UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission File Number 1-12149
CONSOLIDATED FREIGHTWAYS CORPORATION
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 77-0425334
175 Linfield Drive, Menlo Park, CA 94025
Telephone Number (650) 326-1700
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each
Exchange on
Title of Each Class Which Registered
Common Stock ($.01 par value) NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes___X___ No_______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. _______
Aggregate market value of voting stock held by persons other than
Directors, Officers and those shareholders holding more than 5% of the
outstanding voting stock, based upon the closing price per share on the
National Automated System of the National Association of Securities
Dealers Inc. Automated Quotation System on February 26, 1999:
$249,871,555
Number of shares of Common Stock outstanding
as of February 26, 1999: 22,623,748
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
Consolidated Freightways Corporation 1998 Annual Report to Shareholders
(only those portions referenced herein are incorporated in this Form
10-K).
Part III
Part III is incorporated by reference from the proxy statement to be
filed in connection with the Company's 1999 Annual Meeting of
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K).
Page 1
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1998
_______________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
7A. Quantitative and Qualitative Disclosures About
Market Risk 11
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 12
PART III
10. Directors and Executive Officers of the Registrant 13
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial
Owners and Management 14
13. Certain Relationships and Related Transactions 14
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 14
SIGNATURES 15
INDEX TO FINANCIAL INFORMATION 17
Page 2
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1998
_______________________________________________________________________
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Consolidated Freightways Corporation is a holding company that was
incorporated in Delaware in 1996. It is herein referred to as the
"Registrant" or "Company". Formerly a subsidiary of CNF Transportation
Inc. (the former parent) through December 1, 1996, the Company was spun-
off in a tax-free distribution (the Distribution) to shareholders of
the former parent. The Company consists of Consolidated Freightways
Corporation of Delaware (CFCD), a nationwide motor carrier,
incorporated in 1958 as successor to the original trucking company
organized in 1929, and its Canadian operations, including Canadian
Freightways, Ltd., Epic Express, Milne & Craighead, Canadian Sufferance
Warehouses, Blackfoot Logistics and other related businesses; Redwood
Systems, a supply chain management services provider; and the Leland
James Service Corporation, an administrative service provider. The
Company primarily provides less-than-truckload (LTL) transportation and
supply chain management services throughout the United States, Canada
and Mexico, and international freight services between the United
States and more than 80 countries.
(b) Financial Information About Industry Segments
Segment information is summarized in Note 10 on page 27 of the 1998
Annual Report to Shareholders and is incorporated herein by reference.
(c) Narrative Description of Business
The Company, headquartered in Menlo Park, California, is the holding
company of CFCD, a full-service trucking company providing less-than-
truckload freight services nationwide and in Canada and Mexico, and one-
stop international freight service between the United States and 80
countries worldwide through operating agreements with ocean carriers
and a network of international partners. Operations consist of an
extensive transportation network that typically moves shipments of
manufactured or non-perishable processed products having relatively
high value and requiring consistent, expedited service, compared to the
bulk raw materials characteristically transported by railroads,
pipelines and water carriers. Less-than-truckload (LTL) is an industry
designation for shipments weighing less than 10,000 pounds. CFCD is
one of the nation's largest LTL motor carriers in terms of 1998
revenues. The Company also provides supply chain management services
through its wholly-owned subsidiary, Redwood Systems, Inc. (Redwood).
Established in January 1997, Redwood is a third party, non-asset based
logistics company that offers complete supply chain management services
including dedicated contract warehousing and carriage, just-in-time
delivery and specialized time-definite distribution, information-based
logistics services and worldwide multi-modal logistics.
Page 3
CFCD's primary competitors in the national LTL market are Yellow
Freight System, Inc., Roadway Express, Inc. and Arkansas Best
Corporation. CFCD also competes for LTL freight with regional LTL
motor carriers, small package carriers, private carriage and freight
forwarders. Competition for freight is based primarily upon price,
service consistency and transit time. In an effort to provide faster
service and to better compete, CFCD implemented a comprehensive
reengineering of its line-haul operations in October 1995. This
reengineering, called the Business Accelerator System (BAS), replaced
CFCD's traditional hub-and-spoke network with one that moves freight
directionally from point-to-point and streamlines the freight network.
BAS has the effect of reducing miles and freight handling, thereby
reducing transit times and costs as well as more efficiently using
system capacity. This reengineering, in conjunction with value added
service offerings and use of lower-cost rail services allowed the
Company to return to profitability. However, the Company is faced with
a steady erosion of its market share in its traditional "greater than
1,500 miles" length-of-haul due to market trends such as the
"regionalization" of freight due to just-in-time inventory practices,
distributed warehousing and other changes in business processes. Also
contributing to this decline are new longer length-of-haul service
offerings by regional and parcel carriers. To remain competitive, the
Company is investing in its infrastructure to facilitate operations in
the 500 to 1,500 mile length-of-haul market. The Company successfully
launched second day service in certain eastern bound markets in early
1998, reducing transit times by 1 to 2 days, and plans to expand this
service offering in 1999. To grow, the Company must continue to invest
in its infrastructure to become more competitive in shorter length of
haul lanes and develop services tailored to customer needs. Those
services include CF PrimeTime Air, the Company's premium expedited
service offering. The Company made refinements to its expedited air
and ground network in 1998 to establish guaranteed time-definite
service throughout North America, from Canada to Mexico. This service
offering helps to differentiate the Company in the LTL market and is an
important source of growth opportunities in 1999. Also during 1998,
the Company expanded its international services through a joint venture
in Mexico and now provides direct service to more than 50 locations
within Mexico. Customer shipments are handled by the Company, from
origin to destination, with no hand-offs to third parties. Combined
with the Company's PrimeTime service, the Company is the only LTL
carrier to offer premium expedited freight delivery services in and out
of Mexico. These service offerings make the Company a single-source LTL
provider throughout North America.
As a large carrier of LTL general freight, at December 31, 1998, CFCD
operated approximately 39,440 vehicle units including inter-city
tractors and trailers and pick-up and delivery units. It had a network
of 360 U.S. and Canadian freight terminals, metro centers and regional
consolidation centers.
There is a broad diversity in the customers served, size of shipments,
commodities transported and length of haul. No single commodity
accounted for more than a small fraction of total revenues.
CFCD operates daily schedules utilizing relay drivers who drive
approximately eight to ten hours each day and sleeper teams which in
1998 approximated 20% of all linehaul miles in North America. Road
equipment consists of one tractor pulling two 28-foot double trailers
or, to a limited extent, one semi-trailer or three 28-foot trailers.
CFCD generally utilizes trailer equipment that is 102 inches in width.
CFCD continued to maximize use of lower-cost rail services in 1998, as
rail miles as a percentage of total linehaul miles were 28%. In 1998,
CFCD operated in excess of 617 million linehaul miles.
Page 4
CFCD and several Canadian subsidiaries serve Canada through terminals
in the provinces of Alberta, British Columbia, Manitoba, New Brunswick,
Nova Scotia, Ontario, Quebec, Saskatchewan and in the Yukon Territory.
The Canadian operations utilize a fleet of over 1,380 trucks, tractors
and trailers.
Cyclicality and Seasonality
The LTL trucking industry is affected directly by the state of the
overall economy and seasonal fluctuations, which affect the amount of
freight to be transported. Freight shipments, operating costs and
earnings are also affected adversely by inclement weather conditions.
The months of September, October and November of each year usually have
the highest business levels while the first quarter has the lowest.
Employees
At December 31, 1998, approximately 82% of the Company's domestic
employees were represented by various labor unions, primarily the
International Brotherhood of Teamsters. On April 13, 1998, the
International Brotherhood of Teamsters ratified a new five-year
National Master Freight Agreement with CFCD and three other national
motor freight carriers.
Labor costs, including fringe benefits, averaged approximately 65% of
the Company's 1998 revenues. The Company had approximately 21,000,
21,600 and 20,300 employees at December 31, 1998, 1997 and 1996,
respectively.
Fuel
During 1996, the Company experienced a significant increase in fuel
prices, with the average annual fuel cost per gallon (without tax)
increasing to $0.697. To partially offset this increase, the Company
instituted a fuel surcharge program in the second half of 1996. This
program continued throughout 1997, as the average annual fuel cost per
gallon was $0.659. As fuel prices moderated towards the latter half of
1997 and into 1998, the Company eliminated its fuel surcharge effective
February 3, 1998. The average annual fuel cost per gallon continued to
decline in 1998 to $0.462.
Significant increases in fuel prices, to the extent not offset by
increases in transportation rates, would have a material adverse effect
on the profitability of the Company. Historically, the Company has
responded to periods of sharply higher fuel prices by implementing fuel
surcharge programs or base rate increases, or both, to recover
additional costs. However, there can be no assurance that the Company
will be able to successfully implement such surcharges or increases in
response to increased fuel costs in the future.
Page 5
Year 2000
CFCD's operations are supported by a sophisticated data processing
system for the control and management of the business. Management has
a formal plan in place through which it has identified its operational
and financial systems and applications requiring either modification or
replacement for Year 2000 compliance. Of these systems, the Company's
on-line equipment and freight tracking system is deemed most critical.
Based upon an assessment at December 31, 1998, testing and modification
of IT systems is approximately 55% complete while testing of non-IT
embedded systems is approximately 35% complete. 1998 expenses related
to Year 2000 modifications total $4.2 million and include payroll and
payroll related costs as well as the costs of external consultants. In
certain cases, management has opted to replace rather than modify
certain of its systems and applications. Costs associated with the
replacement of systems and applications are capitalized. As of
December 31, 1998, $15.0 million has been capitalized and includes
hardware, software and payroll costs as well as costs of external
consultants. Management expects to spend an additional $22 million to
convert its internal systems for Year 2000 compliance. Of this amount,
it is expected that approximately $5 million will be expensed and
approximately $17 million will be capitalized. These estimates may be
revised based upon the results of continued testing. Management
expects that all Year 2000 system modifications and replacements will
be funded with cash from operations.
Management has engaged outside consultants as part of the process of
assessing its Year 2000 risks. Part of that assessment includes third
party compliance readiness. Management has identified and prioritized
its critical customers and key suppliers of products and services and
is currently soliciting written responses to Year 2000 readiness
questionnaires. Management will formulate contingency plans as
necessary based upon the results of those questionnaires.
Management anticipates having all of its internal systems Year 2000
compliant by mid-1999. However, failure to convert the Company's on-
line equipment and freight tracking system by the Year 2000 could
result in the inability to manage the flow of equipment and freight
through the system efficiently, but would not preclude the delivery of
freight. Additionally, failure to convert financial systems on a timely
basis could result in a return to manual processes resulting in delayed
customer billings and vendor payments. To the extent that the Company
or its critical customers and key suppliers fail to achieve Year 2000
compliance, there could be a material adverse effect on the Company's
business, results of operations and financial position.
Federal and State Regulation
Regulation of motor carriers has changed substantially in the last 20
years. The process started with the Motor Carrier Act of 1980, which
allowed easier access to the industry by new trucking companies,
removed many restrictions on expansion of services by existing
carriers, and increased price competition by narrowing the antitrust
immunities available to the industry's collective ratemaking
organizations. This deregulatory trend was continued by subsequent
legislation in 1982, 1986, 1993 and 1994. The process culminated with
federal pre-emption of most economic regulation of intrastate trucking
regulatory bodies effective January 1, 1995, and with legislation which
terminated the Interstate Commerce Commission (ICC) effective January
1, 1996.
Page 6
Currently, the motor carrier industry is subject to federal regulation
by the Federal Highway Administration (FHWA) and the Surface
Transportation Board (STB), both of which are units of the United
States Department of Transportation (DOT). The FHWA performs certain
functions inherited from the ICC relating chiefly to motor carrier
registration, cargo and liability insurance, extension of credit to
motor carrier customers, and leasing of equipment by motor carriers
from owner-operators. In addition, the FHWA enforces comprehensive
trucking safety regulations relating to driver qualifications, drivers'
hours of service, safety-related equipment requirements, vehicle
inspection and maintenance, recordkeeping on accidents, and
transportation of hazardous materials. Because CFCD makes large and
increasing use of rail "piggyback" (trailer-on-flatcar) service as
permitted under its current collective bargaining agreements, CFCD must
also comply with the hazardous materials transportation regulations of
DOT's Federal Railroad Administration. Compliance with similar
regulations of DOT's Federal Aviation Administration is required when
CFCD tenders shipments to air carriers in the PrimeTime Air program. As
pertinent to the general freight trucking industry, the STB has
authority to resolve certain types of pricing disputes and authorize
certain types of intercarrier agreements under jurisdiction inherited
from the ICC.
At the state level, federal pre-emption of economic regulation does not
prevent the states from regulating motor vehicle safety on their
highways. In addition, federal law allows all states to impose
insurance requirements on motor carriers conducting business within
their borders, and empowers most states to require motor carriers
conducting interstate operations through their territory to make annual
filings verifying that they hold appropriate registrations from FHWA.
Motor carriers also must pay state fuel taxes and vehicle registration
fees, which normally are apportioned on the basis of mileage operated
in each state.
Canadian Regulation
Although the provinces in Canada have regulatory authority over intra-
provincial operations of motor carriers, they have elected to
substantially eliminate intra-provincial regulation of the general
freight trucking industry. Federal legislation to phase in deregulation
of the extra-provincial motor carrier industry took effect January 1,
1988 and the phase in was completed in 1997. The new legislation
relaxed economic regulation of extra-provincial trucking by easing
market entry restrictions. The Canadian provinces have implemented
safety regulations of trucking services applicable to both extra-
provincial and intra-provincial operations of motor carriers. CFCD and
its Canadian affiliates wrote off substantially all of the unamortized
cost of their Canadian operating authorities in 1992.
General
The research and development activities of the Company are not
significant.
During 1998, 1997 and 1996 there was no single customer of the Company
that accounted for 10% or more of consolidated revenues.
The Company is subject to Federal, state and local environmental laws
and regulations relating to, among other things, contingency planning
for spills of petroleum products, and its disposal of waste oil.
Additionally, the Company is subject to significant regulations dealing
with underground fuel storage tanks. The Company stores some of its
fuel for its trucks and tractors in approximately 265 underground tanks
located in 48 states. The Company believes that it is in substantial
compliance with all such environmental laws and regulations and is not
aware of any leaks from such tanks that could reasonably be expected to
have a material adverse effect on the Company's competitive position,
operations or financial position. However, there can be no assurances
that environmental matters existing with respect to the Company, or
compliance by the Company with laws relating to environmental matters,
will not have a material adverse effect on the Company's business,
financial position or results of operations.
Page 7
The Company has in place policies and methods designed to conform with
these regulations. The Company estimates that capital expenditures for
upgrading underground tank systems and costs associated with cleaning
activities for 1999 will not be material.
The Company has received notices from the Environmental Protection
Agency and others that it has been identified as a potentially
responsible party (PRP) under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) or other Federal and state
environmental statutes at various Superfund sites. Under CERCLA, PRP's
are jointly and severally liable for all site remediation and expenses.
Based upon cost studies performed by independent third parties, the
Company believes its obligations with respect to such sites would not
have a material adverse effect on its financial condition or results of
operations.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
Geographic information is summarized in Note 10 on page 27 of the 1998
Annual Report to Shareholders and is incorporated herein by reference.
Page 8
ITEM 2. PROPERTIES
The following summarizes the terminals and freight service centers
operated by the Company at December 31, 1998. In general, the Company
believes such facilities are suitable and adequate to handle CFCD's
current business needs. These facilities generally consist of a large
dock with loading doors, a small office and a large yard for the
movement of tractors and trailers in the normal business operations.
Owned Leased Total
225 135 360
The following table sets forth the location and square footage of
CFCD's principal freight handling facilities:
Location Square Footage
Mira Loma, CA 280,672
Chicago, IL 231,159
Carlisle, PA 151,100
Kansas City, MO 131,916
** Columbus, OH 118,774
Memphis, TN 118,745
Nashville, TN 118,622
* Indianapolis, IN 109,460
Orlando, FL 101,557
* Minneapolis, MN 94,890
Charlotte, NC 89,204
St. Louis, MO 88,640
Akron, OH 82,494
Sacramento, CA 81,286
Atlanta, GA 77,920
Houston, TX 77,346
Dallas, TX 75,358
* Freemont, IN 73,760
* Peru, IL 73,760
Buffalo, NY 73,380
Milwaukee, WI 70,661
Salt Lake City,UT 68,480
Seattle, WA 59,720
*** Springfield, MA 51,760
Portland, OR 47,824
Phoenix, AZ 20,237
* Facility partially or wholly financed through the issuance of
industrial revenue bonds. Principal amount of debt is secured by the
property.
** Property pledged as collateral for the benefit of CNF
Transportation Inc. for workers' compensation claims prior to the
Distribution, as required under the Reimbursement and
Indemnification Agreement dated October 1, 1996.
*** Property is leased from a subsidiary of CNF Transportation Inc.
through December 1, 2005.
Page 9
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Item 8.
Discussions of certain environmental matters are presented in Items 1
and 7.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is listed for trading on the NASDAQ Stock
Market's National Market. The Company's common stock began trading on
December 3, 1996. The market price range of the common stock for the
period January 1, 1998 to December 31, 1998 was $7.50 to $19.75.
Currently there are no cash dividends paid on the Company's common
stock. The Company presently expects that it will not pay a dividend in
1999. The Company's dividend policy thereafter will be dependent on the
circumstances then in existence. There can be no assurance, however,
that the Company will pay any cash dividends on its common stock in the
future.
During the third quarter of 1998, the Company repurchased 1,448,174
shares of its common stock for $12.6 million. Approximately one
million of the repurchased shares were issued under the Company's
restricted stock program.
As of December 31, 1998, there were 34,350 holders of record of the
common stock ($.01 par value) of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Five Year Financial
Summary" on page 30 of the 1998 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations is presented on pages 16 through 18 of the 1998 Annual
Report to Shareholders and is incorporated herein by reference.
Page 10
Certain statements included or incorporated by reference herein,
including certain statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" referred to
above, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and are subject to
a number of risks and uncertainties. Any such forward-looking
statements included or incorporated by reference herein should not be
relied upon as predictions of future events. Certain such forward-
looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "pro forma," "estimates,"
or "anticipates" or the negative thereof or other variations thereof or
comparable terminology, or by discussions of strategy, plans or
intentions. Such forward-looking statements are necessarily dependent
on assumptions, data or methods that may be incorrect or imprecise and
they may be incapable of being realized. In that regard, the following
factors, among others, and in addition to matters discussed elsewhere
herein and in documents incorporated by reference herein, could cause
actual results and other matters to differ materially from those in
such forward-looking statements: changes in general business and
economic conditions; increases in domestic and international
competition and pricing pressure; increases in fuel prices; uncertainty
regarding the Company's ability to improve results of operations; labor
matters, including shortages of drivers and increases in labor costs;
changes in governmental regulation, environmental and tax matters,
increases in costs associated with the conversion of financial and
operational systems and applications for Year 2000 compliance and
failure to convert all systems by the year 2000. As a result of the
foregoing, no assurance can be given as to future results of operations
or financial condition.
ITEM 7A. QUANTITITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are
presented on page 17 of the 1998 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Auditors' Report are
presented on pages 19 through 28, inclusive, of the 1998 Annual Report
to Shareholders subject to the following paragraph and are incorporated
herein by reference. The unaudited quarterly financial data is
included on page 29 of the 1998 Annual Report to Shareholders and is
incorporated herein by reference.
Footnote 9 "Contingencies" from the Company's 1998 Annual Report, filed
as Exhibit 13 to this Form 10-K, has been intentionally omitted, and is
replaced with the following:
"9. Contingencies
The Company and its subsidiaries are involved in various lawsuits
incidental to their businesses. It is the opinion of management that
the ultimate outcome of these actions will not have a material adverse
effect on the Company's financial position or results of operations.
The Company's former parent, CNF Transportation Inc., is engaged in
disputes with the Internal Revenue Service over the amount and timing
of certain tax deductions reported by the former parent in tax years
prior to the spin-off of the Company. These disputes arise from tax
positions first taken by the former parent in the mid-1980's. The
former parent, which is contesting the IRS's positions, has made
certain advance payments to the IRS which would be applied against any
ultimate liability.
Page 11
Under a tax sharing agreement entered into by the former parent and the
Company at the time of the spin-off, the Company could be obligated to
reimburse the former parent for a portion of any additional taxes and
interest which relate to the Company's business prior to the spin-off.
The amount and timing of such payments, if any, is dependent on the
ultimate resolution of the former parent's disputes with the IRS and
the determination of the nature and extent of the Company's obligations
under the tax sharing arrangement. The Company has established certain
reserves both at the time of and subsequent to the spin-off with
respect to the foregoing.
In March 1999, the 10th Circuit Court of Appeals ruled against an
appealing taxpayer in a multi-employer pension plan tax matter
involving facts similar to those underlying one of the principal
disputes between the former parent and the IRS and relating to the
Company's business prior to the spin-off. Given this recent decision,
and the uncertainties surrounding the amount and timing of any
obligations of the Company under the tax sharing agreement, there can
be no assurance that the amount or timing of any liability of the
Company to the former parent will not have a material adverse effect on
the Company's results of operations or financial position.
The Company has received notices from the Environmental Protection
Agency (EPA) and others that it has been identified as a potentially
responsible party (PRP) under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) or other Federal and state
environmental statutes at various Superfund sites. Under CERCLA, PRP's
are jointly and severally liable for all site remediation and expenses.
Based upon cost studies performed by independent third parties, the
Company believes its obligations with respect to such sites would not
have a material adverse effect on its financial position or results of
operations."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Page 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The identification of the Company's Directors is presented on pages 2
and 3 of the Company's 1999 Proxy Statement and those pages are
incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1998
and their applicable business experience are as follows:
W. Roger Curry, 60, President and Chief Executive Officer of the
Company since December 2, 1996. Mr. Curry has served as President and
Chief Executive Officer of CFCD since July 1994. Mr. Curry served as a
Senior Vice President of the former parent from 1986 to December 2,
1996. In 1991, he was elected President of Emery Air Freight
Corporation, relinquishing the position in 1994 to become President of
CFCD.
Patrick H. Blake, 49, Executive Vice President - Operations of the
Company since December 2, 1996. Mr. Blake has served as Executive Vice
President - Operations of CFCD since July 1994. He was Vice President
Eastern Region of CFCD from 1992-1994 and a Division Manager from 1985-
1992.
David F. Morrison, 45, Executive Vice President and Chief Financial
Officer of the Company since December 2, 1996. Mr. Morrison served as
Vice President and Treasurer of the former parent from October 1991 to
October 1996 when he became Executive Vice President and Chief
Financial Officer of CFCD.
Stephen D. Richards, 55, Senior Vice President and General Counsel of
the Company since December 2, 1996. Mr. Richards has been Vice
President and General Counsel of CFCD since September 1995. He was
Deputy General Counsel of the former parent for the preceding four
years.
Thomas A. Paulsen, 55, Senior Vice President - Operations of CFCD since
August 1, 1998. Mr. Paulsen was a Vice President of CFCD from March 1,
1985 to July 31, 1998.
Joseph R. Schillaci, 56, Executive Vice President - Sales and Marketing
of the Company since April 1997. Prior to joining the Company, Mr.
Schillaci was president and chief operating officer of Petro Travel
Plazas, LP, a national fueling, maintenance and retail provider to the
trucking industry, since 1993.
Robert E. Wrightson, 59, Senior Vice President and Controller of the
Company since December 2, 1996. Mr. Wrightson has served as Senior
Vice President and Controller of CFCD since July 1994. Prior to
joining CFCD, he was Vice President and Controller of the former
parent, assuming that position in 1989.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 6 through
11, inclusive, of the Company's 1999 Proxy Statement, and those pages
are incorporated herein by reference.
Page 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 4 and 13 of
the Company's 1999 Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Financial Statements and Exhibits Filed
1. Financial Statements
See Index to Financial Information.
2. Financial Statement Schedules
See Index to Financial Information.
3. Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
December 31, 1998.
Page 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K
Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CONSOLIDATED FREIGHTWAYS CORPORATION
(Registrant)
March 26, 1999 /s/W. Roger Curry
W. Roger Curry
President and Chief Executive Officer
March 26, 1999 /s/David F. Morrison
David F. Morrison
Executive Vice President and
Chief Financial Officer
March 26, 1999 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller
Page 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
March 26, 1999 /s/William D. Walsh
William D. Walsh, Chairman of
the Board
March 26, 1999 /s/W. Roger Curry
W. Roger Curry
President, Chief Executive Officer
and Director
March 26, 1999 /s/G. Robert Evans
G. Robert Evans, Director
March 26, 1999 /s/Paul B. Guenther
Paul B. Guenther, Director
March 26, 1999 /s/John M. Lillie
John M. Lillie, Director
Page 16
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1998
_______________________________________________________________________
INDEX TO FINANCIAL INFORMATION
Consolidated Freightways Corporation and Subsidiaries
The following Consolidated Financial Statements of Consolidated
Freightways Corporation and Subsidiaries appearing on pages 19 through
28, inclusive, of the Company's 1998 Annual Report to Shareholders are
incorporated herein by reference:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1998 and 1997
Statements of Consolidated Operations - Years Ended December 31,
1998, 1997 and 1996
Statements of Consolidated Cash Flows - Years Ended December 31,
1998, 1997 and 1996
Statements of Consolidated Shareholders' Equity - Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
In addition to the above, the following consolidated financial
information is filed as part of this Form 10-K:
Page
Consent of Independent Public Accountants 18
Report of Independent Public Accountants 18
Schedule II - Valuation and Qualifying Accounts 19
The other schedules have been omitted because either (1) they are
neither required nor applicable or (2) the required information has
been included in the consolidated financial statements or notes
thereto.
Page 17
SIGNATURE
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in
this Form 10-K, into Consolidated Freightways Corporation's (the
Company) previously filed Registration Statement File Nos. 333-16851,
333-16835 and 333-25167. As independent public accountants, we also
hereby consent to the application of our report dated January 25, 1999
in the Company's annual report to shareholders incorporated by
reference in this Form 10-K to the supplemental note to the financial
statements included in Item 8, Financial Statements and Supplementary
Data and labeled "9. Contingencies." It should be noted that we have
performed no audit procedures subsequent to January 25, 1999, the date
of our report, except with respect to the supplemental note as to which
the date is March 9, 1999. Furthermore, we have not audited any
financial statements of the Company as of any date or for any period
subsequent to December 31, 1998.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Portland, Oregon,
March 26, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Consolidated Freightways Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Consolidated Freightways Corporation's 1998 Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 25, 1999 (except with respect
to the matter discussed in Item 8, Financial Statements and
Supplemental Data and labeled "9. Contingencies," as to which the date
is March 9, 1999). Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The Schedule on page 19
is the responsibility of the Company's management and is presented for
the purpose of complying with the Securities and Exchange Commission's
rules and is not part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Portland, Oregon,
January 25, 1999
Page 18
SCHEDULE II
CONSOLIDATED FREIGHTWAYS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998
(In thousands)
DESCRIPTION
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
1998 $ 7,467 $15,127 $ - $(11,181)(a) $11,413
1997 $ 9,692 $ 8,374 $ - $(10,599)(a) $ 7,467
1996 $ 9,349 $ 6,534 $ - $ (6,191)(a) $ 9,692
a) Accounts written off net of recoveries.
Page 19
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2.1 Distribution Agreement between Consolidated Freightways
Corporation and Consolidated Freightways, Inc., dated
November 25, 1996. (Exhibit 2.1 to the Company's
Form 8-K dated March 12, 1997.) (*)
(3) Articles of incorporation and bylaws:
3.1 Amended and Restated Certificate of Incorporation of
Consolidated Freightways Corporation. (Exhibit 3.1 to
the Company's Form 10 filed October 2, 1996) (*)
3.2 Amended and Restated Bylaws of Consolidated Freightways
Corporation.
(10) Material Contracts:
10.1 Transition Services Agreement between Consolidated
Freightways Corporation and CNF Service Company, Inc., dated as of
December 2, 1996. (Exhibit 10.1 to the Company's Form 8-K dated
March 12, 1997.) (*)
10.2 Alternative Dispute Resolution Agreement Between
Consolidated Freightways Corporation and Consolidated Freightways,
Inc., dated as of December 2, 1996. (Exhibit 10.2 to the Company's
Form 8-K dated March 12, 1997.) (*)
10.3 Employee Benefit Matters Agreement between Consolidated
Freightways Corporation and Consolidated Freightways, Inc., dated as
of December 2, 1996. (Exhibit 10.3 to the Company's Form 8-K dated
March 12, 1997.) (*)
10.4 Tax Sharing Agreement between Consolidated Freightways
Corporation and Consolidated Freightways, Inc., dated as of
December 2, 1996.(Exhibit 10.4 to the Company's Form 8-K
dated March 12, 1997.) (*)
10.5 Reimbursement and Indemnification Agreement between
Consolidated Freightways Corporation of Delaware and Consolidated
Freightways, Inc., dated as of October 1, 1996. (Exhibit 10.5 to
the Company's Form 8-K dated March 12, 1997.) (*)
10.6 Consolidated Freightways Corporation 1996 Stock Option and
Incentive Plan. (Exhibit 10.6 to the Company's Form 10 filed
October 2, 1996)(*)(#)
10.7 Loan and Security Agreement among Consolidated Freightways
Corporation of Delaware, BankAmerica Business Credit Inc. and various
other financial institutions dated as of November 27, 1996. (Exhibit
10.7 to the Company's Form 10-K for the year ended
December 31, 1996.)(*)
10.8 Consolidated Freightways Corporation 1996 Restricted Stock Award
Agreements. (Exhibit 10.8 to the Company's Form 10-K for the year
ended December 31, 1996.) (*)(#)
10.9 Consolidated Freightways Corporation Senior Executive Incentive
Plan for 1999. (#)
(*) Previously filed with the Securities and Exchange Commission and
incorporated by reference.
(#) Designates a contract or compensation plan for Management or
Directors.
Page 20
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
10.10 Consolidated Freightways Corporation Deferred Compensation
Plan for Executives. (Exhibit 10.10 to the Company's
Form 10-K for the year ended December 31, 1996.)(*)(#)
10.11 Consolidated Freightways Corporation Supplemental
Executive Retirement Plan. (Exhibit 10.11 to the
Company's Form 10-K for the year ended
December 31, 1996.) (*)(#)
10.12 Consolidated Freightways Inc. Executive Split-Dollar
Life Insurance Plan. (Exhibit 10.12 to the Company's
Form 10-K for the year ended December 31, 1996.) (*)(#)
10.13 Participation Agreement dated as of December 22, 1995
between Consolidated Freightways Corporation of
Delaware, as lessee, and ABN AMRO Bank N.V., as lessor,
as amended. (Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended March 31, 1997.)(*)
10.14 Participation Agreement dated as of September 30, 1994
between Consolidated Freightways Corporation of
Delaware, as lessee, and BA Leasing & Capital
Corporation and various other financial
institutions, as lessors, as amended. (Exhibit 10.2 to
the Company's Form 10-Q for the quarter ended
March 31, 1997.)(*)
10.15 Reimbursement and Security Agreement dated July 3, 1997
between Consolidated Freightways Corporation and
CNF Transportation Inc. (Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended June 30, 1997.)(*)
10.16 Third Amendment to Participation Agreement and Master Lease
intended as Security dated December 12, 1997 between Consolidated
Freightways Corporation of Delaware and ABN AMRO Bank
N.V. (Exhibit 10.16 to the Company's Form 10-K for the year
ended December 31, 1997)(*)
10.17 Amendment No. 3 to Loan and Security Agreement dated November
1, 1997 between Consolidated Freightways Corporation of
Delaware and BankAmerica Business Credit, Inc.
(Exhibit 10.17 to the Company's Form 10-K for the year ended
December 31, 1997)(*)
10.18 Amendment No. 4 to Loan and Security Agreement dated July 2,
1998 between Consolidated Freightways Corporation of Delaware
and BankAmerica Business Credit, Inc. (Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1998)(*)
10.19 Consolidated Freightways Corporation 1999 Equity Incentive Plan. (#)
10.20 Consolidated Freightways Corporation Non-Employee Directors'
Equity Plan. (#)
10.21 Employment Agreements with Senior Management. (#)
10.22 Consolidated Freightways Corporation Management Change-of-Control
Plan. (#)
(*) Previously filed with the Securities and Exchange Commission and
incorporated by reference.
(#) Designates a contract or compensation plan for Management or
Directors.
Page 21
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(13) Annual Report to Security Holders:
Consolidated Freightways Corporation 1998 Annual Report to
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K. Other portions such as the "Letter to Shareholders"
are not required and therefore not "filed" as part of this Form 10-K.)
(21) Significant Subsidiaries of the Company
(27) Financial Data Schedule
Page 22
Exhibit 3.2
Amended and Restated
as of March 24, 1999
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
INCORPORATED UNDER THE LAWS OF DELAWARE
TABLE OF CONTENTS
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
ARTICLE I:
LOCATION AND OFFICES
SECTION 1:1. Principal Office 1
SECTION 1:2. Other Offices 1
ARTICLE II:
STOCKHOLDERS
SECTION 2:1. Annual Meeting 1
SECTION 2:2. Business to be Conducted
at Annual Meeting 2
SECTION 2:3. Special Meetings 3
SECTION 2:4. Place of Meetings 3
SECTION 2:5. Notice of Meetings 3
SECTION 2:6. Rules of Conduct 4
SECTION 2.7. Quorum and Voting 4
SECTION 2:8. Voting; Proxy 5
SECTION 2:9. Voting by Fiduciaries, Pledgees and
Pledgors 6
SECTION 2:10. Nomination of Directors 6
SECTION 2:11. List of Stockholders 7
ARTICLE III:
DIRECTORS
SECTION 3:1. General Powers 8
SECTION 3:2. Number and Qualifications 8
SECTION 3:3. Election; Resignation 8
SECTION 3:4. Meetings 9
SECTION 3:5. Quorum 9
SECTION 3:6. Committees 9
SECTION 3:7. Waiver of Notice 10
SECTION 3:8. Consent 10
SECTION 3:9. Notice to Members of the Board 10
SECTION 3:10. Presiding Officer 11
SECTION 3:11. Compensation 11
SECTION 3:12. Interested Directors 11
ARTICLE IV:
OFFICERS
SECTION 4:1. Appointment 12
SECTION 4:2. Tenure 12
SECTION 4:3. Salaries 12
SECTION 4:4. Chairman of the Board 12
SECTION 4:5. President 13
SECTION 4:6. Vice Presidents 13
SECTION 4:7. Secretary 14
SECTION 4:8. Treasurer 14
SECTION 4:9. Other Officers 15
ARTICLE V:
CAPITAL STOCK AND DIVIDENDS
SECTION 5:1. Certificates for Shares 15
SECTION 5:2. Transfers 15
SECTION 5:3. Regulations Governing Issuance and
Transfers of Shares 16
SECTION 5:4. Transfer Agents and Registrars 16
SECTION 5:5. Lost or Destroyed Certificates 16
SECTION 5:6. Fractions of Shares 16
SECTION 5:7. Determination of Stockholders 17
SECTION 5:8. Record Date 17
ARTICLE VI:
OTHER SECURITIES OF THE CORPORATION 17
ARTICLE VII:
INDEMNIFICATION
SECTION 7:1. General Indemnification 18
SECTION 7:2. Insurance, Indemnification
Agreements and Other Matters 18
SECTION 7:3. Nonexclusivity 19
ARTICLE VIII:
MISCELLANEOUS
SECTION 8:1. Voting Shares in Other Corporations 19
SECTION 8:2. Execution of Other Papers and Documents 19
SECTION 8:3. Corporate Seal 20
SECTION 8:4. Books and Records 20
SECTION 8:5. Fiscal Year 20
SECTION 8:6. Amendments 20
AMENDED AND RESTATED
BYLAWS
OF
CONSOLIDATED FREIGHTWAYS CORPORATION
ARTICLE I: LOCATION AND OFFICES
Principal Office.
SECTION 1:1. The principal office of Consolidated
Freightways Corporation (the "Corporation") shall be at
such place as the Board of Directors of the Corporation
(the "Board") may from time to time determine, but until
a change is effected such principal office shall be at
175 Linfield Drive in the City of Menlo Park, California.
Other Offices.
SECTION 1:2. The Corporation may also have other
offices, in such places (within or without the State of
Delaware) as the Board may from time to time determine.
ARTICLE II: STOCKHOLDERS
Annual Meeting.
SECTION 2:1. An annual meeting of the stockholders
of the Corporation shall be held at 10:00 o'clock a.m. on
the last Monday of April of each year, beginning in 1997,
if not a legal holiday, and if a legal holiday then on
the next succeeding day not a legal holiday or on such
other date as shall be designated from time to time by
the Board. The purpose of the meeting shall be to elect
directors and to transact such other business as properly
may be brought before the meeting. If the Corporation
shall fail to hold said meeting for the election of
directors on the date aforesaid, the Board shall cause
the election to be held by the stockholders as soon
thereafter as convenient.
Business to be Conducted at Annual Meeting.
SECTION 2:2.1 At an annual meeting of stockholders,
only such business shall be conducted as shall have been
brought before the meeting (i) pursuant to the
Corporation's notice of the meeting, (ii) by or at the
direction of the Board (or any duly organized committee
thereof), or (iii) by any stockholder of the Corporation
who is a stockholder of record on the date of giving of
the notice provided for in this Section 2:2 and on the
record date for the determination of stockholders
entitled to vote at such meeting and who has complied
with the notice procedures set forth in this Section 2:2.
SECTION 2:2.2 In addition to any other applicable
requirements, for business to be properly brought before
an annual meeting by a stockholder, such stockholder must
have given timely notice in proper written form to the
Secretary which notice is not withdrawn by such stock-
holder at or prior to such annual meeting.
SECTION 2:2.3 To be timely, a stockholder's notice
to the Secretary must be delivered or mailed to and
received by the Secretary at the principal executive
offices of the Corporation no later than the close of
business on the forty-fifth (45th) day nor earlier than
the close of business on the seventy-fifth (75th) day
prior to the fist anniversary date of the date on which
the Corporation first mailed proxy materials for the
preceding year's annual meeting of stockholders;
provided, however, that in the event that the annual
meeting is called for a date that is not within thirty
days before or after the anniversary date of the
preceding year's annual meeting, notice by the
stockholder to be timely must be so received not later
than the close of business on the later of the ninetieth
(90th) day prior to such annual meeting or tenth day
following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of
the date of the annual meeting was made, whichever occurs
first. "Public disclosure" shall mean disclosure in a
press release reported to a national news service or in a
document publicly filed with the Securities and Exchange
Commission.
SECTION 2:2.4 To be in proper written form, such
stockholder's notice must set forth as to each matter the
stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be
brought before the annual meeting and the reasons for
conducting such business at such meeting; (ii) the name
and address, as they appear on the Corporation's books,
of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose
behalf the proposal is made; (iii) the class, series and
the number of shares of the Corporation's stock which are
beneficially owned by such stockholder, the beneficial
owner, if any, on whose behalf the proposal is made; (iv)
a description of all arrangements or understandings
between such stockholder or beneficial owner and any
other person or persons (including their names) in
connection with the proposal of such business by such
stockholder or beneficial owner and any material interest
of the stockholder, and of the beneficial owner, if any,
on whose behalf the proposal is made, in such business;
(v) whether either such stockholder or beneficial owner
intends to deliver a proxy statement and form of proxy to
holders of at least the percentage of the Corporation's
voting shares required under applicable law to carry the
proposal, and (vi) a representation that such stockholder
or beneficial owner intends to appear in person or by
proxy at the annual meeting to being such business before
the meeting. Notwithstanding the foregoing provisions to
include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice
as required by the regulations under the 1934 Act.
Nothing in these by-laws shall be deemed to affect any
rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-
8 under the 1934 Act.
SECTION 2:2.5 Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at
an annual meeting except in accordance with the proce
dures set forth in this Section 2:2. The chairman of the
meeting may, if the facts warrant, determine that the
business was not properly brought before the meeting in
accordance with the provisions of this Section 2:2; and
if the chairman should so determine, the chairman shall
so declare to the meeting, and any such business not
properly brought before the meeting shall not be
transacted.
Special Meetings.
SECTION 2:3. Special meetings of stockholders of
the Corporation for any purpose or purposes may be called
at any time by the Chairman of the Board, the Chief
Executive Officer or a majority of the entire Board.
Special meetings of the stockholders of the Corporation
may not be called by any other person or persons.
Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes
for which the meeting is called shall be given to each
stockholder entitled to vote at such meeting as provided
in Section 2:5, and only such business as is stated in
such notice shall be acted upon thereat.
Place of Meetings.
SECTION 2:4. All meetings of the stockholders shall
be held at the principal office of the Corporation, or at
such other place, within or without the State of
Delaware, as may be determined by the Board and stated in
the notice of the meeting.
Notice of Meetings.
SECTION 2:5. Written notice of each meeting of the
stockholders stating the place, date, and hour of the
meeting, and, in case of a special meeting or where
otherwise required by statute, the purpose or purposes
for which the meeting is called, shall be delivered by
mail not less than ten nor more than sixty days before
the date of the meeting, by or at the direction of the
person calling the meeting, to each stockholder entitled
to vote at such meeting. The notice of a stockholders'
meeting shall be deemed to be delivered when deposited in
the United States mail with postage prepaid, addressed to
each stockholder at such stockholder's address as it
appears on the records of the Corporation.
Rules of Conduct.
SECTION 2:6. The Board of the Corporation shall be
entitled to make such rules or regulations for the
conduct of meetings of stockholders as it shall deem
necessary, appropriate or convenient. Subject to such
rules and regulations of the Board, if any, the chairman
of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such chairman,
are necessary, appropriate or convenient for the proper
conduct of the meeting, including, without limitation,
establishing an agenda or order of business for the
meeting, rules and procedures for maintaining order at
the meeting and the safety of those present, limitations
on participation in such meeting to stockholders of
record of the Corporation and their duly authorized and
constituted proxies, and such other persons as the
chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening
and closing of the polls for balloting on matters which
are to be voted on by ballot. Unless, and to the extent,
determined by the Board or the chairman of the meeting,
meeting of stockholders shall not be required to be held
in accordance with rules of parliamentary procedure.
Quorum and Voting.
SECTION 2:7.1 The holders of a majority of the
outstanding shares (exclusive of treasury stock) entitled
to vote at any meeting of the stockholders, when present
in person or by proxy, shall constitute a quorum for the
transaction of business, except as otherwise provided by
statute, the Certificate of Incorporation of the
Corporation or these Bylaws; but in the absence of such a
quorum the holders of a majority of the shares
represented at the meeting shall have the right succes-
sively to adjourn the meeting to a specified date. When
a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have
been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the
meeting.
SECTION 2:7.2 The absence from any meeting of the
number of shares required by statute, the Certificate of
Incorporation of the Corporation or these Bylaws for
action upon one matter shall not prevent action at such
meeting upon any other matter or matters which may
properly come before the meeting, if the number of shares
required in respect of such other matters shall be
present.
SECTION 2:7.3 When a quorum is present at any meet
ing of the stockholders, the vote of the holders (present
in person or represented by proxy) of a majority of the
shares of stock which are actually voted (and have the
power to vote) on any proposition or question properly
brought to a vote at such meeting shall decide any such
proposition or question, unless the proposition or ques-
tion is one upon which by express provision of statute or
of the Certificate of Incorporation, or of these Bylaws,
a different vote is required, in which case such express
provision shall govern and establish the number of votes
required to determine such proposition or question.
Voting; Proxy.
SECTION 2:8.1 Whenever the law requires or the
chairman of the meeting orders that a vote be taken by
ballot, each stockholder entitled to vote on a particular
question at a meeting of stockholders, pursuant to law or
the Certificate of Incorporation, shall be entitled to
one vote for each share of voting stock held by such
stockholder. Shares standing in the names of two or more
persons shall be voted or represented in accordance with
the determination of the majority of such persons, or, if
only one of such persons is present in person or
represented by proxy, such person shall have the right to
vote such shares and such shares shall be deemed to be
represented for the purpose of determining a quorum. The
date for determining the stockholders entitled to vote at
a meeting of the stockholders shall be determined pursu-
ant to Section 5:8.
SECTION 2:8.2 Each stockholder entitled to vote at
a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy; but no such
proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it is
coupled is an interest in the stock itself or an interest
in the Corporation generally.
Voting by Fiduciaries, Pledgees and Pledgors.
SECTION 2:9. Persons holding stock in a fiduciary
capacity shall be entitled to vote the shares so held.
Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the
Corporation the pledgor has expressly empowered the
pledgee to vote thereon, in which case only the pledgee
or the pledgee's proxy may represent such stock and vote
thereon.
Nomination of Directors.
SECTION 2:10.1 Only persons who are nominated in
accordance with the following procedures shall be eligi-
ble for election as directors of the Corporation, except
as may be otherwise expressly provided in the Certificate
of Incorporation of the Corporation with respect to the
right of holders of preferred stock of the Corporation to
nominate and elect a specified number of directors in
certain circumstances. Nominations of persons for elec-
tion to the Board may be made at any annual meeting of
stockholders, (i) by or at the direction of the Board (or
any duly authorized committee thereof) or (ii) by any
stockholder of the Corporation who is a stockholder of
record on the date of the giving of the notice provided
for in this Section 2:10 and on the record date for the
determination of stockholders entitled to vote at such
meeting and who complies with the notice procedures set
forth in this Section 2:10.
SECTION 2:10.2 In addition to any other applicable
requirements, for a nomination to be made by a stockhold-
er, such stockholder must have given timely notice there
of in proper written form to the Secretary of the
Corporation.
SECTION 2:10.3 To be timely, a stockholder's notice
to the Secretary must be delivered or mailed to and
received by the Secretary at the principal executive
offices of the Corporation no later than the close of
business on the forty-fifth (45th) day nor earlier than
the close of business on the seventy-fifth (75th) day
prior to the fist anniversary date of the date on which
the Corporation first mailed proxy materials for the
preceding year's annual meeting of stockholders;
provided, however, that in the event that the annual
meeting is called for a date that is not within thirty
days before or after the anniversary date of the
preceding year's annual meeting, notice by the
stockholder to be timely must be so received not later
than the close of business on the later of the ninetieth
(90th) day prior to such annual meeting or tenth day
following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of
the date of the annual meeting was made, whichever occurs
first. "Public disclosure" shall mean disclosure in a
press release reported to a national news service or in a
document publicly filed with the Securities and Exchange
Commission.
SECTION 2:10.4 To be in proper written form, a
stockholder's notice to the Secretary must set forth (i)
as to each person whom the stockholder proposes to
nominate for election as a director (A) the name, age,
business address and residence address of the person, (B)
the principal occupation or employment of the person, (C)
the class, series and the number of share of capital
stock of the Corporation which are owned beneficially or
of record by the person and (D) any other information
relating to the person that would be required to be
disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies
for election of directors in an election contest or is
otherwise required pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations
promulgated thereunder; and (ii) as to the stockholder
giving the notice or the beneficial owner on whose behalf
the nomination is made, (A) the name and address of such
stockholder as they appear on the Corporation's books,
(B) the class or series and the number of shares of the
Corporation's stock which are beneficially owned by such
stockholder and beneficial owner, (C) a description of
all arrangements or understandings between such
stockholder or beneficial owner and each proposed nominee
and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by
such stockholder or beneficial owner, (D) a
representation that such stockholder or beneficial owner
intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice, (E) whether
either such stockholder or beneficial owner intends to
deliver a proxy statement and form of proxy to holders of
a sufficient number of the Corporation's voting shares to
elect such nominee or nominees, and (F) any other
information relating to such stockholder or beneficial
owner that would be required to be disclosed in a proxy
statement or other filings required to be made in
connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder. Such
notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve
as a director if elected.
SECTION 2:10.5 No person shall be eligible for
election as a director of the Corporation unless
nominated in accordance with the procedures set forth in
this Section 2:10. If the chairman of the meeting
determines that a nomination was not made in accordance
with the foregoing procedures, the chairman shall declare
to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
List of Stockholders.
SECTION 2:11. The Secretary shall prepare and make,
at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares
registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the
list required by this Section 2:11 or the books of the
Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE III: DIRECTORS
General Powers.
SECTION 3:1. The Board shall control and manage the
business and property of the Corporation. The Board may
exercise all such powers of the Corporation and do all
lawful acts and things as are not by law, the Certificate
of Incorporation or these Bylaws directed or required to
be exercised or done by the stockholders or some
particular officer of the Corporation.
Number and Qualifications.
SECTION 3:2. The number of directors shall be
determined from time to time by resolution of the Board
in accordance with the terms of Article FIFTH of the
Certificate of Incorporation.
Election; Resignation.
SECTION 3:3. Except as provided in the Certificate
of Incorporation with respect to the filling of
vacancies, directors shall be elected by a plurality of
the votes cast at annual meetings of stockholders, and
shall hold office until the annual meeting for the year
in which his term expires and until his successor shall
be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or
removal from office. Any director may resign at any time
upon written notice to the Secretary, such resignation to
specify whether it will be effective at a particular
time, upon receipt by the Secretary or at the pleasure of
the Board. If no such specification is made, it shall be
deemed effective at the pleasure of the Board. Directors
need not be stockholders. The directors who are to be
elected at the annual meeting of the stockholders shall
be elected by ballot by the holders of shares entitled to
vote.
Meetings.
SECTION 3:4.1. The Board of the Corporation may
hold meetings, both regular and special, either within or
without the State of Delaware. Regular meetings of the
Board may be held without notice at such time and at such
place as may from time to time be determined by the
Board. Special meetings of the Board may be called by the
Chairman, if there be one, the President or any director.
Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail
not less than forty-eight (48) hours before the date of
the meeting, by telephone or facsimile transmission on
twenty-four (24) hours' notice, or on such shorter notice
as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
SECTION 3:4.1. Members of the Board, or any
committee designated by the Board, may participate in a
meeting of the Board or such committee by means of
conference telephone or similar communications equipment
by means of which all persons participating in the
meeting can hear each other, and participating in the
meeting in this manner shall constitute presence in
person at such meeting.
Quorum.
SECTION 3:5. Except as may be otherwise
specifically provided by law, the Certificate of Incorpo
ration or these Bylaws, at all meetings of the Board, a
majority of the entire Board shall constitute a quorum
for the transaction of business and the act of a majority
of the directors present at any meeting at which there is
a quorum shall be the act of the Board. If a quorum
shall not be present at any meeting of the Board, the
directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Committees.
SECTION 3:6. The Board shall have the following
committees: a Compensation Committee and an Audit
Committee. The Board may, by resolution passed by a
majority of the entire Board, designate one or more
additional committees. Each committee shall consist of
three or more of the directors of the Corporation. The
Board may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee.
In the absence or disqualification of a member of a
committee, and in the absence of a designation by the
Board of an alternate member to replace the absent or
disqualified member, the member or members thereof
present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at
the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and
provided in the resolution establishing such committee,
shall have and may exercise all the powers and authority
of the Board in the management of the business and
affairs of the Corporation. Each committee shall keep
regular minutes and report to the Board when required.
Waiver of Notice.
SECTION 3:7. Any notice which is required by law or
by the Certificate of Incorporation or by these Bylaws to
be given to any director may be waived in writing, signed
by such director, whether before or after the time stated
therein. Attendance of a director at any meeting shall
constitute waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of
objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Consent.
SECTION 3:8. Any action required or permitted to be
taken at any meeting of the Board (or of any committee
thereof) may be taken without a meeting if all members of
the Board (or committee) consent thereto in writing, and
the writing or writings are filed with the minutes of the
proceedings of the Board (or committee).
Notice to Members of the Board.
SECTION 3:9. Each member of the Board shall file
with the Secretary of the Corporation an address to which
mail, by hand deliveries or overnight commercial courier
deliveries may be transmitted and, if appropriate, a
telephone number to which facsimile notices may be
transmitted. A notice mailed, delivered by hand or by
overnight commercial courier (receipt requested) or trans-
mitted by facsimile (with confirmation receipt) in accor
dance with the instructions provided by the director
shall be deemed sufficient notice. Such address or
telephone number may be changed at any time and from time
to time by a director by giving written notice of such
change to the Secretary. Failure on the part of any
director to keep an address and, if applicable, telephone
number on file with the Secretary shall automatically
constitute a waiver of notice of any regular or special
meeting of the Board which might be held during the
period of time that such address and telephone number, if
applicable, are not on file with the Secretary. A notice
shall be deemed to be mailed when deposited in the United
States mail, postage prepaid. A notice shall be deemed
to be delivered by hand or by overnight commercial
courier or by facsimile transmission when sent to the
address or telephone number, as the case may be, which
the director has placed on file with the Secretary, and
in the case of facsimile transmission, when a
confirmation receipt is received.
Presiding Officer.
SECTION 3:10. The Chairman of the Board shall
preside at all meetings of the Board at which the
Chairman is present. In the absence of the Chairman, the
Board shall select a chairman of the meeting from among
the directors present.
Compensation.
SECTION 3:11. The directors may be paid their
expenses, if any, of attendance at each meeting of the
Board and may be paid a fixed sum for attendance at each
meeting of the Board or a stated retainer as director.
No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing
committees may be allowed like compensation for attending
committee meetings.
Interested Directors.
SECTION 3:12. No contract or transaction between
the Corporation and one or more of its directors or
officers, or between the Corporation and any other
Corporation, partnership, association, or other
organization in which one or more of its directors or officers
are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or
solely because the director or officer is present at or
participates in the meeting of the Board or committee
thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such
purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or
transaction are disclosed or are known to the Board or
the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum;
or (ii) the material facts as to his or their relation-
ship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stock-
holders; or (iii) the contract or transaction is fair as
to the Corporation as of the time it is authorized,
approved or ratified, by the Board, a committee thereof
or the stockholders. Common or interested directors may
be counted in determining the presence of a quorum at a
meeting of the Board or of a committee which authorizes
the contract or transaction.
ARTICLE IV: OFFICERS
Appointment.
SECTION 4:1. At the annual meeting of the Board
following their election by the stockholders, the
directors shall elect from its membership a Chairman of
the Board and a President. The Board shall elect such
Vice Presidents, a Secretary, a Treasurer, Assistant
Secretaries, Assistant Treasurers and such other
officers, as the Board may from time to time deem
necessary or appropriate.
Tenure.
SECTION 4:2. Officers appointed by the Board shall
hold their respective offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board; and all offi-
cers of the Corporation shall hold office until their
successors are chosen and qualified, subject, however, to
prior death, resignation, retirement, disqualification or
removal from office. Any officer appointed by the Board
may be removed by the Board with or without a hearing and
with or without cause whenever in its judgment the best
interests of the Corporation will be served thereby.
Salaries.
SECTION 4:3. The salaries of all officers of the
Corporation shall be fixed by the Board (or any committee
thereof established for such purpose).
Chairman of the Board.
SECTION 4:4. The Chairman of the Board, if there be
one, shall preside at all meetings of the stockholders
and of the Board. Either the Chairman of the Board or
the President shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the
President is required, the Chairman of the Board shall
possess the same power as the President to sign
certificates for the stock of the Corporation, with the
Secretary (or any Assistant Secretary) or Treasurer (or
any Assistant Treasurer), and all bonds, mortgages,
contracts, and other instruments of the Corporation which
may be authorized by the Board or by such Chairman of the
Board or by the President except where required or
permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may
sign and execute documents when so authorized by these
Bylaws, the Board, the Chairman of the Board or the
President. During the absence or disability of the
President, the Chairman of the Board shall exercise all
the powers and discharge all the duties of the President.
President.
SECTION 4:5. The President shall have general
supervision of the business of the corporation and shall
see that all orders and resolutions of the Board or the
Chairman of the Board are carried into effect. The
President may sign certificates for the stock of the
Corporation, with the Secretary (or any Assistant
Secretary) or Treasurer (or any Assistant Treasurer) and
execute all deeds, bonds, mortgages, contracts and other
instruments of the Corporation authorized by the Board,
by the Chairman of the Board or by such President, except
where required or permitted by law to be otherwise signed
and executed and except that the other officers of the
Corporation may sign and execute documents when so
authorized by these Bylaws, the Board, the Chairman of the
Board or the President. In the absence or disability of
the Chairman of the Board, or if there be none, the
President shall preside at all meetings of the
stockholders and the Board.
Vice Presidents.
SECTION 4:6. Each Vice President shall have such
powers, duties and designations as the Board (or any
committee thereof established for such purpose) assigns
to such Vice President. In the absence or disability of
the President and the Chairman of the Board, the Vice
Presidents, in the order designated by the Board, shall
perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may
also sign certificates for the stock of the Corporation,
with the Secretary (or any Assistant Secretary) or
Treasurer (or any Assistant Treasurer), and, when so
authorized by these Bylaws, the Board, the Chairman of
the Board or the President, may also sign and execute in
the name of the Corporation deeds, mortgages, bonds, con-
tracts or other instruments authorized by the Board, and
shall perform such other duties as from time to time may
be assigned to any Vice President by the Board, the
Chairman of the Board or the President.
Secretary.
SECTION 4:7. The Secretary shall attend all meet
ings of the Board and all meetings of stockholders and
record all the proceedings thereat in a book or books to
be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when re
quired. The Secretary shall give, or cause to be given,
notice of all meetings of the stockholders and special
meetings of the Board, and shall perform such other
duties as may be prescribed by the Board or the Presi-
dent, under whose supervision such Secretary shall be.
If the Secretary shall be unable or shall refuse to cause
to be given notice of all meetings of the stockholders
and special meetings of the Board, and if there be no
Assistant Secretary, then either the Board or the
President may choose another officer to cause such notice
to be given. The Secretary shall have custody of the
seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authori-
ty to affix the same to any instrument requiring it and
when so affixed, it may be attested by the signature of
the Secretary, any Assistant Secretary, the Treasurer,
any Assistant Treasurer or other officer. The Board, the
Chairman of the Board or the President may give general
authority to any other officer to affix the seal of the
Corporation and to attest the affixing by such officer's
signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and
records required by law to be kept or filed are properly
kept or filed, as the case may be. In the absence of the
Secretary from any meeting, the minutes shall be recorded
by the person appointed for that purpose by the presiding
officer.
Treasurer.
SECTION 4:8. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be
designated by the Board, the Chairman of the Board or the
President. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper
vouchers for such disbursements, and shall render to the
President and the Board at its regular meetings, or when
the Board so requires, an account of all transactions as
Treasurer and of the financial condition of the
Corporation. If required by the Board, the Treasurer
shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the
Board for the faithful performance of the duties of the
office and for the restoration to the Corporation, in
case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his posses-
sion or under his control belonging to the Corporation.
Other Officers.
SECTION 4:9. In accordance with Section 4:1, such
other officers as the Board may choose shall perform such
duties and have such powers as from time to time may be
assigned to them by the Board. The Board may delegate to
any other officer of the Corporation the power to choose
such other officers and to prescribe their respective
duties and powers.
ARTICLE V: CAPITAL STOCK AND DIVIDENDS
Certificates for Shares.
SECTION 5:1. Every holder of stock in the
Corporation shall be entitled to have a certificate
signed, in the name of the Corporation (i) by the
Chairman of the Board, the President or a Vice President
and (ii) by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him
in the Corporation. Any or all of the signatures on a
certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the
date of issue.
Transfers.
SECTION 5:2. Certificates representing shares of
stock of the Corporation shall be transferable only on
the books of the Corporation by the person or persons
named in the certificate or by the attorney lawfully
constituted in writing representing such person or per-
sons and upon surrender of the certificate or certifi
cates being transferred which certificate shall be proper-
ly endorsed for transfer or accompanied by a duly
executed stock power. Whenever a certificate is endorsed
by or accompanied by a stock power executed by someone
other than the person or persons named in the certifi-
cate, evidence of authority to transfer shall also be
submitted with the certificate. All certificates surren-
dered to the Corporation for transfer shall be cancelled.
Regulations Governing Issuance and Transfers of Shares.
SECTION 5:3. The Board shall have the power and
authority to make all such rules and regulations as it
shall deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the
Corporation.
Transfer Agents and Registrars.
SECTION 5:4. Transfer agents and registrars for the
Corporation's stock shall be banks, trust companies or
other financial institutions located within or without
the State of Delaware as shall be appointed by the Board,
the Chairman of the Board or the President. The Board
shall define the authority of such transfer agents and
registrars.
Lost or Destroyed Certificates.
SECTION 5:5. Where a certificate for shares of the
Corporation has been lost or destroyed, the Board may
authorize the issuance of a new certificate in lieu
thereof upon satisfactory proof of such loss or
destruction, and upon the giving of an open penalty bond
with surety satisfactory to the Corporation's Treasurer
and General Counsel, if there be one, to protect the
Corporation or any person injured by the issuance of the
new certificate from any liability or expense which it or
they may incur by reason of the original certificate's
remaining outstanding, and upon payment of the
Corporation's reasonable costs incident thereto.
Fractions of Shares.
SECTION 5:6. The Corporation shall not issue
fractions of a share. It shall, however, (1) arrange for
the disposition of fractional interests by those entitled
thereto, and (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive
such fractions are determined, or (3) issue scrip or
warrants in registered or bearer form which shall entitle
the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a
full share. Scrip or warrants shall not, unless other
wise provided therein, entitle the holder to exercise
voting rights, to receive dividends thereon, or to par-
ticipate in any of the assets of the Corporation in the
event of liquidation. The Board may cause scrip or
warrants to be issued subject to the conditions that the
shares for which scrip or warrants are exchangeable may
be sold by the Corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or
subject to any other conditions which the Board may
impose.
Determination of Stockholders.
SECTION 5:7. The Corporation shall be entitled to
treat the holder of record of any share or shares of
stock as the holder in fact thereof, and shall not be
bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other
person, whether or not it shall have express or other
notice thereof, save as expressly provided by the laws of
the State of Delaware.
Record Date.
SECTION 5:8. In order that the Corporation may
determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend
or other distribution or allotment or any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty nor less
than ten days before the date of such meeting, nor more
than sixty days prior to any other action. If no record
date is fixed:
(1) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stock
holders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(2) The record date for determining stockholders
for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution
relating thereto.
A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE VI: OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities
of the Corporation, other than stock certificates, may be
signed (by manual or facsimile signature) by the Chairman
of the Board, the President or any Vice President, or
such other person as may be authorized by the Board, and
the corporate seal impressed thereon or a facsimile of
such seal imprinted thereon and attested (by manual or
facsimile signature) by the signature of the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, or such other person as may be authorized by
the Board. Interest coupons appertaining to any such
bond, debenture or other corporate security, shall be
signed by the Chairman of the Board, the President, any
Vice President, Treasurer or any Assistant Treasurer of
the Corporation, or such other person as may be
authorized by the Board, or bear imprinted thereon the
facsimile signature such person. In case any person who
shall have signed or attested any bond, debenture or
other corporate security, or whose facsimile signature
shall appear thereon or on any such interest coupon,
shall have ceased to be an officer before the bond,
debenture or other corporate security so signed or
attested shall have been delivered, such bond, debenture
or other corporate security nevertheless may be adopted
by the Corporation and issued and delivered as though the
person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such
officer of the Corporation.
ARTICLE VII: INDEMNIFICATION
General Indemnification.
SECTION 7:1. The Corporation shall indemnify to the
fullest extent authorized or permitted by law (as now or
hereafter in effect) any person made, or threatened to be
made, a party to or otherwise involved in any action or
proceeding (whether civil or criminal or otherwise) by
reason of the fact that he, his testator or intestate, is
or was a director or officer of the Corporation or by
reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other
corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity.
Nothing contained herein shall affect any rights to
indemnification to which employees other than directors
and officers may be entitled by law. No amendment or
repeal of this Section 7:1 shall apply to or have any
effect on any right to indemnification provided hereunder
with respect to any acts or omissions occurring prior to
such amendment or repeal.
Insurance, Indemnification Agreements and Other Matters.
SECTION 7:2. The Corporation may purchase and
maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Corpora-
tion, or is serving at the request of the Corporation as
a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify
him against such liability under the provisions of the
law. The Corporation may create a trust fund, grant a
security interest and/or use other means (including,
without limitation, letters of credit, surety bonds
and/or other similar arrangements), as well as enter into
contracts providing for indemnification to the fullest
extent authorized or permitted by law and including as
part thereof any or all of the foregoing, to ensure the
payment of such sums as may become necessary to effect
full indemnification.
Nonexclusivity.
SECTION 7:3. The rights to indemnification
conferred in this Article VII shall not be exclusive of
any other right which any person may have or hereafter
acquire under any statute, the Certificate of
Incorporation of the Corporation, these Bylaws or any
agreement, vote of stockholders or directors or other-
wise.
ARTICLE VIII: MISCELLANEOUS
Voting Shares in Other Corporations.
SECTION 8:1. The Corporation may vote any and all
shares of stock and other securities having voting rights
which may at any time and from time to time be held by it
in any other corporation or corporations and such vote
may be cast either in person or by proxy by such officer
of the Corporation as the Board may appoint or, in
default of such appointment, the Chairman, the President
or a Vice President.
Execution of Other Papers and Documents.
SECTION 8:2. All checks, bills, notes, drafts,
vouchers, warehouse receipts, bonds, mortgages, con-
tracts, registration certificates and all other
instruments, agreements, papers and documents of the
Corporation shall be signed or endorsed for the Corpora-
tion by such of its officers, other employees and agents
as the Board may from time to time determine, or in the
absence of such determination, by the Chairman of the
Board, the President or a Vice President.
Corporate Seal.
SECTION 8:3. The Board shall provide a suitable
seal, containing the name of the Corporation, the year of
its organization and the words "Corporate Seal,
Delaware," which seal shall be in the custody of the
Secretary of the Corporation, and may provide for one or
more duplicates thereof to be kept in the custody of such
other officers of the Corporation as the Board may pre-
scribe.
Books and Records.
SECTION 8:4. Except as the Board may from time to
time direct or as may be required by law, the Corporation
shall keep its books and records at its principal office.
Fiscal Year.
SECTION 8:5. The fiscal year of the Corporation
shall be fixed by resolution of the Board.
Amendments.
SECTION 8:6. These Bylaws may be amended, altered
or repealed, or new Bylaws may be adopted (a) by the
affirmative vote of eighty percent of the outstanding
stock of the Corporation entitled to vote thereon, or (b)
by the affirmative vote of the majority of the Board at
any regular or special meeting; provided that the notice
of such meeting of stockholders or directors, whether
regular or special, shall specify as one of the purposes
thereof the making of such amendment, alteration or
repeal.
Exhibit 10.9
CONSOLIDATED FREIGHTWAYS CORPORATION
SENIOR EXECUTIVE INCENTIVE PLAN
FOR 1999
THE PLAN
In order to motivate certain employees of Consolidated
Freightways Corporation (CFC) more effectively and efficiently,
CFC establishes an Incentive Plan (Plan) under which payments
will be made to designated eligible senior executive personnel
out of calendar year 1999 Incentive Profits.
DESIGNATION OF PARTICIPANTS
Participants in this Plan shall be designated full-time executive
personnel of CFC. A master list of all Plan participants will be
maintained in the office of the President of CFC.
ELIGIBILITY FOR PAYMENT
Participants will commence participation at the beginning of the
first full calendar quarter following becoming eligible.
Calendar quarters begin January 1, April 1, July 1, and October 1
or the first working day thereafter. An employee who commences
participation in the 1999 Plan during the 1999 Plan year, and who
participates less than four full quarters, will receive a pro
rata payment based on the number of full calendar quarters of
Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by CFC
or any of its subsidiaries and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by CFC
through December 31, 1999 but leaves that employment or
otherwise becomes ineligible after December 31, 1999 but
before the final payment is made relating to 1999, unless
terminated for cause, shall be entitled to receive payments
under this Plan resulting from 1999 Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made
(1) to a Plan participant who retires prior to December 31,
1999 pursuant to the Consolidated Freightways Corporation
Retirement Plan or to the provisions of the Social Security
Act and who, at the time of retirement, was an eligible
participant in this Plan, (2) to the heirs, legatees,
administrators or executors of a Plan participant
who dies prior to December 31, 1999 and who, at the time of
death, was an eligible participant in this Plan, (3) to an
eligible Plan participant who is placed on an approved
Medical, Sabbatical, or Military Leave of Absence prior to
December 31, 1999, or (4) to an eligible Plan participant
who is transferred to another subsidiary of Consolidated
Freightways Corporation and who remains an employee through
December 31, 1999.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of Annual Salary. Incentive will be earned
based on CFC pretax pre-incentive profit.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive will be
prepared for each Plan participant which designates (1) the unit
to which the participant is assigned, (2) his assigned
participation, (3) the minimum level of profit achievement
required, (4) the Factor level of achievement for profit, and (5)
the incentive earnings at the Factor profit goal.
DATE OF PAYMENT
The President of CFC may authorize a partial payment of the
estimated annual earned incentive, in December, 1999. The final
payment to eligible participants, less any previous partial
payment, will be made on or before March 15, 2000.
INCENTIVE PROFIT
Incentive Profit is defined as the pre-tax earnings of
Consolidated Freightways Corporation before deducting any amounts
expensed under this or any subsidiary incentive plan, before
deducting any amounts expensed under the restricted stock plan
and before deducting income taxes, but after deducting expenses
incurred from any bonus plan(s).
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan
participant is his annualized salary before any incentive or
other special compensation as of the first pay period following
the date the participant becomes eligible to participate in this
Plan.
MAXIMUM PAYMENT
Payments under this Plan are not limited by each participant's
participation factor.
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CFC may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written
notice to the Plan participants, and will have full discretion as
to the administration and interpretation of this Plan. No
participant in this Plan shall at any time have any right to
receive any payment under this Plan until such time, if any, as
any payment is actually made.
DURATION OF PLAN
This Plan is for the calendar year 1999 only.
Exhibit 10.19
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
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.
(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
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:
(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 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 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 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 (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.
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:
(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.
(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.
(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.
(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.
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.
(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.
(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.
Exhibit 10.20
CONSOLIDATED FREIGHTWAYS CORPORATON
NON-EMPLOYEE DIRECTORS' EQUITY 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.
(h) "Consultant" means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or
advisory services and who is compensated for such services or
(ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include Directors of the
Company who are compensated solely by the Company for their
services as Directors.
(i) "Continuous Service" means that the Optionholder's service
with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The
Optionholder's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate
as an Employee, 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.
(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.
(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.
(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.
(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.
(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 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 "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.
(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.
Exhibit 10.21
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and W. Roger Curry (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its President and Chief Executive Officer;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional three (3)
years after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2001, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Board of Directors of the Company, or the Chief Executive
Officer of the parent company of any company that may acquire the
Company. Executive shall have the powers and duties commensurate
with such position, including but not limited to, hiring
personnel necessary to carry out the responsibilities for such
position as set forth in the annual business plan approved by the
Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or Chief Executive
Officer may reasonably request, provided that Executive may also
serve on the Boards of Directors of one or more other companies
with the prior consent of the Board and may serve on the
governing bodies of such charitable organizations as Executive
determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or Chief Executive Officer,
Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether
or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position
to that of the Company or any other corporation or entity that
directly or indirectly controls, is controlled by, or is under
common control with the Company (an "Affiliate"), provided that
Executive may own less than two percent (2%) of the outstanding
securities of any such publicly traded competing corporation.
2.4 Directorships. Executive will be nominated for
reelection to the Company's Boards of Directors throughout the
term of this Agreement under the applicable provisions of the
Company's Certificate of Incorporation and By-Laws. At the
request of the Company's shareholders, Executive agrees to serve
as a Director of the Company's Board of Directors at no
additional compensation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 65% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits
and age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if Executive had
continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
Executive had continued to perform services for such period with
the same amount of Base Salary and Target Bonus). Thereafter the
Company's obligations hereunder shall terminate. Nothing in this
Agreement shall affect Executive's rights under any disability
plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus four years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional four years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the Chief Executive Officer at the
parent company of the Company, (v) in the case of a Change-in-
Control only, a request that Executive relocate to a worksite
that is more than 15 miles from his prior worksite, unless
Executive accepts such relocation opportunity, (vi) material
reduction in Executive's duties, (vii) failure or refusal of a
successor to the Company and any parent company to assume the
Company's obligations under this Agreement, as provided in
Section 7.2.2, or (viii) material breach by the Company or any
successor to the Company or any parent company of any of the
material provisions of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: W. Roger Curry
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the services to
be rendered by Executive hereunder are of a unique nature and
that in the event of any breach or threatened breach of any of
the covenants contained herein, the damage or imminent damage to
the value and the goodwill of the Company's business will be
irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, the parties
agree that the Company shall be entitled to injunctive relief
against Executive in the event of any breach or threatened breach
of any such provisions by Executive, in addition to any other
relief (including damages) available to the Company under this
Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/Robert W. Hatch
Robert W. Hatch
Chairman, Compensation Committee
Consolidated Freightways
Corporation
Executive:
/s/W.Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and Patrick H. Blake (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Executive Vice President - Operations;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional two (2) years
after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Executive Officer of the Company, or the Chief
Operating Officer of the parent company of any company that may
acquire the Company. Executive shall have the powers and duties
commensurate with such position, including but not limited to,
hiring personnel necessary to carry out the responsibilities for
such position as set forth in the annual business plan approved
by the Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or Chief Operating
Officer of an acquiring parent company may reasonably request,
provided that Executive may also serve on the Boards of Directors
of one or more other companies with the prior consent of the
Board and may serve on the governing bodies of such charitable
organizations as Executive determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or Chief Operating Officer of
an acquiring parent company, Executive shall not during the
period of employment engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with, or that might
place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls,
is controlled by, or is under common control with the Company (an
"Affiliate"), provided that Executive may own less than two
percent (2%) of the outstanding securities of any such publicly
traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits and
age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
the Executive had continued to perform services for such period
with the same amount of Base Salary and Target Bonus).
Thereafter the Company's obligations hereunder shall terminate.
Nothing in this Agreement shall affect Executive's rights under
any disability plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. Executive shall
also be entitled to retire on or after his 55th birthday with an
unreduced pension. In addition, Executive shall be entitled to
continued coverage without premiums under the Company's health,
dental and drug plan (substantially consistent with the terms
thereof in effect on the date hereof) for himself and a spouse or
minor dependent under the same terms as executive officers of the
Company and its Affiliates until such Executive and spouse are
eligible for Medicare or ten years, whichever is shorter. If
Executive or his spouse is or becomes covered under the health
plan of another employer, the Company's plan shall be secondary
for as long as that coverage continues. Payment under this
provision for Change-in-Control shall release the Company from
payment of any other benefits specified above other than Accrued
Compensation, acceleration of vesting of stock-based benefits,
and any other vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the Chief Operating Officer of an
acquiring parent company, (v) in the case of a Change-in-Control
only, a request that Executive relocate to a worksite that is
more than 15 miles from his prior worksite, unless Executive
accepts such relocation opportunity, (vi) material reduction in
Executive's duties, (vii) failure or refusal of a successor to
the Company and any parent company to assume the Company's
obligations under this Agreement, as provided in Section 7.2.2,
or (viii) material breach by the Company or any successor to the
Company or any parent company of any of the material provisions
of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: Patrick H. Blake
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
Executive:
/s/Patrick H. Blake
Patrick H. Blake
Executive Vice President -
Operations
Consolidated Freightways
Corporation
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and David F. Morrison (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Executive Vice President and Chief Financial Officer;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional two (2) years
after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Executive Officer of the Company, or the Chief
Financial Officer of the parent company of any company that may
acquire the Company. Executive shall have the powers and duties
commensurate with such position, including but not limited to,
hiring personnel necessary to carry out the responsibilities for
such position as set forth in the annual business plan approved
by the Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or Chief Financial
Officer of an acquiring parent company may reasonably request,
provided that Executive may also serve on the Boards of Directors
of one or more other companies with the prior consent of the
Board and may serve on the governing bodies of such charitable
organizations as Executive determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or Chief Financial Officer of
an acquiring parent company, Executive shall not during the
period of employment engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with, or that might
place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls,
is controlled by, or is under common control with the Company (an
"Affiliate"), provided that Executive may own less than two
percent (2%) of the outstanding securities of any such publicly
traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus and health benefits,
age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
the Executive had continued to perform services for such period
with the same amount of Base Salary and Target Bonus).
Thereafter, the Company's obligations hereunder shall terminate.
Nothing in this Agreement shall affect Executive's rights under
any disability plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the Chief Financial Officer of an
acquiring parent company, (v) in the case of a Change-in-Control
only, a request that Executive relocate to a worksite that is
more than 15 miles from his prior worksite, unless Executive
accepts such relocation opportunity, (vi) material reduction in
Executive's duties, (vii) failure or refusal of a successor to
the Company and any parent company to assume the Company's
obligations under this Agreement, as provided in Section 7.2.2,
or (viii) material breach by the Company or any successor to the
Company or any parent company of any of the material provisions
of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: David F. Morrison
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
Executive:
/s/David F. Morrison
David F. Morrison
Executive Vice President & Chief
Financial Officer
Consolidated Freightways
Corporation
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and Joseph Schillaci (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Executive Vice President - Sales and Marketing;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional two (2) years
after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Executive Officer of the Company, or the senior sales
and marketing executive of the parent company of any company that
may acquire the Company. Executive shall have the powers and
duties commensurate with such position, including but not limited
to, hiring personnel necessary to carry out the responsibilities
for such position as set forth in the annual business plan
approved by the Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or senior sales and
marketing executive of an acquiring parent company may reasonably
request, provided that Executive may also serve on the Boards of
Directors of one or more other companies with the prior consent
of the Board and may serve on the governing bodies of such
charitable organizations as Executive determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or senior sales and marketing
executive of an acquiring parent company, Executive shall not
during the period of employment engage, directly or indirectly,
in any other business activity (whether or not pursued for
pecuniary advantage) that is or may be competitive with, or that
might place him in a competing position to that of the Company or
any other corporation or entity that directly or indirectly
controls, is controlled by, or is under common control with the
Company (an "Affiliate"), provided that Executive may own less
than two percent (2%) of the outstanding securities of any such
publicly traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits and
age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits, age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
Executive had continued to perform services for such period with
the same amount of Base Salary and Target Bonus). Thereafter the
Company's obligations hereunder shall terminate. Nothing in this
Agreement shall affect Executive's rights under any disability
plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the senior sales and marketing
executive of an acquiring parent company, (v) in the case of a
Change-in-Control only, a request that Executive relocate to a
worksite that is more than 15 miles from his prior worksite,
unless Executive accepts such relocation opportunity,
(vi) material reduction in Executive's duties, (vii) failure or
refusal of a successor to the Company and any parent company to
assume the Company's obligations under this Agreement, as
provided in Section 7.2.2, or (viii) material breach by the
Company or any successor to the Company or any parent company of
any of the material provisions of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: Joseph R. Schillaci
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
Executive:
/s/Joseph R. Schillaci
Joseph R. Schillaci
Executive Vice President - Sales &
Marketing
Consolidated Freightways
Corporation
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and Robert E. Wrightson (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Senior Vice President and Controller;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional two (2) years
after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Financial Officer of the Company, or the Chief
Financial Officer of the parent company of any company that may
acquire the Company. Executive shall have the powers and duties
commensurate with such position, including but not limited to,
hiring personnel necessary to carry out the responsibilities for
such position as set forth in the annual business plan approved
by the Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or Chief Financial
Officer may reasonably request, provided that Executive may also
serve on the Boards of Directors of one or more other companies
with the prior consent of the Board and may serve on the
governing bodies of such charitable organizations as Executive
determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or Chief Financial Officer,
Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether
or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position
to that of the Company or any other corporation or entity that
directly or indirectly controls, is controlled by, or is under
common control with the Company (an "Affiliate"), provided that
Executive may own less than two percent (2%) of the outstanding
securities of any such publicly traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits,
and age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
the Executive had continued to perform services for such period
with the same amount of Base Salary and Target Bonus).
Thereafter the Company's obligations hereunder shall terminate.
Nothing in this Agreement shall affect Executive's rights under
any disability plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the Chief Financial Officer at the
parent company of the Company, (v) in the case of a Change-in-
Control only, a request that Executive relocate to a worksite
that is more than 15 miles from his prior worksite, unless
Executive accepts such relocation opportunity, (vi) material
reduction in Executive's duties, (vii) failure or refusal of a
successor to the Company and any parent company to assume the
Company's obligations under this Agreement, as provided in
Section 7.2.2, or (viii) material breach by the Company or any
successor to the Company or any parent company of any of the
material provisions of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: Robert E. Wrightson
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
Executive:
/s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President & Controller
Consolidated Freightways
Corporation
EMPLOYMENT AGREEMENT
This Agreement, dated as of December 8, 1998, is made by and
between Consolidated Freightways Corporation, and Consolidated
Freightways Corporation of Delaware, Delaware corporations
(hereinafter, together with any successor Corporation(s), the
"Company"), and Stephen D. Richards (hereinafter "Executive").
Recitals
Whereas, Executive is currently employed by the Company as
its Senior Vice President and General Counsel;
Whereas, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive is to be
continued to be employed by the Company on and after the date
hereof; and
Whereas, the Company wishes to be assured that Executive
will be available to the Company for an additional two (2) years
after December 31, 1998.
Now, Therefore, the Company and Executive, in consideration
of the mutual promises set forth herein, agree as follows:
Article 1.
Term of Agreement
1.1 Commencement Date. Executive's employment with the
Company under this Agreement shall commence as of the date of
this Agreement ("Commencement Date") and shall expire on December
31, 2000, unless further extended pursuant to Section 1.2 or
terminated earlier pursuant to Article 6. Notwithstanding the
foregoing, this Agreement shall automatically terminate upon
Executive's attainment of age sixty-five (65).
1.2 Renewal. The term of this Agreement shall be
automatically renewed as of each January 1, beginning with
January 1, 2000, for one (1) additional year unless either party
delivers written notice to the other at least thirty (30) days
prior to such December 31 of an intention to terminate this
Agreement upon the then current termination date. In the event
of a Change-in-Control, the term of this Agreement shall
automatically be extended for one additional year.
Article 2.
Employment Duties
2.1 Title/Responsibilities. Executive hereby accepts
employment with the Company pursuant to the terms and conditions
hereof. Executive agrees to serve the Company in his current
position at the corporate headquarters. Executive shall report to
the Chief Executive Officer of the Company, or the General
Counsel of the parent company of any company that may acquire the
Company. Executive shall have the powers and duties commensurate
with such position, including but not limited to, hiring
personnel necessary to carry out the responsibilities for such
position as set forth in the annual business plan approved by the
Board of Directors of the Company.
2.2 Full Time Attention. Executive shall devote his best
efforts and his full business time and attention to the
performance of the services customarily incident to such office
and to such other services as the Board or General Counsel of an
acquiring parent company may reasonably request, provided that
Executive may also serve on the Boards of Directors of one or
more other companies with the prior consent of the Board and may
serve on the governing bodies of such charitable organizations as
Executive determines.
2.3 Other Activities. Except upon the prior written
consent of the Board of Directors or General Counsel of an
acquiring parent company, Executive shall not during the period
of employment engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with, or that might
place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls,
is controlled by, or is under common control with the Company (an
"Affiliate"), provided that Executive may own less than two
percent (2%) of the outstanding securities of any such publicly
traded competing corporation.
Article 3.
3.1 Base Salary. Executive shall receive a base salary at
an annual rate of not less than his current salary payable
weekly in equal installments in accordance with the Company's
normal payroll practices ("Base Salary"). The Company's Board of
Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Board of Directors or a duly
authorized Committee thereof may from time to time establish in
its sole discretion, which, subject to performance, shall be
commensurate with the increases for the other senior executives
of the Company and its Affiliates. Any increase in salary shall
automatically increase the Base Salary payable by the Company.
3.2 Incentive Bonus. The Company shall provide Executive
an annual bonus plan targeting cash payment of 50% of Base Salary
annually with an opportunity to earn double that amount based
upon achievement by the Company against performance objectives
approved by the Board of Directors or Committee thereof annually
("Target Bonus"). The Board of Directors or Committee thereof
shall, in its sole discretion, determine the extent to which such
performance objectives have been obtained. Objectives under
which a Target Bonus will be earned shall be achievable in a
manner substantially consistent with the senior executive
officers of the Company and its Affiliates and substantially
consistent with past practice.
3.3 Withholdings. All compensation and benefits payable to
Executive hereunder shall be subject to all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Article 4.
Benefits and Other Compensation
4.1 Vacation. Executive shall be entitled to the greater
of four (4) weeks of annual paid vacation or the amount of annual
paid vacation to which Executive is entitled as of the date
hereof or may become entitled under the terms of the current
vacation policy for employees of the Company and its Affiliates,
whichever is greater.
4.2 Benefits. During the term of this Agreement, the
Company shall also provide Executive with the usual health
insurance benefits it generally provides to its other senior
officers of the Company and its Affiliates. The Company shall
provide Executive with the right to participate in and to receive
benefits from life, accident, disability, medical, retirement
medical, pension, supplemental retirement, 401(k), car allowance,
bonus, long-term incentive, stock awards, profit-sharing and
savings plans, and similar benefits made available either
generally to employees of the Company or specifically to other
senior executive officers of the Company and its Affiliates as
such plans and benefits may be adopted by the Company. The
amount of such benefits shall be substantially consistent with
benefits provided to other senior executive officers of the
Company and its Affiliates and past practices (excluding the
extraordinary restricted stock grant). Target long-term
incentives shall be at least as much as those considered by the
Compensation Committee of the Board of Directors in 1998
(attached hereto), with any increase establishing a new minimum
target. Any objectives under such target long-term incentives
shall be achievable in a manner substantially consistent with the
senior executive officers of the Company and its Affiliates.
4.3 Business Expense Reimbursement. During the term of
this Agreement, Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses incurred
by him (in accordance with the policies and procedures
established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to
the Company adequate records and other documentary evidence of
such expenses for which Executive seeks reimbursement. Such
expenses shall be reimbursed and accounted for under the policies
and procedures established by the Company and the Audit Committee
of the Board of Directors.
Article 5.
5.1 Non-disclosure of Proprietary Information - Non
Competition. Executive shall execute upon request the Company's
standard Non-Disclosure Agreement for officers of the Company and
its Affiliates in a form acceptable to the Company's counsel.
In any event, Executive shall maintain the confidentiality and
not use confidential information of the Company during his term
of employment and for two years following termination of his
employment. While employed hereunder, Executive shall not engage,
directly or indirectly, in any other business activity that is
competitive with, or that places him in a competing position to
that of the Company or any Affiliates (provided that Executive
may own less than two percent (2%) of the outstanding securities
of any publicly traded corporation).
5.2 No Solicitation of Employees. As a condition of
receiving benefits under this Agreement, Executive may not
directly solicit employees or full-time consultants of the
Company to leave during his employment with the Company or for a
period of two years from termination of employment.
5.3 Waiver of Claims. Executive shall also waive any
known or unknown claim against the Company and its Affiliates,
including, if applicable, any acquiring corporation, other than
those arising under the Agreement. Executive shall sign an
appropriate release if so requested upon termination of
employment.
5.4 Return of Property. All documents, records, apparatus,
equipment and other physical property which if furnished to or
obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property (whether or not it pertains to the
Company's proprietary information), and agrees not to make or
retain copies, reproductions or summaries of any such property.
Article 6.
Termination
6.1 By Death. The period of employment shall terminate
automatically upon the death of Executive. In such event, the
Company shall pay to Executive's beneficiaries or his estate, as
the case may be, any accrued Base Salary, pro-rata Target Bonus
based upon performance to date of death relative to target
performance, any vested deferred compensation (other than pension
plan, supplemental retirement, 401(k), or profit-sharing plan
benefits which will be paid in accordance with the terms of the
applicable plan), any benefits under any plans of the Company in
which Executive is a participant to the full extent of
Executive's rights under such plans, any accrued vacation pay and
any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of
termination (collectively "Accrued Compensation"), and six (6)
months' additional Base Salary, Target Bonus, health benefits and
age and service credit under the Company's defined benefit
pension plan and supplemental pension plan (as if the Executive
had continued to perform services for such period with the same
amount of Base Salary and Target Bonus). Thereafter, the
Company's obligations hereunder shall terminate.
6.2 By Disability. If Executive is prevented from properly
performing his duties hereunder by reason of any physical or
mental incapacity for a period of more than 60 days in the
aggregate in any 365-day period, or if a determination is made by
a qualified physician selected by the Company and acceptable to
Executive or Executive's representative that continued employment
with the Company by Executive would jeopardize Executive's
physical or mental health, then, to the extent permitted by law,
the Company may terminate the employment on the 60th day of such
incapacity or following such a determination by a qualified
physician. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall pay to Executive in a lump sum a
total of six (6) months' additional Base Salary, Target Bonus,
health benefits and age and service credit under the Company's
defined benefit pension plan and supplemental pension plan (as if
the Executive had continued to perform services for such period
with the same amount of Base Salary and Target Bonus). Thereafter
the Company's obligations hereunder shall terminate. Nothing in
this Agreement shall affect Executive's rights under any
disability plan in which he is an eligible participant.
6.3 By Company for Cause. The Company may terminate
Executive's employment for Cause (as defined below) without
liability at any time with or without advance notice to
Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
Termination shall be for "Cause" in the event of the occurrence
of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in
bad faith and to the material detriment of the Company; (b)
intentional refusal or intentional failure to act in accordance
with any lawful and proper direction or order of the Board; (c)
willful and habitual neglect of his duties of employment; or (d)
conviction of a felony crime involving fraud or an act of
dishonesty against the Company, provided that in the event that
any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10)
business days to cure such event.
6.4 At Will. At any time, the Company may terminate
Executive's employment without liability other than as set forth
below, for any reason not specified in Section 6.3 above, by
giving thirty (30) days advance written notice to Executive. If
the Company elects to terminate Executive pursuant to this
Section 6.4, the Company shall pay to Executive all Accrued
Compensation and shall pay to Executive as provided herein
Executive's Base Salary, Target Bonus and continue to pay the
benefits described in Section 4.2 (except as otherwise explicitly
provided in this Section 6.4) over the period equal to the
remaining term of this Agreement, and thereafter all obligations
of the Company shall terminate. Notwithstanding the preceding
sentence, Executive shall receive (i) his incentive bonus as
described in Section 3.2 only for the proportion of the Company's
fiscal year in which termination occurs based upon the Company's
year-to-date performance against the selected objectives, (ii)
his long-term incentive compensation, if any, only for the
proportion of the applicable period based on the Company's
performance to date of termination against selected objectives,
(iii) additional age and service credits under the Company's
defined benefit pension plan and supplemental retirement plan for
the remainder of the then current term of this Agreement as if
Executive had continued to perform services for such period, and
(iv) acceleration of vesting in full for all stock awards,
whether stock options, restricted stock, or otherwise, then held
by Executive. All such severance compensation amounts shall be
earned and become payable in full immediately upon termination of
employment. If the Company terminates this Agreement or the
employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this Section 6.4 shall apply.
If such termination under this Section 6.4 shall occur within
twenty four (24) months following the occurrence of a Change-in-
Control, Executive shall be paid upon termination in a lump sum
Base Salary, Target Bonus and automobile allowance for the
remainder of the term of this Agreement, plus three years of
pension service and age credit. Executive's benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for an additional three years, had
continued to receive the same amount of Base Salary for that
period, and continued to receive Target Bonus. In addition,
Executive shall be entitled to continued coverage without
premiums under the Company's health, dental and drug plan
(substantially consistent with the terms thereof in effect on the
date hereof) for himself and a spouse or minor dependent under
the same terms as executive officers of the Company and its
Affiliates until such Executive and spouse are eligible for
Medicare or ten years, whichever is shorter. If Executive or his
spouse is or becomes covered under the health plan of another
employer, the Company's plan shall be secondary for as long as
that coverage continues. Payment under this provision for Change-
in-Control shall release the Company from payment of any other
benefits specified above other than Accrued Compensation,
acceleration of vesting of stock-based benefits, and any other
vested rights at time of termination.
6.5 Constructive Termination. In the event that the
Company changes the terms and conditions of Executive's
employment with the Company such that a "Constructive
Termination" has occurred, and Executive ceases performance of
services for the Company thereafter, such action shall be deemed
to be a termination of employment of Executive without cause
pursuant to Section 6.4. For purposes of this Agreement,
"Constructive Termination" shall mean (i) reduction of
Executive's Base Salary and/or Target Bonus, (ii) failure to
provide a package of welfare benefit plans, pension benefit
plans, and fringe benefits for Executive made available generally
to employees of the Company and its Affiliates and to other
senior executives of the Company and its Affiliates which, taken
as a whole, provide substantially similar benefits to those in
which the Executive is entitled to participate immediately prior
to the Commencement Date of this Agreement or in effect prior to
the occurrence of a Change-in-Control, whichever is greater, or
any action by the Company which would adversely affect
Executive's participation, (iii) material reduction of
Executive's benefits under any of such plans, (iv) change in
Executive's responsibilities, authority, title, office, or
reporting relationship resulting in diminution of position,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof is given by Executive,
and excluding the reporting to the General Counsel of an
acquiring parent company, (v) in the case of a Change-in-Control
only, a request that Executive relocate to a worksite that is
more than 15 miles from his prior worksite, unless Executive
accepts such relocation opportunity, (vi) material reduction in
Executive's duties, (vii) failure or refusal of a successor to
the Company and any parent company to assume the Company's
obligations under this Agreement, as provided in Section 7.2.2,
or (viii) material breach by the Company or any successor to the
Company or any parent company of any of the material provisions
of this Agreement.
6.6 Change-in-Control. For purposes of this Agreement, a
"Change-in-Control" shall have occurred if at any time during the
term of Executive's employment hereunder, any of the following
events shall occur:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
6.7 Excise Tax Gross-Up. In the event it shall be
determined that any payment by the Company and/or its Affiliates
to or for the benefit of Executive, whether paid or payable under
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6.7 (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable federal, state, or local
excise tax (such excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in such an amount that
after the payment of all taxes (including without limitation, any
interest and penalties on such taxes and the excise tax) on the
Payment and on the Gross-Up Payment, Executive shall retain an
amount equal to the Payment minus all applicable income and
employment taxes on the Payment. The intent of the parties is
that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any
income, employment and other taxes (including, without
limitation, penalties and interest) imposed on any Gross-Up
Payment, as well as any loss of tax deduction caused by the Gross-
Up Payment or applicable provisions of the Code. All
determinations required to be made under this Section 6.7,
including without limitation, whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations,
which firm must be reasonably acceptable to Executive. All fees
and expenses of such accounting firm shall be borne solely by the
Company.
6.8 Termination by Executive. At any time, whether or not
as a result of Executive's retirement, Executive may terminate
his employment by giving thirty (30) days advance written notice
to the Company. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any
kind, including without limitation, severance compensation, and
thereafter the Company's obligations hereunder shall terminate.
In the event that Executive voluntarily terminates his employment
with the Company during the thirteenth calendar month beginning
after the occurrence of a Change-in-Control, Executive shall also
receive a total of twelve (12) months' Base Salary, Target
Bonus, service and pension credits and health, dental and drug
benefits as if Executive's employment had been involuntarily
terminated by the Company pursuant to Section 6.4 above, except
that Executive shall not be entitled to any tax "gross-up"
benefits described in Section 6.7. Executive benefits under the
Company's defined benefit pension plan and supplemental
retirement plan shall be determined as if Executive had remained
employed with the Company for that period.
Article 7.
General Provisions
7.1 Governing Law. The validity, interpretation,
construction and performance of this Agreement and the rights of
the parties thereunder shall be interpreted and executed under
California law without reference to principles of conflicts of
laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in
California, it is appropriate that California law govern this
Agreement.
7.2 Assignment; Successors; Binding Agreement.
7.2.1 Executive may not assign, pledge or
encumber his interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to
assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform
it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount
is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legates
or other designee or, if there be no such designee, to his
estate.
7.3 Attorney Fees. The Company will reimburse Executive or
Executive's successor-in-interest for all reasonable attorney
fees and costs associated with bringing any action under this
Agreement to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided the court does not find the
claim was brought in bad faith.
7.4 Non-Publication. The parties mutually agree not to
disclose publicly the terms of this Agreement except to the
extent that disclosure is mandated by applicable law.
7.5 No Waiver of Breach. The waiver by any party of the
breach of any provision of this Agreement shall not be deemed to
be a waiver of any subsequent breach. No delay in exercising
any right hereunder shall be deemed to be a waiver of the party's
rights hereunder.
7.6 Notice. For the purposes of this Agreement, notices
and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
To the Company:Consolidated Freightways
Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attn: Chairman of Compensation
Committee
To Executive: Stephen D. Richards
7.7 Modification; Waiver; Entire Agreement. No provisions
of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing
signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other
party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
7.8 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
7.9 Executive Acknowledgment. Executive acknowledges (a)
that he has consulted with or had had the opportunity to consult
with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b)
that he has read and understands the Agreement, is fully aware of
its legal effect, and has entered into it freely based on his own
judgment.
7.10 Injunctive Relief. The parties agrees that the
services to be rendered by Executive hereunder are of a unique
nature and that in the event of any breach or threatened breach
of any of the covenants contained herein, the damage or imminent
damage to the value and the goodwill of the Company's business
will be irreparable and extremely difficult to estimate, making
any remedy at law or in damages inadequate. Accordingly, the
parties agree that the Company shall be entitled to injunctive
relief against Executive in the event of any breach or threatened
breach of any such provisions by Executive, in addition to any
other relief (including damages) available to the Company under
this Agreement or under law. Both parties agree that the remedy
specified in this section is not exclusive of any other remedy
for the breach by Executive of the terms hereof.
7.11 Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one and the same Agreement.
7.12 No Mitigation. The Executive shall not be required to
mitigate the amount of payments hereunder by seeking other
employment or otherwise, and any amount earned by Executive as a
result of employment by other employer after the date of
termination shall not reduce the payments hereunder.
7.13 Indemnity. The Company and its Affiliates shall
indemnify and hold Executive harmless against any loss, cost or
expense arising out of or relating to the performance of his
duties to the Company and its Affiliates, and shall maintain
adequate liability insurance covering such Executive's acts and
omissions occurring during the term of this Agreement and for a
period of six years thereafter.
Executed by the parties as of the date and year first above
written.
Consolidated Freightways
Corporation
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive
Officer
Consolidated Freightways
Corporation
Executive:
/s/Stephen D. Richards
Stephen D. Richards
Senior Vice President & General
Counsel
Consolidated Freightways
Corporation
EXHIBIT 10.22
CONSOLIDATED FREIGHTWAYS CORPORATION
MANAGEMENT CHANGE-OF-CONTROL PLAN
INTRODUCTION
The Consolidated Freightways Corporation Management Change-
of-Control Plan (the "Plan") is hereby adopted by the Board of
Directors (the "Board") of Consolidated Freightways Corporation,
a Delaware corporation (the "Company"), effective as of December
8, 1998. The Plan is intended to provide members of management
who are Participants in the Plan with the benefits specified
herein in the event of a Change of Control.
Certain capitalized terms used in the Plan are defined in
Article 10.
ARTICLE 1
ESTABLISHMENT OF THE PLAN
1.1 Establishment of Plan. As of the date of this
Agreement, the Company hereby establishes a plan to be known as
the "Management Change-of-Control Plan" (the "Plan"), which shall
contain the terms and conditions set forth herein.
1.2 Applicability of Plan. The benefits provided by the
Plan shall be available to all Participants, unless otherwise
specifically provided.
ARTICLE 2
ELIGIBILITY
2.1 Participation. All corporate officers of the Company,
Consolidated Freightways Corporation of Delaware and the
President of Canadian Freightways Limited, as of the date hereof
will be Participants in the Plan. The Board of Directors or the
Compensation Committee of the Board, who have executed a copy of
this Plan, (the "Compensation Committee") may, in its sole
discretion, designate additional members of management or
employees of the Company or any other corporation or entity that
directly or indirectly controls, is controlled by, or is under
common control with the Company (an "Affiliate") to be
Participants in the Plan and, subject to the terms of
Section 2.2, may decide that members of management or employees
who have been designated as Participants in the Plan shall no
longer be Participants. Notwithstanding any of the foregoing
provisions of this Section 2.1 or elsewhere in the Plan to the
contrary, no person otherwise eligible shall be a Participant if
such person has entered into an employment agreement with the
Company or an Affiliate of the Company which expressly provides
for severance benefits in the event of the termination of such
person's employment relationship with the Company or its
Affiliate, as appropriate.
2.2 Duration of Participation. A Participant shall cease
to be a Participant in the Plan upon a determination thereof by
the Board or the Compensation Committee; provided, however, that
in no event shall any such determination impair a Participant's
rights under this Plan with respect to benefits that have accrued
at or prior to such determination. Without limiting the
foregoing, if a Participant is then entitled to payment of
benefits under the Plan as a result of a Change of Control that
occurred at or prior to the time of such determination, such
Participant shall remain a Participant in the Plan until the full
amount of such benefits has been paid to such Participant. In no
event shall any Participant be entitled to benefits pursuant to
this Plan with respect to a Change of Control that occurs after
the termination of such Participant's employment with the
Company, for any reason or for no reason, and nothing in this
Plan shall alter the status of each Participant as an at-will
employee of the Company.
ARTICLE 3
SEVERANCE BENEFITS
3.1 Right to Severance Benefits. If the Change of Control
is consummated while the Plan remains in effect, and a
Participant is either (i) terminated by the Company or an
Affiliate of the Company employing such Participant without Cause
or (ii) voluntarily terminates such employment with Good Reason,
such Participant shall be entitled to receive Severance Benefits
from the Company as set forth in Section 3.2; provided, however,
that the Participant's termination of employment occurs either at
the time of or not more than twenty four (24) months after a
Change of Control.
3.2 Determination of Severance Benefits. If, after a
Change of Control, any Participant has a right to receive
Severance Benefits pursuant to Section 3.1 above, Severance
Benefits shall be determined as follows:
(a) Such Participant will receive as a lump sum cash
payment the equivalent of one (1) times Base Salary and his or
her Target Bonus. Such Participant shall also receive an
additional one (1) year's age and service credit under the
Company's defined benefit pension plan and supplemental
retirement plan as if Participant had continued to perform
services for such period with the same amount of Base Salary and
Target Bonus.
(b) The Company shall pay the premiums for the
terminated Participant and for the eligible spouse and other
COBRA qualified beneficiaries of the terminated Participant for
the health insurance continuation benefits provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, ("COBRA"), and Section 4980B of the Internal Revenue
Code of 1986, as amended (the "Code"), for the maximum period
provided by law for such qualified beneficiary's COBRA
continuation rights, but in any event not to exceed one (1) year
from the date of Participant's termination of employment.
3.3 Time of Severance Payment. The portions of the
Severance Benefits payable in cash shall be paid by the Company
in lump sum in cash not later than thirty (30) days following the
Date of Termination (as defined in Section 3.7).
3.4 No Mitigation. The Participant shall not be required
to mitigate the amount of the Severance Benefits by seeking other
employment or otherwise, and any amount earned by the Participant
as the result of employment by another employer after the Date of
Termination shall not reduce the Severance Benefits.
3.5 Withholding. The Company shall withhold appropriate
federal, state, local and foreign income and employment taxes
from any payments hereunder.
3.6 Notice of Termination. Any termination by the Company
or its Affiliate for Cause or by the Company for termination of
the Plan or by the Participant for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given by hand delivery or by registered or certified mail, return
receipt requested, postage prepaid, if to the Participant, to the
Participant at the Participant's address as set forth in the
Company's records, and, if to the Company, to Consolidated
Freightways Corporation, 175 Linfield Drive, Menlo Park, CA
94025, or to such other address as may be designated by the
Company. Any notices given pursuant to this Section 3.6 shall be
effective on the earlier of the date on which such notice is
actually received by the addressee or the date that is three days
after such notice is sent by the addressor. For purposes of the
Plan, a "Notice of Termination" means a written notice which (i)
indicates the provisions in the Plan that are affected by such
termination and (ii) if the Date of Termination, as defined
below, is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure
by the Company or the Participant to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Cause or of Good Reason shall not waive any right of
the Company or of the Participant, respectively, hereunder or
preclude the Company or the Participant, respectively, from
asserting such fact or circumstance in enforcing its or his/her
rights hereunder.
3.7 Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that if
the Participant's employment is terminated by the Company or its
Affiliate other than for Cause, the Date of Termination shall be
the date on which the Company notifies the Participant of such
termination or such later date specified by the Company.
3.8 Certain Reduction of Payments. In the event that any
distribution received or to be received by a Participant pursuant
to the Plan ("Distribution") would (i) constitute a "parachute
payment" within the meaning of Section 280G of the Code and (ii)
be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then such Distribution shall be reduced to
the largest amount which would result in no portion of the
Distribution being subject to the Excise Tax or such Distribution
may be paid in full, whichever produces the better after-tax
result for the Participant. Necessary calculations will be
prepared by a mutually acceptable accounting firm, paid in full
by the Company.
As a condition of receiving benefits under this Agreement,
Participant may not directly solicit employees or full-time
consultants of the Company to leave during his/her employment
with the Company or for a period of two years from termination of
employment. Participant shall also waive any known or unknown
claim against the Company and its Affiliates, including, if
applicable, any acquiring corporation, other than those arising
under the Agreement. Participant shall sign an appropriate
release if so requested.
ARTICLE 4
PAYMENTS TO AND FROM THE PLAN
The cash benefits under the Plan shall be paid from the
general funds of the Company (by certified or official bank check
or wire transfer of immediately available funds to an account
designated by the applicable Participant), and the Participants
shall be no more than unsecured general creditors of the Company.
ARTICLE 5
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Nonexclusivity. Nothing in the Plan shall prevent or
limit any Participant's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices provided by the Company or its affiliates and for which
a Participant may otherwise qualify, nor shall anything herein
limit or otherwise affect such rights as any Participant may have
under any stock option or other agreements with the Company.
Except as otherwise expressly provided herein, amounts which are
vested benefits or which a Participant is otherwise entitled to
receive under any plan, policy, practice or program of the
Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or
program. Provided, however, Participant shall be entitled within
thirty (30) days of the Date of Termination to be paid a pro-rata
portion of Participant's Target Bonus based upon performance of
the Company and/or an Affiliate and/or as otherwise provided in
the annual bonus plan against the plan objectives.
5.2 Employment Status. The Plan does not constitute a
contract of employment or impose on any Participant, the Company
or any of the Company's affiliates any obligation to retain any
Participant as an employee, to change the status of the
Participant's employment, or to change the Company's or
affiliate's policies regarding termination of employment. In no
event shall any Participant be entitled to benefits pursuant to
this Plan with respect to a Change of Control that occurs after
the termination of such Participant's employment with the
Company, for any reason or for no reason, and nothing in this
Plan shall alter the status of each Participant as an at-will
employee of the Company.
ARTICLE 6
SUCCESSOR TO COMPANY
The Plan shall be binding upon any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or
otherwise, to all or substantially all the business or assets of
the Company and any parent company, and any such successor or
assignee and parent company, if any, shall be required to perform
the Company's obligations under the Plan, in the same manner and
to the same extent that the Company would be required to perform
if no such succession or assignment had taken place. In such
event, the term "Company," as used in the Plan, shall mean the
Company, and any successor or assignee to the business or assets
and any parent company, which by reason hereof becomes bound by
the terms of the Plan.
ARTICLE 7
AMENDMENT AND TERMINATION; ADMINISTRATIVE AUTHORITY
7.1 Amendment or Termination. The Board may amend or
terminate this Plan at any time. Notwithstanding the foregoing,
the Plan shall not terminate, expire or be adversely amended with
respect to any Participant who becomes entitled to benefits
hereunder until such Participant has received such payments or
other rights in full, nor shall the Plan be terminated or
adversely amended with respect to any Participant without the
written consent of such Participant at any time during the twenty
four (24) month period commencing with the occurrence of a Change
of Control.
7.2 Administrative Authority. The Company shall have the
responsibility and authority to establish rules, forms and
procedures for the administration of the Plan, and to construe
and interpret the Plan and to decide any and all questions of
fact, interpretation, definition, computation or administration
arising in connection with the operation of the Plan, including,
but not limited to, the eligibility to participate in the Plan
and amount of benefits paid under the Plan.
ARTICLE 8
NON-TRANSFER OF BENEFITS
No benefit hereunder shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to do so shall be void.
ARTICLE 9
LEGAL CONSTRUCTION AND ARBITRATION
9.1 Applicable Law. This Plan shall be construed in
accordance with the laws of the State of California without
regard to the conflict of laws provisions thereof.
9.2 Arbitration. Any and all disputes or controversies,
whether of law or fact of any nature whatsoever, arising from or
respecting the application of the Plan to any Participant shall
be decided by arbitration by the American Arbitration Association
in accordance with the rules and regulations of that Association,
or by any other arbitration body mutually agreed upon by the
parties. Pre-arbitration discovery shall be permitted at the
request of either party to a dispute under appropriate protection
for proprietary and confidential business information.
The arbitrators shall be selected as follows: the Company
and the Participant who is a party to the dispute shall each
select one independent, qualified arbitrator and the two
arbitrators so selected shall select the third arbitrator. The
Company reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a
competing organization. The Company will pay all of the costs of
any arbitrator hired to resolve a dispute as determined by the
American Arbitration Association.
Arbitration shall take place in San Mateo County,
California, or any other location mutually agreeable to the
parties. At the request of either party, arbitration proceedings
will be conducted in the utmost secrecy and, in such case, all
documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available
for inspection only by the parties to the arbitration, their
respective attorneys, and their respective expert consultants or
witnesses who shall agree, in advance and in writing, to receive
all such information confidentially and to maintain such
information in secrecy, and make no use of such information
except for the purposes of the arbitration, until such
information shall become generally known.
The arbitrators, who shall act by majority vote, shall be
able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary
restraining order, a temporary injunction, or a permanent
injunction, and shall also be able to award damages, with or
without an accounting and costs. The decree or judgment of an
award rendered by the arbitrators may be entered and enforced in
any court having jurisdiction over the parties.
Reasonable notice of the time and place of arbitration shall
be given to persons other than the parties, if such notice is
required by law, in which case such persons or their authorized
representatives shall have the right to attend or participate in
the arbitration hearing in such manner as the law shall require.
If any action is necessary to enforce or interpret the
application of the Plan to a Participant, then that Participant
shall be entitled to reasonable attorneys fees, costs, and
necessary disbursements in addition to any other relief to which
that Participant may be entitled, if any, under all circumstances
regardless of the outcome of the action.
ARTICLE 10
DEFINITIONS
For purposes of the Plan, the following terms shall have the
meanings set forth below.
10.1 "Base Salary" means the greater of the Participant's
base salary on the date hereof, or on the date of the Change-of-
Control. In no event may Base Salary be reduced.
10.2 "Cause" means the occurrence of any of the following:
(a) any intentional action or intentional failure to act by
Participant which was performed in bad faith and to the material
detriment of the Company; (b) Participant intentionally refuses
or intentionally fails to act in accordance with any lawful and
proper direction or order of the Board; (c) Participant willfully
and habitually neglects the duties of employment; or (d)
Participant is convicted of a felony crime involving fraud or an
act of dishonesty against the Company, provided that in the event
that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Participant describing
the nature of such event and Participant shall thereafter have
ten (10) business days to cure such event.
10.3 "Change-of-Control" means any one of the following:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
10.4 "Company" means Consolidated Freightways Corporation,
Consolidated Freightways Corporation of Delaware, and any
successor as provided in Article 6 hereof.
10.5 "Date of Termination" has the meaning set forth in
Section 3.7.
10.6 "Effective Date" shall mean December 8, 1998.
10.7 "Good Reason" means any action taken by the Company or
its successor, as the case may be, that results in a
(i) reduction of Participant's Base Salary and/or Target Bonus
opportunity as in effect immediately prior to the Effective Date
of the Plan or in effect immediately prior to the occurrence of a
Change of Control, whichever is greater, (ii) failure to provide
a package of welfare benefit plans, pension benefit plans, and
fringe benefits for employees of the Company and its Affiliates
and to other officers of the Company and its Affiliates (other
than senior executive officers) which, taken as a whole, provides
substantially similar benefits to those in which the Participant
is entitled to participate immediately prior to the Commencement
Date of this Agreement or that in effect prior to the occurrence
of a Change-of-Control, whichever is greater, or any action by
the Company which would materially adversely affect Participant's
participation or materially reduce Participant's benefits under
any of such plans, (iii) change in Participant's
responsibilities, authority, title (excluding the Corporate
Secretary title), office, or reporting relationships resulting in
diminution of position, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith which
is remedied by the Company promptly after notice thereof is given
by Participant, and excluding the reporting to the equivalent
senior level executive at the Company or the parent company of
the Company, (iv) request that Participant relocate to a worksite
that is more than 15 miles from his or her prior worksite, unless
Participant accepts such relocation opportunity, (v) material
reduction in Participant's duties (excluding the Corporate
Secretary function), (vi) failure or refusal of a successor to
the Company or a parent company to assume the Company's
obligations under this Agreement, as provided in Article 6,
(vii) material breach by the Company or any successor to the
Company of any of the material provisions of this Agreement, or
(viii) failure to provide a package of welfare benefit plans,
pension benefits, and fringe benefits for Participants made
available to employees of the Company and its Affiliates and to
other officers (other than senior executive officers) of the
Company and its Affiliates. In the event of a Change of Control
of the Company in which the Company shall become a division or
subsidiary of a larger organization, references to the
Participant's title with the Company shall be deemed to mean the
equivalent position with such division or subsidiary for purposes
of this Section 10.7, and shall not be deemed to be a Good Reason
under this Section 10.7.
10.8 "Notice of Termination" has the meaning set forth in
Section 3.6.
10.9 "Participant" shall mean an employee who has been
designated as a Participant as provided in Section 2.1, and
signed a copy of the Plan.
10.10 "Plan" has the meaning set forth in Section 1.1.
10.11 "Severance Benefits" has the meaning set forth in
Section 3.2.
10.12 "Target Bonus" shall mean the amount of the annual
cash bonus which the Participant has an opportunity to earn under
the terms of the Company's annual cash incentive bonus plan if
the Company achieves but does not exceed all of the performance
objectives designated under such incentive bonus plan, but not
less than 35% of Base Salary.
ARTICLE 11
MISCELLANEOUS
11.1 Severability. If any term, provision, covenant or
restriction of the Plan is held by a court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of the Plan shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
11.2 Construction of Plan. Any gender, where appearing in
the Plan, shall be deemed to include the other gender, the
singular shall include the plural, and the plural shall include
the singular, unless the context otherwise requires. Descriptive
headings of the several Articles of the Plan are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof. In the event of a
conflict between the text of the Plan and any summary,
description or other information regarding the Plan, the text of
the Plan shall control.
ARTICLE 12
CLAIMS, INQUIRIES AND APPEALS
12.1 Applications for Benefits and Inquiries. Any
application for benefits, inquiries about the Plan or inquiries
about present or future rights under the Plan must be submitted
to the Plan Administrator in writing. The Company, or any
successor, shall at all times maintain a Plan Administrator, and
shall give each Participant written notice of any change in the
Plan Administrator or the address to which benefits or inquiries
should be sent. The Plan Administrator is:
Consolidated Freightways Corporation
Attention: General Counsel
175 Linfield Drive
Menlo Park, CA 94025
12.2 Denial of Claims. In the event that any application
for benefits is denied in whole or in part, the Plan
Administrator must notify the applicant, in writing, of the
denial of the application. The written notice of denial will be
set forth in a manner designed to be understood by the
Participant, and will include specific reasons for the denial,
specific references to the Plan provision upon which the denial
is based and a description of any information or material that
the Plan Administrator needs to complete the review. This
written notice will be given to the employee within 20 days after
the Plan Administrator receives the application.
12.3 Legal Action. No legal action for benefits under the
Plan may be brought until the claimant (i) has submitted a
written application for benefits in accordance with the
procedures described by Section 12.1 above and (ii) has been
notified by the Plan Administrator that the application is denied
(or the application is deemed denied due to the Plan
Administrator's failure to act on it within the established time
period). The Company will reimburse Participant for all
reasonable attorney's fees and costs associated with bringing any
action to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided that the arbitrator or court
does not find the claims was brought in bad faith.
ARTICLE 13
OTHER PLAN INFORMATION
13.1 Employer and Plan Identification Numbers. The Employer
Identification Number assigned to the Company (which is the "Plan
Sponsor" as that term is used in ERISA) by the Internal Revenue
Service is 77-0425334.
13.2 Ending Date for Plan's Fiscal Year. The date of the
end of the fiscal year for the purpose of maintaining the Plan's
records is December 31.
13.3 Agent for the Service of Legal Process. The agent for
the service of legal process with respect to the Plan is:
Consolidated Freightways Corporation, 175 Linfield Drive, Menlo
Park, CA 94025, Attn: General Counsel. Service of legal process
also may be made upon the Plan Administrator.
13.4 Plan Sponsor and Administrator. The "Plan Sponsor" and
the "Plan Administrator" of the Plan is Consolidated Freightways
Corporation, 175 Linfield Drive, Menlo Park, CA 94025. The Plan
Sponsor's and Plan Administrator's telephone number is (650) 326-
1700. The Plan Administrator is the named fiduciary charged with
the responsibility for administering the Plan.
ARTICLE 14
EXECUTION
This Management Change of Control Plan is executed by a duly
authorized officer of the Company as of the 8th day of December,
1998.
Consolidated Freightways
Corporation
By:/s/Stephen D. Richards
Name: Stephen D. Richards
Title: Senior Vice President &
General Counsel
CONSOLIDATED FREIGHTWAYS CORPORATION
MANAGEMENT CHANGE-OF-CONTROL PLAN
INTRODUCTION
The Consolidated Freightways Corporation Management Change-
of-Control Plan (the "Plan") is hereby adopted by the Board of
Directors (the "Board") of Consolidated Freightways Corporation,
a Delaware corporation (the "Company"), effective as of December
8, 1998. The Plan is intended to provide members of management
who are Participants in the Plan with the benefits specified
herein in the event of a Change of Control.
Certain capitalized terms used in the Plan are defined in
Article 10.
ARTICLE 1
ESTABLISHMENT OF THE PLAN
1.1 Establishment of Plan. As of the date of this
Agreement, the Company hereby establishes a plan to be known as
the "Management Change-of-Control Plan" (the "Plan"), which shall
contain the terms and conditions set forth herein.
1.2 Applicability of Plan. The benefits provided by the
Plan shall be available to all Participants, unless otherwise
specifically provided.
ARTICLE 2
ELIGIBILITY
2.1 Participation. All corporate officers of the Company,
Consolidated Freightways Corporation of Delaware and the
President of Canadian Freightways Limited, as of the date hereof
will be Participants in the Plan. The Board of Directors or the
Compensation Committee of the Board, who have executed a copy of
this Plan, (the "Compensation Committee") may, in its sole
discretion, designate additional members of management or
employees of the Company or any other corporation or entity that
directly or indirectly controls, is controlled by, or is under
common control with the Company (an "Affiliate") to be
Participants in the Plan and, subject to the terms of
Section 2.2, may decide that members of management or employees
who have been designated as Participants in the Plan shall no
longer be Participants. Notwithstanding any of the foregoing
provisions of this Section 2.1 or elsewhere in the Plan to the
contrary, no person otherwise eligible shall be a Participant if
such person has entered into an employment agreement with the
Company or an Affiliate of the Company which expressly provides
for severance benefits in the event of the termination of such
person's employment relationship with the Company or its
Affiliate, as appropriate.
2.2 Duration of Participation. A Participant shall cease
to be a Participant in the Plan upon a determination thereof by
the Board or the Compensation Committee; provided, however, that
in no event shall any such determination impair a Participant's
rights under this Plan with respect to benefits that have accrued
at or prior to such determination. Without limiting the
foregoing, if a Participant is then entitled to payment of
benefits under the Plan as a result of a Change of Control that
occurred at or prior to the time of such determination, such
Participant shall remain a Participant in the Plan until the full
amount of such benefits has been paid to such Participant. In no
event shall any Participant be entitled to benefits pursuant to
this Plan with respect to a Change of Control that occurs after
the termination of such Participant's employment with the
Company, for any reason or for no reason, and nothing in this
Plan shall alter the status of each Participant as an at-will
employee of the Company.
ARTICLE 3
SEVERANCE BENEFITS
3.1 Right to Severance Benefits. If the Change of Control
is consummated while the Plan remains in effect, and a
Participant is either (i) terminated by the Company or an
Affiliate of the Company employing such Participant without Cause
or (ii) voluntarily terminates such employment with Good Reason,
such Participant shall be entitled to receive Severance Benefits
from the Company as set forth in Section 3.2; provided, however,
that the Participant's termination of employment occurs either at
the time of or not more than twenty four (24) months after a
Change of Control.
3.2 Determination of Severance Benefits. If, after a
Change of Control, any Participant has a right to receive
Severance Benefits pursuant to Section 3.1 above, Severance
Benefits shall be determined as follows:
(a) Such Participant will receive as a lump sum cash
payment the equivalent of one (1) times Base Salary and his or
her Target Bonus. Such Participant shall also receive an
additional one (1) year's age and service credit under the
Company's defined benefit pension plan and supplemental
retirement plan as if Participant had continued to perform
services for such period with the same amount of Base Salary and
Target Bonus.
(b) The Company shall pay the premiums for the
terminated Participant and for the eligible spouse and other
COBRA qualified beneficiaries of the terminated Participant for
the health insurance continuation benefits provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, ("COBRA"), and Section 4980B of the Internal Revenue
Code of 1986, as amended (the "Code"), for the maximum period
provided by law for such qualified beneficiary's COBRA
continuation rights, but in any event not to exceed one (1) year
from the date of Participant's termination of employment.
3.3 Time of Severance Payment. The portions of the
Severance Benefits payable in cash shall be paid by the Company
in lump sum in cash not later than thirty (30) days following the
Date of Termination (as defined in Section 3.7).
3.4 No Mitigation. The Participant shall not be required
to mitigate the amount of the Severance Benefits by seeking other
employment or otherwise, and any amount earned by the Participant
as the result of employment by another employer after the Date of
Termination shall not reduce the Severance Benefits.
3.5 Withholding. The Company shall withhold appropriate
federal, state, local and foreign income and employment taxes
from any payments hereunder.
3.6 Notice of Termination. Any termination by the Company
or its Affiliate for Cause or by the Company for termination of
the Plan or by the Participant for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given by hand delivery or by registered or certified mail, return
receipt requested, postage prepaid, if to the Participant, to the
Participant at the Participant's address as set forth in the
Company's records, and, if to the Company, to Consolidated
Freightways Corporation, 175 Linfield Drive, Menlo Park, CA
94025, or to such other address as may be designated by the
Company. Any notices given pursuant to this Section 3.6 shall be
effective on the earlier of the date on which such notice is
actually received by the addressee or the date that is three days
after such notice is sent by the addressor. For purposes of the
Plan, a "Notice of Termination" means a written notice which (i)
indicates the provisions in the Plan that are affected by such
termination and (ii) if the Date of Termination, as defined
below, is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure
by the Company or the Participant to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Cause or of Good Reason shall not waive any right of
the Company or of the Participant, respectively, hereunder or
preclude the Company or the Participant, respectively, from
asserting such fact or circumstance in enforcing its or his/her
rights hereunder.
3.7 Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that if
the Participant's employment is terminated by the Company or its
Affiliate other than for Cause, the Date of Termination shall be
the date on which the Company notifies the Participant of such
termination or such later date specified by the Company.
3.8 Certain Reduction of Payments. In the event that any
distribution received or to be received by a Participant pursuant
to the Plan ("Distribution") would (i) constitute a "parachute
payment" within the meaning of Section 280G of the Code and (ii)
be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then such Distribution shall be reduced to
the largest amount which would result in no portion of the
Distribution being subject to the Excise Tax or such Distribution
may be paid in full, whichever produces the better after-tax
result for the Participant. Necessary calculations will be
prepared by a mutually acceptable accounting firm, paid in full
by the Company.
As a condition of receiving benefits under this Agreement,
Participant may not directly solicit employees or full-time
consultants of the Company to leave during his/her employment
with the Company or for a period of two years from termination of
employment. Participant shall also waive any known or unknown
claim against the Company and its Affiliates, including, if
applicable, any acquiring corporation, other than those arising
under the Agreement. Participant shall sign an appropriate
release if so requested.
ARTICLE 4
PAYMENTS TO AND FROM THE PLAN
The cash benefits under the Plan shall be paid from the
general funds of the Company (by certified or official bank check
or wire transfer of immediately available funds to an account
designated by the applicable Participant), and the Participants
shall be no more than unsecured general creditors of the Company.
ARTICLE 5
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Nonexclusivity. Nothing in the Plan shall prevent or
limit any Participant's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices provided by the Company or its affiliates and for which
a Participant may otherwise qualify, nor shall anything herein
limit or otherwise affect such rights as any Participant may have
under any stock option or other agreements with the Company.
Except as otherwise expressly provided herein, amounts which are
vested benefits or which a Participant is otherwise entitled to
receive under any plan, policy, practice or program of the
Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or
program. Provided, however, Participant shall be entitled within
thirty (30) days of the Date of Termination to be paid a pro-rata
portion of Participant's Target Bonus based upon performance of
the Company and/or an Affiliate and/or as otherwise provided in
the annual bonus plan against the plan objectives.
5.2 Employment Status. The Plan does not constitute a
contract of employment or impose on any Participant, the Company
or any of the Company's affiliates any obligation to retain any
Participant as an employee, to change the status of the
Participant's employment, or to change the Company's or
affiliate's policies regarding termination of employment. In no
event shall any Participant be entitled to benefits pursuant to
this Plan with respect to a Change of Control that occurs after
the termination of such Participant's employment with the
Company, for any reason or for no reason, and nothing in this
Plan shall alter the status of each Participant as an at-will
employee of the Company.
ARTICLE 6
SUCCESSOR TO COMPANY
The Plan shall be binding upon any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or
otherwise, to all or substantially all the business or assets of
the Company and any parent company, and any such successor or
assignee and parent company, if any, shall be required to perform
the Company's obligations under the Plan, in the same manner and
to the same extent that the Company would be required to perform
if no such succession or assignment had taken place. In such
event, the term "Company," as used in the Plan, shall mean the
Company, and any successor or assignee to the business or assets
and any parent company, which by reason hereof becomes bound by
the terms of the Plan.
ARTICLE 7
AMENDMENT AND TERMINATION; ADMINISTRATIVE AUTHORITY
7.1 Amendment or Termination. The Board may amend or
terminate this Plan at any time. Notwithstanding the foregoing,
the Plan shall not terminate, expire or be adversely amended with
respect to any Participant who becomes entitled to benefits
hereunder until such Participant has received such payments or
other rights in full, nor shall the Plan be terminated or
adversely amended with respect to any Participant without the
written consent of such Participant at any time during the twenty
four (24) month period commencing with the occurrence of a Change
of Control.
7.2 Administrative Authority. The Company shall have the
responsibility and authority to establish rules, forms and
procedures for the administration of the Plan, and to construe
and interpret the Plan and to decide any and all questions of
fact, interpretation, definition, computation or administration
arising in connection with the operation of the Plan, including,
but not limited to, the eligibility to participate in the Plan
and amount of benefits paid under the Plan.
ARTICLE 8
NON-TRANSFER OF BENEFITS
No benefit hereunder shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to do so shall be void.
ARTICLE 9
LEGAL CONSTRUCTION AND ARBITRATION
9.1 Applicable Law. This Plan shall be construed in
accordance with the laws of the State of California without
regard to the conflict of laws provisions thereof.
9.2 Arbitration. Any and all disputes or controversies,
whether of law or fact of any nature whatsoever, arising from or
respecting the application of the Plan to any Participant shall
be decided by arbitration by the American Arbitration Association
in accordance with the rules and regulations of that Association,
or by any other arbitration body mutually agreed upon by the
parties. Pre-arbitration discovery shall be permitted at the
request of either party to a dispute under appropriate protection
for proprietary and confidential business information.
The arbitrators shall be selected as follows: the Company
and the Participant who is a party to the dispute shall each
select one independent, qualified arbitrator and the two
arbitrators so selected shall select the third arbitrator. The
Company reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a
competing organization. The Company will pay all of the costs of
any arbitrator hired to resolve a dispute as determined by the
American Arbitration Association.
Arbitration shall take place in San Mateo County,
California, or any other location mutually agreeable to the
parties. At the request of either party, arbitration proceedings
will be conducted in the utmost secrecy and, in such case, all
documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available
for inspection only by the parties to the arbitration, their
respective attorneys, and their respective expert consultants or
witnesses who shall agree, in advance and in writing, to receive
all such information confidentially and to maintain such
information in secrecy, and make no use of such information
except for the purposes of the arbitration, until such
information shall become generally known.
The arbitrators, who shall act by majority vote, shall be
able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary
restraining order, a temporary injunction, or a permanent
injunction, and shall also be able to award damages, with or
without an accounting and costs. The decree or judgment of an
award rendered by the arbitrators may be entered and enforced in
any court having jurisdiction over the parties.
Reasonable notice of the time and place of arbitration shall
be given to persons other than the parties, if such notice is
required by law, in which case such persons or their authorized
representatives shall have the right to attend or participate in
the arbitration hearing in such manner as the law shall require.
If any action is necessary to enforce or interpret the
application of the Plan to a Participant, then that Participant
shall be entitled to reasonable attorneys fees, costs, and
necessary disbursements in addition to any other relief to which
that Participant may be entitled, if any, under all circumstances
regardless of the outcome of the action.
ARTICLE 10
DEFINITIONS
For purposes of the Plan, the following terms shall have the
meanings set forth below.
10.1 "Base Salary" means the greater of the Participant's
base salary on the date hereof, or on the date of the Change-of-
Control. In no event may Base Salary be reduced.
10.2 "Cause" means the occurrence of any of the following:
(a) any intentional action or intentional failure to act by
Participant which was performed in bad faith and to the material
detriment of the Company; (b) Participant intentionally refuses
or intentionally fails to act in accordance with any lawful and
proper direction or order of the Board; (c) Participant willfully
and habitually neglects the duties of employment; or (d)
Participant is convicted of a felony crime involving fraud or an
act of dishonesty against the Company, provided that in the event
that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Participant describing
the nature of such event and Participant shall thereafter have
ten (10) business days to cure such event.
10.3 "Change-of-Control" means any one of the following:
(a) The Company is merged, or consolidated, or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior
to such transaction;
(b) The Company sells at least fifty percent (50%) of
its assets in a twelve (12) month period to any other corporation
or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities
of the acquiring or consolidated entity are held in the aggregate
by the holders of voting securities of the Company immediately
prior to such sale;
(c) There is a report filed after the date of this
Agreement on Schedule 13D or Schedule 14 D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing
that any person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) representing 25% or more of the combined voting
power of the then-outstanding voting securities of the Company;
(d) The Company shall file a report or proxy statement
with the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form or report or item therein) that the
change in control of the Company has or may have occurred or will
or may occur in the future pursuant to any then-existing contract
or transaction;
(e) During any period of two consecutive years,
individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election or the nomination
for election by the Company's shareholders of each director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the
beginning of such period (an "Incumbent Director"), and any
director so approved shall be treated as an Incumbent Director in
the future; or
(f) the liquidation or dissolution of the Company.
10.4 "Company" means Consolidated Freightways Corporation,
Consolidated Freightways Corporation of Delaware, and any
successor as provided in Article 6 hereof.
10.5 "Date of Termination" has the meaning set forth in
Section 3.7.
10.6 "Effective Date" shall mean December 8, 1998.
10.7 "Good Reason" means any action taken by the Company or
its successor, as the case may be, that results in a
(i) reduction of Participant's Base Salary and/or Target Bonus
opportunity as in effect immediately prior to the Effective Date
of the Plan or in effect immediately prior to the occurrence of a
Change of Control, whichever is greater, (ii) failure to provide
a package of welfare benefit plans, pension benefit plans, and
fringe benefits for employees of the Company and its Affiliates
and to other officers of the Company and its Affiliates (other
than senior executive officers) which, taken as a whole, provides
substantially similar benefits to those in which the Participant
is entitled to participate immediately prior to the Commencement
Date of this Agreement or that in effect prior to the occurrence
of a Change-of-Control, whichever is greater, or any action by
the Company which would materially adversely affect Participant's
participation or materially reduce Participant's benefits under
any of such plans, (iii) change in Participant's
responsibilities, authority, title (excluding the Corporate
Secretary title), office, or reporting relationships resulting in
diminution of position, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith which
is remedied by the Company promptly after notice thereof is given
by Participant, and excluding the reporting to the equivalent
senior level executive at the Company or the parent company of
the Company, (iv) request that Participant relocate to a worksite
that is more than 15 miles from his or her prior worksite, unless
Participant accepts such relocation opportunity, (v) material
reduction in Participant's duties (excluding the Corporate
Secretary function), (vi) failure or refusal of a successor to
the Company or a parent company to assume the Company's
obligations under this Agreement, as provided in Article 6,
(vii) material breach by the Company or any successor to the
Company of any of the material provisions of this Agreement, or
(viii) failure to provide a package of welfare benefit plans,
pension benefits, and fringe benefits for Participants made
available to employees of the Company and its Affiliates and to
other officers (other than senior executive officers) of the
Company and its Affiliates. In the event of a Change of Control
of the Company in which the Company shall become a division or
subsidiary of a larger organization, references to the
Participant's title with the Company shall be deemed to mean the
equivalent position with such division or subsidiary for purposes
of this Section 10.7, and shall not be deemed to be a Good Reason
under this Section 10.7.
10.8 "Notice of Termination" has the meaning set forth in
Section 3.6.
10.9 "Participant" shall mean an employee who has been
designated as a Participant as provided in Section 2.1, and
signed a copy of the Plan.
10.10 "Plan" has the meaning set forth in Section 1.1.
10.11 "Severance Benefits" has the meaning set forth in
Section 3.2.
10.12 "Target Bonus" shall mean the amount of the annual
cash bonus which the Participant has an opportunity to earn under
the terms of the Company's annual cash incentive bonus plan if
the Company achieves but does not exceed all of the performance
objectives designated under such incentive bonus plan, but not
less than 50% of Base Salary.
ARTICLE 11
MISCELLANEOUS
11.1 Severability. If any term, provision, covenant or
restriction of the Plan is held by a court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of the Plan shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
11.2 Construction of Plan. Any gender, where appearing in
the Plan, shall be deemed to include the other gender, the
singular shall include the plural, and the plural shall include
the singular, unless the context otherwise requires. Descriptive
headings of the several Articles of the Plan are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof. In the event of a
conflict between the text of the Plan and any summary,
description or other information regarding the Plan, the text of
the Plan shall control.
ARTICLE 12
CLAIMS, INQUIRIES AND APPEALS
12.1 Applications for Benefits and Inquiries. Any
application for benefits, inquiries about the Plan or inquiries
about present or future rights under the Plan must be submitted
to the Plan Administrator in writing. The Company, or any
successor, shall at all times maintain a Plan Administrator, and
shall give each Participant written notice of any change in the
Plan Administrator or the address to which benefits or inquiries
should be sent. The Plan Administrator is:
Consolidated Freightways Corporation
Attention: General Counsel
175 Linfield Drive
Menlo Park, CA 94025
12.2 Denial of Claims. In the event that any application
for benefits is denied in whole or in part, the Plan
Administrator must notify the applicant, in writing, of the
denial of the application. The written notice of denial will be
set forth in a manner designed to be understood by the
Participant, and will include specific reasons for the denial,
specific references to the Plan provision upon which the denial
is based and a description of any information or material that
the Plan Administrator needs to complete the review. This
written notice will be given to the employee within 20 days after
the Plan Administrator receives the application.
12.3 Legal Action. No legal action for benefits under the
Plan may be brought until the claimant (i) has submitted a
written application for benefits in accordance with the
procedures described by Section 12.1 above and (ii) has been
notified by the Plan Administrator that the application is denied
(or the application is deemed denied due to the Plan
Administrator's failure to act on it within the established time
period). The Company will reimburse Participant for all
reasonable attorney's fees and costs associated with bringing any
action to enforce their rights hereunder, regardless of the
outcome of such proceeding, provided that the arbitrator or court
does not find the claims was brought in bad faith.
ARTICLE 13
OTHER PLAN INFORMATION
13.1 Employer and Plan Identification Numbers. The Employer
Identification Number assigned to the Company (which is the "Plan
Sponsor" as that term is used in ERISA) by the Internal Revenue
Service is 77-0425334.
13.2 Ending Date for Plan's Fiscal Year. The date of the
end of the fiscal year for the purpose of maintaining the Plan's
records is December 31.
13.3 Agent for the Service of Legal Process. The agent for
the service of legal process with respect to the Plan is:
Consolidated Freightways Corporation, 175 Linfield Drive, Menlo
Park, CA 94025, Attn: General Counsel. Service of legal process
also may be made upon the Plan Administrator.
13.4 Plan Sponsor and Administrator. The "Plan Sponsor" and
the "Plan Administrator" of the Plan is Consolidated Freightways
Corporation, 175 Linfield Drive, Menlo Park, CA 94025. The Plan
Sponsor's and Plan Administrator's telephone number is (650) 326-
1700. The Plan Administrator is the named fiduciary charged with
the responsibility for administering the Plan.
ARTICLE 14
EXECUTION
This Management Change of Control Plan is executed by a duly
authorized officer of the Company as of the 8th day of December,
1998.
Consolidated Freightways
Corporation
By:/s/Stephen D. Richards
Name: Stephen D. Richards
Title: Senior Vice President &
General Counsel
Exhibit 13
Consolidated Freightways Corporation
and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Consolidated Freightways Corporation (the Company) improved operating
income for the second consecutive year as an independent company, earning
$52.1 million in 1998. This is a $6.8 million improvement over 1997 and a
$125.1 million improvement over the 1996 operating loss of $73.1 million.
This increase in operating income reflects the success of management's
programs to contain costs, improve freight mix and gain market acceptance
of its higher yielding premium services. The 1998 results were accomplished
despite a 2.6% reduction in revenue. The improved performance generated
cash from operations of $56.3 million and $77.4 million for 1998 and 1997,
respectively. The 1996 results were adversely impacted by a reconfiguration
of the freight flow system.
Earnings per basic share in 1998 were $1.16 compared with $0.92 in the
previous year. Both 1998 and 1997 include pre-tax non-cash charges of
$14.4 million and $14.3 million, respectively, for the issuance of common
shares to all eligible, full-time employees under the Company's restricted
stock plan. Excluding these charges, earnings per basic share were $1.55
in 1998 compared with $1.31 in 1997.
Revenues for 1998 declined 2.6% as total and less-than-truckload (LTL)
tonnage declined 8.7% and 6.6%, respectively. Yield management programs,
shippers diverting freight due to the perceived threat of a work stoppage
early in the year and the regionalization of distribution activities
contributed to the lower tonnage levels. The decline in tonnage was
partially offset by improved revenue yields. Net revenue per hundred
weight increased 6.4% over 1997 due to improved freight mix, growth of
expedited service offerings and general rate increases, and despite the
elimination of a fuel surcharge in early 1998. In 1997, revenue per
hundred weight increased 6.2% over 1996 for the same reasons. Coupled with
an LTL tonnage increase of 1.6%, 1997 revenues increased 7.1% over 1996.
Salaries, wages and benefits decreased 4.2% in 1998 compared to 1997
primarily due to lower business volumes. The 1998 expenses include a $13.0
million signing bonus paid on signature of a new five year National Master
Freight Agreement, a significant savings over historical contractual wage
increases. The 1997 salaries, wages and benefits were 0.7% higher than
1996 reflecting a $30.0 million Teamster wage and benefit increase, an
increase of $21.1 million in incentive compensation for non-contractual
employees, a $14.3 million non-cash charge related to the Company's
restricted stock plan and expenses associated with increased business
levels. The Company benefited in 1998 and 1997 from increased use of
purchased transportation and the success of workers' compensation cost
containment programs. The 1996 expenses were adversely impacted by a
reconfiguration of the freight flow system in late 1995, and include salary
and benefits for administrative services which were outsourced to the
former parent in 1997 and a $15.0 million charge to increase workers'
compensation reserves.
Operating expenses increased 1.0% in 1998, despite lower business
volumes, due primarily to expenses related to the Company's Year 2000
project and a 9.0% increase in repair and maintenance expense on the
Company's aging fleet. Operating expenses increased 5.4% in 1997 over 1996
due to charges for outsourced administrative services that were included in
salaries, wages and benefits in 1996, as discussed above, and increased
repair and maintenance expense. The Company benefited in 1998 and 1997
from lower fuel costs per gallon and a higher proportion of freight
transported via rail. Operating expenses in 1996 were adversely impacted by
a reconfiguration of the freight flow system in late 1995.
Purchased transportation increased 8.6% in 1998 over 1997 as the
Company continued to maximize use of lower cost rail services. Rail miles
as a percentage of total inter-city miles were 28.0% in 1998 compared with
27.9% in 1997. The increase also reflects a 2.2% increase in rail cost per
mile in 1998 as well as costs associated with the Company's growing
PrimeTime Service. Purchased transportation increased 6.7% in 1997 over
1996 levels as rail miles increased from 26.0% of total inter-city miles.
Operating taxes and licenses decreased 16.2% in 1998 from 1997 due to
lower business volumes, increased use of rail services and continued
reductions in property tax assessments on terminal properties. Operating
taxes and licenses in 1997 decreased 2.9% from 1996 due to increased use
of rail services and reduced property tax assessments.
Claims and insurance decreased 12.5% in 1998 due to lower business
volumes and continued improved claims experience over last year. Claims
and insurance increased 11.4% in 1997 over 1996 due to increased business
volumes.
Depreciation expense decreased 7.2% and 17.5% in 1998 and 1997,
respectively, due primarily to a higher proportion of fully depreciated
equipment. Additionally, $57.6 million of excess properties were
transferred to the former parent in December 1996.
Other expense, net decreased $3.0 million and $1.4 million in 1998 and
1997, respectively, due to increased investment income on the Company's
short-term investments. 1996 includes interest expense on borrowings from
the former parent, which is included in Miscellaneous, net in the
Statements of Consolidated Operations.
The Company's effective income tax (benefit) rates differ from the
statutory Federal rate due primarily to foreign and state taxes and non-
deductible items.
During 1999 management will continue its emphasis on higher yield
premium services including its PrimeTime Service, preventing and containing
claims costs and improving linehaul and city operations. This should
contribute to a third year of improved operating performance and help
offset contractual wage and benefit increases of approximately $14 million
and amortization of approximately $5 million related to the
replacement of certain operational and financial systems and
applications for Year 2000 compliance. While management is optimistic
about the Company's long term prospects, several issues and uncertainties
may impact 1999 results.
Declining Market Share: The Company is faced with a steady erosion of
its market share in its traditional greater than 1,500 miles length- of-
haul due to market trends such as the "regionalization" of freight due to
just in time inventory practices, distributed warehousing and other changes
in business processes. Also contributing to this decline are new longer
length-of-haul service offerings by regional and parcel carriers. To enjoy
continued growth, the Company must invest in its infrastructure to become
more competitive in shorter length-of-haul lanes and develop services
tailored to customer needs.
Price Stability: A relatively robust economy, pricing discipline
amongst competitors and reduced industry capacity has contributed to
relative price stability over the last two years. A decline in economic
growth and/or competitive action through price discounting may
significantly impact the Company's performance through a reduction in
revenue per hundredweight with minimal reduction in cost.
Cyclicality and Seasonality: The less than truckload industry is
affected by the state of the overall economy and seasonal fluctuations,
which affect the amount of freight to be transported. Freight shipments,
operating costs and earnings are also affected adversely by inclement
weather conditions. The months of September, October and November of each
year usually have the highest business levels while the first quarter has
the lowest.
As discussed in Footnote 8 in the Company's 1998 Consolidated
Financial Statements, the Company has a restricted stock plan. If
performance conditions are met, approximately 1,100,000 shares of common
stock will be issued in December 1999, and compensation expense recognized
based on the then market price of the stock. Based on the market price of
the stock on December 31, 1998, the Company would recognize a $10.4 million
non-cash charge, net of related tax benefits.
Risk Factors
The Company is subject to market risks related to changes in interest
rates and foreign currency exchange rates, primarily the Canadian dollar.
Management believes that the impact on the Company's financial position,
results of operations and cash flows from fluctuations in interest rates
and or foreign currency exchange rates would not be material. Consequently,
management does not currently use derivative instruments to manage these
risks; however, it may do so in the future.
Year 2000
Management has a formal plan in place through which it has identified
its operational and financial systems and applications requiring either
modification or replacement for Year 2000 compliance. Of these systems,
the Company's on-line equipment and freight tracking system is deemed most
critical. Based upon an assessment at December 31, 1998, testing and
modification of IT systems is approximately 55% complete while testing of
non-IT embedded systems is approximately 35% complete. 1998 expenses
related to Year 2000 modifications total $4.2 million and include payroll
and payroll related costs as well as the costs of external consultants. In
certain cases, management has opted to replace rather than modify certain
of its systems and applications. Costs associated with the replacement of
systems and applications are capitalized. As of December 31, 1998, $15.0
million has been capitalized and includes hardware, software and payroll
costs as well as costs of external consultants. Management expects to
spend an additional $22 million to convert its internal systems for Year
2000 compliance. Of this amount, it is expected that approximately $5
million will be expensed and approximately $17 million will be capitalized.
These estimates may be revised based upon the results of continued testing.
Management expects that all Year 2000 system modifications and replacements
will be funded with cash from operations.
Management has engaged outside consultants as part of the process of
assessing its Year 2000 risks. Part of that assessment includes 3rd party
compliance readiness. Management has identified and prioritized its
critical customers and key suppliers of products and services and is
currently soliciting written responses to Year 2000 readiness
questionnaires. Management will formulate contingency plans as necessary
based upon the results of those questionnaires.
Management anticipates having all of its internal systems Year 2000
compliant by mid-1999. However, failure to convert the Company's on-line
equipment and freight tracking system by the Year 2000 could result in the
inability to manage the flow of equipment and freight through the system
efficiently, but would not preclude the delivery of freight. Additionally,
failure to convert financial systems on a timely basis could result in a
return to manual processes resulting in delayed customer billings and
vendor payments. To the extent that the Company or its critical customers
and key suppliers fail to achieve Year 2000 compliance, there could be a
material adverse effect on the Company's business, results of operations
and financial position.
Liquidity and Capital Resources
As of December 31, 1998, the Company had $123.1 million in cash and
cash equivalents. Net cash flow from operations for the year ended
December 31, 1998 was $56.3 million due primarily to net income and
depreciation and amortization. Capital expenditures for the year ended
December 31, 1998 were $31.3 million compared with $22.7 million in the
prior year. Management expects capital expenditures to be approximately
$120 million for 1999, primarily for replacement revenue equipment and
upgrades to terminal properties. It is anticipated that those expenditures
will be funded with cash from operations, supplemented by financing
arrangements if necessary.
The Company entered into two operating lease agreements for 485
tractors and 27 trucks in the fourth quarter of 1998 for the replacement of
older equipment. Lease payments in 1999 will total approximately $4.5
million.
During the third quarter of 1998, the Company repurchased 1,448,174
shares of its common stock for $12.6 million. Approximately one million of
the repurchased shares were issued under the Company's restricted stock
program.
On July 2, 1998 the Company amended its secured credit facility,
reducing the total facility from $225.0 million to $150.0 million. Working
capital borrowings are limited to $100.0 million while letters of credit
are limited to $150.0 million. Borrowings under the agreement, which
expires in 2000, bear interest based upon prime or LIBOR, adjusted for a
margin dependent on the Company's financial performance. The amendment
reduced the margin and released all revenue equipment previously encumbered
under the original agreement. Borrowings and letters of credit are secured
primarily by eligible accounts receivable. The amendment further provides
for reduced letter of credit and unused line fees, and less restrictive
financial covenants. As of December 31, 1998, the Company had no short-
term borrowings and $74.6 million of letters of credit outstanding under
this facility. The continued availability of funds under this credit
facility will require that the Company comply with certain financial
covenants, the most restrictive of which limits capital expenditures. The
Company is in compliance as of December 31, 1998 and expects to be in
compliance with these covenants in 1999.
As of December 31, 1998, the Company's ratio of long-term debt to
total capital was 5.4% compared with 5.8% as of December 31, 1997. The
current ratio was 1.3 to 1 as of December 31, 1998 and 1997.
Inflation
Significant increases in fuel prices, to the extent not offset by
increases in transportation rates, would have a material adverse effect on
the profitability of the Company. Historically, the Company has responded
to periods of sharply higher fuel prices by implementing fuel surcharge
programs or base rate increases, or both, to recover additional costs.
However, there can be no assurance that the Company will be able to
successfully implement such surcharges or increases in response to
increased fuel costs in the future.
Other
On April 13, 1998, the International Brotherhood of Teamsters ratified
a new five year National Master Freight Agreement with Consolidated
Freightways Corporation of Delaware, a wholly owned subsidiary of the
Company, and three other national motor freight carriers.
The Company has received notices from the Environmental Protection
Agency and others that it has been identified as a potentially responsible
party (PRP) under the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) or other Federal and state environmental statutes at
various Superfund sites. Under CERCLA, PRP's are jointly and severally
liable for all site remediation and expenses. Based upon cost studies
performed by independent third parties, the Company believes its
obligations with respect to such sites would not have a material adverse
effect on its financial condition or results of operations.
Certain statements included or incorporated by reference herein
constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to a number of
risks and uncertainties. Any such forward-looking statements included or
incorporated by reference herein should not be relied upon as predictions
of future events. Certain such forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "pro forma," "estimates," or "anticipates" or the negative thereof
or other variations thereof or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking statements are
necessarily dependent on assumptions, data or methods that may be incorrect
or imprecise and they may be incapable of being realized. In that regard,
the following factors, among others, and in addition to matters discussed
elsewhere herein and in documents incorporated by reference herein, could
cause actual results and other matters to differ materially from those in
such forward-looking statements: changes in general business and economic
conditions; increases in domestic and international competition and pricing
pressure; increases in fuel prices; uncertainty regarding the Company's
ability to improve results of operations; labor matters, including
shortages of drivers and increases in labor costs; changes in governmental
regulation; environmental and tax matters; increases in costs associated
with the conversion of financial and operational systems and applications
for Year 2000 compliance and failure to convert all systems by the year
2000. As a result of the foregoing, no assurance can be given as to future
results of operations or financial condition.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
1998 1997
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 123,081 $ 107,721
Trade accounts receivable, net of
allowances (Note 2) 292,463 310,601
Other accounts receivable 9,195 10,300
Operating supplies, at lower of average cost
or market 7,561 8,741
Prepaid expenses 40,335 39,696
Deferred income taxes (Notes 2 and 6) 6,806 16,554
Total Current Assets 479,441 493,613
Property, Plant and Equipment, at cost (Note 2)
Land 78,218 78,227
Buildings and improvements 343,492 342,413
Revenue equipment 562,624 559,610
Other equipment and leasehold improvements 123,404 116,390
1,107,738 1,096,640
Accumulated depreciation and amortization (746,966) (713,653)
360,772 382,987
Other Assets
Deposits and other assets (Note 2) 32,199 9,468
Deferred income taxes (Notes 2 and 6) 17,978 11,728
50,177 21,196
Total Assets $ 890,390 $ 897,796
[FN]
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 84,861 $ 83,127
Accrued liabilities (Note 3) 187,528 212,644
Accrued claims costs (Note 2) 72,942 82,023
Federal and other income taxes (Note 6) 14,173 7,706
Total Current Liabilities 359,504 385,500
Long-Term Liabilities
Long-term debt (Note 4) 15,100 15,100
Accrued claims costs (Note 2) 103,574 112,173
Employee benefits (Note 7) 117,236 115,220
Other liabilities 28,258 26,356
Total Liabilities 623,672 654,349
Shareholders' Equity
Preferred stock, $.01 par value; authorized
5,000,000 shares; issued none - -
Common stock, $.01 par value; authorized
50,000,000 shares; issued 23,066,905
and 23,038,437 shares, respectively 231 230
Additional paid-in capital 77,303 71,461
Accumulated other comprehensive loss (11,565) (6,572)
Retained earnings 204,919 178,573
Treasury stock, at cost (477,686 and
18,151 shares, respectively) (4,170) (245)
Total Shareholders' Equity 266,718 243,447
Total Liabilities and Shareholders' Equity $ 890,390 $ 897,796
[FN]
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
Years Ended December 31,
(Dollars in thousands except per share data)
1998 1997 1996
<S> <C> <C> <C>
REVENUES $ 2,238,423 $ 2,299,075 $ 2,146,172
COSTS AND EXPENSES
Salaries, wages and benefits 1,445,899 1,509,665 1,498,707
Operating expenses 367,098 363,615 345,006
Purchased transportation 207,388 191,041 179,126
Operating taxes and licenses 61,090 72,882 75,083
Claims and insurance 55,804 63,741 57,214
Depreciation 49,080 52,872 64,102
2,186,359 2,253,816 2,219,238
OPERATING INCOME (LOSS) 52,064 45,259 (73,066)
OTHER INCOME (EXPENSE)
Investment income 4,957 1,894 263
Interest expense (4,012) (3,213) (843)
Miscellaneous, net (Note 11) (1,192) (1,958) (4,131)
(247) (3,277) (4,711)
Income (loss) before income taxes (benefits) 51,817 41,982 (77,777)
Income taxes (benefits) (Note 6) 25,471 21,623 (22,201)
NET INCOME (LOSS) $ 26,346 $ 20,359 $ (55,576)
Basic average shares outstanding (Note 2) 22,634,362 22,066,212 22,025,323
Diluted average shares outstanding (Note 2) 23,510,752 22,755,714 22,025,323
Basic Earnings (Loss) per Share: (Note 2) $ 1.16 $ 0.92 $ (2.52)
Diluted Earnings (Loss) per Share: (Note 2) $ 1.12 $ 0.89 $ (2.52)
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31,
(Dollars in thousands)
1998 1997 1996
<S> <C> <C> <C>
Cash and Cash Equivalents, Beginning
of Period $ 107,721 $ 48,679 $ 26,558
Cash Flows from Operating Activities
Net income (loss) 26,346 20,359 (55,576)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 50,918 54,679 64,565
Increase (decrease) in deferred income taxes (Note 6) 3,498 16,522 (35,634)
(Gains) losses from property disposals, net 94 (914) (3,089)
Issuance of common stock under restricted stock plan (Note 8) 14,449 14,297 -
Changes in assets and liabilities:
Receivables 19,243 (32,152) (34,484)
Accounts payable 1,734 (4,384) 1,199
Accrued liabilities (25,116) 25,377 4,612
Accrued claims costs (17,680) (11,784) 22,531
Income taxes 6,467 3,623 2,715
Employee benefits 2,016 1,908 7,216
Other (25,701) (10,161) 28,490
Net Cash Provided by Operating Activities 56,268 77,370 2,545
Cash Flows from Investing Activities
Capital expenditures (31,271) (22,674) (48,203)
Proceeds from sales of property 2,918 4,591 8,329
Net Cash Used by Investing Activities (28,353) (18,083) (39,874)
Cash Flows from Financing Activities
Purchase of treasury stock (12,555) (245) -
Former parent investment and advances, net (Note 11) - - 59,450
Net Cash Provided (Used) by Financing Activities (12,555) (245) 59,450
Increase in Cash and Cash Equivalents 15,360 59,042 22,121
Cash and Cash Equivalents, End of Period $ 123,081 $ 107,721 $ 48,679
Supplemental Disclosure
Cash paid for income taxes $ 15,104 $ 6,399 $ 4,099
Cash paid for interest $ 775 $ 1,389 $ 877
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Dollars in thousands)
Accumulated
Common Stock Additional Other Treasury
Number of Paid-in Comprehensive Retained Stock,
Shares Amount Capital Income (Loss) Earnings at cost Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 22,025,323 $ 220 $ 57,174 $ (5,611) $ 207,325 $ - $ 259,108
Comprehensive income (loss) (Note 2)
Net loss - - - - (55,576) - (55,576)
Foreign currency translation adjustment - - - 701 - - 701
Total comprehensive loss (54,875)
Net cash infusion from former
parent (Note 11) - - - - 59,450 - 59,450
Net asset transfers to former
parent (Note 11) - - - - (52,985) - (52,985)
Balance, December 31, 1996 22,025,323 220 57,174 (4,910) 158,214 - 210,698
Comprehensive income (loss) (Note 2)
Net income - - - - 20,359 - 20,359
Foreign currency translation adjustment - - - (1,662) - - (1,662)
Total comprehensive income 18,697
Issuance of common stock under restricted
stock plan (Note 8) 1,013,114 10 14,287 - - - 14,297
Purchase of 18,151 treasury shares - - - - - (245) (245)
Balance, December 31, 1997 23,038,437 230 71,461 (6,572) 178,573 (245) 243,447
Comprehensive income (loss) (Note 2)
Net income - - - - 26,346 - 26,346
Foreign currency translation adjustment - - - (4,993) - - (4,993)
Total comprehensive income 21,353
Purchase of 1,448,174 treasury shares - - - - - (12,555) (12,555)
Issuance of common stock under restricted
stock plan (Note 8) 28,468 1 23 - - - 24
Issuance of 988,639 treasury shares under
restricted stock plan (Note 8) - - 5,819 - - 8,630 14,449
Balance, December 31, 1998 23,066,905 $ 231 $ 77,303 $(11,565) $ 204,919 $ (4,170) $ 266,718
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Consolidated Financial Statements and Basis of Presentation: The
accompanying consolidated financial statements include the accounts of
Consolidated Freightways Corporation and its wholly owned subsidiaries (the
Company). The Company, incorporated in the state of Delaware, consists of
Consolidated Freightways Corporation of Delaware, a nationwide motor
carrier, and its Canadian operations, including Canadian Freightways, Ltd.,
Epic Express, Milne & Craighead, Canadian Sufferance Warehouses, Blackfoot
Logistics, and other related businesses; Redwood Systems, a third party
logistics provider; and the Leland James Service Corporation (LJSC), an
administrative service provider. The Company primarily provides less-than-
truckload transportation and supply chain management services throughout
the United States, Canada and Mexico, and international freight services
between the United States and more than 80 countries.
The Company was a wholly owned subsidiary of CNF Transportation Inc.
(the former parent) through December 1, 1996. On December 2, 1996, the
Company was spun-off in a tax-free distribution (the Distribution) to
shareholders. The amounts included in the accompanying consolidated
financial statements through December 1, 1996 are based upon historical
amounts included in the consolidated financial statements of the former
parent and are presented as if the Company had operated as an independent
stand-alone entity, except that it has not been allocated any portion of
the former parent's consolidated borrowings or interest expense thereon.
2. Principal Accounting Policies
Recognition of Revenues: Transportation freight charges are recognized
as revenue when freight is received for shipment. The estimated costs of
performing the total transportation services are then accrued. This
revenue recognition method does not result in a material difference from in-
transit or completed service methods of recognition.
Cash and Cash Equivalents: The Company considers highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Trade Accounts Receivable, Net: Trade accounts receivable are net of
allowances of $11,413,000 and $7,467,000 as of December 31, 1998 and 1997,
respectively.
Property, Plant and Equipment: Property, plant and equipment are
depreciated on a straight-line basis over their estimated useful lives,
which are generally 25 years for buildings and improvements, 6 to 10 years
for tractor and trailer equipment and 3 to 10 years for most other
equipment. Leasehold improvements are amortized over the shorter of the
terms of the respective leases or the useful lives of the assets.
Expenditures for equipment maintenance and repairs are charged to
operating expenses as incurred; betterments are capitalized. Gains or
losses on sales of equipment are recorded in operating expenses.
Software Costs: The Company adopted the provisions of American
Institute of Certified Public Accountants (AICPA) Statement of Position 98-
1 (SOP 98-1) "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" effective January 1, 1998. SOP 98-1
standardizes which costs related to computer software developed or obtained
for internal use are to be capitalized and those that are to be expensed as
incurred. Prior to adoption of this statement, the Company capitalized
only the costs of purchased software while costs of internally developed
software were expensed. The Company capitalized $17,574,000 of purchased
and internally developed software costs in the year ended December 31,
1998. These costs are included in Other Assets on the Consolidated
Balance Sheet and are being amortized over 5 years.
Income Taxes: The Company follows the liability method of accounting
for income taxes.
Accrued Claims Costs: The Company provides for the uninsured costs of
medical, casualty, liability, vehicular, cargo and workers' compensation
claims. Such costs are estimated each year based on historical claims and
unfiled claims relating to operations conducted through December 31. The
actual costs may vary from estimates based upon trends of losses for filed
claims and claims estimated to be incurred. The long-term portion of
accrued claims costs relates primarily to workers' compensation claims
which are payable over several years.
Translation of Foreign Currency: Local currencies are generally
considered to be the functional currencies outside the United States. The
Company translates the assets and liabilities of its foreign operations at
the exchange rate in effect at the balance sheet date. Income and expenses
are translated using the average exchange rate for the period. The
resulting translation adjustments are reflected in the Statements of
Consolidated Shareholders' Equity. Transactional gains and losses are
included in results of operations.
Interest Expense: The interest expense presented in the Statements of
Consolidated Operations is related to industrial revenue bonds, as
discussed in Note 4 "Debt", and long-term tax liabilities. The interest
expense as presented for the year ended December 31, 1996 is not
necessarily intended to reflect the expense that would have been incurred
had the Company been an independent stand-alone company prior to the
Distribution.
Earnings per Share: Basic earnings per share are calculated using only
the weighted average shares outstanding for the period. Diluted earnings
per share include the dilutive effect of the Company's restricted stock.
See Footnote 8, "Stock Compensation Plans."
The following charts reconcile basic to diluted earnings per share for
the years ended December 31, 1998, 1997 and 1996:
(Dollars in thousands except per share amounts)
Weighted Earnings
Net Income Average (Loss)
Years Ended (Loss) Shares Per Share
December 31, 1998
Basic $ 26,346 22,634,362 $ 1.16
Dilutive effect
of restricted stock -- 876,390 (0.04)
Diluted $ 26,346 23,510,752 $ 1.12
December 31, 1997
Basic $ 20,359 22,066,212 $ 0.92
Dilutive effect
of restricted stock -- 689,502 (0.03)
Diluted $ 20,359 22,755,714 $ 0.89
December 31, 1996
Basic $(55,576) 22,025,323 $(2.52)
Dilutive effect
of restricted stock -- -- --
Diluted $(55,576) 22,025,323 $(2.52)
Comprehensive Income: The Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" in 1998. Comprehensive income includes all changes
in equity during a period except those resulting from investments by and
distributions to owners. Comprehensive income (loss) for the years ended
December 31, 1998, 1997 and 1996 is presented in the Statements of
Consolidated Shareholders' Equity.
Estimates: Management makes estimates and assumptions when preparing
the financial statements in conformity with generally accepted accounting
principles. These estimates and assumptions affect the amounts reported in
the accompanying financial statements and notes thereto. Actual results
could differ from those estimates.
Recent Accounting Pronouncements: The AICPA issued Statement of
Position 98-5 "Reporting on the Costs of Start-Up Activities." This
statement requires that the costs of start-up activities and organization
costs be expensed as incurred. The statement is effective for fiscal years
beginning after December 15, 1998. Management does not expect that
adoption of this standard will have a material effect on the Company's
financial position or results of operations.
The Financial Accounting Standards Board (FASB) issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments. It requires that an organization recognize all derivatives as
either assets or liabilities on the balance sheet at fair value and
establishes the timing of recognition of the gain/loss based upon the
derivatives' intended use. This statement is effective for fiscal years
beginning after June 15, 1999. Management does not expect that adoption of
this standard will have a material effect on the Company's financial
position or results of operations.
Reclassification: Certain amounts in prior years' financial
statements have been reclassified to conform to the current year
presentation.
3. Accrued Liabilities
Accrued liabilities consisted of the following as of December 31:
1998 1997
(Dollars in thousands)
Accrued payroll and benefits $ 88,173 $101,665
Other accrued liabilities 54,184 59,378
Accrued union health and welfare 21,857 22,281
Accrued taxes other than income taxes 14,045 19,854
Accrued incentive bonus 9,269 9,466
Total accrued liabilities $187,528 $212,644
4. Debt
Long-term debt consisted of $15,100,000 of industrial revenue bonds
with rates between 5.15% and 5.25% as of December 31, 1998. Annual
maturities and sinking fund requirements of long-term debt as of December
31, 1998 are as follows: $0 in 1999; $0 in 2000; $0 in 2001; $0 in 2002;
$1,000,000 in 2003 and $14,100,000 in 2004.
During 1998 the Company amended its secured credit facility, reducing
the total facility from $225.0 million to $150.0 million. Working capital
borrowings are limited to $100.0 million while letters of credit are
limited to $150.0 million. Borrowings under the agreement, which expires
in 2000, bear interest based upon prime or LIBOR, adjusted for a margin
dependent on the Company's financial performance. The amendment reduced the
margin and released all revenue equipment previously encumbered under the
original agreement. Borrowings and letters of credit are secured primarily
by eligible accounts receivable. The amendment further provides for
reduced letter of credit and unused line fees, and less restrictive
financial covenants. As of December 31, 1998, the Company had no short-
term borrowings and $74.6 million of letters of credit outstanding under
this facility. The continued availability of funds under this credit
facility will require that the Company comply with certain financial
covenants, the most restrictive of which limits capital expenditures. The
Company is in compliance as of December 31, 1998 and expects to be in
compliance with these covenants in 1999.
Based on interest rates currently available to the Company for debt
with similar terms and maturities, the fair value of long-term debt was
equivalent to book value as of December 31, 1998. As of December 31, 1997,
the fair market value exceeded book value by 10.6%.
5. Leases
The Company is obligated under various non-cancelable leases that
expire at various dates through 2013.
Future minimum lease payments under all leases with initial or
remaining non-cancelable lease terms in excess of one year as of December
31, 1998, are $25,649,000 in 1999, $20,001,000 in 2000, $7,482,000 in 2001,
$6,121,000 in 2002, $5,006,000 in 2003, and $9,622,000 thereafter.
Rental expense for operating leases is comprised of the following:
1998 1997 1996
(Dollars in thousands)
Minimum rentals $37,953 $38,558 $47,146
Less sublease rentals (1,809) (2,102) (1,029)
Net rental expense $36,144 $36,456 $46,117
6. Income Taxes
The components of pretax income (loss) and income taxes (benefits) are
as follows:
1998 1997 1996
(Dollars in thousands)
Pretax income (loss)
U.S. corporations $ 38,115 $ 31,296 $ (86,829)
Foreign corporations 13,702 10,686 9,052
Total pretax income (loss) $ 51,817 $ 41,982 $ (77,777)
Income taxes (benefits)
Current
U.S. Federal $ 14,244 $ (296) $ 11,014
State and local 2,025 88 (2,048)
Foreign 5,704 5,309 4,467
21,973 5,101 13,433
Deferred
U.S. Federal 2,615 14,526 (35,098)
State and local 660 1,884 (536)
Foreign 223 112 -
3,498 16,522 (35,634)
Total income taxes (benefits) $ 25,471 $ 21,623 $ (22,201)
Deferred tax assets and liabilities in the Consolidated Balance Sheets
are classified based on the related asset or liability creating the
deferred tax. Deferred taxes not related to a specific asset or liability
are classified based on the estimated period of reversal. Although
realization is not assured, management believes it more likely than not
that all deferred tax assets will be realized.
The components of deferred tax assets and liabilities in the
Consolidated Balance Sheets as of December 31 relate to the following:
1998 1997
(Dollars in thousands)
Deferred taxes - current
Assets
Reserves for accrued claims costs $ 19,740 $ 23,079
Other reserves not currently deductible 7,358 4,282
Liabilities
Unearned revenue, net (8,871) (9,346)
Employee benefits (11,421) (1,461)
Total deferred taxes - current 6,806 16,554
Deferred taxes - non current
Assets
Reserves for accrued claims costs 39,865 43,675
Employee benefits 27,469 22,934
Retiree health benefits 24,016 24,054
Federal net operating loss and
credit carryovers -- 1,743
Liabilities
Depreciation (57,899) (63,937)
Tax benefits from leasing transactions (12,383) (13,875)
Other (3,090) (2,866)
Total deferred taxes - non current 17,978 11,728
Net deferred taxes $ 24,784 $ 28,282
Income taxes (benefits) varied from the amounts calculated by applying
the U.S. statutory income tax rate to the pretax income (loss) as set forth
in the following reconciliation:
1998 1997 1996
U.S. statutory tax rate 35.0% 35.0% (35.0)%
State income taxes (benefits),
net of federal income
tax benefit 3.8 4.7 (2.0)
Foreign taxes in excess of
U.S. statutory rate 2.2 4.0 1.7
Non-deductible operating
expenses 3.5 3.8 2.6
Fuel tax credits (0.4) (0.6) (0.4)
Foreign tax credits -- (0.2) 0.7
Other, net 5.1 4.8 3.9
Effective income tax rate 49.2% 51.5% (28.5)%
The cumulative undistributed earnings of the Company's foreign
subsidiaries, totaling $53.0 million as of December 31, 1998, which if
remitted may be subject to withholding tax, have been reinvested
indefinitely in the respective foreign subsidiaries' operations.
Therefore, no provision has been made for any U.S tax applicable to foreign
subsidiaries' earnings. Taxes paid to foreign jurisdictions on distributed
foreign earnings may be used, in whole or in part, as credits against the
U.S. tax. The amount of withholding tax that would be payable on remittance
of the undistributed earnings would be $2.6 million.
7. Employee Benefit Plans
The Company adopted the provisions of SFAS No. 132 "Employers'
Disclosures About Pensions and Other Postretirement Benefits" in 1998.
This standard revises employers' disclosures about pension and other
postretirement plans but does not change expense recognition or
measurement. Prior year disclosures have been restated to conform with
current year presentation.
The Company maintains a non-contributory defined benefit pension plan
(the Pension Plan) covering the Company's non-contractual employees in the
United States. The Company's annual pension provision and contributions
are based on an independent actuarial computation. The Company's funding
policy is to contribute the minimum required tax-deductible contribution
for the year. However, it may increase its contribution above the minimum
if appropriate to its tax and cash position and the Pension Plan's funded
status. Benefits under the Pension Plan are based on a career average
final five-year pay formula. Approximately 92% of the Pension Plan assets
are invested in publicly traded stocks and bonds. The remainder is
invested in temporary cash investments and real estate funds.
The following information sets forth the Company's pension liabilities
included in Employee Benefits in the Consolidated Balance Sheets as of
December 31:
(Dollars in thousands) 1998 1997
Change in Benefit Obligation
Benefit obligation at beginning of period $243,869 $213,992
Service cost 7,252 5,975
Interest cost 18,661 17,172
Benefit payments (10,424) (9,589)
Actuarial loss 17,725 13,685
Plan amendments -- 2,634
Benefit obligation at end of period $277,083 $243,869
Change in Fair Value of Plan Assets
Fair value of plan assets at
beginning of period $244,286 $213,787
Actual return on plan assets 34,536 35,853
Benefit payments (10,424) (9,589)
Transfer from former parent -- 4,235
Fair value of plan assets at end of period $268,398 $244,286
Funded Status of the Plan
Funded status at end of year $ (8,685) $ 417
Unrecognized net actuarial gain (41,738) (49,484)
Unrecognized prior service cost 6,999 8,056
Unrecognized net transition asset (5,518) (6,621)
Accrued Pension Plan Liability $(48,942) $(47,632)
1998 1997
Weighted-average assumptions as of December 31,
Discount rate 7.0% 7.5%
Expected return on plan assets 9.5% 9.5%
Rate of compensation increase 4.5% 5.0%
Net pension cost includes the following:
(Dollars in thousands) 1998 1997 1996
Components of net pension cost
Service cost $ 7,252 $ 5,975 $ 7,055
Interest cost 18,661 17,172 16,596
Expected return on plan assets (22,758) (20,196) (18,447)
Amortization of:
Transition asset (1,103) (1,104) (1,119)
Prior service cost 1,057 1,057 1,158
Actuarial gain (1,799) (2,484) (127)
Total net pension cost $ 1,310 $ 420 $ 5,116
The Company's Pension Plan includes a program to provide additional
benefits for compensation excluded from the basic Pension Plan. The annual
provision for this plan is based upon independent actuarial computations
using assumptions consistent with the Pension Plan. As of December 31,
1998 and 1997, the liability was $1,492,000 and $1,177,000. The pension
cost was $315,000, $175,000 and $429,000 for the years ended December 31,
1998, 1997 and 1996.
Approximately 82% of the Company's domestic employees are covered by
union-sponsored, collectively bargained, multi-employer pension plans. The
Company contributed and charged to expense $123,882,000 in 1998,
$126,606,000 in 1997, and $116,712,000 in 1996 for such plans. Those
contributions were made in accordance with negotiated labor contracts and
generally were based on time worked.
The Company maintains a retiree health plan that provides benefits to
non-contractual employees at least 55 years of age with 10 years or more of
service. The retiree health plan limits benefits for participants who were
not eligible to retire before January 1, 1993, to a defined dollar amount
based on age and years of service and does not provide employer-subsidized
retiree health care benefits for employees hired on or after January 1,
1993.
The following information sets forth the Company's total
postretirement benefit liabilities included in Employee Benefits in the
Consolidated Balance Sheets as of December 31:
(Dollars in thousands) 1998 1997
Change in Benefit Obligation
Benefit obligation at beginning of period $ 46,776 $ 44,401
Service cost 434 409
Interest cost 4,121 3,472
Benefit payments (3,882) (2,880)
Actuarial loss 12,434 1,374
Benefit obligation at end of period $ 59,883 $ 46,776
Change in Fair Value of Plan Assets
Fair value of plan assets at
beginning of period $ -- $ --
Company contributions 3,882 2,880
Benefit payments (3,882) (2,880)
Fair value of plan assets at
end of period $ -- $ --
Funded Status of the Plan
Funded status at end of year $ (59,883) $ (46,776)
Unrecognized net actuarial gain (5,252) (17,853)
Unrecognized prior service credit (308) (352)
Accrued Postretirement Benefit Liability $ (65,443) $ (64,981)
1998 1997
Weighted-average assumptions as of December 31,
Discount rate 7.0% 7.5%
For measurement purposes, a 5.5% annual increase in the per capita
cost of covered health care benefits was assumed for 1999. This is
assumed to be the ultimate rate.
Net post retirement cost includes the following:
(Dollars in thousands) 1998 1997 1996
Components of net benefit cost
Service cost $ 434 $ 409 $ 540
Interest cost 4,121 3,472 4,000
Amortization of:
Prior service credit (44) (43) (41)
Actuarial gain (167) (980) (62)
Total net benefit cost $ 4,344 $ 2,858 $ 4,437
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage point change
in the assumed health care cost trend rates would have the following
effects:
(Dollars in thousands)
1% 1%
Increase Decrease
Effect on total of service and interest
cost components $193 $(196)
Effect on the postretirement benefit
obligation $2,582 $(2,630)
The Company's non-contractual employees in the United States are
eligible to participate in the Company's Stock and Savings Plan. This is a
401(k) plan that allows employees to make contributions that the Company
matches with common stock up to 50% of the first three percent of a
participant's basic compensation. The Company's contribution, which is
charged as an expense, totaled $2,088,000 in 1998, $1,993,000 in 1997, and
$1,926,000 in 1996.
The Company has adopted various plans relating to the achievement of
specific goals to provide incentive bonuses for designated employees.
Total incentive bonuses earned by the participants were $24,493,000,
$25,690,000 and $4,614,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
8. Stock Compensation Plans
The Company has a Stock Option and Incentive Plan (the Plan) under
which shares of restricted stock were granted to its regular, full-time
employees. During December 1996, 2,146,450 shares were granted at a
weighted average price of $7.475 per share. In 1997, 1,057,027 shares were
granted at a weighted average price of $15.31 per share, and in 1998,
78,874 shares were granted at a weighted average price of $12.20. The
shares vest over three years from the date of the original grant and are
contingent upon the Company's stock price achieving pre-determined
increases over the grant price for 10 consecutive trading days following
each year. All restricted stock awards entitle the participant credit for
any dividends. Compensation expense is recognized based upon the current
market price and the extent to which performance criteria are being met.
As of December 1998 and December 1997, restrictions on approximately
two-thirds of the shares lapsed. Accordingly, the Company recognized
non-cash charges of $14,449,000 and $14,297,000, respectively.
The Company has approximately 1,077,000 granted but unissued shares of
restricted stock for which compensation expense will be recognized
over future vesting periods as appropriate. As of December 31, 1998,
those shares had an aggregate market value of $17,097,000. The Company
has 137,325 shares remaining reserved under the Plan.
The Plan also allows for officers, non-employee directors and certain
designated employees to be granted options to purchase common stock of the
Company. The terms of the options will be set at the date of grant. No
options have been granted as of December 31, 1998.
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." Adoption of this statement is optional, and the Company has
opted to account for stock-based compensation in accordance with APB 25,
"Accounting for Stock Issued to Employees." Had the Company adopted SFAS
No. 123, pro forma net income for the year ended December 31, 1998 would
have been $29.8 million or $1.32 per basic share and $1.27 per diluted
share. Pro forma net income for the year ended December 31, 1997 would have
been $16.6 million or $0.75 per basic share and $0.73 per diluted share.
This statement would have had an immaterial effect on the net loss for the
year ended December 31, 1996.
[9. Contingencies
This footnote has been intentionally omitted. Please refer to Part II,
Item 8 "Financial Statements and Supplementary Data" in the Company's 1998
Form 10-K for the text of this footnote.]
10. Segment and Geographic Information
The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" in 1998. This statement
requires the presentation of financial information on the same basis that
it is used within an organization to evaluate segment performance and
allocate resources. It also requires enhanced disclosures about
geographic, product and service information.
The Company operates in a single industry segment, primarily providing
less-than-truckload transportation and supply chain management services
throughout the United States, Canada and Mexico, and international freight
services between the United States and more than 80 countries. The
following information sets forth revenues and long lived assets by
geographic location. Revenues are attributed to geographic location based
upon the location of the customer. No one customer provides 10% or more
of total revenues.
Geographic Information
(Dollars in thousands)
1998 1997 1996
Long Long Long
Lived Lived Lived
Revenues Assets Revenues Assets Revenues Assets
United States $2,117,415 $332,912 $2,173,588 $359,961 $2,037,997 $392,428
Canada 121,008 27,860 125,487 23,026 108,175 24,260
Total $2,238,423 $360,772 $2,299,075 $382,987 $2,146,172 $416,688
11. Related Party Transactions
The Company is party to a Transition Services Agreement with its
former parent under which the former parent provides information systems,
data processing, computer, communications and certain administrative
services. The agreement expires December 2, 1999. The Company pays for
services on an arm's length negotiated basis. For the years ended
December 31, 1998 and 1997, the Company was charged $21,100,000 and
$22,649,000 for services under the agreement. For the period from the
Distribution date to December 31, 1996, the Company was charged $2,600,000.
As of December 31, 1998, the Company is in the process of assuming
responsibility for most administrative services and has entered into a five-
year out-sourcing agreement with a third party for information systems,
data processing, computer and communications services.
The Company is also party to an agreement with its former parent that
provides for the allocation of taxes and certain liabilities arising from
periods prior to the Distribution. See Footnote 9, "Contingencies."
As of December 31, 1998, the Company has pledged $22.0 million of real
properties and $13.5 million of letters of credit to its former parent for
uninsured workers' compensation and employer's liability claims incurred
prior to the Distribution and guaranteed by the former parent. The pledged
collateral is reduced over time as the Company's pending claims are
resolved.
The Company received certain corporate support services from the
former parent, namely accounting, finance, legal and treasury services,
prior to the Distribution. Costs were allocated to the Company using both
incremental and proportional methods on a revenue and capital basis. For
the period from January 1, 1996 to the Distribution date, the charge was
$10,600,000 and is included in Operating Expenses in the Statements of
Consolidated Operations. The Company believes that the allocation
methods used provided the Company with a reasonable share of such expenses
and approximates amounts that would have been incurred had the Company
operated on an independent, stand-alone basis.
Miscellaneous, net, in the Statement of Consolidated Operations for
the year ended December 31, 1996 includes $6,115,000 of interest expense on
advances from the former parent prior to the Distribution.
In connection with the Distribution, certain real properties, with an
aggregate net book value of $57,574,000, and net liabilities of $4,589,000
were transferred to the former parent.
Management Report on Responsibility for Financial Reporting
The management of Consolidated Freightways Corporation has
prepared the accompanying financial statements and is
responsible for their integrity. The statements were
prepared in accordance with generally accepted accounting
principles, after giving consideration to materiality, and
are based on management's best estimates and judgements.
The other financial information in the annual report is
consistent with the financial statements.
Management has established and maintains a system of
internal control. Limitations exist in any control structure
based on the recognition that the cost of such system should
not exceed the benefits derived. Management believes its
control system provides reasonable assurance as to the
integrity and reliability of the financial statements, the
protection of assets from unauthorized use or disposition,
and the prevention and detection of fraudulent financial
reporting. The system of internal control is documented by
written policies and procedures that are communicated to
employees. The Company's independent public accountants test
the adequacy and effectiveness of the internal controls.
The board of directors, through its audit committee
consisting of three independent directors, is responsible
for engaging the independent accountants and assuring that
management fulfills its responsibilities in the preparation
of the financial statements. The Company's financial
statements have been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP has
access to the audit committee without the presence of
management to discuss internal accounting controls, auditing
and financial reporting matters.
/s/W. Roger Curry
W. Roger Curry
President and Chief Executive Officer
/s/David F. Morrison
David F. Morrison
Executive Vice President and
Chief Executive Officer
/s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Consolidated Freightways Corporation:
We have audited the accompanying consolidated balance sheets of
Consolidated Freightways Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1998 and 1997, and the related
statements of consolidated operations, cash flows and shareholders'
equity for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Consolidated Freightways Corporation and subsidiaries as of
December 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting
principles.
As explained in Note 2 to the consolidated financial statements,
effective January 1, 1998, the Company changed its method of
accounting for the costs of internal use software to reflect adoption
of American Institute of Certified Public Accountants Statement of
Position No 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."
/s/Arthur Andersen LLP
Portland, Oregon,
January 25, 1999
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
Quarterly Financial Data
(Unaudited)
(Dollars in thousands except per share data)
March 31 June 30 September 30 December 31
<C> <C> <C> <C>
1998 - Quarter Ended
Revenues $545,648 $551,841 $571,231 $569,703
Operating income 14,800 15,506 17,397 4,361 (a)
Income before income taxes 14,319 15,557 17,566 4,375
Income taxes 7,302 8,084 8,335 1,750
Net income 7,017 7,473 9,231 2,625
Basic earnings per share 0.30 0.32 0.41 0.12
Diluted earnings per share 0.29 0.31 0.41 0.11
Market price range $13.00-$18.50 $12.875-$19.75 $7.625-$14.00 $7.50-$18.375
March 31 June 30 September 30 December 31
1997 - Quarter Ended
Revenues $545,633 $578,623 $603,253 $571,566
Operating income (loss) 8,537 16,676 24,340 (4,294)(b)
Income (loss) before income
taxes (benefits) 7,999 15,331 23,383 (4,731)
Income taxes (benefits) 4,745 8,413 11,600 (3,135)
Net income (loss) 3,254 6,918 11,783 (1,596)
Basic earnings (loss) per share 0.15 0.31 0.53 (0.07)
Diluted earnings (loss) per share 0.15 0.31 0.51 (0.07)
Market price range $7.00-$12.25 $10.00-$16.813 $13.75-$18.50 $11.875-$18.438
<FN>
(a) Includes $14.4 million non-cash charge for the issuance of common stock under the Company's
restricted stock plan.
(b) Includes $14.3 million non-cash charge for the issuance of common stock under the Company's
restricted stock plan.
</TABLE>
<TABLE>
<CAPTION>
Five Year Financial Summary
Consolidated Freightways Corporation
And Subsidiaries
Years Ended December 31,
(Dollars in thousands except per share data)
(Unaudited)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues $ 2,238,423 $ 2,299,075 $ 2,146,172 $ 2,106,529 $ 1,936,412
Operating income (loss) 52,064(a) 45,259(b) (73,066)(c) (42,786)(d) (47,743)
Depreciation and amortization 50,918 54,679 64,565 63,902 73,443
Investment income 4,957 1,894 263 756 497
Interest expense 4,012 3,213 843 918 880
Income (loss) before income taxes (benefits) 51,817 41,982 (77,777) (43,798) (44,478)
Income taxes (benefits) 25,471 21,623 (22,201) (13,889) (14,274)
Net income (loss) 26,346 20,359 (55,576) (29,909) (32,116)
Cash from operations 56,268 77,370 2,545 41,772 33,739
PER SHARE
Basic earnings (loss) 1.16 0.92 (2.52) (1.36) (1.46)
Diluted earnings (loss) 1.12 0.89 (2.52) (1.36) (1.46)
Shareholders' equity 11.81 10.58 9.57 11.76 9.70
FINANCIAL POSITION
Cash and cash equivalents 123,081 107,721 48,679 26,558 23,116
Property, plant and equipment, net 360,772 382,987 416,688 501,311 452,878
Total assets 890,390 897,796 857,087 866,698 852,510
Capital expenditures 31,271 22,674 48,203 111,962 32,120
Long-term debt 15,100 15,100 15,100 15,100 15,100
Shareholders' equity 266,718 243,447 210,698 259,108 213,579
RATIOS AND STATISTICS
Current ratio 1.3 to 1 1.3 to 1 1.1 to 1 1.0 to 1 1.1 to 1
Net income (loss) as % of revenues 1.2% 0.9% (2.6)% (1.4)% (1.7)%
Effective income tax rate 49.2% 51.5% (28.5)% (31.7)% (32.1)%
Long-term debt as % of
total capitalization 5.4% 5.8% 6.7% 5.5% 6.6%
Return on average invested capital 26.2% 24.9% (27.8)% (17.1)% (17.1)%
Return on average shareholders' equity 13.9% 12.9% (21.2)% (12.7)% (13.4)%
Average shares outstanding 22,634,362 22,066,212 22,025,323 22,025,323 22,025,323
Market price range $7.50-$19.75 $7.00-$18.50 $6.00-$9.125 n/a n/a
Number of shareholders 34,350 31,650 13,500 n/a n/a
Number of employees 21,000 21,600 20,300 20,200 22,000
<FN>
(a) Includes $14.4 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(b) Includes $14.3 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(c) Includes $15.0 million non-cash charge for the increase in workers' compensation reserve.
(d) Includes approximately $26 million of costs related to implementation of the Business Accelerator System.
</TABLE>
Exhibit 21
CONSOLIDATED FREIGHTWAYS CORPORATION
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
December 31, 1998
The Company and its significant subsidiaries were:
State or
Percent of Province or
Stock Owned Country of
Parent and Significant Subsidiaries by Company Incorporation
Consolidated Freightways Corporation Delaware
Significant Subsidiaries of Consolidated
Freightways Corporation
Consolidated Freightways
Corporation of Delaware 100 Delaware
Canadian Freightways, Limited 100 Alberta,Canada
Milne & Craighead Customs Brokers
(Canada) Ltd. 100 Canada
Canadian Freightways Eastern Limited 100 Ontario, Canada
United Terminals Ltd. 100 Canada
Blackfoot Logistics 100 British Columbia
Consolidadora De Fletes Mexico 100 Mexico
Leland James Service Corporation 100 Delaware
Redwood Systems, Inc. 100 Delaware
Redwood Systems Logistics de Mexico 100 Mexico
Redwood Systems Services de Mexico 100 Mexico
Transportes CF Alfri-Loder, S. de R.L. de C.V. 49 Mexico
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 123,081
<SECURITIES> 0
<RECEIVABLES> 313,071
<ALLOWANCES> (11,413)
<INVENTORY> 7,561
<CURRENT-ASSETS> 479,441
<PP&E> 1,107,738
<DEPRECIATION> (746,966)
<TOTAL-ASSETS> 890,390
<CURRENT-LIABILITIES> 359,504
<BONDS> 15,100
0
0
<COMMON> 77,534
<OTHER-SE> 189,184
<TOTAL-LIABILITY-AND-EQUITY> 890,390
<SALES> 0
<TOTAL-REVENUES> 2,238,423
<CGS> 0
<TOTAL-COSTS> 2,186,359
<OTHER-EXPENSES> 247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,012
<INCOME-PRETAX> 51,817
<INCOME-TAX> 25,471
<INCOME-CONTINUING> 26,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,346
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.12
</TABLE>
