SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________
TO ______________.
Commission file number 0-19791
USFREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3790696
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8550 W. Bryn Mawr Ave., Ste. 700, Chicago, Il. 60631
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (773) 824-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange of which registered
Common Stock $.01 Par Value NASDAQ
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
6 5/8 % Notes Due May 1, 2000
6 1/2 % Notes Due May 1, 2009
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. __X____ Yes________No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K ___.
The number of shares of common stock outstanding at March 16, 2000 was
26,514,571. The aggregate market value of the voting stock of the registrant as
of March 13, 2000 was approximately $961,153,199.
DOCUMENTS INCORPORATED BY REFERENCE
1) 1999 Annual Report to Shareholders for the Fiscal Year Ended December 31,
1999 (Only those portions referenced herein are incorporated in this Form
10-K).
2) Proxy Statement to be filed on or about March 23, 2000 (Only those portions
referenced herein are incorporated in this Form 10-K).
Page 2
USFreightays Corporation
Form 10-K
Fiscal Year Ended December 31, 1999
PART I
Item 1. Business
Background
USFreightways Corporation ("the Company") provides comprehensive supply
chain management services. This is accomplished through the Company's operating
subsidiaries. Regional less-than-truckload ("LTL") general commodities carriers
provide overnight and second-day delivery throughout the United States and into
Canada. Logistics subsidiaries provide integrated supply chain solutions, value
added logistics solutions, reverse logistics services and software and complete
warehouse fulfillment services to its customers. The Company also provides
domestic and international freight forwarding, import and export air and ocean
services as well as premium regional and national truckload ("TL") service.
Principal subsidiaries in the Regional LTL group are USF Holland Inc.
("Holland"), USF Bestway Inc. ("Bestway"), USF Red Star Inc. ("Red Star"), USF
Reddaway Inc. ("Reddaway") and USF Dugan Inc. ("Dugan"); the Logistics group
consists of USF Logistics Inc. ("Logistics"), USF Processors Inc ("Processors")
and USF Distribution Services Inc. ("Distribution Services"); the Freight
Forwarding group includes several companies that all now trade under the name
USF Worldwide Inc. ("Worldwide"); USF Glen Moore Transport Inc. ("Glen Moore")
is the Company's TL carrier.
The Company traces its origins to 1984 when TNT Limited, through its wholly
owned subsidiary TNT Transport Group ("Transport Group"), embarked on a strategy
to establish, through acquisition, a nationwide network of quality regional LTL
carriers. During the same period, the group of businesses that now constitute
the Company also grew as a result of internal expansion and increased
penetration of existing markets. In April 1991 the Company was incorporated as a
holding company for regional trucking companies of Transport Group.
During February 1992 the shareholders of the Company sold 19,593,750 shares
of common stock through an initial public offering for which the proceeds were
paid to Transport Group. In a subsequent transaction in 1993, the Company
purchased from Transport Group all its remaining shares in the Company.
On May 6, 1993 the Company issued, through a public offering, 6 5/8% Notes
in the principal amount of $100,000,000 due May 1, 2000. The proceeds from this
issuance were, in part, used to repay borrowings under existing revolving lines
of credit which were partially used to acquire the common stock from Transport
Group.
On May 1, 1999 the Company issued, through a public offering, 6 1/2%
Guaranteed Unsecured Notes in the principal amount of $100,000,000 due May 1,
2009. The proceeds from this issuance were, in large part, used to repay
borrowings under existing revolving lines of credit.
In February 1997, the Company sold 3,105,000 of its shares in a public
offering. The net proceeds from the sale, amounting to approximately $69,431,000
were initially used to repay outstanding debt under the Company's revolving
credit facility.
During 1998, under the purchase method of accounting, the Company acquired
all of the outstanding shares of Golden Eagle Group, Inc., an international
freight forwarding company; Glen Moore Transport, Inc., a truckload freight
carrier; Moore and Son Co., a transportation logistics services company; and the
general commodities business of Vallerie's Transportation Service, Inc. for a
total of $66,379,000 of cash and debt incurred.
During 1999, under the purchase method of accounting, the Company acquired
all of the outstanding shares of Processors Unlimited Company, Ltd., a provider
of reverse logistics services to the grocery and drug industries; Special
Dispatch of Dallas, Inc., a Texas based provider of assembly and distributions
services; Cuxhaven Group, Inc., a domestic freight forwarding company and former
Baltimore, MD agent for Worldwide; Airgo, Inc., a domestic freight forwarding
company and former Seattle, WA agent for Worldwide; Scan Trans, Inc. a domestic
freight forwarding company and former San Francisco, CA agent for Worldwide;
Pace Transportation, Ltd., a domestic freight forwarding company and former
Baltimore, MD agent for Worldwide; Best Ways Air Cargo, a Puerto Rico-based air
freight forwarder and Underwood Trucking, an Indiana -based truckload carrier.
The Company also purchased the general commodities business of CBL Trucking
Inc., a Mid-Atlantic and New England LTL carrier; certain assets of Gulf
International Freight, a domestic freight forwarding company and certain assets
of Pre Trans, a Puerto Rico business unit of Caro Trans International that
provides ocean services. Total consideration for all Fiscal 1999 acquisitions
amounted to $52,054,000 of cash and debt incurred.
PAGE 3
Following is a table depicting revenue by LTL trucking, TL trucking,
Logistics, Freight forwarding and Corporate and other segments for each of the
most recent three fiscal years:
Revenue ($ in millions)
Fiscal Year 1997 % 1998 % 1999 %
------ --- ------ --- ------ ---
LTL trucking $1,409 90.0 $1,540 83.9 $1,746 78.6
TL trucking 13 0.7 44 2.0
Logistics 106 6.8 130 7.1 207 9.3
Freight forwarding 44 2.8 152 8.3 225 10.1
Corporate and other 6 0.4 - 0.0 -
------ ---- ------ ---- ------ -----
Total $1,565 100.0 $1,835 100.0 $2,222 100.0
------ ----- ------ ----- ------ -----
Regional LTL Trucking
LTL shipments are defined as shipments of less than 10,000 pounds.
Typically, LTL carriers transport freight along scheduled routes from multiple
shippers to multiple consignees utilizing a network of terminals together with
fleets of line-haul and pickup and delivery tractors and trailers. Freight is
picked up from customers by local drivers and consolidated for shipment. The
freight is then loaded into intercity trailers and transferred by line-haul
drivers to the terminal servicing the delivery area. There, the freight is
transferred to local trailers and delivered to its destination by local drivers.
LTL operators are generally categorized as either regional, interregional
or long-haul carriers, depending on the distance freight travels from pickup to
final delivery. Regional carriers usually have average lengths of haul of 500
miles or less and tend to provide either overnight or second day service.
Regional LTL carriers usually are able to load freight for direct transport to a
destination terminal, thereby avoiding the costly and time-consuming use of
breakbulk terminals (where freight is rehandled and reloaded to its ultimate
destination). In contrast, long-haul LTL carriers (average lengths of haul in
excess of 1,000 miles) operate networks of breakbulk and satellite terminals
(hub-spoke systems) and rely heavily on interim handling of freight.
Interregional carriers (500 to 1,000 miles per average haul) also rely on
breakbulk terminals but to a lesser degree than long-haul carriers.
Regional LTL carriers, including the Company's LTL trucking subsidiaries,
principally compete against other regional LTL carriers. To a lesser extent,
they compete against interregional and long-haul LTL carriers. To an even lesser
degree, regional LTL transporters compete against truckload carriers, overnight
package companies, railroads and airlines. Significant barriers to entry into
the regional LTL market exist as a result of the substantial capital
requirements for terminals and revenue equipment and the need for a large,
well-coordinated and skilled work force.
In the competitive environment of each of the Company's LTL trucking
subsidiaries, most LTL carriers have adopted discounting programs that severely
reduce prices paid by some shippers. Additionally, when new LTL competitors
enter a geographic region, they often utilize discounted prices to lure
customers away from the Company's trucking subsidiaries. Such attempts to gain
market share through price reduction programs exert downward pressure on the
industry's price structure and profit margins and have caused many LTL carriers
to cease operations.
PAGE 4
The LTL Trucking Subsidiaries
The following is a brief description of the Company's LTL regional trucking
subsidiaries. Statistical information for subsidiary's operations is reported in
the Company's 1999 Annual Report to the Shareholders, and is incorporated by
reference in this Form 10-K as page F22 of Exhibit 13.
USF Holland is the largest of the Company's operating subsidiaries,
transporting LTL shipments interstate throughout the central United States and
into the Southeast. USF Holland uses predominantly single 48 foot trailers. The
average length of line-haul in the year ended December 31, 1999 was
approximately 390 miles.
USF Red Star operates in the eastern United States, as well as to and from
eastern Canada. USF Red Star uses a combination of single and double trailers.
The average length of line-haul in the year ended December 31, 1999 was
approximately 290 miles. USF Red Star operates in an environment characterized
by intense price competition.
USF Bestway operates throughout the southwest region of the United States
from Texas to California. USF Bestway uses double trailers in its operations.
For the year ended December 31, 1999 the average length of line-haul for USF
Bestway was approximately 414 miles.
USF Reddaway provides LTL carriage along the I-5 corridor from California
to Washington, throughout the northwest United States and into western Canada
and Alaska. The average length of line-haul for the year ended December 31, 1999
was approximately 602 miles. USF Reddaway operates double trailers and, where
possible, triple trailer combinations.
USF Dugan provides service to the Plains states and into the southern
states from Texas to Florida. USF Dugan operates with double and triple
trailers, and the average length of line-haul for the year ended December 31,
1999 was approximately 551 miles.
PAGE 5
Truckload Trucking
TL shipments are defined as shipments of 10,000 or more pounds. Typically,
TL carriers transport freight along irregular routes from single shippers to
single consignees, without the necessity of a network of terminals, together
with fleets of line-haul sleeper tractors and trailers. Consolidated full
truckload freight is picked up from the customer and delivered to its final
destination by either a company long-haul driver or an independent owner-
operator that has a leasing agreement with the carrier.
TL operators are generally categorized as long-haul carriers and to a
lesser degree interregional depending on the distance freight travels from
pickup to final delivery. The average length of haul for most TL operators is in
excess of 1,000 miles.
TL carriers, including the Company's trucking subsidiary, principally
compete against other TL carriers and to some extent the railroads. TL carriers
generally do not compete against LTL carriers. Barriers to entry into the TL
market exist as a result of substantial capital requirements for revenue
equipment and the need for a well-coordinated and skilled work force. The work
force and revenue equipment requirements, to some degree, can be offset through
the leasing of independent contractors that own their equipment. This work force
is not as controllable as the company employee work force.
In the competitive environment of the Company's TL trucking subsidiary,
most TL carriers have adopted discounting programs that severely reduce prices
paid by some shippers. Additionally, when new TL competitors enter the business,
they often utilize discounted prices to lure customers away from the Company's
TL trucking subsidiary. Such attempts to gain market share through price
reduction programs exert downward pressure on the industry's price structure and
profit margins and have caused TL carriers to cease operations.
The TL Trucking Subsidiary
The following is a brief description of the Company's TL trucking
subsidiary. Statistical information for subsidiary's operations is reported in
the Company's 1999 Annual Report to the Shareholders, and is incorporated by
reference in this Form 10-K as page F22 of Exhibit 13.
Glen Moore is the Company's TL subsidiary, transporting TL shipments
interstate throughout the United States generally from the Northeast and
Southeast states to the West coast and into the North Central states.Glen Moore
primarily utilizes sleeper line-haul tractors and 53 foot trailers. Glen Moore's
average length of haul is approximately 1,000 miles.
On August 2, 1999, Glen Moore acquired Underwood Trucking ("Underwood") an
Indiana based TL carrier which was merged into Glen Moore. At the acquisition
date, Underwood was operating approximately 50 tractors and 250 trailers. For
the five months since its acquisition, Underwood has contributed approximately
$1.4 million in revenue. At the end of the current fiscal year, Glen Moore
operated 288 tractors (mainly sleeper units) and 864 trailers.
On January 10, 2000, Glen Moore acquired Tri-Star Transportation, a
Tennessee based TL carrier. Tri-Star operates 170 tractor/trailer units and
while not included in the Company's Fiscal 1999 revenue, generated $28 million
in revenue for 1999, with approximately two-thirds coming from dedicated fleet
operations.
The Logistics Subsidiaries
Logistics subsidiaries provide integrated supply chain solutions, value
added logistics solutions, reverse logistics services and software and complete
warehouse fulfillment services to its customers. These activities are conducted
through USF Logistics, which provides integrated supply chain solutions for its
clients including transportation, warehousing, cross-docking, product
reconfiguration and reverse logistics; USF Distribution Services a national
provider of value-added logistics services to the retail and industrial markets
with a particular focus on consolidation/distribution and fulfillment programs.
On March 1, 1999, USF Logistics acquired Processors Unlimited Company,
Ltd., a Dallas, TX based provider of reverse logistics services and software to
manufacturers, distributors and retailers. In October, 1999, Processors changed
its name to USF Processors. USF Processors currently operates from approximately
60 sites across the country, has in excess of 1,300 employees and contributed
approximately $43.6 million in revenue since its acquisition.
In July 1999, USF Distribution Services acquired Special Dispatch of
Dallas, Inc., a Texas based provider of overnight distribution and consolidation
services to all points in north, central and western Texas. Since its
acquisition, Special Dispatch has contributed approximately $3.7 million in
revenue.
PAGE 6
The Freight Forwarding Subsidiary
The Company is engaged, through its subsidiary USF Worldwide, in providing
domestic and international freight forwarding for its customers which includes
air freight services, import and export air and ocean services and customs house
brokerage services.
During 1999, USF Worldwide acquired three of its former agent owned
stations and converted them into company owned stations in key gateway cities.
USF Worldwide acquired two other companies, located in key gateway cities, and
converted them to company owned stations. In order to expand its services into
the growing Caribbean market, USF Worldwide also acquired a Puerto Rico based
air freight forwarder and a Puerto Rico based Non-vessel operating common
carrier.
In October 1999, USF Worldwide formed a partnership under the trading name
USF Asia Group. USF Asia Group, based in Hong Kong, provides sea/air
consolidation, local forwarding, customs clearance, NVOCC and warehousing and
distribution services to companies doing business to and from or within the
Asia-Pacific region.
Terminals for Regional LTL Trucking
The Company's 241 terminals are a key element in the operation of its
regional trucklines. The terminals vary significantly in size according to the
markets served. Sales personnel at each terminal are responsible for soliciting
new business. Each terminal maintains a team of dispatchers who communicate with
customers and coordinate local pickup and delivery drivers. Terminals also
maintain teams of dock workers, line-haul drivers and administrative personnel.
The larger terminals also have maintenance facilities and mechanics. Each
terminal is directed by a terminal manager who has general supervisory
responsibilities and also plays an important role in monitoring costs and
service quality.
Revenue Equipment
At December 31, 1999 the Company operated 9,019 tractors and 20,720
trailers. Each trucking subsidiary selects its own revenue equipment to suit the
conditions prevailing in its region, such as terrain, climate, and average
length of line-haul. Tractors and trailers are built to standard specifications
and generally are not modified to fit special customer situations.
Each trucking subsidiary has a comprehensive preventive maintenance program
for its tractors and trailers to minimize equipment downtime and prolong
equipment life. Repairs and maintenance are performed regularly at the
subsidiaries' facilities and at independent contract maintenance facilities.
The Company replaces tractors and trailers based on factors such as age and
condition, the market for equipment and improvements in technology and fuel
efficiency. At December 31, 1999 the average age of the Company's line-haul
tractors was 3.6 years and the average age of its line-haul trailers was 7.1
years. Older line-haul tractors are often assigned to pickup and delivery
operations, which are generally operated at lower speeds and over shorter
distances, allowing the Company to extend the life of line-haul tractors and
improve asset utilization. The average age of the Company's pickup and delivery
tractors at December 31, 1999 was 8.6 years.
Sales and Marketing
Sales personnel as well as senior management at each subsidiary are
responsible for soliciting new business and maintaining good customer relations.
In addition, the Company maintains a corporate sales and marketing department
consisting of 21 professionals who are assigned major accounts within specified
geographic regions of the continental United States. These corporate sales
managers solicit business for the regional trucklines from distribution and
logistics executives of large shippers. In many cases, targeted corporations
maintain centralized control of multiple shipping and receiving locations.
PAGE 7
Seasonality
The Company's results, consistent with the trucking and air freight
industry in general, show seasonal patterns with tonnage and revenue declining
during the winter months and, to a lesser degree, during vacation periods in the
summer. Furthermore, inclement weather in the winter months can further
negatively affect the Company's results.
Customers
The Company is not dependent upon any particular industry and provides
services to a wide variety of customers including many large, publicly held
companies. During the year ended December 31, 1999 no single customer accounted
for more than two percent of the Company's operating revenue and the Company's
ten largest customers as a group accounted for approximately nine percent of
total operating revenue. Many of the national account customers use more than
one of the Company's regional trucklines for their transportation requirements.
Cooperation Among Trucklines
The Company's subsidiaries cooperate with each other to market and provide
services along certain routes running between their regions. In such
circumstances, the trucklines jointly price their service and then divide
revenue in proportion to the amount of carriage provided by each company or
based on predetermined formulae.
Information Technology
Each of the Company's operating subsidiaries maintains its own management
information systems and freight tracking and data processing capabilities. These
systems vary in sophistication in accordance with the size of each operation and
the demands of its customers. Software systems are shared among the regional
trucklines where sharing is efficient and appropriate.
Year 2000
During Fiscal 1999, the Company completed remediation and testing of its
business critical systems in order to ensure a smooth transition to the Year
2000. The Company expended approximately $2 million to ensure it was Year 2000
compliant. The Company experienced no measurable business interruptions at the
onset of the Year 2000, but continues to monitor its business critical systems
for possible Year 2000 failures.
Fuel
The motor carrier industry is dependent upon the availability of diesel
fuel. Shortages of fuel, increases in fuel costs or fuel taxes, or rationing of
petroleum products could have a material adverse effect on the profitability of
the Company. The Company's LTL regional trucking subsidiaries maintained a fuel
surcharge, which was implemented during Fiscal 1996, throughout most of Fiscal
1997 to partially offset an increase in fuel prices. Fuel prices, during Fiscal
1998, were generally lower than they have been in the prior two years. Due to
rising fuel prices, the Company's LTL regional trucking subisiiaries reinstated
a fuel surcharge in the third quarter of Fiscal 1999 which is still in effect in
March 2000. Fuel expense (net of fuel surcharges), as a percentage of revenue,
approximated from 2.5 to 4.1% during Fiscal 1999 at the Company's LTL trucking
subsidiaries. Fuel and fuel tax expense in the Company's TL subsidiary, as a
percentage of revenue, approximated 14% during Fiscal 1999. Fuel surcharges in
the TL industry are more difficult to implement and collect. In most cases, TL
operators generally recover the increases in fuel costs through increases in
rates charged for its services. The Company has not experienced any difficulty
in maintaining fuel supplies sufficient to support its operations.
Regulation
In August 1994, two pieces of legislation passed the Congress and were
signed into law that greatly affected the trucking industry. The Trucking
Industry Regulatory Reform Act ("TIRRA") reduced the ICC's authority over motor
carriers by eliminating the tariff-filing requirement for motor common carriers
using individually determined rates, classifications, rules or practices. Under
TIRRA, motor carriers are still required to provide shippers, if requested, with
a copy of the rate, classification, rules or practices of the carrier. Also,
Title VI of the Federal Aviation Administration Authorization Act of 1994 ("the
1994 Act") effectively prohibited state economic regulation of all trucking
operations for motor carriers. The 1994 Act does allow the states to continue
regulation of safety and insurance programs, including carrier inspections. On
December 29, 1995, President Clinton signed the Interstate Commerce Commission
Termination Act of 1995 ("ICCTA") which abolished the ICC as of January 1, 1996
and transferred its residual functions to the Federal Highway Administration and
a newly created Surface Transportation Board within the U. S. Department of
Transportation. Congress has prescribed a transition period during which
regulations implementing the ICCTA including insurance and safety issues must be
promulgated by the Secretary of Transportation.
PAGE 8
The trucking industry remains subject to the possibility of regulatory and
legislative changes that can influence operating practices and the demands for
and the costs of providing services to shippers.
Interstate motor carrier operations are subject to safety requirements
prescribed by the U.S. Department of Transportation ("DOT"), while such matters
as the weight and dimensions of equipment are also subject to Federal and state
regulations. Effective April 1, 1992, truck drivers were required to be
commercial vehicle licensed in compliance with the DOT, and legislation subjects
them to strict drug testing standards. These requirements increase the safety
standards for conducting operations, but add administrative costs and have
affected the availability of qualified, safety conscious drivers throughout the
trucking industry.
The Company uses underground storage tanks at certain terminal facilities and
maintains a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected, the Company takes prompt remedial
action to remove the contaminants.
Insurance and Safety
One of the risk areas in the Company's businesses is cargo loss and damage,
bodily injury, property damage and workers' compensation. The Company is
effectively self-insured on its significant operations up to $2 million per
occurrence for cargo loss and damage, bodily injury and property damage. The
Company is also predominantly self-insured for workers' compensation for amounts
to $1 million per occurrence. Additionally, the Company insures workers'
compensation for amounts in excess of $1 million per occurrence and all other
losses in excess of $2 million.
Each operating subsidiary employs safety specialists and maintains safety
programs designed to meet its specific needs. In addition, the Company employs
specialists to perform compliance checks and conduct safety tests throughout the
Company's operations. The Company's safety record to date has been good.
Employees
At December 31, 1999 the Company employed 22,612 persons, of whom 13,062
were drivers, 2,946 were dock workers, and the balance support personnel,
including office workers, managers and administrators. Approximately 47 percent
of all employees were members of unions. Approximately 89 percent of these union
workers were employed by USF Holland or USF Red Star and belonged to the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America (the "IBT"). Members of the IBT at USF Holland and USF Red Star are
presently working under the terms of a five-year, industry-wide labor agreement
that expires in March 2003.
Item 2. Properties
In March, 2000, the Company rrelocated its executive offices to 8550 West
Bryn Mawr Ave, Ste. 700, Chicago, IL 60631. The Company's 27,500 square foot
facility is occupied under a lease terminating in August 2008.
Each of the Company's operating subsidiaries also maintains a head office
as well as numerous operating facilities. Of the 241 regional LTL trucking
terminal facilities used by the Company as of December 31, 1999, 109 were owned
and 132 were leased. These facilities range in size according to the markets
served. The Company has not experienced and does not anticipate difficulties in
renewing existing leases on favorable terms or obtaining new facilities as and
when required.
PAGE 9
Item 3. Legal Proceedings
The Company is a party to a number of proceedings brought under the
Comprehensive Environmental Response, Compensation and Liability Act, (CERCLA).
The Company has been made a party to these proceedings as an alleged generator
of waste disposed of at hazardous waste disposal sites. In each case, the
Government alleges that the parties are jointly and severally liable for the
cleanup costs. Although joint and several liability is alleged, these
proceedings are frequently resolved on the basis of the quantity of waste
disposed of at the site by the generator. The Company's potential liability
varies greatly from site to site. For some sites the potential liability is de
minimis and for others the costs of cleanup have not yet been determined. While
it is not feasible to predict or determine the outcome of these proceedings or
similar proceedings brought by state agencies or private litigants, in the
opinion of management, the ultimate recovery or liability, if any, resulting
from such litigation, individually or in the aggregate, will not materially
adversely affect the Company's financial condition or results of operations and,
to the Company's best knowledge, such liability, if any, will represent less
than 1% of its revenues.
STEVEN MARK WHITWORTH V. TNT BESTWAY TRANSPORTATION, INC. F/K/A TNT BESTWAY
INC. AND WILLIAM ORR, CASE NO. 96-3935-A, 14TH JUDICIAL DISTRICT COURT, DALLAS
COUNTY, TEXAS.
On April 19, 1996, Steven Mark Whitworth ("Plaintiff") a former employee of
USF Bestway Inc. ("USF Bestway"), a subsidiary of the Company, brought suit
against USF Bestway and one of its employees, alleging claims of fraud and
promissory estoppel arising from Plaintiff's previous employment as a driver
with USF Bestway.
On June 10, 1999, the Court of Appeals, Fifth District, Texas, issued an
opinion reversing the trial court's grant of summary judgement in favor of the
plaintiff, and remanding the case back to the trial court for a new trial on the
merits. Plaintiff has sought review by the Texas Supreme Court of the decision
of the Texas Court of Appeals reversing its judgement. That request for review
was denied in an order released on March 2,2000. The plaintiff has until March
17, 2000 to file a motion for rehearing. On December 27, 1999, the plaintiff
filed a petition for relief under Chapter 13 of the United States Bankruptcy
Code. Texas state rules of procedure may impose a stay on the plaintiff's state
action as a result of the bankruptcy. The Company believes that the action will
not have a material adverse effect on the Company's financial condition.
Also, the Company is involved in other litigation arising in the ordinary
course of business, primarily involving claims for bodily injuries and property
damage. In the opinion of management, the ultimate recovery or liability, if
any, resulting from such litigation, individually or in the aggregate, will not
materially adversely affect the Company's financial condition or results of
operations.
PAGE 10
PART II
Item 5. Market for the Company's Common Stock and related Stockholder Matters
The Company's common stock trades on The NASDAQ Stock Market under the
symbol: USFC. On February 15, 2000 there were approximately 12,000 beneficial
holders of the Company's common stock. For the high and low sales prices for the
common stock for each full calendar quarterly period for fiscal year 1998 and
1999, see page F20 of the Company's Annual Report to the Shareholders -
Financial Statements (incorporated by reference under Item 14 herein).
Since July 2, 1992, the Company has paid a quarterly dividend of $.093333
per share. Although it is the present intention of the Company to continue
paying quarterly dividends, the timing, amount and form of future dividends will
be determined by the board of directors and will depend, among other things, on
the Company's results of operations, financial condition, cash requirements,
certain legal requirements and other factors deemed relevant by the board of
directors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" (incorporated by
reference under Item 14 herein).
Item 6. Selected Financial Data
The information set forth under the caption "Selected Consolidated
Financial Data" on page F21 of the Company's Annual Report to the Shareholders
Financial Statements for the year ended December 31, 1999, is incorporated by
reference under Item 14 herein.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages F2 through F5 of the Company's Annual Report to
the Shareholders - Financial Statements for the year ended December 31, 1999, is
incorporated by reference under Item 14 herein.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data Appearing on pages F7
through F20 of the Company's Annual Report to the Shareholders - Financial
Statements for the year ended December 31, 1999, are incorporated by reference
under Item 14 herein.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PAGE 11
PART III
Item 10. Directors and Executive Officers of the Company
The information for directors is reported in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A, and is incorporated by
reference. The following table sets forth certain information as of December 31,
1999 concerning the registrant's executive officers:
Name Age Position
John Campbell Carruth 69 Chairman and Chief Executive
Officer and Director
Robert V. Fasso 46 President-RegionalCarrier Group
Christopher L. Ellis 54 Senior Vice President, Finance & CFO
John Campbell Carruth, 69, was appointed as the Company's Chief
Executive Officer and President in June of 1991 and Chairman in January of 1998,
and has been a director of the Company since December of 1991.
Robert V. Fasso, 46, was appointed as the Company's President-Regional
Carrier Group in September 1997. Since July 1993, Mr. Fasso has been President
and CEO of the Company's subsidiary USF Bestway Inc. Prior to that date, he was
with Yellow Freight System.
Christopher L. Ellis, 54, has been Senior Vice President, Finance and
Chief Financial Officer of the Company since June 1991.
Item 11. Executive Compensation
This information is reported in the Company's definitive proxy statement
entitled "Management Compensation" and "Compensation Committee Interlocks and
Insider Participation" respectively to be filed pursuant to Regulation 14A, and
is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is reported in the Company's definitive proxy statement
entitled "Security Ownership of Principal Holders and Management" to be filed
pursuant to Regulation 14A, and is incorporated by reference.
Item 13. Certain Relationships and Related Party Transactions
This information is reported in the Company's definitive proxy statement
entitled "Certain Relationships and Related Transactions" to be filed pursuant
to Regulation 14A, and is incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
(a) (1) Financial Statements
The following consolidated financial statements appearing in
the 1999 Annual Report to the Shareholders is incorporated by
reference in this Annual Report on Form 10-K as Exhibit 13:
Page
Selected Consolidated Financial Data F21
Management's Discussion and Analysis of F2-5
Financial Condition and Results of Operations
Report of Independent Public Accountants F6
Consolidated Financial Statements F7-10
Notes to Consolidated Financial Statements F11-20
PAGE 12
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
USFreightways Corporation
Three Years ended December 31, 1999
(dollars in thousands)
Additions
-------------------------
Description Balance at Charges to Charged to Deductions(1) Balance at
Beginning Costs and Other End of
of Period Expenses Accounts Period
- ----------- --------- ---------- ----------- ---------- ---------
Fiscal year ended January 3,1998
Accounts receivable allowances $7,186 $6,717 $0 $3,836 $10,067
for revenue adjusmtents and doubtful accounts
Fiscal year ended December 31, 1998
Accounts receivable allowances $10,067 $6,367 $0 $5,275 $11,159
for revenue adjusmtents and doubtful accounts
Fiscal year ended December 31, 1999
Accounts receivable allowances $11,159 $3,922 $0 $4,458 $10,623
for revenue adjusmtents and doubtful accounts
(1) Primarily uncollectible accounts written off net of recoveries.
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders,
USFreightways Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in USFreightways Corporation and
Subsidiaries annual report to stockholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 19, 2000. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. Schedule II included in this Form 10-K is the responsibility of the
company's management, and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. Schedule II has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 19, 2000
PAGE 13
(3) Exhibits
Exhibit Document
Number Description
3(a) Amended and Restated Certificate of Incorporation
of USFreightways Corporation (incorporated by
reference from Exhibit 3.1 to USFreightways
Corporation Transition Report on Form 10-K, from
June 29, 1991 to December 28, 1991); Certificate
of Designation for Series A Junior Participating
Cumulative Preferred Stock (incorporated by
reference from Exhibit 3(a) to USFreightways
Corporation Annual Report on Form 10-K for the
year ended January 1, 1994); Certificate of
Amendment of Restated Certificate of
Incorporation of USFreightways Corporation
(incorporated by reference from Exhibit 3(i)
to USFreightways Corporation Quarterly Report on
Form 10-Q for the quarter ended June 29, 1996).
3(b) Bylaws of USFreightways Corporation, as restated
January 23, 1998 (incorporated by reference from
Exhibit 3(b) to USFreightways Corporation Annual
Report on Form 10-K for the year ended January 3,
1998).
4(a) Form of Rights Agreement, dated as of February 4,
1994, between USFreightways Corporation and
Harris Trust and Savings Bank, as Rights Agent
(incorporated by reference to USFreightways
Corporation's registration statement on Form 8-A
filed with the Securities and Exchange Commission
on March 18, 1994).
4(b) Form of Indenture, dated as of May 1, 1993
between USFreightways Corporation and Harris
Trust and Savings Bank, as Trustee (incorporated
by reference from USFreightways Corporation's
Registration Statement on Form S-1, filed on
April 16, 1993, Registration No. 33-61134).
4(c) Form of Indenture, dated as of May 5, 1999
between USFreightways Corporation and NBD Bank,
as Trustee (incorporated by reference from
USFreightways Corporation's Registration
Statement on Form S-3/A, filed on April 29, 1999,
Registration No. 333-76217).
10(d) USFreightways Stock Option Plan (incorporated by
reference from Exhibit 10.18 to USFreightways
Corporation Transition Report on Form 10-K from
June 29, 1991 to December 28, 1991).
10(e) Agreement dated March 5, 1993 Supplementing the
Tax Indemnification Agreement between
USFreightways Corporation and TNT Transport Group
(incorporated by reference from Exhibit 10 to
USFreightways Corporation Annual Report on Form
10-K for the year ended January 2, 1993).
10(f) Stock Option Plan for Non-Employee Directors
amended and restated as of December 11, 1998
(filed with this Annual Report on Form 10-K).
10(g) Employment Agreement of Christopher L. Ellis
dated December 16, 1991 (incorporated by
reference from Exhibit 10(g) to USFreightways
Corporation Annual Report on Form 10-K for the
year ended January 1, 1994).
PAGE 14
Exhibit Document
Number Description
10(i) Form of Election of Deferral (incorporated by
reference from Exhibit 10(h) to USFreightways
Corporation Annual Report on Form 10-K for the
year ended December 31, 1994).
10(j) USFreightways Long-Term Incentive Plan amended
and restated as of April 30, 1999 (filed with
this Annual Report on Form 10-K).
10(l) Employment Agreement of Robert V. Fasso dated
December 12, 1997 (incorporated be reference from
Exhibit 10(l) to USFreightways Corporation Annual
Report on Form 10-K for the year ended January 3,
1998).
10(m) $200,000,000 Credit Agreement dated as of
November 26, 1997 among USFreightways
Corporation, the banks named therein and NBD
Bank, N. A. as agent (incorporated by
reference from Exhibit 10(l) to USFreightways
Corporation Annual Report on Form 10-K for the
year ended January 3, 1998).
10(n) Form of Irrevocable Guaranty and Indemnity
relating to the Credit Agreement described in
Exhibit 10(m) (incorporated by reference from
Exhibit 10(l) to USFreightways Corporation Annual
Report on Form 10-K for the year ended January 3,
1998).
10(p) Restricted Stock Agreement with John Campbell
Carruth dated April 27, 1998 (incorporated by
reference from Exhibit 10.1 to USFreightways
Corporation Quarterly Report on Form 10-Q for the
quarter ended July 4, 1998).
10(q) USFreightways Corporation Non-Qualified Deferred
Compensation Plan (incorporated by reference from
Exhibit 10(q) to USFreightways Corporation Annual
Report on Form 10-K for the year ended December
31, 1998).
13 The consolidated financial statement portion
appearing in the 1999 USFreightways Corporation
Annual Report to Shareholders.
21 Subsidiaries of USFreightways Corporation
(incorporated by reference from the 1999
USFreightways Annual Report to Shareholders).
23 Consent of Arthur Anderson LLP.
24 Powers of Attorney
27 Financial Data Schedule
Exhibits 2, 9, 11, 12, 16, 18, 22 and 28 are not applicable to this
filing.
(b) Reports on Form 8-K
None
PAGE 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized. Dated
March 20, 2000.
USFREIGHTWAYS CORPORATION
By: /s/Christopher L. Ellis
--------------------
Christopher L. Ellis
Senior Vice President, Finance and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ John Campbell Carruth * Chairman of the Board March 20, 2000
Chief Executive Officer
and Director (Principal
Executive Officer)
- ---------------------
John Campbell Carruth
/s/ Morley Koffman * Director March 20, 2000
- --------------------
Morley Koffman
/s/ William N. Weaver, Jr. * Director March 20, 2000
- ----------------------------
William N. Weaver, Jr.
/s/ Robert P. Neuschel * Director March 20, 2000
- ------------------------
Robert P. Neuschel
/s/ Neil A. Springer * Director March 20, 2000
- ----------------------
Neil A. Springer
/s/ Robert V. Delaney * Director March 20, 2000
- -----------------------
Robert V. Delaney
/s/ John W. Puth * Director March 20, 2000
- ------------------
John W. Puth
/s/ Anthony J. Paoni * Director March 20, 2000
- ----------------------
Anthony J. Paoni
/s/ Samuel K. Skinner * Director March 20, 2000
- ----------------------
Samuel K. Skinner
/s/ Christopher L. Ellis Chief Financial Officer March 20, 2000
- ------------------------ (Principal Financial Officer)
Christopher L. Ellis
/s/ Robert S. Owen Controller (Principal March 20, 2000
Accounting Officer)
- ------------------
Robert S. Owen
/s/ Christopher L. Ellis
* By: Christopher L. Ellis
Attorney-in-Fact
PAGE 16
EXHIBIT 10(f)
USFREIGHTWAYS CORPORATION
USFREIGHTWAYS CORPORATION STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
AMENDED AND RESTATED AS OF DECEMBER 11, 1998
I. DEFINITIONS AND PURPOSE
A. Definitions:
Unless otherwise specified or unless the context otherwise
requires, the following terms, as used in this Plan, have the
following meanings:
1. Affiliate means a corporation which, for purposes of
Section 422 of the Code, is a parent or subsidiary of
the Company, direct or indirect.
2. Board means the Board of Directors of the Company.
3. Code means the Internal Revenue Code of 1986, as
amended.
4. 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.
5. Company means USFreightways Corporation, a Delaware
corporation, and includes 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 other assets of the
Company.
6. Disability means a permanent and total disability as
defined in Section 22(e)(3) of the Code.
7. Eligible Director means each person who is a director
of the Company, and who is not an employee of the
Company or any Affiliate of the Company and who has
not been an employee of the Company or any Affiliate
of the Company for all or any part of the preceding
fiscal year. For purposes of the Plan, an Eligible
Director shall be deemed to include the employer of
such Eligible Director, or any delegatee mandated by
his employer, if the Eligible Director is required,
as a condition of his employment, to provide that any
Option granted hereunder be made to the employer or
its delegatee.
8. Option means a right or option granted under the
Plan, which right or option shall not be intended to
qualify as an incentive stock option as defined in
Section 422 of the Code.
9. Option Agreement means an agreement between the
Company and a Participant executed and delivered
pursuant to the Plan.
10. Participant means an Eligible Director to whom an
Option is granted under the Plan.
11. Plan means this Stock Option Plan for Non-Employee
Directors, as amended from time to time.
12. Shares means the following shares of the capital
stock of the Company as to which Options have been or
may be granted under the Plan: authorized and
unissued common stock, $0.01 par value, treasury
shares held by the Company or any shares of capital
stock into which the Shares are changed or for which
they are exchanged within the provisions of Article
VI of the Plan.
PAGE 17
B. Purpose of the Plan:
The Plan intended to promote the interests of the Company and
its stockholders by attracting and retaining highly qualified
independent directors through an investment interest in the
Company's future success.
II. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Options may be granted from
time to time shall be Five Hundred Thousand (500,000) Shares.
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option, if the Option was not
exercised, shall be available for the granting of other Options. Any
Option, if the Option was not exercised, shall be available for the
granting of other Options. Any Option shall be treated as "outstanding"
until such Option is exercised in full, or terminates or expires under
the provisions of the Plan or Option Agreement.
Subject to the provisions of Article VI, the aggregate number of Shares
as to which Options 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 such time period as
may be required by the Securities Exchange Act of 1934, as amended from
time to time.
III. ADMINISTRATION OF THE PLAN
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.
IV. ELIGIBILITY FOR PARTICIPATION
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.
PAGE 18
V. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be set forth in an Option 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 Paragraph A
of this Article V, no Option shall be granted and no purported grant of
any Option shall be effective until such Option Agreement shall have
been duly executed on behalf of the Company and by the Participant.
Each such Option Agreement shall be subject to at least the following
terms and conditions:
A. OPTION PRICE:
The exercise price of the Shares covered by each Option
granted under the Plan shall be equal to 100% of the "fair
market value" of the Shares on the date of the granted Option.
If the Shares are listed on any national securities exchange,
the fair market value shall be the mean average of the high
and low sales prices, if any, on the largest such exchange on
the date of the grant of the Option, or, if none, on the most
recent trade date thirty (30) days or less prior to the date
of the grant of the Option. If the Shares are not then listed
on any such exchange, the fair market value of such Shares
shall be the closing "Ask" prices, if any, as reported on the
National Association of Securities Dealers automated Quotation
System ("NASDAQ") for the date of the grant of the Option, or
if none, on the most recent trade date thirty (30) days or
less prior to the date of the grant of the Option for which
such quotations are reported. If the Shares are not then
either listed on any such exchange or quoted on NASDAQ, 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 Service for the date of the
grant of the Option, or, if none, for the most recent trade
date thirty (30) days or less prior to the date of the grant
of the Option for which such quotations are reported.
B. NUMBER OF SHARES:
Each Eligible Director shall automatically, at the later of
the effective date of the Plan or the date such director
becomes an Eligible Director, be granted an Option under this
Plan to acquire 10,000 Shares. Upon the fifth and tenth
anniversaries of such initial grant, each Participant shall
automatically be granted Options under this Plan to acquire an
additional 10,000 Shares at each such anniversary, provided
the Participant is an Eligible Director at such anniversary.
In addition to the foregoing, each Eligible Director may from
time to time be granted by the Committee, in its discretion, a
Discretionary Option.
C. TERM OF OPTION:
No Option granted under the Plan shall be exercisable after
the expiration of ten (10) years from the date of the grant.
D. DATE OF EXERCISE:
1. Options granted to an Eligible Director under the
Plan on the Plan's effective date shall become
exercisable cumulatively in accordance with the
following schedule:
Years Elapsed Since Cumulative Number of Shares
Date of Grant For Which Option May Be Exercised
Less than 1 2,000
1 3,600
2 5,200
3 6,800
4 8,400
5 or more 10,000
2. Options granted to an Eligible Director under the
Plan after the Plan's effective date shall become
exercisable cumulatively in accordance with the
following schedule:
Years Elapsed Since Cumulative Number of Shares
Date of Grant For Which Option May Be Exercised
Less than 1 0
1 2,000
2 4,000
3 6,000
4 8,000
5 or more 10,000
PAGE 19
The foregoing schedules notwithstanding, if a Participant
shall cease to be a director of the Company because of death
or Disability, all Shares for which an Option has been granted
shall become immediately exercisable and shall be exercisable
in accordance with Paragraph F.
Not withstanding 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.
E. MEDIUM OF PAYMENT:
The Option price shall be paid on the date of purchase
specified in the notice of exercise, as set forth in Paragraph
G. It shall be paid in the legal tender of the United States,
or, at the election of the Participant, by surrender to the
Company of previously owned shares with an aggregate fair
market value (on the date of the exercise) equal to the Option
price to be paid; provided, however, that if such shares were
acquired pursuant to an incentive stock option plan (as
defined in Code Section 422) of the Company or Affiliate, then
the applicable holding period requirements of said Section 422
have been met with respect to such shares, and, provided
further, that if (i) such shares were granted pursuant to an
option, then such option must have been granted at least six
(6) months prior to the exercise of the Option hereunder; and
(ii), such shares were purchased other than through the grant
and exercise of an option, such shares were owned by the
Participant for more than six (6) months prior to the exercise
of the Option hereunder.
F. TERMINATION OF STATUS:
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.
PAGE 20
G. EXERCISE OF OPTION AND ISSUE OF STOCK:
Option 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, and (3)
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 which requires the Company
to take any action with respect to the Option Shares prior to
the issuance thereof, whether pursuant to the provisions of
Article VI or otherwise), the Company shall accept payment for
the Option Shares and shall deliver to the person or persons
exercising the Option in exchange therefor an appropriate
certificate or certificates for paid non-assessable Shares. 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.
H. 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 issued to or
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.
I. ASSIGNABILITY AND TRANSFERABILITY OF OPTION:
By its terms, 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.
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.
Any attempted transfer, assignment, pledge, hypothecation or
other disposition of any Option or of any rights granted
thereunder contrary to the provisions of this Paragraph I, or
the levy of any attachment or similar process upon an Option
or such rights, shall be null and void.
VI. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
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-up, combination of
shares or dividend payable in capital stock , or the like, appropriate
adjustments to prevent dilution or enlargement of the rights granted
to, or available for, Participants shall be made in the number and kind
of shares for the purchase of which Options 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. Notwithstanding anything herein to the contrary,
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, a Participant shall be entitled to exercise
immediately all or any portion of the Shares to which he or she
received an Option, regardless of the number of years elapsed since the
date of the grant .
VII. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in
connection with a transaction to which the preceding Article VI is
applicable, all Options granted hereunder shall terminate and become
null and void; provided, however, that if the rights of a Participant
under the applicable Options have not otherwise terminated and expired,
the Participant shall have the right immediately prior to such
dissolution or liquidation to exercise any Option granted hereunder to
the extent that the right to purchase Shares thereunder has become
exercisable as of the date immediately prior to such dissolution or
liquidation.
PAGE 21
VIII. TERMINATION OF THE PLAN
The Plan shall terminate fifteen (15) years from the date of its
adoption. The Plan may be terminated at an earlier date by vote of the
Board; provided, however, that any such earlier termination shall not
affect any Options granted or Option Agreements executed prior to the
effective date of such termination. Except as may otherwise by provided
for under Articles VI and VII, and notwithstanding anything in this
Plan to the contrary, any Options granted prior to the effective date
of the Plan's termination may be exercised, if otherwise exercisable
until ten (10) years have elapsed 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.
IX. 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 to Article II above or that otherwise requires the approval
of the stockholders of the Company in accordance with the Rule 16b-3
requirements of the Securities Exchange Act of 1934, as amended from
time to time, shall be subject to approval of the stockholders within
the requisite time period of such Act, and provided, further, that the
Plan may not be amended more frequently than once every six (6) months,
unless an amendment is necessary to comply with the Code or the
Employee Retirement Income Security Act of 1974, as amended, and is
otherwise permitted by Rule 16b-3.
X. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or members of the Committee, the members of the Committee
shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily 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 members of the
Committee and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Company) 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 Committee member is liable for gross negligence or willful
misconduct in the performance of his or her duties. To receive such
indemnification, a Committee member must first offer in writing to the
Company the opportunity, at his own expense, to defend any such action,
suit or proceeding.
XI. RESTRICTIONS
If the Company shall determine, in its discretion, that the Shares
under the Plan must be registered or qualified under any applicable
state or federal securities law before they may be offered or sold to
the Participant, or that the consent or approval of any governmental
regulatory body is necessary or desirable in connection with the
issuance of such Shares, such Option may not be exercised by the
Participant unless the Shares have been so registered, qualified, or
listed, or until such consent or approval shall have been obtained,
free of any conditions not acceptable to the Company. The Company shall
use reasonable efforts to qualify the Shares, obtain the benefit of any
applicable exemption from such qualification, or obtain any such
consent or approval, provided that no Participant shall have any right
to require the company to undertake any registration or other action
which the Company determines, in its sole discretion, to be unduly
burdensome.
XII. SAVINGS CLAUSE
This Plan intended to comply in all respects with applicable law and
regulations, including Rule 16b-3 of the Securities and Exchange
Commission. 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), 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
provisions 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) so as to foster the intent of this Plan.
Notwithstanding anything herein to the contrary, 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 to purchase.
PAGE 22
XIII. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board. The
adoption of the Plan shall be subject to subsequent approval by the
stockholders of the Company at the next annual meeting of the company's
stockholders unless such approval is not required by any rules or
regulations promulgated by the Securities and Exchange Commission under
Section 16(b) of the Securities Exchange Act of 1934, as amended from
time to time. Notwithstanding the foregoing, if the Plan shall have
been approved by the Board prior to such annual meeting, Options shall
be granted to Eligible Directors prior to the date of such annual
meeting in accordance with Article V, subject to such subsequent
stockholder approval but such Options shall not become exercisable
until such approval is obtained or its is determined that such approval
is not required.
XIV. GOVERNING LAW
This Plan shall be governed by the laws of the State of Delaware and
construed in accordance therewith.
Originally adopted and effective on the 29th day of October, 1993 by the Board
of Directors. Amended and restated this 11th day of December 1998 by the Board
of Directors.
PAGE 23
EXHIBIT 10(j)
USFREIGHTWAYS CORPORATION
USFREIGHTWAYS CORPORATION
LONG-TERM INCENTIVE PLAN
RESTATED AS OF APRIL 30, 1999
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.
PAGE 24
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 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.
PAGE 25
(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.
(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 nine hundred fifty thousand (2,950,000) shares of
which no more than fifty thousand (50,000) shares are for restricted stock
awards having 0% Fair Market Value basis (subject to adjustments 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 three hundred thousand (300,000) 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.
PAGE 26
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;
(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.
PAGE 27
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.
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.
PAGE 28
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. In the case of a grant of an Incentive
Option (provided 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), and in the case of any grant of
a Nonstatutory Option, the Option price per share of the Shares covered by each
such Option shall be not less than the Fair Market Value of the Shares on the
date of the grant of the Option. In all cases of Incentive Options not covered
by the preceding sentence, 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.
PAGE 29
(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
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.
PAGE 30
(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 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.
PAGE 31
(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.
"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).
(o) Repricing
The Committee may not at any time reduce the exercise price of an Option
previously awarded to any Participant, whether through amendment, cancellation
or replacement grants, or any other means (subject to adjustments for stock
splits, stock dividends, and other adjustments described in Section 17 hereof).
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.
PAGE 32
(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 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.
(h) Notwithstanding anything in this Article 8 to the contrary, any restriction
period imposed hereunder shall be for a period of not less than three (3) years,
if such restriction is based upon continuous service with the Company or its
Affiliates.
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).
PAGE 33
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 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).
PAGE 34
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.
(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.
PAGE 35
(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 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.
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.
PAGE 36
(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 this
Sections 13(a), (b) or (c). Failure to comply with the provisions of this
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.
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.
PAGE 37
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-up, 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 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.
PAGE 38
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, (D) extends the period during which Incentive Options may be
granted or exercised, or (E) 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.
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.
Amended and restated this 30th day of April, 1999.