<PAGE> 1
[USFREIGHTWAYS CORPORATION LOGO]
USFREIGHTWAYS CORPORATION
9700 HIGGINS ROAD, SUITE 570
ROSEMONT, ILLINOIS 60018
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 2, 1997
To the Stockholders of USFreightways Corporation:
The Annual Meeting of Stockholders of USFreightways Corporation, a Delaware
corporation (the "Company"), will be held in the Streeter Room at The Westin
Hotel O'Hare located at 6100 River Road, Rosemont, Illinois 60018, on May 2,
1997 at 10:00 A.M. for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect two directors to serve a term of 3 years or until their
respective successors are elected and qualified;
2. To approve amendments to the Stock Option Plan for Non-Employee
Directors;
3. To approve the USFreightways Corporation Long-Term Incentive Plan;
and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record of the Company's Common Stock, par value $0.01 per
share, at the close of business on March 11, 1997, the record date fixed by the
Board of Directors, are entitled to notice of, and to vote at, the meeting, as
more fully described in the Proxy Statement.
The Company's Annual Report to Stockholders is being mailed concurrently
with this Notice and Proxy Statement to all stockholders of record. The
Company's Annual Report on Form 10-K for the fiscal year ended December 28,
1996, as filed with the Securities and Exchange Commission, may be obtained by
any stockholder upon written request to the Secretary of the Company at the
address set forth above.
All stockholders are cordially invited to attend the meeting. Those who
cannot attend are urged to sign, date and otherwise complete the enclosed proxy
and return it promptly in the envelope provided. Any stockholder giving a proxy
has the right to revoke it at any time before it is voted.
By order of the Board of Directors
RICHARD C. PAGANO
Secretary
Rosemont, Illinois
March 24, 1997
<PAGE> 2
---------------------
THIS PAGE
INTENTIONALLY
LEFT BLANK
---------------------
<PAGE> 3
USFREIGHTWAYS CORPORATION
9700 HIGGINS ROAD, SUITE 570
ROSEMONT, ILLINOIS 60018
PROXY STATEMENT
-------------------------
Approximate date proxy material
first sent to stockholders:
March 24, 1997
-------------------------
The following information is provided in connection with the solicitation
of proxies for the Annual Meeting of Stockholders of USFreightways Corporation,
a Delaware corporation (the "Company"), to be held on May 2, 1997, and
adjournments thereof (the "Meeting"), for the purposes stated in the Notice of
Annual Meeting of Stockholders preceding this Proxy Statement.
GENERAL INFORMATION
SOLICITATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
stockholder and, in each case, such proxy is solicited on behalf of the Board of
Directors of the Company for use at the Meeting. The entire cost of soliciting
these proxies will be borne by the Company. Solicitation will be made by mail,
and may also be made by telephone, telegraph or facsimile transmission by
directors, officers and regular employees of the Company, but these persons will
not be separately compensated for such solicitation services. The Company may
pay persons holding shares in their names or the names of their nominees for the
benefit of others, such as brokerage firms, banks, depositories and other
fiduciaries, for costs incurred in forwarding proxy solicitation material to
their principals.
AUTHORITY CONFERRED BY PROXIES
Each proxy duly executed and returned by stockholders and received by the
Company before the Meeting will be voted (1) FOR the election of each of the two
nominee directors specified herein, (2) FOR approval of amendments to the Stock
Option Plan for Non-Employee Directors and (3) FOR approval of the USFreightways
Corporation Long-Term Incentive Plan, unless a contrary choice is specified in
the proxy. Where a contrary specification is indicated as provided in the proxy,
the shares represented by the proxy will be voted in accordance with the
specification made. As to other matters, if any, to be voted upon at the
Meeting, the persons designated as proxies in the accompanying form of proxy
will take such action as they, in their discretion, may deem advisable. The
persons named as proxies were selected by the Board of Directors and each of
them is a director or an officer of the Company.
REVOCABILITY OF PROXIES
Execution of the enclosed proxy will not affect your right as a stockholder
to attend the Meeting and to vote in person. Any stockholder giving a proxy has
the right to revoke it at any time by: (i) a later dated proxy, duly executed
and delivered or presented at the Meeting; (ii) a written revocation sent to and
received by the Secretary of the Company prior to the Meeting; or (iii)
attendance at the Meeting and voting in person.
VOTING SECURITIES AND RECORD DATE
The Company's voting securities currently issued and outstanding consist of
one class of Common Stock, par value $0.01 per share (the "Common Stock"). The
Company has outstanding 25,757,912 shares of Common Stock as of the close of
business on March 11, 1997 (the "Record Date"). Only stockholders of record on
the books of the Company at the close of business on the Record Date will be
entitled to vote at the
1
<PAGE> 4
Meeting. Each share of Common Stock is entitled to one vote. Representation at
the Meeting by the holders of a majority of the shares of Common Stock
outstanding on the Record Date, either by personal attendance or by proxy, will
constitute a quorum. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information as of December 31, 1996, with
respect to the beneficial ownership of the Company's outstanding Common Stock by
each stockholder known to the best of the Company's knowledge and belief to be
the beneficial owner of more than 5% of its Common Stock, each director, nominee
and named executive officer and all the directors and named executive officers
as a group. Except as otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to shares beneficially owned
by them.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ------------ ----------
<S> <C> <C>
Fidelity Management & Research Company
82 Devonshire Street
Boston, MA 02109.......................................... 3,212,300 14.3
Neuberger & Berman
605 Third Avenue
New York, NY 10158........................................ 1,993,400 9.1
The Capital Group Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071..................................... 1,545,000 6.9
Vinik Partners, L. P., Vinik Overseas Fund, Ltd., and
a discretionary account managed by Vinik Asset Management,
L. P
260 Franklin Street
Boston, MA 02110.......................................... 1,334,600 5.9
J. Campbell Carruth......................................... 127,454(2,3,4) *
Robert V. Delaney........................................... 7,300 *
Morley Koffman.............................................. 18,050 *
Robert P. Neuschel.......................................... 11,300(5) *
John W. Puth................................................ 8,300 *
Neil A. Springer............................................ 9,300 *
William N. Weaver, Jr....................................... 4,000 *
Christopher L. Ellis........................................ 58,083(2,3,4,5) *
All directors and executive officers as a group (8
persons).................................................. 243,787 1.1
</TABLE>
- - ------------
* Less than 1%.
(1) Includes options to acquire the following shares which could be exercisable
within 60 days of December 31, 1996 as follows: Mr. Carruth, 100,000 shares;
Mr. Delaney, 6,800 shares; Mr. Koffman, 6,800 shares; Mr. Puth, 6,800
shares; Mr. Neuschel, 6,800 shares; Mr. Springer, 6,800 shares; Mr. Weaver,
2,000 and Mr. Ellis, 49,500 shares.
(2) Includes shares held by the trustee of the USF Employees' 401K Retirement
Plan for the benefit of each individual as follows: Mr. Carruth, 490 shares
and Mr. Ellis, 589 shares.
2
<PAGE> 5
(3) Includes shares held by the agent of the USF Employees' Stock Purchase Plan
as follows: Mr. Carruth, 4,731 shares and Mr. Ellis, 3,043 shares.
(4) Includes 500 restricted shares for Mr. Ellis.
(5) Includes 150 and 500 shares owned by the spouses of Mr. Ellis and Mr.
Neuschel, respectively.
ELECTION OF DIRECTORS
The Company has adopted By-Laws that provide that the Board of Directors
shall consist of not less than three and not more than twenty-one directors,
with the exact number to be determined from time to time by the Board of
Directors, and that the Board of Directors shall be divided into three classes,
equal in number to the extent possible, and, if not all classes can be equal in
number, that the Board of Directors shall decide which class is to have the
unequal number.
The Board of Directors has set the current number of directors at seven,
divided, as required by the By-Laws, into three classes with each class serving
a three year term.
Unless authority to do so is withheld as provided in the proxy, the proxies
solicited by and on behalf of the Board of Directors will be voted FOR the
election of Messrs. Robert V. Delaney and Robert P. Neuschel to serve a three
year term, both of whom have been nominated by the Board of Directors to fill
the position of those directors whose term expires as of the fifth annual
meeting of the Company. If for any reason one or both of the nominees should be
unable to serve or refuse to serve as a director (an event which is not
anticipated), the persons named as proxies will vote for another candidate or
candidates nominated by the Board of Directors, and discretionary authority to
cast such votes is included in the proxy. The nominees receiving the highest
number of votes of shares of Common Stock, up to the number of directors to be
elected, shall be elected.
NOMINEES AND OTHER MEMBERS OF THE BOARD
The Board of Directors has nominated for election the following two
individuals to serve a three year term:
ROBERT V. DELANEY, age 61, has been a director of the Company since
December of 1991. Mr. Delaney has been an Executive Vice President of Cass
Information Systems since January of 1990.
ROBERT P. NEUSCHEL, age 78, has been a director of the Company since
December of 1991. Since 1978, Professor Neuschel has been Professor of
Management at the J. L. Kellogg Graduate School of Management, where he is
currently Professor of Corporate Governance and was Associate Dean from 1992
until 1996 for Advisory Board Relations. From 1978 to December of 1991, he was
Managing Director of the Transportation Center at Northwestern University.
The Company's other directors, each of whom the Company expects to continue
to serve as a director following the Meeting, are as follows:
Class of 1998
J. CAMPBELL CARRUTH, age 66, was appointed as the Company's Chief Executive
Officer and President in June of 1991 and has been a director of the Company
since December of 1991. Mr. Carruth was Chief Executive Officer and President of
TNT Transport Group Inc., a subsidiary of TNT Limited, the Company's former
parent corporation, from 1985 to 1992.
NEIL A. SPRINGER, age 58, has been a director of the Company since December
of 1991. He has been Managing Director of Springer Souder & Associates since
June 1994. He was Senior Vice President of Slayton International Inc. from
September 1992 to May 1994. He was President-Central Region of Alexander
Proudfoot Company from August 1991 to August 1992. Mr. Springer is a director of
Idex Corporation and Dorsey Trailers, Inc.
3
<PAGE> 6
WILLIAM N. WEAVER, JR., age 62, has been the Company's Assistant Secretary
since March 1992. Mr. Weaver is a member of the law firm of Sachnoff & Weaver,
Ltd., an Illinois professional corporation, which is outside counsel to the
Company. Mr. Weaver has practiced law in the State of Illinois since 1964 and
serves as a director of System Software Associates, Inc. as well as several
privately-held corporations. He holds an A. B. degree from Oberlin College and a
J. D. from John Marshall Law School.
Class of 1999
MORLEY KOFFMAN, age 67, has been a director of the Company since December
of 1991. He was elected Chairman of the Board in January of 1992. Mr. Koffman
was a member of the law firm of Freeman & Company of Vancouver, British Columbia
until March 31, 1993. Effective April 1, 1993, he became a member of Koffman
Birnie & Kalef. Mr. Koffman is a director of Ainsworth Lumber Co. Ltd., Nevis
Ltd. and Westar Group Ltd.
JOHN W. PUTH, age 68, has been a director of the Company since January of
1992. Mr. Puth has been President of J. W. Puth Associates since December of
1987, and Chairman of VJ Growers since 1996. Mr. Puth is a director of A. M.
Castle & Co., Allied Products Co., Brockway Standard Holdings Corporation, L. B.
Foster Inc., Lindberg Corporation, System Software Associates, Inc. and several
private manufacturing companies.
COMMITTEES AND ATTENDANCE
The Board of Directors met five times during fiscal year 1996. The Audit
Committee, currently consisting of directors Neil A. Springer (Chairman), Morley
Koffman, Robert V. Delaney, and Robert P. Neuschel met once during fiscal 1996.
The Audit Committee oversees the activities of the Company's independent
auditors. The Compensation Committee, currently consisting of directors John W.
Puth (Chairman), Morley Koffman, William N. Weaver, Jr. and Robert P. Neuschel
met once during fiscal 1996. The Compensation Committee reviews and makes
recommendations to the Board of Directors with regard to the salaries, incentive
compensation and related benefits of corporate officers and other employees and
also administers the Company's employee stock option plan.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid for his
services as a director $20,000 per annum, plus $1,000 for each meeting of the
Board of Directors he attends. The chairman of the Audit Committee and the
chairman of the Compensation Committee receive an additional annual payment of
$3,500 and $2,500, respectively. Members of the Audit Committee (other than Mr.
Koffman) are paid $1,000 for each meeting they attend if the meeting is not held
on the same day as a meeting of the Board of Directors. Members of the
Compensation Committee (other than Mr. Koffman) are paid $750 for each meeting
they attend if the meeting is not held on the same day as a meeting of the Board
of Directors. Members of the committees who attend committee meetings that are
held on the same day as meetings of the Board of Directors receive a $250
payment for each such meeting they attend. Directors who are employees of the
Company are not separately compensated for their services as a director. For his
services as Chairman of the Board of Directors, Mr. Koffman was paid (in
addition to the $20,000 annual payment set forth above) $30,000 in 1996.
4
<PAGE> 7
MANAGEMENT COMPENSATION
The following table discloses the compensation awarded by the Company for
services rendered during the Company's last three fiscal years to the chief
executive officer and to the other named executive officer as of the end of
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------- -----------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL STOCK OPTIONS ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(1) AWARDS($) (#) COMPENSATION ($)
------------------ ---- ---------- ------------ ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Campbell Carruth.................... 1996 600,000 300,000 0 100,000 5,250(3)
President and Chief 1995 600,000 0 0 0 5,250(3)
Executive Officer 1994 575,000 200,000 0 0 5,310(3)
Christopher L. Ellis................... 1996 260,000 62,400 48,000(2) 12,500 39,953(4)
Senior Vice President, 1995 260,000 62,400 0 0 39,710(4)
Finance and Chief 1994 250,000 97,000 22,500(2) 0 39,968(4)
Financial Officer
</TABLE>
- - ---------------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(2) The shares represented by the restricted stock award are subject to a
forfeiture restriction if Mr. Ellis terminates employment with the Company.
This restriction lapses with respect to 25% of the shares on each of the
first four anniversary dates of the award. Dividends are paid on all
restricted shares to the same extent as any other shares of the Company's
common stock. The number of restricted shares for Mr. Ellis held at the end
of fiscal year 1996 was 500 and the value of such shares at the end of the
last fiscal year was $13,500. Mr. Ellis also received a restricted stock
award on February 6, 1997 for 1996 performance.
(3) Consists in all three years of an employer contribution to Mr. Carruth's
401(k) plan maintained by the Company.
(4) Consists in all three years of an employer contribution to Mr. Ellis' 401(k)
plan maintained by the Company and the Company's payment of $34,720 each
year in split-dollar life insurance premiums on Mr. Ellis' behalf.
EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with Mr. Ellis. Under
the agreement, in the event that Mr. Ellis' employment is terminated by the
Company for any reason other than death, disability, retirement or cause, Mr.
Ellis is entitled to either two years notice or, if the Company wishes to
terminate his employment without such notice, to be paid his then prevailing
salary for a two year period following the termination of his employment.
5
<PAGE> 8
OPTION GRANTS FOR FISCAL 1996
The following table provides further information on individual stock option
grants made for fiscal 1996 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SHARES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#) FISCAL 1996 ($/SH.) DATE 5% ($) 10% ($)
---- ---------- ------------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Campbell Carruth................ 50,000(2) 13.2 18.25 1/28/06 573,871 1,454,290
50,000(3) 13.2 24.00 2/5/07 754,680 1,912,490
Christopher L. Ellis............... 12,500(3) 3.3 19.625 7/17/06 154,277 390,965
</TABLE>
- - ---------------
(1) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the
compounded rates specified over the term of the options. These numbers do
not take into account provisions of certain options providing for
termination of the option following termination of employment or
nontransferability of the options and do not make any provision for taxes
associated with exercise. Because actual gains will depend, among other
things, on future performance of the Common Stock, the amount reflected in
this table may not necessarily be achieved.
(2) Options are at the market price on the grant date and vest 50% per year over
2 years.
(3) Options are at the market price on the grant date and vest 20% per year over
5 years.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND DECEMBER 28, 1996 OPTION VALUES
The following table provides information on the value of the named
executive officers' unexercised stock options as of December 28, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE DECEMBER 28, 1996 (#) DECEMBER 28, 1996 ($)(2, 3)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Campbell Carruth.............. 0 0 75,000 50,000 900,000 437,500
Christopher L. Ellis............. 0 0 39,000 26,000 528,000 269,188
</TABLE>
- - ---------------
(1) None of the named executive officers of the Company exercised any of their
options during the fiscal year of 1996.
(2) Assumes a stock price of $27 per share, the closing price of the common
stock reported on NASDAQ on December 27, 1996.
(3) This table excludes stock options granted to Mr. Carruth on February 6, 1997
which were out-of-the money on December 28, 1996.
6
<PAGE> 9
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company monitors salaries paid to comparably situated senior management
at its competitors and sets salaries for its executive officers accordingly.
These competitors include the nine publicly traded less-than-truckload (LTL)
trucking companies included in the "Peer Group" used for the stock performance
graph below (see page 8) as well as others. Base salaries are set to ensure that
the Company is competitively positioned to retain and attract outstanding senior
management. Based on available information, the Company believes that total
executive compensation is near or slightly above the median of these
competitors' total compensation.
Compensation of Executive Officers Generally
In general, the Company sets initial base salaries for its executive
officers in light of this competitive analysis to ensure that the Company is
competitively positioned to retain and attract outstanding senior management.
Subsequent raises in base salary are determined in light of experience,
individual job performance and the Company's overall performance.
Senior managers, including the executive officers, also are eligible for an
annual bonus. Executive officers of the Company, other than Mr. Carruth, are
eligible for a bonus depending on the Company's profit margins as well as to the
extent to which they achieve individualized goals tied to their specific areas
of responsibility. The bonus is capped at 50% of base salary. The Company
operates through a number of distinct operating subsidiaries, each of which
serves a specific region of the United States. The bonus plan for the chief
executive officer of each subsidiary is set at a percentage of the subsidiary's
pre-tax profit (subject to adjustment for certain items unrelated to on-going
operations) and is capped at 100% of base salary.
To encourage management to maximize stockholder value over the long term,
the Company grants to selected senior managers an equity interest in the Company
in the form of restricted stock awards or stock options granted pursuant to its
stock option plan. The options are granted with an exercise price equal to the
market price at the time of grant, and become exercisable generally in stages
over a five year period. The restricted stock awards vest as to 25% of the
shares on each anniversary date of the award. Both the stock options and
restricted stock awards provide senior managers with an incentive to remain with
the Company over a substantial period of time and closely ally the long term
interests of management with those of the stockholders.
Compensation of the Chief Executive Officer
Mr. Carruth's salary for 1996 included in the Summary Compensation Table
was set by the Compensation Committee and memorialized in a summary memo. The
Compensation Committee recommended that Mr. Carruth, as Chief Executive Officer,
be awarded a bonus of $300,000 for 1996. The Committee's principal reason for
doing so was financial performance in 1996 which was strong compared to the
Company's peer group despite severe industry competitive pricing and a slow
economy for the first half of 1996.
The Compensation Committee endorses the position that stock ownership by
management and stock-based performance compensation arrangements are beneficial
in aligning management's and shareholders' interest in enhancing shareholder
value. In determining the size of Mr. Carruth's stock option grant in 1996, the
Committee considered Mr. Carruth's base compensation and lack of bonus for
fiscal year 1995, the fact that Mr. Carruth had not been granted stock options
since 1993, and the stock and option holdings of chief executive officers of the
Company's competitors. In determining the size of Mr. Carruth's stock option
grant in 1997, the Committee considered the Company's financial performance in
1996 which was strong compared to the Company's peer group despite severe
industry competitive pricing and a slow economy for the first half of 1996 and
Mr. Carruth's outstanding leadership. It is the Committee's view that Mr.
Carruth's total 1996 compensation package was based on an appropriate balance of
(1) the Company's performance in 1996, (2) his own performance level and (3)
increases in the market value of the Company's common stock in 1996.
Changes made to the Internal Revenue Code in 1993 limit the Company's
ability to deduct, for federal income tax purposes, certain compensation in
excess of $1 million per year paid to individuals named in the Summary
Compensation Table. This limitation was effective beginning in 1994. Based on
its review of the facts and circumstances, the Committee believes that the
limitation will have no effect on the Company in
7
<PAGE> 10
1997. Although the Committee will periodically review the advisability of making
changes in compensation plans to reflect government mandated policies, it will
not do so unless it feels that such changes are in the best interests of the
Company or its stockholders.
COMPENSATION COMMITTEE
John W. Puth, Chairman
Morley Koffman
Robert P. Neuschel
William N. Weaver, Jr.
COMPARISON OF TOTAL CUMULATIVE SHAREHOLDER RETURNS
The following graph compares the cumulative total stockholder return on the
Company's Common Stock since February 12, 1992, the day on which the Company's
Common Stock was first publicly traded, with the cumulative total return of The
NASDAQ Stock Market and an index prepared for the Company of the stock price
performance on a cumulative total return basis of 9 less-than-truckload general
commodities motor carriers whose stock is currently publicly traded (the "Peer
Group Index"). The graph assumes that $100 was invested on February 12, 1992 in
the Company's common stock, the stock of the companies comprising The NASDAQ
Stock Market and the Peer Group companies (allocated among the Peer Group
companies pro rata according to their relative market capitalizations). Note:
The Company's stock price performance shown below is not necessarily indicative
of future price performance.
COMPARISON FOR THE PERIOD FEBRUARY 12, 1992 THROUGH DECEMBER 31, 1996 OF THE
CUMULATIVE TOTAL RETURNS OF USFREIGHTWAYS CORPORATION COMMON STOCK, THE
NASDAQ STOCK MARKET, AND THE "PEER GROUP" INDEX.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD USFREIGHTWAYS NASDAQ INDEX PEER GROUP
(FISCAL YEAR COVERED) INDEX
<S> <C> <C> <C>
02/13/92 100.000 100.000 100.000
02/28/92 100.000 99.122 101.473
03/31/92 93.750 94.444 100.111
04/30/92 92.500 90.394 105.367
05/29/92 87.500 91.568 102.617
06/30/92 76.939 87.988 89.363
07/31/92 95.858 91.105 87.008
08/31/92 86.398 88.320 85.316
09/30/92 83.941 91.603 88.859
10/30/92 97.931 95.211 96.835
11/30/92 104.290 102.786 103.127
12/31/92 107.591 106.570 101.287
01/29/93 116.557 109.604 104.568
02/26/93 102.468 105.515 103.361
03/31/93 128.212 108.569 96.062
04/30/93 126.279 103.935 91.171
05/28/93 136.587 110.144 85.882
06/30/93 145.088 110.653 88.840
07/30/93 146.384 110.783 93.661
08/31/93 173.588 116.510 93.856
09/30/93 181.215 119.979 95.747
10/29/93 175.370 122.676 102.005
11/30/93 190.958 119.017 106.055
12/31/93 211.221 122.335 106.146
01/31/94 193.620 126.049 115.945
02/28/94 224.912 124.870 117.789
03/31/94 191.339 117.189 112.157
04/29/94 184.471 115.669 112.437
05/31/94 168.771 115.951 111.478
06/30/94 181.286 111.711 104.073
07/29/94 195.080 114.002 102.845
08/31/94 191.139 121.270 109.671
09/30/94 203.783 120.960 102.170
10/31/94 201.805 123.337 102.752
11/30/94 196.859 119.246 92.389
12/30/94 203.591 119.581 102.127
01/31/95 212.529 120.251 94.809
02/28/95 218.488 126.610 102.135
03/31/95 189.513 130.362 94.285
04/28/95 187.518 134.466 95.331
05/31/95 181.534 137.933 90.816
06/30/95 159.310 149.111 88.904
07/31/95 176.344 160.072 93.636
08/31/95 166.324 163.316 96.306
09/29/95 152.076 167.071 88.693
10/31/95 145.027 166.114 80.473
11/30/95 159.126 170.014 88.014
12/29/95 162.886 169.109 84.656
01/31/96 149.734 169.945 74.633
02/29/96 167.945 176.422 81.614
03/29/96 184.871 177.009 85.437
04/30/96 183.855 191.691 85.412
05/31/96 176.745 200.492 80.656
06/28/96 159.205 191.457 73.227
07/31/96 144.407 174.406 59.536
08/30/96 169.411 184.178 63.864
09/30/96 168.084 198.275 62.470
10/31/96 179.357 196.102 63.311
11/29/96 212.667 208.255 67.276
12/31/96 225.785 208.018 70.150
</TABLE>
- - ------------
(1) The "Peer Group" Index consists of the following nine publicly traded
companies, whose primary business is as a less-than-truckload general
commodities motor carrier: Arkansas Best Corporation; American Freightways
Corporation; Arnold Industries Inc.; Caliber System, Inc.; Consolidated
Freightways Corporation; CNF Transportation, Inc.; Old Dominion Freight
Line, Inc.; Roadway Express, Inc.; and Yellow Corporation.
8
<PAGE> 11
PROPOSAL TO AMEND THE STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
PROPOSAL
The Board of Directors has adopted, subject to stockholder approval,
amendments to the Stock Option Plan for Non-Employee Directors (the "Director
Plan") which are attached hereto as Appendix A.
DESCRIPTION OF THE DIRECTOR PLAN
The Director Plan provides for the granting of options to purchase shares
of the Company's common stock, $0.01 par value ("Common Stock"), to each person
who is a non-employee director of the Company (an "Eligible Director").
The Director Plan is administered by a committee appointed by the Board of
Directors (the "Committee"). The Committee has the power to interpret the
provisions of the Director Plan or of any option or option agreement, and to
determine all questions arising under the Director Plan or any option or option
agreement.
Originally, a maximum of 250,000 shares of Common Stock was available for
delivery upon the exercise of options granted or to be granted pursuant to the
Director Plan. Shares to be delivered at the time a stock option is exercised
shall be made available from authorized and unissued shares of Common Stock or
treasury shares held by the Company. The maximum number of shares is subject to
adjustment in the event of stock splits or dividends, recapitalization and other
similar changes affecting the Company's Common Stock. If any outstanding options
granted under the Director Plan terminate or expire unexercised, the shares of
Common Stock allocable to such unexercised options will not be charged against
the maximum limit of shares available under the Director Plan and such shares
will become available for future grants of options under the Director Plan.
Each Eligible Director has been automatically granted an option under the
Director Plan to purchase 10,000 shares of Common Stock. On the fifth and tenth
anniversaries of such initial grant, each Eligible Director shall automatically
be granted options under the Director Plan to acquire an additional 10,000
shares, provided the participant is an Eligible Director at each such
anniversary. Each option shall vest in equal annual installments over five
years.
In the event the Company pays a stock dividend or makes a distribution of
shares, or splits up, combines, reclassifies or substitutes other securities for
its outstanding shares of Common Stock, proportionate adjustments shall be made
in the number of shares of Common Stock subject to options outstanding under the
Director Plan.
Each option granted under the Director Plan is evidenced by an option
agreement executed on behalf of the Company and by the Eligible Director to whom
such option is granted. The exercise price per share of each option granted
under the Director Plan will be equal to the "fair market value" (as defined in
the Director Plan) of a share of Common Stock on the date such option is
granted.
If a participant in the Director Plan ceases to be a director of the
Company because of death or disability, or in the event of an offer for the
Company's shares, the adoption of a plan of merger or consolidation under which
all of the shares of the Company would be eliminated, or a sale of substantially
all of the Company's assets, the participant (or his beneficiary) will be
entitled to exercise immediately all or any portion of the shares, regardless of
the number of years elapsed since the date of grant.
If an Eligible Director ceases to be a director of the Company, he or his
beneficiary may exercise his vested options until the first to occur of (i) one
(1) year after he ceases to be a director or (ii) the date on which the option
expires according to its terms.
No option granted under the Director Plan will be assignable or
transferable except by will or by the laws of descent and distribution.
No options may be granted under the Director Plan on or after October 29,
2008, the fifteenth anniversary of the effective date of the Director Plan, at
which date the Director Plan will terminate. The
9
<PAGE> 12
Director Plan may be terminated at an earlier date by vote of the Board of
Directors; provided, however, that any such earlier termination shall not affect
any options granted prior to the effective date of the termination. No options
granted under the Director Plan will be exercisable after the expiration of ten
(10) years from the date of their grant.
The Board of Directors may amend the Director Plan without stockholder
approval; provided, however, any amendment to the Director Plan that requires
the approval of the stockholders of the Company in accordance with Rule 16b-3 of
the Securities Exchange Act of 1934, as amended from time to time, shall be
subject to approval of the stockholders. In addition, the provisions of the
Director Plan may not be amended more frequently than once every six months,
unless otherwise required by law and permitted by Rule 16b-3.
The table below reports the number of shares of Common Stock which may be
purchased upon exercise of options granted under the amendments to the Director
Plan.
NEW PLAN BENEFITS
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING
NAME AND POSITION OPTIONS GRANTED
----------------- -----------------
<S> <C>
Executive Group............................................. 0
Non-Executive Director Group................................ 150,000
Non-Executive Officer Employee Group........................ 0
</TABLE>
FEDERAL INCOME TAX
The following provides a general summary of the federal income tax
consequences of the Director Plan. Although the Company believes the following
statements are correct based on existing provisions of the Code and the
legislative history, and administrative and judicial interpretations thereof, no
assurance can be given that legislative, administrative, or judicial changes or
interpretations will not occur that would modify such statements.
The options granted under the Director Plan are non-qualified stock options
("Non-Qualified Options"), i.e., they do not qualify as incentive stock options
for tax purposes. The Company understands that, under existing federal income
tax law, (i) no income will be recognized to the participant at the time of
grant, and (ii) upon exercise of an option, the participant generally must
recognize ordinary income in an amount equal to the excess of the fair market
value of the Common Stock at the time of exercise over the option exercise
price. The Company will be entitled to a tax deduction in the same amount and at
the same time provided the Company includes and reports such amounts on a timely
filed Form 1099-MISC (or similar IRS form filing). Generally, upon a disposition
of shares acquired upon exercise of a Non-Qualified Option, any amount received
in excess of the fair market value of the shares at the time of exercise of the
Non-Qualified Option will be treated as long-term or short-term capital gain,
depending upon the holding period of the shares. The Company will not be
entitled to any tax deduction upon such subsequent disposition.
PROPOSED AMENDMENTS
The Company proposes to increase the maximum number of shares of Common
Stock available under the Director Plan to 500,000 shares. Also, the Company
proposes to allow, in addition to the automatic grants, for discretionary grants
to be made under the Director Plan. The discretionary grants may vest at such
time or times as the Board of Directors may determine. Last, the Company
proposes to accelerate the vesting schedule of all granted options, if a
director voluntarily leaves the Board of Directors at the age of 65 or older and
has served on the Board of Directors more than five years, or dies or becomes
disabled within the meaning of the Plan. Under any of those circumstances, the
option would become exercisable in its entirety within the originally prescribed
term of the option. If a director voluntarily leaves the Board of Directors at
the age of 72 or older and has served on the Board of Directors less than five
years, the option, to the extent not otherwise
10
<PAGE> 13
exercisable, would become exercisable on a pro-rata basis depending on the
number of years the director has served on the Board of Directors.
VOTE REQUIRED
Approval of the amendments to the Director Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
PROPOSAL TO APPROVE THE USFREIGHTWAYS CORPORATION
LONG-TERM INCENTIVE PLAN
PROPOSAL
The Board of Directors has adopted, subject to stockholder approval, the
USFreightways Corporation Long-Term Incentive Plan (the "Incentive Plan")
attached hereto as Appendix B.
BACKGROUND AND PURPOSE
The Board of Directors of the Company adopted the Incentive Plan on January
24, 1997. The purpose of the Incentive Plan is to assist the Company in
attracting and retaining key employees, and to give such employees a greater
proprietary interest in, and closer identity with, the Company and its financial
success. The Incentive Plan authorizes the Company to make grants ("Awards") of
Incentive Stock Options (within the meaning of Section 422 of the Code),
Non-Qualified (or non-statutory) Stock Options (the Incentive and Non-Qualified
Stock Options issued under the Incentive Plan are referred to collectively as
"Options"), Restricted Stock, Stock Appreciation Rights ("SARs"), Performance
Awards, or Cash Awards. The Board adopted the Incentive Plan in order to
authorize Awards in the form of equity, equity-based or cash incentives, and
also to respond to the substantial depletion of the shares originally reserved
for issuance under the Company's existing stock option plan.
ADMINISTRATION OF THE INCENTIVE PLAN
The Incentive Plan will be administered by a committee of the Board of
Directors consisting of two or more non-employee Board members (the
"Committee"). The Committee has complete discretion to determine which employees
will be recipients of Awards under the Incentive Plan (the "Participants") and
to establish the terms, conditions and limitations of each Award (subject to the
terms of the Incentive Plan and the applicable provisions of the Code),
including the type and amount of the Award, the number of shares of Common Stock
to be subject to Options or Restricted Stock, or the amount of cash to be
included in the Award, the exercise price of any Options and the date or dates
upon which the Options become exercisable or upon which any restrictions
applicable to any Common Stock included in the Award lapse. The Committee also
has full power to construe and interpret the Plan and the Awards granted under
the Plan, and to establish rules and regulations necessary or advisable for its
administration. The determination of the Committee with respect to any matter
under the Plan to be acted upon by the Committee is final and binding. The
members of the Committee may not receive any Award under the Incentive Plan or
any similar plan while serving on the Committee, unless the Board of Directors
determines that such an Award may be made in accordance with the then current
Rule 16b-3 requirements under the Securities Exchange Act of 1934, as amended.
The Board may amend the Plan in any respect, except that the following
changes may not be made without stockholder approval: (i) the maximum number of
shares available for Awards may not be increased (except upon stock splits and
dividends, combinations and similar events), (ii) the requirements as to
eligibility may not be materially modified, (iii) the benefits to Participants
may not be materially increased,
11
<PAGE> 14
(iv) the period during which Incentive Options may be granted or exercised may
not be extended, and (v) the class of employees eligible to receive Incentive
Options may not be modified.
SHARES SUBJECT TO THE INCENTIVE PLAN
A total of 2,000,000 shares have been reserved for future Awards under the
Incentive Plan. The amount of shares also is subject to adjustment in the event
of stock splits, stock dividends, mergers or other changes in the Company's
capitalization.
ELIGIBILITY FOR AWARDS
Awards under the Incentive Plan may be granted only to employees of the
Company and its subsidiaries. The Committee shall determine which employees are
to be granted Awards under the Incentive Plan. Awards may be granted to a
prospective employee, conditioned upon such person becoming an employee.
TERMS AND CONDITIONS OF AWARDS UNDER THE INCENTIVE PLAN
Generally
Awards under the Incentive Plan may consist of any combination of one or
more Incentive or Non-Qualified Options, Restricted Stock, SARs, Performance
Awards, or Cash Awards, on a stand alone, combination or tandem basis. The
Committee may specify that Awards other than Options shall be paid in cash,
shares of Common Stock, or a combination of cash and stock.
The Committee is permitted to cancel any unexpired, unpaid, unexercised or
deferred Awards at any time if a Participant (a) provides services for a
competitor, (b) discloses confidential Company information, or (c) fails to
disclose and convey to the Company any invention or idea developed by the
Participant during employment by the Company and relating to the business of the
Company. Unless otherwise described below for Options, or as may be provided in
the Award Agreement, all unexpired, unpaid, unexercised or deferred Awards shall
be canceled if a Participant ceases his or her employment with the Company and
its subsidiaries, except for (a) retirement under a Company retirement plan, (b)
retirement in the best interest of the Company (as determined by the Company's
chief executive or other designated senior officer), or (c) termination of the
Participant's employment upon his or her death or disability. Upon retirement
under a Company retirement plan or termination in the best interests of the
Company, the Committee may permit Awards to continue, and may accelerate
exercisability and vesting. Upon the death or disability of a Participant, his
or her estate or beneficiaries (or the Participant in the case of disability)
may exercise or receive benefits under the Award until the original expiration
date as provided in the Award (or within one year in the case of Options) and
the Committee may in its discretion accelerate the vesting or terminate the
restrictions to which the Award is subject.
Upon any change in the nature or number of outstanding shares of Common
Stock due to stock split, stock dividend, merger, reorganization or similar
event, adjustments shall be made to the numbers of shares and the applicable
exercise and base prices under outstanding Awards to prevent dilution or
enlargement of the Awards previously granted.
Stock Options
Both Incentive and Non-Qualified Options may be granted pursuant to the
Incentive Plan. Incentive Options must have an exercise price per share equal to
at least the fair market value of a share at the time the Award is granted. As
required by the Code, if an Incentive Option is granted to a Participant who
owns more than ten percent of the voting power of the Company (a "Significant
Stockholder"), then the exercise price per share shall be not less than one
hundred ten percent (110%) of fair market value on the date of grant. Fair
market value equals the closing sales price of the Common Stock on the date of
grant. The exercise price for Non-Qualified Options shall be determined by the
Committee in its sole discretion on the date of grant, and may be less than fair
market value. The maximum term of all Incentive Options granted under the
Incentive Plan is ten years. (Incentive Options granted to Significant
Stockholders have a maximum term of five years.)
12
<PAGE> 15
The term of Non-Qualified Options may be set by the Committee in its discretion.
No Options may be granted more than ten years from the date the Incentive Plan
was adopted. Except as otherwise determined by the Committee, all Options are
non-transferable and may be exercised during a Participant's lifetime only by
the Participant.
At the time an Option is awarded, the Committee shall specify the date or
dates upon which the Option, or portions of the Option, becomes exercisable. The
permissible manner of payment for the purchase price upon exercise of the Option
(such as cash, check, the transfer of previously owned, fully paid shares, or
through a "cash-less" exercise) shall be set by the Committee in the particular
Award Agreement or by general rules.
A Participant who ceases to be an employee of the Company or its
subsidiaries for any reason other than death, disability, normal retirement or
termination for "cause," shall be permitted to exercise any Option, to the
extent it was exercisable on the date of such cessation, but only within three
months of such cessation. A Participant who is terminated for "cause," as
defined in the Incentive Plan, shall immediately lose all rights to exercise any
Options. If a Participant terminates his or her employment after attaining age
65, all Options shall immediately vest, and the Participant may exercise all
Options granted to him or her during the prescribed term of the Option. If a
Participant dies, his or her estate or personal representative may exercise the
Option, to the extent it was exercisable on the date of death. If a Participant
becomes permanently disabled, he or she may exercise an Option to the extent it
was exercisable at the time of the onset of the disability or, if the Option
vests periodically, to the extent it would have been exercisable as of the next
vesting date. In the case of either death or disability, the Option must be
exercised within twelve (12) months after the date of death or onset of
disability, and prior to the original expiration date of the Option.
Restricted Stock
The Committee may award shares of Common Stock (or grant an award
denominated in units of Common Stock) on a restricted basis. The terms of a
restricted stock Award, including the consideration, if any, to be paid by the
Participant to acquire the stock and the restrictions placed upon such shares
and the time or times or event or events upon which such restrictions will
lapse, shall be determined by the Committee at the time the Award is made and
shall be described in the Award Agreement. After the Restricted Stock is
awarded, the Participant shall be a stockholder with respect to such stock, and
shall have rights to vote and receive dividends with respect to such stock.
Shares of Restricted Stock may not be transferred, assigned or pledged prior to
the lapse of the applicable restrictions. The Committee, in its discretion, may
accelerate the date on which the restrictions lapse.
Stock Appreciation Rights
The Committee may award SARs either alone, in tandem or in combination with
an Option or other Award. An SAR will permit the Participant to receive, upon
exercise, cash or shares of Common Stock equal in value to the excess of the
fair market value of a share of Common Stock as of the exercise date over the
base price set by the Committee at the time the SAR is granted, multiplied by
the number of shares of Common Stock then being exercised under the SAR. The
base price shall be at least the fair market value of a share of Common Stock on
the date of grant, unless a lower base price is approved by the Board of
Directors. SARs shall become exercisable upon the date or dates, or the
occurrence of the events, set by the Committee at the time of grant. An SAR may
only be exercised by the Participant or, if applicable, by the Participant's
personal representative.
Performance Awards
The Committee may grant to Participants Performance Awards that are subject
to conditions specified by the Committee. The Committee may use business
criteria and other measures of performance it deems appropriate in establishing
any performance conditions, and may exercise its discretion to increase or
decrease the amounts payable under any Awards subject to performance conditions,
except as otherwise may be limited in the case of a Performance Award intended
to qualify under Code sec. 162(m). If the Committee determines
13
<PAGE> 16
that a Performance Award should qualify as "performance-based compensation" for
purposes of Code sec. 162(m), the Performance Award shall be contingent upon the
achievement of objective pre-established performance goals and other terms set
by the Committee.
Cash Awards
The Committee may award cash payments under the Incentive Plan, subject to
restrictions and conditions and other terms as determined by the Committee at
the time of the Award. A cash Award shall be subject to cancellation or
forfeiture upon the terms set forth under "Generally," above.
FEDERAL INCOME TAX EFFECTS
Under the Code, as presently in effect, the grant of an Option or SAR or
the award of Restricted Stock under the Incentive Plan will not generate income
to a Participant or a deduction to the Company.
Upon exercise of a Non-Qualified Option or an SAR, the Participant will
normally be deemed to have received ordinary income in an amount equal to the
difference between the exercise price for the Option and the fair market value
of the Company's Common Stock on the exercise date or, in the case of an SAR,
equal to the amount of payment received from the Company (less any exercise
price, if applicable). The Company will be entitled to a tax deduction in the
same amount as is recognized by the Participant and at the same time, provided
the Company includes and reports such amounts on a timely filed Form W-2 or Form
1099-MISC (or similar such IRS form filing). Upon a disposition of shares
acquired upon exercise of a Non-Qualified Option, any amount received in excess
of the fair market value of the shares at the time of exercise of the Option
generally will be treated as long-term or short-term capital gain, depending on
the holding period of the shares. The Company will not be entitled to any tax
deduction upon such subsequent disposition.
In the case of Incentive Options, the Participant recognizes no ordinary
income on the date of grant or exercise. If the Participant holds the stock
acquired through exercise of an Incentive Option for one year from the date of
exercise and two years from the date of grant, the Participant will thereafter
recognize long-term capital gain or loss upon a subsequent sale of the stock,
based on the difference between the Incentive Option's exercise price and the
sale price. If the stock is sold before the requisite holding period, the
Participant will recognize ordinary income based upon the difference between the
exercise price and the lesser of the sales price or the fair market value upon
the date of exercise. The Company generally will be allowed a business expense
deduction only if, and to the extent, the Participant recognizes ordinary
income.
For Awards of Restricted Stock, the fair market value of the stock is not
taxable to the Participant as ordinary income until the year the Participant's
interest is freely transferable or no longer subject to a substantial risk of
forfeiture. Section 83 of the Code, however, permits a Participant to elect to
have the fair market value of the stock taxed as ordinary income in the year the
Award is received. The Company generally will be entitled to a deduction equal
to the amount of ordinary income recognized by the Participant.
Upon the grant of a Performance or Cash Award, the Participant will
recognize ordinary income equal to the amount of the award, which amount will be
includable in the Participant's taxable income in the year such Performance or
Cash Award is paid. The Company will be entitled to a deduction in the same year
equal to the amount of the Award.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE USFREIGHTWAYS
CORPORATION LONG-TERM INCENTIVE PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William N. Weaver, Jr., a director, is a member of the law firm of Sachnoff
& Weaver, Ltd., an Illinois professional corporation. Sachnoff & Weaver, Ltd.
has acted and continues to act as outside counsel to the Company with regard to
certain matters and has received legal fees for services rendered in connection
therewith.
14
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John W. Puth, Morley Koffman, Robert P. Neuschel and William N. Weaver,
Jr., none of whom are employees of the Company served on the Compensation
Committee. Mr. Weaver served as Assistant Secretary of the Company in a
non-employee capacity. There are no committee interlocks or insider (employee)
participation.
INDEPENDENT PUBLIC ACCOUNTANTS
By the selection of the Company's management, the accounting firm of KPMG
Peat Marwick LLP, certified public accountants, has served and continues to
serve the Company as its independent public accountants. One or more
representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting, with the opportunity to make a statement if they desire to do so, and
to be available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and NASDAQ. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during fiscal year 1996, all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with except that one report, covering one transaction
involving the disposition of the Company's Common Stock, was inadvertently filed
late by R. S. Owen, Vice President and Controller of the Company.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders accompanies this
Proxy Statement. The Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 28, 1996, as filed
with the Commission, is available without charge to any stockholder upon written
request to Christopher L. Ellis, Senior Vice President, Finance and Chief
Financial Officer, USFreightways Corporation, 9700 Higgins Road, Suite 570,
Rosemont, Illinois 60018. The exhibits filed with the Form 10-K are not
included; however, copies of such exhibits will be furnished, if requested, upon
payment of the Company's reasonable expenses in furnishing those materials.
STOCKHOLDER PROPOSALS
Stockholder proposals submitted for evaluation as to inclusion in the proxy
materials for the Company's next annual meeting of stockholders must be received
by the Company not later than November 18, 1997, at the Company's principal
executive offices at 9700 Higgins Road, Suite 570, Rosemont, Illinois 60018.
15
<PAGE> 18
OTHER MATTERS
Management is not aware of any other matters to be presented for action at
the Meeting. If any other matters are properly brought before the Meeting, it is
the intention of the persons named as proxies in the accompanying form of proxy
to vote the shares represented thereby in accordance with their best judgment.
For the Board of Directors
RICHARD C. PAGANO
Secretary
Rosemont, Illinois
March 24, 1997
16
<PAGE> 19
APPENDIX A
AMENDMENT TO THE
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
RESOLVED, that the Stock Option Plan for Non-Employee Directors (the Plan)
be amended as follows:
1. The first paragraph of Article II (Shares Subject to the Plan)
shall be amended to read as follows:
"The aggregate number of Shares as to which Options may be granted
from time to time shall be Five Hundred Thousand (500,000) Shares."
2. The first paragraph of Article III (Administration of the Plan)
shall be amended to read as follows:
"The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee is authorized to:
A. Interpret the provisions of the Plan or any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
B. Determine the Eligible Directors to whom Options shall be
granted;
C. Determine the number of Shares for which an Option or Options
shall be granted;
D. Provide for the acceleration of the right to exercise an
Option (or any portion thereof); and
E. Specify the terms and conditions upon which Options may be
granted.
The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be
final."
3. Article IV (Eligibility for Participation) shall be amended to read
as follows:
"Each Participant must be an Eligible Director of the Company at the
time an Option is granted. Each Eligible Director shall be granted, at the
later of the effective date of the Plan or the date such director becomes
an Eligible Director, and at such other time or times as described in
Article V, an Option to purchase Shares under the Plan. In addition to the
formula-based Shares set forth in Article V, the Committee may at any time
and from time to time grant one or more additional Options to one or more
Eligible Directors ("Discretionary Options") and may designate the number
of Shares to be subject to each Discretionary Option so granted, provided
however that no grant of a Discretionary Option to purchase Shares shall
permit unrestricted ownership of Shares by the Eligible Director for at
least six (6) months from the date of grant of the Discretionary Option,
unless the Committee determines that the grant of such Discretionary Option
to purchase Shares otherwise satisfies the then current Rule 16b-3
requirements under the Securities Exchange Act of 1934."
4. The following sentence shall be added to Article V(B) (Number of
Shares):
"In addition to the foregoing, each Eligible Director may from time
to time be granted by the Committee, in its discretion, a Discretionary
Option."
5. Article V(D) (Date of Exercise) shall be amended to add the
following sentence:
"Notwithstanding anything herein to the contrary, upon the
authorization of the grant of a Discretionary Option, or at anytime
thereafter, the Committee may prescribe the date or dates on which the
Discretionary Option becomes exercisable, and may provide that the
Discretionary Option become exercisable in installments over a period of
years, or upon the attainment of stated goals."
A-1
<PAGE> 20
6. Paragraph F of Article V (Terms and Conditions of Options) shall be
amended to read as follows:
"1. In the event that a Participant shall cease to be a director of
the Company for any reason other than death, Disability, or voluntary
termination as a director of the Company on or after the attainment of
his or her 65th birthday, his or her Option shall be exercisable, only
to the extent that it was exercisable at the date he or she ceased to be
a director and only until the first to occur of one (1) year after such
date or until the date on which the Option otherwise expires according
to its terms.
2. In the event that a Participant shall cease to be a director of
the Company because of death or Disability, his or her Option may be
exercised in its entirety (notwithstanding the vesting schedule set
forth in Paragraph D of this Article V or in any Option Agreement)
within the originally prescribed term of the Option by the Participant
or by any person or persons designated by the Participant as the
executors or administrators of the Participant's estate, or by any
person or persons who shall have acquired the Option directly from the
Participant by his or her will or the applicable law of descent and
distribution.
3. In the event that a Participant shall cease to be a director of
the Company because of voluntary termination as a director of the
Company on or after the attainment of his or her 65th birthday and that
Participant has served as a director of the Company for five (5) years
or more, his or her Option may be exercised in its entirety
(notwithstanding the vesting schedule set forth in Paragraph D of this
Article V or in any Option Agreement) within the originally prescribed
term of the Option by the Participant; provided that the Committee, in
its sole discretion, approves the exercise of the Option in its
entirety.
4. In the event that a Participant shall cease to be a director of
the Company because of voluntary termination as a director of the
Company on or after the attainment of his or her 72nd birthday and that
Participant has not served as a director of the Company for five (5)
years, his or her Option shall be exercisable (notwithstanding the
vesting schedule set forth in Paragraph D of this Article V or in any
Option Agreement) within the originally prescribed term of the Option by
the Participant, to the extent that (a) it was exercisable at the date
he or she ceased to be a director and (b) if the Option was exercisable
periodically, to the extent of any additional rights that would have
become exercisable (had the Participant not voluntarily terminated as a
director of the Company) during successive one year periods from the
Participant's date of termination for each year the Participant served
as a director of the Company."
A-2
<PAGE> 21
APPENDIX B
USFREIGHTWAYS CORPORATION
LONG-TERM INCENTIVE PLAN
1. PURPOSE
The USFreightways Corporation Long-Term Incentive Plan is adopted January
24, 1997. The Plan is designed to attract and retain selected employees of the
Company and its Affiliates, and reward them for making major contributions to
the success of the Company and its Affiliates. These objectives are accomplished
by making long-term incentive awards under the Plan that will offer Participants
an opportunity to have a greater proprietary interest in, and closer identity
with, the Company and its Affiliates and their financial success.
The Awards may consist of:
(a) Incentive Options;
(b) Nonstatutory Options;
(c) Restricted Stock;
(d) Rights;
(e) Performance Awards; or
(f) Cash Awards
or any combination of the foregoing, as the Committee may determine.
The Plan is intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code to the extent deemed
appropriate by the Committee. The Plan and the grant of Awards hereunder are
expressly conditioned upon the Plan's approval by the stockholders of the
Company. If such approval is not obtained, then this Plan and all Awards
hereunder shall be null and void ab initio.
2. DEFINITIONS
(a) AFFILIATE means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association or other entity (other
than the Company) that, for purposes of Section 422 of the Code, is a subsidiary
of the Company, direct or indirect.
(b) AWARD means the grant to any employee of any form of Option, Restricted
Stock, Right, Performance Award, or Cash Award, whether granted singly, in
combination, or in tandem, and pursuant to such terms, conditions, and
limitations as the Committee may establish in order to fulfill the objectives of
the Plan.
(c) AWARD AGREEMENT means an agreement entered into between the Company and
a Participant under which an Award is granted and which sets forth the terms,
conditions, and limitations applicable to the Award.
(d) BOARD means the Board of Directors of the Company.
(e) CASH AWARD means an Award of cash, subject to the requirements of
Section 11 and such other restrictions as the Committee deems appropriate or
desirable.
(f) CODE means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
(g) COMMITTEE means the committee to which the Board delegates the power to
act under or pursuant to the provisions of the Plan, or the Board if no
committee is selected. If the Board delegates powers to a committee, and if the
Company is or becomes subject to Section 16 of the Exchange Act, then, if
necessary for compliance therewith, such committee shall consist initially of
not less than two (2) members of the Board, each member of which must be a
"non-employee director," within the meaning of the applicable rules promulgated
pursuant to the Exchange Act. If the Company is or becomes subject to Section 16
of the Exchange Act, no member of the Committee shall receive any Award pursuant
to the Plan or any similar plan
B-1
<PAGE> 22
of the Company or any Affiliate while serving on the Committee, unless the Board
determines that the grant of such an Award satisfies the then current Rule 16b-3
requirements under the Exchange Act. Notwithstanding anything herein to the
contrary, and insofar as it is necessary in order for compensation recognized by
Participants pursuant to the Plan to be fully deductible to the Company for
federal income tax purposes, each member of the Committee also shall be an
"outside director" (as defined in regulations or other guidance issued by the
Internal Revenue Service under Code Section 162(m)).
(h) COMMON STOCK means the common stock of the Company.
(i) COMPANY means USFreightways Corporation, a Delaware corporation, and
any successor or assignee corporation or corporations into which the Company may
be merged, changed, or consolidated; any corporation for whose securities the
securities of the Company shall be exchanged; and any assignee of or successor
to substantially all of the assets of the Company.
(j) DISABILITY OR DISABLED means a permanent and total disability as
defined in Section 22(e)(3) of the Code.
(k) EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.
(l) FAIR MARKET VALUE means, if the Shares are listed on any national
securities exchange, the closing sales price, if any, on the largest such
exchange on the valuation date, or, if none, on the most recent trade date
immediately prior to the valuation date provided such trade date is no more than
thirty (30) days prior to the valuation date. If the Shares are not then listed
on any such exchange, the fair market value of such Shares shall be the closing
sales price if such is reported, or otherwise the mean between the closing "Bid"
and the closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the valuation date,
or if none, on the most recent trade date immediately prior to the valuation
date provided such trade date is no more than thirty (30) days prior to the
valuation date. If the Shares are not then either listed on any such exchange or
quoted in NASDAQ, or there has been no trade date within such thirty (30) day
period, the fair market value shall be the mean between the average of the "Bid"
and the average of the "Ask" prices, if any, as reported in the National Daily
Quotation System for the valuation date, or, if none, for the most recent trade
date immediately prior to the valuation date provided such trade date is no more
than thirty (30) days prior to the valuation date. If the fair market value
cannot be determined under the preceding three sentences, it shall be determined
in good faith by the Committee.
(m) INCENTIVE OPTION means an Option that, when granted, is intended to be
an "incentive stock option," as defined in Section 422 of the Code.
(n) NONSTATUTORY OPTION means an Option that, when granted, is not intended
to be an "incentive stock option," as defined in Section 422 of the Code.
(o) NORMAL RETIREMENT means termination of a Participant's employment with
the Company or one of its Affiliates after the Participant reaches the age of
65.
(p) OPTION means a right or option to purchase Common Stock, including
Restricted Stock if the Committee so determines.
(q) PARTICIPANT means an employee to whom one or more Awards are granted
under the Plan.
(r) PERFORMANCE AWARD means an Award subject to the requirements of Section
10, and such performance conditions as the Committee deems appropriate or
desirable.
(s) PLAN means the USFreightways Corporation Long-Term Incentive Plan, as
amended from time to time.
(t) RESTRICTED Stock means an Award made in Common Stock or denominated in
units of Common Stock and delivered under the Plan, subject to the requirements
of Section 8, such other restrictions as the Committee deems appropriate or
desirable, and as awarded in accordance with the terms of the Plan.
B-2
<PAGE> 23
(u) RIGHT means a stock appreciation right delivered under the Plan,
subject to the requirements of Section 9 and as awarded in accordance with the
terms of the Plan.
(v) SHARES means the following shares of the capital stock of the Company
as to which Options or Restricted Stock have been or may be granted under the
Plan and upon which Rights or units of Restricted Stock may be based: treasury
or authorized but unissued Common Stock, $.01 par value, of the Company, or any
shares of capital stock into which the Shares are changed or for which they are
exchanged within the provisions of Section 17 of the Plan.
3. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Awards may be granted from time
to time shall be Two Million (2,000,000) Shares (subject to adjustment for stock
splits, stock dividends, and other adjustments described in Section 17 hereof).
In accordance with Code Section 162(m), if applicable, the aggregate number
of Shares as to which Awards may be granted in any one calendar year to any one
employee shall not exceed Two Hundred Thousand (200,000) Shares (subject to
adjustment for stock splits, stock dividends, and other adjustments described in
Section 17 hereof).
From time to time, the Committee and appropriate officers of the Company
shall take whatever actions are necessary to file required documents with
governmental authorities and stock exchanges so as to make Shares available for
issuance pursuant to the Plan. Shares subject to Awards that expire or that are
forfeited, terminated, unexercised, canceled by agreement of the Company and the
Participant, settled in cash in lieu of Common Stock or in such manner that all
or some of the Shares covered by such Awards are not issued to a Participant, or
are exchanged for Awards that do not involve Common Stock, shall immediately
become available for Awards. Awards payable in cash shall not reduce the number
of Shares available for Awards under the Plan.
Except as otherwise set forth herein, the aggregate number of Shares as to
which Awards may be granted shall be subject to change only by means of an
amendment of the Plan duly adopted by the Company and approved by the
stockholders of the Company within one year before or after the date of the
adoption of the amendment.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum at any meeting thereof (including by
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
shall be the acts of the Committee for purposes of this Plan. The Committee may
authorize one or more of its members or an officer of the Company to execute and
deliver documents on behalf of the Committee. A member of the Committee shall
not exercise any discretion respecting himself or herself under the Plan. The
Board shall have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines. Subject to the
provisions of the Plan, the Committee is authorized to:
(a) Interpret the provisions of the Plan and any Award or Award
Agreement, and make all rules and determinations that it deems necessary or
advisable to the administration of the Plan;
(b) Determine which employees of the Company or an Affiliate shall be
designated as Participants and which of the employees shall be granted
Awards;
(c) Determine whether an Option to be granted shall be an Incentive
Option or Nonstatutory Option;
(d) Determine the number of Shares for which an Option or Restricted
Stock shall be granted;
B-3
<PAGE> 24
(e) Determine the number of Rights, the Cash Award or the Performance
Award to be granted;
(f) Provide for the acceleration of the right to exercise any Award;
and
(g) Specify the terms, conditions, and limitations upon which Awards
may be granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be made and
prescribed in the context of preserving the tax status of the Incentive Options
as incentive stock options within the meaning of Section 422 of the Code.
The Committee may delegate to the chief executive officer and to other
senior officers of the Company or its Affiliates its duties under the Plan
pursuant to such conditions or limitations as the Committee may establish,
except that only the Committee may select, and grant Awards to, Participants who
are subject to Section 16 of the Exchange Act. All determinations of the
Committee shall be made by a majority of its members. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Award.
The Committee shall have the authority at any time to cancel Awards for
reasonable cause and to provide for the conditions and circumstances under which
Awards shall be forfeited.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
the Participants. No determination shall be subject to de novo review if
challenged in court.
5. ELIGIBILITY FOR PARTICIPATION
Awards may be granted under this Plan only to employees of the Company or
its Affiliates. The foregoing notwithstanding, each Participant receiving an
Incentive Option must be an employee of the Company or of an Affiliate at the
time the Incentive Option is granted.
The Committee may at any time and from time to time grant one or more
Awards to one or more employees and may designate the number of Shares, if
applicable, to be subject to each Award so granted, provided, however that no
Incentive Option shall be granted after the expiration of ten (10) years from
the earlier of the date of the adoption of the Plan by the Company or the
approval of the Plan by the stockholders of the Company, and provided further,
that the Fair Market Value of the Shares (determined at the time the Option is
granted) as to which Incentive Options are exercisable for the first time by any
employee during any single calendar year (under the Plan and under any other
incentive stock option plan of the Company or an Affiliate) shall not exceed Two
Million Dollars ($2,000,000). To the extent that the Fair Market Value of such
Shares exceeds Two Million Dollars ($2,000,000), the Shares subject to Option in
excess of Two Million Dollars ($2,000,000) shall, without further action by the
Committee, automatically be converted to Nonstatutory Options.
Notwithstanding any of the foregoing provisions, the Committee may
authorize the grant of an Award to a person not then in the employ of, or
engaged by, the Company or of an Affiliate, conditioned upon such person
becoming eligible to be granted an Award at or prior to the execution of the
Award Agreement evidencing the actual grant of such Award.
B-4
<PAGE> 25
6. AWARDS UNDER THIS PLAN
As the Committee may determine, the following types of Awards may be
granted under the Plan on a stand alone, combination, or tandem basis:
(A) INCENTIVE OPTION
An Award in the form of an Option that shall comply with the requirements
of Section 422 of the Code. Subject to adjustments in accordance with the
provisions of Section 17, the aggregate number of Shares that may be subject to
Incentive Options under the Plan shall not exceed Two Million (2,000,000).
(B) NONSTATUTORY OPTION
An Award in the form of an Option that shall not be intended to comply with
the requirements of Section 422 of the Code.
(C) RESTRICTED STOCK
An Award made to a Participant in Common Stock or denominated in units of
Common Stock, subject to future service and such other restrictions and
conditions as may be established by the Committee, and as set forth in the Award
Agreement, including but not limited to continuous service with the Company or
its Affiliates, achievement of specific business objectives, increases in
specified indices, attaining growth rates, and other measurements of Company or
Affiliate performance.
(D) STOCK APPRECIATION RIGHT
An Award in the form of a Right to receive the excess of the Fair Market
Value of a Share on the date the Right is exercised over the Fair Market Value
of a Share on the date the Right was granted.
(E) PERFORMANCE AWARDS
An Award made to a Participant that is subject to performance conditions
specified by the Committee, including but not limited to continuous service with
the Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance.
(F) CASH AWARDS
An Award made to a Participant and denominated in cash, with the eventual
payment subject to future service and such other restrictions and conditions as
may be established by the Committee, and as set forth in the Award Agreement.
Each Award under the Plan shall be evidenced by an Award Agreement.
Delivery of an Award Agreement to each Participant shall constitute an agreement
between the Company and the Participant as to the terms and conditions of the
Award.
7. TERMS AND CONDITIONS OF INCENTIVE OPTIONS AND NONSTATUTORY OPTIONS
Each Option shall be set forth in an Award Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is granted.
Except for the setting of the Option price under Section 7(a), no Option shall
be granted and no purported grant of any Option shall be effective until such
Award Agreement shall have been duly executed on behalf of the Company and by
the Participant. Each such Award Agreement shall be subject to at least the
following terms and conditions:
(A) OPTION PRICE
The purchase price of the Shares covered by each Option granted under the
Plan shall be determined by the Committee. The Option price per share of the
Shares covered by each Nonstatutory Option shall be at
B-5
<PAGE> 26
such amount as may be determined by the Committee in its sole discretion on the
date of the grant of the Option. In the case of an Incentive Option, if the
Participant owns directly or by reason of the applicable attribution rules ten
percent (10%) or less of the total combined voting power of all classes of share
capital of the Company, the Option price per share of the Shares covered by each
Incentive Option shall be not less than the Fair Market Value of the Shares on
the date of the grant of the Incentive Option. In all other cases of Incentive
Options, the Option price shall be not less than one hundred ten percent (110%)
of the Fair Market Value on the date of grant.
(B) NUMBER OF SHARES
Each Option shall state the number of Shares to which it pertains.
(C) TERM OF OPTION
Each Incentive Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Award Agreement may
provide, and shall be subject to earlier termination as herein provided, except
that if the Option price is required under Section 7(a) to be at least one
hundred ten percent (110%) of Fair Market Value, each such Incentive Option
shall terminate not more than five (5) years from the date of the grant thereof,
and shall be subject to earlier termination as herein provided. The Committee
shall determine the time at which a Nonstatutory Option shall terminate.
(D) DATE OF EXERCISE
Upon the authorization of the grant of an Option, or at any time
thereafter, the Committee may, subject to the provisions of Section 7(c),
prescribe the date or dates on which the Option becomes exercisable, and may
provide that the Option become exercisable in installments over a period of
years, or upon the attainment of stated goals.
(E) MEDIUM OF PAYMENT
The Option price shall be payable upon the exercise of the Option, as set
forth in Section 7(j). It shall be payable in such form (permitted by Section
422 of the Code in the case of Incentive Options) as the Committee shall, either
by rules promulgated pursuant to the provisions of Section 4 of the Plan, or in
the particular Award Agreement, provide.
(F) TERMINATION OF EMPLOYMENT
(1) A Participant who ceases to be an employee of the Company or of an
Affiliate for any reason other than death, Disability, Normal Retirement or
termination "for cause," as defined in Section 7(f)(2), may exercise any Option
granted to such Participant, to the extent that the right to purchase Shares
thereunder has become exercisable on the date of such termination, but only
within three (3) months after such date of termination, or, if earlier, within
the originally prescribed term of the Option. A Participant's employment shall
not be deemed terminated by reason of a transfer to another employer that is the
Company or an Affiliate.
(2) A Participant who ceases to be an employee of the Company or of an
Affiliate "for cause" shall, upon such termination, cease to have any right to
exercise any Option. For purposes of this Plan, cause shall mean (A) a
Participant's theft or embezzlement, or attempted theft or embezzlement, of
money or property of the Company or of an Affiliate, a Participant's
perpetration or attempted perpetration of fraud, or a Participant's
participation in a fraud or attempted fraud, on the Company or of an Affiliate
or a Participant's unauthorized appropriation of, or a Participant's attempt to
misappropriate, any tangible or intangible assets or property of the Company or
of an Affiliate; (B) any act or acts of disloyalty, dishonesty, misconduct,
moral turpitude, or any other act or acts by a Participant injurious to the
interest, property, operations, business or reputation of the Company or of an
Affiliate; (C) a Participant's commission of a felony or any other crime the
commission of which results in injury to the Company or of an Affiliate; or (D)
any violation of any restriction on the disclosure or use of confidential
information of the Company or of an Affiliate or on
B-6
<PAGE> 27
competition with the Company or of an Affiliate or any of its businesses as then
conducted. The determination of the Committee as to the existence of cause shall
be conclusive and binding upon the Participant and the Company or the Affiliate.
(3) A Participant who is absent from work with the Company or an Affiliate
because of temporary disability (any disability other than a Disability), or who
is on leave of absence for any purpose permitted by any authoritative
interpretation (i.e., regulation, ruling, case law, etc.) of Section 422 of the
Code, shall not, during the period of any such absence, be deemed, by virtue of
such absence alone, to have terminated his or her employment or relationship
with the Company or with an Affiliate, except as the Committee may otherwise
expressly provide or determine.
(4) Section 7(f)(1) shall control and fix the rights of a Participant who
ceases to be an employee of the Company or of an Affiliate for any reason other
than Disability, death, Normal Retirement or termination "for cause," and who
subsequently becomes Disabled or dies. Nothing in Section 7(g) and (h) shall be
applicable in any such case.
(G) TOTAL AND PERMANENT DISABILITY
A Participant, who ceases to be an employee of the Company or of an
Affiliate by reason of Disability, may exercise any Option granted to such
Participant (notwithstanding that the Participant might not have been able to
exercise the Option as to some or all of the Shares if the Participant had not
become Disabled) within a period of not more than twelve (12) months after the
date that the Participant became Disabled as determined by the Committee, or, if
earlier, within the originally prescribed term of the Option.
(H) DEATH
In the event that a Participant to whom an Option has been granted ceases
to be an employee of the Company or of an Affiliate by reason of such
Participant's death, any Option granted to such Participant (notwithstanding
that the Participant might not have been able to exercise the Option as to some
or all of the Shares if the Participant had not died) may be exercised by the
Participant's estate or personal representative within a period of not more than
twelve (12) months after the date of death of such Participant or, if earlier,
within the originally prescribed term of the Option.
(I) NORMAL RETIREMENT
Except as otherwise mandated by Code Section 422, a Participant, who ceases
to be an employee of the Company or of an Affiliate by reason of such
Participant's Normal Retirement, may exercise any Option (notwithstanding that
the Participant might not have been able to exercise the Option as to some or
all of the Shares if the Participant had not terminated his or her employment
because of Normal Retirement) within a period of not more than twelve (12)
months after the date of Normal Retirement, or, if earlier, within the
originally prescribed term of the Option.
(J) EXERCISE OF OPTION AND ISSUANCE OF STOCK
Options shall be exercised by giving written notice to the Company. Such
written notice shall: (1) be signed by the person exercising the Option, (2)
state the number of Shares with respect to which the Option is being exercised,
(3) contain the warranty required by Section 7(n), if applicable, and (4)
specify a date (other than a Saturday, Sunday or legal holiday) not less than
five (5) nor more than ten (10) days after the date of such written notice, as
the date on which the Shares will be purchased. Such tender and conveyance shall
take place at the principal office of the Company during ordinary business
hours, or at such other hour and place agreed upon by the Company and the person
or persons exercising the Option. On the date specified in such written notice
(which date may be extended by the Company in order to comply with any law or
regulation that requires the Company to take any action with respect to the
Option Shares prior to the issuance thereof), the Company shall accept payment
for the Option Shares in cash, by bank or certified check, by wire transfer, or
by such other means as may be approved by the Committee and shall deliver to the
person or persons exercising the Option in exchange therefor an appropriate
certificate or certificates for fully
B-7
<PAGE> 28
paid nonassessable Shares or undertake to deliver certificates within a
reasonable period of time. In the event of any failure to take up and pay for
the number of Shares specified in such written notice on the date set forth
therein (or on the extended date as above provided), the right to exercise the
Option shall terminate with respect to such number of Shares, but shall continue
with respect to the remaining Shares covered by the Option and not yet acquired
pursuant thereto.
If approved in advance by the Committee, payment in full or in part also
may be made (1) by delivering Shares already owned by the Participant having a
total Fair Market Value on the date of such delivery equal to the Option price;
(2) by the execution and delivery of a note or other evidence of indebtedness
(and any security agreement thereunder) satisfactory to the Committee; (3) by
authorizing the Company to retain Shares that otherwise would be issuable upon
exercise of the Option having a total Fair Market Value on the date of delivery
equal to the Option price; (4) by the delivery of cash or the extension of
credit by a broker-dealer to whom the Participant has submitted a notice of
exercise or otherwise indicated an intent to exercise an Option (in accordance
with part 220, Chapter II, Title 12 of the Code of Federal Regulations, a
so-called "cashless" exercise); or (5) by any combination of the foregoing.
(K) RIGHTS AS A STOCKHOLDER
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to such
Shares as have been registered in the Company's share register in the name of
such Participant upon the due exercise of the Option and tender of the full
Option price.
(L) ASSIGNABILITY AND TRANSFERABILITY OF OPTION
Unless otherwise permitted by the Code and by Rule 16b-3 of the Exchange
Act, if applicable, and approved in advance by the Committee, an Option granted
to a Participant shall not be transferable by the Participant and shall be
exercisable, during the Participant's lifetime, only by such Participant or, in
the event of the Participant's incapacity, his guardian or legal representative.
Except as otherwise permitted herein, such Option shall not be assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment, or similar process and any
attempted transfer, assignment, pledge, hypothecation or other disposition of
any Option or of any rights granted thereunder contrary to the provisions of
this Section 7(l), or the levy of any attachment or similar process upon an
Option or such rights, shall be null and void.
(M) OTHER PROVISIONS
The Award Agreement for an Incentive Option shall contain such limitations
and restrictions upon the exercise of the Option as shall be necessary in order
that such Option can be an "incentive stock option" within the meaning of
Section 422 of the Code. Further, the Award Agreements authorized under the Plan
shall be subject to such other terms and conditions including, without
limitation, restrictions upon the exercise of the Option, as the Committee shall
deem advisable and which, in the case of Incentive Options, are not inconsistent
with the requirements of Section 422 of the Code.
(N) PURCHASE FOR INVESTMENT
If Shares to be issued upon the particular exercise of an Option shall not
have been effectively registered under the Securities Act of 1933, as now in
force or hereafter amended, the Company shall be under no obligation to issue
the Shares covered by such exercise unless and until the following conditions
have been fulfilled. The person who exercises such Option shall warrant to the
Company that, at the time of such exercise, such person is acquiring his or her
Option Shares for investment and not with a view to, or for sale in connection
with, the distribution of any such Shares, and shall make such other
representations, warranties, acknowledgments, and affirmations, if any, as the
Committee may require. In such event, the person acquiring such Shares shall be
bound by the provisions of the following legend (or similar legend) which shall
be endorsed upon the certificate(s) evidencing his or her Option Shares issued
pursuant to such exercise.
B-8
<PAGE> 29
"The shares represented by this certificate have been acquired for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, in the absence of an effective registration
statement for the shares under the Securities Act of 1933 or an opinion
of counsel satisfactory to the Company that an exemption from
registration is then available."
"The shares of stock represented by this certificate are subject to all
of the terms and conditions of a certain Agreement dated as of
, , among the Company and certain of its
stockholders. A copy of the Agreement is on file in the office of the
Secretary of the Company. The Agreement provides, among other things,
for restrictions upon the holder's right to transfer the shares
represented hereby, and for certain prior rights to purchase and certain
obligations to sell the shares of common stock evidenced by this
certificate at a designated purchase price determined in accordance with
certain procedures. Any attempted transfer of these shares other than in
compliance with the Agreement shall be void and of no effect. By
accepting the shares of stock evidenced by this certificate, any
permitted transferee agrees to be bound by all of the terms and
conditions of said Agreement."
Without limiting the generality of the foregoing, the Company may delay issuance
of the Shares until completion of any action or obtaining any consent that the
Company deems necessary under any applicable law (including without limitation
state securities or "blue sky" laws).
8. REQUIRED TERMS AND CONDITIONS OF RESTRICTED STOCK
(a) The Committee may from time to time grant an Award in Shares of Common
Stock or grant an Award denominated in units of Common Stock, for such
consideration, if any, as the Committee deems appropriate (which amount may be
less than the Fair Market Value of the Common Stock on the date of the Award),
and subject to such restrictions and conditions and other terms as the Committee
may determine at the time of the Award (including, but not limited to,
continuous service with the Company or its Affiliates, achievement of specific
business objectives, increases in specified indices, attaining growth rates, and
other measurements of Company or Affiliate performance), and subject further to
the general provisions of the Plan, the applicable Award Agreement, and the
following specific rules.
(b) If Shares of Restricted Stock are awarded, such Shares cannot be
assigned, sold, transferred, pledged, or hypothecated prior to the lapse of the
restrictions applicable thereto, and, in no event, prior to six (6) months from
the date of the Award. The Company shall issue, in the name of the Participant,
stock certificates representing the total number of Shares of Restricted Stock
awarded to the Participant, as soon as may be reasonably practicable after the
grant of the Award.
(c) Restricted Stock issued to a Participant under the Plan shall be
governed by an Award Agreement that shall specify whether Shares of Common Stock
are awarded to the Participant, or whether the Award shall be one not of Shares
of Common Stock but one denominated in units of Common Stock, any consideration
required thereto, and such other provisions as the Committee shall determine.
(d) Subject to the provisions of Section 8(b) and (e) hereof and the
restrictions set forth in the related Award Agreement, the Participant receiving
an Award of Shares of Restricted Stock shall thereupon be a stockholder with
respect to all of the Shares represented by such certificate or certificates and
shall have the rights of a stockholder with respect to such Shares, including
the right to vote such Shares and to receive dividends and other distributions
made with respect to such Shares. All Common Stock received by a Participant as
the result of any dividend on the Shares of Restricted Stock, or as the result
of any stock split, stock distribution, or combination of the Shares affecting
Restricted Stock, shall be subject to the restrictions set forth in the related
Award Agreement.
(e) Restricted Stock or units of Restricted Stock awarded to a Participant
pursuant to the Plan will be forfeited, and any Shares of Restricted Stock or
units of Restricted Stock sold to a Participant pursuant to the Plan may, at the
Company's option, be resold to the Company for an amount equal to the price paid
therefor, and in either case, such Restricted Stock or units of Restricted Stock
shall revert to the Company, if the Company so determines in accordance with
Section 13 or any other condition set forth in the Award
B-9
<PAGE> 30
Agreement, or, alternatively, if the Participant's employment with the Company
or its Affiliates terminates, other than for reasons set forth in Section 12,
prior to the expiration of the forfeiture or restriction provisions set forth in
the Award Agreement.
(f) The Committee, in its discretion, shall have the power to accelerate
the date on which the restrictions contained in the Award Agreement shall lapse
with respect to any or all Restricted Stock awarded under the Plan.
(g) The Committee may prescribe such other restrictions, conditions, and
terms applicable to Restricted Stock issued to a Participant under the Plan that
are neither inconsistent with nor prohibited by the Plan or the Award Agreement,
including, without limitation, terms providing for a lapse of the restrictions
of this Section or any Award Agreement in installments.
9. REQUIRED TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
If deemed by the Committee to be in the best interests of the Company, a
Participant may be granted a Right. Each Right shall be granted subject to such
restrictions and conditions and other terms as the Committee may specify in the
Award Agreement at the time the Right is granted, subject to the general
provisions of the Plan, and the following specific rules.
(a) Rights may be granted, if at all, either singly, in combination with
another Award, or in tandem with another Award. At the time of grant of a Right,
the Committee shall specify the base price of Common Stock to be used in
connection with the calculation described in Section 9(b), provided that the
base price shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share of Common Stock on the date of grant, unless approved by the
Board.
(b) Upon exercise of a Right, which shall be not less than six (6) months
from the date of the grant, the Participant shall be entitled to receive in
accordance with Section 14, and as soon as practicable, the excess of the Fair
Market Value of one Share of Common Stock on the date of exercise over the base
price specified in such Right, multiplied by the number of Shares of Common
Stock then subject to the Right, or the portion thereof being exercised.
(c) Notwithstanding anything herein to the contrary, if the Award granted
to a Participant allows him or her to elect to cancel all or any portion of an
unexercised Option by exercising an additional or tandem Right, then the Option
price per Share of Common Stock shall be used as the base price specified in
Section 9(a) to determine the value of the Right upon such exercise and, in the
event of the exercise of such Right, the Company's obligation with respect to
such Option or portion thereof shall be discharged by payment of the Right so
exercised. In the event of such a cancellation, the number of Shares as to which
such Option was canceled shall become available for use under the Plan, less the
number of Shares, if any, received by the Participant upon such cancellation in
accordance with Section 14.
(d) A Right may be exercised only by the Participant (or, if applicable
under Section 12, by a legatee or legatees of such Right, or by the
Participant's executors, personal representatives, or distributees).
10. PERFORMANCE AWARDS
(a) A Participant may be granted an Award that is subject to performance
conditions specified by the Committee. The Committee may use business criteria
and other measures of performance it deems appropriate in establishing any
performance conditions (including, but not limited to, continuous service with
the Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance), and may exercise its discretion to reduce
or increase the amounts payable under any Award subject to performance
conditions, except as otherwise limited under Section 10(c) and (d), below, in
the case of a Performance Award intended to qualify under Code Section 162(m).
(b) Any Performance Award will be forfeited if the Company so determines in
accordance with Section 13 or any other condition set forth in the Award
Agreement, or, alternatively, if the Participant's
B-10
<PAGE> 31
employment with the Company or its Affiliates terminates, other than for reasons
set forth in Section 12, prior to the expiration of the time period over which
the performance conditions are to be measured.
(c) If the Committee determines that a Performance Award to be granted to
an employee should qualify as "performance-based compensation" for purposes of
Code Section 162(m), the grant and/or settlement of such Performance Award shall
be contingent upon achievement of preestablished performance goals and other
terms set forth in Section 10(c).
(1) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a targeted
level or levels of performance with respect to such criteria, as specified by
the Committee consistent with this Section 10(c). Performance goals shall be
objective and shall otherwise meet the requirements of Code Section 162(m),
including the requirement that the level or levels of performance targeted by
the Committee result in the performance goals being "substantially uncertain."
The Committee may determine that more than one performance goal must be achieved
as a condition to settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to different
Participants.
(2) Business Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified Affiliates or
business units of the Company (except with respect to the total stockholder
return and earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such Performance Awards: (A)
total stockholder return; (B) such total stockholder return as compared to the
total return (on a comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 or the Nasdaq-U.S. Index; (C) net
income; (D) pre-tax earnings; (E) EBITDA; (F) pre-tax operating earnings after
interest expense and before bonuses, service fees, and extraordinary or special
items; (G) operating margin; (H) earnings per share; (I) return on equity; (J)
return on capital; (K) return on investment; (L) operating income, excluding the
effect of charges for acquired in-process technology and before payment of
executive bonuses; (M) earnings per share, excluding the effect of charges for
acquired in-process technology and before payment of executive bonuses; (N)
working capital; and (O) total revenues. The foregoing business criteria also
may be used in establishing performance goals for Cash Awards granted under
Section 11 hereof.
(3) Compensation Limitation. No employee may receive a Performance Award
in excess of $1 million for any three (3) year period.
(d) Achievement of performance goals in respect of such Performance Awards
shall be measured over such periods as may be specified by the Committee.
Performance goals shall be established on or before the dates that are required
or permitted for "performance-based compensation" under Code Section 162(m).
(e) Settlement of Performance Awards may be in cash or Shares, or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards, but may not exercise discretion to increase any
such amount payable in respect of a Performance Award subject to Code Section
162(m).
11. REQUIRED TERMS AND CONDITIONS OF CASH AWARDS
(a) The Committee may from time to time authorize the award of cash
payments under the Plan to Participants, subject to such restrictions and
conditions and other terms as the Committee may determine at the time of
authorization (including, but not limited to, continuous service with the
Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance), and subject to the general provisions of
the Plan, the applicable Award Agreement, and the following specific rules.
(b) Any Cash Award will be forfeited if Company so determines in accordance
with Section 13 or any other condition set forth in the Award Agreement, or,
alternatively, if the Participant's employment with the Company or its
Affiliates terminates, other than for reasons set forth in Section 12, prior to
the attainment of any goals set forth in the Award Agreement or prior to the
expiration of the forfeiture or restriction provisions set forth in the Award
Agreement, whichever is applicable.
B-11
<PAGE> 32
(c) The Committee, in its discretion, shall have the power to change the
date on which the restrictions contained in the Award Agreement shall lapse, or
the date on which goals are to be measured, with respect to any Cash Award.
(d) Any Cash Award, if not previously forfeited, shall be payable in
accordance with Section 14 as soon as practicable after the restrictions lapse
or the goals are attained.
(e) The Committee may prescribe such other restrictions, conditions, and
terms applicable to the Cash Awards issued to a Participant under the Plan that
are neither inconsistent with nor prohibited by the Plan or the Award Agreement,
including, without limitation, terms providing for a lapse of the restrictions,
or a measurement of the goals, in installments.
12. TERMINATION OF EMPLOYMENT
Except as may otherwise be (A) provided in Section 7 for Options, (B)
provided for under the Award Agreement, or (C) permitted pursuant to Sections
12(a) and (c) (subject to the limitations under the Code for Incentive Options),
if the employment of a Participant terminates, all unexpired, unpaid,
unexercised, or deferred Awards shall be canceled immediately.
(a) Retirement under a Company or Affiliate Retirement Plan. When a
Participant's employment terminates as a result of retirement as defined under a
Company or Affiliate retirement plan but such retirement is not a Normal
Retirement as defined under the Section 2(o) of the Plan, the Committee may
permit Awards to continue in effect beyond the date of retirement in accordance
with the applicable Award Agreement, and/or the exercisability and vesting of
any Award may be accelerated.
(b) Resignation in the Best Interests of the Company or an Affiliate. When
a Participant resigns from the Company or an Affiliate and, in the judgment of
the chief executive officer or other senior officer designated by the Committee,
the acceleration and/or continuation of outstanding Awards would be in the best
interests of the Company, the Committee may (i) authorize, where appropriate,
the acceleration and/or continuation of all or any part of Awards granted prior
to such termination and (ii) permit the exercise, vesting, and payment of such
Awards for such period as may be set forth in the applicable Award Agreement,
subject to earlier cancellation pursuant to Section 13 or at such time as the
Committee shall deem the continuation of all or any part of the Participant's
Awards are not in the Company's or its Affiliate's best interests.
(c) Death or Disability of a Participant
(1) In the event of a Participant's death, the Participant's estate or
beneficiaries shall have a period up to the earlier of (A) the expiration date
specified in the Award Agreement, or (B) the expiration date specified in
Section 7(h), within which to receive or exercise any outstanding Awards held by
the Participant under such terms as may be specified in the applicable Award
Agreement. Rights to any such outstanding Awards shall pass by will or the laws
of descent and distribution in the following order: (i) to beneficiaries so
designated by the Participant; (ii) to a legal representative of the
Participant; or (iii) to the persons entitled thereto as determined by a court
of competent jurisdiction. Awards so passing shall be made at such times and in
such manner as if the Participant were living.
(2) In the event a Participant is determined by the Company to be Disabled,
and subject to the limitations of Section 7(g), Awards may be paid to, or
exercised by, the Participant, if legally competent, or by a legally designated
guardian or other representative if the Participant is legally incompetent by
virtue of such Disability.
(3) After the death or Disability of a Participant, the Committee may in
its sole discretion at any time (A) terminate restrictions in Award Agreements;
(B) accelerate any or all installments and rights; and/or (C) instruct the
Company to pay the total of any accelerated payments in a lump sum to the
Participant, the Participant's estate, beneficiaries or representative,
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Awards
ultimately might have become payable to other beneficiaries.
B-12
<PAGE> 33
13. CANCELLATION AND RESCISSION OF AWARDS
Unless the Award Agreement specifies otherwise, the Committee may cancel
any unexpired, unpaid, unexercised, or deferred Awards at any time if the
Participant is not in compliance with the applicable provisions of the Award
Agreement, the Plan, or with the following conditions:
(a) A Participant shall not breach any protective agreement entered
into between him or her and the Company or any Affiliates, or render
services for any organization or engage directly or indirectly in any
business which, in the judgment of the chief executive officer of the
Company or other senior officer designated by the Committee, is or becomes
competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes
otherwise prejudicial to or in conflict with the interests of the Company.
For a Participant whose employment has terminated, the judgment of the
chief executive officer shall be based on terms of the protective
agreement, if applicable, or on the Participant's position and
responsibilities while employed by the Company or its Affiliates, the
Participant's post-employment responsibilities and position with the other
organization or business, the extent of past, current, and potential
competition or conflict between the Company and other organization or
business, the effect of the Participant's assuming the post-employment
position on the Company's or its Affiliate's customers, suppliers,
investors, and competitors, and such other considerations as are deemed
relevant given the applicable facts and circumstances. A Participant may,
however, purchase as an investment or otherwise, stock or other securities
of any organization or business so long as they are listed upon a
recognized securities exchange or traded over-the-counter, and such
investment does not represent a substantial investment to the Participant
or a greater than one percent (1%) equity interest in the organization or
business.
(b) A Participant shall not, without prior written authorization from
the Company, disclose to anyone outside the Company or its Affiliates, or
use in other than the Company's or Affiliate's business, any confidential
information or materials relating to the business of the Company or its
Affiliates, acquired by the Participant either during or after employment
with the Company or its Affiliates.
(c) A Participant shall disclose promptly and assign to the Company
all right, title, and interest in any invention or idea, patentable or not,
made or conceived by the Participant during employment with the Company or
an Affiliate, relating in any manner to the actual or anticipated business,
research, or development work of the Company or its Affiliates, and shall
do anything reasonably necessary to enable the Company or its Affiliates to
secure a patent, trademark, copyright, or other protectable interest where
appropriate in the United States and in foreign countries.
Upon exercise, payment, or delivery pursuant to an Award, the Participant
shall certify on a form acceptable to the Committee that he or she is in
compliance with the terms and conditions of the Plan, including the provisions
of Sections 13(a), (b) or (c). Failure to comply with the provisions of Sections
13(a), (b) or (c) prior to, or during the one (1) year period after, any
exercise, payment, or delivery pursuant to an Award shall cause such exercise,
payment, or delivery to be rescinded. The Company shall notify the Participant
in writing of any such rescission within two (2) years after such exercise,
payment, or delivery. Within ten (10) days after receiving such a notice from
the Company, the Participant shall pay to the Company the amount of any gain
realized or payment received as a result of the rescinded exercise, payment, or
delivery pursuant to the Award. Such payment shall be made either in cash or by
returning to the Company the number of Shares of Common Stock that the
Participant received in connection with the rescinded exercise, payment, or
delivery.
14. PAYMENT OF RESTRICTED STOCK, RIGHTS, PERFORMANCE
AWARDS AND CASH AWARDS
Payment of Restricted Stock, Rights, Performance Awards and Cash Awards may
be made, as the Committee shall specify, in the form of cash, Shares of Common
Stock, or combinations thereof; provided, however, that a fractional Share of
Common Stock shall be paid in cash equal to the Fair Market Value of the
fractional Share of Common Stock at the time of payment.
B-13
<PAGE> 34
15. WITHHOLDING
Except as otherwise provided by the Committee,
(a) The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan; and
(b) In the case of payments of Awards, or upon any other taxable event
hereunder, a Participant may elect, subject to the approval in advance by the
Committee, to satisfy the withholding requirement, if any, in whole or in part,
by having the Company withhold Shares of Common Stock that would otherwise be
transferred to the Participant having a Fair Market Value, on the date the tax
is to be determined, equal to the minimum marginal tax that could be imposed on
the transaction. All elections shall be made in writing and signed by the
Participant.
16. SAVINGS CLAUSE
This Plan is intended to comply in all respects with applicable law and
regulations, including, (A) with respect to those Participants who are officers
or directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission, if applicable, and (B) with respect to
executive officers, Code Section 162(m). In case any one or more provisions of
this Plan shall be held invalid, illegal, or unenforceable in any respect under
applicable law and regulation (including Rule 16b-3 and Code Section 162(m)),
the validity, legality, and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby and the invalid, illegal, or
unenforceable provision shall be deemed null and void; however, to the extent
permitted by law, any provision that could be deemed null and void shall first
be construed, interpreted, or revised retroactively to permit this Plan to be
construed in compliance with all applicable law (including Rule 16b-3 and Code
Section 162(m)) so as to foster the intent of this Plan. Notwithstanding
anything herein to the contrary, with respect to Participants who are officers
and directors for purposes of Section 16 of the Exchange Act, if applicable, and
if required to comply with rules promulgated thereunder, no grant of, or Option
to purchase, Shares shall permit unrestricted ownership of Shares by the
Participant for at least six (6) months from the date of grant or Option, unless
the Board determines that the grant of, or Option to purchase, Shares otherwise
satisfies the then current Rule 16b-3 requirements.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS
In the event that the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value, stock
split, combination of shares or dividends payable in capital stock, or the like,
appropriate adjustments to prevent dilution or enlargement of the Awards granted
to, or available for, Participants shall be made in the manner and kind of
Shares for the purchase of which Awards may be granted under the Plan, and, in
addition, appropriate adjustment shall be made in the number and kind of Shares
and in the Option price per share subject to outstanding Options. The foregoing
notwithstanding, no such adjustment shall be made in an Incentive Option which
shall, within the meaning of Section 424 of the Code, constitute such a
modification, extension, or renewal of an Option as to cause it to be considered
as the grant of a new Option.
Notwithstanding anything herein to the contrary, the Company may, in its
sole discretion, accelerate the timing of the exercise provisions of any Award
in the event of a tender offer for the Company's Shares, the adoption of a plan
of merger or consolidation under which a majority of the Shares of the Company
would be eliminated, or a sale of all or any portion of the Company's assets or
capital stock. Alternatively, the Company may, in its sole discretion, cancel
any or all Awards upon any of the foregoing events and provide for the payment
to Participants in cash of an amount equal to the value or appreciated value,
whichever is applicable, of the Award, as determined in good faith by the
Committee, at the close of business on the date of such event. The preceding two
sentences of this Section 17 notwithstanding, the Company shall be required to
accelerate the timing of the exercise provisions of any Award if (i) any such
business combination is to be
B-14
<PAGE> 35
accounted for as a pooling-of-interests under APB Opinion 16 and (ii) the timing
of such acceleration does not prevent such pooling-of-interests treatment.
Upon a business combination by the Company or any of its Affiliates with
any corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees or directors of, or consultants or advisors
to, the Company or its Affiliates. The number of Shares subject to such
substitute Options shall be determined in accordance with the terms of the
transaction by which the business combination is effected. Notwithstanding the
other provisions of this Plan, the other terms of such substitute Options shall
be substantially the same as or economically equivalent to the terms of the
options for which such Options are substituted, all as determined by the Board
or by the Committee, as the case may be. Upon the grant of substitute Options
pursuant hereto, the options to purchase securities of such other corporation or
entity for which such Options are substituted shall be cancelled immediately.
18. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in connection
with a transaction to which Section 17 is applicable, all Awards granted
hereunder shall terminate and become null and void; provided, however, that if
the rights of a Participant under the applicable Award have not otherwise
terminated and expired, the Participant may, if the Committee, in its sole
discretion, so permits, have the right immediately prior to such dissolution or
liquidation to exercise any Award granted hereunder to the extent that the right
thereunder has become exercisable as of the date immediately prior to such
dissolution or liquidation.
19. TERMINATION OF THE PLAN
The Plan shall terminate (10) years from the earlier of the date of its
adoption by the Board or the date of its approval by the stockholders. The Plan
may be terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any Award
Agreements executed prior to the effective date of such termination.
Notwithstanding anything in this Plan to the contrary, any Options granted prior
to the effective date of the Plan's termination may be exercised until the
earlier of (A) the date set forth in the Award Agreement, or (B) in the case of
an Incentive Option, ten (10) years from the date the Option is granted; and the
provisions of the Plan with respect to the full and final authority of the
Committee under the Plan shall continue to control.
20. AMENDMENT OF THE PLAN
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any amendment that
(A) increases the numbers of Shares that may be granted under this Plan, other
than as provided by Section 17, (B) materially modifies the requirements as to
eligibility to participate in the Plan, (C) materially increases the benefits to
Participants, (iv) extends the period during which Incentive Options may be
granted or exercised, or (v) changes the designation of the class of employees
eligible to receive Incentive Options, or otherwise causes the Incentive Options
to no longer qualify as "incentive stock options" as defined in Section 422 of
the Code, also shall be subject to the approval of the stockholders of the
Company within one (1) year either before or after such adoption by the Board,
subject to the requirements of Section 16 of the Plan.
21. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to prevent a
Participant from terminating the Participant's employment with the Company or an
Affiliate.
B-15
<PAGE> 36
22. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken by them as
directors or members of the Committee and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Board) or paid
by them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that the director or Committee member is liable for gross
negligence or willful misconduct in the performance of his or her duties. To
receive such indemnification, a director or Committee member must first offer in
writing to the Company the opportunity, at its own expense, to defend any such
action, suit or proceeding.
23. UNFUNDED PLAN
Insofar as it provides for payments in cash in accordance with Section 14,
or otherwise, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Common Stock,
or rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock, or rights
thereto, nor shall the Plan be construed as providing for such segregation, nor
shall the Company, the Board, or the Committee be deemed to be a trustee of any
cash, Common Stock, or rights thereto to be granted under the Plan. Any
liability of the Company to any Participant with respect to a grant of cash,
Common Stock, or rights thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award Agreement;
no such obligation of the Company shall be deemed to be secured by any pledge or
other encumbrance on any property of the Company. Neither the Company nor the
Board nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.
24. MITIGATION OF EXCISE TAX
If any payment or right accruing to a Participant under this Plan (without
the application of this Section 24), either alone or together with other
payments or rights accruing to the Participant from the Company or an Affiliate,
would constitute a "parachute payment" (as defined in Section 280G of the Code
and regulations thereunder), such payment or right shall be reduced to the
largest amount or greatest right that will result in no portion of the amount
payable or right accruing under the Plan being subject to an excise tax under
Section 4999 of the Code or being disallowed as a deduction under Section 280G
of the Code. The determination of whether any reduction in the rights or
payments under this Plan is to apply shall be made by the Company. The
Participant shall cooperate in good faith with the Company in making such
determination and providing any necessary information for this purpose.
25. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board, provided that
the Plan is approved by the stockholders of the Company before or at the
Company's next annual meeting, but in no event shall stockholder approval be
sought more than one (1) year after such adoption by the Board.
26. GOVERNING LAW
This Plan shall be governed by the laws of the State of Illinois and
construed in accordance therewith.
Adopted this 24th day of January, 1997.
B-16
<PAGE> 37
PROXY/VOTING INSTRUCTION CARD
USFREIGHTWAYS CORPORATION
9700 W. Higgins, Suite 570 - Rosemont, Illinois 60018
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON MAY 2, 1997.
The undersigned appoints J. Campbell Carruth and Christopher L. Ellis as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of USFreightways Corporation held of record by the undersigned on March
11, 1997, at the Annual Meeting of Stockholders to be held on May 2, 1997 or
any adjournment thereof, and in their discretion, the Proxies are authorized to
voted upon such other business as may properly come before the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED, FOR APPROVAL OF THE
AMENDMENTS TO THE STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS AND FOR APPROVAL
OF THE USFREIGHTWAYS CORPORATION LONG-TERM INCENTIVE PLAN.
You are encouraged to specify your choices by marking the appropriate box on
the reverse side.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE.
USFREIGHTWAYS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
[ ]
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 and 3.
<S><C>
FOR ALL
FOR WITHHELD EXCEPT FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS / / / / / / 2. Amendments to the / / / / / /
Stock Option Plan
Nominees: ------------------ for Non-Employee Directors
Robert V. Delaney and Robert P. Neushel Nominee Exception
FOR AGAINST ABSTAIN
3. Approval of the / / / / / /
USFreightways
Corporation Long-Term
Incentive Plan.
This Proxy when properly executed will be voted
in the manner directed herein by the undersigned
stockholder(s).
------------------------------------------------
Signature(s)
------------------------------------------------
Signature(s)
Dated:
------------------------------------------
Note: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. The signer hereby revokes all proxies heretofore given by the
signer to vote at said meeting or any adjournment thereof.
</TABLE>
