                           Washington D. C. 20549

                                  Form 10-Q

X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
   ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 4, 1998, OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
   ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _______________

                  Commission File Number 0-19791

                     USFREIGHTWAYS CORPORATION
          (Exact name of registrant as specified in its charter)


Delaware                                               36-3790696
(State of Incorporation)                    (IRS Employer Identification No.)

9700 Higgins Road, Rosemont, Illinois                      60018
(Address of principal executive offices)                 (Zip Code)


                       Registrant's telephone number
                    including area code: (847) 696-0200


                           Not applicable
      (Former name or former address, if changed since the last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 11, 1998, 26,231,997  shares of common stock were outstanding.


<PAGE>



                             PART I: FINANCIAL INFORMATION



Item 1.                           Financial Statements.

                                USFreightways Corporation
                             Condensed Consolidated Balance Sheets
                                Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                 July 4,             January 3,
                                                                   1998                   1998
-----------------------------------------------------------------------------------------------
             <S>                                                 <C>                      <C>
Assets
Current assets:
     Cash                                                  $      7,228          $       6,471
     Accounts receivable, net                                   203,027                187,554
     Other                                                       46,497                 43,091
                                                       -----------------    -------------------
          Total current assets                                  256,752                237,116
                                                       -----------------    -------------------

Net property and equipment                                      490,593                448,315
Net intangible assets                                           103,836                104,407
Other assets                                                     10,170                  9,697
                                                       -----------------    -------------------
Total assets                                               $    861,351            $   799,535
                                                       -----------------    -------------------

Liabilities and Stockholders' Equity
Current liabilities:
     Current bank debt                                     $        150            $       650
     Accounts payable                                            63,300                 62,895
     Other current liabilities                                  153,119                118,169
                                                       -----------------    -------------------
          Total current liabilities                             216,569                181,714
                                                       -----------------    -------------------
Long-term liabilities:
     Long-term bank debt                                         10,000                 15,000
     Notes payable                                              100,000                100,000
     Other long-term liabilities                                111,697                110,621
                                                       -----------------    -------------------
          Total long-term liabilities                           221,697                225,621
                                                       -----------------    -------------------
Common stockholders' equity                                     423,085                392,200
                                                       -----------------    -------------------
Total liabilities and stockholders' equity                 $    861,351            $   799,535
                                                       -----------------    -------------------

</TABLE>
<PAGE>




                              USFreightways Corporation
                         Consolidated Statements of Income
             Unaudited (Dollars in thousands, except per-share amounts)

<TABLE>
<CAPTION>
                                                       Three months ended                           Six months ended
                                           -------------------------------------   -----------------------------------------
                                                     July 4,            June 28,              July 4,              June 28,
                                                       1998                1997                  1998                  1997
--------------------------------------------------------------------------------   -----------------------------------------
      <S>                                            <C>                 <C>                   <C>                   <C>
Operating revenue                           $     447,026       $      380,763      $       889,365      $         736,580
Operating expenses:
     Salaries, wages and benefits                 266,428              240,114              531,193                467,070
     Other Operating expenses                      79,072               74,856              160,848                148,451
     Purchased transportation                      41,871               13,502               84,049                 25,844
     Insurance and claims                           7,464                7,881               15,827                 14,950
     Depreciation and amortization                 19,743               17,495               39,277                 34,279
                                           -----------------   -----------------   -------------------  --------------------
         Total operating expenses                 414,578              353,848              831,194                690,594
                                           -----------------   -----------------   -------------------  --------------------
Income from operations                             32,448               26,915               58,171                 45,986
                                           -----------------   -----------------   -------------------  --------------------
Non-operating income (expense):
     Interest expense                              (2,026)              (2,016)              (4,134)                (4,598)
     Interest income                                  210                  226                  443                    390
     Other, net                                       (49)                ( 54)                (227)                    45
                                           -----------------   -----------------   -------------------  --------------------
          Total non-operating expense              (1,865)              (1,844)              (3,918)                (4,163)
                                           -----------------   -----------------   -------------------  --------------------
Net income before income taxes                     30,583               25,071               54,253                 41,823
Income tax expense                                 12,539               10,530               22,480                 17,532
                                           -----------------   -----------------   -------------------  --------------------
Net income                                  $      18,044       $       14,541       $       31,773      $          24,291
                                           -----------------   -----------------   -------------------  --------------------

Average shares outstanding - basic             26,201,994          25,829,398            26,159,329            25,052,941
Average shares outstanding - diluted           26,607,779          26,129,479            26,568,959            25,351,923
Basic earnings per common share:            $        0.69       $         0.56       $         1.21      $            0.97
Diluted earnings per common share:          $        0.68       $         0.56       $         1.20      $            0.96
                                           -----------------   -----------------   -------------------  --------------------

</TABLE>
<PAGE>


                                 USFreightways Corporation
                         Condensed Consolidated Statements of Cash Flows
                                Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                      Six months ended
                                                       --------------------------------------
                                                                 July 4,             June 28,
                                                                   1998                 1997
---------------------------------------------------------------------------------------------
           <S>                                                   <C>                     <C>
Cash flows from operating activities:

Net Income                                              $       31,773      $       24,291
Adjustments to net income:
    Depreciation and amortization                               39,277              34,279
    Other items affecting cash                                  15,817               6,431
      from operating activities
                                                       -----------------   ------------------
Net cash provided by operating activities                       86,867              65,001
                                                       -----------------   ------------------
Cash flows from investing activities:
  Capital expenditures, net of
    proceeds on sales                                          (78,237)            (46,747)
  Acquisition                                                  ( 1,500)
                                                       -----------------   ------------------
Net cash used in investing activities                          (79,737)            (46,747)
                                                       -----------------   ------------------
Cash flows from financing activities:
  Dividends paid                                                (4,873)             (4,514)
  Proceeds from sale of common stock                                -               69,431
  Proceeds from sale of treasury stock                           4,000               2,865
  Proceeds from long-term debt                                       -
  Payments on long-term debt                                   ( 5,500)            (78,139)
                                                       -----------------   ------------------
Net cash provided by (used in) financing activities            ( 6,373)            (10,357)
                                                       -----------------   ------------------
Net increase in cash                                               757               7,897
                                                       -----------------   ------------------
Cash at beginning of period                                      6,471               4,090
                                                       -----------------   ------------------
Cash at end of period                                   $        7,228      $       11,987
                                                       -----------------   ------------------
</TABLE>
The  financial  statements  have been  prepared  in  accordance  with  generally
accepted  accounting  principles for interim financial  information and with the
instructions  to  Form  10-Q.  Accordingly,  they  do  not  include  all  of the
information and footnotes required by generally accepted  accounting  principles
for complete  financial  statements.  The  statements  are unaudited but, in the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered  necessary for a fair presentation have been included.  The Company's
results of operations  are affected by the seasonal  aspects of the regional LTL
trucking  business.  Therefore,  operating  results for the three months and six
months ended July 4, 1998 are not necessarily indicative of the results that may
be expected for the year ending January 2, 1999. For further information,  refer
to  consolidated  financial  statements  and footnotes  thereto  included in the
registrant's annual report on Form 10-K for the year ended January 3, 1998.

<PAGE>

<TABLE>
<CAPTION>

Segment Reporting                                         Three Months Ended                 Six Months Ended
                                                         July 4,        June 28,         July 4,          June 28,
                                                           1998            1997            1998               1997
---------------------------------------------------------------------------------------------------------------
         <S>                                                <C>            <C>         <C>               <C>
Revenue
   LTL Group:
      USF Holland                                  $    196,152    $    176,220      $   393,647     $  339,950
      USF Reddaway                                       53,263          48,397          104,704         93,383
      USF Red Star                                       53,591          48,588          104,264         94,983
      USF Dugan                                          45,451          42,597           90,997         83,165
      USF Bestway                                        34,111          33,512           68,252         63,932
---------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                            382,568         349,314          761,864        675,413
   Logistics subsidiaries                                30,835          26,144           59,574         51,309
   Freight forwarding                                    33,623           3,001           67,927          5,720
   Corporate and other                                      -             2,304              -            4,138
---------------------------------------------------------------------------------------------------------------
Total Revenue                                      $    447,026     $   380,763      $   889,365     $  736,580

Income From Operations
   LTL Group:
      USF Holland                                  $     19,930     $    17,725      $    37,329     $   30,138
      USF Reddaway                                        4,877           3,422            8,005          4,843
      USF Red Star                                        1,115             127            1,299            213
      USF Dugan                                           2,136           1,963            3,528          3,650
      USF Bestway                                         3,945           4,689            8,267          8,202
---------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                             32,003          27,926           58,428         47,046
   Logistics subsidiaries                                 2,046           1,266            3,805          2,562
   Freight forwarding                                       860              -             1,484             20
   Corporate and other                                   (1,391)         (1,619)          (3,531)        (2,331)
   Amortization of intangibles                           (1,070)           (658)          (2,015)        (1,311)
----------------------------------------------------------------------------------------------------------------
Total Income from Operations                        $    32,448     $    26,915       $   58,171     $   45,986
----------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>









Item 2.           Management's Discussion and Analysis of Financial Conditions
                    and Results of Operation.



                  USFreightways   Corporation ("the Company") reported  record
net  income  for the  thirteen  weeks  ended  July 4,  1998 of $18,044,000,  a
24%  increase  over the  $14,541,000  which was reported for the thirteen weeks
which ended June 28, 1997.
                
                 Net  income  per  share for the  current  year's  quarter  was
equivalent to 68 cents diluted  earnings per share,  and 69 cents basic earnings
per share,  a 21%  increase  compared  to 56 cents on a diluted  basis and a 23%
increase compared to 56 cents on a basic basis for the same quarter of 1997.

                  Revenue  this year  increased  by 17.4% to  $447,026,000  from
$380,763,000  for the second quarter of 1997. USF Seko Worldwide,  the Company's
domestic and international  freight  forwarder,  which was acquired on September
30, 1997,  contributed  $33,623,000 revenue in the 1998 quarter.  There were two
less working days in the second quarter this year compared to the similar period
for 1997,  since  both July 4th and Good  Friday  holidays  occurred  this year,
whereas neither of these holidays were included in the 1997 quarter.

                  Total  revenue  for  the  less-than-truckload  (LTL)  regional
subsidiaries  amounted to $6,170,452  per working day, an increase of 13.1% over
the  $5,458,031  per working day for the 1997 quarter.  Daily LTL shipment count
increased  8.6% and LTL revenue per shipment of $106.18 was 4.0% higher than for
the comparable period of 1997. Average weight per shipment was 1,137 pounds.

                  Net income for the six months  ended July 4, 1998  amounted to
$31,773,000, compared to $24,291,000 for the 1997 six month period. Earnings for
the six months ended July 4, 1998 were $1.20 per diluted  share,  a 25% increase
compared to 96 cents per diluted share for the 1997 six month period.

                  The logistics group had an excellent  quarter achieving record
revenue and operating income. Revenue for the thirteen weeks of the current year
amounted to $30,835,000,  an increase of 17.9%, and the operating ratio improved
to 93.4% from 95.2% in the second quarter of 1997. Revenue for the six months of
the current  year  amounted to  $59,574,000,  an increase of 16.1% over the same
period of last year.  Operating  income of $3,805,000 and an operating  ratio of
93.6% for the six months of the current year  compares to  $2,562,000  and 95.0%
for the same period of last year.

                  Operating  income  for the  Company's  forwarding  operations,
primarily  USF Seko  Worldwide,  for the  current  year's  six month  period was
$1,484,000  compared to $1,169,000 on a pro forma basis as if USF Seko Worldwide
was included last year.

                  Despite a slight downturn in the economy and the adverse
impact of the GM strike, particularly at USF Holland, revenue and net income
improved for the second quarter and six month period  compared to the same
periods of the previous year. The GM strike,  which commenced June 5, 1998, 
reduced revenue in the regional  trucking  subsidiaries  with  the  most 
significant measurable reduction in USF Holland,  which was estimated to have
been in excess of $2.0 million.  All of the regional  trucking  subsidiaries 
continue to outperform  the majority of their competitors.  USF Reddaway, 
USF Holland, USF Dugan and USF Red Star showed improvement in both operating 
ratio and operating  income in the second quarter compared to the same period
of the previous year. The combined  operating  ratio for the five regional 
trucking subsidiaries improved from 92.0% in 1997 to 91.6% in the current year.

                  USF  Holland,  noted  for its  excellent service and safety
standards, established a new 'collision free miles' record of over 8.6 million 
consecutive miles driven without a collision.  The USF Holland linehaul  drivers
were also  recognized  for their  excellent  safe  driving by winning  the 
Michigan  Trucking   Association   safety  award  for  the  second consecutive
year.
<PAGE>

 Management's Discussion and Analysis of Financial Conditions
               and Results of Operation. (Cont'd.)




                  Although there are indications  that the rate of economic 
growth has slowed since the first quarter,  the outlook for the economy for the
balance of the year  remains at levels  above the same period of 1997.  While a
long  duration of the 'GM strike' will have a negative  impact on the
transportation  industry,  the Company's strong  balance  sheet,  low  debt, 
and strict  cost  controls permit the Company to adjust to any resultant
economic downturn.

                  Capital  expenditures  for the three months of the 1998
quarter  amounted  to  approximately  $44  million of which $24  million  was 
for revenue equipment  and $13  million  for  terminal  facilities.  Last  year 
for the same period,  capital  expenditures  amounted to $27 million of which
$20 million was for revenue  equipment and $7 million for terminal  facilities
and miscellaneous equipment.  For  the  six  months  ended  July  4,  1998,  
capital  expenditures approximated  $80 million  which  compares to $48 million
for the 1997 six month period.

                   On July 30, 1998, the Company entered into an agreement to
acquire Glen Moore Transport Inc., a Carlisle, Pennsylvania based truckload
carrier.  Glen Moore has annualized revenue of approximately $35 million and 
operates 255 tractors and 600 trailers.  This agreement is expected to close 
during the third quarter of 1998.

                    The Financial Accounting Standards Board (FASB) has issued
FASB Statement No. 132 ("Employers' Disclosures about Pensions and and Other
Postretirement Benefits") which the Company will adopt in the fourth quarter
of 1998.  FASB has also issued Statement 133, "Accounting for Derivative 
Instruments and Hedging Activities".  The Company is currently evaluating the
impact of these pronouncements; however it does not anticipate that the 
adoption of these statements will have a material impact on results of
operations or financial position.

                    A dividend of 9 1/3 cents per share was paid July 10, 1998
to shareholders of record on June 26, 1998.

                     This release contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to 
differ materially. These risks and uncertainties are detailed from time to time
in reports filed by the Company with the Securities and Exchange Commission
including forms 8K, 10Q and 10K.


<PAGE>



                   PART II: OTHER INFORMATION



Item 1.           Legal Proceedings.

                  The  Company  is a party to a number  of  proceedings  brought
                  under the Comprehensive  Environmental Response,  Compensation
                  and Liability Act, (CERCLA). The Company has been made a party
                  to these proceedings as an alleged generator of waste disposed
                  of at  hazardous  waste  disposal  sites.  In each  case,  the
                  Government  alleges that the parties are jointly and severally
                  liable  for the  cleanup  costs.  Although  joint and  several
                  liability  is  alleged,   these   proceedings  are  frequently
                  resolved on the basis of the quantity of waste  disposed of at
                  the site by the generator.  The Company's  potential liability
                  varies greatly from site to site. For some sites the potential
                  liability  is de  minimis  and for others the costs of cleanup
                  have not yet been  determined.  While  it is not  feasible  to
                  predict  or  determine  the  outcome of these  proceedings  or
                  similar  proceedings  brought  by state  agencies  or  private
                  litigants, in the opinion of management, the ultimate recovery
                  or  liability,   if  any,   resulting  from  such  litigation,
                  individually   or  in  the  aggregate,   will  not  materially
                  adversely affect the Company's  financial condition or results
                  of  operations  and, to the  Company's  best  knowledge,  such
                  liability,  if  any,  will  represent  less  than  1%  of  its
                  revenues.

                  On April 19,  1996,  Steven  Mark  Whitworth  ("Plaintiff")  a
                  former  employee  of USF Bestway  Inc.,  a  subsidiary  of the
                  Company ("USF  Bestway",  brought suit against USF Bestway and
                  one of its employees,  alleging claims of fraud and promissory
                  estoppel  arising from  Plaintiff's  previous  employment as a
                  driver with USF Bestway,  Steven Mark Whitworth v. TNT Bestway
                  Transportation,  Inc. f/k/a .TNT Bestway Inc. and William Orr,
                  Case No.  96-3935-A,  14th  Judicial  District  Court,  Dallas
                  County,  Texas. On or about October 2, 1996, Plaintiff amended
                  his  petition  and added  claims  of  wrongful  discharge  and
                  conspiracy to wrongfully discharge.

                  On October  7, 1996,  Plaintiff  moved for  summary  judgment,
                  claiming  that he was entitled to a judgment of  $3,500,000 in
                  actual  damages and  $1,750,000  in attorney fees based on (i)
                  the USF Bestway's  alleged  untimely  responses to Plaintiff's
                  requests for  admissions  and (ii) the USF  Bestway's  alleged
                  failure  to  comply  with  the   requirements   of  Texas  law
                  concerning the signature of pleadings by counsel in connection
                  with the  responses to  Plaintiff's  requests for  admissions.
                  Following  a hearing  on  November  1, 1996,  the trial  court
                  granted  Plaintiff's  motion for summary  judgment and entered
                  judgment in favor of  Plaintiff  and against the USF  Bestway,
                  for $3,500,000 in actual damages $1,750,000 in attorneys' fees
                  together with court costs and interest.

                  On November 27, 1996, USF Bestway moved for reconsideration of
                  the judgment and for a new trial. At a January 7, 1997 hearing
                  on  this  motion,  the  trial  court  denied  the  motion  for
                  reconsideration   and  for  new  trial,  but  ruled  that  the
                  responses  to the  Plaintiff's  requests for  admissions  were
                  timely.  USF Bestway has posted a  superedeas  bond to prevent
                  enforcement  of the judgment  pending appeal and perfected its
                  appeal to the Dallas Court of Appeals.

                  Management  of the Company  believes  that it has good grounds
                  for obtaining a reversal of the judgment on appeal  because it
                  believes,  among other reasons,  that the judgment  entered on
                  the basis of the procedural  technicality of counsel's failure
                  to comply with the  requirements  of Texas law  concerning the
                  signature of pleadings by counsel,  will not be sustained by a
                  reviewing  court and further  believes,  the judgment  will be
                  vacated and the matter  remanded for a trial on the merits and
                  that, in any event, will not have a material adverse effect on
                  USF Bestway's financial  condition.  In the event the judgment
                  is sustained on appeal,  management of USF Bestway  intends to
                  pursue  potential  causes of action  against  all  appropriate
                  parties.

                  Also, the Company is involved in other  litigation  arising in
                  the ordinary course of business,  primarily  involving  claims
                  for bodily  injuries  and property  damage.  In the opinion of
                  management,  the  ultimate  recovery  or  liability,  if  any,
                  resulting  from  such  litigation,   individually  or  in  the
                  aggregate,  will not materially adversely affect the Company's
                  financial condition or results of operations.



<PAGE>




Item 4.           Submission of Matters to a Vote of Security Holders.

              (a) On  May  1,  1998,  the  annual  meeting  of  stockholders  of
                  USFreightways Corporation was held pursuant to notice.

              (b) N/A

              (c) Election of Directors

                  John Campbell Carruth     FOR:              22,952,392
                                            WITHHOLD:            124,249

                  Neil A. Springer          FOR:              22,952,593
                                            WITHHOLD:            124,048

                  William N. Weaver, Jr.    FOR:              22,952,479
                                            WITHHOLD:            124,162


              (d) N/A

Item 6.           Exhibits and Reports on Form 8-K.

              (a) Exhibits

                  1.       Exhibit 10.1-Restricted Stock Agreement with John
                              Campbell Carruth dated April 27, 1998.

                  2.        Exhibit 10.2-Employment Agreement with John
                              Campbell Carruth dated June 1, 1998,
                           effective January 3, 1999.

                  3.       Exhibit 27-Financial Data Schedule.

              (b) Current Reports on Form 8-K were filed:

                  1.       No current reports on Form 8-K were filed during
                              the quarter.








                               SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized.  Dated the 11th
day of August, 1998.




         USFREIGHTWAYS CORPORATION


        By:   /s/ Christopher L. Ellis
                  ____________________  
                  Christopher L. Ellis
                  Senior Vice President, Finance and Chief Financial Officer


        By:   /s/ Robert S. Owen
                  ______________
                  Robert S. Owen
                  Controller and Principal Accounting Officer


<PAGE>



EXHIBIT 10.1

                            USFREIGHTWAYS CORPORATION
                            RESTRICTED STOCK AGREEMENT


         THIS   AGREEMENT  is  made  this  27th  day  of  April,   1998  between
USFreightways Corporation, a Delaware corporation (the "Company"), and J.
Campbell Carruth (the "Recipient").

         WHEREAS,  the  Company  desires  to  grant  to  the  Recipient  certain
restricted shares of its common capital stock (the "Restricted Stock") under the
Company's Long-Term Incentive Plan (the "Plan"),  which has been approved by its
stockholders; and

         WHEREAS,  the Company and the Recipient  understand  and agree that any
terms used herein have the same meanings as in the Plan (the  "Recipient"  being
referred to in the Plan as a "Participant").

         NOW, THEREFORE,  in consideration of the following mutual covenants and
for other good and valuable consideration, the parties agree as follows:

1.       GRANT OF RESTRICTED STOCK

         The Company hereby grants to the Recipient 59,480 Shares of Restricted
Stock on the terms and conditions and subject to all the limitations set forth
herein and in the Plan, which is incorporated herein by reference. The Recipient
acknowledges receipt of a copy of the Plan.

2.       PURCHASE PRICE

         The purchase price of the  Restricted  Stock shall be deemed to be zero
Dollars per Share.  The  foregoing  notwithstanding,  the  Recipient  shall not,
without the consent of the Company, make any election under Section 83(b) of the
Code to recognize income at the date of grant.

3.       CERTIFICATES AND SHAREHOLDER RIGHTS

         The Company's  Transfer  Agent and Registrar  shall prepare and issue a
stock  certificate  containing  a  legend  referring  to this  Agreement  in the
Recipient's name  representing the Shares of Restricted Stock that the Recipient
has been granted,  which certificate shall be held by the Recipient  pursuant to
the terms of this  Agreement  and the Plan.  From and after the  issuance of the
certificate,  the  Recipient  shall be the holder of record with  respect to the
Restricted  Stock, and shall have the right to vote such Restricted Stock and to
receive  stock  splits,  dividends,  and  distributions  with  respect  to  such
Restricted Stock, which splits, dividends, and distributions shall be subject to
the terms and conditions of the Plan and this Agreement.

4.       RESTRICTIONS AND VESTING

(a)               Until the passage of the time periods or the occurrence of the
                  events  specified in Paragraph 4(b) below, the Recipient shall
                  not sell, transfer,  convey,  pledge,  encumber,  or otherwise
                  dispose of all or a portion of any interest in the  Restricted
                  Stock.

(b)               Subject  to the  Plan  and this  Agreement,  the  restrictions
                  hereunder  shall lapse on the first to occur of the  following
                  dates or events, whichever is applicable:



         (i)      Number of Shares                Date Restrictions Lapse

                  14,870                          April 27, 1999
                  14,870                          April 27, 2000
                  14,870                          April 27, 2001
                  14,870                          April 27, 2002

         (ii)     Total Number of Shares      Event on Which Restrictions Lapse

                  59,480                      Recipient's Death or Disability as
                                                  defined in the Plan

         (iii)    Total Number of Shares      Event on Which Restrictions Lapse

                  59,480                          Change of Control



<PAGE>


                  Absent  the  Company's  written  notice to the  contrary,  any
         Restricted  Stock the  restrictions  on which have not lapsed  upon the
         Recipient's termination of employment shall be forfeited immediately if
         the Recipient terminates his employment or his employment is terminated
         for "cause," as defined in the Employment  Agreement to be entered into
         between  the  Recipient  and the  Company,  and  this  statement  shall
         constitute  the  written  notice   required  under  the  Plan  of  such
         forfeiture.

                  For purposes of this  Paragraph 4, a "Change of Control" shall
         be  deemed  to  occur on the  earliest  of (1) the  acquisition  by any
         entity,  person,  or group of  beneficial  ownership,  as that  term is
         defined in Rule 13d-3 under the  Securities  Exchange  Act of 1934,  of
         more than 50% of the outstanding  capital stock of the Company entitled
         to  vote  for the  election  of  directors  ("Voting  Stock");  (2) the
         completion by any entity, person, or group (other than the Company or a
         subsidiary  of the  Company) of a tender offer for more than 50% of the
         outstanding  Voting Stock of the Company;  or (3) the effective time of
         (i) a  merger  or  consolidation  of  the  Company  with  one  or  more
         corporations as a result of which the holders of the outstanding Voting
         Stock of the  Company  immediately  prior to such merger hold less than
         80% of the Voting Stock of the surviving or resulting  corporation,  or
         (ii) a transfer of all of the  property or assets of the Company  other
         than to an entity of which the Company  owns at least 80% of the Voting
         Stock.
                                                                

5.       DIVIDENDS

         From and after  the date the  Recipient  acquires  the  Shares,  and is
issued a certificate  or  certificates,  the Recipient  shall be entitled,  with
respect to the Recipient's Shares of Restricted Stock, to any dividends declared
by the  Company  on its  Shares of Common  Stock and paid in the form of cash or
other property.

         Cash dividends paid with respect to Shares of Restricted Stock shall be
paid to the  Recipient.  In the case of  dividends  declared  by the Company and
payable in the form of Common Stock or other  securities  of the  Company,  then
such  securities  shall be subject to the terms and  conditions  of the Plan and
this Agreement,  shall be represented by certificates  issued in the name of the
Recipient  but  shall be  subject  to the  restrictions  and  vesting  schedules
specified  in  Paragraph  4,  provided  that  the  restrictions   applicable  to
securities issued as a dividend on certain Shares shall lapse  concurrently with
the restrictions on the underlying Shares.

6.       RELEASE OF RESTRICTIONS

         At such time as the  restrictions  on the  Shares of  Restricted  Stock
lapse, or as soon thereafter as may be practicable, the restrictive legend shall
be removed from the certificate or certificates.

7.       NOTICES

         Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by registered or certified mail,  return receipt  requested,
addressed as follows:

To the Company:              USFreightways Corporation
                             9700 Higgins Road
                             Suite 570
                             Rosemont, IL 60018
                             Attn:  Long-Term Incentive Plan Award Committee

To the Recipient:            J. Campbell Carruth
                             316 Rivershire Ct.
                             Lincolnshire, Illinois 60069-3814

or to such other  address or  addresses  of which  notice in the same manner has
previously  been given.  Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
<PAGE>





8.       GOVERNING LAW

         This Agreement  shall be construed and enforced in accordance  with the
laws of the State of Illinois.


9.       BINDING EFFECT

         This   Agreement   shall  be  binding   upon  the   heirs,   executors,
administrators, successors and assigns of the parties hereto.

IN WITNESS WHEREOF,  the Company and the Recipient have caused this Agreement to
be  executed  on its and his  behalf  effective  the day and  year  first  above
written.


USFREIGHTWAYS CORPORATION                           J. CAMPBELL CARRUTH
        Christopher L. Ellis
        ____________________                        ___________________
By: /s/ Christopher L. Ellis                By: /s/ J. Campbell Carruth
Its:     Senior Vice President,
         Chief Financial Officer









<PAGE>



EXHIBIT 10.2

                                            EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of June, 1998,  effective January 3, 1999 (the "Effective Date"),
by  and  between   USFreightways   Corporation,   a  Delaware  corporation  (the
"Employer"), and J. Campbell Carruth (the "Executive").

                                                  RECITALS

         A.        The Employer  desires that the Executive  continue to provide
services for the benefit of the Employer and its  affiliates  and the Executive
desires to accept such  continued  employment  with the Employer.

         B. The Employer and the Executive  acknowledge  that the Executive will
be a member of the senior  management  team of the Employer  and, as such,  will
participate in implementing the Employer's business plan.

         NOW,  THEREFORE,  in  consideration  of  the  above  premises  and  the
following mutual covenants and conditions, the parties agree as follows:

1.       Employment.  The Employer  shall employ the Executive as its Chairman,
and the Executive  hereby  accepts such  employment on the following terms and
conditions.

2. Duties.  The Executive  shall,  during the term of this  Agreement,  have the
duties, responsibilities,  powers, and authority customarily associated with the
position of Chairman.  The  Executive  shall report to, and follow the direction
of, the Board of  Directors  (the  "Board").  In addition to, or in lieu of, the
foregoing,  the Executive  also shall perform such other and unrelated  services
and  duties  as may be  agreed  upon  from  time to time  by the  Board  and the
Executive. The Executive shall diligently,  competently,  and faithfully perform
all  duties,  and shall use his best  efforts to promote  the  interests  of the
Employer.  It shall not be  considered  a  violation  of the  foregoing  for the
Executive to serve on corporate, industry, civic, religious or charitable boards
or committees.

3. Executive  Loyalty.  The Executive shall devote a substantial  portion of his
business  time to the  interests  of the  Employer,  and the  Employer  shall be
entitled to all  benefits  and profits  arising  from or incident to any and all
work,  services,  and advice  provided by the  Executive  to the  Employer.  The
Executive  and  the  Employer  expressly  agree  that  during  the  term of this
Agreement,  the  Executive  may engage,  directly or  indirectly,  as a partner,
officer, director,  stockholder,  advisor, agent, employee, or in any other form
or capacity,  in any other business that is not similar to that of the Employer.
The  foregoing  notwithstanding,  nothing  herein  contained  shall be deemed to
prevent the  Executive  from  investing  his money in the capital stock or other
securities of any corporation  whose stock or securities are  publicly-owned  or
are regularly traded on any public exchange, nor shall anything herein contained
be deemed to prevent the Executive from investing his money in real estate.

4.       Term of Employment.  Unless sooner  terminated as hereinafter
provided,  this Agreement shall be entered into for a period of five (5) years,
commencing on the Effective Date.

5.       Compensation.

A. Salary.  The Employer  shall pay the  Executive an annual salary of $500,000,
payable in  substantially  equal  installments in accordance with the Employer's
payroll  policy from time to time in effect.  The  Executive's  salary  shall be
subject  to any  payroll  or  other  deductions  as may be  required  to be made
pursuant to law,  government  order,  or by agreement  with,  or consent of, the
Executive.

B.       Other  Benefits.  During  the term of this  Agreement,  the  Employer
shall  include  the  Executive  in any life  insurance, disability insurance,
medical, dental or health insurance,  savings,  pension and retirement plans
and other benefit  plans  or  programs  (including,  if  applicable,  any
excess  benefit  or  supplemental  executive retirement plans) maintained by
the Employer for the benefit of its executives.
<PAGE>




6. Expenses.  The Employer shall provide the Executive with an expense allowance
of up to $50,000 per year,  and all  reasonable  business,  medical,  dental and
health expenses shall be reimbursed  therefrom,  provided the Executive  submits
paid receipts or other documentation  acceptable to the Employer and as required
by the Internal  Revenue  Service to qualify as ordinary and necessary  business
expenses under the Internal Revenue Code of 1986, as amended.

7.       Termination.  Notwithstanding  anything in  Paragraph 4  of this
Agreement to the contrary,  the  Executive's  services shall terminate upon the
first to occur of the following events:

A.       At the end of the term of this Agreement.

B. Upon the Executive's date of death or the date the Executive is given written
notice that he has been determined to be disabled by the Employer.  For purposes
of  this  Agreement,  the  Executive  shall  be  deemed  to be  disabled  if the
Executive,  as a result of  illness  or  incapacity,  shall be unable to perform
substantially his required duties for a period of four (4) consecutive months or
for any aggregate  period of six (6) months in any twelve (12) month  period.  A
termination of the Executive's  employment by the Employer for disability  shall
be communicated to the Executive by written notice and shall be effective on the
tenth (10th) business day after receipt of such notice by the Executive,  unless
the Executive  returns to full-time  performance of his duties before such tenth
(10th)  business  day. The foregoing  notwithstanding,  if the Executive and the
Employer  subsequently  agree that,  following  such  termination  on account of
disability, the Executive is able to return to his employment,  then he shall be
entitled to do so and the term of this  Agreement  shall be reinstated and again
expire on the fifth anniversary of the Effective Date.

C. On the date the Employer  provides the Executive  with written notice that he
is being  terminated for "cause." For purposes of this Agreement,  the Executive
shall be deemed  terminated  for cause if the Employer  terminates the Executive
after the Executive:

(1)      shall  have  committed  any  felony  including,  but not  limited  to
                a felony  involving  fraud,  theft,  misappropriation,
                dishonesty, or embezzlement; or

(2)             shall have committed intentional acts that materially impair the
                goodwill or business of the Employer or cause material damage to
                its property, goodwill, or business.

D. On the date the Executive terminates his employment for any reason,  provided
that the Executive shall give the Employer ninety (90) days written notice prior
to such date of his intention to terminate this Agreement.

8.  Compensation Upon  Termination.  If the Executive's  services are terminated
pursuant to Paragraph 7, the Executive  shall be entitled to his salary  through
his final date of active employment. The Executive shall also be entitled to any
benefits mandated under the Consolidated  Omnibus Budget  Reconciliation  Act of
1985 (COBRA) or required under the terms of any death,  insurance, or retirement
plan,  program, or agreement provided by the Employer and to which the Executive
is a party  or in which  the  Executive  is a  participant,  including,  but not
limited  to,  any  short-term  or  long-term  disability  plan  or  program,  if
applicable.

9. Notices. Any and all notices required in connection with this Agreement shall
be deemed adequately given only if in writing and (a) personally  delivered,  or
sent by first class,  registered  or certified  mail,  postage  prepaid,  return
receipt requested,  or by recognized  overnight courier,  (b) sent by facsimile,
provided  a hard copy is mailed on that date to the party for whom such  notices
are intended,  or (c) sent by other means at least as fast and reliable as first
class mail. A written notice shall be deemed to have been given to the recipient
party  on the  earlier  of (a) the date it shall  be  delivered  to the  address
required by this Agreement; (b) the date delivery shall have been refused at the
address required by this Agreement;  (c) with respect to notices sent by mail or
overnight courier, the date as of which the Postal Service or overnight courier,
as the case may be, shall have indicated such notice to be  undeliverable at the
address required by this Agreement; or (d) with respect to a facsimile, the date
on which the  facsimile is sent and receipt of which is  confirmed.  Any and all
notices referred to in this Agreement,  or which either party desires to give to
the other, shall be addressed to his residence in the case of the Executive,  or
to its principal office in the case of the Employer.

10.      Waiver of  Breach.  A waiver by the  Employer  of a breach of any
provision  of this  Agreement  by the  Executive  shall not operate or be
construed as a waiver or estoppel of any subsequent  breach by the  Executive.
No waiver shall be valid unless in writing and signed by an authorized officer
of the Employer.
<PAGE>



11.      Assignment.  The  Executive  acknowledges  that the services to be
rendered by him are unique and personal.  Accordingly,  the Executive  may not
assign  any of his  rights or  delegate  any of his  duties  or  obligations
under  this Agreement.  The rights and  obligations of the Employer  under this
Agreement  shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.

12. Entire  Agreement.  This Agreement sets forth the entire and final agreement
and understanding of the parties and contains all of the agreements made between
the parties with respect to the subject matter hereof. This Agreement supersedes
any and all other  agreements,  either oral or in  writing,  between the parties
hereto,  with respect to the subject matter hereof. No change or modification of
this  Agreement  shall be valid unless in writing and signed by the Employer and
the Executive.

13.      Headings.  The headings in this Agreement are inserted for  convenience
only and are not to be considered a  construction  of the provisions hereof.

14.      Execution  of  Agreement.  This  Agreement  may be executed in several
counterparts,  each of which  shall be  considered  an original, but which when
taken together, shall constitute one agreement.

15.      Recitals.  The recitals to this  Agreement  are  incorporated  herein
as an integral  part hereof and shall be  considered  as substantive and not
precatory language.

16.  Governing  Law.  This  Agreement  shall be governed  by, and  construed  in
accordance  with,  the laws of the State of Illinois,  without  reference to its
conflict of law  provisions,  and any court  action  commenced  to enforce  this
Agreement  shall  have as its sole  and  exclusive  venue  the  County  of Cook,
Illinois.

         IN WITNESS  WHEREOF,  the parties have set their signatures on the date
first written above.

EMPLOYER:                                           EXECUTIVE:

USFREIGHTWAYS CORPORATION,                          J. CAMPBELL CARRUTH
a Delaware corporation
        
        Christopher L. Ellis
        ____________________                        ___________________
By: /s/ Christopher L. Ellis                By: /s/ J. Campbell Carruth
Its: Senior Vice President, Finance
and Chief Financial Officer