CONSOLIDATED FREIGHTWAYS, INC.
EXECUTIVE SPLIT-DOLLAR LIFE INSURANCE PLAN
Effective January 1, 1994
Preamble
Consolidated Freightways, Inc. established the Executive Split-
Dollar Life Insurance Plan, effective January 1, 1994, for the
purpose of providing life insurance for certain valuable
employees of the Company while they are employed and into their
retirement years. The Company reserves the right to determine
those employees eligible to participate the Plan.
SECTION 1
Definitions
Annual Compensation means the weekly salary of a Participant as
determined by using week 1 payroll processing for the calendar
year multiplied by 52. Annual Compensation does not include any
payments made under the Employer's Incentive Compensation Plan,
or any other bonus plan. Annual Compensation is used to
determined the initial Face Value of the Policy.
Beneficiary means the person or persons who are to receive
benefits after the death of the Participant.
Board of Directors means the Board of Directors of the Company or
any committee to which the Board of Directors specifically
delegates any authority granted to it under the Plan.
Cash Surrender Value of the Policy means the cash value of the
Policy, plus the cash value of any paid-up additions, plus any
dividend accumulations and unpaid dividends, less any policy loan
balance.
Cash Value of the Policy means the cash value as illustrated in
the table of values shown in the Policy plus the cash value of
any paid up additions credited to the Policy.
Committee means the Pension and Employee Benefits Committee.
Company means Consolidated Freightways, Inc., a Delaware
corporation.
Current Loan Value of the Policy means the loan value of the
Policy reduced by any outstanding policy loan balance.
Disability means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than twelve months.
Early Retirement has the same meaning as defined in the
Retirement Plan.
Early Retirement Age means the day on which a Participant attains
the age 55.
Effective Date means January 1, 1994 with respect to the
Executive Split-Dollar Life Insurance Plan.
Eligible Spouse means that spouse to whom a Participant is
married on the date of his death. To the extent provided under a
"qualified domestic relations order," the term Eligible Spouse
shall mean a former spouse in the place of the Participant's
current spouse.
Employee means a person employed by the Employer, any portion of
whose income is subject to withholding of income tax and/or for
whom Social Security contributions are made by an Employer, as
well as any other person qualifying as a common law employee of
an Employer.
Employer means the Company or any Subsidiary thereof who has
adopted the Plan.
Employer's Interest in the Policy means the Employer's
accumulated premium payments less the accumulated amount
reimbursed by the Participant and less any Policy loan balance.
Equivalent Compensation means Annual Compensation indexed by 5%
compounded annually, except in the third through fifth years
where indexing is 33 1/3% annually.
ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
Face Value means the amount of life insurance indicated on an
individual Policy or as indexed within the Policy.
Incentive Compensation Plan means the short-term annual incentive
bonus plan or plans adopted by an Employer from time to time.
Insurer means The Northwestern Mutual Life Insurance Company.
Loan Value of the Policy means the amount which with loan
interest will equal the Cash Value of the Policy and of any paid-
up additions on the next loan interest due date or on the next
premium due date whichever is the smaller amount.
Normal Retirement has the same meaning as defined in the
Retirement Plan.
Normal Retirement Age means the day on which the Participant
attains age 65.
Participant means an Employee selected by the Committee who
elects to enroll in the Plan.
Plan means the Consolidated Freightways, Inc. Executive Split-
Dollar Life Insurance Plan set forth herein, and as amended from
time to time.
Plan Year means the calendar year.
Policy means the split-dollar life insurance issued in the name
of a Participant.
Policy Loan Balance means the policy loans outstanding plus
interest accrued to date.
Retirement Plan means the Consolidated Freightways, Inc.
Retirement Plan, as it may be amended from time to time.
Severance Date means the earlier of the date a Participant quits,
retires, or is discharged or dies.
Masculine pronouns used herein shall include the feminine, the
singular number shall include the plural, and the plural shall be
read as singular.
SECTION 2
Eligibility and Participation
Only an Employee selected by the Board of Directors or the
Committee is eligible to participate in the Plan.
SECTION 3
Allocation of Payment of Premium and Dividends
Each Premium on the policies shall be paid by the Employer as it
becomes due. By weekly payroll deduction (over the first 50 pay
periods of the Plan Year) the Participant shall reimburse the
Employer for a portion of the premium paid by the Employer. The
amount of the reimbursement shall equal the value of the economic
benefit attributable to the life insurance protection provided to
the Participant under the Plan. The value of the economic
benefit shall be calculated by using the lower of the Internal
Revenue Service table P.S. 58 rates or the Insurer's term rates
times the excess of the current death benefit over the Employer's
total value of its share of the premium.
Dividends shall be applied as required according to the Policy
form chosen by the Company.
SECTION 4
Assignment of Policy
The Employee shall be the sole owner of the Policy. The Employee
may exercise all rights, options, and privileges of ownership in
the Policy except those granted to the Employer in the
assignment.
However, to secure premiums paid by the Employer as described
above, the Participant shall execute an assignment of the Policy
to the Employer as collateral for amounts to be advanced by the
Employer by an instrument of assignment, recorded with the
Insurer. The Employer will have those rights in the Policy given
to it in the assignment, except that the Employer will not
surrender the Policy for cancellation except upon expiration of
the thirty (30) day period described in Section 11 and except
that the Employer will not, without written consent of the
Employee, assign its rights in the Policy, other than for the
purpose of obtaining a loan against the Policy, to anyone other
than the Employee.
Any payments under the Policy to the Employer in connection with
the rights granted to the Employer in the assignment referred to
in the prior paragraph shall first be made from Policy cash
values attributable to the paid up additional life insurance
purchased by Policy dividends. The Employee shall have no
interest in the paid up additional life insurance protection
except to the extent the death benefit or cash value thereof
exceeds the total Employer's share of premiums paid.
SECTION 5
Disability and Death
In the event a Participant in the Plan suffers a Disability, the
Employer will continue to make premium payments under the Plan.
The Participant's reimbursement obligations shall be waived
during such time of Disability.
In the event the Policy becomes a claim by reason of the
Participant's death, the Employer shall have an interest in the
proceeds of the Policy to the total value of its share of the
premiums paid under Section 3 of this Plan less any Policy
indebtedness to the Insurer. The balance, if any, of the
proceeds of the Policy shall be paid directly by the Insurer to
the Beneficiary designated by the Participant.
SECTION 6
Approved Leaves of Absence
A Participant on an approved leave of absence from the Employer
shall be required to reimburse the Company at least monthly, an
amount equal to the economic value of the benefit as determined
in Section 3.
SECTION 7
Possession of the Policy
A Participant who becomes ineligible to participate in the Plan
or who is not selected by the Committee for further participation
in the Plan, shall have the right to take possession of his
Policy and continue premium payments, if any, directly to the
Insurer. The Cash Surrender Value of the Policy, if any will be
reduced by the Employer's Interest in the Policy.
A Participant who retires from the Employer, as defined in the
Retirement Plan, shall be entitled to take possession of his
Policy. The Company will continue to make premium payments under
the terms of the Policy, if necessary. The Participant's Cash
Value of the Policy, if any, will be reduced by the Employer's
Interest in the Policy. The Face Value of the Policy available
to the retiree should equal the Equivalent Compensation of the
Participant calculated as of the beginning of the most recent
Plan Year. The Company retains the sole right to maintain a
lower amount of insurance.
At all other times, the Policy will be assigned to the Employer
by the Participant in a collateral assignment agreement provided
for this purpose.
SECTION 8
Loans
The Employer shall have the right to borrow on the Policy up to
the lesser of (a) the Employer's Interest in the Policy or (b)
the Loan Value of the Policy.
SECTION 9
Face Value of the Split-Dollar Life Insurance
The Company will purchase on behalf of each Participant a Face
Value Policy equal to the Annual Compensation of the Participant.
In the third through fifth years of the Policy, the face value of
the Policy will be increased in approximately equal increments so
that the fifth year face value of the Policy will equal twice the
Equivalent Compensation of the Participant. In all other years,
the Face Value of the Policy will increase at a rate of 5% per
annum.
During the first four years of the Policy, the Company will
coordinate benefits under this Plan with benefits payable under
the Company's Group Life Insurance Plan so that the Participant
will continually have a combined life insurance benefit equal to
twice the Annual Compensation of the Participant. Upon reaching
twice the Equivalent Compensation on the face value of this
Policy, coverage in the Company's Basic Group Life Insurance Plan
will cease. This will not affect the Employee's eligibility to
participate in the Company's Optional Group Life Insurance Plan.
SECTION 10
Obligations of the Insurer
The Insurer shall be bound only by the provisions of and
endorsements on the Policy, and any payments made or action taken
by it in accordance therewith shall fully discharge the Insurer
from all claims, suits and demands of all persons whatsoever. It
shall in no way be bound by or deemed to have notice of the
provisions of this Plan.
SECTION 11
Termination of Agreement
The agreement entered into between the Employer and the
Participant under this Plan may be terminated at any time while
the Participant is living by written notice thereof by either the
Employer or the Participant to the other; and, in any event, said
agreement will terminate at the Participant's Severance Date.
This agreement may be terminated, by the Employee, subject to the
conditions expressed below, with or without the consent of the
Employer by giving notice in writing to the Employer. The
Employer acknowledges that its present intent is to maintain this
agreement with the Employee for the indefinite future but
expressly reserves the right to amend or terminate this Plan at
any time upon 30 days written notice to the Employee if the
Employer is good faith determines that such continuation is no
longer in its best interest or consistent with its policies.
Such amendment or termination, however, shall not reduce or
eliminate any benefit or interest that the Employee may have in
such Policy subject to the Plan determined as of the effective
date of such amendment or termination. In the event that either
the Employer or Employee terminates the agreement or it is
terminated as of the Employee's Severance Date, the Participant
shall take possession of the Policy, and at his discretion, can
continue the Policy under the terms and conditions prescribed by
the Insurer. The Participant's interest in the Cash Value of the
Policy shall be reduced by the Employer's Interest in the Policy
in accordance with the collateral assignment agreement.
In the event of termination of this agreement as provided above,
the Employee shall have the right to repay the Employer within 90
days of the date of termination an amount equal to the Employer's
share of the premiums paid under the Policy less any Policy
indebtedness to the Insurer or any other indebtedness secured by
the cash value of the Policies. The Employee will be obligated
for all future premium payments under the Policy.
If the Employee fails to repay the Employer within 90 days of the
date of termination of the agreement, Employee shall execute any
and all instruments that may be required to vest ownership of
said Policy in the Employer.
SECTION 12
Claiming Benefits
If the Participant should die while an active Employee, the
Retirement Plans Administration Office will notify the
Participant's Beneficiary of any necessary documents required.
The amount of life insurance payable under the Plan will be paid
when the necessary documents have been received and approved.
The Retirement Plans Administration Office will file the claim,
on behalf of the Beneficiary, with the Insurer.
If the Participant should die after his Severance Date, but while
the Policy remains in force, his Beneficiary should contact the
Retirement Plans Administration Office. That office will
instruct the Beneficiary on the necessary documents needed to
file a claim against the Policy. The Retirement Plans
Administrative Office will file the claim, on behalf of the
Beneficiary, with the Insurer.
SECTION 13
Denial of a Benefit
If for any reason a claim for benefits under this Plan is denied
by the Employer, the Committee shall deliver to the claimant a
written explanation setting forth the specific reasons for the
denial, pertinent to the Plan Section on which the denial is
based, such other data as may be pertinent and information on the
procedures to be followed by the claimant in obtaining a review
of his claim, all written in a manner calculated to be understood
by the claimant.
For this purpose the claimant's claim shall be deemed filed when
presented in writing to the Retirement Plans Administration
Office, P.O. Box 3680, Portland, OR 97208. The Committee's
explanation of the denial shall be in writing, delivered to the
claimant within 90 days of the date the claim was filed.
The claimant shall have 60 days following his receipt of the
denial of the claim to file with the Committee a written request
for review of the denial. For such review, the claimant or his
representative may submit pertinent documents and written issues
and comments.
The Committee shall decide the issue on review and furnish the
claimant's request for review of his claim. The decision on
review shall be in writing and shall include specific reasons for
the decision, written in a manner calculated to be understood by
the claimant, as well as specific references to the pertinent
Plan provisions on which the decision is based. If a copy of the
decision is not furnished to the claimant within such 60 days,
the claim shall be denied on the review.