<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CONSOLIDATED FREIGHTWAYS CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE>
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Notice of Annual Meeting
and
Proxy Statement
Annual Meeting of Shareholders
May 10, 1999
[LOGO OF CONSOLIDATED
FREIGHTWAYS
CORPORATION]
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- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF CONSOLIDATED
FREIGHTWAYS
CORPORATION]
175 Linfield Drive Telephone: 650/326-1700
Menlo Park, California 94025
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, May 10, 1999
10:00 A.M., Pacific Daylight Time
Stanford Park Hotel, 100 El Camino Real, Menlo Park, California
DEAR SHAREHOLDER:
The Annual Meeting of Shareholders of Consolidated Freightways Corporation
("the Company") will be held at 10:00 A.M., Pacific Daylight Time, on Monday,
May 10, 1999 to:
1. Elect three Group 3 directors for a three-year term.
2. Approve the 1999 Equity Incentive Plan.
3. Approve the Non-Employee Directors' Equity Plan
4. Transact any other business properly brought before the meeting and any
adjournment or postponement of the meeting.
Shareholders of record at the close of business on March 17, 1999, are
entitled to notice of and to vote at the meeting. A list of the shareholders
entitled to vote at the Annual Meeting will be open to examination by any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, at the offices of the Company, 175 Linfield Drive, Menlo Park, CA
94025, from April 30, 1999 until the date of the Annual Meeting.
Your vote is important. Whether or not you plan to attend, I urge you to
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, in
order that as many shares as possible will be represented at the meeting. If
you attend the meeting and prefer to vote in person, you will be able to do so
and your vote at the meeting will revoke any proxy you may submit.
Sincerely,
/s/ MARYLA R. FITCH
MARYLA R. FITCH
Vice President and Secretary
March 30, 1999
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
175 Linfield Drive
Menlo Park, California 94025
Telephone: 650/326-1700
PROXY STATEMENT
The Annual Meeting of Shareholders of Consolidated Freightways Corporation
will be held on May 10, 1999. Shareholders of record at the close of business
on March 17, 1999 will be entitled to notice of and to vote at the meeting or
any adjournment or postponement of the meeting. This proxy statement and
accompanying proxy are first being sent to shareholders on or about March 30,
1999.
Board of Directors' Recommendation
The Board of Directors of the Company is soliciting your proxy for use at
the meeting and any adjournment or postponement of the meeting. The Board
recommends a vote for the election of the three nominees for directors, for
the 1999 Equity Incentive Plan, and for the Non-Employee Directors' Equity
Plan, all of which are described later.
Proxy Voting Procedures
To be effective, properly signed proxies must be returned to the Company
prior to the meeting. The shares represented by your proxy will be voted in
accordance with your instructions. However, if no instructions are given, your
shares will be voted in favor of the three directors nominated and in favor of
the 1999 Equity Incentive Plan and the Non-Employee Directors' Equity Plan.
The Board of Directors does not know of any other matters to be presented at
the meeting. If any other matters are properly presented, the persons named on
the accompanying proxy will vote according to their best judgment.
Voting Requirements
The holders of a majority of the outstanding shares of Common Stock of the
Company must be represented in person or by proxy at the meeting to establish
a quorum for action at the meeting. The three nominees who receive the
greatest number of votes cast for election of directors at the meeting will be
elected directors for a three-year term. The affirmative vote of a majority of
the votes cast at the meeting is required to approve the 1999 Equity Incentive
Plan and the Non-Employee Directors' Equity Plan. If a proxy or ballot
indicates that a shareholder, broker or other nominee abstains from voting or
that shares are not to be voted on a particular proposal, the shares will be
counted for purposes of establishing a quorum, but will not be counted as
votes cast in determining the outcome of a proposal. Therefore, abstentions
and "non-votes" will not affect the outcome of any vote. Votes will be counted
by employees of The Bank of New York which as been engaged to act as inspector
of elections.
Voting Shares Outstanding
At the close of business on March 17, 1999, the record date for the Annual
Meeting, there were outstanding and entitled to vote 22,623,748 shares of
Common Stock. Each share of Common Stock has the right to one vote.
Proxy Voting Convenience
You are encouraged to exercise your right to vote by returning to the
Company a properly executed proxy in the enclosed envelope, whether or not you
plan to attend the meeting. This will ensure that your votes are cast.
<PAGE>
Revocability of Proxies
You may revoke or change your proxy at any time prior to its use at the
meeting. There are three ways you may do so: (1) give the Company a written
direction to revoke your proxy; (2) submit a later dated proxy, in either case
to the Secretary of the Company at the Company's principal office,
175 Linfield Drive, Menlo Park, CA 94025; or (3) attend the meeting and vote
in person. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
ELECTION OF DIRECTORS
The Board of Directors Recommends a Vote "For" All Nominees
Pursuant to the Certificate of Incorporation, the Board of Directors of the
Company has set the number of Directors of the Company at eight. The Company
has three groups of directors, each of whom is elected for a three-year term.
Group 1 directors will be elected in 2000 and Group 2 directors will be
elected in 2001. Vacancies that occur prior to the expiration of a three-year
term may be filled by the remaining directors. All directors have served as
directors of the Company since December 2, 1996.
The following persons are the nominees of the Board of Directors for
election as Group 3 directors to serve for a three-year term until the Annual
Meeting of Shareholders to be held in the year 2002 and until their successors
are duly elected and qualified:
Robert W. Hatch
John M. Lillie
Raymond F. O'Brien
If a nominee becomes unable or unwilling to serve, proxy holders are
authorized to vote for election of such person or persons as shall be
designated by the Board of Directors. The Board of Directors knows of no
reason why any of the nominees should be unable or unwilling to serve.
Nominees for Terms Expiring in 2002
Robert W. Hatch -- age 60
Chairman and Chief Executive Officer of Cereal Ingredients, Inc. (a
specialty ingredient manufacturer and laboratory, providing fat-free and high
fiber products) since 1991. He also served as Chairman of the Board of
Chromcraft Revington (a diversified furniture manufacturer) from 1992 to 1993,
and Chairman, President, and Chief Executive Officer of Mohasco (a
manufacturer of upholstered and case goods furniture) from 1989 to 1992. Mr.
Hatch is Chairman of the Company's Compensation Committee.
John M. Lillie -- age 62
President of Sequoia Associates LLC (a private investment firm) since 1998.
He was Chairman of Specialized Bicycle Components (a manufacturer of premium
bicycles and accessories) from 1996 to 1998. He also served as Chairman,
President and Chief Executive Officer of American President Companies (a
provider of global container transportation) from 1992 to 1995. Mr. Lillie is
a director of The Gap, Inc., Circle International and Walker Interactive
Corporation. Mr. Lillie is a member of the Company's Audit Committee.
2
<PAGE>
Raymond F. O'Brien -- age 76
Chairman Emeritus of CNF Transportation Inc. since 1995. He served as
President of CNF (a diversified transportation services company), the former
parent of the Company, from 1975 through 1988 and as Chief Executive Officer
of CNF from 1977 to 1988 and from 1990 to 1991. Mr. O'Brien also served as
Chairman of the Board of CNF from 1979 through 1995. He is a director of
Watkins-Johnson Company. Mr. O'Brien is a member of Company's Compensation
Committee.
Directors for Terms Expiring in 2000
W. Roger Curry -- age 60
President and Chief Executive Officer of the Company since December 2, 1996.
He has also served as President and Chief Executive Officer of the Company's
trucking subsidiary, Consolidated Freightways Corporation of Delaware, since
July 1994. He served as a Senior Vice President of CNF (a diversified
transportation services company), from 1986 to December 1996 and as President
of CNF's subsidiary, Emery AirFreight Corporation (an air freight company),
from 1991 to July 1994. Mr Curry is a director of Bemiss-Jason Corp.
G. Robert Evans -- age 67
Retired Chairman of Material Sciences Corporation (continuously processed,
coated materials technologies) from 1991 to 1998. He remains a director of
Material Sciences Corporation and is a director of Swift Energy Company. Mr.
Evans is Chairman of the Company's Audit Committee.
James B. Malloy -- age 71
Retired Chairman of Smurfit Packaging Company from 1993 to 1998 and
President and Chief Executive Officer of Jefferson Smurfit Corporation and its
affiliate, Container Corporation of America (integrated multinational paper
and packaging manufacturers) from 1980 to 1993. Mr. Malloy is a director of
The Jefferson Smurfit Group PLC. He is a member of the Company's Compensation
Committee.
Directors for Terms Expiring in 2001
Paul B. Guenther -- age 58
Retired President of PaineWebber Group, Inc. (a full service securities
firm) from 1994 to 1995 and President of PaineWebber Incorporated (a full
service securities firm) from 1988 to 1995. He is now principally a volunteer
executive or director of a number of not-for-profit organizations. Mr.
Guenther is a director of Frontier Insurance. He is a member of the Company's
Audit Committee.
William D. Walsh -- age 68
Chairman of Sequoia Associates LLC (a private investment firm) since 1982.
He is Chairman of the Board of Champion Road Machinery Limited, the Clayton
Group, Inc., Newell Manufacturing Corporation, Newell Industrial Corporation,
Unova Inc., and a director of Basic Vegetable Products, Inc., Newcourt Credit
Group Inc., Bemiss-Jason Corp., URS Corporation and Crown Vantage, Inc. Mr.
Walsh is Chairman of the Board of the Company and a member of the Company's
Compensation Committee.
3
<PAGE>
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock as of February 28, 1999, by the directors, the five
most highly compensated executive officers and by the directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership(1) Class(2)
- ------------------------ ----------------------- ----------
<S> <C> <C>
Patrick H. Blake............................ 157,009 *
W. Roger Curry.............................. 312,057 1.38%
G. Robert Evans............................. 20,768 *
Paul B. Guenther............................ 40,000 *
Robert W. Hatch............................. 8,167 *
John M. Lillie.............................. 30,000 *
James B. Malloy............................. 21,000 *
David F. Morrison........................... 92,256 *
Raymond F. O'Brien.......................... 42,112 *
Stephen D. Richards......................... 120,800 *
William D. Walsh............................ 258,796 1.14%
Robert E. Wrightson......................... 125,701 *
All directors and executive officers as a
group (14 persons)......................... 1,439,861 6.36%
</TABLE>
- --------
* Less than one percent of the Company's outstanding shares of Common Stock.
(1) Represents shares as to which the individual has sole voting and
investment power (or shares such power with his spouse). The shares shown
include awards of 448,334 shares of restricted stock which remain
restricted and subject to forfeiture, including: 100,000 shares for Mr.
Curry, 50,000 shares each for Messrs. Blake and Morrison, 41,667 shares
each for Messrs. Richards, Walsh and Wrightson and 6,667 shares each for
the remaining persons named. Restricted shares are not issued until
restrictions lapse, at which time the holders will have the right to vote
such stock, unless receipt of the shares is deferred.
(2) The percent is calculated based on shares of Common Stock outstanding on
February 28, 1999, except that restricted stock subject to forfeiture is
deemed outstanding for the purpose of calculating the percentage of
outstanding securities owned by a person, but is not deemed outstanding
for calculating the percentage owned by another person. All restricted
stock is deemed outstanding for the purpose of calculating the percentage
of outstanding securities owned by all directors and executive officers as
a group.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND BOARD COMMITTEES
During 1998, the Board of Directors held seven meetings. Each director
attended at least 75% of all the meetings of the Board and the Committees of
the Board on which he served.
The Board of Directors has standing Audit and Compensation Committees. The
Board does not have a standing Nominating Committee. The Audit Committee held
five meetings and the Compensation Committee held four meetings in 1998.
4
<PAGE>
Audit Committee: The Audit Committee recommends to the Board of Directors
the appointment of independent public accountants to perform the audit of the
Company's accounting records and authorizes the performance of services by the
accountants so appointed. The Committee reviews the annual audit of the
Company by the independent public accountants, and, in addition, annually
reviews the results of the examinations of accounting procedures and controls
performed by the Company's internal auditors. The members of the Audit
Committee are G. Robert Evans--Chairman, Paul B. Guenther and John M. Lillie.
Compensation Committee: The Compensation Committee approves the salaries and
other compensation of the officers of the Company. The Committee determines
the compensation policies and programs for officers and key personnel and
incentive compensation for employees of the Company and its domestic
subsidiaries. It oversees the administration of the Company's short-term and
long-term incentive compensation plans and grants awards under the Company's
1996 Stock Option and Incentive Plan. The Committee also oversees the
administration of the retirement and benefit plans of the Company and its
domestic subsidiaries for non-contractual employees. The members of the
Compensation Committee are Robert W. Hatch--Chairman, James B. Malloy, Raymond
F. O'Brien and William D. Walsh.
COMPENSATION OF DIRECTORS
Non-employee directors receive meeting fees of $1,000 for each Board meeting
attended, $500 for each committee meeting attended and $250 for each
telephonic meeting attended. In addition, a restricted stock award of 20,000
shares of the Company's Common Stock was made to each non-employee director on
December 2, 1996, except that the Chairman of the Board received a restricted
stock award of 125,000 shares. These grants provided for vesting on the next
three anniversary dates of the award provided that the stock traded after each
such anniversary date at 20%, 40% and 60%, respectively, higher than the base
price of $7.475. The base price represents the average closing price of the
Common Stock over the first five trading days after the Company became a
publicly-held company on December 2, 1996 following its spin-off from CNF
Transportation Inc. The first two-thirds of the award have vested and the
remaining one-third will vest on December 2, 1999, provided the Company's
Common Stock thereafter trades at or above $11.96 per share.
See "Approval of the 1999 Equity Incentive Plan--Other Stock Plans of the
Company" later in this proxy statement for information regarding restricted
stock awards granted to all employees, including officers, and the directors
of the Company. See also "Approval of the Non-Employee Directors' Equity Plan"
later in this proxy statement for information regarding proposed future
compensation of directors.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation of the
Company's chief executive officer and the next four most highly compensated
executive officers (the "Named Executives") for the three years ended December
31, 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- ---------------- All Other
Name and Principal Restricted Stock Compensation
Positions Year Salary ($) Bonus ($) Awards ($) (2) ($) (3)
------------------ ---- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
W.R. Curry.............. 1998 425,880 285,241 -- 70,170
President, Chief 1997 412,048 225,417 -- 41,631
Executive 1996 412,048 -- 2,242,500 20,695
Officer and Director
P.H. BLAKE.............. 1998 245,102 123,415 -- 3,933
Executive Vice 1997 231,764 126,790 -- 5,554
President-- 1996 231,764 -- 1,121,250 3,554
Operations
D.F. MORRISON (1)....... 1998 234,120 123,415 -- 4,827
Executive Vice 1997 231,764 126,790 -- 4,781
President and 1996 46,525 -- 1,121,250 1,058
Chief Financial Officer
S.D. RICHARDS........... 1998 207,288 106,496 -- 7,486
Senior Vice President 1997 199,992 109,409 -- 7,112
and General Counsel 1996 199,992 -- 934,375 50,484
R.E. WRIGHTSON.......... 1998 234,884 125,076 -- 12,993
Senior Vice President 1997 234,884 128,497 -- 7,877
and Controller 1996 234,884 -- 934,375 7,016
</TABLE>
- --------
(1) Mr. Morrison was compensated by CNF Transportation Inc. (the Company's
former parent company) as Vice President and Treasurer until joining the
Company in October 1996. Only compensation for the partial year worked at
the Company is shown at an annualized rate of $231,764.
(2) The restricted stock awards have the same terms as restricted stock awards
made to directors. See "Compensation of Directors." The number and value
of the unvested, restricted stock awards, based upon the closing price of
the Company's common stock at December 31, 1998, were: Mr. Curry--100,000
shares, $1,587,500; Mr. Blake and Mr. Morrison--50,000 shares, $793,750
each; Mr. Richards and Mr. Wrightson--41,667 shares, $661,464 each.
(3) For 1998, All Other Compensation consists of the following:
(a) 401(k) Match: matching contributions in the Company's common stock
under the Company's Stock and Savings Plan: $2,400 for each Named
Executive.
(b) Deferred Compensation: above market interest credited on deferred
salary and/or bonus for Mr. Curry--$21,753; Mr. Blake--$1,533; Mr.
Morrison--$2,427; Mr. Richards--$5,086, and above market interest
credited on deferred compensation under CNF long-term incentive
compensation plans for Mr. Curry--$46,017 and Mr. Wrightson--$10,593.
The Company assumed CNF's obligations for this deferred compensation in
connection with the spin-off of the Company as an independent,
publicly-held company on December 2, 1996. Excludes interest credited
on salary and/or bonus deferred prior to the spin-off which will be
paid by CNF.
6
<PAGE>
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
The following table illustrates the approximate annual pension that may
become payable to an employee in the higher salary classifications.
<TABLE>
<CAPTION>
Average Final Total Earnings
During
Highest Five Consecutive
Years Years of Plan Participation
of Last Ten Years of --------------------------------------------
Employment 15 20 25 30 35
---------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000.......................................... $ 46,834 $ 65,445 $ 84,056 $102,667 $121,278
$300,000.......................................... $ 70,334 $ 98,945 $127,056 $155,167 $183,278
$400,000.......................................... $ 94,834 $132,445 $170,056 $207,667 $245,278
$500,000.......................................... $118,834 $165,945 $213,056 $260,167 $307,278
$600,000.......................................... $142,834 $199,445 $256,056 $312,667 $369,278
$700,000.......................................... $166,834 $232,945 $299,056 $365,167 $431,278
$800,000.......................................... $190,834 $266,445 $342,056 $417,667 $493,278
</TABLE>
Compensation covered for the Named Executives, shown in the preceding
"Summary Compensation Table," is the highest five-year average over the last
ten years of employment of the "Salary" and "Bonus" shown in that table.
Retirement benefits shown are payable at or after age 65 in the form of a
single life annuity, using the current level of Social Security benefits to
compute the adjustment for such benefits.
Federal law places certain limitations on the amount of compensation that
may be taken into account in calculating pension benefits and on the amount of
pension payments that may be paid under federal income tax qualified plans.
The Company has adopted a non-qualified plan to provide for payment out of the
Company's general funds of benefits not covered by the qualified plan. The
table above represents total retirement benefits which may be paid from a
combination of the qualified and non-qualified plan.
As of December 31, 1998, Messrs. Curry, Blake, Morrison, Richards and
Wrightson had approximately 30, 23, 12, 7 and 31 years of plan participation,
respectively.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with each of the Named
Executives shown in the preceding "Summary Compensation Table" that provide
for continued salary and benefits and the opportunity to earn short-term and
long-term incentive compensation at not less than current levels. The
agreements were approved by the Board of Directors in 1998, with Mr. Curry
abstaining.
Mr. Curry's agreement provides for a three-year term ending December 31,
2001. The agreements for the other Named Executives provide for two-year terms
ending December 31, 2000. The agreements automatically renew for one more year
on January 1 of each year unless such renewal provision is terminated by the
executive or the Company. All agreements automatically terminate when the
executive reaches age 65. They terminate sooner upon termination for cause,
voluntary termination of employment, death or disability.
In the event of termination of employment by death or disability, the Named
Executive would be entitled to a lump sum payment of six months base salary
and target bonus, plus health benefits and age and service credits under the
Company's retirement plans. In the event of termination of employment by the
Company without cause or if the Named Executive resigns due to a constructive
termination of employment by the Company, the Named Executive would be
entitled to a lump sum payment of salary and target bonus and continued
benefits for the remainder of the term of his
7
<PAGE>
employment agreement. The Named Executive would also be entitled to (i) pro-
rata short-term and long-term incentives based upon performance of the Company
to date of termination; (ii) additional age and service credits under the
Company's pension and supplemental retirement plans for the remainder of the
term of the employment agreement with benefits determined as if the Named
Executive had continued employment for that period at current salary and
target bonus; and (iii) acceleration of the vesting of any stock awards.
In the event of a change-in-control, the terms of the employment agreements
will automatically be extended for one additional year. If a Named Executive's
employment is terminated without cause or by constructive termination within
24 months of a change-in-control, the Named Executive will be paid in a lump
sum base salary, target bonus and automobile allowance for the remainder of
the term of the agreement, plus be given three years (four years for Mr.
Curry) age and service credit under the Company's retirement plans with
benefits determined as if the Named Executive had continued employment for
that period at current salary and target bonus, and be entitled to continued
health care without premiums for the Named Executive and his spouse until
eligible for Medicare, or ten years, whichever is shorter. In addition to the
severance payments described above, the Named Executive would be entitled to
receive an additional payment, net of taxes, to compensate for any excise tax
required on those or other payments to the extent required under the Internal
Revenue Code for excess severance payments. A Named Executive has the right to
voluntarily resign in the thirteenth calendar month following a change-in-
control and receive twelve months of base salary, target bonus and benefits in
lieu of the more extensive severance compensation under the employment
agreement.
Constructive termination includes a reduction in base salary, target bonus
or long-term incentive opportunity, material reduction of benefits, material
changes in responsibilities, and, in the event of a change-in-control,
relocation. "Change-in-control" generally includes: (i) a merger,
consolidation or reorganization where less than 50% of the voting power is
retained by the Company's shareholders; (ii) the sale of at least 50% of the
Company's assets in a 12 month period and thereafter less than 50% of the
voting power is retained by the Company's shareholders; (iii) the acquisition
of beneficial ownership of 25% or more of the Company's voting power by any
person as the term "person" is used under the Securities Exchange Act of 1934;
(iv) the current directors ceasing to be a majority of the directors of the
Company during any two-year period unless approved by two-thirds of the
incumbent directors; and (v) the Company filing a report with the Securities
and Exchange Commission under applicable law that a change in control of the
Company has or may have occurred or will or may occur in the future pursuant
to a then-existing contract or transaction; or (vi) a liquidation or
dissolution of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
One of the Compensation Committee's responsibilities is to determine the
compensation of officers, including the chief executive officer and the four
most highly compensated executive officers shown in the preceding "Summary
Compensation Table" (the "Named Executives"). The Committee is composed of
four non-employee directors.
Policies
The Committee has established "pay-for-performance" as the guiding principle
of compensation, with a major portion of total compensation "at risk" through
short-term and long-term incentives. The greater the executive's
responsibilities, the higher the percentage of total potential compensation
should be "at risk."
The Committee has also determined that the Company should pay competitive
base salaries and above average incentive compensation for achievement of
objectives, under a compensation program
8
<PAGE>
designed to attract and retain the highest quality executives for the long-
term success and competitiveness of the Company. Short-term incentives should
be tied to measurable performance goals established at the beginning of the
year. However, the Committee has reserved the discretion to increase or award
bonuses for significant corporate accomplishments, superior performance
relative to comparable companies, and to take into account external factors
that may adversely affect performance such as general economic conditions.
Long-term incentives should closely align the interests of executives with the
long-term interests of the Company and its shareholders.
The Committee believes that compensation, including salary, should be
measured and evaluated against a peer compensation group. Salaries should also
take into account compensation outside the peer group where the Company may
compete for executive talent, and subjective factors, such as experience,
responsibilities, performance and value to the Company. The peer compensation
group is not the same as the companies included in the S&P SmallCap Trucking
Index used later in the "Performance Graph," but rather a broader group of
transportation companies selected by the Committee which it believes is
representative of the market in which the Company may compete for executive
talent.
Using the peer compensation group as a general guideline, the Committee will
target salaries between the 50th and 75th percentile of that group. Short-term
and long-term incentives, together with salary, will be targeted at or above
the 75th percentile of the peer compensation group for superior performance.
The compensation program for officers includes three principal components:
Base Salary
Salaries are reviewed annually by the Compensation Committee. The Committee
exercises subjective judgment based upon a variety of factors. These include,
from time to time: (i) advice and information provided by an independent
compensation consultant; (ii) recommendations from the chief executive officer
for officers other than himself; (iii) salaries for comparable executives at
other transportation companies; (iv) responsibilities, performance, knowledge,
experience and value of the services of the executives considered; and (v)
performance of the Company.
Short-Term Incentive Compensation
The Compensation Committee approved a 1998 cash incentive plan for all
regular, full-time, noncontractual employees based upon measurable performance
objectives. The plan included the opportunity to surpass that target for
exceeding performance objectives. Bonuses, for officers, were targeted from
35% to 65% of salary for the chief executive officer.
1998 target bonuses for officers were based upon pre-tax, pre-incentive
profits of the Company as a whole or its principal U.S. operating subsidiary.
The target bonus for the officer managing Canadian operations was based on the
profits of the Canadian operations.
In 1998, the chief executive officer earned a bonus of 69% of salary. The
other Named Executives earned bonuses of 53% of salary. The amounts are shown
in the preceding "Summary Compensation Table." Bonuses were earned strictly on
the basis of the performance criteria established at the beginning of the
year.
Long-Term Incentive Compensation
Long-term executive compensation for 1997 through 1999 was initially
approved by the Compensation Committee of the Company's former parent, CNF
Transportation Inc., prior to the Company's spin-off as an independent,
publicly-owned company on December 2, 1996. Such action
9
<PAGE>
was taken with the advice of an independent compensation consultant. The
Company's Compensation Committee reviewed and approved that action and made
restricted stock grants under the Company's 1996 Stock Option and Incentive
Plan on December 2, 1996 to officers and senior managers. The Committee
subsequently granted restricted stock awards on the same terms to all full-
time employees.
The grants were consistent with the objective of aligning the interests of
officers with the long-term interests of the Company's shareholders. The
grants were also in keeping with the general policy of pay-for-performance and
the policy that an even greater portion of the total potential compensation
for officers generally, and even more so for the Named Executives, should be
tied to performance.
Under the original grants, the shares vest ratably over three years,
contingent upon increases in the stock price of 20%, 40% and 60% over the
$7.475 average closing stock price during the first five trading days after
December 2, 1996. Except under limited circumstances, the executive must be a
full-time employee at the time the stock vests. The first two-thirds vested in
equal increments on December 16, 1997 and December 16, 1998 upon attainment of
the stock performance objectives. Subsequent grants were made to newly hired
or promoted senior managers, including officers, under the same terms except
for a higher stock price appreciation requirement. Some of those grants have
also vested.
The amount of share awards made was based upon the principles that the
officers were the key executives who could return the Company to profitability
and thereafter grow profits, thereby benefiting the Company's shareholders.
The Committee also believed that the officers should have a significant
incentive tied to an increase in shareholder value, reflecting the magnitude
of the challenge in turning around the Company. Allocation among officers was
based upon a subjective judgment of the relative contribution that would be
made by the individual executives. The awards to the Named Executives are
disclosed in the preceding "Summary Compensation Table."
CEO Compensation
The Compensation Committee increased the 1998 salary of W. Roger Curry,
President and Chief Executive Officer of the Company, from $412,048 to
$430,976, his first increase since 1995. In addition to his performance and
performance of the Company, the increase was based upon an external study that
showed his compensation was below the median compensation of other CEOs in the
peer compensation group.
Mr. Curry's cash incentive for 1998 was based upon the pre-tax, pre-
incentive profits of the Company and its subsidiaries. The 1998 objectives
were established by the Committee in late 1997 when the Company's operating
plan for 1998 was established. His target bonus was increased from 35% in 1997
to 65% in 1998 based upon advice from an independent compensation consultant
and a review of peer group compensation practices. The increase was consistent
with the Committee's policy of providing the Company's executives the
opportunity to earn incentive compensation substantially above the peer
compensation group for superior performance. Target profits were exceeded and
Mr. Curry earned a cash incentive of $285,241.
Mr. Curry received a restricted stock award on December 2, 1996, for 300,000
shares of the Company's Common Stock, based on the action taken by the CNF
Compensation Committee and the approval of the Company's Compensation
Committee. Mr. Curry was granted the largest share of two times the next
highest award based upon the Committee's judgment of the relative importance
of his position and expected contribution. No additional long-term incentive
awards were made to Mr. Curry in 1997 and 1998.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally limits the
deductibility of certain compensation paid to the chief executive officer or
any of the four other most highly compensated
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<PAGE>
executives as of the end of the fiscal year in excess of $1 million annually.
There is an exception for certain performance-based compensation established
and administered by "outside directors" defined in Section 162(m). Because Mr.
O'Brien was an officer of the Company's principal operating subsidiary more
than twenty years ago, he may not qualify as an outside director. Accordingly,
a separate Compensation Committee, which excludes Mr. O'Brien, acts on all
matters (including the restricted stock grants to executive officers referred
to earlier) which may qualify for the performance-based compensation exemption
under Section 162(m).
The Company's Compensation Committee has adopted the general policy that
compensation paid to the officers subject to the deductibility limitation
should be structured so as to maximize the deductibility of such compensation
for federal income tax purposes. Currently, the Committee expects that all
compensation paid to executive officers will be deductible. The Committee,
however, reserves the discretion to pay compensation to executive officers
that may not be deductible.
THE COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Robert W. Hatch, Chairman Raymond F. O'Brien
James B. Malloy William D. Walsh
</TABLE>
The material in this report and the following Performance Graph are not
"soliciting material," are not deemed filed with the SEC, and are not to be
incorporated by reference into any filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
whether made before or after the date of this proxy statement and irrespective
of any general incorporation language contained in any filing.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee have been independent directors of the
Company and have had no other relationships with the Company and its
subsidiaries. Mr. O'Brien previously served as an officer of the Company's
principal operating subsidiary from 1962 to 1975.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during 1998 its executive officers and directors
complied with all filing requirements of Section 16(a) of the Securities and
Exchange Act of 1934, except that Mr. David F. Morrison was late in reporting
the transfer of stock to a family trust.
PERFORMANCE GRAPH
Consolidated Freightways Corporation, S & P SmallCap 600 Index and
S & P SmallCap Trucking Index
The graph assumes that $100 was invested on November 13, 1996, the date on
which "when-issued" trading commenced in the Company's Common Stock, in each
of the Company's Common Stock ("CFWY"), the S & P SmallCap 600 Index and the S
& P SmallCap Trucking Index, and that dividends in the two indexes were
reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P
S&P SMALL CAP
Measurement Period CONSOLIDATED SMALL CAP TRUCKING
(Fiscal Year Covered) FREIGHTWAYS 600 INDEX INDEX
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 13/NOV/96 $100 $100 $100
FYE DEC/96 $148 $106 $108
FYE MAR/97 $198 $101 $110
FYE JUN/97 $273 $119 $126
FYE SEP/97 $294 $138 $154
FYE DEC/97 $227 $134 $135
FYE MAR/98 $283 $148 $149
FYE JUN/98 $232 $142 $134
FYE SEP/98 $138 $117 $103
FYE DEC/98 $265 $137 $134
</TABLE>
12
<PAGE>
PRINCIPAL SHAREHOLDERS
According to information furnished to the Company as of February 16, 1999,
the only persons known to the Company to own beneficially an interest in 5% or
more of the shares of Common Stock are set forth below. All such information
is as reported in the most recent Schedule 13G filed by each such person with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
- ---------------- -------------------- --------
<S> <C> <C>
Alliance Capital Management, L.P.,............... 3,083,450(1) 13.6%
a subsidiary of The Equitable Companies
Incorporated
1345 Avenue of the Americas
New York, NY 10105
Four Partners.................................... 1,316,250(2) 5.8%
c/o Thomas J. Tisch
667 Madison Avenue
New York, NY 10021
</TABLE>
- --------
(1) The Equitable Companies Incorporated, through its subsidiary, Alliance
Capital Management, L.P., has sole voting power of 66,900 shares, shared
voting power of 3,015,200 shares, sole dispositive power over 3,083,450
shares and shared dispositive power over 0 shares.
(2) Four Partners has sole voting power and sole dispositive power over
1,316,250 shares. By virtue of their status as managing trustees of the
trusts which are the general partners of Four Partners, Andrew H. Tisch,
Daniel R. Tisch, James S. Tisch and Thomas J. Tisch may be deemed to have
indirectly shared power to vote or direct the vote, or to dispose or
direct the disposition of, the 1,316,250 shares owned by Four Partners.
APPROVAL OF THE 1999 EQUITY INCENTIVE PLAN
The Board of Directors Recommends a Vote "For" the Plan
In February 1999, the Board of Directors adopted the Consolidated
Freightways Corporation 1999 Equity Incentive Plan, subject to shareholder
approval. The Plan provides for the grant of stock options, stock appreciation
rights, restricted stock awards and stock bonuses ("Stock Awards" or
"Awards").
The total number of shares authorized for Stock Awards is 2,000,000 shares
of Common Stock. Restricted stock and stock bonus awards are limited to
400,000 shares. In addition, a participant may not be granted Stock Awards for
more than 400,000 shares during any calendar year. If an Award expires or is
cancelled without having been exercised or vested, the unvested or canceled
shares generally will again be available for grants under the Plan.
The purpose of the Plan is to attract and retain employees and consultants
and motivate them to use their best efforts for the success of the Company.
The Plan is also intended to encourage participants to think like
shareholders, thereby aligning their interests more closely with the Company's
shareholders.
Administration
The Board has delegated the administration of the Plan to the Compensation
Committee of the Board of Directors. Subject to the provisions of the Plan,
the Committee has the power to construe and interpret the Plan in its sole
discretion. It also has the sole discretion to determine the persons
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<PAGE>
who will receive Awards, the size and types of such Stock Awards, and their
terms and conditions. Notwithstanding, Awards may not be amended to lower the
aggregate consideration payable, nor may they be canceled and reissued, unless
approved by shareholders of the Company.
The Board intends to limit the directors who may grant Stock Awards to
"outside directors" under Section 162(m) of the Internal Revenue Code. This is
one of the requirements to assure the deductibility for federal income tax
purposes of compensation from Stock Awards earned by the chief executive
officer and the other four most highly compensated officers. Since Mr. Raymond
F. O'Brien, a member of the Compensation Committee, was an officer of the
Company's principal operating subsidiary from 1962 to 1975, he may not be
considered to be an outside director. Accordingly, a sub-committee of the
Compensation Committee consisting of the other three members of the Committee
will make grants under the Plan and act on all other matters relating to the
Plan.
Eligibility
All employees and consultants of the Company are eligible to be selected to
receive Stock Awards. The actual number of employees and consultants who will
receive Awards cannot be determined because selection for participation in the
Plan is at the discretion of the Committee. It is currently expected that
Awards will be limited to key management employees. To date, no Stock Awards
have been granted under the Plan.
Options
The Committee may grant non-qualified stock options, incentive stock options
or a combination of the two. The number of shares covered by an option will be
determined by the Committee. However, no participant may be granted Stock
Awards for more than 400,000 shares in any one calendar year.
Incentive stock options may only be granted to employees. In addition, the
aggregate fair market value, determined at the time of the grant, of the
shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by a participant during any calendar year may
not exceed $100,000.
The exercise price of incentive and non-qualified stock options may not be
less than 100% of the fair market value of the stock subject to the option on
the date of the grant (110% for anyone who owns 10% of the voting power of the
Company). The closing price of the Company's Common Stock as reported on the
NASDAQ National Market on February 26, 1999 was $14.50 per share.
The exercise price of options must be paid with cash or the receipt of
irrevocable instructions to pay the exercise price from sales proceeds. The
Committee may also permit payment of the exercise price through tender of
shares of the Company's Common Stock, deferred payment arrangements or other
legal consideration acceptable to the Committee.
Options become exercisable at the times and on the terms established by the
Committee. In general, the maximum term of options under the Plan is 10 years.
In the event of termination of service, the options terminate 3 months after
voluntary termination and 6 months after an involuntary termination (3 months
in case of incentive stock options). In the event of termination of service
because of disability, death or retirement, the options may be exercised at
any time within 12 months, 18 months and 36 months, respectively. In no case
may the exercise period extend beyond its term. If a participant's service
terminates for cause, the options will terminate immediately.
Stock Bonuses and Restricted Stock
Stock bonus and restricted stock awards represent shares of the Company's
Common Stock which vest in accordance with the terms established by the
Committee. The number of shares subject to these Stock Awards will be
determined by the Committee, but may not exceed 400,000 in total.
14
<PAGE>
Stock bonus and restricted stock awards may be subject to such restrictions
on transferability, other restrictions, if any, and/or conditions to vesting
as the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee may
determine. Such restrictions or conditions may include factors relating to the
increase in the value of the stock or individual or Company performance such
as the attainment of certain specified individual, divisional or Company-wide
performance levels. The performance measures may include: operating profits,
revenue, revenue increases, earnings per share, net income, increases in net
income, pre-tax earnings, pre-tax earnings before interest, return on
designated assets, return on sales, cash flow, return on capital, return on
equity, return on investment, operating ratio, economic value added,
depreciation and amortization, pre-tax operating earnings after interest and
before incentives, operating income before incentives, a combination of any of
these criteria or any other measurable performance objective. The Committee
may also impose additional restrictions pursuant to which a participant may
elect to defer the receipt (or constructive receipt) of a stock bonus or
restricted stock award beyond the date the base restrictions may lapse. The
Committee has the power to accelerate the vesting of restricted stock awards
and stock bonuses under the Plan.
Stock Appreciation Rights
Stock appreciation rights represent the right of a participant to receive
the excess of the fair market value of a share of Common Stock on the date of
exercise over the grant price, which may not be less than the fair market
price on the date of grant. There are three types of stock appreciation
rights.
Tandem stock appreciation rights are tied to an underlying option and
require the participant to elect whether to exercise the underlying option or
to surrender the option for a cash appreciation distribution. Concurrent stock
appreciation rights are tied to an underlying option and are exercised
automatically at the same time the underlying option is exercised. The
participant receives a cash appreciation distribution equal to the fair market
value of the vested shares purchased under the option less the aggregate
exercise price payable for such shares. Independent stock appreciation rights
are granted independently of any option and entitle the participant to receive
upon exercise an appreciation distribution in cash and/or shares, at the
Committee's discretion.
Adjustment Provisions
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, recapitalization, re-incorporation,
stock 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,
may change the class and number of shares of Common Stock subject to the Plan
and outstanding Stock Awards. In that event, the Plan will be appropriately
adjusted as to the type of security and the maximum number of shares of Common
Stock subject to the Plan, and outstanding Awards will be adjusted as to the
type of security, number of shares and price per share of Common Stock subject
to such Awards.
Effect Of Certain Corporate Events
The Plan provides that, in the event of a dissolution, liquidation or sale
of all or substantially all of the assets of the Company, specified types of
merger, or other corporate reorganization ("change in control"), any surviving
or acquiring corporation shall assume Stock Awards outstanding under the Plan
or substitute similar Stock Awards for those outstanding under the Plan. If a
surviving or acquiring corporation declines to assume outstanding Stock
Awards, or to substitute similar Stock Awards, then,
15
<PAGE>
the vesting of such Awards will be accelerated. The acceleration of an award
may be viewed as an anti-takeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
If a participant's service is terminated involuntarily without cause within 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.
Duration, Amendment and Termination
The Board may amend or terminate the Plan without shareholder approval at
any time for any reason, except that, as required by Section 162(m) of the
Internal Revenue Code, certain material amendments must be approved by
shareholders. Unless sooner terminated, the Plan will terminate on February
16, 2009.
In no event may Stock Awards be amended to lower the consideration payable,
nor may such Awards be cancelled and reissued, unless approved by the
shareholders.
Federal Income Tax Information
A recipient of a stock option or stock appreciation right will not have
taxable income on the date of grant. Upon the exercise of non-qualified
options and stock appreciation rights, the participant will recognize ordinary
income equal to the difference between the fair market value of the shares on
the date of exercise and the exercise price. Any gain or loss recognized upon
any later disposition of the shares generally would be a capital gain or loss.
Purchase of shares upon exercise of an incentive stock option will not
result in any taxable income to the participant, except for purposes of the
alternative minimum tax. Gain or loss recognized by the participant on a later
sale or other disposition will either be capital gain or loss or ordinary
income, depending upon how long the participant holds the shares. No taxable
income is recognized upon receipt of a stock appreciation right, but upon
exercise, the fair market value of the shares (or the cash value in lieu of
shares) will be taxable to the participant as ordinary income.
There are no tax consequences to the participant or the Company by reason of
the grant of restricted stock or stock bonuses where there are certain types
of vesting restrictions, unless the participant elects to be taxed on its then
fair market value. Absent such election, upon vesting the participant will
recognize ordinary income equal to the fair market value of the shares or
units at such time less the purchase price, if any. If there are no
restrictions on vesting, the participant normally will recognize ordinary
income equal to the excess of the stock's fair market value on its acquisition
date less any purchase price. Upon disposition of any such stock, the
participant will recognize a long-term or short-term capital gain or loss,
depending on whether the stock was held for more than one year, on the
difference between the sale price and the amount recognized as ordinary income
upon acquisition or vesting.
The Committee may permit participants to satisfy tax withholding
requirements in connection with the exercise or receipt of an Award by
electing to have the Company withhold otherwise deliverable shares, or
delivering to the Company already-owned shares having a value equal to the
amount required to be withheld.
The Company generally will be entitled to a tax deduction for a Stock Award
in an amount equal to the ordinary income realized by the participant at the
time the participant recognizes such income. Internal Revenue Code section
162(m) contains special rules regarding the federal income tax deductibility
of compensation paid to the Company's chief executive officer and generally to
each of the other four most highly compensated executive officers. The general
rule is that annual compensation paid to any of these specified executives
will be deductible only to the extent that it does
16
<PAGE>
not exceed $1 million. However, the Company can preserve the deductibility of
certain compensation in excess of $1 million if it complies with conditions
imposed by section 162(m). The Plan has been designed to permit the Committee
to grant Stock Awards which qualify as performance-based compensation.
Other Stock Plans of the Company
The Company's 1996 Stock Option and Incentive Plan ("1996 Plan") authorizes
the grant of Stock Awards for 3,303,798 shares of Common Stock to employees,
directors and consultants. Restricted Stock Awards for almost all of the
shares were granted to all employees and directors from December 1996 through
July 1997, conditioned upon continued employment and an increase in the stock
price. Subsequent grants were made to newly-hired and promoted senior
managers. A principal purpose of these grants was to more closely align the
interests of employees with the long-term interests of shareholders.
The Stock Awards granted to the directors are described earlier under
"Compensation of Directors" and awards made to the five most highly
compensated officers are shown earlier under "Summary Compensation Table." As
of February 28, 1999, stock awards for 1,107,517 shares were outstanding under
the 1996 Plan and awards for 102,964 shares were still available for grant.
Awards for those shares must be made on or prior to December 2, 2001 when the
Plan terminates.
The shares vest and are issued over three years if the Company's Common
Stock trades for ten consecutive trading days at an average price that is 20%,
40%, and 60% higher than the base price after each anniversary date of the
grant, respectively. The base price is $7.475, representing the average
closing price of the Common Stock over the first five trading days after
becoming a publicly-held company on December 2, 1996. Prior to vesting, awards
are forfeited upon voluntary termination of service or termination for cause.
Restrictions on these awards will lapse upon a change in control. However, the
Compensation Committee may decide to revoke this provision at any time prior
to the change-in-control. Restricted stock awards entitle the person receiving
the award to credit for any dividends, but carry no voting rights until
vested. All remaining awards will be forfeited on December 2, 2001 if the
required stock price appreciation has not been achieved. The first one-third
of these awards vested on December 16, 1997 and the second one-third vested on
December 16, 1998.
APPROVAL OF THE NON-EMPLOYEE DIRECTORS' EQUITY PLAN
The Board of Directors Recommends a Vote "For" the Plan
A guiding principle of the Company's executive compensation is "pay for
performance" with a major portion of the total compensation "at risk" through
performance incentives. Consistent with this philosophy, the Board of
Directors believes that a majority of directors' compensation should be "at
risk" through grants of stock options which align the interests of directors
with the long-term interests of the Company and its shareholders.
The Non-Employee Directors' Equity Plan (The "Directors' Plan") was
unanimously adopted by the Board of Directors, subject to shareholder
approval. It will become effective on May 10, 1999 if approved by the
shareholders. The Directors' Plan is intended to promote the long-term growth
and financial success of the Company by enabling it to attract, retain and
motivate talented directors with an equity interest in the Company.
Subject to shareholder approval, the Directors' Plan provides for an initial
grant of options to purchase 200,000 shares of Common Stock of the Company on
May 11, 1999, to seven non-employee directors. Each non-employee director
would be granted an option for 25,000 shares. The Chairman
17
<PAGE>
of the Board would be granted an option to purchase an additional 25,000
shares in recognition of the extra services he performs as Chairman.
The grant is intended to compensate the directors for their services for
four years from January 1, 2000 through December 31, 2003. Options would vest
monthly over 48 months, beginning January 31, 2000. No additional grants would
be made to current directors under the Directors' Plan during that time,
except that any director who succeeds the Chairman of the Board prior to
December 31, 2003, would be granted an additional option to purchase a pro-
rata portion of 25,000 shares based upon the number of full months left from
the date of election in the four-year vesting period.
A new director would be granted an option to purchase a pro-rata portion of
25,000 shares (50,000 if elected Chairman of the Board) based upon the number
of full months left from the date of appointment or election in the four-year
vesting period. In addition, a special grant for 3,000 shares would be made to
the new director as an inducement to join the Board. All grants would be made
on the day following the first annual meeting of shareholders following the
director's appointment or at which the director is elected. The special grant
and options for the full months served prior to the meeting, if any, would
vest in one year. The other shares would vest monthly on a pro-rata basis over
the remaining term of the four-year compensation Plan.
Stock options to purchase Common Stock would be granted at the fair market
value of the Common Stock on the date of grant. Accordingly, the options would
have no value to the directors unless the share price appreciates. Options
would expire five years from date of grant. If a director leaves the Board for
any reason, options for unvested shares would be forfeited. If a director
loses his position within two years of a change-in-control, the vesting of the
options will automatically be accelerated. A director may exercise vested
options at any time within 24 months of leaving the Board of Directors or the
expiration date of the option if sooner.
An aggregate of 250,000 shares is reserved for issuance under the Directors'
Plan. Unvested options, which are forfeited when a director leaves the board,
and options which expire without being exercised, again become available for
options granted under the Directors' Plan. The number of shares will be
appropriately adjusted by the Board of Directors if the Common Stock is
affected by a reorganization, merger, consolidation, recapitalization, stock
split, stock dividend, spin-off, restructuring or other such major event. The
Directors' Plan will terminate on December 31, 2003, and no grants may be made
after that date.
The timing, amount, type and recipients of stock options are set forth in
the Directors' Plan. Therefore, no discretionary action by an administrative
body is required. The Compensation Committee of the Board has been delegated
the power to construe, interpret and to administer the Directors' Plan to the
extent required.
Neither the directors nor the Company will incur federal tax consequences as
a result of the grant of a stock option. Upon the exercise of an option,
directors will recognize ordinary income equal to the difference between the
option price and the fair market value of the shares on the date of exercise.
The Company generally is entitled to a deduction for the same amount for
federal income tax purposes. Generally, any profit or loss on the subsequent
disposition of such shares will be short-term or long-term gain or loss to the
director, depending upon the holding period for the shares.
As described earlier under "Compensation of Directors," non-employee
directors receive a fee of $1,000 per Board meeting attended, $500 per
Committee meeting attended and $250 per telephonic meeting attended. Based
upon scheduled meetings for 1999, directors who serve on the Compensation
Committee would earn $5,500 and directors who serve on the Audit Committee
would earn $6,000 in 1999. There is no retainer fee. In December 1999,
directors will earn 6,667 shares (41,667 shares for the Chairman of the Board)
of Common Stock under the Company's 1996 Stock
18
<PAGE>
Option and Incentive Plan provided that the 60% price appreciation vesting
requirement is achieved from the initial trading price of the Company's Common
Stock after its spin-off as a publicly-held company in December 1996. No
further grants will be made to directors under the 1996 Plan.
Beginning in 2000, it is expected that directors' fees will be increased to
an annual retainer of $12,000, $2,000 per Board meeting attended and $1,000
per Committee meeting attended. In such event, each non-employee director
would receive cash compensation of $23,000 to $24,000 (depending on Committee
membership) in 2000 based on scheduled meetings. These fees would supplement
the stock option grants under the Directors' Plan.
CONFIDENTIAL VOTING
The Board of Directors has adopted a confidential voting policy. Under this
policy, all proxies, ballots and voting materials that identify the votes of
specific shareholders will be kept confidential from the Company except as may
be required by law or to assist in the pursuit or defense of claims or
judicial actions, and except in the event of a contested proxy solicitation.
In addition, comments written on proxies, ballots, or other voting materials,
together with the name and address of the commenting shareholder, will be made
available to the Company without reference to the vote of the shareholder,
except where such vote is included in the comment or disclosure is necessary
to understand the comment. Certain vote tabulation information may also be
made available to the Company, provided that the Company is unable to
determine how any particular shareholder voted.
Access to proxies, ballots and other shareholder voting records will be
limited to inspectors of election who are not employees of the Company and to
certain Company employees and agents engaged in the receipt, count and
tabulation of proxies.
SUBMISSION OF SHAREHOLDER PROPOSALS
Under the rules of the Securities and Exchange Commission, shareholder
proposals intended for inclusion in next year's proxy statement must be
directed to the Corporate Secretary, Consolidated Freightways Corporation, at
175 Linfield Drive, Menlo Park, California 94025, and must be received by
November 30, 1999. With respect to shareholder proposals not intended to be
included in the proxy statement or nominations of persons for election to the
Board, the Company's Bylaws require that advance notice of such proposals and
nominations be given to the Corporate Secretary no later than the close of
business on the 45th day and no earlier than the close of business on the 75th
day prior to the first anniversary of the day on which proxy materials for the
prior year's annual meeting were first mailed to shareholders. Proposals and
nominations received after that date will not be eligible to be raised or
voted upon at the meeting. Any notice of a proposal or nomination must include
certain information about the shareholder, the proposal and nominee as well as
the written consent of any nominee, all as required by the Bylaws of the
Company. A copy of these Bylaw provisions may be obtained without charge by
writing to the Corporate Secretary.
OTHER MATTERS
The Company will furnish to interested shareholders, free of charge, a copy
of its 1998 Annual Report on Form 10-K that is filed with the Securities and
Exchange Commission. Please direct your written request to the Corporate
Secretary, Consolidated Freightways Corporation, 175 Linfield Drive, Menlo
Park, California 94025.
The expense of proxy solicitation will be paid by the Company. The
solicitation is being made by mail and may also be made by telephone,
facsimile, or personally by directors, officers, and regular
19
<PAGE>
employees of the Company who will receive no extra compensation for their
services. The Company has engaged Innisfree M&A Incorporated to assist in the
solicitation of proxies, for which it will pay a fee of $7,500. The company
will also reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners of the Company's Common Stock.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARYLA R. FITCH
MARYLA R. FITCH
Vice President and Secretary
March 30, 1999
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CONSOLIDATED FREIGHTWAYS CORPORATION
1999 EQUITY INCENTIVE PLAN
1. PURPOSES.
(A) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock
Awards are the Employees 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 factual 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 or 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
include poor performance of the Participant's services for the Company or its
Affiliates as determined by the Company following (A) written notice to the
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Participant describing the nature of such deficiency and (B) the Participant's
failure to cure such deficiency within 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 the 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 the 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) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(L) "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.
(M) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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(N) "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.
(O) "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.
(P) "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 not 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.
(Q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(R) "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.
(S) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(T) "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.
(U) "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.
(V) "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
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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.
(W) "PARTICIPANT" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(X) "PLAN" means this Consolidated Freightways Corporation 1999 Equity
Incentive Plan.
(Y) "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.
(Z) "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.
(AA) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(BB) "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.
(CC) "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.
(DD) "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 of 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:
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(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 this 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 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 whom 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 the 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
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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 (400,000) shares of Common Stock may be
issued as restricted stock and stock bonus awards.
(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 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 Stock Awards 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
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provisions of separate Options need not be identical, but 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. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be 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 each 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 stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, 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 (ii) 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 similar 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
of 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 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.
(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
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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 of the date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months in the event of a voluntary termination
and six (6) months in the event of an involuntary termination 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 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 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
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(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 within
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 specified 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.
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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
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(I) CONSIDERATION. A stock bonus may be awarded solely 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, so 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:
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(I) PURCHASE PRICE. The purchase price, if any, 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, if any, 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
option 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 forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
(C) STOCK BONUSES AND RESTRICTED STOCK. Stock bonus and restricted stock
awards may be subject to such restrictions on transferability, other
restrictions, if any, and/or conditions to vesting as the Board may impose at
the date of grant or thereafter, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such installments, or
otherwise, as the Board may determine. Such restrictions or conditions may
include factors relating to the increase in the value of the stock or individual
or Company performance such as the attainment of certain specified individual,
divisional or Company-wide performance levels. The performance measures may
include: operating profits, revenue, revenue increases, earnings per share, net
income, increase in net income, pre-tax earnings, pre-tax earnings before
interest, return on designated assets, return on sales, cash flow, return on
capital, return on equity, return on investment, operating income, economic
value added, depreciation and amortization, pre-tax operating earnings after
interest and before incentives, operating income before incentives, a
combination of any of these criteria or any other measurable performance
objective. The Committee may also impose additional restrictions pursuant to
which a participant may elect to defer the receipt (or constructive receipt) of
a stock bonus or restricted stock award beyond the date the base restrictions
may lapse.
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(D) 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.
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(I) RELATIONSHIP TO OPTIONS. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. 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.
(II) 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 of the 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.
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(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 an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, or (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate.
(D) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of 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
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 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 the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (ii) 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.
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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 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 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.
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(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 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
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, 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, Stock
Awards may not be amended to lower the aggregate consideration payable, nor may
Stock Awards be canceled and reissued, unless approved by stockholders of the
Company.
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 the day before the tenth
(10th) anniversary of 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.
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(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.
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CONSOLIDATED FREIGHTWAYS CORPORATON
1999 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 benefit 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 Consolidated Freightways Corporation, a Delaware
corporation.
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(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) "CONSULTANT 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,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no 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 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) "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 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.
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(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.
(X) "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.
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(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.
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.
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(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 (48).
(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 of 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 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 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.
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(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 the 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.
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(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 or 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
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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 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 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 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
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<PAGE>
"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 for
those 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 terminates for any reason upon or 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, and
any repurchase right by the Company or its Affiliates with respect to any shares
of stock covered by such Options shall immediately lapse.
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.
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(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.
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The Board of Directors recommends a vote FOR the election of directors FOR
proposals 2 and 3.
1. Election of three Group 3 directors for a three-year term.
FOR all nominees listed below.
[_]
WITHHOLD AUTHORITY to vote for all nominees listed below.
[_]
EXCEPTIONS
[_]
Nominees: Robert W. Hatch, John M. Lillie, Raymond F. O'Brien
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and strike a line through that nominee's name.)
2. Approval of 1999 Equity Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval of Non-Employee Directors' Equity Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
The proxies are hereby authorized to vote in their discretion upon such other
matters as may properly come before the meeting and any adjournments or
postponements thereof.
Change of Address and/or
Comments Mark Here
Note: Please sign exactly as name appears
hereon. Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
Dated_______________________________, 1999
Signature_________________________________
Signature_________________________________
Votes must be indicated
(x) in Black or Blue ink. X
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
<PAGE>
CONSOLIDATED FREIGHTWAYS CORPORATION
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
of Consolidated Freightways Corporation
The undersigned appoints W.R. CURRY, D.F. MORRISON, S.D. RICHARDS and each
of them, the proxies of the undersigned, with full power of substitution, to
vote the stock of CONSOLIDATED FREIGHTWAYS CORPORATION, which the undersigned
may be entitled to vote at the Annual Meeting of Shareholders to be held on
Monday, May 10, 1999 at 10:00 A.M. or at any adjournments or postponements
thereof. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting and any and all adjournments or
postponements thereof.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors recommendations.
This proxy when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted (1) FOR the election
of directors set forth on the reverse side of this card; (2) FOR approval of the
1999 Equity Incentive Plan; and (3) FOR approval of the Non-Employee Directors'
Equity Plan.
For participants in the Company's
401k Plan and Stock and Savings Plan
and in the CNF Transportation Inc.
Thrift and Stock Plan, any shares
held in the share owner's account on
the record date will be voted by the
applicable trustee of a plan in accordance CONSOLIDATED FREIGHTWAYS CORPORATION
with the participant's instructions or P.O. BOX 11147
if no instructions are given, such shares NEW YORK, N.Y. 10203-0147
will be voted in the same proportion as
all other shares in the plan for which
instructions are received. The trustees
will vote in their discretion upon other
business as may properly come before
the meeting.
(Continued and to be signed on other side)
