<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1996
REGISTRATION NO. 001-12149
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
CONSOLIDATED FREIGHTWAYS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0425334
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
175 LINFIELD DRIVE 94025
MENLO PARK, CALIFORNIA (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (415) 326-1700
------------------------
Copies of Communications to:
STEPHEN D. RICHARDS BRIAN J. MCCARTHY
175 Linfield Drive 300 South Grand Avenue, Suite 3400
Menlo Park, California 94025 Los Angeles, California 90071
- --------------------------------------------------------------------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class to be registered which each class is to be registered
COMMON STOCK, PAR VALUE $0.01 PER NEW YORK STOCK EXCHANGE
SHARE
Securities to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- ---- -------------------------------------------------- --------------------------------------------------
<C> <S> <C>
1 Business.......................................... Business; Selected Historical Financial Data
2 Financial Information............................. Selected Historical Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations
3 Properties........................................ Business -- Properties
4 Security Ownership of Certain Beneficial Owners
and Management................................... Security Ownership of Certain Beneficial Owners
and Management
5 Directors and Executive Officers.................. Management
6 Executive Compensation............................ Executive Compensation and Other Matters
7 Certain Relationships and Related Transactions.... Relationship between CFI and the Company after the
Distribution; Executive Compensation and Other
Matters
8 Legal Proceedings................................. Business -- Legal Proceedings
9 Market Price of and Dividends on the Registrant's
Common Equity and Related Shareholder Matters.... The Distribution -- Listing and Trading of the
Common Stock; Risk Factors -- No Current Public
Market for the Common Stock; Possibility of
Significant Price Fluctuations; Dividend Policy;
Description of Company Capital Stock
10 Recent Sales of Unregistered Securities........... None
11 Description of Registrant's Securities to be
Registered....................................... Description of Company Capital Stock; Purposes and
Antitakeover Effects of Certain Provisions of the
Company's Charter and Bylaws
12 Indemnification of Directors and Officers......... Liability and Indemnification of Directors and
Officers
13 Financial Statements and Supplementary Data....... Selected Historical Financial Data; Pro Forma
Consolidated Financial Statements; Index to
Combined Financial Statements
14 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. None
15 Financial Statements and Exhibits................. Index to Combined Financial Statements; Index to
Exhibits
</TABLE>
<PAGE>
INCORPORATION BY REFERENCE OF REGISTRATION STATEMENT ON FORM 10, FILE NO.
001-12149
Consolidated Freightways Corporation (the "Company") hereby incorporates by
reference into this Information Statement on Form 10 in its entirety the
Information Statement on Form 10 (File No. 001-12149) filed on September 10,
1996 with the Securities and Exchange Commission (the "Commission"), including
each of the documents filed by the Company with the Commission and incorporated
or deemed to be incorporated by reference therein.
<PAGE>
PART II -- INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Distribution Agreement between Consolidated Freightways, Inc. and Consolidated Freightways
Corporation, to be dated as of , 1996
3.1 Form of Amended and Restated Certificate of Incorporation of Consolidated Freightways Corporation
3.2 Form of Amended and Restated Bylaws of Consolidated Freightways Corporation
4.1 Form of Common Stock Certificate
10.1 Form of Transition Services Agreement between Consolidated Freightways, Inc. and Consolidated
Freightways Corporation, to be dated as of , 1996
10.2 Form of Alternative Dispute Resolution Agreement between Consolidated Freightways, Inc. and Consolidated
Freightways Corporation, to be dated as of , 1996
10.3 Form of Employee Benefit Matters Agreement between Consolidated Freightways, Inc. and Consolidated
Freightways Corporation, to be dated as of , 1996
10.4 Form of Tax Sharing Agreement between Consolidated Freightways, Inc. and Consolidated Freightways
Corporation, to be dated as of , 1996
10.5 Form of Reimbursement and Indemnification Agreement between Consolidated Freightways, Inc. and
Consolidated Freightways Corporation of Delaware, to be dated as of , 1996
10.6 Form of Consolidated Freightways Corporation 1996 Stock Incentive Plan
21.1 Subsidiaries of the Registrant
</TABLE>
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED FREIGHTWAYS CORPORATION
By: ________/s/ W. ROGER CURRY________
W. Roger Curry
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: ____October 2, 1996____
II-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
2.1 Form of Distribution Agreement between Consolidated Freightways, Inc. and Consolidated
Freightways Corporation, to be dated as of , 1996...................................
3.1 Form of Amended and Restated Certificate of Incorporation of Consolidated Freightways
Corporation.....................................................................................
3.2 Form of Amended and Restated Bylaws of Consolidated Freightways Corporation......................
4.1 Form of Common Stock Certificate.................................................................
10.1 Form of Transition Services Agreement between Consolidated Freightways, Inc. and Consolidated
Freightways Corporation, to be dated as of , 1996...................................
10.2 Form of Alternative Dispute Resolution Agreement between Consolidated Freightways, Inc. and
Consolidated Freightways Corporation, to be dated as of , 1996......................
10.3 Form of Employee Benefit Matters Agreement between Consolidated Freightways, Inc. and
Consolidated Freightways Corporation, to be dated as of , 1996......................
10.4 Form of Tax Sharing Agreement between Consolidated Freightways, Inc. and Consolidated Freightways
Corporation, to be dated as of , 1996...............................................
10.5 Form of Reimbursement and Indemnification Agreement between Consolidated Freightways, Inc. and
Consolidated Freightways Corporation of Delaware, to be dated as of , 1996..........
10.6 Form of Consolidated Freightways Corporation 1996 Stock Incentive Plan...........................
21.1 Subsidiaries of the Registrant...................................................................
</TABLE>
II-3
<PAGE>
FORM OF
DISTRIBUTION AGREEMENT
between
CONSOLIDATED FREIGHTWAYS, INC.
and
CONSOLIDATED FREIGHTWAYS CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE DISTRIBUTION
2.1 Cooperation Prior to the Distribution . . . . . . . . . . . . . . 5
2.2 Conditions to Distribution. . . . . . . . . . . . . . . . . . . . . 5
2.3 The Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Sale of Fractional Shares . . . . . . . . . . . . . . . . . . . . 6
2.5 Odd-Lot Program . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 The Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Company Board . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Company Charter and Bylaws. . . . . . . . . . . . . . . . . . . . 10
3.4 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Operation in the Ordinary Course of Business. . . . . . . . . . . 10
3.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Collections and Payments after the
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Certain Post-Distribution Transactions. . . . . . . . . . . . . . 11
ARTICLE IV INDEMNIFICATION
4.1 Indemnification by CFI. . . . . . . . . . . . . . . . . . . . . . 12
4.2 Indemnification by the Company. . . . . . . . . . . . . . . . . . 12
4.3 Limitations on Indemnification Obligations. . . . . . . . . . . . 13
4.4 Procedures for Indemnification. . . . . . . . . . . . . . . . . . 13
4.5 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 Environmental Liabilities . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V ACCESS TO INFORMATION; SERVICES
5.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Production of Witnesses . . . . . . . . . . . . . . . . . . . . . 17
5.3 Provision of Services . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Retention of Records. . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Provision of Corporate Records. . . . . . . . . . . . . . . . . . 19
5.8 Privileged Matters. . . . . . . . . . . . . . . . . . . . . . . . 20
i
<PAGE>
ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Form 10 and Information Statement . . . . . . . . . . . . . . . . 20
6.3 Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII SHARED CLAIMS
7.1 Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Non-Shared Liabilities . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII MISCELLANEOUS
8.1 Complete Agreement; Construction. . . . . . . . . . . . . . . . . 22
8.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.5 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 23
8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 23
8.8 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.9 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . 24
8.10 Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . 24
8.11 Legal Enforceability. . . . . . . . . . . . . . . . . . . . . . . 24
8.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 24
8.13 No Solicitation of Employees. . . . . . . . . . . . . . . . . . . 25
8.14 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . 25
Schedule 3.1(b) LJSC Service Departments
Schedule 3.1(e) LJSC Real Property
Schedule 3.1(g) Administrative and Business
Operations
Schedule 3.1(h) Marks
Schedule 3.6(b) Insurance Policies
Schedule 4.1 CFI Indemnification
Schedule 4.2 Company Indemnification
ANNEX 1 Form of ADR Agreement
ANNEX 2 Form of Agreement on Employee Benefits Matters
ANNEX 3 Form of Reimbursement Agreement
ANNEX 4 Form of Services Agreement
ANNEX 5 Form of Tax Sharing Agreement
ANNEX 6 Form of Restated Certificate of Incorporation
ANNEX 7 Form of Restated Bylaws
ii
<PAGE>
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (the "Agreement") is made as of this
_____ of __________, 1996 by and between CONSOLIDATED FREIGHTWAYS, INC., a
Delaware corporation (together with its wholly owned subsidiaries, "CFI"),
and CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation (together
with its wholly owned subsidiaries, the "Company").
RECITALS
WHEREAS, CFI is the holder of all of the issued and outstanding shares
of common stock, $.01 par value per share, of the Company (the "Company Common
Stock");
WHEREAS, the Board of Directors of CFI (the "CFI Board") has
determined that it is advisable to distribute (the "Distribution") all of the
shares of Company Common Stock to the holders of the common stock, $.01 par
value per share, of CFI (the "CFI Common Stock");
WHEREAS, CFI and the Company have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and certain other agreements that will govern certain matters
relating to the Distribution and the relationships thereafter between CFI and
the Company;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
1
<PAGE>
ACTION: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
ADR AGREEMENT: the Alternative Dispute Resolution Agreement to be
entered into by CFI and the Company as of the Distribution Date, the form of
which is attached hereto as Annex 1.
AFFILIATE: as defined in Rule 12b-2 under the Exchange Act.
CFI GROUP: At any time following the Distribution, CFI and all
entities which are Affiliates of CFI at such time.
CODE: the Internal Revenue Code of 1986, as amended.
COMMISSION: the Securities and Exchange Commission.
COMPANY GROUP: At any time following the Distribution, the Company
and all entities which are Affiliates of the Company at such time.
DISTRIBUTION AGENT: First Chicago Trust Company of New York.
DISTRIBUTION DATE: the date as determined by the CFI Board or a
committee thereof on which the Distribution takes place by delivery of the
shares of Company Common Stock to the Distribution Agent.
DISTRIBUTION RATIO: the ratio of CFI Common Stock to Company Common
Stock to be distributed in the Distribution.
EMPLOYEE BENEFIT MATTERS AGREEMENT: the Agreement on Employee Benefit
Matters to be entered into by CFI and the Company as of the Distribution Date,
the form of which is attached hereto as Annex 2.
ENVIRONMENTAL LIABILITIES: means any Liabilities arising from, under
or relating to any environmen-
2
<PAGE>
tal, health or safety law, rule, regulation, Action, threatened Action, order
or consent decree.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
FORM 10: the registration statement on Form 10 filed by the Company
with the Commission to effect the registration of the Company Common Stock under
the Exchange Act.
INFORMATION STATEMENT: the Information Statement on Form 14C filed by
the Company with the Commission and included in the Form 10 at the time of its
effectiveness.
INSURANCE PROCEEDS: those monies (i) received by an insured from an
insurance carrier on an insurance claim or (ii) paid by an insurance carrier on
behalf of an insured on an insurance claim, in either case net of any applicable
deductibles, retentions, or costs paid by such insured, but such term does not
refer to proceeds received from an insurer on an employee benefits group
insurance policy.
IRS: the Internal Revenue Service.
LIABILITIES: any and all debts, liabilities, obligations, absolute or
contingent, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, direct or indirect,
whenever arising, including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any governmental entity or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking including those
arising under this Agreement.
LJCS: Leland James Service Corporation, a Delaware Corporation.
LOSSES: any and all debts, losses, Liabilities, claims, damages,
obligations, payments or costs and expenses, absolute or contingent, matured or
unma-
3
<PAGE>
tured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
direct or indirect (including, without limitation, the costs and expenses of
any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any such actions or threatened actions).
NYSE: the New York Stock Exchange.
OTHER AGREEMENTS: the ADR Agreement, the Employee Benefit Matters
Agreement, the Reimbursement Agreement, the Services Agreement and the Tax
Sharing Agreement.
RECORD DATE: the close of business on the date to be determined by
the CFI Board or a committee thereof as the record date for the determination of
stockholders of record of CFI entitled to receive the Distribution.
REIMBURSEMENT AGREEMENT: the Reimbursement and Indemnification
Agreement to be entered into between CFI and Consolidated Freightways
Corporation of Delaware ("CFCD") as of October 1, 1996, the form of which is
attached hereto as Annex 3.
SECURITIES ACT: the Securities Act of 1933, as amended.
SERVICES AGREEMENT: the Transition Services Agreement to be entered
into by CNF Service Company, Inc. and the Company as of the Distribution Date,
the form of which is attached hereto as Annex 4.
SUBSIDIARIES: the term "Subsidiaries" as used herein with respect to
any entity shall, unless otherwise indicated, be deemed to refer to both direct
and indirect subsidiaries of such entity.
TAX SHARING AGREEMENT: the Tax Sharing Agreement to be entered into
by CFI and the Company as of the Distribution Date, the form of which is
attached hereto as Annex 5.
4
<PAGE>
ARTICLE II
THE DISTRIBUTION
2.1 COOPERATION PRIOR TO THE DISTRIBUTION. Prior to the
Distribution:
(a) CFI and the Company shall prepare, and the Company shall
file with the Commission, the Form 10. CFI and the Company shall prepare, and
CFI shall mail, promptly after the effectiveness of the Form 10, to the holders
of CFI Common Stock, the Information Statement, which shall set forth
appropriate disclosure concerning the Company, the Distribution and other
matters. The Company shall use reasonable efforts to cause the Form 10 to
become effective under the Exchange Act.
(b) CFI and the Company shall cooperate in preparing, filing
with the Commission and causing to become effective any registration statements
or amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the Employee
Benefit Matters Agreement.
(c) The Company shall prepare, file and pursue an application to
permit listing of the Company Common Stock on the NYSE (and/or such other
exchange as the Company deems appropriate), under the symbol "CFW" (or such
other symbol as the Company deems appropriate).
2.2 CONDITIONS TO DISTRIBUTION. The CFI Board shall in its
discretion establish the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution. The Distribution
shall be subject to satisfaction of each of the following conditions, among
other things: (i) the consummation of certain internal corporate
reorganizations; (ii) the successful renegotiation of certain CFI credit
facilities and debt instruments, including the execution of certain consents,
waivers and amendments thereto by lenders; (iii) the establishment of separate
credit facilities for CFCD; (iv) the receipt of an opinion of Houlihan Lokey
Howard & Zukin; (v) the receipt of certain third-party consents relating to
certain contracts, licenses and other agreements; (vi) the receipt of rulings
from the IRS or an opinion of special tax counsel to CFI to the
5
<PAGE>
effect that, among other things, the Distribution will qualify as a tax-free
distribution under Section 355 of the Internal Revenue Code of 1986, as
amended; (vii) the receipt of a letter from the staff of the Commission
confirming that it will take no action with respect to certain matters
relating to the Distribution; (viii) the Form 10 having become effective and
no stop order being in effect; (ix) there not being in effect any statute,
rule, regulation or order of any court, governmental or regulatory body that
prohibits or makes illegal the transactions contemplated by the Distribution;
(x) approval for listing of the Company Common Stock on the NYSE; and (xi)
declaration of the special dividend by the CFI Board. The CFI Board reserves
the right in its discretion, other than with respect to those set forth in
clauses (i), (vi), (vii) and (xi), to waive the satisfaction of any condition
to the Distribution; PROVIDED, HOWEVER, that the CFI Board may abandon, defer
or modify the Distribution and the related transactions at any time prior to
the Distribution Date.
2.3 THE DISTRIBUTION. On the Distribution Date or as soon thereafter
as practicable, subject to the conditions set forth in this Agreement, CFI shall
deliver to the Distribution Agent a certificate or certificates representing the
number of then outstanding shares of Company Common Stock to be distributed in
the Distribution, endorsed in blank, and shall instruct the Distribution Agent
to distribute to each holder of record of CFI Common Stock on the Record Date a
certificate or certificates representing one share of Company Common Stock for
every two shares of CFI Common Stock so held. The Company agrees to provide all
certificates for shares of Company Common Stock that the Distribution Agent
shall require in order to effect the Distribution.
2.4 SALE OF FRACTIONAL SHARES. The Distribution Agent shall not
distribute any fractional shares of Company Common Stock ("Fractional Shares")
to any holder of CFI Common Stock. The Distribution Agent shall be instructed
to aggregate all such Fractional Shares and sell them in an orderly manner after
the Distribution Date in the open market and, after completion of all such
sales, distribute a PRO RATA portion of the proceeds from such sales to each
holder of CFI Common Stock who would otherwise have received a Fractional
Share. CFI will
6
<PAGE>
bear the cost of brokerage commissions incurred in connection with such sales.
2.5 ODD-LOT PROGRAM. In connection with the Distribution, the
Company shall offer to holders of CFI Common Stock who would otherwise receive
fewer than 100 shares of Company Common Stock in the Distribution a program by
which such holders may instruct the Distribution Agent to sell such shares of
Company Common Stock on their behalf. The Company shall cause such program to
be conducted in accordance with the terms and conditions described in the
Information Statement.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 THE REORGANIZATION. Prior to the Distribution Date:
(a) CFI shall take all steps necessary to establish CFCD as a
wholly owned subsidiary of the Company.
(b) CFI shall take all steps necessary to establish Leland James
Service Corporation ("LJSC") as a wholly owned subsidiary of the Company;
PROVIDED, HOWEVER, that immediately prior to the Distribution or
simultaneously therewith, the LJSC administrative service departments
identified on Schedule 3.1(b) shall be transferred to CNF Service Company,
Inc., a wholly owned subsidiary of CFI.
(c) CFI shall take all steps necessary to merge Vantage Parts
into CFI.
(d) CFI shall take all steps necessary to establish Milne &
Craighead as a wholly owned, indirect subsidiary of CFCD.
(e) CFI shall take all steps necessary to effect the transfer of
all real property owned by CFCD and set forth on Schedule 3.1(e) to CF
Properties, Inc., a wholly owned subsidiary of CFI ("CF Properties"), and to
effect the transfer of CFI's Gresham terminal and land
7
<PAGE>
under CFI's Santa Fe Springs and Hayward Terminals to CFC.
(f) The Company acknowledges that any and all rights in the
proprietary software programs (including without limitation all source and
object code and all documentation therefor, and all versions thereof) and
data developed by, or on behalf of, the Company, CFI or its affiliates prior
to the Distribution Date, and all intellectual property rights therein,
including without limitation all copyrights, patent rights, know-how and
trade secret rights, and including, without limitation, the right to sue for
any past, present or future infringement of any of the foregoing, are vested
in CFI. The Company will execute and deliver any instruments or take such
other actions as CFI may reasonably request in order to confirm such
assignment and to otherwise effectuate the purposes and terms of this
Agreement.
(g) CFI hereby shall grant to the Company, effective as of
the termination of the Services Agreement, a royalty-free, worldwide,
perpetual and non-transferable, license without right of sublicense, to use
and create derivative works of the proprietary software programs (including
without limitation all source and object code and documentation therefor, and
all versions thereof) and data owned by CFI, in the form they exist as of the
termination of the Services Agreement, which the Company uses in its business
as of the Distribution Date as set forth on Schedule 3.1(g) hereto
(collectively, the "Licensed Materials"). CFI shall take such steps
necessary to provide to the Company, at CFI's expense, and with minimal
interruption of the operations of CFI or its affiliates, copies of the
Licensed Materials, together with any third party licenses, and reasonable
instruction as to their installation and use. CFI shall also provide the
Company, at CFI's expense, licenses for third party software programming,
which the Company uses in its business as of the date hereof. Third-party
licenses shall be at least as broad in scope as prior to the Distribution
Date unless commercially unreasonable. Where use of software is limited to a
specified number of users or otherwise restricted, an equitable division shall
be made as set forth on Schedule 3.1(g). To the extent that the purchase of
any third-party licenses is commercially unreasonable, CFI shall have the
right to substitute a comparable program.
8
<PAGE>
Notwithstanding anything to the contrary set forth herein, the Company
acknowledges and agrees that:
i) The use of the Licensed Materials is to be limited
to the internal business use of the Company, or its affiliates and
their authorized customers who in the ordinary course of business
with the Company request access to the Licensed Materials in
connection with products or services otherwise provided by the
Company.
ii) The Company's, its affiliates' and authorized
customers' right to use the Licensed Materials which require a
third-party license is conditioned upon the Company's, its
affiliates and authorized customers observing the applicable
terms and conditions in any third party licenses relating to the
Licensed Materials and as to affiliates and authorized customers
the obtaining of any necessary consents or separate licenses from
such third party vendors. CFI shall make reasonable efforts to
obtain all consents or separate licenses from third party licensors
necessary for the Company to: have the right to use the Licensed
Materials to the extent contemplated herein and be able to receive
the services contemplated under the Services Agreement.
iii) The Company shall assume all Liabilities relating
to the Company's use, and use by any of the Company's affiliates
or authorized customers, of the Licensed Materials after the
Distribution Date and shall indemnify and hold harmless CFI
against all Liabilities and expenses (including reasonable
attorneys' fees and costs of litigation) which CFI may
incur, which arise out of the use of the Licensed Materials
by the Company, its affiliates or authorized customers after
the Distribution Date.
iv) Notwithstanding the immediately preceding paragraph,
CFI shall assume all liabilities relating to the use of software
requiring a third-party license where CFI has failed to provide the
Company with the applicable third-party licenses, and shall indemnify
and hold harmless the Company against all losses, liabilities and
expenses (including
9
<PAGE>
reasonable attorneys' fees and cost of litigation) which the
Company may incur, which arise out of such failure of CFI to obtain
such third-party licenses for the Company.
v) The Licensed Materials constitute confidential
information and shall remain the property of CFI, subject to the
license granted herein. The Company agrees to hold the same in
confidence and not to disclose or distribute the same unless such
information subsequently becomes publicly available through no
fault of the Company.
vi) CFI shall assume all liabilities relating to CFI's
use, and use by CFI's affiliates or authorized customers, of the
Licensed Materials and any materials not licensed to the Company,
and shall indemnify and hold harmless the Company against all
losses, liabilities and expenses (including reasonable attorneys'
fees and cost of litigation) which the Company may occur, which arise
out of the use of the Licensed Materials or any of the materials
not licensed to the Company by CFI, its affiliates or authorized
customers.
vii) The Company may request additional worldwide,
perpetual and non-transferable licenses from CFI which are not
currently used by it in its business. CFI may grant such licenses
in its sole discretion. The licenses requested and granted as of
the date hereof are listed in Schedule 3.1(g) as "Additional
Licenses." The Company shall pay the costs of copying such
software and purchasing any required third-party licenses related
thereto. The Company shall assume all Liabilities relating to the
Company's use thereof and shall indemnify and hold harmless CFI
against all Liabilities and expenses whatsoever (including
reasonable attorneys' fees and costs of litigation) which CFI may
incur, which arise out of, or are in any way related to the use of
such software by the Company, its affiliates or authorized customers.
viii) The Company shall pay its proportional share of
the development costs of the Li-
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censed Materials identified in Schedule 3.1(g) as "Under
Development" as incurred after the Distribution Date. Any cost of
"cloning" a second copy, if any, shall be part of the development
costs. The Company shall not, however, pay a proportional share of
the development costs where such Licensed Materials are part of
the services being provided to the Company under the Services
Agreement.
ix) Because of the extensive number of software
programs used by the parties, the parties expect that some
programs may inadvertently be omitted from Schedule 3.1(g). In
such event, the parties shall determine in good faith whether such
programs should be added as Licensed Materials and related
third-party software used by the Company as of the date hereof as,
"Additional Licenses" or "Under Development."
(h) Prior to the Distribution Date, CFI shall take all steps
necessary to assign to the Company the trademarks, trade names and service
marks set forth on Schedule 3.1(h) (collectively, the "Marks"); PROVIDED,
HOWEVER, that CFI and the Company shall each have the right to use the Marks
for the nine-month period beginning on the Distribution Date. CFI shall
assign the trademarks, trade names and service marks relating to "CF Air" and
"CF Air Freight" (and as stylized) on the third anniversary of the date of this
Agreement.
(i) Prior to the Distribution Date, CFI and the Company shall
take all steps necessary to increase the outstanding shares of Company Common
Stock so that, immediately prior to the Distribution, CFI will hold a number
of shares of Company Common Stock sufficient to enable it to complete the
Distribution based on the Distribution Ratio.
3.2 COMPANY BOARD. CFI and the Company shall take all steps
necessary to elect as directors of the Company, on or prior to the Distribution
Date, the persons named in the Form 10 to constitute the board of directors of
the Company on the Distribution Date.
3.3 COMPANY CHARTER AND BYLAWS. On or prior to the Distribution
Date, (a) CFI shall approve and cause the Amended and Restated Certificate of
Incorporation of
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the Company substantially in the form of Annex 6 hereto to be
filed with the Secretary of State of Delaware and to be in effect on the
Distribution Date and (b) CFI shall adopt the Amended and Restated Bylaws of the
Company substantially in the form of Annex 7 hereto to be in effect on the
Distribution Date.
3.4 OTHER AGREEMENTS. On or prior to the Distribution Date, CFI
and the Company shall enter into, and/or (where applicable) shall cause their
respective Subsidiaries to enter into, the Other Agreements and any other
agreements necessary or appropriate in connection with the transactions
contemplated hereby and thereby. In the event of a conflict between the
terms of this agreement and the terms of any of the Other Agreements or any
such other agreements (including without limitation Section 5.04 of the Tax
Sharing Agreement), the terms of such Other Agreement or other agreement
shall govern.
3.5 OPERATION IN THE ORDINARY COURSE OF BUSINESS. Prior to the
Distribution Date, the Company shall, and shall cause each of its Subsidiaries
to, conduct its business and operations in the ordinary course of business,
consistent with past practice, and shall, and shall cause each of its
Subsidiaries to, continue to ship products, pay accounts payable and invoices,
deposit and accept payments, and make capital expenditures in the ordinary
course of business, all consistent with past practice. The Company shall not,
and shall cause each of its Subsidiaries not to, undertake any arrangement with
the intent to delay receipt of any funds by the Company or its Subsidiaries
until on or after the Distribution Date or to accelerate any payment to be made
by the Company or its Subsidiaries prior to the Distribution Date, except in
each case in the ordinary course of business consistent with past practice.
3.6 INSURANCE. The Company, for itself and on behalf of each
other member of the Company Group, does hereby release CFI and each other
member of the CFI Group from all Liabilities arising from or in connection
with the insurance policies described on Schedule 3.6(b), excluding
occurrences which commenced on or prior to October 1, 1996. The Company,
for itself and on behalf of each other member of the Company Group, does
hereby acknowledge that these policies are cancelled or terminated as to CFCD
and its subsidiaries as of October
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1, 1996 except to the extent of claims referred to in the preceding sentence.
The Company expressly waives any and all rights under section 1542 of the
Civil Code of California, which provides as follows:
"A General Release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
3.7 COLLECTIONS AND PAYMENTS AFTER THE DISTRIBUTION DATE. Except
as may be explicitly provided in this Agreement and the Other Agreements, any
cash receipts arising out of or relating to the assets, liabilities or
operations of the Company or its past or present Subsidiaries received on or
after the Distribution Date shall be retained by the Company and such
Subsidiaries and any liabilities or obligations, other than any liabilities
or obligations relating to LJSC and arising on or prior to the Distribution
Date, arising out of, relating to or asserted on the basis of the assets,
liabilities or operations of the Company or its past or present Subsidiaries
due and unpaid on and after the Distribution Date or incurred on and after
the Distribution Date shall be payable by the Company and such Subsidiaries.
3.8 CERTAIN POST-DISTRIBUTION TRANSACTIONS. THE COMPANY. (i) The
Company shall, and shall cause each of its Subsidiaries to, comply with each
representation and statement made, or to be made, to any taxing authority in
connection with the IRS Ruling or any other ruling obtained, or to be obtained,
by the Company and CFI acting together, from any such taxing authority with
respect to any transaction contemplated by this Agreement; and (ii) until the
third anniversary of the Distribution Date, neither the Company nor any of its
Subsidiaries shall (A) make a material disposition, by means of a sale or
exchange of assets or capital stock, a distribution to stockholders or
otherwise, of its assets, (B) repurchase or issue any Company capital stock
(other than stock issued pursuant to employee plans), or (C) cease the active
conduct of its businesses independently, with its own employees and without
material change, unless, in each of cases (A), (B) and (C), in the opinion of
counsel
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to the Company, which opinion shall be reasonably satisfactory to CFI,
or pursuant to a favorable IRS supplemental ruling letter reasonably
satisfactory to CFI, such act or omission would not adversely affect the tax
consequences of the Distribution to CFI or the stockholders of CFI, as set forth
in any ruling issued by any taxing authority; and the Company has no present
intention to take any such actions.
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY CFI. Except as otherwise provided by any
of the Other Agreements or as contemplated by Section 4.5 or Article VII
hereof, effective as of the Distribution Date, CFI agrees to indemnify,
defend and hold harmless the Company, each other member of the Company Group,
and their present or former officers, directors, shareholders, agents,
employees, representatives, successors-in-interest, parents, Affiliates,
insurers, attorneys and assigns (the "Company Indemnitees") from and against
any and all Losses of the Company Indemnitees arising out of or related in
any manner to any item set forth on Schedule 4.1.
4.2 INDEMNIFICATION BY THE COMPANY. Except as otherwise provided
by any of the Other Agreements or as contemplated by Section 4.5 or Article
VII hereof, effective as of the Distribution Date, the Company agrees to
indemnify, defend and hold harmless CFI, each other member of the CFI Group,
and their present or former officers, directors, shareholders, agents,
employees, representatives, successors-in-interest, parents, Affiliates,
insurers, attorneys and assigns (the "CFI Indemnitees") from and against any
and all Losses of the CFI Indemnitees arising out of or related in any manner
to any item set forth on Schedule 4.2.
4.3 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. The amount that
either CFI or the Company (an "Indemnifying Party") is or may be required to pay
to an indemnified party ("Indemnitee") pursuant to Section 4.1 or 4.2 shall be
reduced by any Insurance Proceeds or other amounts actually recovered by or on
behalf of such Indemnitee, in reduction of the related Loss. If an
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Indemnitee shall have received the payment required by this Agreement from an
Indemnifying Party in respect of any Loss and shall subsequently actually
receive Insurance Proceeds or other amounts in respect of such Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received (up to
but not in excess of the amount of any indemnity payment made hereunder). No
insurer or other third party shall: (a) be relieved of the responsibility to
pay any claims which it would otherwise be obligated to pay in the absence of
the foregoing indemnification provisions; (b) solely by virtue of the
indemnification provisions hereof, have any subrogation rights with respect
to any claims which it would otherwise be obligated to pay; or (c) be
entitled to a benefit it would not be entitled to receive in the absence of
the foregoing indemnification provisions. Any Indemnifying Party shall
succeed to the rights of any Indemnitee with respect to any matter
contemplated by this Section 4.3.
4.4 PROCEDURES FOR INDEMNIFICATION. (a)(i) If an Indemnitee shall
receive notice or otherwise learn of the assertion of any claim or commencement
of any proceeding (including any governmental investigation) by a person who is
not a party to this Agreement (or any Affiliate of either party) (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim setting forth the particulars as to such claim or proceeding
in reasonable detail; PROVIDED that the failure of any Indemnitee to give notice
as provided in this Section 4.4(a) shall not relieve the related Indemnifying
Party of its obligations under this Article IV, unless such Indemnifying Party
is actually prejudiced by such failure to give notice and then only to the
extent of such actual prejudice.
(ii) An Indemnifying Party may, to the extent it wishes
within thirty days of receipt of notice of a Third Party claim and at its
cost and expense, elect to defend or to seek to settle or compromise any
Third-Party Claim; PROVIDED that the Indemnitee may participate in such
settlement or defense through its chosen counsel at its sole cost and
expense. After notice from an
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Indemnifying Party to an Indemnitee of its election to assume the defense of
a Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article IV for any legal or other expenses (except
expenses approved in advance by the Indemnifying Party) subsequently incurred
by such Indemnitee in connection with the defense thereof; PROVIDED that if
the defendants in any such Third-Party Claim include both the Indemnifying
Party and one or more Indemnitees and in any Indemnitee's reasonable judgment
a conflict of interest between one or more of such Indemnitees and such
Indemnifying Party exists in respect of such claim, such Indemnitees shall
have the right to employ separate counsel to represent such Indemnitees and
in that event the reasonable fees and expenses of such separate counsel (but
not more than one separate counsel reasonably satisfactory to the
Indemnifying Party) shall be paid by such Indemnifying Party; PROVIDED
FURTHER if and to the extent that there is a conflict of defenses or
positions among the Indemnitees, the Indemnitees shall have the right to
retain such number of additional separate counsel, reasonably satisfactory to
the Indemnifying Party, as is reasonably necessary to avoid such conflicts,
and the Indemnifying Party shall be responsible for the reasonable fees and
expenses of such additional separate counsel; PROVIDED FURTHER that the
Indemnitee may participate in the settlement or defense of a Third-Party
Claim through counsel chosen by such Indemnitee if the fees and expenses of
such counsel shall be borne by such Indemnitee. If an Indemnifying Party
elects not to assume responsibility for defending a Third-Party Claim, such
Indemnitee may defend or seek to compromise or settle such Third-Party Claim
but shall not thereby waive any right to indemnity therefor pursuant to this
Agreement. Notwithstanding the foregoing, the Indemnifying Party shall not be
liable for any settlement of any Third-Party Claim effected without its
written consent. The Indemnifying Party shall not, except with the consent of
the Indemnitee, (i) enter into any such settlement that does not include as
an unconditional term thereof the giving by the person or persons asserting
such Third-Party Claim to all Indemnitees an unconditional release from all
liability with respect to such Third-Party Claim, or (ii) consent to entry of
any judgment.
(b) Any claim on account of a Loss that does not result from a
Third-Party Claim shall be asserted
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by written notice given by the Indemnitee to the Indemnifying Party. Such
Indemnifying Party shall have a period of thirty (30) days after the receipt
of such notice within which to respond thereto. If such Indemnifying Party
does not respond within such thirty-day period, such Indemnifying Party shall
be deemed to have refused to accept responsibility to make payment. If such
Indemnifying Party does not respond within such thirty-day period or rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party under this Agreement or under
applicable law (except as provided in the ADR Agreement).
(c) In addition to any adjustments required pursuant to Section
4.3, if the amount of any Loss shall, at any time subsequent to the payment
required by this Agreement, be reduced by recovery, settlement or otherwise, the
amount of such reduction that has been received by the Indemnitee, less any
expenses properly incurred in connection therewith, shall promptly be repaid by
the Indemnitee to the Indemnifying Party.
(d) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall have all rights of subrogation and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right or claim relating to such Third-Party Claim or
against any other person. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of
such Indemnifying Party, in prosecuting any subrogated right or claim.
(e) Notwithstanding anything to the contrary herein or in the
Other Agreements, the foregoing indemnification provisions and procedures
shall apply to any other indemnification agreements herein or in the Other
Agreements.
4.5 RELEASES.
(a) Subject to Article VII and effective on the Distribution
Date, the Company and each other member of the Company Group releases and
forever discharges CFI, each other member of the CFI Group, and their present
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or former officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents, Affiliates, insurers,
attorneys and assigns of and from any and all Liabilities (other than those
for which indemnification is available under (i) this Article IV or (ii) any
Other Agreement (subject to the provisions of Section 4.3)).
(b) Subject to Article VII and effective on the Distribution
Date, CFI and each other member of the CFI Group releases and forever
discharges the Company, each other member of the Company Group and their
present or former officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents, Affiliates, insurers,
attorneys and assigns of and from any and all Liabilities (other than those
for which indemnification is available under this Article IV and any Other
Agreement (subject to the provisions of Section 4.3)).
(c) Each of the Company, for itself and on behalf of
each other member of the Company Group, and CFI, for itself and on behalf of
each other member of the CFI Group, expressly waives any and all rights under
section 1542 of the Civil Code of California, which provides as follows:
"A General Release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the Release, which if known by
him must have materially affected his settlement with the
debtor."
4.6 ENVIRONMENTAL LIABILITIES. Notwithstanding anything
contained herein or in any Other Agreement to the contrary, neither party
shall have any obligation to indemnify the other party with respect to any
Environmental Liabilities.
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ARTICLE V
ACCESS TO INFORMATION; SERVICES
5.1 ACCESS TO INFORMATION. From and after the Distribution Date, CFI
and its Subsidiaries shall afford to the Company and its authorized accountants,
counsel and other designated representatives (collectively, "Representatives")
reasonable access (including using reasonable efforts to give access to the
person or firms possessing information) and duplicating rights during normal
business hours to all administrative records, books, contracts and
instruments, and all Company-owned computer software and computer data and
other Company-owned data and information (collectively, "Information") within
CFI's or any such Subsidiary's possession or control relating to the Company
or any Company Subsidiary and to any property owned by CFI that was leased or
operated by the Company or any Company Subsidiary, insofar as such access is
reasonably required by the Company or any Company Subsidiary. Similarly, the
Company and its Subsidiaries shall afford to CFI and its Representatives
reasonable access (including using reasonable efforts to give access to
persons or firms possessing information) and duplicating rights during normal
business hours to Information within the Company's or any such Subsidiary's
possession or control relating to CFI or any CFI Subsidiary or relating to
the Company prior to the Distribution Date and to any property owned by the
Company that was leased or operated by CFI or any CFI Subsidiary (other than
the Company and its Subsidiaries), insofar as such access is reasonably
required by CFI or any CFI Subsidiary. Information may be requested under
this Article V for, without limitation, audit, accounting, claim, litigation
and tax purposes, as well as for purposes of fulfilling disclosure and
reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
5.2 PRODUCTION OF WITNESSES. After the Distribution Date, each of
CFI and the Company and its respective Subsidiaries shall use reasonable efforts
to make available to the other party and its Subsidiaries, upon written request,
its directors, officers, employees and agents as witnesses to the extent that
any such person may reasonably be required in connection with any
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legal, administrative or other proceedings in which the requesting party may
from time to time be involved.
5.3 PROVISION OF SERVICES. In addition to any services
contemplated to be provided following the Distribution Date by any Other
Agreement, each party, upon written request, shall make available to the
other party, during normal business hours and in a manner that will not
interfere unreasonably with such party's business, its financial, tax,
accounting, legal, employee benefits and similar staff services
(collectively, "Services") whenever and to the extent that they may be
reasonably required in connection with the preparation of tax returns,
audits, claims, litigation or administration of employee benefit plans, and
otherwise to assist in effecting an orderly transition following the
Distribution.
5.4 REIMBURSEMENT. Except to the extent otherwise provided in any
Other Agreement, each party providing Information, witnesses or Services under
Section 5.1, 5.2 or 5.3 to the other party shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all out-of-
pocket costs and expenses as may be reasonably incurred in providing such
Information, witnesses or Services. For purposes of this Section 5.4,
salaries and other compensation payable to employees of either party shall be
deemed to be an out-of-pocket cost or expense reimbursable hereunder.
5.5 RETENTION OF RECORDS. Except as otherwise required by law or
agreed to in writing, each of CFI and the Company shall retain, and shall cause
its respective Subsidiaries to retain following the Distribution Date, all
significant information ("Information") relating to the business of the other
and the other's subsidiaries, for a period (a "Retention Period") consistent
with the document retention policies in effect at CFI and the Company,
respectively. In addition, such Information shall not be destroyed or otherwise
disposed of if during such period a party shall request in writing that any of
the Information be retained for additional specific and reasonable periods of
time at the expense of the party so requesting. After the applicable Retention
Period, any party may destroy or otherwise dispose of any Information at any
time, provided that, prior to such destruction or disposal, (a) such party shall
provide no less than ninety (90) days' prior written notice to the other
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party, identifying the Information proposed to be destroyed or disposed of,
and (b) if the recipient of such notice shall request in writing prior to the
scheduled date for such destruction or disposal that any of the Information
proposed to be destroyed or disposed of be delivered to such requesting
party, the party proposing the destruction or disposal shall promptly arrange
for the delivery of such of the Information as was requested at the expense
of the requesting party.
5.6 CONFIDENTIALITY. Each of the CFI Group on the one hand, and the
Company Group on the other hand, shall use commercially reasonable efforts to
hold, and cause its Representatives to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other's Representatives pursuant to this Agreement or any of the Other
Agreements (except to the extent that such Information is (a) in the public
domain through no fault of such party or (b) later lawfully acquired on a non-
confidential basis from other sources which are not subject to any
confidentiality litigation with the subject party by such party or subsequently
developed by such party), and neither party shall release or disclose such
Information to any other person, except to its auditors, attorneys, financial
advisors, bankers and other consultants and advisors, and on terms and
conditions substantially the same as the terms and conditions on which such
party releases its own Information, unless compelled to disclose by judicial or
administrative process or, as advised by its counsel, by other requirements of
law.
5.7 PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in any Other
Agreement, CFI shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered, for the
transportation (at the Company's cost) to the Company of the Company's books
and records in its possession, except to the extent such items are already in
the possession of the Company. Such books and records shall be the property
of the Company, but shall be available to CFI for review and duplication
until CFI shall notify the Company in writing that such records are no longer
of use to CFI.
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(b) Except as otherwise provided in any Other Agreement, the
Company shall arrange as soon as practicable following the Distribution Date, to
the extent not previously delivered, for the transportation (at CFI's cost) to
CFI of CFI's and its Subsidiaries' books and records in its possession, except
to the extent such items are already in the possession of CFI or a Subsidiary of
CFI. Such books and records shall be the property of CFI, but shall be
available to the Company for review and duplication until the Company shall
notify CFI in writing that such records are no longer of use to the Company.
5.8 PRIVILEGED MATTERS. The Company and CFI recognize that legal and
other professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of both CFI and
the Company and that both CFI and the Company should be deemed to be the client
for the purposes of asserting all privileges related thereto. No party may
waive any privilege which could be asserted under any applicable law, and in
connection with which the other party has a material interest, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third parties.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company, for itself and on behalf of each other member of the
Company Group, makes the following representations and warranties to, and
covenants with, CFI, for its benefit and for the benefit of each other member
of the CFI Group, each and all of which shall survive the execution and
delivery of this Agreement and the Distribution Date.
6.1 FINANCIAL STATEMENTS. The consolidated balance sheets of the
Company and its Subsidiaries and the consolidated statements of earnings and
consolidated statement of cash flows for the Company and its Subsidiaries, each
in the form included in the Information Statement, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be
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indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates indicated
therein and the results of operations and cash flows for the periods
indicated therein.
6.2 FORM 10 AND INFORMATION STATEMENT. The Form 10 and the
Information Statement each do not misstate any material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, provided, however, there shall be excluded therefrom any
information provided by CFI.
6.3 MARKS. None of CFI's existing trademarks, trade names and
service marks that are not also Marks ("CFI marks" as set forth in Schedule
6.3) infringe in any manner any of the Marks or otherwise interfere with the
Company's expected use of the Marks, and none of the Company nor any other
member of the Company Group shall, at any time, bring or join in any suit,
claim or other proceeding or action adverse to CFI or any other member of the
CFI Group relating to the use of the CFI marks.
ARTICLE VII
SHARED CLAIMS
7.1 ACKNOWLEDGMENT. Each party acknowledges that, from and after
the Distribution Date, there may be claims and proceedings against such party
and its Subsidiaries (other than workers' compensation claims which pertain
to any persons who remain employed by LJSC on the day after the Distribution
Date ("Excluded Claims") which shall remain the sole responsibility of LJSC)
that relate (in whole or in part) to activities alleged to have transpired
prior to the Distribution Date and with respect to which it would be fair and
appropriate to apportion liability therefor between the parties ("Shared
Claims").
7.2 NOTIFICATION. If any party shall receive notice or otherwise
learn of the assertion of any claim or the commencement of any proceeding which
such party believes may constitute a Shared Claim (including, without
limitation, any such claim or proceeding that names or identifies the other
party or any of its Subsidiaries
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as a responsible party), such party shall (i) immediately assume the defense
thereof and shall in all respects respond thereto in a timely manner and (ii)
promptly provide written notice thereof to the other party, setting forth the
particulars as to such claim or proceeding in reasonable detail; PROVIDED
that the failure of such party to give such notice shall not relieve the
other party of any obligation to accept liability unless it is actually
prejudiced by such failure and then only to the extent of such actual
prejudice.
7.3 COOPERATION. The parties shall cooperate with each other in the
defense or settlement of Shared Claims to the effect that (i) subject to the
provisions of Section 7.2, the party bearing the greater liability shall be
responsible for the control and administration of any Shared Claim and (ii) the
other party shall cooperate with such party with respect to such control and
administration.
7.4 LIABILITY. The parties shall seek to apportion liability between
them with respect to any Shared Claim, and in so doing shall take cognizance of
all relevant factors, including but not limited to, the time and duration of
any alleged activity giving rise thereto. If the parties are unable to agree
on an apportionment of liability within thirty days of receipt of
notification as provided in Section 7.2, they shall submit the matter for
resolution as provided in the ADR Agreement.
7.5 NON-SHARED LIABILITIES. Anything to the contrary contained in
this Article VII notwithstanding, claims or proceedings arising out of or
relating to LJSC, its employees and operations on or prior to the
Distribution Date (other than Excluded Claims) shall be allocated as
described below. The Company shall assume and indemnify CFI against all
Losses and Liabilities arising out of or related to personnel matters that
are caused by employees who are employed by LJSC immediately following the
Distribution Date. CFI shall assume and indemnify the Company against all
other Losses and Liabilities arising out of or related to LJSC on or prior to
the Distribution Date, including all other personnel matters. If employees
of both the Company and CFI cause any such Losses or Liabilities relating to
LJSC, then they shall be Shared Claims and dealt with as provided in this
Article VII.
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ARTICLE VIII
MISCELLANEOUS
8.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the Other
Agreements, including any schedules and exhibits hereto or thereto, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
8.2 EXPENSES. Except as otherwise set forth in this Agreement and
the Other Agreements, (i) CFI will pay all out-of-pocket costs and expenses
that are necessary to effect the Distribution and incurred prior to the
Distribution and (ii) each party shall bear its costs and expenses arising
after the Distribution in connection with the Distribution; provided,
however, CFI shall pay the reasonable moving and relocation costs of
separating employees of CFI and CFC in Portland into two buildings, excluding
design and architectural fees, phone and data connections infrastructure and
labor associated with the move, including any other capital improvements,
except that CFI shall pay for the costs of wheelchair ramp access, ADA required
upgrades and lobby expansion.
8.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to the
principles of conflicts of laws thereof.
8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (return receipt requested), or sent by
cable, telegram, telecopy (confirmed by regular, first-class mail), to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
if to CFI:
Consolidated Freightways, Inc.
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3240 Hillview Avenue
Palo Alto, California 94304
Attn: General Counsel
if to the Company:
Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, California 94025
Attn: General Counsel
8.5 AMENDMENTS AND WAIVERS. This Agreement may not be altered or
amended, nor may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
No waiver of any term, provision or condition of or failure to exercise or delay
in exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
8.7 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
8.8 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the CFI Board without the approval of the Company or the
shareholders of CFI. In the event of such termination, no party shall have any
liability of any kind to any other party on account of such termination except
that expenses incurred in connection with the transactions contemplated hereby
shall be paid as provided in Section 8.2.
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8.9 NO THIRD-PARTY BENEFICIARIES. Except for the provisions of
Article IV relating to Indemnitees, this Agreement is solely for the benefit of
the parties hereto and their respective Affiliates and should not be deemed to
confer upon third parties (including any employee of the CFI Group or the
Company Group) any remedy, claim, reimbursement, cause of action or other right
other than those existing without reference to this Agreement.
8.10 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
8.11 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
8.12 FURTHER ASSURANCES. In addition to the actions specifically
provided for elsewhere in this Agreement, each of the parties hereto will use
its reasonable efforts to (i) execute and deliver such further documents and
take such other actions as any other party may reasonably request in order to
effectuate the purposes of this Agreement and to carry out the terms hereof, and
(ii) take, or cause to be taken, all actions, and to do, or cause to be done,
all things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using its reasonable efforts to obtain any consents and approvals and make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement.
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8.13 NO SOLICITATION OF EMPLOYEES. For a period of three years
after the Distribution Date, neither CFI nor the Company, nor any of their
Subsidiaries, will directly solicit the employment of any employee of the
other company, or any of its Subsidiaries, without the prior written consent
of such other company; PROVIDED, HOWEVER, that if the Company shall cease to
receive services provided by CNF Service Company, Inc. pursuant to the
Services Agreement after the Distribution Date, it may solicit employees
(employed either at the time of notification by the Company of the
termination of services, or in the preceding six months) from the groups that
had been providing such services.
8.14 DISPUTE RESOLUTION. Any dispute between the parties concerning
the performance of this Agreement shall be resolved in accordance with the
provisions of the ADR Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
CONSOLIDATED FREIGHTWAYS, INC.
on behalf of itself and its
wholly owned subsidiaries
By:
------------------------------
Its:
CONSOLIDATED FREIGHTWAYS CORPORATION
on behalf of itself and its
wholly owned subsidiaries
By:
------------------------------
Its:
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FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
The undersigned, Maryla R. Boonstoppel, certifies that she is the
Secretary of Consolidated Freightways Corporation, a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), and
does hereby further certify as follows:
1. The name of the Corporation is Consolidated Freightways
Corporation.
2. The Corporation was originally incorporated under the name LHT
Holdings, Inc. Pursuant to an amendment to its Certificate of Incorporation
filed on August 26, 1996, the Corporation changed its name to Consolidated
Freightways Corporation.
3. The original Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on March
20, 1996.
4. This Amended and Restated Certificate of Incorporation was duly
adopted by stockholder written consent in accordance with Sections 228, 242 and
245 of the General Corporation Law of the State of Delaware.
5. The text of the Certificate of Incorporation of the Corporation
as amended hereby is restated to read in its entirety as follows:
FIRST. The name of the Corporation is Consolidated Freightways
Corporation.
SECOND. The address of the Corporation's registered office in the
State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover 19901,
County of Kent, and the name of its registered agent at such address is the
Prentice-Hall Corporation System, Inc.
<PAGE>
THIRD. The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware (the "GCL").
FOURTH. The aggregate number of shares of all classes of stock
which the Corporation shall have authority to issue is 55,000,000, 50,000,000
of which shares shall be common stock having a par value of $.01 per share
("Common Stock") and 5,000,000 of which shares shall be Preferred Stock
having no par value ("Preferred Stock"). A description of each of such
classes of stock and the designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, of each class of
stock of the Corporation which are fixed by the Certificate of Incorporation
of the Corporation, and the express grant of authority to the Board of
Directors of the Corporation (the "Board") to fix by resolution or
resolutions the designations and the powers, preferences and rights of each
other class, and the qualifications, limitations or restrictions thereof, are
as follows:
1. The Board shall have authority, by resolution or resolutions, at
any time and from time to time to divide and establish any or all of the
unissued shares of Preferred Stock not then allocated to any series of Preferred
Stock into one or more series, and, without limiting the generality of the
foregoing, to fix and determine the designation of each such series, the number
of shares which shall constitute such series and the following relative rights
and preferences of the shares of each series so established:
(a) the annual dividend rate payable on shares of such series,
the time of payment thereof, whether such dividends shall be cumulative or non-
cumulative, and the date or dates from which any cumulative dividends shall
commence to accrue;
(b) the price or prices at which and the terms and conditions,
if any, on which shares of such series may be redeemed;
(c) the amounts payable upon shares of such series in the event
of the voluntary or involuntary dissolution, liquidation or winding-up of the
affairs of the Corporation;
(d) the sinking fund provisions, if any, for the redemption or
purchase of shares of such series;
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(e) the extent of the voting powers, if any, of the shares of
such series;
(f) the terms and conditions, if any, on which shares of such
series may be converted into shares of stock of the Corporation of any other
class or classes or into shares of any other series of the same or any other
class or classes;
(g) whether, and if so the extent to which, shares of such
series may participate with the Common Stock in any dividends in excess of the
preferential dividend fixed for shares of such series or in any distribution of
the assets of the Corporation, upon a liquidation, dissolution or winding-up
thereof, in excess of the preferential amount fixed for shares of such series;
and
(h) any other designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, of shares of such series not fixed and determined by
law or in the Certificate of Incorporation of the Corporation, and to increase
or decrease the number of shares of any series so created, subsequent to the
issue of that series but not below the number of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
2. There shall be no limitation or restriction on any variation
between any of the different series of Preferred Stock as to the designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof; and the several series
of Preferred Stock may, except as hereinafter in this Article FOURTH otherwise
expressly provided, vary in any and all respects as fixed and determined by the
resolution or resolutions of the Board providing for the issuance of the various
series; provided, however, that all shares of any one series of Preferred Stock
shall have the same designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations and
restrictions. Different series of Preferred Stock shall not be considered to
constitute different classes of shares for the purpose of voting by classes
except as otherwise fixed by the Board with respect to any series at the time of
the creation thereof.
3. So long as any shares of Preferred Stock are outstanding, the
Corporation shall not declare and pay or set apart for payment any dividends
(other than dividends payable in Common Stock or other stock of the Corporation
ranking
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junior to the Preferred Stock as to dividends) or make any other distribution
on such junior stock, if at the time of making such declaration, payment or
distribution the Corporation shall be in default with respect to any dividend
payable on, or any obligation to retire, shares of Preferred Stock.
4. Subject to such limitations, if any, as may be contained in the
resolution or resolutions providing for the issue of Preferred Stock of any
series adopted by the Board, shares of Preferred Stock purchased, redeemed or
otherwise acquired by the Corporation (excepting shares of such stock acquired
on the conversion or exchange thereof into or for other shares of the Corpora-
tion) (a) shall, upon the filing by the Corporation of a certificate pursuant to
Delaware law reducing its capital in respect to such shares, have the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Corporation at any time as shares of any series of Preferred Stock and (b)
shall, unless and until a certificate with respect thereto is filed as
aforesaid, constitute treasury stock; and shares of Preferred Stock acquired on
the conversion or exchange thereof into or for other shares of the Corporation
shall, after such conversion or exchange, have the status of authorized and
unissued shares of Preferred Stock and may be reissued by the Corporation at any
time as shares of any series of Preferred Stock.
5. Subject to the provisions of any applicable law or the Bylaws of
the Corporation as from time to time amended with respect to the closing of the
transfer books or the fixing of a record date for the determination of
stockholders entitled to vote, and except as otherwise provided by law or in
resolutions of the Board establishing any series of Preferred Stock pursuant to
this Article FOURTH, the holders of outstanding shares of Common Stock of the
Corporation shall exclusively possess the voting power for the election of
directors and for all other purposes. The amount of either the authorized
Preferred Stock or Common Stock, or the amount of both such classes of stock,
may be increased or decreased by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote. Each holder of
record of shares of Common Stock of the Corporation shall be entitled to one
vote for each share of such stock standing in such holder's name on the books of
the Corporation.
FIFTH. A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board consisting of not less than five
nor more than nine directors, the exact number of directors to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the entire Board. The directors shall be divided into three groups, designated
Group I, Group II and Group III. Each Group of directors shall consist, as
nearly as may be
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<PAGE>
possible, of one-third of the total number of directors constituting the
entire Board (determined for purposes of the Certificate of Incorporation
without regard to whether any vacancies exist on the Board). The term of the
initial Group I directors shall terminate on the date of the 1997 annual
meeting of stockholders; the term of the initial Group II directors shall
terminate on the date of the 1998 annual meeting of stockholders; and the
term of the initial Class III directors shall terminate on the date of the
1999 annual meeting of stockholders. At each annual meeting of stockholders
beginning with the 1997 annual meeting, successors to the Group of directors
whose term expires at that annual meeting shall be elected for a three-year
term.
B. If the number of directors is changed, any increase or decrease
shall be apportioned among the Groups so as to maintain the number of directors
in each Group as nearly equal as possible, and any additional director of any
Group elected to fill a vacancy resulting from an increase in such Group shall
hold office for a term that shall coincide with the remaining term of that
Group, but in no case will a decrease in the number of directors shorten the
term of any incumbent director.
C. A director shall hold office until the annual meeting for the year
in which his or her term expires and until his or her successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board, however
resulting, may be filled by a majority of the Board then in office, even if less
than a quorum is present or by a sole remaining director. Any director elected
to fill a vacancy shall have the same remaining term as that of his or her
predecessor.
D. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock shall have the right, voting
separately by class or series, to elect directors at an annual or special meet-
ing of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of the
Certificate of Incorporation of the Corporation applicable thereto.
SIXTH. Elections of directors at an annual or special meeting of
stockholders shall be by written ballot, unless the Bylaws of the Corporation
provide otherwise.
SEVENTH. Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the Corporation
5
<PAGE>
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation then entitled to vote generally in the election of directors,
considered for purposes of this Article SEVENTH as one class.
EIGHTH. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) to make, alter or repeal the Bylaws of the Corporation;
(b) to authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation;
(c) to set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to abolish any
such reserve or reserves in the manner in which the same was created;
(d) by resolution passed by a majority of the whole Board, to
designate one or more committees, each committee to consist of three or more of
the directors of the Corporation, which, to the extent provided in the
resolution or in the Bylaws of the Corporation, shall have and may exercise the
powers of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the Bylaws of the Corporation or as may be
determined from time to time by resolution adopted by a majority of the whole
Board; and
(e) when and as authorized by the affirmative vote of the holders of
a majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called for that purpose, to sell, lease or exchange
all or substantially all of the property and assets of the Corporation,
including its good will and its corporate franchises, upon such terms and
conditions and for such consideration, which may be in whole or in part shares
of stock in, and/or other securities of, any other corporation or corporations,
as the Board shall deem expedient and for the best interests of the Corporation.
NINTH. A. In addition to any affirmative vote required by law, any
other provision of the Certificate of Incorporation of the Corporation, the
Bylaws of the Corporation or otherwise, and except as otherwise expressly
provided in Sections B or C of this Article NINTH, a Business Transaction with
or a Stock Repurchase
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<PAGE>
from, or proposed by or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder shall require the
approval by not less than a majority vote of the holders of all of the
Corporation's outstanding Voting Stock, voting together as a single class,
which is beneficially owned by persons other than such Interested Stockholder
and its Affiliates and Associates. Such affirmative vote shall be required
notwithstanding the fact that no vote may otherwise be required, or that a
lesser percentage or separate class vote may be required, by law, any other
provision of the Certificate of Incorporation of the Corporation, the Bylaws
of the Corporation or otherwise.
B. The provisions of Section A of this Article NINTH shall not be
applicable to any Business Transaction involving an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder, and such Business
Transaction shall require only such affirmative vote, if any, as is required by
law, any other provision of the Certificate of Incorporation of the Corporation,
the Bylaws of the Corporation or otherwise, if all of the conditions specified
in either of the following Paragraph 1 or 2 are met:
1. The Business Transaction shall have been approved (or shall have
been effected in accordance with a written agreement approved) by a
majority of the Disinterested Directors, whether such approval is given
prior or subsequent to the acquisition of beneficial ownership of the
Voting Stock that caused such Interested Stockholder to become an
Interested Stockholder. A Business Transaction with an Interested
Stockholder or an Affiliate or an Associate of an Interested Stockholder
shall be deemed to have been approved by a majority of the Disinterested
Directors if such Business Transaction either (i) was expressly approved
(or the agreement pursuant to which it was effected was expressly approved)
by a majority of Disinterested Directors, or (ii) is within a category of
Business Transactions with such Interested Stockholder or its Affiliates or
Associates authorized to be entered into by a resolution or resolutions
adopted by, and not subsequently rescinded by, a majority of Disinterested
Directors.
2. The Business Transaction is a Business Combination and all of the
following conditions shall have been met:
(a) The aggregate amount of cash and the Fair Market Value as of
the date of the consummation of the Business Transaction of consideration
other than cash to be received per share by holders of the Corporation's
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Common Stock in such Business Transaction shall be at least equal to the
highest amount determined under clauses (i) and (ii) below:
(i) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of such Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder for any shares of Common
Stock in connection with the acquisition by such Interested
Stockholder or any such Affiliate or Associate of beneficial
ownership of shares of Common Stock (x) within the two-year
period immediately prior to the first public announcement of the
proposed Business Transaction (the "Announcement Date"), or (y)
in the transaction in which such Interested Stockholder became an
Interested Stockholder, whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which such Interested
Stockholder became an Interested Stockholder (the "Determination
Date"), whichever is higher.
(b) The aggregate amount of cash and the Fair Market Value as of
the date of the consummation of the Business Transaction of consider-
ation other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock other than Common
Stock shall be at least equal to the highest amount determined under
clauses (i), (ii) and (iii) below:
(i) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of such Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder for any shares of such
class or series of Capital Stock in connection with the ac-
quisition by such Interested Stockholder or any such Affiliate or
Associate of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date, or (y) in the
transaction in which such Interested Stockholder became an
Interested Stockholder, whichever is higher;
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(ii) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the Deter-
mination Date, whichever is higher; and
(iii) the highest preferential amount per share, if any, to
which the holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, regardless of whether the Business
Transaction to be consummated constitutes such an event.
The provisions of this Paragraph 2(b) shall be required to be met
with respect to every class or series of outstanding Capital Stock,
whether or not such Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder has previously acquired
beneficial ownership of any shares of the particular class or series
of Capital Stock.
(c) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of such
Interested Stockholder and its Affiliates and Associates in connection
with their direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the consideration
so paid for shares of any class or series of Capital Stock varied as
to form, the form of consideration for such class or series of Capital
Stock shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of such class or series of
Capital Stock previously acquired by such Interested Stockholder and
its Affiliates and Associates. The prices determined in accordance
with Paragraphs 2(a) and 2(b) of this Section B shall be subject to an
appropriate adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
(d) After the Determination Date and prior to the consummation
of such Business Transaction: (i) except as approved by a majority of
the Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) payable in accordance with the
terms of any outstanding Capital Stock; (ii) there shall have been no
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reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any stock split, stock dividend or
subdivision of the Common Stock), except as approved by a majority of
the Disinterested Directors; (iii) there shall have been an increase
in the annual rate of dividends paid on the Common Stock as necessary
to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Disinterested Directors; and (iv) neither such
Interested Stockholder nor any Affiliate or Associate of such
Interested Stockholder shall have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction
that results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction that, after giving effect
thereto, would not result in any increase in such Interested
Stockholder's or any such Affiliate's or Associate's percentage
beneficial ownership of any class or series of Capital Stock.
(e) A proxy or information statement describing the proposed
Business Transaction and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Act") (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to all stockholders of the
Corporation at least thirty days prior to the consummation of such
Business Transaction (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Transaction that the
Disinterested Directors, or any of them, may choose to make and, if
deemed advisable by a majority of the Disinterested Directors, the
opinion of an investment banking firm selected by a majority of the
Disinterested Directors as to the fairness (or not) of the terms of
the Business Transaction from a financial point of view to the holders
of the outstanding shares of Capital Stock other than such Interested
Stockholder and its Affiliates or Associates, such investment banking
firm to be paid a reasonable fee for its services by the Corporation.
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C. The provisions of Section A of this Article NINTH shall not be
applicable to a Stock Repurchase with, or proposed by or on behalf of, an
Interested Stockholder or an Affiliate or Associate of an Interested Stockhold-
er, and such Stock Repurchase shall require only such affirmative vote, if any,
as is required by law, any other provision of the Certificate of Incorporation
of the Corporation, the Bylaws of the Corporation or otherwise, if the
conditions specified in either of the following Paragraph 1 or 2 are met:
1. The Stock Repurchase is made pursuant to a tender offer or
exchange offer for a class of Capital Stock made available on the same
basis to all holders of such class of Capital Stock.
2. The Stock Repurchase is made pursuant to an open market purchase
program approved by a majority of the Disinterested Directors, PROVIDED
that such repurchase is effected on the open market and is not the result
of a privately negotiated transaction.
D. For the purposes of this Article NINTH:
1. The term "Business Transaction" shall mean:
(a) any merger or consolidation of the Corporation with, or any
sale or transfer of all or substantially all of the Corporation's
assets to, (i) any Interested Stockholder or (ii) any other
corporation (whether or not itself an Interested Stockholder) which is
or after such merger, consolidation, sale or transfer would be an
Affiliate or Associate of an Interested Stockholder, or any
liquidation or dissolution of the Corporation (any such merger,
consolidation, sale, transfer, liquidation or dissolution being
referred to herein as a "Business Combination"); or
(b) any other transaction (other than a Stock Repurchase)
between the Corporation or any Subsidiary, on the one hand, and any
Interested Stockholder or any Affiliate or Associate of an Interested
Stockholder, on the other hand, and any amendment to the Bylaws of the
Corporation proposed by or on behalf of any Interested Stockholder or
any Affiliate or Associate of an Interested Stockholder; or
(c) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation, or any merger or
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consolidation of the Corporation with any Subsidiary, or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of
increasing the percentage beneficial ownership of any class or series
of Capital Stock held by, or the voting power with respect to the
Corporation of, any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(d) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses (a)
to (c).
2. The term "Stock Repurchase" shall mean any repurchase by the
Corporation or any Subsidiary of any shares of Capital Stock at a price
greater than the then Fair Market Value of such shares from an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder if
beneficial ownership of one-quarter or more of all shares of Capital Stock
beneficially owned by such Interested Stockholder and its Affiliates and
Associates were acquired (disregarding shares acquired as part of a pro-
rata stock dividend or stock split) within a period of less than two years
prior to the date of such repurchase (or the date of an agreement in
respect thereof).
3. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article FOURTH
of this Amended and Restated Certificate of Incorporation, and the term
"Voting Stock" shall mean all Capital Stock which by its terms may be voted
on all matters submitted to stockholders of the Corporation generally.
4. The term "person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
5. The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary, or any pension, profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation
or any Subsidiary, or any trustee of or fiduciary with respect to any such
plan when acting in such capacity) who (a) is the beneficial owner of
Voting
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Stock representing ten percent (10%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of Voting Stock;
or (b) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was
the beneficial owner of Voting Stock representing ten percent (10%) or more
of the votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock.
6. A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement
or understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 5 of this Section D, the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of
Paragraph 6 of this Section D, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement, arrangement
or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
7. A person shall be deemed to be an "Affiliate" of a specified
person, if such person directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, such specified person. A person shall be deemed to be an "Associate"
of a specified person, if such person is (a) a corporation or organization
(other than the Corporation or any Subsidiary) of which such specified
person is an officer or partner or of which such specified person is,
directly or indirectly, the beneficial owner of ten percent (10%) or more
of any class of equity securities, (b) a trust or other estate (other than
any pension, profit-sharing, employee stock ownership or other employee
benefit plan of the Corporation or any Subsidiary) in which such specified
person has a substantial beneficial interest or as to which such specified
person serves as trustee or in a similar
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fiduciary capacity, or (c) a relative or spouse of such specified person,
or a relative of such spouse, who has the same home as such specified
person.
8. The term "Subsidiary" means any corporation of which a majority of
any class of equity security is beneficially owned by the Corporation, as
well as any Affiliate of the Corporation which is controlled by the
Corporation; PROVIDED, HOWEVER, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 5 of this Section D, the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
9. With respect to any Business Transaction with, or proposed by or
on behalf of, an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, and with respect to any proposal of the kind
referred to in Section H of this Article NINTH, which is proposed by or on
behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, the term "Disinterested Director" means any member
of the Board who is not an Affiliate or Associate or representative of such
Interested Stockholder and was a member of the Board prior to the time that
such Interested Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director, while such successor is a member of
the Board, who is not an Affiliate or Associate or representative of such
Interested Stockholder and is recommended or elected to succeed the
Disinterested Director by a majority of Disinterested Directors.
10. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock Exchange
Listed Stocks, or, if such stock is not quoted on the Composite Tape, on
the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered
under the Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect
to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no such
quotations are available, the fair market value on the date in question of
a share of such stock as determined by a majority of the Disinterested
Directors in good faith, and (c) in the case of property other than cash or
stock, the fair market value of such property
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on the date in question as determined in good faith by a majority of the
Disinterested Directors.
11. In the event of any Business Transaction in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2(a) and 2(b) of Section B of this Article NINTH shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
E. A majority of the Disinterested Directors shall have the power and duty
to determine for the purposes of this Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, and (d) whether the consideration to be received in any
Stock Repurchase by the Corporation or any Subsidiary exceeds the then Fair
Market Value of the shares of Capital Stock being repurchased. Any such
determination made in good faith shall be binding and conclusive on all parties.
F. Nothing contained in this Article NINTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
G. The fact that any Business Transaction complies with the provisions of
Section B of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board, or any member thereof, to
approve such Business Transaction or recommend its adoption or approval to the
stockholders of the Corporation, nor shall such compliance limit, prohibit or
otherwise restrict in any manner the Board, or any member thereof, with respect
to evaluations of or actions and responses taken with respect to such Business
Transaction.
H. Notwithstanding any other provisions of the Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, the
Certificate of Incorporation or the Bylaws of the Corporation) and in addition
to the voting requirements set forth in Article SEVENTEENTH hereof, any proposal
to amend or repeal, or adopt any provision of the Certificate of Incorporation
inconsistent with, this Article NINTH which is proposed by or on behalf of an
Interested Stockholder or an Affiliate or Associate of an Interested Stockholder
shall require approval by a vote of a majority of the holders of all then
outstanding shares of Voting Stock which are
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beneficially owned by persons other than such Interested Stockholder and its
Affiliates and Associates, voting together as a single class; PROVIDED,
HOWEVER, that this Section H shall not apply to, and such majority vote shall
not be required for, any amendment, repeal or adoption which does not affect
the provisions of this Article NINTH relating to Stock Repurchases and which
is recommended by a majority of the Disinterested Directors, if a majority of
the directors then in office are Disinterested Directors.
TENTH. Meetings of stockholders may be held outside the State of
Delaware, if the Bylaws so provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board or in the Bylaws of the Corporation.
ELEVENTH. Any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly noticed and called, as
provided in the Bylaws of the Corporation, and may not be taken by a written
consent of the stockholders pursuant to the GCL.
TWELFTH. Special meetings of stockholders of the Corporation for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President or a majority of the entire Board. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
THIRTEENTH: No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such a director as a director to the full extent authorized or
permitted by law (as now or hereafter in effect). Notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by applicable law
(i) for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the GCL or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article THIRTEENTH
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
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FOURTEENTH. Advance notice of new business and stockholder
nominations for the election of directors shall be given in the manner and to
the extent provided in the Bylaws of the Corporation.
FIFTEENTH. The private property of the stockholders of this
Corporation shall not be subject to the payment of corporate debts to any extent
whatsoever.
SIXTEENTH. The officers and directors of the Corporation, and such
other persons as authorized by a majority of the entire Board consistent with
the provisions of the GCL shall be indemnified by the Corporation to the fullest
extent authorized or permitted by law (as now or hereafter in effect).
SEVENTEENTH. The Corporation reserves the right to adopt, amend,
alter or repeal any provisions contained in the Certificate of Incorporation in
the manner now or hereafter prescribed by the statutes of the State of Delaware
and the Certificate of Incorporation, and all rights herein conferred on
stockholders are expressly subject to this reservation. Notwithstanding
anything contained in the Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding stock of the Corporation entitled to vote thereon shall be required
to adopt, amend, alter or repeal any provision inconsistent with Articles FIFTH,
SEVENTH, EIGHTH, NINTH, ELEVENTH, TWELFTH, THIRTEENTH, SIXTEENTH and SEVENTEENTH
of the Certificate of Incorporation.
IN WITNESS WHEREOF, Consolidated Freightways Corporation has caused
its corporate seal to be affixed and this Amended and Restated Certificate of
Incorporation to be signed by Maryla R. Boonstoppel, its Secretary, this
day of , 1996.
CONSOLIDATED FREIGHTWAYS
CORPORATION
---------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AS OF
---------------
FORM OF
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
INCORPORATED UNDER THE LAWS OF DELAWARE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
ARTICLE I:
LOCATION AND OFFICES
SECTION 1:1. Principal Office. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1:2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II:
STOCKHOLDERS
SECTION 2:1. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2:2. Business to be Conducted at Annual Meeting. . . . . . . . . . 2
SECTION 2:3. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2:4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2:5. Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2:6. Rules of Conduct. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.7. Quorum and Voting . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2:8. Voting; Proxy . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2:9. Voting by Fiduciaries, Pledgees and Pledgors. . . . . . . . . 6
SECTION 2:10. Nomination of Directors . . . . . . . . . . . . . . . . . . . 6
SECTION 2:11. List of Stockholders. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III:
DIRECTORS
SECTION 3:1. General Powers. . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3:2. Number and Qualifications. . . . . . . . . . . . . . . . . . . 8
SECTION 3:3. Election; Resignation . . . . . . . . . . . . . . . . . . . . 8
SECTION 3:4. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3:5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
SECTION 3:6. Committees. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3:7. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3:8. Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3:9. Notice to Members of the Board. . . . . . . . . . . . . . . . 10
SECTION 3:10. Presiding Officer . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3:11. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3:12. Interested Directors. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV:
OFFICERS
SECTION 4:1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4:2. Tenure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4:3. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4:4. Chairman of the Board . . . . . . . . . . . . . . . . . . . . 12
SECTION 4:5. President. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4:6. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4:7. Secretary.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4:8. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4:9. Other Officers. . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V:
CAPITAL STOCK AND DIVIDENDS
SECTION 5:1. Certificates for Shares . . . . . . . . . . . . . . . . . . . 15
SECTION 5:2. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5:3. Regulations Governing Issuance and Transfers
of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5:4. Transfer Agents and Registrars. . . . . . . . . . . . . . . . 16
SECTION 5:5. Lost or Destroyed Certificates. . . . . . . . . . . . . . . . 16
SECTION 5:6. Fractions of Shares . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5:7. Determination of Stockholders . . . . . . . . . . . . . . . . 17
SECTION 5:8. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI:
OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . . . . . . . . .17
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ARTICLE VII:
INDEMNIFICATION
SECTION 7:1. General Indemnification . . . . . . . . . . . . . . . . . . . 18
SECTION 7:2. Insurance, Indemnification Agreements and
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7:3. Nonexclusivity. . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII:
MISCELLANEOUS
SECTION 8:1. Voting Shares in Other Corporations . . . . . . . . . . . . . 19
SECTION 8:2. Execution of Other Papers and Documents . . . . . . . . . . . 19
SECTION 8:3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8:4. Books and Records . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8:5. Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8:6. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 20
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<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
ARTICLE I: LOCATION AND OFFICES
PRINCIPAL OFFICE.
SECTION 1:1. The principal office of Consolidated Freightways
Corporation (the "Corporation") shall be at such place as the Board of
Directors of the Corporation (the "Board") may from time to time determine,
but until a change is effected such principal office shall be at 175 Linfield
Drive in the City of Menlo Park, California.
OTHER OFFICES.
SECTION 1:2. The Corporation may also have other offices, in such
places (within or without the State of Delaware) as the Board may from time
to time determine.
ARTICLE II: STOCKHOLDERS
ANNUAL MEETING.
SECTION 2:1. An annual meeting of the stockholders of the Corporation
shall be held at 10:00 o'clock a.m. on the last Monday of April of each year,
beginning in 1997, if not a legal holiday, and if a legal holiday then on the
next succeeding day not a legal holiday or on such other date as shall be
designated from time to time by the Board. The purpose of the meeting shall be
to elect directors and to transact such other business as properly may be
brought before the meeting. If the Corporation shall fail to hold said meeting
for the election of directors on the date aforesaid, the Board shall cause the
election to be held by the stockholders as soon thereafter as convenient.
BUSINESS TO BE CONDUCTED AT ANNUAL MEETING.
SECTION 2:2.1 At an annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) pursuant to
the
<PAGE>
Corporation's notice of the meeting, (ii) by or at the direction of the Board
(or any duly organized committee thereof), or (iii) by any stockholder of the
Corporation who is a stockholder of record on the date of giving of the
notice provided for in this Section 2:2 and on the record date for the
determination of stockholders entitled to vote at such meeting and who has
complied with the notice procedures set forth in this Section 2:2.
SECTION 2:2.2 In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice in proper written form to the
Secretary which notice is not withdrawn by such stockholder at or prior to such
annual meeting.
SECTION 2:2.3 To be timely, a stockholder's notice to the Secretary must
be delivered or mailed to and received by the Secretary at the principal
executive offices of the Corporation, not less than sixty days nor more than
ninety days prior to the first anniversary date of the preceding year's annual
meeting of stockholders; PROVIDED, HOWEVER, that in the event that the annual
meeting is called for a date that is not within thirty days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever occurs first.
SECTION 2:2.4 To be in proper written form, such stockholder's notice must
set forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at such meeting;
(ii) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, and the name and address of the beneficial
owner, if any, on whose behalf the proposal is made; (iii) the class, series
and the number of shares of the Corporation's stock which are beneficially owned
by such stockholder, and the beneficial owner, if any, on whose behalf the
proposal is made; (iv) a description of all arrangements or understandings
between such stockholder or beneficial owner and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder or beneficial owner and any material interest of the stockholder,
and of the beneficial owner, if any, on whose behalf the proposal is made, in
such business; and (v) a representation that such stockholder or beneficial
owner intends to appear in person or by proxy at the annual meeting to bring
such business before the meeting.
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SECTION 2:2.5 Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 2:2. The chairman of the meeting may, if
the facts warrant, determine that the business was not properly brought before
the meeting in accordance with the provisions of this Section 2:2; and if the
chairman should so determine, the chairman shall so declare to the meeting, and
any such business not properly brought before the meeting shall not be trans-
acted.
SPECIAL MEETINGS.
SECTION 2:3. Special meetings of stockholders of the Corporation for
any purpose or purposes may be called at any time by the Chairman of the
Board, the Chief Executive Officer or a majority of the entire Board.
Special meetings of the stockholders of the Corporation may not be called by
any other person or persons. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given to each stockholder entitled to vote at such
meeting as provided in Section 2:5, and only such business as is stated in
such notice shall be acted upon thereat.
PLACE OF MEETINGS.
SECTION 2:4. All meetings of the stockholders shall be held at the
principal office of the Corporation, or at such other place, within or without
the State of Delaware, as may be determined by the Board and stated in the
notice of the meeting.
NOTICE OF MEETINGS.
SECTION 2:5. Written notice of each meeting of the stockholders stating
the place, date, and hour of the meeting, and, in case of a special meeting or
where otherwise required by statute, the purpose or purposes for which the
meeting is called, shall be delivered by mail not less than ten nor more than
sixty days before the date of the meeting, by or at the direction of the person
calling the meeting, to each stockholder entitled to vote at such meeting. The
notice of a stockholders' meeting shall be deemed to be delivered when deposited
in the United States mail with postage prepaid, addressed to each stockholder at
such stockholder's address as it appears on the records of the Corporation.
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RULES OF CONDUCT.
SECTION 2:6. The Board of the Corporation shall be entitled to make such
rules or regulations for the conduct of meetings of stockholders as it shall
deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board, if any, the chairman of the meeting shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the Corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless, and to the extent, determined by the Board or the
chairman of the meeting, meeting of stockholders shall not be required to be
held in accordance with rules of parliamentary procedure.
QUORUM AND VOTING.
SECTION 2:7.1 The holders of a majority of the outstanding shares
(exclusive of treasury stock) entitled to vote at any meeting of the
stockholders, when present in person or by proxy, shall constitute a quorum for
the transaction of business, except as otherwise provided by statute, the
Certificate of Incorporation of the Corporation or these Bylaws; but in the
absence of such a quorum the holders of a majority of the shares represented at
the meeting shall have the right successively to adjourn the meeting to a
specified date. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
SECTION 2:7.2 The absence from any meeting of the number of shares
required by statute, the Certificate of Incorporation of the Corporation or
these Bylaws
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for action upon one matter shall not prevent action at such meeting upon any
other matter or matters which may properly come before the meeting, if the
number of shares required in respect of such other matters shall be present.
SECTION 2:7.3 When a quorum is present at any meeting of the stockholders,
the vote of the holders (present in person or represented by proxy) of a
majority of the shares of stock which are actually voted (and have the power to
vote) on any proposition or question properly brought to a vote at such meeting
shall decide any such proposition or question, unless the proposition or
question is one upon which by express provision of statute or of the Certificate
of Incorporation, or of these Bylaws, a different vote is required, in which
case such express provision shall govern and establish the number of votes
required to determine such proposition or question.
VOTING; PROXY.
SECTION 2:8.1 Whenever the law requires or the chairman of the meeting
orders that a vote be taken by ballot, each stockholder entitled to vote on a
particular question at a meeting of stockholders, pursuant to law or the
Certificate of Incorporation, shall be entitled to one vote for each share of
voting stock held by such stockholder. Shares standing in the names of two or
more persons shall be voted or represented in accordance with the determination
of the majority of such persons, or, if only one of such persons is present in
person or represented by proxy, such person shall have the right to vote such
shares and such shares shall be deemed to be represented for the purpose of
determining a quorum. The date for determining the stockholders entitled to
vote at a meeting of the stockholders shall be determined pursuant to Section
5:8.
SECTION 2:8.2 Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such stockholder
by proxy; but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
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VOTING BY FIDUCIARIES, PLEDGEES AND PLEDGORS.
SECTION 2:9. Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation the pledgor has expressly empowered the pledgee to vote thereon, in
which case only the pledgee or the pledgee's proxy may represent such stock and
vote thereon.
NOMINATION OF DIRECTORS.
SECTION 2:10.1 Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of the
Corporation, except as may be otherwise expressly provided in the Certificate of
Incorporation of the Corporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board may be made at any annual meeting of stockholders, (i) by or at the
direction of the Board (or any duly authorized committee thereof) or (ii) by any
stockholder of the Corporation who is a stockholder of record on the date of the
giving of the notice provided for in this Section 2:9 and on the record date for
the determination of stockholders entitled to vote at such meeting and who
complies with the notice procedures set forth in this Section 2:9.
SECTION 2:10.2 In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
SECTION 2:10.3 To be timely, a stockholder's notice to the Secretary must
be delivered or mailed to and received by the Secretary at the principal
executive offices of the Corporation not less than sixty days nor more than
ninety days prior to the first anniversary date of the preceding year's annual
meeting of stockholders, PROVIDED, HOWEVER, that in the event that the annual
meeting is called for a date that is not within thirty days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever occurs first.
SECTION 2:10.4 To be in proper written form, a stockholder's notice to the
Secretary must set forth (i) as to each person whom the stockholder proposes to
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nominate for election as a director (A) the name, age, business address and
residence address of the person, (B) the principal occupation or employment of
the person, (C) the class or series and the number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (D)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (ii) as to the
stockholder giving the notice or the beneficial owner on whose behalf the
nomination is made, (A) the name and address of such stockholder as they appear
on the Corporation's books, (B) the class or series and the number of shares of
the Corporation's stock which are beneficially owned by such stockholder or
beneficial owner, (C) a description of all arrangements or understandings
between such stockholder or beneficial owner and each proposed nominee and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made by such stockholder or beneficial owner, (D) a
representation that such stockholder or beneficial owner intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice,
and (E) any other information relating to such stockholder or beneficial owner
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and regula-
tions promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
SECTION 2:10.5 No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Section 2:10. If the chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
LIST OF STOCKHOLDERS.
SECTION 2:11. The Secretary shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten
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days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as
to who are the stockholders entitled to examine the stock ledger, the list
required by this Section 2:10 or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
ARTICLE III: DIRECTORS
GENERAL POWERS.
SECTION 3:1. The Board shall control and manage the business and property
of the Corporation. The Board may exercise all such powers of the Corporation
and do all lawful acts and things as are not by law, the Certificate of
Incorporation or these Bylaws directed or required to be exercised or done by
the stockholders or some particular officer of the Corporation.
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NUMBER AND QUALIFICATIONS.
SECTION 3:2. The number of directors shall be determined from time to time
by resolution of the Board in accordance with the terms of Article FIFTH of the
Certificate of Incorporation.
ELECTION; RESIGNATION.
SECTION 3:3. Except as provided in the Certificate of Incorporation with
respect to the filling of vacancies, directors shall be elected by a plurality
of the votes cast at annual meetings of stockholders, and shall hold office
until the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any director
may resign at any time upon written notice to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board. If no such specification is made, it
shall be deemed effective at the pleasure of the Board. Directors need not be
stockholders. The directors who are to be elected at the annual meeting of the
stockholders shall be elected by ballot by the holders of shares entitled to
vote.
MEETINGS.
SECTION 3:4.1. The Board of the Corporation may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board may be held without notice at such time and at such place
as may from time to time be determined by the Board. Special meetings of the
Board may be called by the Chairman, if there be one, the President or any
director. Notice thereof stating the place, date and hour of the meeting shall
be given to each director either by mail not less than forty-eight (48) hours
before the date of the meeting, by telephone or facsimile transmission on
twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
SECTION 3:4.2. Members of the Board, or any committee designated by the
Board, may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participating in
the meeting in this manner shall constitute presence in person at such meeting.
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QUORUM.
SECTION 3:5. Except as may be otherwise specifically provided by law, the
Certificate of Incorporation or these Bylaws, at all meetings of the Board, a
majority of the entire Board shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board. If a quorum shall not be
present at any meeting of the Board, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
COMMITTEES.
SECTION 3:6. The Board shall have the following committees: a
Compensation Committee and an Audit Committee. The Board may, by resolution
passed by a majority of the entire Board, designate one or more additional
committees. Each committee shall consist of three or more of the directors
of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board to act at the meeting in
the place of any absent or disqualified member. Any committee, to the extent
allowed by law and provided in the resolution establishing such committee,
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation. Each committee
shall keep regular minutes and report to the Board when required.
WAIVER OF NOTICE.
SECTION 3:7. Any notice which is required by law or by the Certificate of
Incorporation or by these Bylaws to be given to any director may be waived in
writing, signed by such director, whether before or after the time stated
therein. Attendance of a director at any meeting shall constitute waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
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CONSENT.
SECTION 3:8. Any action required or permitted to be taken at any meeting
of the Board (or of any committee thereof) may be taken without a meeting if all
members of the Board (or committee) consent thereto in writing, and the writing
or writings are filed with the minutes of the proceedings of the Board (or
committee).
NOTICE TO MEMBERS OF THE BOARD.
SECTION 3:9. Each member of the Board shall file with the Secretary of the
Corporation an address to which mail, by hand deliveries or overnight commercial
courier deliveries may be transmitted and, if appropriate, a telephone number to
which facsimile notices may be transmitted. A notice mailed, delivered by hand
or by overnight commercial courier (receipt requested) or transmitted by
facsimile (with confirmation receipt) in accordance with the instructions
provided by the director shall be deemed sufficient notice. Such address or
telephone number may be changed at any time and from time to time by a director
by giving written notice of such change to the Secretary. Failure on the part
of any director to keep an address and, if applicable, telephone number on file
with the Secretary shall automatically constitute a waiver of notice of any
regular or special meeting of the Board which might be held during the period of
time that such address and telephone number, if applicable, are not on file with
the Secretary. A notice shall be deemed to be mailed when deposited in the
United States mail, postage prepaid. A notice shall be deemed to be delivered
by hand or by overnight commercial courier or by facsimile transmission when
sent to the address or telephone number, as the case may be, which the director
has placed on file with the Secretary, and in the case of facsimile
transmission, when a confirmation receipt is received.
PRESIDING OFFICER.
SECTION 3:10. The Chairman of the Board shall preside at all meetings of
the Board at which the Chairman is present. In the absence of the Chairman, the
Board shall select a chairman of the meeting from among the directors present.
COMPENSATION.
SECTION 3:11. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board and may be paid a fixed sum for
attendance at each meeting of the Board or a stated retainer as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and
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receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
INTERESTED DIRECTORS.
SECTION 3:12. No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
Corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose if (i) the
material facts as to his or their relationship or interest and as to the
contract or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board or of a committee which authorizes the contract
or transaction.
ARTICLE IV: OFFICERS
APPOINTMENT.
SECTION 4:1. At the annual meeting of the Board following their election
by the stockholders, the directors shall elect from its membership a Chairman of
the Board and a President. The Board shall elect such Vice Presidents, a
Secretary, a Treasurer, Assistant Secretaries, Assistant Treasurers and such
other officers, as the Board may from time to time deem necessary or appropri-
ate.
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TENURE.
SECTION 4:2. Officers appointed by the Board shall hold their respective
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board; and all officers of the
Corporation shall hold office until their successors are chosen and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any officer appointed by the Board may be removed by the
Board with or without a hearing and with or without cause whenever in its
judgment the best interests of the Corporation will be served thereby.
SALARIES.
SECTION 4:3. The salaries of all officers of the Corporation shall be
fixed by the Board (or any committee thereof established for such purpose).
CHAIRMAN OF THE BOARD.
SECTION 4:4. The Chairman of the Board, if there be one, shall preside
at all meetings of the stockholders and of the Board. Either the Chairman of
the Board or the President shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the President is
required, the Chairman of the Board shall possess the same power as the
President to sign, with the Secretary (or Assistant Secretary) or Treasurer
(or Assistant Treasurer), certificates for the stock of the Corporation, and
all bonds, mortgages, contracts, and other instruments of the Corporation
which may be authorized by the Board or by such Chairman of the Board or by
the President. During the absence or disability of the President, the
Chairman of the Board shall exercise all the powers and discharge all the
duties of the President.
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PRESIDENT.
SECTION 4:5. The President shall have general supervision of the business
of the Corporation and shall see that all orders and resolutions of the Board or
the Chairman of the Board are carried into effect. The President may sign, with
the Secretary (or Assistant Secretary) or Treasurer (or Assistant Treasurer),
certificates for stock of the Corporation and execute all deeds, bonds,
mortgages, contracts and other instruments of the Corporation authorized by the
Board, by the Chairman of the Board or by such President, except where required
or permitted by law to be otherwise signed and executed and except that the
other officers of the Corporation may sign and execute documents when so
authorized by these Bylaws, the Board, the Chairman of the Board or the
President. In the absence or disability of the Chairman of the Board, or if
there be none, the President shall preside at all meetings of the stockholders
and the Board.
VICE PRESIDENTS.
SECTION 4:6. Each Vice President shall have such powers, duties and
designations as the Board (or any committee thereof established for such
purpose) assigns to such Vice President. In the absence or disability of the
President and the Chairman of the Board, the Vice Presidents, in the order
designated by the Board, shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President may also sign, with the Secretary (or
Assistant Secretary) or Treasurer (or Assistant Treasurer), certificates for
stock of the Corporation, and, when so authorized by the Chairman of the Board
or President, may also sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts or other instruments authorized by the Board, and
shall perform such other duties as from time to time may be assigned to any Vice
President by the Board.
SECRETARY.
SECTION 4:7. The Secretary shall attend all meetings of the Board and all
meetings of stockholders and record all the proceedings thereat in a book or
books to be kept for that purpose; the Secretary shall also perform like duties
for the standing committees when required. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board, and shall perform such other duties as may be prescribed by the Board
or the President, under whose supervision such Secretary shall be. If the
Secretary shall be unable
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or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board, and if there be no Assistant
Secretary, then either the Board or the President may choose another officer
to cause such notice to be given. The Secretary shall have custody of the
seal of the Corporation and the Secretary or any Assistant Secretary, if
there be one, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by the signature of the
Secretary or by the signature of any Assistant Secretary. The Board may give
general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by such officer's signature. The Secretary shall
see that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as
the case may be. In the absence of the Secretary from any meeting, the
minutes shall be recorded by the person appointed for that purpose by the
presiding officer.
TREASURER.
SECTION 4:8. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
the Board, at its regular meetings, or when the Board so requires, an account of
all transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board, the Treasurer shall give the Corporation a bond in
such sum and with such surety or sureties as shall be satisfactory to the Board
for the faithful performance of the duties of the office and for the restoration
to the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
OTHER OFFICERS.
SECTION 4:9. In accordance with Section 4:1, such other officers as the
Board may choose shall perform such duties and have such powers as from time to
time may be assigned to them by the Board. The Board may delegate to any other
officer of the Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
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ARTICLE V: CAPITAL STOCK AND DIVIDENDS
CERTIFICATES FOR SHARES.
SECTION 5:1. Every holder of stock in the Corporation shall be entitled to
have a certificate signed, in the name of the Corporation (i) by the Chairman of
the Board, the President or a Vice President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
Any or all of the signatures on a certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
TRANSFERS.
SECTION 5:2. Certificates representing shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the person or
persons named in the certificate or by the attorney lawfully constituted in
writing representing such person or persons and upon surrender of the
certificate or certificates being transferred which certificate shall be prop-
erly endorsed for transfer or accompanied by a duly executed stock power.
Whenever a certificate is endorsed by or accompanied by a stock power executed
by someone other than the person or persons named in the certificate, evidence
of authority to transfer shall also be submitted with the certificate. All
certificates surrendered to the Corporation for transfer shall be cancelled.
REGULATIONS GOVERNING ISSUANCE AND TRANSFERS OF SHARES.
SECTION 5:3. The Board shall have the power and authority to make all such
rules and regulations as it shall deem expedient concerning the issue, transfer
and registration of certificates for shares of stock of the Corporation.
TRANSFER AGENTS AND REGISTRARS.
SECTION 5:4. Transfer agents and registrars for the Corporation's stock
shall be banks, trust companies or other financial institutions located within
or without the State of Delaware as shall be appointed by the Board. The Board
shall also define the authority of such transfer agents and registrars.
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LOST OR DESTROYED CERTIFICATES.
SECTION 5:5. Where a certificate for shares of the Corporation has been
lost or destroyed, the Board may authorize the issuance of a new certificate in
lieu thereof upon satisfactory proof of such loss or destruction, and upon the
giving of an open penalty bond with surety satisfactory to the Corporation's
Treasurer and General Counsel, if there be one, to protect the Corporation or
any person injured by the issuance of the new certificate from any liability or
expense which it or they may incur by reason of the original certificate's
remaining outstanding, and upon payment of the Corporation's reasonable costs
incident thereto.
FRACTIONS OF SHARES.
SECTION 5:6. The Corporation shall not issue fractions of a share. It
shall, however, (1) arrange for the disposition of fractional interests by those
entitled thereto, and (2) pay in cash the fair value of fractions of a share as
of the time when those entitled to receive such fractions are determined, or (3)
issue scrip or warrants in registered or bearer form which shall entitle the
holder to receive a certificate for a full share upon the surrender of such
scrip or warrants aggregating a full share. Scrip or warrants shall not, unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, or to participate in any of the assets of the
Corporation in the event of liquidation. The Board may cause scrip or warrants
to be issued subject to the conditions that the shares for which scrip or
warrants are exchangeable may be sold by the Corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board may impose.
DETERMINATION OF STOCKHOLDERS.
SECTION 5:7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of the
State of Delaware.
RECORD DATE.
SECTION 5:8. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allot-
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ment or any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not
be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. If no record date is
fixed:
(1) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(2) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, HOWEVER, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VI: OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities of the Corporation,
other than stock certificates, may be signed by the Chairman of the Board, the
President or any Vice President, or such other person as may be authorized by
the Board, and the corporate seal impressed thereon or a facsimile of such seal
imprinted thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer, or such other person as
may be authorized by the Board; provided, however, that where any such bond,
debenture or other corporate security shall be authenticated by the signature of
a trustee under an indenture pursuant to which such bond, debenture or other
corporate securities shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate security
may be the imprinted facsimile of the signatures of such persons. Interest
coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the Corporation, or such other person as may be
authorized by the Board, or bear imprinted thereon the facsimile signature such
person. In case any person who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be an officer
before the bond, debenture or other corporate security so signed or
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attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the Corporation and issued and
delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of
the Corporation.
ARTICLE VII: INDEMNIFICATION
GENERAL INDEMNIFICATION.
SECTION 7:1. The Corporation shall indemnify to the fullest extent
authorized or permitted by law (as now or hereafter in effect) any person made,
or threatened to be made, a party to or otherwise involved in any action or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
he, his testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other Corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this Section 6:1 shall apply to or
have any effect on any right to indemnification provided hereunder with respect
to any acts or omissions occurring prior to such amendment or repeal.
INSURANCE, INDEMNIFICATION AGREEMENTS AND OTHER MATTERS.
SECTION 7:2. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another Corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of the law. The Corporation may
create a trust fund, grant a security interest and/or use other means
(including, without limitation, letters of credit, surety bonds and/or other
similar arrangements), as well as enter into contracts providing for
indemnification to the fullest extent authorized or permitted by law and
including as part thereof any or all of the foregoing, to ensure the payment of
such sums as may become necessary to effect full indemnification.
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NONEXCLUSIVITY.
SECTION 7:3. The rights to indemnification conferred in this Article VI
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, the Certificate of Incorporation of the Corporation,
these Bylaws or any agreement, vote of stockholders or directors or otherwise.
ARTICLE VIII: MISCELLANEOUS
VOTING SHARES IN OTHER CORPORATIONS.
SECTION 8:1. The Corporation may vote any and all shares of stock and
other securities having voting rights which may at any time and from time to
time be held by it in any other Corporation or Corporations and such vote may be
cast either in person or by proxy by such officer of the Corporation as the
Board may appoint or, in default of such appointment, the Chairman, the
President or a Vice President.
EXECUTION OF OTHER PAPERS AND DOCUMENTS.
SECTION 8:2. All checks, bills, notes, drafts, vouchers, warehouse
receipts, bonds, mortgages, contracts, registration certificates and all other
papers and documents of the Corporation shall be signed or endorsed for the
Corporation by such of its officers, other employees and agents as the Board may
from time to time determine, or in the absence of such determination, by the
Chairman of the Board, the President or a Vice President, PROVIDED that
instruments requiring execution with the formality of deeds shall be signed by
the Chairman of the Board, the President or a Vice President and impressed with
the Seal of the Corporation, duly attested by the Secretary or an Assistant
Secretary.
CORPORATE SEAL.
SECTION 8:3. The Board shall provide a suitable seal, containing the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware," which seal shall be in the custody of the Secretary of the
Corporation, and may provide for one or more duplicates thereof to be kept in
the custody of such other officer of the Corporation as the Board may prescribe.
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BOOKS AND RECORDS.
SECTION 8:4. Except as the Board may from time to time direct or as may be
required by law, the Corporation shall keep its books and records at its
principal office.
FISCAL YEAR.
SECTION 8:5. The fiscal year of the Corporation shall be fixed by
resolution of the Board.
AMENDMENTS.
SECTION 8:6. These Bylaws may be amended, altered or repealed, or new
Bylaws may be adopted (a) by the affirmative vote of eighty percent of the
outstanding stock of the Corporation entitled to vote thereon, or (b) by the
affirmative vote of the majority of the Board at any regular or special
meeting; PROVIDED that the notice of such meeting of stockholders or
directors, whether regular or special, shall specify as one of the purposes
thereof the making of such amendment, alteration or repeal.
21
<PAGE>
PAR VALUE OF $.01 PAR VALUE OF $.01
NUMBER SHARES
CF_____ ______
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CONSOLIDATED FREIGHTWAYS CORPORATION
CUSIP 209232 10 7
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
is the registered owner of shares
OF THE FULLY PAID AND NON-ASSESSABLE COMMON STOCK OF
Consolidated Freightways Corporation, transferable on the books of said
Corporation in person or by attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
Witness the signatures of its duly authorized officers.
Dated:
- -------------------------- -----------------
VICE PRESIDENT AND SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
A full statement of the rights, preferences, privileges, and
restrictions granted to or imposed upon the respective classes of shares of
the Corporation, including the Common Stock, ownership of which is
represented by this Certificate, and the Preferred Stock, and upon the
respective holders thereof, may be obtained by any shareholder upon request
and without charge from the Secretary of the Corporation, at the principal
office of the Corporation. The following is only a summary of certain of
these rights, preferences and restrictions.
1. Each share of Common Stock is entitled to one vote on all matters
submitted to a vote of the holders of shares entitled to vote as set forth
in the Articles of Incorporation.
2. The Board of Directors has the authority to fix the number of shares
of any series of Preferred Stock, to determine the designation of such series
and to determine or alter the rights, preferences, privileges and
restrictions upon any wholly unissued series of Preferred Stock.
_____________________________________________________________________
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -______Custodian______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under Uniform Gifts to Minors
right of survivorship and
not as tenants in common Act__________________________
(State)
Additional abbreviations may also be used though not in the above list.
_______________________________________________________________________
For Value Received, ________________________________________ hereby
sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
| |
|_____________________________________|________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of capital stock represented by the within Certificate, and does hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated __________________________________
_______________________________________
Dated __________________________________
_______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
<PAGE>
FORM OF
TRANSITION SERVICES AGREEMENT
between
CNF SERVICE COMPANY, INC.
and
CONSOLIDATED FREIGHTWAYS CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 SERVICES TO BE PROVIDED
Section 1.1 General Description; Provision of
Services; Volume Discounts. . . . . . . . . . . . . . . . . 2
Section 1.2 Performance Levels. . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Instructions. . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.4 Consents; Indemnification; Assets . . . . . . . . . . . . . 3
Section 1.5 Systems Availability and Data
Integrity . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.6 Systems Users . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2 PAYMENT FOR SERVICES
Section 2.1 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Invoices; Payment Procedures . . . . . . . . . . . . . . . . 6
Section 2.3 Disputed Fees. . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 TERM; TERMINATION OF SERVICES
Section 3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Termination of Services. . . . . . . . . . . . . . . . . . . 8
ARTICLE 4 COOPERATION
Section 4.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Provider Administrative Records. . . . . . . . . . . . . . . 9
Section 4.3 Periodic Review of Services. . . . . . . . . . . . . . . . . 9
ARTICLE 5 FORCE MAJEURE
Section 5.1 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6 CONFIDENTIALITY
Section 6.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE 7 MISCELLANEOUS
Section 7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 7.2 Severability . . . . . . . . . . . . . . . . . . . . . . . .13
Section 7.3 Binding Effect; Assignment . . . . . . . . . . . . . . . . .13
Section 7.4 No Third Party Beneficiaries . . . . . . . . . . . . . . . .13
Section 7.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . .13
Section 7.6 Jurisdiction and Consent to Service. . . . . . . . . . . . .13
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<PAGE>
Section 7.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . .14
Section 7.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .14
Section 7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .14
Section 7.10 Relationship of the Parties . . . . . . . . . . . . . . . .14
Section 7.11 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 7.12 Sole Remedy; No Damages . . . . . . . . . . . . . . . . . .15
Section 7.13 Indemnification . . . . . . . . . . . . . . . . . . . . . .15
ii
<PAGE>
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT ("Agreement") dated as of
__________ __, 1996, by and between CNF Service Company, Inc., a
corporation organized under the laws of the State of Delaware
(together with its wholly owned subsidiaries, "Provider"), and
Consolidated Freightways Corporation, a corporation organized under
the laws of the State of Delaware (together with its wholly owned
subsidiaries, "Recipient").
W I T N E S S E T H
WHEREAS, Provider is a wholly owned subsidiary of
Consolidated Freightways, Inc., a Delaware corporation ("CFI");
WHEREAS, pursuant to that certain Distribution Agreement dated as
of the date hereof (the "Distribution Agreement"), all of the shares of
common stock of Recipient are being distributed (the "Distribution") to the
stockholders of CFI;
WHEREAS, prior to the Distribution, Leland James Service
Corporation, a Delaware corporation ("LJSC") provided services to
Consolidated Freightways Corporation of Delaware ("CFCD"), the
principal operating subsidiary of Recipient;
WHEREAS, in connection with the Distribution, certain
service capabilities of LJSC are being transferred to Provider;
WHEREAS, in order for Recipient to operate CFCD effectively
in a transition period following the consummation of the Distribution,
Recipient desires to enter into certain arrangements with Provider
with respect to the performance of certain transition services;
WHEREAS, Provider is willing to enter into such transition
arrangements on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
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<PAGE>
ARTICLE 1
SERVICES TO BE PROVIDED
Section 1.1 GENERAL DESCRIPTION; PROVISION OF SERVICES; VOLUME
DISCOUNTS. (a) The purpose of this Agreement is to set forth the terms upon
which Recipient is to receive certain services from Provider on an interim
basis after the Distribution on the terms and subject to the conditions
herein (the "Services").
(b) Pursuant to the terms and conditions of this Agreement,
Provider shall provide, and Recipient shall purchase, the Services as
described in Exhibit A hereto.
(c) In addition, each party shall provide to the other all
information (including, without limitation, discount account numbers)
necessary for the other party to (i) make purchases on its own account and
(ii) where applicable, receive the discounts formerly available under the
agreements identified on Exhibit B hereto (except to the extent that (A) the
other party thereto shall object and (B) any such agreement does not permit),
until such time as those agreements expire or are replaced or this Agreement
expires, but in no event later than the third anniversary of the date hereof.
Recipient shall indemnify and hold harmless Provider against all Losses and
Liabilities (as defined in that certain Distribution Agreement by and between
CFI and Recipient (the "Distribution Agreement")) incurred by Provider and
arising from false or misleading information provided by Recipient, such
indemnification to be provided in a like manner to the provision of
indemnification under the Distribution Agreement.
Section 1.2 PERFORMANCE LEVELS. In providing the Services,
Provider shall perform according to the performance levels maintained by LJSC
in the past; or, should any instance arise in which none of such performance
levels applies, Provider shall act to substantially the same extent, in
substantially the same manner and with substantially the same degree of care
and diligence as LJSC would have acted, prior to the Distribution, if it had
provided such Services to CFCD. Each Service shall be provided priority no
less favorably than in the
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<PAGE>
past, consistent with past practices and without discrimination against
recipient.
Section 1.3 INSTRUCTIONS. The parties agree that the Services
provided by Provider shall be essentially ministerial in nature so that
Provider shall, in all matters requiring the exercise of discretion, follow
Recipient's instructions, which shall be promptly provided to Provider by
Recipient to the extent requested by Provider and which may be requested in
writing. With respect to post-Distribution occurrences for which Provider is
to perform Services as set forth in numbers 23, 24, 25, 26, 30 and 37 on
Exhibit A, the parties agree that Provider shall be under no obligation to
perform any (or any part of) such Services without clear, written
instructions from Recipient. Notwithstanding the foregoing, Provider shall
not be required to follow any such instructions that, in Provider's
reasonable judgment, are inconsistent with the proper performance of its
responsibilities, or that require the exercise of discretion, including
without limitation the making of decisions regarding the hiring or firing of
employees.
Section 1.4 CONSENTS; INDEMNIFICATION; ASSETS. (a) If the
provision of any of the Services by Provider to Recipient would place CFI,
Provider or any other subsidiary of CFI in violation or breach of any
contract or license between any such entity and any third party, then
Recipient and Provider shall use their respective commercially reasonable
efforts, with all costs thereof to be borne by Recipient to obtain forthwith
any consent required for Provider to provide such Services to Recipient, and
Recipient shall indemnify and hold harmless Provider against all Losses and
Liabilities relating to any claims arising from any such alleged violation or
breach. If, after the exercise of such efforts, such consent cannot be
obtained, Provider shall use commercially reasonable efforts to provide
Recipient with functionally equivalent Services with any additional costs
required in providing such Services to be borne by Recipient. Recipient
shall indemnify and hold harmless Provider against all Losses and Liabilities
which arise from or in any way relate to (i) the use of any software or
hardware provided by Recipient or (ii) the use of any software or hardware in
connection with the performance of the Services hereunder provided by
Recipient. Notwithstanding anything to the contrary hereunder, this Section
shall not apply to the agreement of Recipient and Provider's parent company
as provided in Section 3.1(g) of the Distribution Agreement.
(b) The provision of Services by Provider shall include all
costs, including but not limited to, personnel (including fringe benefits and
management fees
3
<PAGE>
relating thereto), computer hardware, computer time, printers, voice and data
telecommunications equipment, file cabinets, paper files, administrative
records, photocopies, incidental costs and all other assets owned by Provider
after the Distribution which are needed in connection with the provision of
such Services on a routine and non-routine basis and during peak and non-peak
periods; PROVIDED, that any such equipment may be replaced from time to time
by Provider with functionally equivalent or upgraded equipment.
(c) (i) All data, software or other property or assets owned or
created by Recipient (other than the intellectual property rights which
Recipient has acknowledged to be vested in CFI pursuant to Section 3.1(f) of
the Distribution Agreement) shall remain the sole and exclusive property and
responsibility (including, without limitation, with respect to maintenance,
modification and upgrade) of Recipient. Provider shall not acquire any
rights in any such data, software or other property or assets, including any
derivative works of Recipient-owned software or data created by Provider,
pursuant to this Agreement or Provider's performance hereunder.
(ii) All data, software or other property or assets which
are owned by Provider, including without limitation derivative works thereof
and new data or software created by Provider at Provider's expense pursuant
to the provision of Services ("Provider Software") shall be the sole and
exclusive property and responsibility (including, without limitation, with
respect to maintenance, modification and upgrade) of Provider and any
interest of Recipient therein shall be limited to the Licensed Materials (as
defined in the Distribution Agreement). Recipient shall not acquire any other
rights in any such data, software or other property or assets pursuant to
this Agreement or Recipient's performance hereunder.
(d) If as a result of unanticipated events or conditions,
Recipient reasonably determines that it requires modification of any of the
Services, Provider shall so modify the Services (i) to the extent
commercially reasonable, (ii) to the extent such modifications do not
adversely affect Provider's ability to maintain its computer systems in
connection with its
4
<PAGE>
continuing business, and (iii) at Recipient's sole cost and expense subject
to Recipient's approval of Provider's estimate. Recipient shall have
exclusive ownership rights to any software changes or additions it pays for.
(e) Provider shall provide all support and assistance reasonably
requested by Recipient, at an arm's-length, negotiated price, but no more
than a commercially reasonable price, in connection with the transfer of any
and all Services from Provider to Recipient or any of its affiliates or an
alternative third-party service provider selected by Recipient. Specifically,
upon the request of Recipient, during the term of this Agreement, Provider
shall deliver to Recipient (or as directed by Recipient), at the Recipient's
request and without interrupting the operations of Provider or its
affiliates, all data and programs proprietary to Recipient or licensed by
Recipient from third party vendors, and all backup or archival copies thereof
(or any part thereof as specified by Recipient), in hard copy, electronic,
magnetic or any other form which is then in Provider's possession or control,
as requested by Recipient, and copies of all material licensed pursuant to
Section 3.1(f) of the Distribution Agreement by Recipient from Provider (with
reasonable instructions for the installation and use thereof).
Section 1.5 SYSTEMS AVAILABILITY AND DATA INTEGRITY. Provider
shall maintain, consistent with past practices, operational recovery
procedures to insure the availability of systems and the integrity of data
relating to the Services at all times. In the event of the unavailability of
any such systems or the loss or destruction of any such data, Provider shall
use commercially reasonable efforts consistent with past practices to restore
such systems and recover or replace such data as quickly and completely as
possible.
Section 1.6 SYSTEMS USERS. In each case as it relates to
Recipient's employees, consultants, affiliates or authorized customers during
the term of this Agreement the addition or deletion of authorized users
("Users"), including persons authorized at the application-level or
system-level, in regard to any computer system, the modification of computer
system authority or access granted to any person, and the control generally
of access to and use of computer systems, is to be at the direction of
5
<PAGE>
Recipient, and Provider shall permit no changes in such access or use without
prior written notice to and consent from Recipient. No User will be allowed
system authority or access greater than at the application level without the
prior written consent of Provider. Each party shall indemnify and hold
harmless the other against all degradations in performance levels caused by
users authorized for system level access, such indemnification to be provided
in a like manner to the provision of indemnification under the Distribution
Agreement.
ARTICLE 2
PAYMENT FOR SERVICES
Section 2.1 COSTS. The prices charged for the Services shall
initially be those set forth in Exhibit A, which have been negotiated on an
arm's length basis (the "Service Fees"). The Service Fees shall be adjusted
every 6 months (such adjustment to be determined on a basis consistent with
the historical prices for such Services), except that the Service Fees for
the first 12-month period shall be as indicated on Exhibit A and Provider
shall, not less than six months before any proposed increase in Service Fees,
provide Recipient with details of any proposed increase and justification
therefor. The Parties shall negotiate in good faith to reach an agreement
within 30 days. Recipient shall not be charged a fee for any improvements or
upgrades to facilities or equipment without its prior written consent.
Section 2.2 INVOICES; PAYMENT PROCEDURES. (a) Not later than 30
days after the end of each calendar month Provider shall send Recipient an
invoice that includes a detailed breakdown of all Service Fees for such
month. All invoices shall be sent to: Consolidated Freightways Corporation,
attention: Controller, mailing address: 175 Linfield Drive, Menlo Park, CA
94025. All payments of such invoices shall be made by wire transfer or
interbank transfer in immediately available funds to Provider's account at
such banks as Provider shall designate to Recipient in writing and shall be
made within 15 days after the date of receipt of any invoice.
(b) Notwithstanding any other provision hereof, (i)
Recipient shall reimburse Provider for each
6
<PAGE>
payroll paid by Provider to the employees of the Recipient for the period
contemplated above, and (ii) Recipient shall provide each such reimbursement
by wire transfer of immediately available funds on the day prior to the
issuance of that payroll to such employees. For purposes of this Agreement,
"payroll" shall mean gross payroll (including all taxes) less deductions from
payroll which are paid directly by the Recipient, as set forth on Schedule
2.2(b).
Section 2.3 DISPUTED FEES. In the event that Recipient and
Provider have a good faith dispute with respect to the amount of payment for
Services actually rendered (other than with respect to the underlying
schedule of fees for Services generally), Recipient shall withhold payment
only of any unpaid amount in dispute, and shall deliver to Provider promptly
(and within 15 days following receipt of any invoice from Provider that is
the basis of such dispute) a written statement describing the dispute, which
statement shall provide a reasonably detailed breakdown of the disputed
payment amounts. The parties agree to use their best efforts to resolve any
such dispute hereunder within 15 days following Provider's receipt of
Recipient's statement describing the dispute. In the event the parties
cannot resolve the dispute within such time period, each discrepancy or
disagreement which cannot be so resolved shall be submitted to a firm of
nationally recognized independent certified public accountants (agreed upon
by Provider and Recipient), who shall promptly deliver a report setting forth
their calculation of each item that was the subject of discrepancy or
disagreement, which report shall be final and binding on the parties. The
fees and expenses of such firm shall be borne one-half by Provider and
one-half by Recipient and each party shall bear its own other expenses in
connection therewith.
ARTICLE 3
TERM; TERMINATION OF SERVICES
Section 3.1 TERM. (a) The term of this Agreement shall
commence on the date hereof and shall continue in effect until the close of
business on the third anniversary of the date hereof.
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<PAGE>
(b) Notwithstanding anything to the contrary in this
Agreement, the provisions of Articles 5 and 6 and Sections 1.1(c), 1.4(a),
1.6, 2.1, 4.2, 7.6, 7.7, 7.8, 7.11, 7.12 and 7.13 shall survive any
termination of this Agreement or the provision of Services hereunder.
Section 3.2 TERMINATION OF SERVICES. Recipient may at any time,
upon six months' irrevocable written notice to Provider, terminate all the
Services or any Service (or any portion thereof) on a Service by Service
basis. Provider may, at any time after the first anniversary of the date
hereof, terminate any or all of the Services identified as numbers _____ on
Exhibit A on six months' irrevocable written notice to Recipient; provided,
however, Recipient shall be entitled to continue receiving the
telecommunication and data processing services through the third anniversary
date in its sole discretion. The provision of all Services pursuant hereto
shall in any event terminate on or prior to the third anniversary of the date
hereof. Upon termination of any Service, all administrative records (which
term is not to be construed to include Provider Software) relating to that
Service as such records relate solely to Recipient which have not already
been transferred to the sole possession of Recipient shall be so transferred,
it being understood that Provider may retain copies of such records.
ARTICLE 4
COOPERATION
Section 4.1 COOPERATION. Each of the parties shall cooperate
with and provide assistance to the other consistent with the terms and
conditions hereof (including, without limitation, any limitations relating to
software) to enable (i) the full performance of all obligations hereunder,
(ii) the review and audit of books and administrative records as they relate
to the provision of Services, and (iii) Recipient, or any of its affiliates
or third party service provider, to assume the performance of any and all
Services upon termination or prior thereto; such cooperation and assistance
to include without limitation providing the other party, its representatives
and its agents (including, without limitation, its outside auditors) with
reasonable access, during
8
<PAGE>
normal business hours and upon reasonable advance notice, to its employees,
representatives and agents and its books, administrative records, offices and
properties relating to the Services. Nothing in this section 4.1 shall
operate to grant any right to Recipient of Provider-owned software, data or
other intellectual property.
Section 4.2 PROVIDER ADMINISTRATIVE RECORDS. Provider shall
keep administrative records regarding the provision of Services as LJSC has
kept records for itself regarding such Services prior to the Distribution,
and for each Service shall retain such records for a period of twelve months
following the cessation of Provider's provision of that Service to Recipient.
Recipient, its agents and representatives shall have reasonable access
during normal business hours and upon reasonable advance notice to such
records (which term is not to be construed to include Provider Software) from
the date hereof through the end of the period for retaining such records
pursuant to this Section 4.2.
Section 4.3 PERIODIC REVIEW OF SERVICES. From time to time
during the term of this Agreement, but not less frequently than once each
month, the parties shall meet and discuss the nature, quality, and level of
Services covered by this Agreement, any concerns either party may have in
regard to such matters, and any amendments either party may wish to make to
the Services specified in Exhibit A.
ARTICLE 5
FORCE MAJEURE
Section 5.1 FORCE MAJEURE. Each party shall be relieved of its
obligations hereunder if and to the extent that any of the following events
or conditions directly or indirectly hinder, limit or make impracticable the
performance by that party of any of its obligations hereunder: Act of God,
war, riot, fire, earthquake, explosion, flood, sabotage, national defense
requirement, strike, lockout, job action, injunction, act or order of a
governmental agency or instrumentality thereof (whether of fact or law), act
of a public enemy, embargo or other concerted act of workers,
telecommunications failures or electrical failures; PROVIDED that Provider
shall contin-
9
<PAGE>
ue to have in place at all times disaster recovery procedures consistent with
past practices of LJSC regarding CFCD to enable rapid recovery from any such
event or condition. Such procedures may be subject to revision by Provider
from time to time as may be required in the ordinary course of business,
PROVIDED, that such revisions do not adversely affect the levels of
protection afforded by such procedures. Prior to being relieved of any
obligations hereunder Provider shall have used commercially reasonable
efforts (consistent with past practices) to remove or otherwise address the
effects of any such event or condition as soon as practicable. Recipient
shall be liable for all costs incurred by Provider in connection with any
Service that Provider fails to complete and provide as a result of any such
event or condition.
ARTICLE 6
CONFIDENTIALITY
Section 6.1 CONFIDENTIALITY. The parties acknowledge that in
connection with the provision of Services hereunder, each may gain access to
confidential and proprietary information regarding the other's financial and
business affairs (hereinafter "Confidential Information" or "Information").
Each party hereby agrees to use commercially reasonable efforts to:
(a) confine its access to and examination of
Confidential Information to the minimum Information necessary to
enable Provider to provide the Services hereunder and Recipient to
operate its business;
(b) limit access to such Information only to those
individuals who reasonably need to receive such access to enable
Provider to provide the Services hereunder and Recipient to operate
its business;
(c) inform such individuals of the confidential nature
of such Information and take all reasonable steps to secure the
compliance of such individuals with the terms of this Article 6;
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<PAGE>
(d) use such Information solely to enable Provider to
provide the Services hereunder and Recipient to operate its
business;
(e) keep such Information confidential and not disclose
it to any third party in any manner except as may be required by law
or court order; and
(f) provide the other party with reasonable access to
that party's employees, representatives and agents and its books and
administrative records relating to the relevant business (including,
without limitation, any and all computer access reports and security
access reports) in order for the other party to monitor compliance
with this Article 6.
Notwithstanding the foregoing, disclosures of Information may be
made to third parties: (i) with the prior written consent of the party whose
Information it is, (ii) if the Information is in the public domain and has
entered the public domain through no fault of the party seeking to make such
disclosure or its affiliates or representatives, (iii) if the Information is
lawfully acquired by the party seeking to make such disclosure or its
affiliates or representatives from sources other than the party whose
Information it is or its affiliates or representatives and none of the party
seeking to make such disclosure, its affiliates or its representatives is
aware that such source was under any obligation (whether contractual, legal
or fiduciary) to the party whose Information it is or any of its affiliates
or representatives to keep such Information confidential or (iv) to the
extent disclosure is compelled by law or court order. Each party shall be
responsible for any breach of this Article 6 caused by itself or any of its
employees, agents or representatives. Anything contained herein to the
contrary notwithstanding, the parties acknowledge and agree that irreparable
damage would occur in the event that any provision of this Article 6 was not
performed in accordance with its terms, and that the parties shall be
entitled to specific performance as the sole remedy.
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<PAGE>
ARTICLE 7
MISCELLANEOUS
Section 7.1 NOTICES. All notices, requests, demands, consents,
waivers and other communications required or permitted to be given under this
Agreement (excluding invoices as described in Section 2.2 above) shall be in
writing and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such
party or other person as shall be specified by notice given hereunder):
If to Provider to:
CNF Service Company, Inc.
1717 N.W. 21st Avenue
Portland, OR 97209
Attention: Controller
Fax No.:
with a copy to:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, CA 94304
Attention: General Counsel
Fax No.: (415) 494-8372
If to Recipient to:
Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attention: General Counsel
Fax No.:
All such notices, requests, demands, waivers and communications
shall be deemed received upon (i) actual receipt thereof by the addressee or
(ii) actual delivery thereof to the appropriate address.
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Section 7.2 SEVERABILITY. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such
declaration shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which other provisions shall remain in
full force and effect and the application of such invalid or unenforceable
provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable shall be valid and enforced to the fullest
extent permitted by law.
Section 7.3 BINDING EFFECT; ASSIGNMENT. This Agreement and all
of the provisions hereof shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, including, without
limitation, by operation of law, by any party hereto without the prior
written consent of the other party hereto; PROVIDED, (i) that either of the
parties hereto may without such prior written consent transfer or assign its
rights hereunder to one or more of its affiliates, but no such transfer
arrangement shall release the transferring party of its obligations hereunder
and (ii) that Provider may subcontract to any party so long as Provider
remains liable for the performance of Services provided by any such
subcontractor.
Section 7.4 NO THIRD PARTY BENEFICIARIES. This Agreement is
solely for the benefit of the parties and their respective successors and
permitted assigns, and shall not be deemed to confer upon or give to any
other party any remedy, claim, liability, reimbursement, cause of action or
other right.
Section 7.5 INTERPRETATION. The section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 7.6 JURISDICTION AND CONSENT TO SERVICE. In accordance
with the laws of the State of Oregon, and without limiting the jurisdiction
or venue of any other court, the parties (a) agree that any suit, action or
proceeding arising out of or relating to this
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Agreement (other than proceedings arising under Section 2.3 above with
respect to the amount of payment for Services) shall be brought solely in the
state or federal courts of Oregon; (b) consent to the exclusive jurisdiction
of each such court in any suit, action or proceeding relating to or arising
out of this Agreement; (c) waive any objection which any of them may have to
the laying of venue in any such suit, action or proceeding in any such court;
and (d) agree that service of any court paper may be made in any manner as
may be provided under the applicable laws or court rules governing service of
process in such court.
Section 7.7 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof,
and supersedes all other prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof. Any
conflicts between the language herein and the language used in the
Distribution Agreement shall be resolved in favor of the language used herein.
SECTION 7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON (REGARDLESS
OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED TO
MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, PERFORMANCE AND REMEDIES.
Section 7.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 7.10 RELATIONSHIP OF THE PARTIES. Provider and
Recipient each acknowledge that they are separate entities, each of which has
entered into this Agreement for independent business reasons. Except as
provided below in this Section 7.10, the relationship of Provider to
Recipient hereunder is that of an independent contractor and nothing herein
shall be deemed or construed to create a relationship of partnership,
employment, agency, joint venture, or any other relationship. Except as
provided below in this Section 7.10, neither party shall transact any
business in the name of the other party or obligate or commit the other party
in any
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manner. In recognition of the fact that some of the Services to be provided
by Provider pursuant to this Agreement will require that personnel employed
by Provider engage in business dealings with customers, vendors, or others
with whom Recipient does business and that it is to Recipient's advantage for
such business dealings to be conducted on behalf of and in the name of
Recipient, Recipient may authorize Provider to use any of its names, whenever
(a) necessary or appropriate in providing Services or other assistance
hereunder and (b) Recipient explicitly so instructs Provider, in writing.
Recipient shall indemnify and hold harmless Provider against all Losses and
Liabilities incurred by Provider and arising from this Section 7.10, such
indemnification to be provided in a like manner to the provision of
indemnification under the Distribution Agreement.
Section 7.11 WAIVER. Any failure by either party to comply with
any obligation, covenant or agreement herein or to fulfill any condition
herein may be waived only by a written notice from the party entitled to the
benefits thereof. No failure by either party hereto to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder preclude any
other or future exercise of that right or any other right hereunder by that
party.
Section 7.12 SOLE REMEDY; NO DAMAGES. If Recipient becomes
dissatisfied with the quality or level of Services provided hereunder, its
sole remedy shall be termination of all or a part of the Services without
right to seek actual, compensatory or consequential damages.
Section 7.13 INDEMNIFICATION. Recipient, at its own expense,
shall indemnify, defend and hold Provider, its subsidiaries and their present
or former officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents, affiliates, insurers,
attorneys and assigns (collectively, the "Indemnified Parties") harmless from
and against any claims, judgments, losses, deficiencies, damages, punitive or
exemplary damages, fines or penalties, liabilities, costs and expenses
(including reasonable attorneys' fees, charges and disbursements) whether
required to be paid to
15
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a third party or otherwise incurred in connection with or arising from any
claim, suit, action or proceeding ("Claim") against the Indemnified Party to
the extent the basis of such Claim is that: (i) Recipient has failed to pay
any amounts owed to third parties in connection with the Services provided by
Provider under this Agreement; (ii) a third party has been or may be injured
or damaged in any way by any breach of Recipient of any of its duties,
representations or warranties under this Agreement; (iii) Recipient or any of
its employees, agents, or services acted improperly in connection with the
notification, investigation, adjustment or settlement of claims and losses
arising out of the Services described in Exhibit A, and (iv) there is any
other liability or obligation arising out of Provider's administration or
operation of the Services or functions described in Exhibit A, except to the
extent that same arises from the gross negligence or willful misconduct of
Provider. The provision of indemnification under this Section 7.13 shall be
in a like manner to the provision of indemnification under the Distribution
Agreement.
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IN WITNESS WHEREOF, the parties have each caused this
Agreement to be executed by its duly authorized representative as of
the day and year first above written.
CNF SERVICE COMPANY, INC.
on behalf of itself and its
wholly owned subsidiaries
By: _________________________
Name:
Title:
CONSOLIDATED FREIGHTWAYS
CORPORATION
on behalf of itself and its
wholly owned subsidiaries
By: ________________________
Name:
Title:
17
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FORM OF
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT (the "Agreement") dated as of
, 1996, by and between Consolidated Freightways Corporation, a
Delaware corporation (the "Company"), and Consolidated Freightways, Inc., a
Delaware corporation ("CFI").
RECITALS
This Agreement is made pursuant to the Distribution Agreement
("Distribution Agreement") dated as of , 1996 between the
Company and CFI. Each term used herein which is defined in the Distribution
Agreement shall have the same meaning when used herein as it is given in the
Distribution Agreement.
The Company and CFI have determined that it is necessary and desirable
to agree on the procedures described in this Agreement as the sole and exclusive
method for them to resolve any and all disputes which have arisen prior to the
distribution (the "Distribution") to the shareholders of CFI of the shares of
the Company or which may from time to time arise under the Transaction Documents
(as herein defined), and claims which either party may have from time to time
against the other as a result of the Transaction Documents or in any way related
to the Distribution whether such disputes or claims are based on a breach of one
party or its obligations under the Transaction Documents or disagreement between
the parties as to the meaning or application of the Transaction Documents or in
any manner related to or arising out of the Distribution (any such dispute or
claim, a "Dispute").
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
As used in this Agreement, the following terms shall have the
following meaning (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
AMOUNT IN CONTROVERSY: the monetary value of any Dispute plus the
monetary value of any future Dispute which could reasonably arise under the
provision at issue.
CPR: the Center for Public Resources, Inc.
CPR REGIONAL OFFICE: the office of the CPR located closest to Palo
Alto, California, or such other office of the CPR as the parties hereto may
agree.
<PAGE>
DEMAND: a written demand for arbitration under Article IV of this
Agreement which shall contain a statement setting forth the nature of the
Dispute, the Amount in Controversy and such other information as may be required
under the CPR Rules for Non-Administered Arbitration of Business Disputes as in
effect from time to time (the "Arbitration Rules").
DISPUTE: as defined in the recitals to this Agreement.
REQUEST: a written request for mediation under Article III of this
Agreement which shall contain a brief statement of the nature of the Dispute and
such other information as may be required under the then current CPR Model
Procedure for Mediation of Business Disputes (the "Mediation Rules").
TRANSACTION DOCUMENTS: the Distribution Agreement, the Other
Agreements and the other agreements referred to in Section 3.4 of the
Distribution Agreement.
ARTICLE II
RESOLUTION OF DISPUTES
All Disputes which cannot be resolved by the parties through good
faith negotiation and consultation within sixty (60) days after either party
shall have notified the other of such Dispute shall first be submitted to
mediation pursuant to Article III hereof and the Mediation Rules and such other
rules of procedure as the parties may agree; provided that, in the event of a
conflict between Article III and the Mediation Rules, Article III shall govern.
If a Dispute cannot be resolved through mediation, then such Dispute shall be
submitted to binding arbitration pursuant to Article IV hereof and the Arbi-
tration Rules and such other rules of procedure as the parties may agree;
provided that, in the event of a conflict between Article IV and the Arbitration
Rules, Article IV shall govern.
ARTICLE III
MEDIATION
Section 3.1 REQUEST FOR MEDIATION. Either party to a Dispute may
initiate mediation by filing a Request (along with any copies thereof that may
be required under the Mediation Rules) and a copy of this Agreement with the CPR
Regional Office and by delivering a copy of the Request to the other party.
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<PAGE>
Section 3.2 APPOINTMENT OF MEDIATOR. Unless the parties otherwise
agree in writing, the CPR shall appoint a single mediator from the CPR Panel of
Neutrals.
Section 3.3 DATE, TIME AND PLACE. Unless the parties otherwise agree
in writing, all mediation proceedings shall take place in Palo Alto, California.
The date, time and place of each mediation session shall be determined by
agreement of the parties or, if the parties cannot agree within a reasonable
period of time, by the mediator; provided that the first such session shall be
held within fifteen (15) days of the date on which the mediator is appointed.
Section 3.4 TERMINATION. The mediation proceedings shall be
terminated upon the happening of any of the following: (i) by execution of a
settlement agreement by the parties; (ii) by written declaration of the mediator
that further efforts at mediation are no longer worthwhile; or (iii) by written
declaration of one or both parties that the mediation proceedings are
terminated. A written declaration hereunder shall not terminate the mediation
proceedings until notice thereof has been given to the parties, or to the other
party, as appropriate, in accordance with Section 5.4 hereof.
ARTICLE IV
ARBITRATION
Section 4.1 INITIATING ARBITRATION. Either party to a Dispute that
has not been settled or resolved through mediation may initiate arbitration by
filing a Demand and a copy of this Agreement (along with any copies thereof that
may be required under the Arbitration Rules) with the CPR Regional Office within
sixty (60) business days following the termination of the mediation proceedings
and by delivering a copy of the Demand to the other party. Failure to file a
Demand within such period shall constitute an absolute bar to the institution of
any proceedings with respect to such Dispute and a waiver of all claims related
thereto.
Section 4.2 APPOINTMENT OF ARBITRATORS. Unless the parties otherwise
agree in writing, a Dispute subject to this Article IV shall be heard by a panel
of three (3) arbitrators who shall be appointed according to the procedure
contemplated by Rule 6 of the Arbitration Rules.
Section 4.3 ABSENCE OF CONFLICTS. No person shall serve as an
arbitrator in any Dispute in which the person has any financial or personal
interest, except by the written consent of both parties.
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<PAGE>
Section 4.4 DATE, TIME AND PLACE. Unless the parties otherwise agree
in writing, all arbitration proceedings shall take place in Palo Alto,
California. The date, time and place of each hearing shall be determined by
agreement of the parties or, if the parties cannot agree within a reasonable
period of time, by the arbitration panel or sole arbitrator (each an "Arbitra-
tor"), as appropriate. The first such hearing shall be held as soon as
practicable following appointment of the Arbitrator(s), but in no event more
than one (1) year after such appointment. Each arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the
award rendered by the Arbitrator(s) may be entered by any court having
jurisdiction thereof.
Section 4.5 AWARD. The Arbitrator(s) may grant any remedy or relief
that the Arbitrator(s) deem just and equitable including, but not limited to,
injunctive relief, judgment interest, attorneys' fees and specific performance;
PROVIDED, HOWEVER, that the Arbitrator(s) shall not be authorized to award
punitive damages.
ARTICLE V
MISCELLANEOUS
Section 5.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the
Transaction Documents and other agreements and documents referred to therein
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
Section 5.2 SURVIVAL OF AGREEMENTS. All covenants and agreements of
the parties contained in this Agreement shall survive the Distribution Date.
Section 5.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to the principles of conflicts of law thereof.
Section 5.4 NOTICE. All notices and other communications required or
permitted to be given or made under this Agreement shall, unless otherwise
provided herein or in the applicable CPR rules, be in writing and shall be
deemed to have been given (i) on the date of personal delivery, or (ii) provided
such notice or communication is actually received by the party to which it is
addressed in the ordinary course of delivery, on the date of (A) deposit in the
United States mail, postage prepaid, by registered or certified mail, return
receipt requested, (B) transmission by telegram, cable, telex or facsimile
transmission, or (C) delivery to a nationally recognized overnight courier
service, in each case addressed
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<PAGE>
as set forth below, or to such other person, entity or address as either
party shall designate by notice to the other in accordance herewith:
To the Company: Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, California 94025
Attention: General Counsel
To CFI: Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, CA 94204
Attention: General Counsel
Section 5.5 WAIVER. No waiver by any party of any of the provisions
of this Agreement will be deemed, or will constitute, a waiver of any other
provision, whether similar, nor will any waiver constitute a continuing waiver.
No waiver will be binding unless executed in writing by the party making the
waiver.
Section 5.6 ASSIGNMENT. Neither party may assign, by operation of
law, merger or otherwise, license, sublicense or otherwise transfer any or all
of its rights or obligations under this Agreement to any other person or entity
without obtaining the prior written consent of the other party.
Section 5.7 AMENDMENTS. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 5.8 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 5.9 SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements,
and obligations set forth herein or arising hereunder to be performed by any
Subsidiary of such party on and after the Distribution Date.
Section 5.10 NO THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, right or reimbursement or other right.
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<PAGE>
Section 5.11 TITLES AND HEADINGS. Titles and headings to articles
and sections herein are inserted for the convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 5.12 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unen-
forceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
6
<PAGE>
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
CONSOLIDATED FREIGHTWAYS CORPORATION
By:
--------------------------
Title:
CONSOLIDATED FREIGHTWAYS, INC.
By:
--------------------------
Title:
7
<PAGE>
FORM OF
EMPLOYEE BENEFIT MATTERS AGREEMENT
This EMPLOYEE BENEFIT MATTERS AGREEMENT (the "Agreement") is made as
of this ____ of ____________, 1996 by and between CONSOLIDATED FREIGHTWAYS,
INC., a Delaware corporation ("CFI") and CONSOLIDATED FREIGHTWAYS CORPORATION, a
Delaware corporation (the "Company").
RECITALS
WHEREAS, CFI is the holder of all of the issued and outstanding shares
of common stock of the Company;
WHEREAS, the employees of the Company and its Subsidiaries are covered
by various employee benefit plans sponsored by CFI which are limited to
employees of CFI and its Subsidiaries; and
WHEREAS, CFI has determined that it will distribute all of the shares
of the Company's common stock to the holders of the common stock of CFI, which
will cause the Company and its Subsidiaries to no longer be Subsidiaries of CFI;
NOW, THEREFORE, CFI and the Company agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings, such meanings to be equally applicable to both the singular
and plural forms of the terms defined:
ADR AGREEMENT. The Alternative Dispute Resolution Agreement entered
into between CFI and the Company dated the same date as this Agreement , the
form of which is attached as Annex 1 to the Distribution Agreement.
COMPANY EMPLOYEE. A person described in 2.3.
DISTRIBUTION AGREEMENT. The Distribution Agreement entered into
between CFI and the Company dated the same date as this Agreement and governing
the distribution of the Company common stock to the holders of CFI common stock.
DISTRIBUTION DATE. The date on which all the shares of Company common
stock are delivered to the distribution agent pursuant to the Distribution
Agreement.
<PAGE>
SUBSIDIARY. A corporation that is a member of a controlled group of
corporations, within the meaning of Internal Revenue Code Section 1563, with CFI
or with the Company, except that the Company and its Subsidiaries shall not be
treated as Subsidiaries of CFI.
ARTICLE II
SEPARATION OF BENEFIT PLANS
2.1 ADOPTION OF COMPANY PLANS. The Company and its Subsidiaries shall, as
of the Distribution Date, cease participating in the employee benefit plans
sponsored by CFI. As of the Distribution Date, the Company shall adopt employee
benefit plans covering Company Employees that are substantially the same as the
employee benefit plans sponsored by CFI covering Company Employees prior to the
Distribution Date except as follows. The Company shall not be obligated to
duplicate or replace the CFI employee benefit plans that are limited to
executive employees and may adopt such new executive employee benefit plans as
it shall decide in its absolute discretion.
2.2 SEPARATE RESPONSIBILITIES. CFI and the Company agree that CFI shall
have sole responsibility for its employee benefit plans, arrangements and
policies for employees of CFI and its Subsidiaries and that the Company shall
have sole responsibility for its employee benefit plans, arrangements and
policies for Company Employees. CFI and the Company intend that, to the extent
possible, Company Employees shall look solely to the Company and its plans,
arrangements and policies for the provision of employee benefits, except certain
executive benefits discussed in this Agreement, and that employees of CFI and
its Subsidiaries shall look solely to CFI and its plans, arrangements and
policies for the provision of employee benefits.
2.3 IDENTIFICATION OF COMPANY EMPLOYEES. "Company Employees" shall be
determined as follows:
(a) All persons actively employed by the Company or a
Subsidiary of the Company on the Distribution Date are Company
Employees, unless described in (b).
(b) Persons who accept employment with CNF Service Company, Inc.
as of the Distribution Date shall not be Company Employees.
(c) All persons formerly employed by the Company or a Subsidiary
of the Company who were not subsequently employed by CFI or by a
Subsidiary of CFI are Company Employees, unless described in (d).
2
<PAGE>
(d) Persons who would be described in (c) but who are listed by
the Company and CFI in a schedule attached hereto shall not be Company
Employees. It is intended that Company Employees shall not include
former employees at CFI's administrative office in Portland, Oregon
unless they were part of a service group that worked exclusively for
Consolidated Freightways Corporation of Delaware and its subsidiaries at
termination of employment.
ARTICLE III
TAX QUALIFIED RETIREMENT PLANS
3.1 ADOPTION OF COMPANY TASP. The Company shall adopt a Thrift and Stock
Plan (the "Company TASP") as follows:
(a) The Company TASP shall be effective as of the
Distribution Date.
(b) Subject to Section 2.1, and to (c), (d) and (e) below,
the Company TASP shall be in a form satisfactory to the Company in its
sole discretion.
(c) The Company TASP shall be qualified under Sections
401(a) and 401(k) of the Code and shall have a related trust qualified
under Section 501(a) of the Code. The Company shall file, or cause
the administrator of the Company TASP to file, with the Internal
Revenue Service an Application for Determination with respect to the
Company TASP within the remedial amendment period prescribed by
applicable law and regulations. The Company shall amend the Company
TASP as may be required by the Internal Revenue Service as a condition
for receipt of a favorable determination letter within the time
required by the Internal Revenue Service for adoption of such
amendment.
(d) Subject to the transfer of assets and liabilities
provided for in Section 3.2, the Company TASP shall credit service
performed before the Distribution Date for CFI and its Subsidiaries
under applicable service crediting rules as if such service were
performed for the Company.
(e) The Company TASP shall provide for matching
contributions invested in Company common stock, but need not include
an employee stock ownership plan with Company stock purchased by
borrowing.
3.2 TASP SPINOFF. The CFI TASP consists of two plans: a 401(k) plan (the
"CFI TASP 401(k)") and an employee stock ownership plan (the "CFI TASP ESOP").
Accounts under the CFI TASP 401(k) are invested at the direction of participants
in several funds, including a fund for common stock of CFI (the "CFI Stock
Fund"). The CFI TASP ESOP is invested primarily in a special class of
convertible preferred stock of CFI (the "Preferred Stock") and in common stock
of CFI. The CFI TASP ESOP holds shares of
3
<PAGE>
Preferred Stock in a suspense account that secures loans to the CFI TASP ESOP.
Preferred Stock is converted to Common Stock of CFI before distribution to
participants or transfer to a person other than the trustee of the CFI TASP. On
the Distribution Date, the CFI TASP will receive common stock of the Company
with respect to its shares of CFI common stock. Within 180 days after the
Distribution Date, CFI and the Company shall cause the portion of the CFI TASP
that covers Company Employees to be spun off from the CFI TASP and to be merged
into the Company TASP. In connection with the spinoff and merger, the following
shall apply:
(a) CFI shall direct the trustee of the CFI TASP to
transfer assets held for the benefit of Company Employees under the
CFI TASP to the trustee of the Company TASP. The trustee of the CFI
TASP shall make such transfer even though the Company TASP has not yet
received a favorable determination letter from the Internal Revenue
Service with respect to the qualification of the Company TASP under
Section 401(a) of the Code if the Company demonstrates to CFI's
reasonable satisfaction that the Company has preserved its right to
make remedial amendments required by the Internal Revenue Service as a
condition of a favorable determination.
(b) CFI shall cause the fiduciaries of the CFI TASP to
provide an accounting to the fiduciaries of the Company TASP with
respect to all assets and accounts transferred to the Company TASP.
The accounting shall be reasonably satisfactory to the Company for
purposes of proper allocation of assets, earnings, gains and losses to
the accounts of participants under the Company TASP.
(c) CFI shall cause IRS Form 5310A to be filed with the
Internal Revenue Service, giving notice of the spinoff and merger, at
least 30 days before the date of the spinoff and merger.
(d) The Company TASP shall include a CFI Stock Fund and an
investment fund for common stock of the Company (the "Company Stock
Fund") for participant-directed investment of accounts. Accounts
invested in common stock of the Company and common stock of CFI shall
be transferred in kind from the CFI TASP in the spinoff and merger and
shall be placed initially in the Company Stock Fund or the CFI Stock
Fund according to the stock transferred. The Company TASP shall
provide that participants may direct amounts out of the CFI Stock Fund
but may not direct investment of any additional amounts into it. As
of the next calendar quarter end following the third anniversary of
the Distribution Date, the CFI Stock Fund shall be closed and its
assets moved into another investment fund selected by each participant
or, for participants who fail to make a selection, by the Company.
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(e) The CFI TASP 401(k) shall include a Company Stock Fund,
in addition to the existing CFI Stock Fund, for participant-directed
investment of accounts. The Company common stock distributed on
shares of CFI common stock held in the CFI Stock Fund shall become the
assets of the Company Stock Fund. The CFI TASP shall provide that
participants may direct amounts out of the Company Stock Fund but may
not direct investment of any additional amounts into it. As of the
next calendar quarter end following the third anniversary of the
Distribution Date, the Company Stock Fund shall be closed and its
remaining assets moved into another investment fund selected by each
participant or, for participants who fail to make a selection, by CFI.
(f) The accounts to be transferred from the CFI TASP
ESOP to the Company TASP will include accounts holding Preferred
Stock. Such Preferred Stock will be automatically converted to Common
Stock of CFI upon transfer to the trustee of the Company TASP.
3.3 ADOPTION OF COMPANY RETIREMENT PLAN. The Company shall adopt a
defined benefit pension plan (the "Company Retirement Plan") to cover Company
Employees as follows:
(a) The Company Retirement Plan shall be effective as of
the Distribution Date. Company Employees shall start to accrue
benefits under the Company Retirement Plan and shall cease to accrue
benefits under the Consolidated Freightways, Inc. Retirement Plan (the
"CFI Retirement Plan") as of the Distribution Date.
(b) Subject to Section 2.1, and to (c), (d) and (e) below,
the Company Retirement Plan shall be in a form satisfactory to the
Company in its sole discretion.
(c) The Company Retirement Plan shall be qualified under
Section 401(a) of the Code and have a related trust qualified under
Section 501(a) of the Code. The Company shall file, or cause the
administrator of the Company Retirement Plan to file with the Internal
Revenue Service an Application for Determination with respect to the
Company Retirement Plan within the remedial amendment period
prescribed by applicable law and regulations. The Company shall amend
the Company Retirement Plan as may be required by the Internal Revenue
Service as a condition for receipt of a favorable determination letter
within the time required by the Internal Revenue Service for adoption
of any such amendment.
(d) Benefits with respect to the transfer described in
Section 3.4 below shall be preserved in accordance with applicable
law, including but
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<PAGE>
not limited to the requirements of Section 411(d)(6) of the Internal
Revenue Code.
(e) Subject to the transfer of assets and liabilities
provided for under Section 3.4, the Company Retirement Plan shall
credit service performed before the Distribution Date for CFI and its
Subsidiaries under applicable service crediting rules as if such
service were performed for the Company.
(f) After the transfer described in Section 3.4, the CFI
Retirement Plan shall have no obligation to Company Employees. The
Company Retirement Plan shall be a continuation of the CFI Retirement
Plan with respect to benefits accrued by Company Employees under the
CFI Retirement Plan. The transfer described in Section 3.4 shall not
be a plan termination.
3.4 RETIREMENT PLAN SPINOFF. Within 180 days after the Distribution Date,
CFI and the Company shall cause the portion of the CFI Retirement Plan
consisting of the liability for benefits of Company Employees accrued through
the Distribution Date to be spun off from the CFI Retirement Plan along with
related assets and to be merged into the Company Retirement Plan. In connection
with the spinoff and merger, the following shall apply:
(a) The assets of the CFI Retirement Plan to be transferred
to the Company Retirement Plan will be equal to the lump sum present
value of such liability as of the date of the spinoff and merger.
Present value shall be based on the accumulated benefit obligation for
benefits already accrued and on an interest rate selected by CFI with
the approval of the actuary who performed the most recent annual
valuation of the CFI Retirement Plan. CFI shall direct the trustee of
the CFI Retirement Plan to transfer such assets to the trustee of the
Company Retirement Plan.
(b) The parties shall make commercially reasonable efforts
to reach an agreement with the Pension Benefit Guaranty Corporation
("PBGC") that the interest rate selected pursuant to (a) is acceptable
for calculating the amount of assets to be transferred from the CFI
Retirement Plan to the Company Retirement Plan. In the event that no
such agreement is reached and a lower interest rate is used in
response to actions of the PBGC, the Company shall pay CFI an amount
equal to the increase in the amount of assets transferred resulting
from use of such lower interest rate. The Company shall pay such
amount in cash in five equal annual installments including interest at
the prevailing commercial prime lending rate of the bank with which
CFI has its principal banking relationship on the date of the transfer
of CFI Retirement
6
<PAGE>
Plan assets. Such installments shall commence with the first anniversary
of the date of such transfer.
(c) CFI shall file IRS Form 5310A with the Internal Revenue
Service, giving notice of the spinoff and merger, at least 30 days
before the date of the spinoff and merger.
(d) The trustee of the CFI Retirement Plan shall make the
transfer of assets under (a) even though the Company Retirement Plan
has not yet received a favorable determination letter with respect to
qualification under Section 401(a) of the Internal Revenue Code if the
Company demonstrates to CFI's reasonable satisfaction that the Company
has preserved its right to make remedial amendments required by the
Internal Revenue Service as a condition of a favorable determination.
(e) The trustee of the CFI Retirement Plan and any other
fiduciary under the CFI Retirement Plan with applicable responsibility
shall determine and identify the assets of the CFI Retirement Plan
that shall be liquidated for transfer to the Company Retirement Plan.
After the transfer, the fiduciaries of the Company Retirement Plan
shall be responsible for the custody and investment of Company
Retirement Plan assets.
(f) If any employees of CNF Service Company, Inc. (or an
affiliate) become employed by Leland James Service Corporation within
three years after the Distribution Date immediately following
termination of employment with CNF Service Company, Inc. with no
intervening period as a result of termination of any services under the
Transition Services Agreement between CNF Service Company, Inc. and the
Company dated the same date as this Agreement, an additional transfer of
assets and liabilities shall be made from the CFI Retirement Plan to the
Company Retirement Plan. Such transfer shall consist of the liability
for benefits accrued for such employees under the CFI Retirement Plan
through the date of the employment termination together with assets
equal to the present value of such liability determined on the basis
described in (a) above. Such transfer of assets and liabilities shall be
completed within 90 days after the end of such three-year period.
3.5 ADOPTION OF COMPANY COMMON STOCK FUND. The Company shall adopt a
frozen defined contribution plan (the "Company Common Stock Fund") as follows:
(a) The Company Common Stock Fund shall be effective as of
the Distribution Date.
(b) Subject to Section 2.1, and to (c) below, the Company
Common Stock Fund shall be in a form satisfactory to the Company in
its sole discretion.
(c) The Company Common Stock Fund shall be qualified under
Section 401(a) of the Code and have a related trust qualified under
section 501(a) of the Code. The Company shall file, or cause the
administrator of the Company Common Stock Fund to file, with the
Internal Revenue Service an Application for Determination with respect
to the Company Common Stock Fund within the remedial amendment period
prescribed by applicable law and regulations. The Company shall amend
the Company Common Stock Fund as may be required by the Internal
Revenue Service as a condition for receipt of a favorable
determination letter within the time required by the Internal Service
for the adoption of any such amendment.
(d) Assets of the Company Common Stock Fund shall be invested in
accordance with provisions of the plan document and the related trust.
3.6 COMMON STOCK FUND SPINOFF. Within 180 days after the Distribution
Date CFI and the Company shall cause the accounts in the CFI Common Stock Fund
to be spun
7
<PAGE>
off from the CFI Common Stock Fund and to be merged into the Company Common
Stock Fund. In connection with the spinoff and merger, the following shall
apply:
(a) CFI shall direct the trustee of the CFI Common Stock
Fund to transfer assets equal in value on the transfer date to the
balance of the accounts for the Company Employees to the trustee for
the Company Common Stock Fund. The trustee shall use first common
stock of the Company received on the plan's shares of CFI common stock
on the Distribution Date. Any additional amount to be transferred
shall be CFI common stock. The trustee of the CFI Common Stock Fund
or the trustee of the Company Common Stock Fund shall sell the stock
of the other corporation held after the spinoff and merger at a time
selected in its absolute discretion and use the proceeds of sale to
acquire stock of the plan sponsor.
(b) CFI shall cause the fiduciaries of the CFI Common Stock
Fund to provide an accounting to the fiduciaries of the Company Common
Stock Fund with respect to all assets and accounts transferred to the
Company Common Stock Fund. The accounting shall be reasonably
satisfactory to the Company for purposes of proper allocation of
assets, earnings, gains and losses to the accounts of participants
under the Company Common Stock Fund.
(c) CFI shall file IRS Form 5310A with the Internal Revenue
Service, giving notice of the spinoff and merger, at least 30 days
before the date of the spinoff and merger.
ARTICLE IV
EXECUTIVE BENEFIT PLANS
4.1 TOP-HAT PLANS. CFI shall retain the obligation to pay Company
Employees the accounts in the Consolidated Freightways, Inc. Executive Deferred
Compensation Plan (the "CFI Deferral Plan") accumulated from compensation
deferred up to the Distribution Date. CFI shall retain the obligation to pay
Company Employees benefits accrued under the Consolidated Freightways, Inc.
Supplemental Retirement and Excess Benefit Plan (the "CFI SERP") as of the
Distribution Date based on service and compensation up to that date and the
offsetting CFI Retirement Plan benefits accrued as of that date. Assets in the
trust related to the CFI Deferral Plan and the CFI SERP shall remain in such
trust. CFI shall amend the CFI Deferral Plan and the CFI SERP to provide that
events, such as termination of employment or retirement, triggering distribution
of benefits from the CFI Deferral Plan and the CFI SERP shall be determined for
Company Employees on the basis of employment with and retirement from the
Company and its Subsidiaries. The Company shall provide CFI with information
about such events after the Distribution Date to assist CFI in the
administration of the CFI Deferral Plan and the CFI SERP.
8
<PAGE>
4.2 STOCK OPTION PLANS. The existing stock options of Company Employees
should be handled as follows:
(a) Each outstanding option held by CFI employees ("CFI Option")
as of the Distribution Date shall be adjusted so that the aggregate
"spread" (i.e., the excess of the fair market value of a share of CFI stock
subject to such option and the per share exercise price) inherent in such
option after giving effect to the Distribution, is equal to the aggregate
"spread" inherent in such option prior to giving effect to the Distribution
("CFI Spread").
(b) Each outstanding option held by Company employees ("CFI-CFC
Option") provides generally that following a termination of employment from
CFI or any of its affiliates, an optionee will have 90 days to exercise his
or her options before they expire. Prior to the Distribution Date, the
stock option agreements under the Consolidated Freightways, Inc. Stock
Option Plan of 1988 (the "CFI Stock Plan") that are held by Company
employees shall be amended to provide that all options shall become fully
vested and exercisable 30 days prior to the Distribution. Accordingly,
effective as of the Distribution Date, each Company employee who will be
considered a terminated employee under the CFI Stock Plan shall have 90
days after such termination of employment (the "90 Day Period") to exercise
his or her CFI-CFC Options to purchase CFI stock. After the 90 Day Period
such options shall expire.
(c) For purposes of determining the CFI Spread, the fair market
value of a share of CFI stock prior to the Distribution shall be deemed to
be equal to the average of the daily closing prices for a share of CFI
stock on the NYSE for the five trading days immediately preceding the
record date; and the fair market value of a share of CFI stock following
the Distribution shall be deemed to be equal to the average of the daily
closing prices for a share of CFI stock in "when-issued" trading on the
NYSE (or, if there shall not have been "when issued" trading on such
exchange, in the over-the-counter market) for the five trading days
immediately preceding the Distribution Date.
(d) For purposes of determining the value of a share of Company
Stock, the fair market value of a share of Company stock shall be deemed to
be equal to the average of the daily closing prices for a share of Company
stock on the NYSE for the five trading days immediately following the
90 Day Period.
9
<PAGE>
ARTICLE V
WELFARE BENEFIT PLANS
5.1 MEDICAL AND DEPENDANT CARE ACCOUNT BENEFITS. As of the Distribution
Date, the Company shall establish a Welfare Benefits Plan (the "Company Welfare
Plan") qualified under Section 125 of the Code to provide medical and dependent
care account benefits to Company Employees covered under the Consolidated
Freightways, Inc. Welfare Benefits Plan (the "CFI Welfare Plan") in 1996 before
the Distribution Date, and the following shall apply:
(a) Subject to 2.1, and to (b) and (c) below, the Company
Welfare Plan shall be in a form satisfactory to the Company in its
sole discretion.
(b) The Company Welfare Plan shall have a first plan year
that is a short plan year beginning on the Distribution Date and
ending December 31, 1996. Compensation reduction elections by
participants under the CFI Welfare Plan for the 1996 plan year shall
continue in effect as to the Company Welfare Plan.
(c) For 1996, the Company Welfare Plan shall provide for
medical spending accounts and dependent care spending accounts under
substantially the same terms as the CFI Welfare Plan. CFI shall
transfer to the Company the unused account balances of Company
Employees under the CFI Welfare Plan. The Company shall credit the
amounts transferred with respect to each participant and each account
to corresponding accounts under the Company Welfare Plan. Claims for
reimbursement from medical and dependent care spending accounts under
the CFI Welfare Plan by Company Employees that have not been paid as
of the Distribution Date shall be paid by the Company under the
Company Welfare Plan. The fiduciary of the Company Welfare Plan shall
have the authority to determine whether or not claims under the
Company Welfare Plan are properly submitted or are payable. Upon
request, CFI or the administrator of the CFI Welfare Plan shall
deliver or make available to the Company and the administrator of the
Company Welfare Plan all records of participants that are relevant to
administration of the Company Welfare Plan.
5.2 HEALTH PLAN DEDUCTIBLES AND COVERAGE LIMITS, COBRA COVERAGE. The
Company shall adopt health plans to cover Company Employees effective as of the
Distribution Date and the following shall apply:
10
<PAGE>
(a) On and after the Distribution Date neither CFI nor any
of the welfare benefit plans sponsored by CFI shall provide coverage
to Company Employees.
(b) For the period from the Distribution Date to
December 31, 1996, Company Employees who were participants under the
Consolidated Freightways, Inc. Health Plan (the "CFI Health Plan") as
of the Distribution Date shall be credited with amounts paid under the
CFI Health Plan for plan deductibles against any corresponding
deductibles under a Company plan health or medical plan. Benefits
provided under the CFI Health Plan to a Company Employee with respect
to 1996 claims will be counted toward any coverage limits applicable
to a Company Employee under any Company health or medical plan for the
coverage period ending December 31, 1996. For purposes of this
paragraph (b), deductibles and benefits paid for eligible dependants
of Company Employees shall be taken into account.
(c) The Company shall provide group health plan
continuation coverage as required under Sections 601 through 607 of
ERISA ("COBRA coverage") for Company Employees and related "qualified
beneficiaries" for "qualifying events" that occur before or after the
Distribution Date.
5.3 RETIREE HEALTH BENEFITS. The Company and its Subsidiaries shall be
obligated to provide health benefits to retired Company Employees, with the
obligation applying to the entity that employed the retiree at the time of
retirement. To the extent permitted by the Company's Health Plan and
applicable law, the Company may eliminate or change retiree health benefits.
5.4 LONG-TERM DISABILITY BENEFITS. The Company and its Subsidiaries shall
be obligated to provide long-term disability benefits to disabled Company
Employees, with the obligation applying to the entity the disabled individual
was employed by at the time of disability.
5.5 SEVERANCE BENEFITS. A termination of employment with the Company,
CFI, or any subsidiary of the Company or CFI immediately followed by
employment with any other such entity shall not be deemed a severance of
employment for purposes of any policy, plan, program or agreement that
provides for the payment of severance, salary continuation or similar
benefits. If any person employed by Leland James Service Corporation
immediately prior to the Distribution Date loses employment prior to or
simultaneously with the Distribution Date as a direct result of the
transaction provided for by the Distribution Agreement and for no other
reason, CFI shall be responsible for any severance, salary continuation
or similar benefit payable upon such loss of employment.
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<PAGE>
5.6 OTHER WELFARE BENEFITS. Except as otherwise provided in 2.1 and this
Article V, welfare benefits provided by CFI and its Subsidiaries and by the
Company and its Subsidiaries for their respective employees after the
Distribution Date shall not be affected by each other and each company may
provide or elect not to provide benefits in its sole discretion.
ARTICLE VI
MISCELLANEOUS
6.1 RIGHTS OF EMPLOYEES. This Agreement is not intended to give any
individual employee or former employee of CFI or the Company or any of their
Subsidiaries any personal right or interest. No employee, shall have any right
under this Agreement to maintain employment with CFI, the Company or any
Subsidiary, become employed by CFI, the Company or any Subsidiary or accrue any
benefit with respect to employment. No employee, former employee, beneficiary
or dependent shall have any right to be designated as a Company Employee or to
be retained as the responsibility of CFI.
6.2 ENTIRE AGREEMENT. This Agreement, together with the Distribution
Agreement, embodies the entire Agreement and understanding of the parties with
respect to the matters provided for herein and shall supersede any and all prior
agreements, arrangements and understanding relating to such matters. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the parties.
6.3 GOVERNING LAW. The interpretation and performance of the Agreement
shall be governed by the laws of the state of California without regard tor the
choice of law provisions thereof.
6.4 NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have
been duly delivered on the date of personal delivery or on the date of
receipt if mailed by registered or certified mail to the attention of
__________ at the addresses stated in the Agreement.
6.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
6.6 TERMINATION. This Agreement shall be terminated if the Distribution
Agreement is terminated or if the distribution of Company stock fails to occur.
If the Agreement terminates under this Section 6.5, no party shall have any
liability to any person under the Agreement.
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<PAGE>
6.7 DISPUTE RESOLUTION. Any dispute between the parties concerning the
performance of this Agreement shall be resolved in accordance with the
provisions of the ADR Agreement.
CFI CONSOLIDATED FREIGHTWAYS, INC.
BY
-----------------------------------
EXECUTED: , 1996
-----------------
COMPANY CONSOLIDATED FREIGHTWAYS CORPORATION
BY
----------------------------------
EXECUTED: , 1996
-----------------
13
<PAGE>
FORM OF
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement"), dated as of this ___ day of
_______, 1996, by and between Consolidated Freightways, Inc., a Delaware
corporation ("CFI"), and Consolidated Freightways Corporation, a Delaware
corporation ("Holdings").
WHEREAS, CFI and Holdings have entered into a Distribution Agreement dated
as of ______________, 1996 (the "Distribution Agreement"), providing for the
distribution by CFI of the common stock of Holdings to the holders of CFI common
stock as of the close of the day on the Distribution Date, and setting forth the
terms and conditions which will govern certain relationships between the
parties; and
WHEREAS, CFI and Holdings desire to set forth their agreement on the
proper allocation among CFI, Holdings and their subsidiaries of federal, state,
local and foreign taxes and to provide for future cooperation with respect to
tax matters;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"AFFILIATE" means any corporation which is a member of the Consolidated
Group.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 2
"CFI AFFILIATE" means any corporation, partnership or other entity directly
or indirectly controlled by CFI, other than Holdings or any Holdings Affiliate.
"CFI BUSINESSES" means the present and future subsidiaries, divisions and
business of any member of the CFI Group, other than the present and future
subsidiaries, divisions and business of any member of the Holdings Group. CFI
Businesses shall include all former subsidiaries, divisions and businesses other
than the Holdings Businesses.
"CFI GROUP" means the group of corporations that immediately after the
Distribution Date are members of the affiliated group of which CFI is the common
parent (within the meaning of section 1504 of the Code).
"CODE" means the Internal Revenue Code of 1986 (or, if relevant, the
Internal Revenue Code of 1954), as amended, or any successor thereto, as in
effect for the taxable period in question.
"COMBINED JURISDICTION" means, for any taxable period, any jurisdiction in
which Holdings or a Holdings Affiliate could be or is included in a consolidated
or combined return with CFI or a CFI Affiliate for Other Tax purposes for such
period.
"CONSOLIDATED GROUP" means the affiliated group of corporations (within the
meaning of section 1504 of the Code) of which CFI is the common parent.
"DISTRIBUTION" means the transfer by CFI of its ownership of Holdings and
the Holdings Affiliates from CFI by means of a distribution of the stock of
Holdings to CFI shareholders.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 3
"DISTRIBUTION DATE" means the date determined by the CFI Board of Directors
as of which the Distribution shall be effected.
"FINAL DETERMINATION" means the final resolution of liability for any Tax
for a taxable period (i) by the appropriate IRS form which binds the taxpayer on
the date of acceptance by or on behalf of the IRS, or by a comparable form under
the laws of other jurisdictions; except that any such form that reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the Taxing Authority to assert a further
deficiency shall not constitute a Final Determination; (ii) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (iii) by a closing agreement or accepted offer in
compromise under section 7121 or section 7122 of the Code, or comparable
agreements under the laws of other jurisdictions; (iv) by any allowance of a
refund or credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be recovered (including
by way of offset) by the Tax imposing jurisdiction; or (v) by any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
"HOLDINGS AFFILIATE" means any former or current corporation, partnership
or other entity directly or indirectly controlled by Holdings.
"HOLDINGS BUSINESSES" means the present and future subsidiaries, divisions
and business of any member of the Holdings Group. Holdings Businesses shall
include all former subsidiaries, divisions and businesses.
"HOLDINGS GROUP" means the group of corporations that immediately after the
Distribution Date are members of the affiliated group of corporations of which
Holdings is the common parent (within the meaning of section 1504(a) of the
Code).
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 4
"IRS" means the Internal Revenue Service.
"OTHER TAXES" is defined in Section 3.05.
"REPRESENTATIVE" means with respect to any person or entity, any of such
person's or entity's directors, officers, employees, agents, consultants,
advisors, accountants, attorneys and representatives.
"RESTRUCTURING TAXES" means all Taxes resulting from the disposition of
Holdings stock undertaken to effect the Holdings Distribution.
"RULING REQUEST" means the private letter ruling request filed by CFI with
the IRS dated February 22, 1996, as supplemented from time to time, with respect
to certain tax aspects of the Distribution.
"TAX" means any of the Taxes.
"TAX CONTROVERSY" is defined in Section 4.02.
"TAX RETURN" means any return, filing, questionnaire or other document
required to be filed, including requests for extensions of time, filings made
with estimated Tax payments, claims for refund and amended returns that may be
filed, for any taxable period with any Taxing Authority (whether domestic or
foreign) in connection with any Tax (whether or not a payment is required to be
made with respect to such filing) or any information reporting requirement.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 5
"TAXES" means any and all forms of taxation, whether created or imposed by
a national, municipal, state, federal, or other governmental body (a "Taxing
Authority") and, without limiting the generality of the foregoing, shall include
net income, alternative or add-on minimum, any special estimated tax payments
required pursuant to section 847 of the Code, gross income, sales, use, ad
valorem, gross receipts, value added, franchise, profits, license, transfer,
recording, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profit, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any related interest, penalties or other additions to tax, or
additional amounts imposed by any such Taxing Authority on the Consolidated
Group or any member thereof.
"TAXING AUTHORITY" is defined under the term "Taxes."
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
SECTION 2.01. MANNER OF FILING. All Tax Returns (relating to pre-
Distribution and post-Distribution taxable periods) filed by CFI and CFI
Affiliates and Holdings and Holdings Affiliates after the Distribution Date
shall be prepared on a basis which is consistent with the rulings of Taxing
Authorities or opinions of tax counsel retained or approved by CFI and which are
issued in connection or relate directly to the Distribution and shall be filed
on a timely basis (including extensions) by the party responsible for such
filing under this Agreement.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 6
SECTION 2.02. PRE-DISTRIBUTION FEDERAL TAX RETURNS
(a) Holdings will join, and will cause each Holdings Affiliate to join, in
all pre-Distribution federal Tax Returns for the Consolidated Group to the
extent they are eligible to join in such returns under the provisions of the
Code and the regulations thereunder. Holdings will neither elect to file
separate returns for such periods nor will it cause or permit any of the
Holdings Affiliates to so elect.
(b) Holdings hereby irrevocably designates, and Holdings agrees to cause
each of the Holdings Affiliates to so designate, CFI as its agent to take any
and all actions necessary or incidental to the filing of Form 1122 (or any
amendment thereto) with respect to any taxable period in which Holdings or any
of the Holdings Affiliates is a member of the Consolidated Group, and Holdings
agrees to deliver, and to cause each Holdings Affiliate to deliver, executed
copies of Form 1122 (or any amendment thereto) to CFI, if required, with respect
to any such year.
(c) CFI shall timely prepare and file, or cause to be timely prepared and
filed, all pre-Distribution federal Tax Returns for the Consolidated Group. This
shall include all tax items required to be reported by the Holdings Group for
taxable periods ending before or including the Distribution Date. Holdings shall
provide CFI, with respect to Holdings and Holdings Affiliates, its federal Tax
Returns and supporting schedules and additional information requested by CFI for
the 1996 taxable period ending on the Distribution Date on a timely basis, as
reasonably determined by CFI, in order for CFI to timely file the Tax Returns
for the Consolidated Group. Upon request, CFI shall deliver to Holdings copies
of the relevant portions of the Consolidated Group Tax Return for 1996, as
determined by CFI, within 30 days after the day that it is filed.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 7
(d) All Tax Returns relating to taxable periods ending before or including
the Distribution Date and submitted after the date of this Agreement by Holdings
shall be prepared, and all items of such Tax Returns shall be reported (in the
absence of a controlling change in law or circumstances, except with the consent
of CFI, which consent shall not be unreasonably withheld), in a manner that is
consistent with past practices, elections, accounting methods, conventions, and
principles of taxation (collectively, "Tax Practices") used for the most recent
taxable periods for which Tax Returns involving similar items have been filed
prior to the Distribution Date. All decisions relating to the preparation of Tax
Returns under Section 2.02 (including whether items are reported consistent with
past Tax Practices) shall be made in the reasonable discretion of CFI. However,
any decisions regarding intercompany transactions, as defined under Treas. Reg.
Section 1.1502-13, shall be made as mutually agreed upon by the parties or by
CFI if mutual agreement is not reached, with CFI's decision being subject to
arbitration under Section 5.04.
SECTION 2.03. POST-DISTRIBUTION FEDERAL TAX RETURNS. Holdings shall
prepare and file, or cause to be filed, all post-Distribution federal Tax
Returns for the Holdings Group for taxable periods beginning after the
Distribution Date. CFI shall prepare and file, or cause to be prepared and
filed, all post-Distribution federal Tax Returns for the CFI Group for taxable
periods beginning after the Distribution Date. CFI and Holdings agree to notify
each other within 60 days after such post-Distribution federal Tax Returns are
filed regarding any utilization by either party of minimum tax credits generated
in pre-Distribution taxable periods. In addition CFI agrees to provide to
Holdings periodic estimates of the amount of minimum tax credits generated in
pre-Distribution years which are expected to be utilized in post-Distribution
returns of the CFI Group. CFI agrees to provide such estimates within 60 days
after each quarterly federal estimated tax payment and within 60 days after an
application for automatic extension of time (Form
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 8
7004) is filed. Holdings acknowledges that such estimates are subject to change
and CFI shall have no liability for any changes or inaccuracies in such
estimates.
ARTICLE III
PAYMENT OF TAXES
SECTION 3.01. ALLOCATION OF TAX LIABILITY.
(a) For purposes of this Agreement, the Consolidated Group's federal
regular income tax liability for all periods ending before or including the
Distribution Date shall be allocated in accordance with section 1552(a)(2) of
the Code and Treasury Regulations sections 1.1552-1(a)(2) and 1.1502-33(d)(3).
Accordingly, the consolidated federal regular income tax liability to be
allocated to each Affiliate included in the federal Tax Return of the
Consolidated Group in the following manner:
(1) STEP 1. Each Affiliate shall first be allocated that percentage
of the consolidated federal regular income tax liability which is equal to the
percentage that the total federal regular income tax liability of such
Affiliate, if computed on a separate return basis (with the adjustments
provided by Treasury Regulation section 1.1552-1(a)(2)), would be to the total
amount of the federal regular income tax of all Affiliates so computed.
(2) STEP 2. An additional amount shall be allocated to each Affiliate
equal to one hundred percent (100%) of the excess, if any, of (A) the "separate
return tax liability" of such Affiliate for the taxable year (as computed
pursuant to Treasury Regulation section 1.1552-1(a)(2)), over (B) the tax
liability of such Affiliate in accordance with STEP 1 of this Section 3.01(a).
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 9
(3) STEP 3. The total of any additional amounts allocated to
Affiliates pursuant to STEP 2 of this Section 3.01(a) (including amounts
allocated as a result of a carryback) shall be paid by such Affiliates to those
other Affiliates which had such losses, deductions, or credits in proportion to
the tax benefit derived by the Consolidated Group from the losses, credits and
deductions of all Affiliates, as determined by CFI.
(4) For the purposes of this Agreement, Holdings' allocable share of
the consolidated federal regular income tax liability, as determined under this
Section, is the aggregate amount of liability allocated to Holdings and any
Holdings Affiliate. CFI's allocable share of the consolidated federal income tax
liability, as determined under this Section, is the aggregate amount of
liability allocated to CFI and any CFI Affiliate.
(b) For purposes of this Agreement, the Consolidated Group's federal
minimum tax liability and environmental tax liability for all periods ending
before or including the Distribution Date shall be allocated in accordance with
the allocation method set out in Proposed Regulations Sections 1.1502-55 and
1.1552-1(g) issued on December 30, 1992 (the "Proposed Regulations"). If
temporary or final regulations are issued which differ from the Proposed
Regulations, this Agreement will be amended to reflect such changes to the
extent and for an effective date deemed necessary or desirable by CFI.
SECTION 3.02. ALTERNATIVE MINIMUM TAX CREDITS. A portion of any
consolidated minimum tax credit of the Consolidated Group will be allocated to a
Holdings Affiliate which ceases to be a member of the Consolidated Group on the
Distribution Date in accordance with the allocation method set forth in the
Proposed Regulations. To the extent such Holdings Affiliate was not allocated a
corresponding amount of alternative minimum tax in an earlier or the same tax
year, Holdings shall pay to CFI an amount equal to the amount of any such credit
utilized by the Holdings Affiliate on an estimated basis on or before June 30
following the taxable year in which the credit is utilized by
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 10
such Holdings Affiliate. Subsequent thereto, a final settlement payment, if
necessary, will be made within 10 days of filing the Tax Return for such taxable
year or, if later, 10 days after receipt of notice of the amount of the
settlement payment required. Any payment required under this Section shall be
accompanied by a calculation setting forth the basis for the amount paid. In
calculating minimum tax credit utilization and payment responsibility under this
Section, minimum tax credits allocated to Holdings Affiliates under this Section
shall be deemed used first. If temporary or final regulations are issued which
differ from the Proposed Regulations, this Agreement will be amended to reflect
such changes to the extent and for an effective date deemed necessary or
desirable by CFI.
SECTION 3.03. PAYMENT OF CONSOLIDATED FEDERAL INCOME TAX.
(a) CFI shall pay all Taxes due with respect to the consolidated federal
income tax liability (including any minimum tax or environmental tax liability)
of the Consolidated Group for all taxable periods ending before or including the
Distribution Date. Holdings shall pay to CFI an amount equal to Holdings' and
Holdings Affiliates' share of such Taxes as determined in the manner provided in
Section 3.01. Furthermore, Holdings shall make estimated tax payments to CFI or
receive refunds on or before the statutory payment dates under a method
generally consistent with past practices as reasonably determined by CFI. CFI
hereby acknowledges that, upon resolution of the intercompany accounts as of the
Distribution Date, all federal Taxes have been paid by Holdings and Holdings
Affiliates with respect to federal consolidated Tax Returns that have been filed
for any period up to and including the year ended December 31, 1995, and
Holdings and Holdings Affiliates shall have no further liability in respect
thereof except as otherwise provided in this Agreement.
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CFI TAX SHARING AGREEMENT PAGE 11
(b) Except as otherwise provided in this Agreement, Holdings shall pay all
Taxes due with respect to the federal income tax liability (including any
minimum tax or environmental tax liability) of the Holdings Group for periods
beginning after the Distribution Date.
SECTION 3.04. TAX DEFICIENCIES AND REFUNDS AS TO CFI FILED RETURNS.
(a) If as a result of any audit, amendment or other change in a federal
income Tax Return as filed by CFI or any CFI Affiliate with respect to any
taxable period ending before or including the Distribution Date, there is an
additional amount of federal income Taxes (including minimum tax and
environmental tax) due and payable, or a refund of federal income Taxes
previously paid (whether by payment, credit, offset against other federal income
Taxes due or otherwise), any such deficiency shall be paid by, and any such
refund shall be payable to, CFI.
(b) Holdings shall pay to CFI any federal income Taxes paid by CFI as a
result of any audit, amendment or other change in a Consolidated Group Tax
Return allocable to the Holdings' Businesses (as determined under Section 3.01)
with respect to any taxable periods ending before or including the Distribution
Date. In determining the amount due under this Section 3.04(b), the amount of
federal income Taxes paid by CFI shall include any additional tax payments or
deposits made by CFI for a taxable year subsequent to the filing of the federal
income tax return for the taxable year, it being expressly recognized by
Holdings that no portion of such payments were charged to Holdings or a Holdings
Affiliate through the intercompany accounts.
(c) CFI shall pay to Holdings, reduced by reasonable administrative costs
(including legal and accounting expenses) incurred by CFI or a CFI Affiliate,
the amount of any refund of federal income Taxes received (including by offset
against other federal Taxes
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CFI TAX SHARING AGREEMENT PAGE 12
due) as a result of any audit, amendment or other change in a Consolidated Group
Tax Return allocable to the Holdings Businesses (as determined under Section
3.01) with respect to any taxable period ending before or including the
Distribution Date.
(d) For purposes of both (b) and (c) of this Section, the amount of any
federal Taxes paid or federal Taxes received (including by way of offset) as a
result of any audit, amendment or other change to a Consolidated Group Tax
Return shall be taken into account in the year to which they relate and the Tax
liability (including Other Taxes) for such year shall be recomputed and
allocated accordingly.
SECTION 3.05 PENALTIES AND INTEREST
(a) Any interest incurred by the Consolidated Group shall be paid by the
Affiliate to whom it is attributable. The total amount of interest incurred by
the Consolidated Group will be apportioned to and paid by each Affiliate
according to (1) the ratio of the interest incurred by each Affiliate so
computed, plus (2) the additional interest, if any, that such Affiliate would
have paid on a separate return basis over the allocated interest determined
under (1) above. Interest computed by an Affiliate on a separate return basis
shall be calculated using the interest rate or rates applicable to the
consolidated deficiency. Any additional amount allocated to an Affiliate
determined under (2) above shall be paid to the Affiliate whose income or
deduction would have given rise to a refund on a separate return basis, but in
no case shall an Affiliate which incurs interest under (2) above be required to
pay more interest to such receiving Affiliate than such receiving Affiliate
would have received on a separate return basis. In calculating the allocable
share of any interest payable by a Holdings Affiliate with respect to any
federal audit adjustments, only interest actually payable to the IRS, and not
interest abated as a result of tax deposits, shall be taken into account. CFI
shall have sole discretion to determine how tax deposits are allocated among
taxable periods and audit items. CFI shall act in good faith
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CFI TAX SHARING AGREEMENT PAGE 13
in making such determination, with an intention to minimize the overall out-of-
pocket costs and financial reporting impacts on CFI and Holdings.
(b) Any interest received by the Consolidated Group as a result of any
refund of Tax shall be allocated to the Affiliate whose income or deductions
gave rise to the refund. The amount of interest received by the Consolidated
Group will be apportioned to and received by each Affiliate according to (1) the
ratio of the interest to be received by each Affiliate computed on a separate
return basis to the total of all the interest received by Affiliates so
computed, plus (2) the additional interest, if any, that such Affiliate would
have received on a separate return basis over the allocated interest determined
under (1) above. Any additional amount allocated to an Affiliate determined
under (2) above shall be received from the Affiliate whose income or deductions
caused such interest not to be received by the Consolidated Group, but in no
case shall an Affiliate which receives such interest receive more interest than
such Affiliate would have received on a separate return basis.
(c) Any penalties incurred by the Consolidated Group shall be paid by the
Affiliate whose actions, income or deductions caused such penalties. If a
penalty was caused by more than one Affiliate, such penalty shall be allocated
proportionately to those Affiliates that would have incurred a penalty on a
separate return basis. Any excess penalty will be allocated in proportion to the
actions, income or deductions of each Affiliate which caused or contributed to
the penalty regardless of whether such Affiliate's actions, income or deductions
exceeded the minimum threshold required for the penalty to be imposed.
(d) For purposes of this Agreement, Holdings' allocable share of any
interest or penalties, as determined under this Section, is the aggregate amount
of liability allocated to Holdings and any Holdings Affiliate. CFI's allocable
share of any interest or penalties,
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CFI TAX SHARING AGREEMENT PAGE 14
as determined under this Section, is the aggregate amount of liability allocated
to CFI and any CFI Affiliate.
SECTION 3.06. OTHER TAX RETURNS OF HOLDINGS.
(a) Holdings shall prepare and file, or cause to be prepared and filed,
all appropriate Tax Returns or other filings relating to Taxes other than
federal income taxes ("Other Taxes") imposed on any member of the Holdings Group
or the Holdings Businesses except for returns and filings with respect to
Combined Jurisdictions.
(b) For any Combined Jurisdictions, CFI or a CFI Affiliate, as
appropriate, shall be responsible for the preparation and filing of all returns
and filings relating to any Other Taxes imposed upon any member of the Holdings
Group for the same taxable periods with respect to which CFI is responsible for
filing federal income tax returns under Section 2.02. For this purpose, Holdings
(or the appropriate Holdings Affiliate) shall provide CFI (or the appropriate
CFI Affiliate) such schedules and additional information requested by CFI for
any period for which such Tax Return has not been filed as of the date hereof by
the later of (i) 15 days after such request or (ii) 60 days prior to the date on
which such Tax Return shall be due. Unless required by law, as reasonably
determined by CFI, CFI shall file such Tax Return consistent with such schedules
and additional information provided by Holdings or Holdings Affiliates. CFI
shall deliver to Holdings copies of relevant portions of each Tax Return no
later than 60 days after the day that such Tax Return is filed. Unless required
by law, as reasonably determined by CFI, CFI shall not amend any such Tax Return
to reflect any change in information provided by Holdings Businesses without the
written consent of Holdings.
(c) CFI hereby acknowledges that all Other Taxes have been paid with
respect to Tax Returns that have been filed (in any Combined Jurisdiction in
which unitary or nexus
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CFI TAX SHARING AGREEMENT PAGE 15
consolidation principles have been agreed upon by CFI and Holdings or a Holdings
Affiliate) on or before the Distribution Date. Liability for payment of all
Other Taxes imposed by any Combined Jurisdiction shall be allocated between the
CFI Group and the Holdings Group. The allocation shall be made in such manner as
CFI shall reasonably deem appropriate; provided, however, that the liability of
the Holdings Group shall not exceed the greater of (i) the total amount that the
Holdings Group would have paid if the members of the Holdings Group filed their
own return for Other Taxes not combined with any other member of the CFI Group,
or (ii) a pro rata share of the combined liability of the members of the
Holdings Group and the CFI Group. CFI shall be liable for the Other Taxes
remaining after payment of the Holdings Group's allocable share of the Other
Taxes.
(d) To the extent there is an Other Tax liability, but the Holdings Group
has a net aggregate loss in a Combined Jurisdiction, the Holdings Group shall be
entitled to the benefit of the net aggregate loss, to the extent reasonably
determined by CFI, except limited (i) to the extent of its nexus within the
state, and (ii) to the extent such benefit is eliminated or reduced by the fact
that Holding Group's inclusion in the Combined Jurisdiction increases the
liability of the combined group.
(e) To the extent that a refund is obtained by CFI Businesses or Holdings
Businesses and such refund relates to Other Taxes in Combined Jurisdictions,
Holdings or a Holdings Affiliate shall be entitled to receive its proportionate
share of such refunds as determined by CFI (or a member of the CFI Group, as
appropriate), in accordance with the principles of Section 3.06(c) or (d).
(f) CFI and Holdings shall be responsible for the filing of their
respective Tax Returns for (i) non-Combined Jurisdictions, and (ii)
jurisdictions outside the United
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CFI TAX SHARING AGREEMENT PAGE 16
States that are due with respect to all taxable periods and for the payment of
all Taxes due or payable in connection therewith.
(g) If as a result of any audit, amendment or other change in a Combined
Jurisdiction Tax Return as filed by CFI or a CFI Affiliate with respect to any
taxable period ending before or including the Distribution Date, there is an
additional amount of Taxes due and payable, or a refund of Taxes previously paid
(whether by payment, credit, offset against other Taxes due or otherwise), any
such deficiency shall be paid by, and any such refund shall be payable to, CFI
or the CFI Affiliate. Holdings shall pay to CFI any Taxes incurred as a result
of any audit, amendment or other change in a Combined Jurisdiction Tax Return
with respect to any taxable period ending before or including the Distribution
Date in a manner consistent with the provisions outlined in Section 3.06(c) and
(d). CFI or a CFI Affiliate shall pay to Holdings the amount of any refund of
Other Taxes received (including by offset against Other Taxes due) as a result
of any audit, amendment or other change to a Tax Return attributable to the
Holdings Businesses with respect to any taxable period ending before or
including the Distribution Date in a manner consistent with the provisions
outlined in Section 3.06(e).
(h) Notwithstanding the provisions of Section 3.06(g), if Holdings or a
Holdings Affiliate wishes to make advance payment of, or enter into a cash bond
with respect to, any Taxes for which it would bear the burden under this
Agreement prior to the date that payment of such Taxes is required by the
relevant Taxing Authority, CFI shall permit Holdings to make such advance
payment or enter into such cash bond and shall take such reasonable actions as
may be necessary to effectuate the same.
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CFI TAX SHARING AGREEMENT PAGE 17
SECTION 3.07. RESTRUCTURING TAXES.
(a) Notwithstanding any other provision of this Agreement to the
contrary, Holdings shall pay and shall indemnify and hold harmless CFI from
and against any and all Restructuring Taxes and from and against any costs
whatsoever connected with such taxes, including, but not limited to, fees,
interest, penalties and reasonable attorney's fees to the extent any portion
of such Restructuring Taxes would not have resulted: (i) but for a Ruling
Misrepresentation or Omission (as defined in Section 3.07(b)); or (ii) but
for the fact that, within three (3) years after the Distribution Date, either
Holdings or any member of the Holdings Group has (A) made a material
disposition outside the Holdings Group by means of a sale or exchange of
assets or capital stock (except (x) the issuance by Holdings of its own stock
in an amount which does not exceed 10% of Holding's issued and outstanding
stock immediately following the Distribution Date and (y) dispositions, if
any, disclosed in the Ruling Request), (B) made a distribution to its
stockholders or otherwise of any assets of the Holdings Group (other than
dividends paid in the ordinary course of business), (C) made any repurchase
of any Holdings Group capital stock (excluding repurchases in connection with
employee benefit plans which comply with Revenue Procedure 91-63), (D) has
voluntarily ceased to engage in the active conduct of a trade or business
within the meaning of section 355(b)(2) of the Code, or (E) Holdings has
liquidated or merged with any other corporation (including a member of the
Holdings Group) unless, prior to each of cases (A), (B), (C), (D) and (E),
Holdings has received an opinion of counsel to the Holdings Group (which
opinion shall be reasonably satisfactory to CFI) or a favorable supplemental
ruling letter satisfactory to CFI, that such act would not adversely affect
the tax consequences of the Distribution to CFI or the shareholders of CFI,
as set forth in any ruling issued by the IRS or in any opinion of counsel to
CFI obtained in lieu of such a ruling.
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CFI TAX SHARING AGREEMENT PAGE 18
(b) For purposes of paragraph (a), a "Ruling Misrepresentation or
Omission" means with respect to Holdings or a Holdings Affiliate (i) the failure
of Holdings or a member of the Holdings Group to comply in all material respects
with each written representation and statement regarding Holdings or a Holdings
Affiliate made to the IRS in the Ruling Request or in a certificate provided to
counsel to the CFI Group for use in preparing its tax opinion with respect to
the Distribution, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Ruling Request (or certificate provided to
counsel) or the omission to state in the Ruling Request (or certificate provided
to counsel) a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only, in the case of both clause (i)
and (ii), insofar as any such statement or omission was made in reliance upon,
and in conformity with, written information furnished by Holdings, a Holdings
Affiliate, or a Representative of either specifically for use in the preparation
of the Ruling Request (or certificate provided to counsel).
SECTION 3.08. MANNER OF PAYMENT.
(a) Any payment required to be made pursuant to Sections 3.04, 3.05, 3.06,
3.07 or Section 3.10 with respect to any Tax Return shall be made by wire
transfer by the party obligated to make such payment (i) in the case of a refund
of Tax, within 10 days after receipt (whether by way of payment, credit, or
offset against any payments due or otherwise) of such refund or (ii) in the case
of the payment of Tax with respect to any such Tax Return, within 10 days after
the later of (x) such payment of Tax or (y) the delivery of written demand for
the payment hereunder to the party obligated to make such payment hereunder. Any
payment described in clause (i) and any demand for payment described in clause
(ii) shall be accompanied by a calculation consistent with past Tax Practices
setting forth the basis for the amount paid or demanded. Any payment not made
within the prescribed time period shall thereafter bear interest at the federal
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 19
underpayment rate established pursuant to section 6621(a)(2) (substituting "5
percentage points" for "3 percentage points" in the case any demand for payment
described in clause (ii) in an amount exceeding $100,000).
(b) Notwithstanding the foregoing, in the case of payments due from
Holdings as a result of any IRS audit adjustments for tax liability years
1984-1990 which result in a deferred tax asset for Holdings for taxable years
following the Distribution Date, at Holdings' request CFI shall enter into a
note agreement on reasonable commercial terms permitting Holdings to make
installment payments of the amounts due hereunder over a period not longer
than the lesser of (i) five years, or (ii) the period over which such deferred
tax asset is amortized by Holdings.
SECTION 3.09. LIABILITY FOR TAXES WITH RESPECT TO POST-DISTRIBUTION
TAXABLE PERIODS. Unless otherwise provided in this Agreement, the CFI Group and
the Holdings Group severally shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to taxable periods
beginning after the Distribution Date which are attributable to the CFI
Businesses and the Holdings Businesses, respectively.
SECTION 3.10. CARRYBACKS AND CARRYFORWARDS.
(a) In the event that Holdings, any Holdings Affiliate or the Holdings
Group incurs a loss or realizes a tax credit in a Tax Return filed for periods
after the Distribution Date, loss or tax credit will not be carried back to any
Consolidated Group Tax Return without the specific consent of CFI. CFI need
consent only if the carryback of such loss or credit to the Consolidated Group
return will cause no detriment to CFI's tax position. In determining whether a
carryback is likely to cause a detriment to its tax position, CFI may take into
account audit risks resulting from claiming a carryback. If CFI agrees to
carryback such loss or credit, or is required by law to carryback such loss or
credit, Holdings shall be entitled to its allocable share of any refund of Tax
obtained by the
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CFI TAX SHARING AGREEMENT PAGE 20
Consolidated Group (or any member of the Consolidated Group in a Combined
Jurisdiction) as a result of the carryback of losses or credits of any member of
the Holdings Group from any taxable period beginning after the Distribution Date
to any taxable period ending before or including the Distribution Date. Such
refund is limited to the net amount received by CFI (by refund, offset against
other Taxes or otherwise), net of any net Tax cost incurred by CFI or a CFI
Affiliate, which would include the reduction of minimum tax credits previously
utilized by CFI, resulting from such refund, and shall be paid in the manner and
at the time specified in Section 3.08. In determining the net amount received by
CFI as a result of a carryback of losses or tax credits by Holdings or a
Holdings Affiliate, amounts carried back by Holdings or a Holdings Affiliate
shall be considered to reduce the Consolidated Group's tax burden only to the
extent that such carrybacks reduce the Consolidated Group's tax burden after
first taking into account all other tax credits and carrybacks available to the
Consolidated Group. Holdings shall indemnify CFI for any interest, fines and
penalties resulting from the carryback of any item under this paragraph.
Notwithstanding this Section 3.10, Holdings and any member of the Holdings Group
shall have the right, in its sole discretion, to make the election under section
172(b)(3) of the Code, which would eliminate or limit the carryback of any loss
or credit of the Holdings Group to any taxable period ending before or including
the Distribution Date.
(b) If CFI has a carryback of losses or credits from any member of the CFI
Group from any taxable period beginning after the Distribution Date to any
taxable period ending before or including the Distribution, CFI shall be
entitled to any refund received from the Taxing Authority attributable to the
carryback. To the extent such refund is reduced as a result of the inclusion of
the Holdings Group in the Tax Return to which the item is carried back and
results in additional minimum tax credits or other credits being made available
to the Holdings Group, Holdings shall pay to CFI the amount of any tax savings
when and if the additional benefits are realized by Holdings.
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CFI TAX SHARING AGREEMENT PAGE 21
(c) Within 180 days following the close of the CFI tax year in which the
Distribution Date occurs, CFI shall provide a schedule of the relevant
carryforward items allocable to Holdings for tax years following the
Distribution Date. CFI shall indemnify Holdings for any interest, fines or
penalties resulting from the overstatement of the carryforward items or CFI
shall reimburse Holdings for any Tax benefits (including interest at the rate
specified in Section 3.08) foregone by Holdings as a result of the
understatement of the carryforward items. Notwithstanding the foregoing, CFI
shall not be required to so indemnify or reimburse Holdings (i) with respect to
any overstated allocation of alternative minimum tax credits made by CFI on a
good faith basis, or (ii) to the extent the overstatement or understatement of
any carryforward items other than alternative minimum tax credits results (x)
from a change in law or regulation (including the retroactive effectiveness of
any such law or regulation), (y) from an audit or other adjustments to the Tax
Returns as filed, or (z) from incorrect information supplied by Holdings.
ARTICLE IV
COOPERATION AND EXCHANGE OF INFORMATION
SECTION 4.01. COOPERATION.
(a) CFI and Holdings shall cooperate (and shall cause any member of their
group to cooperate) fully at such time and to the extent reasonably requested by
the other party in connection with the preparation and filing of any return or
the conduct of any audit, dispute, proceeding suit or action concerning any
issues or any other matter contemplated hereunder. Such cooperation shall
include, without limitation, (i) the retention and provision on demand of books,
records, documentation or other information relating to any Tax Return until the
later of (x) the expiration of the applicable federal or state statute
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CFI TAX SHARING AGREEMENT PAGE 22
of limitation (giving effect to any extension, waiver, or mitigation thereof)
and (y) in the event any claim has been made under this Agreement for which such
information is relevant, until a Final Determination with respect to such claim;
(ii) the provision of additional information with respect to and explanation of
Tax Practices and material provided under clause (i) of this section; (iii) the
execution of any document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return by any member of the CFI Group or
the Holdings Group, or in connection with any audit, proceeding, suit or action
addressed in the preceding sentence; and (iv) the use of the parties' reasonable
best efforts to obtain any documentation from a governmental authority or third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
(b) CFI and Holdings shall use reasonable efforts to keep each other
advised as to the status of Tax audits and litigation involving any items
reportable on a consolidated federal income Tax Return or a combined Tax Return
with respect to the Holdings Businesses for pre-Distribution periods and which
(i) give rise to a Tax which could be assessed against Holdings (or any
Affiliate thereof) or (ii) could give rise to a liability of Holdings (or any
Affiliate thereof) under this Agreement (either of which constitutes a
"Liability Issue"). The primary person for dealing with the Holdings Liability
Issues in Tax audits shall be a Holdings Representative. CFI and Holdings shall
promptly furnish each other copies of any inquiries or requests for information
from any Taxing Authority or any other administrative, judicial or other
governmental authority concerning any Liability Issue. CFI shall notify Holdings
as to which inquiries or information requests it desires to monitor and, with
respect to such matters, Holdings will submit for CFI approval (which shall not
be unreasonably withheld) the information to be provided to a Taxing Authority
or any governmental authority in response to the inquiries or requests. Holdings
agrees to timely notify CFI regarding any proposed written communication
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CFI TAX SHARING AGREEMENT PAGE 23
(I.E., communications not related to inquiries or requests for information) by
Holdings or a Holdings Affiliate to any such Taxing Authority or other
governmental authority with respect to such Liability Issue and CFI shall
subsequently notify Holdings as to which Liability Issues CFI desires to
monitor. Upon request by CFI, Holdings shall provide copies of such written
communications and documents to be submitted therewith and receive approval from
CFI to submit such communications (which approval shall not be unreasonably
withheld and shall be given on a timely basis) prior to submission to the Taxing
Authority or other governmental authority. CFI shall have the right to consult
with Holdings regarding any responses attributable to such requests. CFI shall
indemnify Holdings for any costs which would not have been incurred, but for
CFI's failure to grant approval to Holdings to submit information for which
CFI's approval is required by this section; provided, however, this
indemnification shall not apply to CFI actions or decisions made pursuant to
Section 2.02(b). Furthermore, CFI and Holdings, as the case may be, shall each
promptly furnish to the other upon receipt a copy of information document
requests, a notice of proposed adjustment, revenue agent's report or similar
report or notice of deficiency together with all relevant documents and memos
related to the foregoing documents, notices or reports, received by any member
of the CFI Group or any member of the Holdings Group, as the case may be,
relating to any Liability Issue.
(c) CFI shall advise Holdings with respect to items reported in a revenue
agent's report and provide periodic updates, as necessary, as to the resolution
of any such items relating to the Consolidated Group that may affect any member
of the Holdings Group after the Distribution Date.
(d) Holdings shall promptly notify CFI of any inquiries by any Taxing
Authority or other administrative, judicial or other governmental authority that
relates to any Other Taxes that may be imposed on CFI or a CFI Affiliate.
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CFI TAX SHARING AGREEMENT PAGE 24
SECTION 4.02. CONTEST PROVISIONS.
(a) Subject to the cooperation provisions of Section 4.01, CFI shall have
full responsibility for and discretion in handling any Tax controversy,
including, without limitation, an audit, technical advice request, arbitration
or dispute resolution procedure, protest to the Appeals Division of the IRS,
and litigation in Tax Court or any other court of competent jurisdiction (a "Tax
Controversy"), involving a Tax Return of the Consolidated Group or a Tax Return
for a Combined Jurisdiction. However, upon request by Holdings, and subject to
CFI approval (which may not be unreasonably withheld) and the cooperation
provisions of Section 4.01, Holdings shall have full responsibility and
discretion in the handling, at Holdings' expense of any Tax Controversy with
respect to any item reported on a Holdings or Holdings Affiliate Tax Return that
would give rise to a payment of Tax for which Holdings would be liable, or a
refund of Tax for which Holdings would be entitled to receive payment, under
Article III hereof. If CFI approval is not granted to Holdings for the handling
of a Tax Controversy item, CFI shall provide Holdings with a timely written
response which sets out the reasons for not granting the approval. Furthermore,
CFI shall be subject to the cooperation provisions of Section 4.01 and shall
allow Holdings, at Holdings' expense, the right to consult with CFI with respect
to such Tax Controversy.
(b) In addition to the cooperation and contest provisions of Section 4.01
and Section 4.02(a), in the event that a notice of deficiency is received by CFI
from any Taxing Authority and such notice relates in whole or in part to
Restructuring Taxes for which Holdings would be liable to CFI pursuant to
Section 3.06 hereof (the "Holdings Restructuring Issue") then --
(1) CFI, upon receiving written request from Holdings, which shall be
given no later than a date reasonably necessary to permit preparation
and timely filing
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CFI TAX SHARING AGREEMENT PAGE 25
of a petition in the Tax Court for redetermination of the deficiency,
shall timely file such petition at Holdings' expense; provided,
however, that upon the request of Holdings, CFI shall, at Holdings'
expense: (A) pay the amount of the deficiency (provided that Holdings
has loaned to CFI no later than three (3) business days before CFI
pays such deficiency, without interest and until a Final Determination
of the Holdings Restructuring Issue, 100 percent of the amount of the
portion of the deficiency relating to the Holdings Restructuring
Issue; (B) file a claim for refund of such Tax; and (C) if the claim
is denied, bring an action in a court of competent jurisdiction
seeking the refund of such Tax; and
(2) In the event that a judgment of the Tax Court or other court of
competent jurisdiction results in an adverse determination with
respect to the Holdings Restructuring Issue and CFI notifies Holdings
that it does not intend to appeal such Holdings Restructuring Issue,
then Holdings shall have the right to cause CFI to appeal such adverse
determination at Holdings' expense.
(3) Holdings and its Representatives, at Holding's expense, shall be
entitled to participate in all conferences, meetings, or proceedings
with any Tax Authority, the subject matter of which is or includes the
Holdings Restructuring Issue. Holdings and its Representatives, at
Holding's expense, shall be entitled to participate in all appearances
before any court, the subject matter of which includes the Holdings
Restructuring Issue.
(4) All actions taken under this Section 4.02(b) at Holding's request or
direction shall be at Holdings' expense.
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CFI TAX SHARING AGREEMENT PAGE 26
(5) The right to participate referred to in Section 4.02(b)(3) hereof
shall include the submission and content of documentation, protests,
memoranda of fact and law and briefs, the conduct of oral arguments or
presentations, the selection of witnesses, and the negotiations of
stipulations of fact with respect to the Holdings Restructuring Issue.
(6) Within five (5) business days of the receipt by CFI of a refund of any
amounts loaned to it by Holdings under paragraph (b)(1) above
(including any interest received by CFI), CFI shall pay such refunded
amount and interest, if any to Holdings net of any net Tax detriment
(as determined by CFI) incurred by CFI or a CFI Affiliate resulting
from such refund.
SECTION 4.03. INFORMATION FOR SHAREHOLDERS. CFI shall provide each
shareholder which receives Holdings stock pursuant to the Distribution with the
information necessary for each such shareholder to comply with the requirements
of section 355 of the Code and the Treasury Regulations with respect to
statements that such shareholders must file with their federal income tax
returns demonstrating the applicability of section 355 to the Distribution.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. TAX INDEMNIFICATION.
(a) Holdings shall indemnify and hold harmless CFI and each CFI Affiliate
from and against any liability, cost or expense, including, without limitation,
any fine, penalty, interest, charge, attorney's fee or accountant's fee arising
out of fraudulent or negligent information, workpapers, documents and other
items prepared by Holdings or a Holdings
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 27
Affiliate used in the preparation of any Tax Return filed by CFI and/or the
Consolidated Group for any period during which Holdings or a Holdings Affiliate
was or has been a member of the Consolidated Group.
(b) Except as set forth in Section 5.01(a), CFI shall indemnify and hold
harmless Holdings and each Holdings Affiliate from and against any liability,
cost or expense, including, without limitation, any fine, penalty, interest,
charge, attorney's fee or accountant's fee arising out of fraudulent or
negligent preparation of any Tax Return filed by CFI and/or the Consolidated
Group for any period during which Holdings or a Holdings Affiliate was or has
been a member of the Consolidated Group.
SECTION 5.02. BREACH. CFI shall indemnify and hold harmless each member
of the Holdings Group and Holdings shall indemnify and hold harmless each member
of the CFI Group from and against any payment required to be made under this
Agreement as a result of the breach by a member of the CFI Group or the Holdings
Group, as the case may be, of any obligation under this Agreement.
SECTION 5.03. DISCLAIMERS.
(a) CFI disclaims all knowledge of or responsibility for the content or
accuracy of any separate returns or filings made by Holdings or Holdings
Affiliates except to the extent such returns include information provided by CFI
pursuant to Section 3.10(c).
(b) Holdings disclaims all knowledge of or responsibility for the content
or accuracy of any (i) separate returns or filings made by CFI or CFI
Affiliates, (ii) Tax Returns or filings made by or on behalf of the Consolidated
Group or any member thereof for any period except to the extent such federal Tax
Returns or filings reflect items of the
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 28
Holdings Businesses, and (iii) Tax Returns or filings in Combined Jurisdictions,
except to the extent such Tax Returns or filings reflect items of the Holdings
Businesses.
SECTION 5.04. RESOLUTION OF CERTAIN DISPUTES.
(a) Disagreements between CFI and Holdings with respect to amounts that
either claims is owed by the other (or by an Affiliate of the other) under this
Agreement or other matters under this Agreement that are not resolved by mutual
agreement shall be resolved by arbitration pursuant to this Section 5.04. Until
the time of a final resolution by the arbitrator selected pursuant to Section
5.04(b), the time period for any payments described in Section 3.08 (other than
loans required by Section 4.02(c)) shall be tolled. Such tolling, however, shall
not affect the accrual of interest.
(b) SELECTION OF THE ARBITRATOR. Any arbitrator selected pursuant to this
Section 5.04(b) shall have at least ten years of experience in the field of
corporate taxation, shall be an attorney licensed to practice law in any state
of the United States or a certified public accountant licensed to practice in
any state of the United States and shall not be or have been routinely employed
by, retained or affiliated with either party. The parties shall first attempt to
agree on a mutually satisfactory arbitrator. If the parties are unable to agree
on a mutually satisfactory arbitrator within 30 days after either party notifies
the other in writing of a disagreement requiring arbitration pursuant to this
Section 5.04 (15 days in the case of a disagreement with respect to Section 4.01
or Section 4.02), each party shall select an arbitrator. The two arbitrators
thus selected shall agree on and select a third arbitrator. If the two
arbitrators cannot agree on such third arbitrator within 30 days (15 days in the
case of a disagreement with respect to Section 4.01 or Section 4.02), the
parties shall each select a different arbitrator and renew the foregoing
procedure. If the position of arbitrator is vacated by virtue of events outside
the control of the parties, the person or persons who originally selected the
arbitrator to fill
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 29
such position shall select a new arbitrator to fill the position, unless the
parties agree to continue the arbitration with the remaining arbitrators. When
used hereafter, the term "arbitrator" may refer to the three arbitrators so
selected when appropriate and a decision of a majority of such arbitrators shall
constitute a decision by the arbitrator in the appropriate context.
(c) ARBITRATION PROCEDURES.
(1) The arbitration shall be conducted in accordance with the rules set
forth in Exhibit A. The arbitration shall not be conducted under the
auspices of the American Arbitration Association.
(2) Each party within 30 days after engagement of the arbitrator shall
submit to the arbitrator a written statement of the party's position
(including, where relevant, the total net amount it asserts is owed by
it or is due to it) regarding the total amount in dispute, together
with a copy of such calculation.
(3) The arbitrator shall base his or her decision on the following
standards. In the case of a factual dispute between the parties, the
arbitrator shall make a determination of the facts. In the case of a
dispute regarding a legal issue, including the proper application of
the Tax laws or the proper interpretation of this Agreement, the
arbitrator shall make a determination in accordance with his or her
best legal judgment. Upon making determinations with respect to all
factual and legal issues in dispute, the arbitrator shall determine
the amount due by one party to the other or such other matter with
respect to the matter subject to the arbitration. Where relevant, as
to each matter in dispute, the arbitrator shall find in favor of the
party whose statement submitted pursuant
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 30
to paragraph (2) above proposed the amount closest to the amount so
determined.
(4) The arbitrator shall render a written decision stating only the result
of such decision as soon as practicable. The arbitrator shall also
orally explain the bases of such decision to both parties as soon as
practicable. If and only if both parties request, the arbitrator shall
state the basis of such decision in writing. As to each matter in
dispute, the arbitrator's decision shall be in an amount equal to one
of the total amounts asserted by one of the parties in the written
statements submitted pursuant to paragraph (2) above. The arbitrator
shall not, and is not authorized, to render a decision in any other
amount.
(5) The arbitrator's decision shall be final and binding on the parties.
No appeal to any court is contemplated by this Agreement and each
party, to the maximum extent permissible by law, waives and
relinquishes all rights and entitlements to appeal such decision.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 31
SECTION 5.05. NOTICES. Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed given upon delivery
if delivered personally or by courier, upon mailing if sent by certified mail,
return receipt requested, postage prepaid, or upon completion of transmission if
sent by telecopy or facsimile, to the parties at the following address:
CFI at: 3240 Hillview Avenue
Palo Alto, CA 94304
Attn: General Counsel
Holdings at: 175 Linfield Drive
Menlo Park, CA 94025
Attn: General Counsel
SECTION 5.06. COMPLETE AGREEMENT. This Agreement and the Exhibit thereto
constitute the entire agreement of the parties concerning the subject matter
hereof, supersede all other agreements, whether or not written, in respect of
any Tax between or among CFI and CFI Affiliates, on the one hand, and Holdings
and Holdings Affiliates, on the other hand. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto.
SECTION 5.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflict of laws of the State of California.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 32
SECTION 5.08. SUCCESSORS AND ASSIGNS. A party's rights and obligations
under this Agreement may not be assigned without the prior written consent of
the other party. All of the provisions of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
SECTION 5.09. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties to this Agreement and their respective Affiliates and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without the Agreement.
SECTION 5.10. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions. Any prohibition
or unenforceability of any provision of this Agreement in any jurisdiction shall
not invalidate or render unenforceable the provision in any other jurisdiction.
SECTION 5.11. EXPENSES. Unless otherwise provided in this Agreement, each
party shall bear any and all expenses that arise from their respective
obligations under this Agreement (including Arbitration). In the event either
party to this Agreement brings an action or proceeding for breach or enforcement
of this Agreement, the prevailing party in such action or proceeding, whether or
not such action or proceeding proceeds to final judgment, shall be entitled to
recover as an element of its costs, and not as damages, such reasonable
attorneys' fees as may be awarded in the action or proceeding in addition to
whatever other relief to which the prevailing party may be entitled.
<PAGE>
CFI TAX SHARING AGREEMENT PAGE 33
SECTION 5.12. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signature thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
CONSOLIDATED FREIGHTWAYS, INC.
By:
--------------------------------
Its:
-------------------------------
CONSOLIDATED FREIGHTWAYS CORPORATION
By:
-------------------------------
Its:
-------------------------------
<PAGE>
FORM OF
REIMBURSEMENT AND INDEMNIFICATION AGREEMENT
between
CONSOLIDATED FREIGHTWAYS, INC.
and
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE
<PAGE>
TABLE OF CONTENTS
PAGE
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Existing and Future Claims. . . . . . . . . . . . . . . . . . . . . . . . 3
3. CFCD Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. CFCD Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. Letter of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Release of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10. Change in Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. Duration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .10
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . .11
15. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
16. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
17. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
18. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
i
<PAGE>
PAGE
19. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
20. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
21. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
22. Duty to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ii
<PAGE>
REIMBURSEMENT AND INDEMNIFICATION AGREEMENT
THIS REIMBURSEMENT AND INDEMNIFICATION AGREEMENT ("Agreement") is entered
into as of October 1, 1996 (the "Commencement Date"), by and between
Consolidated Freightways, Inc., a Delaware corporation (together with its wholly
owned subsidiaries, "CFI"), and Consolidated Freightways Corporation of
Delaware, a Delaware corporation (together with its wholly owned subsidiaries,
"CFCD").
RECITALS
A. CFCD is and will remain, until the distribution of the common stock of
Consolidated Freightways Corporation to the stockholders of CFI (the date of
such distribution being referred to herein as the "Distribution Date"), a wholly
owned subsidiary of CFI.
B. CFI administers, either through a subsidiary or with a third-party
administrator, an insurance program (the "Insurance Program") for its corporate
entities with respect to (i) Workers' Compensation Claims, as defined herein,
and (ii) Public Liability and Property Damage Claims, as defined herein.
C. Under the Insurance Program, CFI administers claims made against CFCD
with respect to CFCD's obligations, including similar obligations relating to
Leland James Service Corporation ("LJSC") (collectively, and excluding any such
obligations relating to LJSC which arise or are incurred prior to or on the
Distribution Date, the "CFCD Obligations"), and provides certain oversight
services, at the direction of CFCD, for claims under (i) the workers'
compensation statutory, regulatory and common law systems in each of the states
in which CFCD does business and, (ii) certain public liability and property
damage statutory, regulatory and common law systems in each of the states in
which CFCD does business. Where required by law or by contract, CFI provides
the necessary insurance, guarantees or collateral for the performance of the
CFCD Obligations in each such state.
D. Obligations that arise with respect to CFCD under the Insurance
Program are the responsibility of CFCD. However, in the past these amounts have
been advanced by CFI and CFCD has reimbursed CFI for such payments.
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<PAGE>
E. CFCD and CFI desire to memorialize in writing the reimbursement and
indemnification arrangements which have existed between CFI and CFCD with
respect to amounts owed and advanced under the Insurance Program.
NOW THEREFORE, in consideration of the agreement of CFI to continue
administering the Insurance Program as contemplated in Section 2 below and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
CASH COLLATERAL AGREEMENT: shall have the meaning specified in Section
6(a).
CLAIM: means any claim, judgment, loss, deficiency, damages, punitive or
exemplary damages, fine or penalty, liability, costs and expenses (including
reasonable attorneys' fees, charges and disbursements) whether required to be
paid to a third party or otherwise incurred in connection with or arising from
any claim, suit, action or proceeding.
DEPOSIT BANK: shall have the meaning specified in Section 6(a).
INDEMNIFIED PARTIES: means CFI, its agents and their present or former
officers, directors, shareholders, agents, employees, representatives,
successors-in-interest, parents, affiliates, insurers (including, without
limitation, insurers for CFI and CFCD), attorneys and assigns.
INSUFFICIENCY NOTICE: shall have the meaning specified in Section 6(c).
LETTER OF CREDIT: means an irrevocable, unconditional letter of credit
with a face amount equal to $30,000,000, issued by a bank approved by CFI.
LOSS: means any judgment, loss, deficiency, damages, liability, costs or
expenses.
MINIMUM BALANCE: means, at any time, an amount equal to the aggregate
amount paid during the eight immediately preceding business days for Public
Liability and Property Damage Claims, Workers'
2
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Compensation Claims and related expenses, which amount shall be subject to
increase or decrease in accordance with Section 6(c).
MORTGAGE PROPERTY: shall have the meaning specified in Section 8.
MORTGAGES: shall have the meaning specified in Section 8.
PERMITTED EXCEPTIONS: shall have the meaning specified in Section 10(d).
PROPERTY VALUE: means the fair market value of each Mortgage Property.
PUBLIC LIABILITY AND PROPERTY DAMAGE CLAIMS: means Claims made against
CFCD or LJSC (excluding any such obligations relating to LJSC which arise or are
incurred prior to or on the Distribution Date) under certain public liability
and property damage statutory, regulatory and common law systems and which CFCD
directs CFI to administer under the Insurance Program.
REIMBURSEMENT OBLIGATIONS: shall have the meaning specified in Section
6(a).
RELEVANT CLAIM: means a Public Liability and Property Damage Claim or a
Workers' Compensation Claim.
RESERVE ACCOUNT: shall have the meaning specified in Section 6(a).
RESERVE OBLIGATION: means CFCD's obligation to deposit sums in the Reserve
Account pursuant to Sections 6(b) and 6(c).
SECURITY SCHEDULE: shall have the meaning specified in Section 9(a).
TITLE COMPANY: means any title company satisfactory to CFI.
WORKERS' COMPENSATION CLAIMS: means Claims made against CFCD or LJSC
(excluding any such obligations relating to LJSC employees which arise or are
incurred prior to or on the Distribution Date, other than relating to
employees who remain actively employed by LJSC following the Distribution
Date) under the workers' compensation statutory, regulatory and common law
systems and which CFCD directs CFI to administer under the Insurance Program.
3
<PAGE>
2. EXISTING AND FUTURE CLAIMS. Effective as of the Commencement Date,
CFCD will obtain its own insurance for the CFCD Obligations arising from and
after the Commencement Date. CFI will not administer (but shall provide certain
oversight services for the period beginning the Commencement Date and ending the
Distribution Date with respect to) claims against CFCD which are insured under
that separate insurance or result from occurrences on or after the Commencement
Date. As of the Commencement Date, the only claims which CFI will administer
will be claims of the type it has ordinarily and customarily administered and
that arise out of occurrences prior to the Commencement Date. CFI will
administer these claims either itself or through a third-party administrator.
CFI will not provide the necessary insurance, guarantees or collateral for the
performance of the CFCD Obligations for any claim occurring after the
Commencement Date. CFI will maintain the necessary collateral and security on
claims occurring prior to the Distribution Date.
3. CFCD REIMBURSEMENT. Upon demand by CFI, CFCD agrees to immediately
reimburse CFI for all amounts advanced and costs reasonably incurred by CFI in
connection with the CFCD Obligations which are in excess of the Reserve Amount
required under Section 6(a) hereof.
4. CFCD INDEMNIFICATION. CFCD, at its own expense, shall indemnify,
defend and hold the Indemnified Parties harmless from and against any Relevant
Claim against the Indemnified Parties to the extent the basis of such Relevant
Claim is that: (i) CFCD has failed to pay any amounts owed which constitute
CFCD Obligations, (ii) a third party has been or may be injured or damaged in
any way by any breach by CFCD of any of its duties, representations or
warranties under this Agreement, (iii) CFCD or any of its employees, agents, or
servants acted improperly in connection with the notification, investigation,
adjustment, and settlement of claims and losses arising under the Insurance
Program, and (iv) there is any other liability or obligation arising either out
of CFI's (or its agents') provision of certain oversight services for the period
beginning the Commencement Date and ending the Distribution Date or out of CFI's
(or its agents') administration or operation of the Insurance Program, except to
the extent that same arises from the gross negligence or willful misconduct of
CFI (or its agents). The provision of indemnification under this Section 4
shall be in a like manner to the provision of indemnification under the
Distribution Agreement (as defined herein).
5. EXCULPATION. CFI and its agents shall not be liable to CFCD for any
Losses which arise in any manner from the operation or administration of the
4
<PAGE>
Insurance Program (including but not limited to the handling of insurance claims
or any failure to obtain insurance) except to the extent that same arises from
the gross negligence or willful misconduct of CFI. CFCD hereby waives all
claims against CFI and its agents for such Losses and the cost and expense of
defending against claims relating to such Losses, except to the extent that same
arises from the gross negligence or willful misconduct of CFI. CFCD expressly
waives any and all rights under section 1542 of the Civil Code of California,
which provides as follows:
"A General Release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
Release, which if known by him must have materially affected his
settlement with the debtor."
6. RESERVE ACCOUNT.
(a) ESTABLISHMENT OF RESERVE ACCOUNT. As soon as practicable hereafter,
but in any event no later than the Distribution Date, CFCD shall establish a
deposit account (the "Reserve Account") at a California branch of a bank
selected by CFI (the "Deposit Bank"), which Reserve Account shall be established
in the name of CFI, as secured party, to hold funds for the payment of CFCD's
reimbursement obligations hereunder (collectively, the "Reimbursement
Obligations"). CFCD shall deposit the Minimum Balance into the Reserve Account
on the date that it is established. Amounts held in the Reserve Account shall
be invested at the sole discretion of CFI. Any dividends or interest earned on
the Reserve Account shall be added to balance thereof and shall be taxable
income to CFCD. Prior to the establishment of the Reserve Account, CFI and CFCD
shall execute and deliver a Cash Collateral Agreement in the form of Exhibit A
attached hereto (the "Cash Collateral Agreement"), which agreement shall govern
the establishment and maintenance of the Reserve Account.
(b) USE OF RESERVE ACCOUNT. At any time and from time to time during the
term of this Agreement, CFI shall have the right to immediately withdraw funds
from the Reserve Account to reimburse itself for any amounts advanced and costs
incurred by CFI in connection with CFCD Obligations. The Cash Collateral
Agreement shall provide that on the first business day of each week during the
term hereof, the Deposit Bank shall deliver written notice to CFI and CFCD by
telecopy setting forth the balance of the Reserve Account as of the close of
business on the preceding business day. In the event that the balance disclosed
in such notice is less than the Minimum Balance, then CFCD shall
5
<PAGE>
deposit such shortfall into the Reserve Account within three (3) business
days following its receipt of notice from the Deposit Bank.
(c) ADJUSTMENT OF MINIMUM BALANCE AMOUNT. In the event that, from time
to time, CFI determines based upon an analysis of payments of CFCD
Obligations that the amount of the Minimum Balance is insufficient to satisfy
the Reimbursement Obligations as they arise, then (i) CFI shall deliver
written notice of such insufficiency (the "Insufficiency Notice") to CFCD
together with documentation supporting such analysis and (ii) the Minimum
Balance shall thereafter for the term of this Agreement (unless thereafter
adjusted pursuant to the terms hereof) be increased by an amount equal to
such insufficiency. Not later than three (3) business days following CFCD's
receipt of an Insufficiency Notice, CFCD shall deposit the amount of such
insufficiency into the Deposit Account. Likewise, upon request of CFCD, CFI
shall conduct an analysis of payments of CFCD Obligations for the purpose of
determining if the Minimum Balance should be reduced, using the standard of
eight days of estimated payments, excluding extraordinary payments. In the
event that CFI determines that the Minimum Balance should be reduced, then
(i) CFI shall promptly deliver written notice thereof to CFCD together with
documentation supporting such analysis and (ii) the Minimum Balance shall
thereafter for the term of this Agreement (unless thereafter adjusted
pursuant to the terms hereof) be reduced in accordance with CFI's analysis.
7. LETTER OF CREDIT. On or prior to the Distribution Date, CFCD shall
deliver to CFI a Letter of Credit. CFI shall have the right to draw upon the
Letter of Credit in San Francisco, California, in accordance with the terms of
this Agreement by presentation to the issuer thereof of (i) CFI's sight draft
and (ii) a certificate stating that CFI has the right to draw upon the Letter of
Credit in accordance with the terms hereof. In the event that at any time while
this Agreement remains in effect, CFCD fails to comply with its Reserve
Obligation in accordance with Section 6 hereof, then CFI shall have the right to
draw upon the Letter of Credit in an amount equal to the amount CFCD was
required to deposit in to the Reserve Account in accordance with Section 6
hereof and deposit such draw proceeds into the Reserve Account. On or before
the fifth (5th) business day following any such draw, CFCD shall deliver to CFI
an additional Letter of Credit so that the aggregate face amount of all Letters
of Credit held by CFI shall equal $30,000,000 (or such lesser amount as provided
in Section 9 below).
8. MORTGAGES. On or before the Distribution Date, CFCD shall execute
and acknowledge four (4) copies of the mortgage in the form of Exhibit B
attached hereto (collectively, the "Mortgages") with respect to each of the
real properties identified on Exhibit C attached hereto (the "Mortgage
Properties"). The Mortgages shall constitute valid first priority liens
against the fee title interest in the Mortgage Properties (subject only to
such defects, liens, encum-
6
<PAGE>
brances, assessments, security interests, restrictions, easements and other
title exceptions as shall be approved by the CFI), which Mortgages shall
secure the timely payment and performance of CFCD's obligations hereunder,
including, without limitation, the Reimbursement Obligations and the Reserve
Obligations. Concurrently with the execution and delivery of the Mortgages,
CFCD shall deliver the following to CFI:
(a) UCC FINANCING STATEMENTS. UCC-1 financing statements (in
form and substance reasonably acceptable to CFI) covering fixtures owned by
CFCD and affixed to, or used in connection with, each Mortgage Property, in
each case appropriately completed and duly executed, acknowledged and filed
in the appropriate land offices.
(b) GENERAL ASSIGNMENT. A first priority assignment to CFI (in
form and substance reasonably acceptable to CFI) of CFCD's interest in and
to all leases relating to each Mortgage Property, material service
contracts concerning or affecting such Mortgage Property and all permits,
approvals and licenses issued with respect to such Mortgage Property.
9. RELEASE OF SECURITY.
(a) ANNUAL RELEASE OF MORTGAGES. On the first anniversary of the
Commencement Date and on each anniversary of the Commencement Date thereafter,
CFI shall cause one or more Mortgage Properties to be released from the lien(s)
of the Mortgages so that the aggregate Property Value of the Mortgage Properties
which shall continue to be encumbered by Mortgages immediately following such
release shall be as close as possible to (but not less than) the Property Value
set forth for the corresponding year on the schedule set forth in Section 9(d)
below (the "Security Schedule"). For the purposes of this Section 9(a), CFI and
CFCD agree that the Property Value of each Mortgage Property equals the value
identified on Exhibit B attached hereto and such value shall be the Property
Value used by CFI in determining which Mortgage Properties shall be released
from the lien of the Mortgages in accordance with this Agreement; provided,
however, that in the event either party reasonably believes that the aggregate
value of the Mortgage Properties has increased or decreased by 20% or more, then
the parties shall agree on an independent MAI appraiser to determine the
Property Value of the Mortgage Properties, which determination shall be binding
on the parties for the purposes of this Section 9(a) and Section 10(b) hereof.
Subject to the foregoing, CFCD shall have the sole and absolute right to
determine which Mortgage
7
<PAGE>
Properties are to be released from the lien of the Mortgages in accordance
with this Section 9(a).
(b) DELIVERIES. In connection with any proposed release of a Mortgage
Property, CFCD shall (not later than ten (10) Business Days prior to the
proposed date of release) deliver or cause to be delivered to CFI:
(i) An officer's certificate setting forth that, to the best
knowledge of the certifying Person, no default has occurred and is
continuing hereunder or under the Mortgages.
(ii) A copy of the instruments necessary to effect the release of the
Mortgages.
(c) ANNUAL REDUCTION OF LETTER OF CREDIT FACE AMOUNT. On the first
anniversary of the Commencement Date and on each anniversary of the
Commencement Date thereafter, CFI shall permit the aggregate face amount of
the Letter(s) of Credit to be reduced to the face amount set forth for the
corresponding year on the Security Schedule.
In connection with any release pursuant to this Section 9(b), and after CFCD
has delivered the items required pursuant to the subparagraphs (i) and (ii)
above, CFI shall promptly execute and deliver any instrument reasonably
necessary or appropriate to release the Mortgage Property to be released
pursuant to this Section 9(b).
(d) SECURITY SCHEDULE.
COMMENCEMENT
DATE FACE AMOUNT OF PROPERTY VALUE OF
ANNIVERSARY LETTER OF CREDIT MORTGAGE PROPERTIES
- ------------ ---------------- -------------------
1997 $30,000,000 $50,000,000
1998 $20,000,000 $30,000,000
1999 $20,000,000 $10,000,000
2000 $10,000,000 $0
2001 - termination $ (1) $0
__________________________
(1) The lesser of $10,000,000 or 100% of the reserve for Relevant Claims.
8
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10. CHANGE IN COLLATERAL.
(a) Notwithstanding anything to the contrary herein, in the event
that, at any time prior to the fourth (4th) anniversary of the Commencement
Date, CFI (i) becomes aware of an adverse physical condition or defect
affecting any Mortgage Property which diminishes the Property Value of such
Mortgage Property by 20% or more from the corresponding value set forth on
Exhibit B hereto and (ii) delivers written notice to CFCD of such condition
or defect together with a written report, opinion, or appraisal prepared by
an independent third party expert (who is licensed to prepare such a report,
opinion or appraisal and is an employee or member of a nationally recognized
firm), which report, opinion or appraisal confirms unequivocally that the
Property Value of the impacted Mortgage Property has diminished by 20% or
more as a result of such condition or defect, then CFCD shall either
(i) increase the face amount of the Letter of Credit by the amount of such
diminution or (ii) execute, acknowledge and deliver to CFI a Mortgage
together with the documents identified in Sections 8(a) through 8(c), which
encumbers real property (other than the existing Mortgage Properties) owned
by CFCD, which (1) has been approved by CFI, which approval shall not be
unreasonably withheld, and (2) CFCD can demonstrate to CFI's reasonable
satisfaction that the new Mortgage Property has a Property Value equal to or
in excess of the amount of such diminution.
(b) Notwithstanding anything to the contrary herein, CFCD may, at
any time prior to the fourth (4th) anniversary of the Commencement Date,
substitute one or more parcels of real property for any Mortgage Property for
another, provided that CFCD (i) delivers written notice to CFI of its
intention to substitute a Mortgage Property together with a general
description of the substitute property and (ii) executes, acknowledges and
delivers to CFI a Mortgage together with the documents identified in Sections
8(a) through 8(c), which encumbers the substitute property owned by CFCD and
provided further that (1) the substitute has been approved by CFI, which
approval shall not be unreasonably withheld, and (2) CFCD can demonstrate to
CFI's reasonable satisfaction that the substitute property has a Property
Value equal to or in excess of the Property Value of the substituted Mortgage
Property.
11. COVENANTS.
(a) NOTICE TO ADDITIONAL INSUREDS. CFCD shall promptly provide
written notice to all third parties for whom CFCD has agreed to provide
insurance that such insurance will, as of the Distribution Date, no longer be
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provided by CFI or CF Financial Services, and will take steps to ensure that
alternative insurance arrangements are made in a timely manner.
(b) DEDUCTIBLES AND PREMIUMS. CFCD shall promptly pay all
deductibles, retentions and premiums applicable under the Insurance Program.
(c) INSURANCE. CFCD will keep insured by financially sound and
reputable insurers all property of a character usually insured by parties
engaged in the same or similar business similarly situated against loss or
damage of the kinds and in the amounts customarily insured against by such
parties and carry such other insurance as is usually carried by such parties and
as required in accordance with the terms of the Mortgages.
(d) LIMITATION ON LIENS. CFCD will not create, incur, assume or
suffer to exist any lien or encumbrance upon any of the Mortgage Property,
except the following liens (referred to herein as "PERMITTED EXCEPTIONS"):
(1) liens imposed by any governmental authority for taxes,
assessments or charges not yet delinquent;
(2) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(3) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the Mortgage Property subject thereto
or interfere with the ordinary conduct of the business of CFCD;
(4) liens arising under the Mortgages and related documents;
(5) any other liens approved by CFI in writing (which approval
may be withheld in the CFI's sole discretion); and
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(6) any extensions, renewals or replacements of the foregoing.
12. DURATION OF AGREEMENT. The parties agree that this Agreement shall
continue in full force and effect as long as there are any CFCD Obligations
outstanding. The parties agree that this Agreement shall continue in full force
and effect for the purpose of determining the rights and obligations of the
parties in the event such termination has occurred and subsequent thereto either
of the following occurs:
(a) A Relevant Claim arising under or in connection with the Insurance
Program which had been closed prior to the termination of this
Agreement is reopened; or
(b) A Relevant Claim arises under or in connection with the Insurance
Program based on an occurrence allegedly within the Insurance Program,
or the administration of a claim within the Insurance Program, but
which has not been reported prior to the termination of this Agreement
until such claims have been closed.
13. NOTICES. Except as otherwise provided herein, any notice or other
communication to be given hereunder shall be in writing and shall be (as elected
by the party giving such notice): (i) personally delivered; (ii) transmitted by
postage-prepaid registered or certified airmail, return receipt requested; (iii)
transmitted by facsimile (with a copy of such transmission by postage prepaid
registered or certified airmail, return receipt requested); or (iv) deposited
prepaid with a nationally recognized overnight courier service. Unless
otherwise provided herein, all notices shall be deemed to have been duly given
on: (a) the date of receipt (or if delivery is refused, the date of such
refusal) if delivered personally, by facsimile or by courier, or (b) three (3)
days after the date of posting if transmitted by mail. Either party may change
its address for notice purposes hereof on not less than three (3) days' prior
notice to the other party. Notice hereunder shall be directed to a party at the
address for such party which is set forth below:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attention: General Counsel
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Consolidated Freightways Corporation of Delaware
175 Linfield Drive
Menlo Park, California 94025
Attention: General Counsel
14. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all the parties hereto had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
15. ASSIGNABILITY. Without limiting the restrictions upon assignment and
transfer set forth herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors and assigns of the respective parties hereto.
16. GENDER AND NUMBER. Whenever required by the context hereof, the
singular shall include the plural and the plural shall include the singular.
The masculine gender shall include the feminine and neuter genders, and the
neuter shall include the masculine and feminine.
17. CAPTIONS. Sections, titles or captions in no way define, limit,
extend or describe the scope of this Agreement nor the intent of any of its
provisions.
18. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
19. INTEGRATION. This Agreement and that certain Distribution Agreement
entered into between CFI and Consolidated Freightways Corporation as of
__________, 1996, including any schedules, exhibits or other documents ancillary
thereto, contain the entire agreement of the parties with respect to the subject
matter hereof, and supersede all other agreements or understandings of any kind.
20. AMENDMENTS. This Agreement may not be amended, modified or
supplemented by the parties in any manner, except by an instrument in writing
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signed on behalf of each of the parties by a duly authorized officer or
representative.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the
principles of conflicts of laws thereof.
22. DUTY TO COOPERATE. CFCD agrees to cooperate with CFI in the
investigation of any Relevant Claim, to provide prompt notice of any Claim and
to provide any information CFI shall reasonably request for the purpose of
investigating a CFCD obligation. Neither party shall do anything to impair the
other party's equitable or contractual rights of subrogation against third
parties.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date first written above.
CONSOLIDATED FREIGHTWAYS, INC.,
a Delaware corporation,
on behalf of itself and its wholly owned
subsidiaries
By: _______________________________
Name:
Title:
CONSOLIDATED FREIGHTWAYS CORPORATION
OF DELAWARE, a Delaware corporation,
on behalf of itself and its wholly owned
subsidiaries
By: _______________________________
Name:
Title:
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FORM OF
CONSOLIDATED FREIGHTWAYS CORPORATION
1996 STOCK OPTION AND INCENTIVE PLAN
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
1996 STOCK OPTION AND INCENTIVE PLAN
SECTION PAGE
- ------- ----
1. Purpose; Types of Awards; Construction.................................. 1
2. Definitions............................................................. 1
3. Administration.......................................................... 6
4. Eligibility............................................................. 7
5. Stock Subject to the Plan............................................... 7
6. Specific Terms of Awards................................................ 8
7. Change in Control Provisions............................................ 14
8. Loan Provisions......................................................... 14
9. General Provisions...................................................... 14
i
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CONSOLIDATED FREIGHTWAYS CORPORATION
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the 1996 Stock Option and Incentive Plan of
Consolidated Freightways Corporation (the "Plan") is to afford an incentive to
non-employee directors, selected employees and consultants of Consolidated
Freightways Corporation (the "Company"), or any Subsidiary or Affiliate that now
exists or hereafter is organized or acquired, to acquire a proprietary interest
in the Company, to continue as employees or consultants, as the case may be, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business. Pursuant to Section 6 of the Plan, there may be granted
Stock Options (including "incentive stock options" and "nonqualified stock
options"), stock appreciation rights and limited stock appreciation rights
(either in connection with options granted under the Plan or independently of
options), restricted stock, restricted stock units, dividend equivalents and
other stock- or cash-based awards. The Plan also provides the authority to make
loans to exercise options or otherwise purchase shares of stock. The Plan is
designed to comply with the requirements for "performance-based compensation"
under Section 162(m) of the Code and the conditions for exemption from short-
swing profit recovery rules under Rule 16b-3 of the Exchange Act, and shall be
interpreted in a manner consistent with the requirements thereof.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity if, at the time of granting of
an Award or a Loan, (i) the Company, directly or indirectly, owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity or (ii) such entity, directly or
indirectly, owns at least 20% of the combined voting power of all classes of
stock of the Company.
(b) "Award" means any Option, SAR (including a Limited SAR),
Restricted Stock, Restricted Stock Unit, Dividend Equivalent or Other Stock-
Based Award or Other Cash-Based Award granted under the Plan.
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(c) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts that
have been designated by a Grantee in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under the
Plan upon his or her death, or, if there is no designated Beneficiary or
surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means a change in control of the Company,
which will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (A) the Company, (B) any trustee
or other fiduciary holding securities under an employee benefit plan
of the Company, or (C) any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of Stock), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) during any period of two consecutive years individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this Section 2(f)) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corpora-
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tion, other than (A) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or parent
entity) 50% or more of the combined voting power of the voting
securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person" (as
hereinabove defined) acquired 50% or more of the combined voting power
of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
(g) "Change in Control Price" means the higher of (i) the highest
price per share paid in any transaction constituting a Change in Control or (ii)
the highest Fair Market Value per share at any time during the 60-day period
preceding or following a Change in Control.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3.
(j) "Company" means Consolidated Freightways Corporation, a
corporation organized under the laws of the State of Delaware, or any successor
corporation.
(k) "Dividend Equivalent" means a right, granted to a Grantee
under Section 6(g), to receive cash, Stock, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award, and may be paid currently or on a deferred basis.
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(l) "Effective Date" means , 1996, the date that the Plan
----
was adopted by the shareholders of the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(n) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Committee. Unless otherwise determined by the Committee in good faith, the per
share Fair Market Value of Stock as of a particular date shall mean (i) the
closing sales price per share of Stock on the national securities exchange on
which the Stock is principally traded, for the last preceding date on which
there was a sale of such Stock on such exchange, or (ii) if the shares of Stock
are then traded in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Stock in such over-the-counter market for the
last preceding date on which there was a sale of such Stock in such market, or
(iii) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its sole discretion, shall determine.
(o) "Grantee" means a person who, as a non-employee director,
employee or consultant of the Company, a Subsidiary or an Affiliate, has been
granted an Award or Loan under the Plan.
(p) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(q) "Limited SAR" means a right granted pursuant to Section 6(c)
which shall, in general, be automatically exercised for cash upon a Change in
Control.
(r) "Loan" means the proceeds from the Company borrowed by a Plan
participant under Section 8 of the Plan.
(s) "NQSO" means any Option that is designated as a nonqualified
stock option.
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(t) "Option" means a right, granted to a Grantee under Section
6(b), to purchase shares of Stock. An Option may be either an ISO or an NQSO,
provided that ISO's may be granted only to employees of the Company or a
Subsidiary.
(u) "Other Cash-Based Award" means cash awarded under Section
6(h), including cash awarded as a bonus or upon the attainment of specified
performance criteria or otherwise as permitted under the Plan.
(v) "Other Stock-Based Award" means a right or other interest
granted to a Grantee under Section 6(h) that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, Stock, including, but not limited to (1) unrestricted Stock awarded as a
bonus or upon the attainment of specified performance criteria or otherwise as
permitted under the Plan, and (2) a right granted to a Grantee to acquire Stock
from the Company for cash and/or a promissory note containing terms and
conditions prescribed by the Committee.
(w) "Plan" means this Consolidated Freightways Corporation 1996
Stock Option and Incentive Plan, as amended from time to time.
(x) "Restricted Stock" means an Award of shares of Stock to a
Grantee under Section 6(d) that may be subject to certain restrictions and to a
risk of forfeiture.
(y) "Restricted Stock Unit" means a right granted to a Grantee
under Section 6(e) to receive Stock or cash at the end of a specified deferral
period, which right may be conditioned on the satisfaction of specified
performance or other criteria.
(z) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
(aa) "Stock" means shares of the common stock, par value $.01
per share, of the Company.
(bb) "SAR" or "Stock Appreciation Right" means the right,
granted to a Grantee under Section 6(c), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date
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of exercise of the right, with payment to be made in cash, Stock, or property as
specified in the Award or determined by the Committee.
(cc) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an Award,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards and make Loans; to determine the
persons to whom and the time or times at which Awards shall be granted and Loans
shall be made; to determine the type and number of Awards to be granted and the
amount of any Loan, the number of shares of Stock to which an Award may relate
and the terms, conditions, restrictions and performance criteria relating to any
Award or Loan; and to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards and Loans in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; to designate Affiliates; to construe and
interpret the Plan and any Award or Loan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to determine the terms and provisions of
the Award Agreements and any promissory note or agreement related to any Loan
(which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
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Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted or Loan made hereunder.
4. ELIGIBILITY.
Awards and Loans may be granted to selected employees, consultants and
directors (including directors who are not employees of the Company) of the
Company and its present or future Subsidiaries and Affiliates, in the discretion
of the Committee. In determining the persons to whom Awards and Loans shall be
granted and the type of any Award or the amount of any Loan (including the
number of shares to be covered by such Award), the Committee shall take into
account such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN.
The maximum number of shares of Stock reserved for the grant of Awards
under the Plan shall be equal to 15% of all outstanding stock of the Company as
of the Distribution Date, subject to adjustment as provided herein. No more
than 100% of the total shares available for grant may be awarded to a single
individual in a single year. Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company in the open market, in private transactions or
otherwise. If any shares subject to an Award are forfeited, cancelled,
exchanged or surrendered or if an Award otherwise terminates or expires without
a distribution of shares to the Grantee, the shares of stock with respect to
such Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan; PROVIDED THAT, in the case of forfeiture, cancellation, exchange or
surrender of shares of Restricted Stock or Restricted Stock Units with respect
to which dividends or Dividend
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Equivalents have been paid or accrued, the number of shares with respect to such
Awards shall not be available for Awards hereunder unless, in the case of shares
with respect to which dividends or Dividend Equivalents were accrued but unpaid,
such dividends and Dividend Equivalents are also forfeited, cancelled, exchanged
or surrendered. Upon the exercise of any Award granted in tandem with any other
Awards or awards, such related Awards or awards shall be cancelled to the extent
of the number of shares of Stock as to which the Award is exercised and,
notwithstanding the foregoing, such number of shares shall no longer be
available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock or other property (including cash) that
may thereafter be issued in connection with Awards, (ii) the number and kind of
shares of Stock or other property (including cash) issued or issuable in respect
of outstanding Awards, and (iii) the exercise price, grant price, or purchase
price relating to any Award; PROVIDED THAT, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. The term of each Award shall be for such period as
may be determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Stock, or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest to be credited with respect to
such payments. In addition to the foregoing, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter, such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine.
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(b) OPTIONS. The Committee is authorized to grant Options to
Grantees on the following terms and conditions:
(i) TYPE OF AWARD. The Award Agreement evidencing the grant
of an Option under the Plan shall designate the Option as an ISO or an
NQSO.
(ii) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
PROVIDED THAT, in the case of an ISO, such exercise price shall be not
less than the Fair Market Value of a share on the date of grant of
such Option, and in no event shall the exercise price for the purchase
of shares be less than par value. The exercise price for Stock
subject to an Option may be paid in cash or by an exchange of Stock
previously owned by the Grantee, or a combination of both, in an
amount having a combined value equal to such exercise price. A
Grantee may also elect to pay all or a portion of the aggregate
exercise price by having shares of Stock with a Fair Market Value on
the date of exercise equal to the aggregate exercise price withheld by
the Company or sold by a broker-dealer under circumstances meeting the
requirements of 12 C.F.R. Section 220 or any successor thereof.
(iii) TERM AND EXERCISABILITY OF OPTIONS. The date on which
the Committee adopts a resolution expressly granting an Option shall
be considered the day on which such Option is granted. Options shall
be exercisable over the exercise period (which shall not exceed ten
years from the date of grant), at such times and upon such conditions
as the Committee may determine, as reflected in the Award Agreement;
PROVIDED THAT, the Committee shall have the authority to accelerate
the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate.
An Option may be exercised to the extent of any or all full shares of
Stock as to which the Option has become exercisable, by giving written
notice of such exercise to the Committee or its designated agent.
(iv) TERMINATION OF EMPLOYMENT, ETC. An Option may not be
exercised unless the Grantee is then a director of, in the employ of,
or then maintains a consulting relationship with, the
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Company or a Subsidiary or an Affiliate (or a company or a parent or
subsidiary company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies), and unless
the Grantee has remained continuously so employed, or continuously
maintained such relationship, since the date of grant of the Option;
PROVIDED THAT, the Award Agreement may contain provisions extending
the exercisability of Options, in the event of specified terminations,
to a date not later than the expiration date of such Option.
(v) OTHER PROVISIONS. Options may be subject to such other
conditions including, but not limited to, restrictions on
transferability of the shares acquired upon exercise of such Options,
as the Committee may prescribe in its discretion or as may be required
by applicable law.
(c) SARS AND LIMITED SARS. The Committee is authorized to grant
SARs and Limited SARs to Grantees on the following terms and conditions:
(i) IN GENERAL. Unless the Committee determines otherwise,
an SAR or Limited SAR (1) granted in tandem with an NQSO may be
granted at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only be granted at
the time of grant of the related ISO. An SAR or Limited SAR granted
in tandem with an Option shall be exercisable only to the extent the
underlying Option is exercisable.
(ii) SARS. An SAR shall confer on the Grantee a right to
receive an amount with respect to each share subject thereto, upon
exercise thereof, equal to the excess of (1) the Fair Market Value of
one share of Stock on the date of exercise over (2) the grant price of
the SAR (which in the case of an SAR granted in tandem with an Option
shall be equal to the exercise price of the underlying Option, and
which in the case of any other SAR shall be such price as the
Committee may determine).
(iii) LIMITED SARS. A Limited SAR shall confer on the
Grantee a right to receive with respect to each share subject thereto,
automatically upon the occurrence of a Change in Control,
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an amount equal in value to the excess of (1) the Change in Control
Price (in the case of an LSAR granted in tandem with an ISO, the Fair
Market Value), of one share of Stock on the date of such Change in
Control over (2) the grant price of the Limited SAR (which in the case
of a Limited SAR granted in tandem with an Option shall be equal to
the exercise price of the underlying Option, and which in the case of
any other Limited SAR shall be such price as the Committee
determines).
(d) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock to Grantees on the following terms and conditions:
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and other
restrictions, if any, as the Committee may impose at the date of grant
or thereafter, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such
installments, or otherwise, as the Committee may determine. Such
restrictions may include factors relating to the increase in the value
of the stock or individual or Company performance such as the
attainment of certain specified individual, divisional or Company-wide
performance levels, sales volume increases, or Company-wide earnings
per share. The Committee may also impose additional restrictions
pursuant to which a Grantee may elect to defer the receipt (or
constructive receipt) of a Restricted Stock grant beyond the date the
basic restrictions may lapse. Except to the extent restricted under
the Award Agreement relating to the Restricted Stock, a Grantee
granted Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock and
the right to receive dividends thereon.
(ii) FORFEITURE. Upon termination of employment with or
service to the Company, or upon termination of the director or
consulting relationship, as the case may be, during the applicable
restriction period, Restricted Stock and any accrued but unpaid
dividends or Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; PROVIDED THAT, the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock will be waived
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in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole
or in part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Grantee, such certificates shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company
shall retain physical possession of the certificate.
(iv) DIVIDENDS. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date, or deferred for payment to
such date as determined by the Committee, in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of
such dividends. Stock distributed in connection with a stock split or
stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) RESTRICTED STOCK UNITS. The Committee is authorized to grant
Restricted Stock Units to Grantees, subject to the following terms and
conditions:
(i) AWARD AND RESTRICTIONS. Delivery of Stock or cash, as
determined by the Committee, will occur upon expiration of the
deferral period specified for Restricted Stock Units by the Committee.
In addition, Restricted Stock Units shall be subject to such
restrictions as the Committee may impose, at the date of grant or
thereafter, which restrictions may lapse at the expiration of the
deferral period or at earlier or later specified times, separately or
in combination, in installments or otherwise, as the Committee may
determine. Such restrictions may include factors relating to the
increase in the value of the stock or individual or Company
performance such as the attainment of certain specified individual,
divisional or Company-wide performance levels, sales volume increases,
or Company-wide earnings per share. The Committee may also impose
additional restrictions pursuant to which a Grantee may
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elect to defer the receipt (or constructive receipt) of a Restricted
Stock Unit grant beyond the date the basic restrictions may lapse.
(ii) FORFEITURE. Upon termination of employment or
termination of the director or consulting relationship during the
applicable deferral period or portion thereof to which forfeiture
conditions apply, or upon failure to satisfy any other conditions
precedent to the delivery of Stock or cash to which such Restricted
Stock Units relate, all Restricted Stock Units that are then subject
to deferral or restriction shall be forfeited; PROVIDED THAT, the
Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Stock Units will be
waived in whole or in part in the event of termination resulting from
specified causes, and the Committee may in other cases waive in whole
or in part the forfeiture of Restricted Stock Units.
(f) STOCK AWARDS IN LIEU OF CASH AWARDS. The Committee is
authorized to grant Stock as a bonus, or to grant other Awards, in lieu of
Company commitments to pay cash under other plans or compensatory arrangements.
Stock or Awards granted hereunder shall have such other terms as shall be
determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to Grantees. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, or other
investment vehicles as the Committee may specify, provided that Dividend
Equivalents (other than freestanding Dividend Equivalents) shall be subject to
all conditions and restrictions of the underlying Awards to which they relate.
(h) OTHER STOCK- OR CASH-BASED AWARDS. The Committee is
authorized to grant to Grantees Other Stock-Based Awards or Other Cash-Based
Awards as an element of or supplement to any other Award under the Plan, as
deemed by the Committee to be consistent with the purposes of the Plan. Such
Awards may be granted with value and payment contingent upon performance of the
Company or any other factors designated by the Committee, or valued by reference
to the performance of specified Subsidiaries or Affiliates. The Committee shall
determine the terms and conditions of such Awards at the date of grant or
thereafter.
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7. CHANGE IN CONTROL PROVISIONS. Unless otherwise determined by the
Committee prior to the occurrence thereof, in the event of a Change of Control:
(a) any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions,
and forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards shall be deemed to be fully achieved.
8. LOAN PROVISIONS. Subject to the provisions of the Plan and all
applicable federal and state laws, rules and regulations, the Committee shall
have the authority to make Loans to Grantees (on such terms and conditions as
the Committee shall determine), to enable such Grantees to purchase shares.
Loans shall be evidenced by a promissory note or other agreement, signed by the
borrower, which shall contain provisions for repayment and such other terms and
conditions as the Committee shall determine.
9. GENERAL PROVISIONS.
(a) APPROVAL OF SHAREHOLDERS. The Plan shall take effect upon
its adoption by the Board but the Plan (and any grants of Awards made prior to
the shareholder approval mentioned herein) shall be subject to ratification by
the holder(s) of a majority of the issued and outstanding shares of voting
securities of the Company entitled to vote, which ratification must occur within
twelve (12) months of the date that the Plan is adopted by the Board. In the
event that the shareholders of the Company do not ratify the Plan at a meeting
of the shareholders at which such issue is considered and voted upon, then upon
such event the Plan and all rights hereunder shall immediately terminate and no
Grantee (or any permitted transferee thereof) shall have any remaining rights
under the Plan or any Award Agreement entered into in connection herewith.
(b) NONTRANSFERABILITY. Awards shall not be transferable by a
Grantee except by will or the laws of descent and distribution or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, and shall be exercisable during
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the lifetime of a Grantee only by such Grantee or his guardian or legal
representative.
(c) NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan
or in any Award or Loan granted or any Award Agreement, promissory note or other
agreement entered into pursuant hereto shall confer upon any Grantee the right
to continue in the employ of or to continue as a consultant of the Company, any
subsidiary or any Affiliate or to be entitled to any remuneration or benefits
not set forth in the Plan or such Award Agreement, promissory note or other
agreement or to interfere with or limit in any way the right of the Company or
any such Subsidiary or Affiliate to terminate such Grantee's employment,
director or consulting relationship.
(d) TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any other payment to
a Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Grantees to satisfy obligations for
the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Grantee's tax obligations.
(e) AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; PROVIDED THAT, no amendment that requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3, shall be effective
unless the same shall be approved by the requisite vote of the stockholders of
the Company entitled to vote thereon. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Grantee, without such
Grantee's consent, under any Award or Loan theretofore granted under the Plan.
(f) NO RIGHTS TO AWARDS OR LOANS; NO STOCKHOLDER RIGHTS. No
Grantee shall have any claim to be granted any Award or Loan under the Plan, and
there is no obligation for uniformity of treatment of Grantees. Except as
provided specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by the Award until
the date of the issuance of a stock certificate to him for such shares.
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(g) UNFUNDED STATUS OF AWARDS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights that
are greater than those of a general creditor of the Company.
(h) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(i) REGULATIONS AND OTHER APPROVALS.
(i) The obligation of the Company to sell or deliver Common
Stock with respect to any Award granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at
any time the Committee determines, in its absolute discretion, that the listing,
registration or qualification of Common Stock issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Award or the
issuance of Common Stock, no such Award shall be granted or payment made or
Common Stock issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions not acceptable to the Committee.
(iii) In the event that the disposition of Common Stock
acquired pursuant to the Plan is not covered by a then current registration
statement under the Securities Act and is not otherwise exempt from such
registration, such Common Stock shall be restricted against transfer to the
extent required by the Securities Act or regulations thereunder, and the
Committee may require a Grantee receiving Common Stock pursuant to the Plan, as
a condition precedent to receipt of such Common Stock, to represent to the
Company in writing that the Common Stock acquired by such Grantee is acquired
for investment only and not with a view to distribution.
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(j) GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles thereof.
(k) EFFECTIVE DATE; PLAN TERMINATION.
(i) EFFECTIVE DATE. The Plan shall take effect upon its
adoption by the Board (the "Effective Date"), but the Plan (and any grants of
Awards made prior to the stockholder approval mentioned herein), shall be
subject to the approval of the holder(s) of a majority of the issued and
outstanding shares of voting securities of the Company entitled to vote, which
approval must occur within twelve months of the date the Plan is adopted by the
Board. In the absence of such approval, such Awards shall be null and void.
(ii) DURATION. Unless earlier terminated by the Board or
the Committee pursuant to the provisons of the Plan, the Plan shall terminate on
the fifth anniversary of its Effective Date as hereinbefore specified. No
Awards shall be granted under the Plan after such termination date.
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CONSOLIDATED FREIGHTWAYS CORPORATION
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
June 30, 1996
The Company and its significant subsidiaries were:
STATE OR
PERCENT OF PROVINCE OR
PARENT AND STOCK OWNED* COUNTRY OF DBA
SIGNIFICANT SUBSIDIARIES BY COMPANY INCORPORATION NAMES
- ------------------------ ---------- ------------- -----
Consolidated Freightways
Corporation Delaware
Significant Subsidiaries of
Consolidated Freightways
Corporation
Consolidated Freightways 100 Delaware Nashville
Corporation of Delaware Merchandise Store
Canadian Freightways Limited 100 Alberta, Canada CF Parcel Express,
CF Parcel Service
*Directly or indirectly
