UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number 1-12149
CONSOLIDATED FREIGHTWAYS CORPORATION
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 77-0425334
175 Linfield Drive, Menlo Park, CA 94025
Telephone Number (650) 326-1700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Number of shares of Common Stock, $.01 par value,
outstanding as of July 31, 1999: 22,598,929
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-Q
Quarter Ended June 30, 1999
_____________________________________________________________________
_____________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Statements of Consolidated Income -
Three and Six Months Ended June 30, 1999 and 1998 5
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Stockholder Proposals 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1999 1998
.
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 101,224 $ 123,081
Trade accounts receivable, net of allowances 318,449 292,463
Other receivables 6,369 9,195
Operating supplies, at lower of average
cost or market 8,126 7,561
Prepaid expenses 41,166 40,335
Deferred income taxes 6,806 6,806
Total Current Assets 482,140 479,441
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 83,382 78,218
Buildings and improvements 353,042 343,492
Revenue equipment 547,502 562,624
Other equipment and leasehold improvements 129,905 123,404
1,113,831 1,107,738
Accumulated depreciation and amortization (747,758) (746,966)
366,073 360,772
OTHER ASSETS
Deposits and other assets 51,050 32,199
Deferred income taxes 22,358 17,978
73,408 50,177
TOTAL ASSETS $ 921,621 $ 890,390
The accompanying notes are an integral part of these statements.
PAGE 3
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1999 1998
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 87,108 $ 84,861
Accrued liabilities 206,788 187,528
Accrued claims costs 72,695 72,942
Federal and other income taxes 14,931 14,173
Total Current Liabilities 381,522 359,504
LONG-TERM LIABILITIES
Long-term debt 15,100 15,100
Accrued claims costs 98,400 103,574
Employee benefits 121,191 117,236
Other liabilities and deferred credits 27,324 28,258
Total Liabilities 643,537 623,672
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized
5,000,000 shares; issued none -- --
Common stock, $.01 par value; authorized
50,000,000 shares; issued 23,100,515
and 23,066,905 shares, respectively 231 231
Additional paid-in capital 77,416 77,303
Accumulated other comprehensive loss (9,689) (11,565)
Retained earnings 214,177 204,919
Treasury stock, at cost (464,086 and 477,686
shares, respectively) (4,051) (4,170)
Total Shareholders' Equity 278,084 266,718
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 921,621 $ 890,390
The accompanying notes are an integral part of these statements.
PAGE 4
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES $ 589,781 $ 551,841 $1,147,989 $1,097,489
COSTS AND EXPENSES
Salaries, wages and benefits 379,781 357,115 738,181 710,686
Operating expenses 100,420 88,225 192,000 176,545
Purchased transportation 59,345 48,485 111,117 94,421
Operating taxes and licenses 17,334 17,215 34,376 34,318
Claims and insurance 14,610 12,857 28,508 26,141
Depreciation 13,329 12,438 25,653 25,072
584,819 536,335 1,129,835 1,067,183
OPERATING INCOME 4,962 15,506 18,154 30,306
OTHER INCOME (EXPENSE)
Investment income 836 1,463 1,654 2,415
Interest expense (886) (972) (1,918) (1,967)
Miscellaneous, net (226) (440) (585) (878)
(276) 51 (849) (430)
Income before income taxes 4,686 15,557 17,305 29,876
Income taxes 2,179 8,084 8,047 15,386
NET INCOME $ 2,507 $ 7,473 $ 9,258 $ 14,490
Basic average shares outstanding 22,626,761 23,048,519 22,617,285 23,039,159
Diluted average shares outstanding 23,454,306 24,325,142 23,032,273 24,221,957
Basic Earnings per Share: $ 0.11 $ 0.32 $ 0.41 $ 0.63
Diluted Earnings per Share: $ 0.11 $ 0.31 $ 0.40 $ 0.60
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
PAGE 5
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Six Months Ended
June 30,
1999 1998
(Dollars in thousands)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 123,081 $ 107,721
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 9,258 14,490
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 28,040 25,961
Decrease in deferred income taxes (4,380) (556)
Gains from property disposals, net (306) (10)
Issuance of common stock under restricted stock plan 230 -
Changes in assets and liabilities:
Receivables (23,160) 9,046
Prepaid expenses (831) (13,360)
Accounts payable 2,247 (6,010)
Accrued liabilities 19,260 21,876
Accrued claims costs (5,421) (6,814)
Income taxes 758 4,321
Employee benefits 3,955 1,198
Other (22,898) (1,039)
Net Cash Provided by Operating Activities 6,752 49,103
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (30,743) (7,191)
Proceeds from sales of property 2,134 357
Net Cash Used by Investing Activities (28,609) (6,834)
Increase (decrease) in Cash and Cash Equivalents (21,857) 42,269
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 101,224 $ 149,990
The accompanying notes are an integral part of these statements.
PAGE 6
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements of
Consolidated Freightways Corporation and subsidiaries (the Company)
have been prepared by the Company, without audit by independent
public accountants, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management,
the consolidated financial statements include all normal recurring
adjustments necessary to present fairly the information required to
be set forth therein. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted from these statements pursuant to such rules and regulations
and, accordingly, should be read in conjunction with the consolidated
financial statements included in the Company's 1998 Annual Report to
Shareholders.
There were no significant changes in the Company's commitments
and contingencies as previously described in the 1998 Annual Report
to Shareholders and related annual report to the Securities and
Exchange Commission on Form 10-K.
2. Segment and Geographic Information
The Company operates in a single industry segment, primarily
providing less-than-truckload transportation and supply chain
management services throughout the United States, Canada and Mexico,
and international freight services between the United States and more
than 80 countries. The following information sets forth revenues and
long-lived assets by geographic location. Revenues are attributed to
geographic location based upon the location of the customer. No one
customer provides 10% or more of total revenues.
Geographic Information
(Dollars in thousands)
Quarter Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues
United States $557,508 $520,529 $1,086,929 $1,036,245
Canada 32,273 31,312 61,060 61,244
Total $589,781 $551,841 $1,147,989 $1,097,489
PAGE 7
Geographic Information (continued)
As of
June 30,
1999 1998
Long-Lived Assets
United States $335,228 $340,478
Canada 30,845 23,787
Total $366,073 $364,265
3. Stock Compensation
As of June 30, 1999 there were approximately 1,087,000 granted
but unissued restricted common shares remaining from the initial
grant made under the Company's Stock Option and Incentive Plan.
Those shares vest as early as December 16, 1999, but are contingent
upon the Company's stock price achieving a 60% increase over the
price at the time of grant. If performance conditions are met, those
shares will be issued to employees in December 1999 and compensation
expense will be recognized based on the market price of the stock at
that time. Based upon the closing stock price of $12.84 per share on
June 30, 1999, the Company would recognize an $8.0 million non-cash
charge, net of related tax benefits.
The Company granted an additional 141,000 restricted common
shares to senior management in May 1999. These shares, which have a
maximum term of three years, vest as early as May 2000, but are
contingent on the Company's stock price achieving $20.00 per share.
Also in May 1999, the Company granted 916,085 stock options to
members of the Board of Directors and management at prices ranging
from $13.00 to $14.0625 per share, equal to the closing stock prices
on the dates of the grants. The options vest ratably over 48 months,
beginning in January 2000 and expire in May 2004.
PAGE 8
4. Earnings per Share
The following chart reconciles basic to diluted earnings per
share for the three and six months ended June 30, 1999 and 1998. See
Footnote 3 for a discussion of dilutive securities.
(Dollars in thousands except per share amounts)
Weighted
Three Average Earnings
Months Ended Net Income Shares Per Share
June 30, 1999
Basic $ 2,507 22,626,761 $0.11
Dilutive effect of
restricted stock
and stock options -- 827,545 --
Diluted $ 2,507 23,454,306 $0.11
June 30, 1998
Basic $ 7,473 23,048,519 $0.32
Dilutive effect of
restricted stock
and stock options -- 1,276,623 (0.01)
Diluted $ 7,473 24,325,142 $0.31
Weighted
Six Average Earnings
Months Ended Net Income Shares Per Share
June 30, 1999
Basic $ 9,258 22,617,285 $0.41
Dilutive effect of
restricted stock
and stock options -- 414,988 (0.01)
Diluted $ 9,258 23,032,273 $0.40
June 30, 1998
Basic $14,490 23,039,159 $0.63
Dilutive effect of
restricted stock
and stock options -- 1,182,798 (0.03)
Diluted $14,490 24,221,957 $0.60
PAGE 9
5. Comprehensive Income
Comprehensive income for the three and six months ended June 30,
1999 and 1998 is as follows:
(Dollars in thousands)
Three Six
Months Ended Months Ended
June 30, June 30,
1999 1998 1999 1998
Net Income $2,507 $7,473 $ 9,258 $14,490
Other Comprehensive Income (Loss):
Foreign currency translation
adjustments 1,394 (2,278) 1,876 (2,290)
Comprehensive Income $3,901 $5,195 $11,134 $12,200
6. Contingencies
The Company and its subsidiaries are involved in various
lawsuits incidental to their businesses. It is the opinion of
management that the ultimate outcome of these actions will not have a
material adverse effect on the Company's financial position or
results of operations.
The Company's former parent, CNF Transportation Inc., is engaged
in disputes with the Internal Revenue Service over the amount and
timing of certain tax deductions reported by the former parent in tax
years prior to the spin-off of the Company. These disputes arise from
tax positions first taken by the former parent in the mid-1980's. The
former parent, which is contesting the IRS's positions, has made
certain advance payments to the IRS which would be applied against
any ultimate liability.
Under a tax sharing agreement entered into by the former parent
and the Company at the time of the spin-off, the Company may be
obligated to reimburse the former parent for a portion of any
additional taxes and interest which relate to the Company's business
prior to the spin-off. The amount and timing of such payments, if
any, is dependent on the ultimate resolution of the former parent's
disputes with the IRS and the determination of the nature and extent
of the Company's obligations under the tax sharing arrangement. The
Company has established certain reserves both at the time of and
subsequent to the spin-off with respect to the foregoing. There can
be no assurance that the amount or timing of any liability of the
Company to the former parent will not have a material adverse effect
on the Company's results of operations or financial position.
PAGE 10
The Company has received notices from the Environmental
Protection Agency (EPA) and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) or
other Federal and state environmental statutes at various Superfund
sites. Under CERCLA, PRP's are jointly and severally liable for all
site remediation and expenses. Based upon cost studies performed by
independent third parties, the Company believes its obligations with
respect to such sites would not have a material adverse effect on its
financial position or results of operations.
PAGE 11
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Revenues for the quarter and six months ended June 30, 1999
increased 6.9% and 4.6%, respectively, compared with the same periods
last year. Total and less-than-truckload (LTL) tonnage increased
1.5% and 2.2%, respectively, on total and LTL shipment increases of
4.4% and 4.5%, respectively, in the quarter. Tonnage remained flat
for the six-month period on total and LTL shipment increases of 3.0%
and 3.1%, respectively. During the quarter, the Company experienced
incremental business from the shutdown of a regional carrier in late
May, a 60% increase in PrimeTime business and expansion of its new
two-day service offerings. These improvements helped offset
continued erosion in the Company's core long-haul market from
increased competition from regional carriers and changing customer
distribution patterns. The Company also experienced improved revenue
per hundredweight which increased 3.7% and 3.8% in the quarter and
six-month period, respectively, due to an effective rate increase of
approximately 3.3% in October 1998.
Salaries, wages and benefits increased 6.3% and 3.9% in the
quarter and six-month period, respectively, over the prior year due
primarily to increased business levels and a Teamster wage and
benefit increase on April 1st. The Company stepped up its driver
recruitment and training in the quarter and carried over 200
additional drivers in anticipation of driver retirements expected to
occur during the remainder of the year, adding $3.0 million of
additional wage expense.
Operating expenses increased 13.8% and 8.8% in the quarter and
six- month period, respectively, due primarily to increased shipment
levels, start-up costs associated with the expansion of the Company's
2-day service offering and higher than anticipated costs associated
with transitioning information technology services from the former
parent to a third party. Lease expense for new revenue equipment,
software amortization related to the replacement of certain
operational and financial systems, costs associated with hiring and
training new employees and costs associated with the Company's Year
2000 project also contributed to the increase. The Company was also
adversely impacted by a 5.8% increase in the average fuel cost per
gallon in the quarter.
Purchased transportation increased 22.4% and 17.7% in the
quarter and six-month period, respectively, due to the use of owner-
operators for new truckload operations, costs associated with the
Company's growing PrimeTime service and increased rail costs.
Although rail miles as a percentage of total inter-city miles
remained relatively flat in the quarter and six-month period, total
rail costs increased due to an approximately 3% increase in rail cost
per mile.
PAGE 12
Operating taxes and licenses increased marginally, in line with
business levels.
Claims and insurance expense increased 13.6% and 9.1% in the
quarter and six-month period, respectively, due to higher claims
experience year-over-year.
Depreciation increased 7.2% and 2.3% in the quarter and six-
month period, respectively, due to increased capital expenditures in
1999 as the Company began replacing older revenue equipment.
The above factors resulted in a $10.5 million decrease in
operating income to $5.0 million for the quarter. The operating
ratio deteriorated to 99.2% from 97.2%. Operating income decreased
$12.2 million in the six-month period to $18.2 million, with the
operating ratio deteriorating to 98.4% from 97.2%.
Other expense, net, increased $327,000 and $419,000 in the
quarter and six-month period, respectively, due to decreased
investment income on the Company's short-term investments. Short-
term investments decreased as funds were used for capital expenditure
purposes.
The Company's effective income tax rates differ from the
statutory Federal rate due primarily to foreign and state taxes and
non-deductible items.
Management is continuing with its infrastructure investments to
expand its new 2-day service offering to be more competitive in the
shorter length-of-haul market. Combined with additional value-added
service offerings like CF PrimeTime and CF SureTime, a new time-
definite delivery service introduced in August, management is
expanding its service offerings. Continued yield enhancements and
cost containment should offset salary, wage and benefit increases of
$10.0 million and amortization of $3.0 million related to the
replacement of certain operational and financial systems for Year
2000 compliance during the remainder of the year.
As discussed in Footnote 3, the Company has a restricted stock
program. If performance conditions are met in December 1999,
approximately 1,087,000 shares of common stock will be issued to
employees, and compensation expense recognized based on the market
price of the stock at that time. Based upon the closing stock price
of $12.84 per share on June 30, 1999, the Company would recognize an
$8.0 million non-cash charge, net of related tax benefits.
As discussed above, the Company experienced a significant
increase in fuel costs in the second quarter as the average cost per
gallon increased approximately 28% over the first quarter. The
Company's rules tariff implements a fuel surcharge when the average
cost per gallon of on-highway diesel fuel exceeds $1.10, as
determined from the Energy Information Administration of the
Department of Energy's publication of weekly retail on-highway diesel
prices. This provision of the rules tariff became effective July
12th. However, there can be no assurance that the Company will be
able to successfully implement such surcharges in response to
increased fuel costs in the future.
PAGE 13
As discussed in more detail in Footnote 6, the Company is party
to a tax sharing agreement with its former parent. Given the
uncertainties surrounding the amount and timing of any obligations of
the Company under the tax sharing agreement, there can be no
assurance that the amount or timing of any liability of the Company
to the former parent will not have a material adverse effect on the
Company's results of operations or financial position.
RISK FACTORS
The Company is subject to market risks related to changes in
interest rates and foreign currency exchange rates, primarily the
Canadian dollar. Management believes that the impact on the
Company's financial position, results of operations and cash flows
from fluctuations in interest rates and foreign currency exchange
rates would not be material. Consequently, management does not
currently use derivative instruments to manage these risks; however,
it may do so in the future.
YEAR 2000
Management has a formal plan in place through which it has
identified its operational and financial systems and applications
requiring either modification or replacement for Year 2000
compliance. Of these systems, the Company's on-line equipment and
freight tracking system is deemed most critical. Based upon an
assessment at June 30, 1999, testing and modification of mission
critical IT mainframe applications, which includes the on-line
equipment and freight tracking system, is 100% complete while non-
mission critical mainframe applications are expected to be completed
in August. Non-mainframe related Year 2000 activities are
approximately 70% complete. Expenses related to Year 2000
modifications totaled $1.5 million for the six months ended June 30,
1999 and include payroll and payroll related costs as well as the
costs of external consultants. In certain cases, management has
opted to replace rather than modify certain of its systems and
applications. Costs associated with the replacement of systems and
applications are capitalized. As of June 30, 1999, $27.3 million has
been capitalized and includes hardware, software and payroll costs as
well as costs of external consultants. Management expects to spend
an additional $15 million to replace and/or convert its internal
systems for Year 2000 compliance. Of this amount, it is expected
that approximately $3 million will be expensed and approximately $12
million will be capitalized. These estimates may be revised based
upon the results of continued implementation. Management expects
that all Year 2000 system modifications and replacements will be
funded with cash from operations.
PAGE 14
Management has engaged outside consultants as part of the
process of assessing its Year 2000 risks. Part of that assessment
includes 3rd party compliance readiness. Management has identified
and prioritized its critical customers and key vendors of products
and services and is soliciting written responses to Year 2000
readiness questionnaires. Management has completed substantially all
of the vendor verification portion of the effort. Management is
formulating contingency plans as necessary based upon the results of
those questionnaires.
As noted above, modification and testing of the Company's on-
line equipment and freight tracking system is complete. Management
anticipates having all of its internal systems Year 2000 compliant by
September 1999. To the extent that the Company or its critical
customers and key suppliers fail to achieve Year 2000 compliance,
there could be a material adverse effect on the Company's business,
results of operations and financial position.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had $101.2 million in cash and
cash equivalents. Net cash flow from operations for the six months
ended June 30, 1999 was $6.8 million due primarily to net income
and depreciation and amortization. Management expects cash flow from
operations for 1999 will be sufficient for working capital
requirements. Capital expenditures for the six months ended June 30,
1999 were $30.7 million compared with $7.2 million in the same period
last year. Management expects capital expenditures to be
approximately $73 million for the remainder of the year primarily for
the purchase of operating equipment and upgrades to terminal
properties. It is anticipated that those expenditures will be funded
with existing cash balances and cash from operations, supplemented by
financing arrangements.
The Company is in the process of completing a six-year operating
lease agreement for approximately 700 new trucks and tractors that
will be placed in service throughout the third quarter. Lease
payments for these new trucks and tractors are expected to be
approximately $3 million for the remainder of 1999 and $9 million
annually through 2005. These new units are replacements for older
equipment currently in service.
The Company has a secured credit facility under which it has
$150.0 million available for working capital and letter of credit
needs. As of June 30, 1999, the Company had no short-term borrowings
and $74.6 million of letters of credit outstanding. The credit
facility terminates on January 2, 2000. The Company is currently
negotiating a new credit facility.
As discussed in Footnote 6, the Company is party to a tax
sharing agreement with its former parent. Given the uncertainties
surrounding the amount and timing of any obligations of the Company
under the tax sharing agreement, there can be no assurance that the
amount or timing of any liability of the Company to the former parent
will not have a material adverse effect on the Company's results of
operations or financial position.
PAGE 15
OTHER
On May 13, 1999, Patrick H. Blake was promoted to President of
Consolidated Freightways Corporation of Delaware (CFCD), a
subsidiary, and Chief Operating Officer of the parent company. Mr.
Blake was formerly Executive Vice President of Operations. Also on
May 13, 1999, Sunil Bhardwaj was promoted to Senior Vice President
and Chief Financial Officer of CFCD and the parent company. Mr.
Bhardwaj, formerly Vice President of Planning and Treasurer, replaces
David F. Morrison who left the Company.
The Company has received notices from the Environmental
Protection Agency and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) or
other Federal and state environmental statutes at various Superfund
sites. Under CERCLA, PRP's are jointly and severally liable for all
site remediation and expenses. Based upon cost studies performed by
independent third parties, the Company believes its obligations with
respect to such sites would not have a material adverse effect on its
financial condition or results of operations.
Certain statements included or incorporated by reference herein
constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to a
number of risks and uncertainties. Any such forward-looking
statements included or incorporated by reference herein should not be
relied upon as predictions of future events. Certain such forward-
looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or the negative thereof or other
variations thereof or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking statements are
necessarily dependent on assumptions, data or methods that may be
incorrect or imprecise and they may be incapable of being realized.
In that regard, the following factors, among others, and in addition
to matters discussed elsewhere herein and in documents incorporated
by reference herein, could cause actual results and other matters to
differ materially from those in such forward-looking statements:
changes in general business and economic conditions; increases in
domestic and international competition and pricing pressure;
increases in fuel prices; uncertainty regarding the Company's ability
to improve results of operations; labor matters, including shortages
of drivers and increases in labor costs; changes in governmental
regulation; environmental and tax matters; increases in costs
associated with the conversion of financial and operational systems
and applications for Year 2000 compliance and failure to convert all
systems by the year 2000. As a result of the foregoing, no assurance
can be given as to future results of operations or financial
condition.
PAGE 16
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As previously disclosed, the Company has received notices from
the Environmental Protection Agency and others that it has been
identified as a potentially responsible party (PRP) under the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) or other Federal and state environmental statutes at various
Superfund sites. Based upon cost studies performed by independent
third parties, the Company believes its obligations with respect to
such sites would not have a material adverse effect on its financial
condition or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Shareholders Meeting held May 10, 1999, the
following matters were presented with the indicated voting results:
For the purpose of electing members of the Board of Directors,
the votes representing shares of Common stock were cast as follows:
Nominee For Withheld
Robert W. Hatch 21,008,966 728,820
John M. Lillie 21,009,631 728,155
Raymond F. O'Brien 21,019,112 718,674
The following directors did not stand for election and continued in
office as directors after the Annual Shareholders Meeting: W. Roger
Curry, G. Robert Evans, Paul B. Guenther, James B. Malloy and William
D. Walsh.
For the purpose of approving the 1999 Equity Incentive Plan, the
votes representing shares of Common stock were cast as follows: For:
11,811,750; Against: 6,410,606; Abstain: 104,241.
For the purpose of approving the Non-Employee Director's Equity
Plan, the votes representing shares of Common stock were cast as
follows: For: 15,689,838; Against: 2,465,027; Abstain: 171,730.
PAGE 17
ITEM 5. Stockholder Proposals
Pursuant to the Company's bylaws, stockholders who wish to bring
matters or propose nominees for director at the Company's 2000 annual
meeting of stockholders must provide specified information to the
Company between January 15, 2000 and February 14, 2000 (unless such
matters are included in the Company's proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended).
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Employment Agreement for Sunil Bhardwaj.
(10.2) Amended Employment Agreement for David F. Morrison.
(10.3) 1999 Consolidated Freightways Corporation Equity
Incentive Plan and Stock Option Agreement.
(10.4) Consolidated Freightways Corporation Non-Employee
Directors' Stock Option Plan and Stock Option
Agreement.
(27) Financial Data Schedule
PAGE 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company (Registrant) has duly
caused this Form 10-Q Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Consolidated Freightways Corporation
(Registrant)
August 12, 1999 /s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
August 12, 1999 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and
Controller
PAGE 19
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Agreement, dated as of May 13, 1999, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and Sunil Bhardwaj (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Senior Vice President and Chief Financial Officer;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional one (1) year
after December 31, 1999.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Executive Officer of the Company, or the Chief
Financial Officer of the parent company of any company that may
acquire the Company. Executive shall have the powers and duties
commensurate with such position, including but not limited to,
hiring personnel necessary to carry out the responsibilities for
such position as set forth in the annual business plan approved
by the Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board of Directors, the Chief
Executive Officer or Chief Financial Officer of an acquiring
parent company may reasonably request, provided that Executive
may also serve on the Boards of Directors of one or more other
companies with the prior consent of the Board and may serve on
the governing bodies of such charitable organizations as
Executive determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors, the Chief Executive Officer or
Chief Financial Officer of an acquiring parent company, Executive
shall not during the period of employment engage, directly or
indirectly, in any other business activity (whether or not
pursued for pecuniary advantage) that is or may be competitive
with, or that might place him in a competing position to that of
the Company or any other corporation or entity that directly or
indirectly controls, is controlled by, or is under common control
with the Company (an "Affiliate"), provided that Executive may
own less than two percent (2%) of the outstanding securities of
any such publicly traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The person to whom the
Executive reports shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1999 at its
May 12th meeting with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits and
age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
the Executive had continued to perform services for such period
with the same amount of Base Salary and Target Bonus). Thereafter
the Company's obligations hereunder shall terminate. Nothing in
this Agreement shall affect Executive's rights under any
disability plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the Chief Financial Officer of an
acquiring parent company, (v) in the case of a Change-in-Control
only, a request that Executive relocate to a worksite that is
more than 15 miles from his prior worksite, unless Executive
accepts such relocation opportunity, (vi) material reduction in
Executive's duties, (vii) failure or refusal of a successor to
the Company and any parent company to assume the Company's
obligations under this Agreement, as provided in Section 7.2.2,
or (viii) material breach by the Company or any successor to the
Company or any parent company of any of the material provisions
of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company: Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation Committee
To Executive: Sunil Bhardwaj
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways Corporation
/s/Stephen D. Richards
Stephen D. Richards
Senior Vice President and General
Counsel
Consolidated Freightways Corporation
Executive:
/s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President & Chief
Financial Officer
Consolidated Freightways Corporation
Exhibit 10.2
AMENDED
EMPLOYMENT AGREEMENT
This Agreement, as amended, effective as of May 15, 1999, is
made by and between Consolidated Freightways Corporation, a
Delaware corporation (hereinafter, together with any successor
Corporation(s), the "Company"), and David F. Morrison
(hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Executive Vice President and Chief Financial Officer;
Whereas, Executive previously entered into an Employment
Agreement with the Company, dated December 8, 1998;
Whereas, the Company and Executive wish to set forth in this
Amended Employment Agreement the amended terms and conditions
under which Executive is to be continued to be employed by the
Company on and after the effective date hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company through December 31, 1999.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree that Employment
Agreement, dated December 8, 1998, be amended, effective as of
the date of this Amended Employment Agreement, to read in full as
follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 1999.
1.2 Renewal. This Agreement shall automatically terminate
on December 31, 1999, and shall not be renewed or extended unless
otherwise agreed in writing by the parties. Effective December
31, 1999, Executive shall and hereby irrevocably does without
further action resign as an employee, officer and director of the
Company and any of its Affiliates.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters, until such time as the
Company appoints a new Chief Financial Officer, in its sole
discretion. Thereafter, Executive shall serve the Company at the
corporate headquarters in such executive capacity and with such
duties commensurate with Executive's background and skills as may
from time to time be requested by the Board of Directors of the
Company or the individual to whom the Executive reports.
Executive shall report to the Chief Executive Officer of the
Company, the Chief Financial Officer of the parent company of any
company that may acquire the Company, or the Chief Financial
Officer the Company may appoint to replace Executive. Executive
shall have the powers and duties commensurate with his position,
including but not limited to, hiring personnel necessary to carry
out the responsibilities for such position as set forth in the
annual business plan approved by the Board of Directors of the
Company.
2.2 Part-Time Attention. Executive shall devote his best
efforts and 25% of his business time and attention to the
performance of the services customarily incident to such
position and to such other services as Executive's direct report
may reasonably request.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or Executive's direct report,
Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether
or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position
to that of the Company or any other corporation or entity that
directly or indirectly controls, is controlled by, or is under
common control with the Company or any entity in which the
Company directly or indirectly owns 49% or more of the voting
stock (an "Affiliate"), provided that Executive may own less than
two percent (2%) of the outstanding securities of any such
publicly traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of 25% of his current salary payable weekly in
equal installments in accordance with the Company's normal
payroll practices ("Base Salary").
3.2 Incentive Bonus. Executive shall continue to
participate in the incentive bonus plan applicable to Executive
at the target percentage of 50% of actual salary paid or payable
but deferred in 1999 ("Target Bonus"). If earned, bonuses will
be paid at the same time as bonuses are paid to other senior
executives. The Board of Directors or Committee thereof shall,
in its sole discretion, determine the extent to which such
performance objectives have been obtained. No new short-term
incentives will be awarded to Executive.
3.3 Long-Term Incentives. Executive shall continue to have
the right to earn restricted stock. However, the number of
shares in the third installment which may be earned under
Executive's Restricted Stock Award and Deferral Agreement shall
be reduced from 50,000 shares of Common Stock to 29,688. In
addition, provided that Executive performs his employment duties
through December 31, 1999, the restricted stock may vest at any
time on or prior to December 2, 2001 notwithstanding Executive's
termination of employment on December 31, 1999. The stock shall
continue to be subject to earlier termination for death,
disability or termination for cause under the terms of the
Restricted Stock Award and Deferral Agreement, and all other
terms of the Executive's Restricted Stock Award and Deferral
Agreement shall otherwise continue in effect. Executive
acknowledges that the Compensation Committee intends to
distribute any vested restricted stock in January 2000, or if not
then vested, upon vesting, notwithstanding Executive's election
to defer receipt of such stock. No new long-term incentives will
be awarded to Executive.
3.4 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall not accrue vacation during
the term of this Agreement.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company. The Company shall provide Executive
with the right to participate in and to receive benefits from
life, accident, disability, medical, retirement medical, pension,
supplemental retirement, the 401(k), and 25% of standard car
allowance. Provided however, Executive shall not be entitled to
any other benefits provided generally to employees or to
executives, and short-term and long-term incentives shall be
limited to those described in Sections 3.2 and 3.3.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"). Thereafter,
the Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation. Thereafter, the Company's obligations
hereunder shall terminate. Nothing in this Agreement shall
affect Executive's rights under any disability plan in which he
is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive required hereunder
which, taken as a whole, provide substantially similar benefits
to those in which the Executive is entitled to participate
immediately prior to the Commencement Date of this Agreement, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and except as contemplated elsewhere herein, (v) a request that
Executive relocate to a worksite that is more than 15 miles from
his prior worksite, unless Executive accepts such relocation
opportunity, (vi) material reduction in Executive's duties,
except as contemplated hereunder, (vii) failure or refusal of a
successor to the Company and any parent company to assume the
Company's obligations under this Agreement, as provided in
Section 7.2.2, or (viii) material breach by the Company or any
successor to the Company or any parent company of any of the
material provisions of this Agreement.
6.6 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company: Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation Committee
To Executive: David F. Morrison
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
7.14 Taxes. Except as specifically provided in this
Agreement, Executive shall be responsible for all taxes, interest
and penalties that Executive may incur by reason of the
performance of this Agreement by the Company, notwithstanding any
statement of income furnished by the Company. Executive shall be
fully responsible for determining the amount and timing of any
such taxes.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive Officer
Consolidated Freightways Corporation
Executive:
/s/David F. Morrison
David F. Morrison
Executive Vice President & Chief
Financial Officer
Consolidated Freightways Corporation
Exhibit 10.3
Consolidated Freightways Corporation
1999 Equity Incentive Plan
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible
to receive Stock Awards are the employees, Directors and
Consultants of the Company and its Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to
provide a means by which eligible recipients of Stock Awards may
be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options,
(iii) stock appreciation rights, (iv) stock bonuses and (v)
rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan,
seeks to retain the services of the group of persons eligible to
receive Stock Awards, to secure and retain the services of new
members of this group and to provide incentives for such persons
to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as
those terms are defined in Sections 424(e) and (f), respectively,
of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means the occurrence of any of the following
(and only the following): (i) conviction of the Participant of
any felony involving fraud or act of dishonesty against the
Company or its Affiliates; (ii) conduct by the Participant which,
based upon good faith and reasonable fact investigation and
determination of the Company (or, if the Participant is a named
executive officer as defined in Item 402(a)(3) of Regulation S-K
promulgated by the Securities Exchange Commission, of the Board
of Directors of the Company), demonstrates gross unfitness to
serve; or, (iii) intentional, material violation by the
Participant of any statutory of fiduciary duty of the Participant
to the Company or its Affiliates, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to the Participant
describing the nature of such event and the Participant shall
thereafter have thirty (30) days to cure such event. In
addition, if the Participant is not a corporate officer of the
Company, "Cause" shall also determine poor performance of the
Participant's services for the Company or its Affiliates as
determined by the Company following (A) written notice to the
Participant describing the nature of such deficiency and (B) the
Participant's failure to cure such deficiency with thirty (30)
days following receipt of such written notice.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of one or more members of
the Board appointed by the Board in accordance with subsection
3(c).
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Consolidated Freightways Corporation, a
Delaware corporation.
(h) "Consultant" means any person, including an advisor,
(1) engaged by the Company or an Affiliate to render consulting
or advisory services and who is compensated for such services or
(2) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors
of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely
paid a director's fee by Company for their services as Directors.
(i) "Continuous Service" means that the Participant's
service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The
Participant's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for
which Participant renders such service, provided that there is no
interruption or termination of the Participant's Continuous
Service. For example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the
Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of
any leave of absence approved by that party, including sick
leave, military leave or any other personal leave.
(j) "Covered Employee" means the chief executive officer
and the four (4) other highest compensated officers of the
Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code.
(k) "Director" means a member of the Board of Directors of
the Company.
(l) "Disability" means the permanent and total disability
of a person within the meaning of Section 22(e)(3) of the Code.
(m) "Employee" means any person employed by the Company or
an Affiliate. Mere service as a Director or payment of a
director's fee by the Company or an Affiliate shall not be
sufficient to constitute "employment" by the Company or an
Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Fair Market Value" means, as of any date, the value of
the Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or traded on the NASDAQ National Market or the
NASDAQ SmallCap Market, the Fair Market Value of a share of
Common Stock shall be the most recent closing sales price for
such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) prior to the
time of the grant of the Stock Award, reported in The Wall Street
Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common
Stock, the Fair Market Value shall be determined in good faith by
the Board.
(p) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder.
(q) "Non-Employee Director" means a Director of the Company
who either (i) is not a current Employee or Officer of the
Company or its parent or a subsidiary, does not receive
compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as
to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is non engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(r) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(s) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(t) "Option" means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between
the Company and an Optionholder evidencing the terms and
conditions of an individual Option grant. Each Option Agreement
shall be subject to the terms and conditions of the Plan.
(v) "Optionholder" means a person to whom an Option is
granted pursuant to the Plan, or, if applicable, such other
person who holds an outstanding Option.
(w) "Outside Director" means a Director of the Company who
either (i) is not a current employee of the Company or an
"affiliated corporation" (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not
a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the
Company or an "affiliated corporation" at any time and is not
currently receiving direct or indirect remuneration from the
Company or an "affiliated corporation" for services in any
capacity other than as a Director or (ii) is otherwise considered
an "outside director" for purposes of Section 162(m) of the Code.
(x) "Participant" means a person to who a Stock Award is
granted pursuant to the Plan, or, if applicable, such other
person who holds an outstanding Stock Award.
(y) "Plan" means this Consolidated Freightways Corporation
1999 Equity Incentive Plan.
(z) "Retirement" means the retirement of an Optionholder or
Participant as a participant under the terms of and within the
meaning of the Company's Pension Plan, as amended from time to
time.
(aa) "Rule 16b-3" means Rule 16b-3 promulgated under
the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time.
(bb) "Securities Act" means the Securities Act of 1933,
as amended.
(cc) "Stock Award" means any right granted under the
Plan, including an Option, a stock appreciation right, a stock
bonus and a right to acquire restricted stock.
(dd) "Stock Award Agreement" means a written agreement
between the Company and a holder of a Stock Award evidencing the
terms and conditions of an individual Stock Award grant. Each
Stock Award Agreement shall be subject to the terms and
conditions of the Plan.
(ee) "Ten Percent Stockholder" means a person who owns
(or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board will administer the
Plan unless and until the Board delegates administration to a
Committee, as provided in subsection 3(c).
(b) Powers of Board. The board shall have the power,
subject to, and within the limitations of, the express provisions
of the Plan:
(i) To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards;
when and how each Stock Award shall be granted; what type or
combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; and the
number of shares with respect to which a Stock Award shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules
and regulations for its administration. The Board, in the
exercise of the power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as
provided in Section 12.
(iv) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote
the best interests of the Company which are not in conflict with
the provisions of the Plan.
(v) Any interpretation of the Plan by the Board of any
decision made by it under the Plan shall be final and binding on
all persons.
(c) Delegation to the Committee.
(i) General. The Board may delegate administration of
the Plan to a Committee or Committees of one or more members of
the Board, and the term "Committee" shall apply to any person or
persons to who such authority has been delegated. If
administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to
delegate to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan
to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration
of the Plan.
(ii) Committee Composition when Common Stock is
Publicly Traded. At such time as Common Stock is publicly
traded, in the discretion of the Board, a Committee may consist
solely of two or more Outside Directors, in accordance with
Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the
scope of such authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the Board who
are not Outside Directors, the authority to grant Stock Awards to
eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award or (b) not
persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of
one or more members of the Board who are not Non-Employee
Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section
11 relating to adjustments upon changes in stock, the stock that
may be issued pursuant to Stock Awards shall not exceed in the
aggregate two million (2,000,000) shares of Common Stock. No
more than four hundred thousand (400,000) shares of Common Stock
may be issued in the form of Restricted Stock bonuses.
(b) Reversion of Shares to the Share Reserve. If any Stock
Award shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full (or
vested in the case of restricted stock bonuses), the stock not
acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to stock
appreciation rights exercised in accordance with the Plan shall
not be available for subsequent issuance under the Plan. If any
Common Stock acquired pursuant to the exercise of an Option shall
for any reason be repurchased by the Company under an unvested
share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not
revert to and again become available for issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or
otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive
Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted to Employees,
Directors, and Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder
shall be eligible for the grant of an Incentive Stock Option
unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock
at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions
of Section 11 relating to adjustments upon changes in stock, no
employee shall be eligible to be granted Options and/or stock
appreciation rights covering more than four hundred thousand
(400,000) shares of the Common Stock during any calendar year.
6. Option Provisions.
Each Option shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. All
Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and a separate
certificate or certificates will be issued for shares purchased
on exercise of each type of Option. The provisions of separate
Options need not be identical, but each Option shall include
(through incorporations of provisions hereof by reference in the
Option or otherwise) the substance of each of the following
provisions:
(a) Term. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, no Incentive Stock Option
shall exercisable after the expiration of ten (10) years from the
date it was granted.
(b) Exercise Price of an Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of any Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the stock subject to
the Option on the date the Option is granted. Notwithstanding
the foregoing, an Incentive Stock Option may be granted with an
exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of the stock
acquired pursuant to an Option shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in
cash (or by check) at the time the Option is exercised, (ii) if
at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the
Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds,
or (iii) at the discretion of the Board at the time of the grant
of the Option (or subsequently in the case of a Nonstatutory
Stock Option) by delivery to the Company of other Common Stock,
according to a deferred payment or other arrangement with the
Participant, or in any other form of legal consideration that may
be acceptable to the Board; provided, however, that at any time
that the Company is incorporated in Delaware, payment the Common
Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest
shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) Transferability of an Incentive Stock Option. An
Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the
Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(d), the Optionholder may, by delivering written
notice to the Company, in a forms satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the
Option.
(e) Transferability of a Nonstatutory Stock Option. A
Nonstatutory Stock Option shall be transferable to the extent
provided in the Option Agreement. If the Nonstatutory Stock
Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by
will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the
Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the
Option.
(f) Vesting Generally. The total number of shares of
Common Stock subject to an Option, may, but need not, vest and
therefore become exercisable in periodic installments which may,
but need not, be equal. The Option may be subject to such other
terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection
6(f) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(g) Termination of Continuous Service. In the event an
Optionholder's Continuous Service terminates (other than upon the
Optionholder's termination for Cause, Retirement, death or
Disability), the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise it as
to the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months following
the termination of the Optionholder's Continuous Service (or such
longer or shorter period specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate. Notwithstanding
the foregoing, an Incentive Stock Option shall be exercised
within three (3) months following termination of the
Optionholder's Continuous Service.
(h) Extension of Termination Date. An Optionholder's
Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder's Continuous
Service (other than upon the Optionholder's retirement, death or
Disability) would be prohibited at any time solely because the
issuance of the shares would violate the registration
requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the
Option set forth in subsection 6(a) or (ii) the expiration of a
period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of
the Option would not be in violation of such registration
requirements.
(i) Disability of Optionholder. In the event an
Optionholder's Continuous Service terminates as a result of the
Optionholder's Disability, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to
exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter
period specified in the Option Agreement) or (ii) the expiration
of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or
her Option within the time specified herein, the Option shall
terminate.
(j) Death of an Optionholder. In the event (i) an
Optionholder's Continuous Service terminates as a result of the
Optionholder's death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the
termination of the Optionholder's Continuous Service and prior to
the expiration of the Option for a reason other than death, then
the Option may be exercised (to the extent the Optionholder was
entitled to exercise the Option as of the date of death) by the
Optionholder's estate by a person who acquired the right to
exercise the Option by bequest or inheritance, or by a person
designated to exercise the option upon the Optionholder's death
pursuant to subsection 6(d) or 6(e), but only with the period
ending on the earlier of (1) the date eighteen (18) months
following the date of death (or such longer or shorter period
specified in the Option Agreement) or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If,
after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(k) Retirement of Optionholder. In the event an
Optionholder's Continuous Service terminates as a result of the
Optionholder's Retirement, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to
exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date thirty-six
(36) months following such termination (or such longer or shorter
period specified in the Option Agreement) or (ii) the expiration
of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or
her Option within the time specific herein, the Option shall
terminate.
(l) Termination of Continuous Service for Cause. In the
event an Optionholder's Continuous Service terminates for Cause,
the Optionholder's Option shall terminate immediately.
(m) Early Exercise. The Option, may, but need not, include
a provision whereby the Optionholder may elect at any time before
the Optionholder's Continuous Service terminates to exercise the
Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to an unvested share repurchase option
in favor of the Company or to any other restriction the Board
determines to be appropriate.
(n) Re-Load Options. Without in any way limiting the
authority of the Board to make or not to make grants of Options
hereunder, the Board shall have the authority (but not an
obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-
Load Option") in the event the Optionholder exercises the Option
evidenced by the Option Agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option Agreement. Any
such Re-Load Option shall (i) provide for a number of shares
equal to the number of shares surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which
is the same as the expiration date of the Option the exercise of
which gave rise to such Re-Load Option; and (iii) have an
exercise price which is equal to one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Re-Load
Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject
to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock
Option or a Nonstatutory Stock Option, as the Board may designate
at the time of the grant of the original Option; provided,
however, that the designation of any Re-Load Option as an
Incentive Stock Option shall be subject to the one hundred
thousand dollars ($100,000) annual limitation on exercisability
of Incentive Stock Options described in subsection 10(d) and in
Section 422(d) of the Code. There shall be no Re-Load Options on
a Re-Load Option. Any such Re-Load Option shall be subject to
the availability of sufficient shares under subsection 4(a) and
the Section 162(m) Limitation" on the grants of Options under
subsection 5(c) and shall be subject to such other terms and
conditions as the Board may determine which are not inconsistent
with the express provisions of the Plan regarding the terms of
Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall
be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of
stock bonus agreements may change from time to time, and the
terms and conditions of separate stock bonus agreements need not
be identical, but each stock bonus agreement shall include
(through incorporation or provisions hereof by reference in the
agreement or otherwise) the substance of each of the following
provisions:
(i) Consideration. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company
for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the
stock bonus agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous
Service. In the event a Participant's Continuous Service
terminates, the Company may reacquire any or all of the shares of
Common Stock held by the Participant which have not vested as of
the date of termination under the terms of the stock bonus
agreement.
(iv) Transferability. Rights to acquire shares under
the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth
in the stock bonus agreement, as the Board shall determine in its
discretion, as long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus
agreement.
(b) Restricted Stock Awards. Each restricted stock
purchase agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The
terms and conditions of the restricted stock purchase agreements
may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall
include (through incorporation of provisions hereof by reference
in the agreement or otherwise) the substance of each of the
following provisions:
(i) Purchase Price. The purchase price under each
restricted stock purchase agreement shall be such amount as the
Board shall determine and designate in such restricted stock
purchase agreement.
(ii) Consideration. The purchase price of stock
acquired pursuant to the restricted stock purchase agreement
shall be paid either: (i) in cash at the time of purchase; (ii)
at the discretion of the Board, according to a deferred payment
or other similar arrangement with the Participant; or (iii) in
any other form of legal consideration that may be acceptable to
the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, payment of the
Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
(iii) Vesting. Shares of Common Stock acquired
under the restricted stock purchase agreement may, but need not,
be subject to a share repurchase options in favor of the Company
in accordance with a vesting schedule to be determined by the
Board.
(iv) Termination of Participant's Continuous Service.
In the event a Participant's Continuous Service terminates, the
Company may repurchase or otherwise reacquire any or all of the
shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the
restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares under
the restricted stock purchase agreement shall be transferable by
the Participant only upon such terms and conditions as are set
for in the restricted stock purchase agreement, as the Board
shall determine in its discretion, as long as stock awarded under
the restricted stock agreement remains subject to the terms of
the restricted stock purchase agreement.
(c) Stock Appreciation Rights.
(i) Authorized Rights. The following three types of
stock appreciation rights shall be authorized for issuance under
the Plan:
(1) Tandem Rights. A "Tandem Right" means a
stock appreciation right granted appurtenant to an Option which
is subject to the same terms and conditions applicable to the
particular Option grant to which it pertains with the following
exceptions: The Tandem Right shall require the holder to elect
between the exercise of the underlying Option for shares of
Common Stock and the surrender, in whole or in part, of such
Option for an appreciation distribution. The appreciation
distribution payable on the exercised the Tandem Right shall be
in cash (or, if so provided, in an equivalent number of shares of
Common Stock based on Fair Market Value on the date of the Option
surrender) in an amount up to the excess of (A) the Fair Market
Value (on the date of the Option surrender) of the number of
shares of Common Stock covered by that portion of the surrendered
Option in which the Optionholder is vested over (B) the aggregate
exercise price payable for such vested shares.
(2) Concurrent Rights. A "Concurrent Right"
means a stock appreciation right granted appurtenant to an Option
which applies to all or a portion of the shares of Common Stock
subject to the underlying Option and which is subject to the same
terms and conditions applicable to the particular Option grant to
which it pertains with the following exceptions: A Concurrent
Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular
shares of Common Stock to which the Concurrent Right pertains.
The appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent
number of shares of Common Stock based on Fair Market Value on
the date of the exercise of the Concurrent Right) in an amount
equal to such portion as determined by the Board at the time of
the grant of the excess of (A) the aggregate Fair Market Value
(on the date of the exercise of the Concurrent Right) of the
vested shares of Common Stock purchased under the underlying
Option which have Concurrent Rights appurtenant to them over (B)
the aggregate exercise price paid for such shares.
(3) Independent Rights. An "Independent Right"
means a stock appreciation right granted independently of any
Option but which is subject to the same terms and conditions
applicable to a Nonstatutory Stock Option with the following
exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount
equal to the excess of (a) the aggregate Fair Market Value (on
the date of the exercise of the Independent Right) of a number of
shares of Company stock equal to the number of share equivalents
in which the holder is vested under such Independent Right, and
with respect to which the holder is exercising the Independent
Right on such date, over (b) the aggregate Fair Market Value (on
the date of the grant of the Independent Right) of such number of
shares of Company stock. The appreciation distribution payable
on the exercised Independent Right shall be in cash or, if so
provided, in an equivalent number of shares of Common Stock based
on Fair Market Value on the date of the exercise of the
Independent Right.
(ii) Relationship to Options. Stock appreciation
rights appurtenant to Incentive Stock Options may be granted only
to Employee. The "Section 162(m) Limitation" provided in
subsection 5(c) and any authority to amend Options shall apply as
well to the grant of stock appreciation rights.
(iii) Exercise. To exercise any outstanding stock
appreciation right, the holder shall provide written notice of
exercise to the Company in compliance with the provisions of the
Stock Award Agreement evidencing such right. Except as provided
in subsection 5(c) regarding the "Section 162(m) Limitation", no
limitation shall exist on the aggregate amount of cash payments
that the Company may make under the Plan in connection with the
exercise of a stock appreciation right.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock
Awards, the Company shall keep available at all times the number
of shares of Common Stock required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to
obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to
grant Stock Awards and to issue and sell shares of Common Stock
upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards
shall constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board
shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock
Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which
it will vest.
(b) Stockholder Rights. No Participant shall be deemed to
be the holder of, or to have any rights of a holder with respect
to, any shares subject to such Stock Award unless and until such
Participant has satisfied all requirements for exercise of the
Stock Award pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in the
Plan or any instrument executed or Stock Award granted pursuant
thereto shall confer upon any Participant or other holder of
Stock Awards any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Stock Award
was granted or shall affect the right of the Company or Affiliate
to terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement
with the Company or Affiliate, or (iii) the service of a Director
pursuant to the Bylaws of the Company or an Affiliate as well as
any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case
may be.
(d) Incentive Stock Option $100,000 Limitation. To the
extent that the aggregate Fair Market Value (determined at the
time of the grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a
Participant, as a condition of exercising or acquiring stock
under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant's knowledge and
experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experiences in financial and business
matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks
of exercising the Stock Award; and (ii) to give written
assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for
the Participant's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such
requirements, shall be inoperative, if (i) the issuance of the
shares upon exercise or acquisition of stock under the Stock
Award has been registered under a then currently effective
registration statement under the Securities Act or (iii) as to
any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The
Company, may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(f) Withholding Obligations. To the extent provided by the
terms of a Stock Award Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to
the exercise or acquisition of stock under a Stock Award by any
of the following means (in addition to the Company's right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the
Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in
the stock subject to the Plan, or subject to any Stock Award,
without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities
subject to award to any person pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in
the class(es) and number of securities and price per share of
stock subject to such outstanding Stock Awards. Such adjustments
shall be made by the Board, the determination of which shall be
final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)
(b) Change in Control. In the event of (i) a dissolution
or liquidation of the Company, (ii) a sale of all or
substantially all of the assets of the Company, (iii) a merger or
consolidation in which the Company is not the surviving
corporation, (iv) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities,
cash or otherwise, and in which beneficial ownership of
securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the
election of directors has changed, (v) an acquisition by any
person, entity or group within the meaning of Section 13(d) or
14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or an Affiliate) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the
Company representing at least fifty percent (50%) of the combined
voting power entitled to vote in the election of directors, or
(vi) that the individuals, who, as of the date of the adoption of
this Plan, are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least fifty percent (50%)
of the Board, (if the election, or nomination for election, by
Company's stockholders of any new director was approved by a vote
of at least fifty percent (50%) of the Incumbent Board, such new
director shall be considered as a member of the Incumbent Board),
any one of which events shall constitute a "Change in Control",
then any surviving corporation or acquiring corporation shall
assume any Stock Awards outstanding under the Plan or shall
substitute similar stock awards (including an award to acquire
the same consideration paid to the stockholders in the
transaction) for those outstanding under the Plan. In the event
any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards
for those outstanding under the Plan, then with respect to Stock
Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable,
the time during which such Stock Awards may be exercised) shall
be accelerated in full, and the Stock Awards shall terminate if
not exercised (if applicable) at or a reasonable time following
such event as shall be determined by the Board.
(c) Termination of Continuous Service Upon a Change in
Control. If a Participant's Continuous Service is terminated
involuntarily without Cause upon or within twenty-four (24)
months after the occurrence of a Change in Control, then any
Stock Awards held by such Participant shall immediately become
fully vested and exercisable, and any repurchase right by the
Company or its Affiliates with respect to any shares of stock
covered by such Stock Award shall immediately lapse.
12. Amendment of the Plan and Stock Awards.
(a) Amendment of the Plan. The Board at any time, and from
time to time, may amend the Plan. However, except as provided in
Section 11 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, Rule 16b-3
of any NASDAQ or securities exchange listing requirements.
(b) Stockholder Approval. The Board, may, in its sole
discretion, submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive
officers.
(c) Contemplated Amendments. It is expressly contemplated
that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions
of the Code and the regulations promulgated thereunder relating
to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance
therewith.
(d) No Impairment of Rights. Rights under any Stock Award
granted before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the consent
of the Participant and (ii) the Participant consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and
from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights under any Stock Award
shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Participant and (ii) the
Participant consents in writing. Notwithstanding the foregoing,
the Stock Awards may not be amended to lower to aggregate
consideration payable, nor may Stock Awards be canceled and
reissued, unless approved by stockholders of the Company.
13. Termination of Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan
at any time. Unless sooner terminated, the Plan shall terminate
on the day before the tenth (10th anniversary) or the date the
Plan is adopted by the Board or approved by the stockholders of
the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is
terminated.
(b) No Impairment of Rights. Rights and obligations under
any Stock Award granted while the Plan is in effect shall not be
impaired by suspension or termination of the Plan, except with
the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective as determined by the Board,
but no Stock Award shall be exercised (or; in the case of a stock
bonus, shall be granted) unless and until the Plan has been
approved by the stockholders of the Company, which approval shall
be within twelve (12) months before or after the date the Plan is
adopted by the Board.
Consolidated Freightways Corporation
1999 Equity Incentive Plan
Stock Option Agreement
(Officers)
Pursuant to the Stock Option Grant Notice ("Grant Notice")
and this Stock Option Agreement, Consolidated Freightways
Corporation (the "Company") has granted you an option under its
1999 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in the Grant
Notice at the exercise price indicated in the Grant Notice.
Defined terms not explicitly defined in this Stock Option
Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein,
your option will vest as provided in the Grant Notice, provided
that vesting will cease upon the termination of your Continuous
Service.
2. Number of Shares and Exercise Price. The number of
shares subject to your option and your exercise price per share
referred to in the Grant Notice may be adjusted from time to time
for capitalization adjustments, as provided in Section 11 of the
Plan.
3. Method of Payment. Payment of the exercise price is due in
full
upon exercise of all or any part of your option. You may elect
to make payment of the exercise price in cash or by check or by a
same day sale of a portion of your Common Stock acquired upon
exercise of your option as follows:
In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street
Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash
(or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company
from the sales proceeds.
The Optionholder may also pay the exercise price by
delivery to the Company of other Common Stock with a Fair market
Value equal to the exercise price.
4. Whole Shares. Your option may only be exercised for
whole shares.
5. Securities Law Compliance. Notwithstanding anything to
the contrary contained herein, your option may not be exercised
unless the shares issuable upon exercise of your option are then
registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements
of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing the
option, and the option may not be exercised if the Company
determines that the exercise would not be in material compliance
with such laws and regulations.
6. Term. The term of your option commences on the Date of
Grant and expires upon the earliest of the following:
(a) immediately upon termination of your Continuous
Service for Cause;
(b) three (3) months after the termination of your
Continuous Service for any reason other than Retirement,
Disability, death, or involuntary termination (with or without
Cause), provided that if during any part of such three (3) month
period the option is not exercisable solely because of the
condition set forth in paragraph 5, the option shall not expire
until the earlier of the Expiration Date or until it shall have
been exercisable for an aggregate period of three (3) months
after the termination of your Continuous Service;
(c) six (6) months after the involuntary termination
of your Continuous Service without Cause;
(d) twelve (12) months after the termination of your
Continuous Service due to Disability;
(e) eighteen (18) months after your death if you die
either during your Continuous Service or within twelve (12)
months after your Continuous Service terminates for reason other
than Cause;
(f) thirty-six (36) months after the termination of
your Continuous Service due to Retirement (i.e., retirement as a
participant under the terms of and within the meaning of the
Company's Pension Plan, as amended from time to time); or
(g) the fifth (5th) anniversary of the Date of Grant.
7. Exercise.
(a) You may exercise the vested portion of your option
during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to
the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together
with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require
you to enter an arrangement providing for the payment by you to
the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares
are subject at the time of exercise, or (3) the disposition of
shares acquired upon such exercise.
8. Transferability. Your option is not transferable,
except by will or by the laws of descent and distribution, and is
exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who,
in the event of your death, shall thereafter be entitled to
exercise your option.
9. Change in Control.
(a) In the event of (i) a dissolution or liquidation of the
Company, (ii) a sale of all or substantially all of the assets of
the Company, (iii) a merger or consolidation in which the Company
is not the surviving corporation, (iv) a reverse merger in which
the Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, and in which beneficial
ownership of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote
in the election of directors has changed, (v) an acquisition by
any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate) of
the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule)
of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the
election of directors, or (vi) that the individuals who, as of
the date of the adoption of this Plan, are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at
least fifty percent (50%) of the Board, (if the election, or
nomination for election, by the Company's stockholders of any new
director was approved by a vote of at least fifty percent (50%)
of the Incumbent Board, such new director shall be considered as
a member of the Incumbent Board), any one of which events shall
constitute a "Change in Control", then any surviving corporation
or acquiring corporation shall assume any options outstanding
under the Plan or shall substitute similar stock awards
(including an award to acquire the same consideration paid to
shareholders in the transaction) for those outstanding under the
Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such options or to substitute
similar stock awards for those outstanding under the Plan, then
with respect to options held by Participants whose Continuous
Service has not terminated, the vesting of such options (and, if
applicable, the time during which such options may be exercised)
shall be accelerated in full, and the options shall terminate if
not exercised (if applicable) at or a reasonable time following
such event as shall be determined by the Board.
(b) If an Optionholder's Continuous Service is terminated
involuntarily without Cause (other than by death or disability)
upon or within twenty-four (24) months after the occurrence of a
Change in Control, then any options held by such Participant
shall immediately become fully vested and exercisable.
10. Option not a Service Contract. Your option is not an
employment or service contract, and nothing in your option shall
be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company or an Affiliate, or
of the Company or an Affiliate to continue your employment. In
addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors,
Officers or Employees to continue any relationship that you might
have as a Director or Consultant for the Company or an Affiliate.
11. Withholding Obligations.
(a) At the time your option is exercised, in whole or
in part, or at any time thereafter as requested by the Company,
you hereby authorize withholding from payroll and any other
amounts payable to you, and otherwise agree to make adequate
provision for (including by means of a "same day sale" pursuant
to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company),
any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with your option.
(b) Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any
applicable conditions or restrictions of law, the Company may
withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of
whole shares having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum
amount of tax required to be withheld by law. Shares shall be
withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are
otherwise issuable to you upon such exercise. Any adverse
consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.
(c) Your option is not exercisable unless the tax
withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your
option when desired even though your option is vested, and the
Company shall have no obligation to issue a certificate for such
shares or release such shares from any escrow provided for
herein.
12. Notices. Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices
delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the
last address you provided to the Company.
13. Governing Plan Document. Your option is subject to all
the provisions of the Plan, the provisions of which are hereby
made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations which may from
time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
Consolidated Freightways Corporation
1999 Equity Incentive Plan
Stock Option Agreement
(Management)
Pursuant to the Stock Option Grant Notice ("Grant Notice")
and this Stock Option Agreement, Consolidated Freightways
Corporation (the "Company") has granted you an option under its
1999 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in the Grant
Notice at the exercise price indicated in the Grant Notice.
Defined terms not explicitly defined in this Stock Option
Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein,
your option will vest as provided in the Grant Notice, provided
that vesting will cease upon the termination of your Continuous
Service.
2. Number of Shares and Exercise Price. The number of
shares subject to your option and your exercise price per share
referred to in the Grant Notice may be adjusted from time to time
for capitalization adjustments, as provided in Section 11 of the
Plan.
4. Method of Payment. Payment of the exercise price is due in
full
upon exercise of all or any part of your option. You may elect
to make payment of the exercise price in cash or by check or by a
same day sale of a portion of your Common Stock acquired upon
exercise of your option as follows:
In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street
Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash
(or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company
from the sales proceeds.
The Optionholder may also pay the exercise price by
delivery to the Company of other Common Stock with a Fair market
Value equal to the exercise price.
4. Whole Shares. Your option may only be exercised for
whole shares.
5. Securities Law Compliance. Notwithstanding anything to
the contrary contained herein, your option may not be exercised
unless the shares issuable upon exercise of your option are then
registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements
of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing the
option, and the option may not be exercised if the Company
determines that the exercise would not be in material compliance
with such laws and regulations.
6. Term. The term of your option commences on the Date of
Grant and expires upon the earliest of the following:
(a) immediately upon termination of your Continuous
Service for Cause;
(b) three (3) months after the termination of your
Continuous Service for any reason other than Retirement,
Disability, death, or involuntary termination (with or without
Cause), provided that if during any part of such three (3) month
period the option is not exercisable solely because of the
condition set forth in paragraph 5, the option shall not expire
until the earlier of the Expiration Date or until it shall have
been exercisable for an aggregate period of three (3) months
after the termination of your Continuous Service;
(c) six (6) months after the involuntary termination
of your Continuous Service without Cause;
(d) twelve (12) months after the termination of your
Continuous Service due to Disability;
(e) eighteen (18) months after your death if you die
either during your Continuous Service or within twelve (12)
months after your Continuous Service terminates for reason other
than Cause;
(f) thirty-six (36) months after the termination of
your Continuous Service due to Retirement (i.e., retirement as a
participant under the terms of and within the meaning of the
Company's Pension Plan, as amended from time to time); or
(g) the fifth (5th) anniversary of the Date of Grant.
7. Exercise.
(a) You may exercise the vested portion of your option
during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to
the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together
with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require
you to enter an arrangement providing for the payment by you to
the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares
are subject at the time of exercise, or (3) the disposition of
shares acquired upon such exercise.
8. Transferability. Your option is not transferable,
except by will or by the laws of descent and distribution, and is
exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who,
in the event of your death, shall thereafter be entitled to
exercise your option.
9. Change in Control.
(c) In the event of (i) a dissolution or liquidation of the
Company, (ii) a sale of all or substantially all of the assets of
the Company, (iii) a merger or consolidation in which the Company
is not the surviving corporation, (iv) a reverse merger in which
the Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, and in which beneficial
ownership of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote
in the election of directors has changed, (v) an acquisition by
any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate) of
the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule)
of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the
election of directors, or (vi) that the individuals who, as of
the date of the adoption of this Plan, are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at
least fifty percent (50%) of the Board, (if the election, or
nomination for election, by the Company's stockholders of any new
director was approved by a vote of at least fifty percent (50%)
of the Incumbent Board, such new director shall be considered as
a member of the Incumbent Board), any one of which events shall
constitute a "Change in Control", then any surviving corporation
or acquiring corporation shall assume any options outstanding
under the Plan or shall substitute similar stock awards
(including an award to acquire the same consideration paid to
shareholders in the transaction) for those outstanding under the
Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such options or to substitute
similar stock awards for those outstanding under the Plan, then
with respect to options held by Participants whose Continuous
Service has not terminated, the vesting of such options (and, if
applicable, the time during which such options may be exercised)
shall be accelerated in full, and the options shall terminate if
not exercised (if applicable) at or a reasonable time following
such event as shall be determined by the Board.
(d) If an Optionholder's Continuous Service is terminated
involuntarily without Cause (other than by death or disability)
upon or within twenty-four (24) months after the occurrence of a
Change in Control, then any options held by such Participant
shall immediately become fully vested and exercisable.
10. Option not a Service Contract. Your option is not an
employment or service contract, and nothing in your option shall
be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company or an Affiliate, or
of the Company or an Affiliate to continue your employment. In
addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors,
Officers or Employees to continue any relationship that you might
have as a Director or Consultant for the Company or an Affiliate.
11. Withholding Obligations.
(a) At the time your option is exercised, in whole or
in part, or at any time thereafter as requested by the Company,
you hereby authorize withholding from payroll and any other
amounts payable to you, and otherwise agree to make adequate
provision for (including by means of a "same day sale" pursuant
to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company),
any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with your option.
(b) Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any
applicable conditions or restrictions of law, the Company may
withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of
whole shares having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum
amount of tax required to be withheld by law. Shares shall be
withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are
otherwise issuable to you upon such exercise. Any adverse
consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.
(c) Your option is not exercisable unless the tax
withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your
option when desired even though your option is vested, and the
Company shall have no obligation to issue a certificate for such
shares or release such shares from any escrow provided for
herein.
12. Notices. Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices
delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the
last address you provided to the Company.
13. Governing Plan Document. Your option is subject to all
the provisions of the Plan, the provisions of which are hereby
made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations which may from
time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
Exhibit 10.4
CONSOLIDATED FREIGHTWAYS CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purposes.
(a) Eligible Option Recipients. The persons eligible to
receive Options are the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to
provide a means by which Non-Employee Directors' interests are
more closely aligned with those of the stockholders of the
Company by giving Non-Employee Directors an opportunity to
benefits from increases in value of the Common Stock through the
granting of Nonstatutory Stock Options.
(c) General Purpose. The Company, by means of the Plan,
seeks to retain the services of its Non-Employee Directors, to
secure and retain the services of new Non-Employee Directors and
to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as
those terms are defined in Sections 424(e) and (f), respectively,
of the Code.
(b) "Annual Meeting" means the annual meeting of the
stockholders of the Company.
(c) "Basic Grant" means an Option granted to a Non-Employee
Director who meets the specified criteria pursuant to subsections
6(a) or 6(b) of the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means the Consolidated Freightways
Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor,
(i) engaged by the Company or an Affiliate to render consulting
or advisory services and who is compensated for such services or
(ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include Directors of the
Company who are compensated solely by the Company for their
services as Directors.
(i) "Continuous Service" means that the Optionholder's
service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The
Optionholder's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate
as an Employee, Director or Consultant or a change in the entity
for which the Optionholder renders such service, provided that
there is not interruption or termination of the Optionholder's
Continuous Service. For example, a change in status from a Non-
Employee Director of the Company to a Consultant of an Affiliate
or an Employee of the Company will not constitute an interruption
of Continuous Service. The Board or chief executive officer of
the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including
sick leave, military leave or any other personal leave.
(j) "Director" means a member of the Board of Directors of
the Company.
(k) "Employee" means any person employed by the Company or
an Affiliate. Mere service as a Director or payment of a
director's fee by the Company or an Affiliate shall not be
sufficient to constitute "employment" by the Company or an
Affiliate.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of
the Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or traded on the NASDAQ National Market or the
NASDAQ SmallCap Market, the Fair Market Value of a share of
Common Stock shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market (or the exchange or
market with the greatest volume of trading in the Common Stock)
on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common
Stock, the Fair Market Value shall be determined in good faith by
the Board.
(n) "Non-Employee Director" means a Director who is not an
Employee or Consultant.
(o) "Nonstatutory Stock Option" means an Option not
intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations
promulgated thereunder.
(p) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(q) "Option" means a Nonstatutory Stock Option granted
pursuant to the Plan.
(r) "Option Agreement" means a written agreement between
the Company and an Optionholder evidencing the terms and
conditions of an individual Option grant. Each Option Agreement
shall be subject to the terms and conditions of the Plan.
(s) "Optionholder" means a person to whom an Option is
granted pursuant to the Plan, or, if applicable, such other
person who holds an outstanding Option.
(t) "Plan" means this Consolidated Freightways Corporation
1999 Non-Employee Directors' Stock Option Plan.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from
time to time.
(v) "Securities Act" means the Securities Act of 1933, as
amended.
(w) "Special Grant" means an Option granted to a Non-
Employee Director who meets the specified criteria pursuant to
subsection 6(b) of the Plan.
3. Administration.
(a) Administration by Board. The Board shall administer
the Plan. The Board may delegate administration of the Plan to a
committee of the Board comprised of one or more Directors.
(b) Powers of Board. The Board shall have the power,
subject to, and within the limitations of, the express provisions
of the Plan:
(i) To determine the provisions of each Option to the
extent not specified in the Plan.
(ii) To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency
in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote
the best interests of the Company which are not in conflict with
provisions of the Plan.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, the stock that may
be issued pursuant to Options shall not exceed in the aggregate
two hundred fifty thousand (250,000) shares of Common Stock.
(b) Reversion of Shares to the Share Reserve. If any
Option shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full, the
stock not acquired under such Option shall revert to and again
become available for issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or
otherwise.
5. Eligibility.
Nondiscretionary Options as set forth in section 6 shall be
granted under the Plan to all Non-Employee Directors.
6. Non-Discretionary Grants.
Option Grants. Without any further action of the Board,
each Non-Employee Director shall be granted the following Options
(if such Non-Employee Director is then serving as a Non-Employee
Director on the date of grant of such Option):
(a) On May 11, 1999, the date following the May 10, 1999
Annual Meeting, each person who is then a Non-Employee Director
shall automatically be granted a Basic Grant to purchase twenty
five thousand (25,000) shares of Common Stock on the terms and
conditions set forth herein. If, on that date, a Non-Employee
Director is also serving as Chairman of the Board, that Non-
Employee Director shall instead be granted a Basic Grant to
purchase fifty thousand (50,000) shares of Common Stock on the
terms and conditions set forth herein.
(b) After May 10, 1999, each person who is elected or
appointed for the first time to be a Non-Employee Director
automatically shall, upon the day following the first Annual
Meeting following the Non-Employee Director's appointment or
election, be granted a Basic Grant to purchase twenty-five
thousand (25,000) shares of Common Stock multiplied by a
fraction, the numerator of which is that number of full or
partial months left from the date of the grant of such Basic
Grant, until December 31, 2003 and the denominator of which is
forty eight (48). In no event shall this fraction exceed one
(1). In addition, a special grant of three thousand (3,000)
shares of Common Stock ("Special Grant") shall be made to a new
Non-Employee Director as an inducement to join the Board.
(c) In addition to the Basic Grant described in subsection
6(b) and the Special Grant, a person who first becomes a Non-
Employee Director after May 10, 1999 shall receive a supplemental
Option on the day following the first Annual meeting following
the Non-Employee Director's appointment or election in the amount
of twenty-five thousand (25,000) shares of Common Stock
multiplied by a fraction, the numerator of which shall be the
number of full months after January 1, 2000, which such Director
has served between his or her appointment or election and the
beginning of the month in which the first Annual Meeting
following his or her appointment or election is held and the
denominator of which is forty eight.
(d) No Option shall be granted to purchase a fractional
share of Common Stock. Any calculations made under this Section
6 which would otherwise result in the grant of a fractional share
shall be rounded to the nearest whole share (any result
containing half a share shall be rounded up to the next higher
number of whole shares).
7. Option Provisions.
Each Option shall be in such form and shall contain such
terms and conditions as required by the Plan. Each Option shall
contain such additional terms and conditions, not inconsistent
with the Plan, as the Board shall deem appropriate. Each Option
shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of
the following provisions:
(a) Term. No Option shall be exercisable after the
expiration of five (5) years from the date it was granted.
(b) Exercise Price. The exercise price of each Option
shall be one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of the stock
acquired pursuant to an Option may be paid, to the extent
permitted by applicable statutes and regulations, in any
combination of (i) cash or check, (ii) delivery to the Company of
other Common Stock, (iii) deferred payment or (iv) any other form
of legal consideration that may be acceptable to the Board and
provided in the Option Agreement; provided, however, that at any
time that the Company is incorporated in Delaware, payment of the
Common Stock's "par value", as defined in Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest
shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) Transferability. An Option shall be transferable to
the extent provided in the option agreement. If the Option does
not provide for transferability, then the Option shall not be
transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Director only by the Director. Notwithstanding the foregoing
provisions of this subsection 7(d), the Director may, by
delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the
death of a Director, shall thereafter be entitled to exercise the
Option.
(e) Vesting Generally. Options shall vest and become
exercisable as follows:
(i) Basic Grants described in subsection 6(a) shall
provide for vesting monthly on a pro-rata basis over a 48-month
period, beginning on January 1, 2000 and ending on December 31,
2003. Therefore, the first installment of monthly vesting for
such a Basic Grant would occur on January 31, 2000. For Non-
Employee Directors elected or appointed after the May 10, 1999
Annual Meeting, monthly pro-rata vesting shall begin on the last
day of the month following the first Annual Meeting following
such Non-Employee Director's appointment or election and end on
December 31, 2003.
(ii) Special Grants described in subsection 6(b) and
supplemental Options described in subsection 6(c) shall vest in
their entirety one year after the date of the grant.
(f) Termination of Continuous Service. In the event an
Optionholder's Continuous Service terminates for any reason
(including as a result of death or disability), the Optionholder
(or his or her successor in interest) may exercise the Option (to
the extent that the Optionholder was entitled to exercise it as
of the date of termination), but only within such period of time
ending on the earlier of (i) the date twenty-four (24) months
following the termination of the Optionholder's Continuous
Service, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the
Optionholder (or his or her successor in interest) does not
exercise the Option within the time specified in the Option
Agreement, the Option shall terminate.
(g) Extension of Termination Date. If the exercise of the
Option following the termination of the Optionholder's Continuous
Service would be prohibited at any time solely because the
issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth
in subsection 7(a) or (ii) the expiration of a period of three
(3) months after the termination of the Optionholder's Continuous
Service during which the exercise of the Option would not be in
violation of such registration requirements, but in any event no
earlier than the Option would otherwise have expired under
subsection 7(f).
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the
Options, the Company shall keep available at all times the number
of shares of Common Stock required to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to
obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to
grant Options and to issue and sell shares of Common Stock upon
exercise of the Options; provided, however, that this undertaking
shall not require the Company to register under the Securities
Act the Plan, any Option or any stock issued or issuable pursuant
to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for
the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Options unless and until such
authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Stockholder Rights. No Optionholder shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Option unless and until
such Optionholder has satisfied all requirements for exercise of
the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall
confer upon any Optionholder any right to continue to serve the
Company as a Non-Employee Director or shall affect the right of
the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii)
the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii)
the service of a Director pursuant to the Bylaws of the Company
or an Affiliate, and any applicable provisions of the corporate
law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(c) Investment Assurances. The Company may require an
Optionholder, as a condition of exercising or acquiring stock
under any Option, (i) to give written assurances satisfactory to
the Company as to the Optionholder's knowledge and experience in
financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together
with the purchaser representative, the merits and risks of
exercising the Option; and (ii) to give written assurances
satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder's
own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise
of acquisition of stock under the Option has been registered
under a then currently effective registration statement under the
Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then
applicable securities laws. The Company, may, upon advice of
counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer
of the stock.
(d) Withholding Obligations. The Optionholder may satisfy
any federal, state or local tax withholding obligation relating
to the exercise or acquisition of stock under an Option by any of
the following means (in addition to the Company's right to
withhold from any compensation paid to the Optionholder by the
Company) or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the Optionholder
as a result of the exercise or acquisition of stock under the
Option; or (iii) delivering to the Company owed and unencumbered
shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in
the stock subject to the Plan, or subject to any Option, without
the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not
involving the receipt of consideration by the Company), the Plan
will be appropriately adjusted in the class(es) and maximum
number of securities subject both to the Plan pursuant to
subsection 4(a) and to the nondiscretionary Options specified in
Section 6, and the outstanding Options will be appropriately
adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Options. The Board
shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)
(b) Change in Control. In the event of (i) a dissolution
or liquidation of the Company, (ii) a sale of all or
substantially all of the assets of the Company, (iii) a merger or
consolidation in which the Company is not the surviving
corporation, (iv) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities,
cash or otherwise, and in any of the above cases in which
beneficial ownership of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors has changes, (v) an
acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or an
Affiliate) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act or comparable
successor rule) of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, or (vi) that the
individuals who, as of the date of the adoption of this Plan, are
members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least fifty percent (50%) of the Board,
(if the election, or nomination for election, by the Company's
stockholders of any new director was approved by a vote of at
least fifty percent (50%) of the Incumbent Board, such new
director shall be considered as a member of the Incumbent Board),
any one of which events shall constitute a "Change in Control",
then any surviving corporation or acquiring corporation shall
assume any Options outstanding under the Plan or shall continue
or substitute similar options (including an option to acquire the
same consideration paid to the stockholders in the transaction)
for those outstanding under the Plan. In the event any surviving
corporation or acquiring corporation refuses to assume such
options or to continue or substitute similar Options outstanding
under the Plan, then with respect to Options held by Directors
whose Continuous Service has not terminated, the vesting of such
Options (and, if applicable, the time during which such Options
may be exercised) shall be accelerated in full, and the Options
shall terminate if not exercised (if applicable) at or a
reasonable time following such event as shall be determined by
the Board.
(c) Termination of Continuous Service upon a Change in
Control. If a Director's Continuous Service is terminated
involuntarily without cause (other than as a result of death of
disability) within twenty-four (24) months after the occurrence
of a Change in Control, then any Options held by such Director
shall immediately become fully vested and exercisable.
12. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from
time to time, may amend the Plan. However, except as provided in
Section 11 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Rule 16b-3 or any NASDAQ or
securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole
discretion, submit any other amendment to the Plan for
stockholder approval.
(c) No Impairment of Rights. Rights under any Option
granted before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the consent
of the Optionholder and (ii) the Optionholder consents in
writing.
(d) Amendment of Options. The Board at any time, and from
time to time, may amend the terms of any one or more Options;
provided, however, that the rights under any Option shall not be
impaired by any such amendment unless (i) the Company requests
the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan
at any time. Unless sooner terminated, the Plan shall terminate
on December 31, 2003. No Options may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of
the Plan shall not impair rights and obligations under any Option
granted while the Plan is in effect except with the written
consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective on May 10, 1999, the date
the Plan is adopted by the stockholders of the Company.
15. Choice of Law.
All questions concerning the construction, validity and
interpretation of this Plan shall be governed by the law of the
State of Delaware, without regard to such state's conflict of
laws rules.
Consolidated Freightways Corporation
Non-Employee Directors' Stock Option Plan
Stock Option Agreement
Pursuant to the Stock Option Grant Notice ("Grant Notice")
and this Stock Option Agreement, Consolidated Freightways
Corporation (the "Company") has granted you an option under its
Non-Employee Directors' Stock Option Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock
indicated in the Grant Notice at the exercise price indicated in
the Grant Notice. Defined terms not defined in this Stock Option
Agreement but defined in the Plan shall have the same definitions
as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein,
your option will vest as provided in the Grant Notice, provided
that vesting will cease upon the termination of your Continuous
Service.
2. Number of Shares and Exercise Price. The number of
shares subject to your option and your exercise price per share
referred to in the Grant Notice may be adjusted from time to time
for capitalization adjustments, as provided in Section 11 of the
Plan.
3. Method of Payment. Payment of the exercise price is
due in full upon exercise of all or any part of your option. You
may elect to make payment of the exercise price in cash or by
check or by delivery to the Company of other Common Stock.
4. Whole Shares. Your option may only be exercised for
whole shares.
5. Securities Law Compliance. Notwithstanding anything to
the contrary herein, your option may not be exercised unless the
shares issuable upon exercise of your option are then registered
under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of
the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing the option,
and the option may not be exercised if the Company determines
that the exercise would not be in material compliance with such
laws and regulations.
6. Term. The term of your option commences on the Date of
Grant and expires upon the earliest of the following:
(a) immediately upon termination of your Continuous
Service for cause:
(b) twenty-four (24) months following termination of
your Continuous Service; or
(c) the fifth (5th) anniversary of the Date of Grant.
7. Exercise. You may exercise the vested portion of your
option during its term by delivering a Notice of Exercise (in a
form designated by the Company) together with the exercise price
to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together
with such additional documents as the Company may then require.
8. Transferability. Your option is not transferable,
except by will or by the laws of descent and distribution, and is
exercisable during your life only by you. Notwithstanding by
delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise your
option.
9. Change in Control.
(a) In the event of (i) a dissolution or liquidation of the
Company, (ii) a sale of all or substantially all of the assets of
the Company, (iii) a merger or consolidation in which the Company
is not the surviving corporation, (iv) a reverse merger in which
the Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, and in which beneficial
ownership of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote
in the election of directors has changed, (v) an acquisition by
any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate) of
the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule)
of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the
election of directors, or (vi) that the individuals who, as of
the date of the adoption of this Plan, are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at
least fifty percent (50%) of the Board, (if the election, or
nomination for election, by the Company's stockholders of any new
director was approved by a vote of at least fifty percent (50%)
of the Incumbent Board, such new director shall be considered as
a member of the Incumbent Board), any one of which events shall
constitute a "Change in Control", then any surviving corporation
or acquiring corporation shall assume any options outstanding
under the Plan or shall substitute similar stock awards
(including an award to acquire the same consideration paid to the
stockholders in the transaction) for those outstanding under the
Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such options or to substitute
similar stock awards for those outstanding under the Plan, then
with respect to options held by Optionholders whose Continuous
Service has not terminated, the vesting of such options (and the
time during which such options may be exercised) shall be
accelerated in full, and the options shall terminate if not
exercised (if applicable) at or a reasonable time following such
event as shall be determined by the Board.
(b) If an Optionholder's Continuous Service is terminated
involuntarily without cause (other than by death or disability)
within twenty-four (24) months after the occurrence of a Change
in Control, then any options held by such Optionholder shall
immediately become fully vested and exercisable.
10. Option not a Service Contract. Your option is not an
employment or service contract, and nothing in your option shall
be deemed to create in any way whatsoever any obligation on your
part to continue the employ or service of the Company. In
addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors,
Officers or Employees to continue any relationship that you might
have as a Director, Employee or Consultant for the Company or an
Affiliate.
11. Withholding Obligations.
(a) At the time your option is exercised, in whole or
in part, or at any time thereafter as requested by the Company,
you agree to pay the Company any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of
the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any
applicable conditions or restrictions of law, the Company may
withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of
whole shares having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum
amount of tax required to be withheld by law. Any adverse
consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.
(c) Your option is not exercisable unless the tax
withholding obligations of the Company and/or any Affiliate, if
any, are satisfied. Accordingly, you may not be able to exercise
your option when desired even though your option is vested, and
the Company shall have no obligation to issue a certificate for
such shares or release such shares from any escrow provided for
herein.
12. Notices. Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices
delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the
last address you provided to the Company.
13. Governing Plan Document. Your option is subject to all
the provisions of the Plan, the provisions of which are hereby
made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations which may from
time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
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<RECEIVABLES> 334,518
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0
0
<COMMON> 77,647
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