-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OszUWicY45aG+Y/rlOFhkES2W4PT1LTkcgC0tPSNUKBMvsuExPDpWXcHtpMtvxGM P4cO2Xykg41zAynT5/QAQg== 0000912057-96-021829.txt : 19961003 0000912057-96-021829.hdr.sgml : 19961003 ACCESSION NUMBER: 0000912057-96-021829 CONFORMED SUBMISSION TYPE: 10-12B/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19961002 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS CORP CENTRAL INDEX KEY: 0001022581 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 770425334 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12B/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12149 FILM NUMBER: 96638506 BUSINESS ADDRESS: STREET 1: 175 LINFIELD DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4153261700 MAIL ADDRESS: STREET 1: 175 LINFIELD DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 10-12B/A 1 10-12B/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1996 REGISTRATION NO. 001-12149 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ CONSOLIDATED FREIGHTWAYS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 77-0425334 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 175 LINFIELD DRIVE 94025 MENLO PARK, CALIFORNIA (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (415) 326-1700 ------------------------ Copies of Communications to: STEPHEN D. RICHARDS BRIAN J. MCCARTHY 175 Linfield Drive 300 South Grand Avenue, Suite 3400 Menlo Park, California 94025 Los Angeles, California 90071 - -------------------------------------------------------------------------------- Securities to be registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class to be registered which each class is to be registered COMMON STOCK, PAR VALUE $0.01 PER NEW YORK STOCK EXCHANGE SHARE Securities to be registered pursuant to Section 12(g) of the Act: NONE (Title of Class) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONSOLIDATED FREIGHTWAYS CORPORATION CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10 PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM FORM 10 ITEM CAPTION LOCATION IN INFORMATION STATEMENT - ---- -------------------------------------------------- -------------------------------------------------- 1 Business.......................................... Business; Selected Historical Financial Data 2 Financial Information............................. Selected Historical Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations 3 Properties........................................ Business -- Properties 4 Security Ownership of Certain Beneficial Owners and Management................................... Security Ownership of Certain Beneficial Owners and Management 5 Directors and Executive Officers.................. Management 6 Executive Compensation............................ Executive Compensation and Other Matters 7 Certain Relationships and Related Transactions.... Relationship between CFI and the Company after the Distribution; Executive Compensation and Other Matters 8 Legal Proceedings................................. Business -- Legal Proceedings 9 Market Price of and Dividends on the Registrant's Common Equity and Related Shareholder Matters.... The Distribution -- Listing and Trading of the Common Stock; Risk Factors -- No Current Public Market for the Common Stock; Possibility of Significant Price Fluctuations; Dividend Policy; Description of Company Capital Stock 10 Recent Sales of Unregistered Securities........... None 11 Description of Registrant's Securities to be Registered....................................... Description of Company Capital Stock; Purposes and Antitakeover Effects of Certain Provisions of the Company's Charter and Bylaws 12 Indemnification of Directors and Officers......... Liability and Indemnification of Directors and Officers 13 Financial Statements and Supplementary Data....... Selected Historical Financial Data; Pro Forma Consolidated Financial Statements; Index to Combined Financial Statements 14 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............. None 15 Financial Statements and Exhibits................. Index to Combined Financial Statements; Index to Exhibits
INCORPORATION BY REFERENCE OF REGISTRATION STATEMENT ON FORM 10, FILE NO. 001-12149 Consolidated Freightways Corporation (the "Company") hereby incorporates by reference into this Information Statement on Form 10 in its entirety the Information Statement on Form 10 (File No. 001-12149) filed on September 10, 1996 with the Securities and Exchange Commission (the "Commission"), including each of the documents filed by the Company with the Commission and incorporated or deemed to be incorporated by reference therein. PART II -- INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 2.1 Form of Distribution Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996 3.1 Form of Amended and Restated Certificate of Incorporation of Consolidated Freightways Corporation 3.2 Form of Amended and Restated Bylaws of Consolidated Freightways Corporation 4.1 Form of Common Stock Certificate 10.1 Form of Transition Services Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996 10.2 Form of Alternative Dispute Resolution Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996 10.3 Form of Employee Benefit Matters Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996 10.4 Form of Tax Sharing Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996 10.5 Form of Reimbursement and Indemnification Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation of Delaware, to be dated as of , 1996 10.6 Form of Consolidated Freightways Corporation 1996 Stock Incentive Plan 21.1 Subsidiaries of the Registrant
II-1 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED FREIGHTWAYS CORPORATION By: ________/s/ W. ROGER CURRY________ W. Roger Curry PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: ____October 2, 1996____ II-2 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 2.1 Form of Distribution Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996................................... 3.1 Form of Amended and Restated Certificate of Incorporation of Consolidated Freightways Corporation..................................................................................... 3.2 Form of Amended and Restated Bylaws of Consolidated Freightways Corporation...................... 4.1 Form of Common Stock Certificate................................................................. 10.1 Form of Transition Services Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996................................... 10.2 Form of Alternative Dispute Resolution Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996...................... 10.3 Form of Employee Benefit Matters Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996...................... 10.4 Form of Tax Sharing Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation, to be dated as of , 1996............................................... 10.5 Form of Reimbursement and Indemnification Agreement between Consolidated Freightways, Inc. and Consolidated Freightways Corporation of Delaware, to be dated as of , 1996.......... 10.6 Form of Consolidated Freightways Corporation 1996 Stock Incentive Plan........................... 21.1 Subsidiaries of the Registrant...................................................................
II-3 EX-2.1 2 DISTRIBUTION AGREEMENT FORM OF DISTRIBUTION AGREEMENT between CONSOLIDATED FREIGHTWAYS, INC. and CONSOLIDATED FREIGHTWAYS CORPORATION TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS 1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II THE DISTRIBUTION 2.1 Cooperation Prior to the Distribution . . . . . . . . . . . . . . 5 2.2 Conditions to Distribution. . . . . . . . . . . . . . . . . . . . . 5 2.3 The Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.4 Sale of Fractional Shares . . . . . . . . . . . . . . . . . . . . 6 2.5 Odd-Lot Program . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION 3.1 The Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 7 3.2 Company Board . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.3 Company Charter and Bylaws. . . . . . . . . . . . . . . . . . . . 10 3.4 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 10 3.5 Operation in the Ordinary Course of Business. . . . . . . . . . . 10 3.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.7 Collections and Payments after the Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . 11 3.8 Certain Post-Distribution Transactions. . . . . . . . . . . . . . 11 ARTICLE IV INDEMNIFICATION 4.1 Indemnification by CFI. . . . . . . . . . . . . . . . . . . . . . 12 4.2 Indemnification by the Company. . . . . . . . . . . . . . . . . . 12 4.3 Limitations on Indemnification Obligations. . . . . . . . . . . . 13 4.4 Procedures for Indemnification. . . . . . . . . . . . . . . . . . 13 4.5 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.6 Environmental Liabilities . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V ACCESS TO INFORMATION; SERVICES 5.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . 16 5.2 Production of Witnesses . . . . . . . . . . . . . . . . . . . . . 17 5.3 Provision of Services . . . . . . . . . . . . . . . . . . . . . . 17 5.4 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.5 Retention of Records. . . . . . . . . . . . . . . . . . . . . . . 18 5.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.7 Provision of Corporate Records. . . . . . . . . . . . . . . . . . 19 5.8 Privileged Matters. . . . . . . . . . . . . . . . . . . . . . . . 20 i ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS 6.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 20 6.2 Form 10 and Information Statement . . . . . . . . . . . . . . . . 20 6.3 Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VII SHARED CLAIMS 7.1 Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . . . . 21 7.2 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 7.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 7.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7.5 Non-Shared Liabilities . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VIII MISCELLANEOUS 8.1 Complete Agreement; Construction. . . . . . . . . . . . . . . . . 22 8.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.5 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 23 8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 8.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 23 8.8 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 8.9 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . 24 8.10 Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . 24 8.11 Legal Enforceability. . . . . . . . . . . . . . . . . . . . . . . 24 8.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 24 8.13 No Solicitation of Employees. . . . . . . . . . . . . . . . . . . 25 8.14 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . 25 Schedule 3.1(b) LJSC Service Departments Schedule 3.1(e) LJSC Real Property Schedule 3.1(g) Administrative and Business Operations Schedule 3.1(h) Marks Schedule 3.6(b) Insurance Policies Schedule 4.1 CFI Indemnification Schedule 4.2 Company Indemnification ANNEX 1 Form of ADR Agreement ANNEX 2 Form of Agreement on Employee Benefits Matters ANNEX 3 Form of Reimbursement Agreement ANNEX 4 Form of Services Agreement ANNEX 5 Form of Tax Sharing Agreement ANNEX 6 Form of Restated Certificate of Incorporation ANNEX 7 Form of Restated Bylaws ii DISTRIBUTION AGREEMENT This DISTRIBUTION AGREEMENT (the "Agreement") is made as of this _____ of __________, 1996 by and between CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation (together with its wholly owned subsidiaries, "CFI"), and CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation (together with its wholly owned subsidiaries, the "Company"). RECITALS WHEREAS, CFI is the holder of all of the issued and outstanding shares of common stock, $.01 par value per share, of the Company (the "Company Common Stock"); WHEREAS, the Board of Directors of CFI (the "CFI Board") has determined that it is advisable to distribute (the "Distribution") all of the shares of Company Common Stock to the holders of the common stock, $.01 par value per share, of CFI (the "CFI Common Stock"); WHEREAS, CFI and the Company have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Distribution and certain other agreements that will govern certain matters relating to the Distribution and the relationships thereafter between CFI and the Company; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 GENERAL. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 1 ACTION: any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. ADR AGREEMENT: the Alternative Dispute Resolution Agreement to be entered into by CFI and the Company as of the Distribution Date, the form of which is attached hereto as Annex 1. AFFILIATE: as defined in Rule 12b-2 under the Exchange Act. CFI GROUP: At any time following the Distribution, CFI and all entities which are Affiliates of CFI at such time. CODE: the Internal Revenue Code of 1986, as amended. COMMISSION: the Securities and Exchange Commission. COMPANY GROUP: At any time following the Distribution, the Company and all entities which are Affiliates of the Company at such time. DISTRIBUTION AGENT: First Chicago Trust Company of New York. DISTRIBUTION DATE: the date as determined by the CFI Board or a committee thereof on which the Distribution takes place by delivery of the shares of Company Common Stock to the Distribution Agent. DISTRIBUTION RATIO: the ratio of CFI Common Stock to Company Common Stock to be distributed in the Distribution. EMPLOYEE BENEFIT MATTERS AGREEMENT: the Agreement on Employee Benefit Matters to be entered into by CFI and the Company as of the Distribution Date, the form of which is attached hereto as Annex 2. ENVIRONMENTAL LIABILITIES: means any Liabilities arising from, under or relating to any environmen- 2 tal, health or safety law, rule, regulation, Action, threatened Action, order or consent decree. EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. FORM 10: the registration statement on Form 10 filed by the Company with the Commission to effect the registration of the Company Common Stock under the Exchange Act. INFORMATION STATEMENT: the Information Statement on Form 14C filed by the Company with the Commission and included in the Form 10 at the time of its effectiveness. INSURANCE PROCEEDS: those monies (i) received by an insured from an insurance carrier on an insurance claim or (ii) paid by an insurance carrier on behalf of an insured on an insurance claim, in either case net of any applicable deductibles, retentions, or costs paid by such insured, but such term does not refer to proceeds received from an insurer on an employee benefits group insurance policy. IRS: the Internal Revenue Service. LIABILITIES: any and all debts, liabilities, obligations, absolute or contingent, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, direct or indirect, whenever arising, including all costs and expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any governmental entity or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking including those arising under this Agreement. LJCS: Leland James Service Corporation, a Delaware Corporation. LOSSES: any and all debts, losses, Liabilities, claims, damages, obligations, payments or costs and expenses, absolute or contingent, matured or unma- 3 tured, liquidated or unliquidated, accrued or unaccrued, known or unknown, direct or indirect (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such actions or threatened actions). NYSE: the New York Stock Exchange. OTHER AGREEMENTS: the ADR Agreement, the Employee Benefit Matters Agreement, the Reimbursement Agreement, the Services Agreement and the Tax Sharing Agreement. RECORD DATE: the close of business on the date to be determined by the CFI Board or a committee thereof as the record date for the determination of stockholders of record of CFI entitled to receive the Distribution. REIMBURSEMENT AGREEMENT: the Reimbursement and Indemnification Agreement to be entered into between CFI and Consolidated Freightways Corporation of Delaware ("CFCD") as of October 1, 1996, the form of which is attached hereto as Annex 3. SECURITIES ACT: the Securities Act of 1933, as amended. SERVICES AGREEMENT: the Transition Services Agreement to be entered into by CNF Service Company, Inc. and the Company as of the Distribution Date, the form of which is attached hereto as Annex 4. SUBSIDIARIES: the term "Subsidiaries" as used herein with respect to any entity shall, unless otherwise indicated, be deemed to refer to both direct and indirect subsidiaries of such entity. TAX SHARING AGREEMENT: the Tax Sharing Agreement to be entered into by CFI and the Company as of the Distribution Date, the form of which is attached hereto as Annex 5. 4 ARTICLE II THE DISTRIBUTION 2.1 COOPERATION PRIOR TO THE DISTRIBUTION. Prior to the Distribution: (a) CFI and the Company shall prepare, and the Company shall file with the Commission, the Form 10. CFI and the Company shall prepare, and CFI shall mail, promptly after the effectiveness of the Form 10, to the holders of CFI Common Stock, the Information Statement, which shall set forth appropriate disclosure concerning the Company, the Distribution and other matters. The Company shall use reasonable efforts to cause the Form 10 to become effective under the Exchange Act. (b) CFI and the Company shall cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereto that are appropriate to reflect the establishment of or amendments to any employee benefit and other plans contemplated by the Employee Benefit Matters Agreement. (c) The Company shall prepare, file and pursue an application to permit listing of the Company Common Stock on the NYSE (and/or such other exchange as the Company deems appropriate), under the symbol "CFW" (or such other symbol as the Company deems appropriate). 2.2 CONDITIONS TO DISTRIBUTION. The CFI Board shall in its discretion establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution. The Distribution shall be subject to satisfaction of each of the following conditions, among other things: (i) the consummation of certain internal corporate reorganizations; (ii) the successful renegotiation of certain CFI credit facilities and debt instruments, including the execution of certain consents, waivers and amendments thereto by lenders; (iii) the establishment of separate credit facilities for CFCD; (iv) the receipt of an opinion of Houlihan Lokey Howard & Zukin; (v) the receipt of certain third-party consents relating to certain contracts, licenses and other agreements; (vi) the receipt of rulings from the IRS or an opinion of special tax counsel to CFI to the 5 effect that, among other things, the Distribution will qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended; (vii) the receipt of a letter from the staff of the Commission confirming that it will take no action with respect to certain matters relating to the Distribution; (viii) the Form 10 having become effective and no stop order being in effect; (ix) there not being in effect any statute, rule, regulation or order of any court, governmental or regulatory body that prohibits or makes illegal the transactions contemplated by the Distribution; (x) approval for listing of the Company Common Stock on the NYSE; and (xi) declaration of the special dividend by the CFI Board. The CFI Board reserves the right in its discretion, other than with respect to those set forth in clauses (i), (vi), (vii) and (xi), to waive the satisfaction of any condition to the Distribution; PROVIDED, HOWEVER, that the CFI Board may abandon, defer or modify the Distribution and the related transactions at any time prior to the Distribution Date. 2.3 THE DISTRIBUTION. On the Distribution Date or as soon thereafter as practicable, subject to the conditions set forth in this Agreement, CFI shall deliver to the Distribution Agent a certificate or certificates representing the number of then outstanding shares of Company Common Stock to be distributed in the Distribution, endorsed in blank, and shall instruct the Distribution Agent to distribute to each holder of record of CFI Common Stock on the Record Date a certificate or certificates representing one share of Company Common Stock for every two shares of CFI Common Stock so held. The Company agrees to provide all certificates for shares of Company Common Stock that the Distribution Agent shall require in order to effect the Distribution. 2.4 SALE OF FRACTIONAL SHARES. The Distribution Agent shall not distribute any fractional shares of Company Common Stock ("Fractional Shares") to any holder of CFI Common Stock. The Distribution Agent shall be instructed to aggregate all such Fractional Shares and sell them in an orderly manner after the Distribution Date in the open market and, after completion of all such sales, distribute a PRO RATA portion of the proceeds from such sales to each holder of CFI Common Stock who would otherwise have received a Fractional Share. CFI will 6 bear the cost of brokerage commissions incurred in connection with such sales. 2.5 ODD-LOT PROGRAM. In connection with the Distribution, the Company shall offer to holders of CFI Common Stock who would otherwise receive fewer than 100 shares of Company Common Stock in the Distribution a program by which such holders may instruct the Distribution Agent to sell such shares of Company Common Stock on their behalf. The Company shall cause such program to be conducted in accordance with the terms and conditions described in the Information Statement. ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION 3.1 THE REORGANIZATION. Prior to the Distribution Date: (a) CFI shall take all steps necessary to establish CFCD as a wholly owned subsidiary of the Company. (b) CFI shall take all steps necessary to establish Leland James Service Corporation ("LJSC") as a wholly owned subsidiary of the Company; PROVIDED, HOWEVER, that immediately prior to the Distribution or simultaneously therewith, the LJSC administrative service departments identified on Schedule 3.1(b) shall be transferred to CNF Service Company, Inc., a wholly owned subsidiary of CFI. (c) CFI shall take all steps necessary to merge Vantage Parts into CFI. (d) CFI shall take all steps necessary to establish Milne & Craighead as a wholly owned, indirect subsidiary of CFCD. (e) CFI shall take all steps necessary to effect the transfer of all real property owned by CFCD and set forth on Schedule 3.1(e) to CF Properties, Inc., a wholly owned subsidiary of CFI ("CF Properties"), and to effect the transfer of CFI's Gresham terminal and land 7 under CFI's Santa Fe Springs and Hayward Terminals to CFC. (f) The Company acknowledges that any and all rights in the proprietary software programs (including without limitation all source and object code and all documentation therefor, and all versions thereof) and data developed by, or on behalf of, the Company, CFI or its affiliates prior to the Distribution Date, and all intellectual property rights therein, including without limitation all copyrights, patent rights, know-how and trade secret rights, and including, without limitation, the right to sue for any past, present or future infringement of any of the foregoing, are vested in CFI. The Company will execute and deliver any instruments or take such other actions as CFI may reasonably request in order to confirm such assignment and to otherwise effectuate the purposes and terms of this Agreement. (g) CFI hereby shall grant to the Company, effective as of the termination of the Services Agreement, a royalty-free, worldwide, perpetual and non-transferable, license without right of sublicense, to use and create derivative works of the proprietary software programs (including without limitation all source and object code and documentation therefor, and all versions thereof) and data owned by CFI, in the form they exist as of the termination of the Services Agreement, which the Company uses in its business as of the Distribution Date as set forth on Schedule 3.1(g) hereto (collectively, the "Licensed Materials"). CFI shall take such steps necessary to provide to the Company, at CFI's expense, and with minimal interruption of the operations of CFI or its affiliates, copies of the Licensed Materials, together with any third party licenses, and reasonable instruction as to their installation and use. CFI shall also provide the Company, at CFI's expense, licenses for third party software programming, which the Company uses in its business as of the date hereof. Third-party licenses shall be at least as broad in scope as prior to the Distribution Date unless commercially unreasonable. Where use of software is limited to a specified number of users or otherwise restricted, an equitable division shall be made as set forth on Schedule 3.1(g). To the extent that the purchase of any third-party licenses is commercially unreasonable, CFI shall have the right to substitute a comparable program. 8 Notwithstanding anything to the contrary set forth herein, the Company acknowledges and agrees that: i) The use of the Licensed Materials is to be limited to the internal business use of the Company, or its affiliates and their authorized customers who in the ordinary course of business with the Company request access to the Licensed Materials in connection with products or services otherwise provided by the Company. ii) The Company's, its affiliates' and authorized customers' right to use the Licensed Materials which require a third-party license is conditioned upon the Company's, its affiliates and authorized customers observing the applicable terms and conditions in any third party licenses relating to the Licensed Materials and as to affiliates and authorized customers the obtaining of any necessary consents or separate licenses from such third party vendors. CFI shall make reasonable efforts to obtain all consents or separate licenses from third party licensors necessary for the Company to: have the right to use the Licensed Materials to the extent contemplated herein and be able to receive the services contemplated under the Services Agreement. iii) The Company shall assume all Liabilities relating to the Company's use, and use by any of the Company's affiliates or authorized customers, of the Licensed Materials after the Distribution Date and shall indemnify and hold harmless CFI against all Liabilities and expenses (including reasonable attorneys' fees and costs of litigation) which CFI may incur, which arise out of the use of the Licensed Materials by the Company, its affiliates or authorized customers after the Distribution Date. iv) Notwithstanding the immediately preceding paragraph, CFI shall assume all liabilities relating to the use of software requiring a third-party license where CFI has failed to provide the Company with the applicable third-party licenses, and shall indemnify and hold harmless the Company against all losses, liabilities and expenses (including 9 reasonable attorneys' fees and cost of litigation) which the Company may incur, which arise out of such failure of CFI to obtain such third-party licenses for the Company. v) The Licensed Materials constitute confidential information and shall remain the property of CFI, subject to the license granted herein. The Company agrees to hold the same in confidence and not to disclose or distribute the same unless such information subsequently becomes publicly available through no fault of the Company. vi) CFI shall assume all liabilities relating to CFI's use, and use by CFI's affiliates or authorized customers, of the Licensed Materials and any materials not licensed to the Company, and shall indemnify and hold harmless the Company against all losses, liabilities and expenses (including reasonable attorneys' fees and cost of litigation) which the Company may occur, which arise out of the use of the Licensed Materials or any of the materials not licensed to the Company by CFI, its affiliates or authorized customers. vii) The Company may request additional worldwide, perpetual and non-transferable licenses from CFI which are not currently used by it in its business. CFI may grant such licenses in its sole discretion. The licenses requested and granted as of the date hereof are listed in Schedule 3.1(g) as "Additional Licenses." The Company shall pay the costs of copying such software and purchasing any required third-party licenses related thereto. The Company shall assume all Liabilities relating to the Company's use thereof and shall indemnify and hold harmless CFI against all Liabilities and expenses whatsoever (including reasonable attorneys' fees and costs of litigation) which CFI may incur, which arise out of, or are in any way related to the use of such software by the Company, its affiliates or authorized customers. viii) The Company shall pay its proportional share of the development costs of the Li- 10 censed Materials identified in Schedule 3.1(g) as "Under Development" as incurred after the Distribution Date. Any cost of "cloning" a second copy, if any, shall be part of the development costs. The Company shall not, however, pay a proportional share of the development costs where such Licensed Materials are part of the services being provided to the Company under the Services Agreement. ix) Because of the extensive number of software programs used by the parties, the parties expect that some programs may inadvertently be omitted from Schedule 3.1(g). In such event, the parties shall determine in good faith whether such programs should be added as Licensed Materials and related third-party software used by the Company as of the date hereof as, "Additional Licenses" or "Under Development." (h) Prior to the Distribution Date, CFI shall take all steps necessary to assign to the Company the trademarks, trade names and service marks set forth on Schedule 3.1(h) (collectively, the "Marks"); PROVIDED, HOWEVER, that CFI and the Company shall each have the right to use the Marks for the nine-month period beginning on the Distribution Date. CFI shall assign the trademarks, trade names and service marks relating to "CF Air" and "CF Air Freight" (and as stylized) on the third anniversary of the date of this Agreement. (i) Prior to the Distribution Date, CFI and the Company shall take all steps necessary to increase the outstanding shares of Company Common Stock so that, immediately prior to the Distribution, CFI will hold a number of shares of Company Common Stock sufficient to enable it to complete the Distribution based on the Distribution Ratio. 3.2 COMPANY BOARD. CFI and the Company shall take all steps necessary to elect as directors of the Company, on or prior to the Distribution Date, the persons named in the Form 10 to constitute the board of directors of the Company on the Distribution Date. 3.3 COMPANY CHARTER AND BYLAWS. On or prior to the Distribution Date, (a) CFI shall approve and cause the Amended and Restated Certificate of Incorporation of 11 the Company substantially in the form of Annex 6 hereto to be filed with the Secretary of State of Delaware and to be in effect on the Distribution Date and (b) CFI shall adopt the Amended and Restated Bylaws of the Company substantially in the form of Annex 7 hereto to be in effect on the Distribution Date. 3.4 OTHER AGREEMENTS. On or prior to the Distribution Date, CFI and the Company shall enter into, and/or (where applicable) shall cause their respective Subsidiaries to enter into, the Other Agreements and any other agreements necessary or appropriate in connection with the transactions contemplated hereby and thereby. In the event of a conflict between the terms of this agreement and the terms of any of the Other Agreements or any such other agreements (including without limitation Section 5.04 of the Tax Sharing Agreement), the terms of such Other Agreement or other agreement shall govern. 3.5 OPERATION IN THE ORDINARY COURSE OF BUSINESS. Prior to the Distribution Date, the Company shall, and shall cause each of its Subsidiaries to, conduct its business and operations in the ordinary course of business, consistent with past practice, and shall, and shall cause each of its Subsidiaries to, continue to ship products, pay accounts payable and invoices, deposit and accept payments, and make capital expenditures in the ordinary course of business, all consistent with past practice. The Company shall not, and shall cause each of its Subsidiaries not to, undertake any arrangement with the intent to delay receipt of any funds by the Company or its Subsidiaries until on or after the Distribution Date or to accelerate any payment to be made by the Company or its Subsidiaries prior to the Distribution Date, except in each case in the ordinary course of business consistent with past practice. 3.6 INSURANCE. The Company, for itself and on behalf of each other member of the Company Group, does hereby release CFI and each other member of the CFI Group from all Liabilities arising from or in connection with the insurance policies described on Schedule 3.6(b), excluding occurrences which commenced on or prior to October 1, 1996. The Company, for itself and on behalf of each other member of the Company Group, does hereby acknowledge that these policies are cancelled or terminated as to CFCD and its subsidiaries as of October 12 1, 1996 except to the extent of claims referred to in the preceding sentence. The Company expressly waives any and all rights under section 1542 of the Civil Code of California, which provides as follows: "A General Release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the Release, which if known by him must have materially affected his settlement with the debtor." 3.7 COLLECTIONS AND PAYMENTS AFTER THE DISTRIBUTION DATE. Except as may be explicitly provided in this Agreement and the Other Agreements, any cash receipts arising out of or relating to the assets, liabilities or operations of the Company or its past or present Subsidiaries received on or after the Distribution Date shall be retained by the Company and such Subsidiaries and any liabilities or obligations, other than any liabilities or obligations relating to LJSC and arising on or prior to the Distribution Date, arising out of, relating to or asserted on the basis of the assets, liabilities or operations of the Company or its past or present Subsidiaries due and unpaid on and after the Distribution Date or incurred on and after the Distribution Date shall be payable by the Company and such Subsidiaries. 3.8 CERTAIN POST-DISTRIBUTION TRANSACTIONS. THE COMPANY. (i) The Company shall, and shall cause each of its Subsidiaries to, comply with each representation and statement made, or to be made, to any taxing authority in connection with the IRS Ruling or any other ruling obtained, or to be obtained, by the Company and CFI acting together, from any such taxing authority with respect to any transaction contemplated by this Agreement; and (ii) until the third anniversary of the Distribution Date, neither the Company nor any of its Subsidiaries shall (A) make a material disposition, by means of a sale or exchange of assets or capital stock, a distribution to stockholders or otherwise, of its assets, (B) repurchase or issue any Company capital stock (other than stock issued pursuant to employee plans), or (C) cease the active conduct of its businesses independently, with its own employees and without material change, unless, in each of cases (A), (B) and (C), in the opinion of counsel 13 to the Company, which opinion shall be reasonably satisfactory to CFI, or pursuant to a favorable IRS supplemental ruling letter reasonably satisfactory to CFI, such act or omission would not adversely affect the tax consequences of the Distribution to CFI or the stockholders of CFI, as set forth in any ruling issued by any taxing authority; and the Company has no present intention to take any such actions. ARTICLE IV INDEMNIFICATION 4.1 INDEMNIFICATION BY CFI. Except as otherwise provided by any of the Other Agreements or as contemplated by Section 4.5 or Article VII hereof, effective as of the Distribution Date, CFI agrees to indemnify, defend and hold harmless the Company, each other member of the Company Group, and their present or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, Affiliates, insurers, attorneys and assigns (the "Company Indemnitees") from and against any and all Losses of the Company Indemnitees arising out of or related in any manner to any item set forth on Schedule 4.1. 4.2 INDEMNIFICATION BY THE COMPANY. Except as otherwise provided by any of the Other Agreements or as contemplated by Section 4.5 or Article VII hereof, effective as of the Distribution Date, the Company agrees to indemnify, defend and hold harmless CFI, each other member of the CFI Group, and their present or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, Affiliates, insurers, attorneys and assigns (the "CFI Indemnitees") from and against any and all Losses of the CFI Indemnitees arising out of or related in any manner to any item set forth on Schedule 4.2. 4.3 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. The amount that either CFI or the Company (an "Indemnifying Party") is or may be required to pay to an indemnified party ("Indemnitee") pursuant to Section 4.1 or 4.2 shall be reduced by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnitee, in reduction of the related Loss. If an 14 Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of any Loss and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received (up to but not in excess of the amount of any indemnity payment made hereunder). No insurer or other third party shall: (a) be relieved of the responsibility to pay any claims which it would otherwise be obligated to pay in the absence of the foregoing indemnification provisions; (b) solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect to any claims which it would otherwise be obligated to pay; or (c) be entitled to a benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions. Any Indemnifying Party shall succeed to the rights of any Indemnitee with respect to any matter contemplated by this Section 4.3. 4.4 PROCEDURES FOR INDEMNIFICATION. (a)(i) If an Indemnitee shall receive notice or otherwise learn of the assertion of any claim or commencement of any proceeding (including any governmental investigation) by a person who is not a party to this Agreement (or any Affiliate of either party) (a "Third-Party Claim") with respect to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof promptly after becoming aware of such Third-Party Claim setting forth the particulars as to such claim or proceeding in reasonable detail; PROVIDED that the failure of any Indemnitee to give notice as provided in this Section 4.4(a) shall not relieve the related Indemnifying Party of its obligations under this Article IV, unless such Indemnifying Party is actually prejudiced by such failure to give notice and then only to the extent of such actual prejudice. (ii) An Indemnifying Party may, to the extent it wishes within thirty days of receipt of notice of a Third Party claim and at its cost and expense, elect to defend or to seek to settle or compromise any Third-Party Claim; PROVIDED that the Indemnitee may participate in such settlement or defense through its chosen counsel at its sole cost and expense. After notice from an 15 Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnifying Party shall not be liable to such Indemnitee under this Article IV for any legal or other expenses (except expenses approved in advance by the Indemnifying Party) subsequently incurred by such Indemnitee in connection with the defense thereof; PROVIDED that if the defendants in any such Third-Party Claim include both the Indemnifying Party and one or more Indemnitees and in any Indemnitee's reasonable judgment a conflict of interest between one or more of such Indemnitees and such Indemnifying Party exists in respect of such claim, such Indemnitees shall have the right to employ separate counsel to represent such Indemnitees and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel reasonably satisfactory to the Indemnifying Party) shall be paid by such Indemnifying Party; PROVIDED FURTHER if and to the extent that there is a conflict of defenses or positions among the Indemnitees, the Indemnitees shall have the right to retain such number of additional separate counsel, reasonably satisfactory to the Indemnifying Party, as is reasonably necessary to avoid such conflicts, and the Indemnifying Party shall be responsible for the reasonable fees and expenses of such additional separate counsel; PROVIDED FURTHER that the Indemnitee may participate in the settlement or defense of a Third-Party Claim through counsel chosen by such Indemnitee if the fees and expenses of such counsel shall be borne by such Indemnitee. If an Indemnifying Party elects not to assume responsibility for defending a Third-Party Claim, such Indemnitee may defend or seek to compromise or settle such Third-Party Claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement. Notwithstanding the foregoing, the Indemnifying Party shall not be liable for any settlement of any Third-Party Claim effected without its written consent. The Indemnifying Party shall not, except with the consent of the Indemnitee, (i) enter into any such settlement that does not include as an unconditional term thereof the giving by the person or persons asserting such Third-Party Claim to all Indemnitees an unconditional release from all liability with respect to such Third-Party Claim, or (ii) consent to entry of any judgment. (b) Any claim on account of a Loss that does not result from a Third-Party Claim shall be asserted 16 by written notice given by the Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such thirty-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party under this Agreement or under applicable law (except as provided in the ADR Agreement). (c) In addition to any adjustments required pursuant to Section 4.3, if the amount of any Loss shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction that has been received by the Indemnitee, less any expenses properly incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party. (d) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall have all rights of subrogation and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim or against any other person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (e) Notwithstanding anything to the contrary herein or in the Other Agreements, the foregoing indemnification provisions and procedures shall apply to any other indemnification agreements herein or in the Other Agreements. 4.5 RELEASES. (a) Subject to Article VII and effective on the Distribution Date, the Company and each other member of the Company Group releases and forever discharges CFI, each other member of the CFI Group, and their present 17 or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, Affiliates, insurers, attorneys and assigns of and from any and all Liabilities (other than those for which indemnification is available under (i) this Article IV or (ii) any Other Agreement (subject to the provisions of Section 4.3)). (b) Subject to Article VII and effective on the Distribution Date, CFI and each other member of the CFI Group releases and forever discharges the Company, each other member of the Company Group and their present or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, Affiliates, insurers, attorneys and assigns of and from any and all Liabilities (other than those for which indemnification is available under this Article IV and any Other Agreement (subject to the provisions of Section 4.3)). (c) Each of the Company, for itself and on behalf of each other member of the Company Group, and CFI, for itself and on behalf of each other member of the CFI Group, expressly waives any and all rights under section 1542 of the Civil Code of California, which provides as follows: "A General Release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the Release, which if known by him must have materially affected his settlement with the debtor." 4.6 ENVIRONMENTAL LIABILITIES. Notwithstanding anything contained herein or in any Other Agreement to the contrary, neither party shall have any obligation to indemnify the other party with respect to any Environmental Liabilities. 18 ARTICLE V ACCESS TO INFORMATION; SERVICES 5.1 ACCESS TO INFORMATION. From and after the Distribution Date, CFI and its Subsidiaries shall afford to the Company and its authorized accountants, counsel and other designated representatives (collectively, "Representatives") reasonable access (including using reasonable efforts to give access to the person or firms possessing information) and duplicating rights during normal business hours to all administrative records, books, contracts and instruments, and all Company-owned computer software and computer data and other Company-owned data and information (collectively, "Information") within CFI's or any such Subsidiary's possession or control relating to the Company or any Company Subsidiary and to any property owned by CFI that was leased or operated by the Company or any Company Subsidiary, insofar as such access is reasonably required by the Company or any Company Subsidiary. Similarly, the Company and its Subsidiaries shall afford to CFI and its Representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to Information within the Company's or any such Subsidiary's possession or control relating to CFI or any CFI Subsidiary or relating to the Company prior to the Distribution Date and to any property owned by the Company that was leased or operated by CFI or any CFI Subsidiary (other than the Company and its Subsidiaries), insofar as such access is reasonably required by CFI or any CFI Subsidiary. Information may be requested under this Article V for, without limitation, audit, accounting, claim, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. 5.2 PRODUCTION OF WITNESSES. After the Distribution Date, each of CFI and the Company and its respective Subsidiaries shall use reasonable efforts to make available to the other party and its Subsidiaries, upon written request, its directors, officers, employees and agents as witnesses to the extent that any such person may reasonably be required in connection with any 19 legal, administrative or other proceedings in which the requesting party may from time to time be involved. 5.3 PROVISION OF SERVICES. In addition to any services contemplated to be provided following the Distribution Date by any Other Agreement, each party, upon written request, shall make available to the other party, during normal business hours and in a manner that will not interfere unreasonably with such party's business, its financial, tax, accounting, legal, employee benefits and similar staff services (collectively, "Services") whenever and to the extent that they may be reasonably required in connection with the preparation of tax returns, audits, claims, litigation or administration of employee benefit plans, and otherwise to assist in effecting an orderly transition following the Distribution. 5.4 REIMBURSEMENT. Except to the extent otherwise provided in any Other Agreement, each party providing Information, witnesses or Services under Section 5.1, 5.2 or 5.3 to the other party shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payment for all out-of- pocket costs and expenses as may be reasonably incurred in providing such Information, witnesses or Services. For purposes of this Section 5.4, salaries and other compensation payable to employees of either party shall be deemed to be an out-of-pocket cost or expense reimbursable hereunder. 5.5 RETENTION OF RECORDS. Except as otherwise required by law or agreed to in writing, each of CFI and the Company shall retain, and shall cause its respective Subsidiaries to retain following the Distribution Date, all significant information ("Information") relating to the business of the other and the other's subsidiaries, for a period (a "Retention Period") consistent with the document retention policies in effect at CFI and the Company, respectively. In addition, such Information shall not be destroyed or otherwise disposed of if during such period a party shall request in writing that any of the Information be retained for additional specific and reasonable periods of time at the expense of the party so requesting. After the applicable Retention Period, any party may destroy or otherwise dispose of any Information at any time, provided that, prior to such destruction or disposal, (a) such party shall provide no less than ninety (90) days' prior written notice to the other 20 party, identifying the Information proposed to be destroyed or disposed of, and (b) if the recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such of the Information as was requested at the expense of the requesting party. 5.6 CONFIDENTIALITY. Each of the CFI Group on the one hand, and the Company Group on the other hand, shall use commercially reasonable efforts to hold, and cause its Representatives to hold, in strict confidence, all Information concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement or any of the Other Agreements (except to the extent that such Information is (a) in the public domain through no fault of such party or (b) later lawfully acquired on a non- confidential basis from other sources which are not subject to any confidentiality litigation with the subject party by such party or subsequently developed by such party), and neither party shall release or disclose such Information to any other person, except to its auditors, attorneys, financial advisors, bankers and other consultants and advisors, and on terms and conditions substantially the same as the terms and conditions on which such party releases its own Information, unless compelled to disclose by judicial or administrative process or, as advised by its counsel, by other requirements of law. 5.7 PROVISION OF CORPORATE RECORDS. (a) Except as may otherwise be provided in any Other Agreement, CFI shall arrange as soon as practicable following the Distribution Date, to the extent not previously delivered, for the transportation (at the Company's cost) to the Company of the Company's books and records in its possession, except to the extent such items are already in the possession of the Company. Such books and records shall be the property of the Company, but shall be available to CFI for review and duplication until CFI shall notify the Company in writing that such records are no longer of use to CFI. 21 (b) Except as otherwise provided in any Other Agreement, the Company shall arrange as soon as practicable following the Distribution Date, to the extent not previously delivered, for the transportation (at CFI's cost) to CFI of CFI's and its Subsidiaries' books and records in its possession, except to the extent such items are already in the possession of CFI or a Subsidiary of CFI. Such books and records shall be the property of CFI, but shall be available to the Company for review and duplication until the Company shall notify CFI in writing that such records are no longer of use to the Company. 5.8 PRIVILEGED MATTERS. The Company and CFI recognize that legal and other professional services that have been and will be provided prior to the Distribution Date have been and will be rendered for the benefit of both CFI and the Company and that both CFI and the Company should be deemed to be the client for the purposes of asserting all privileges related thereto. No party may waive any privilege which could be asserted under any applicable law, and in connection with which the other party has a material interest, without the consent of the other party, except to the extent reasonably required in connection with any litigation with third parties. ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS The Company, for itself and on behalf of each other member of the Company Group, makes the following representations and warranties to, and covenants with, CFI, for its benefit and for the benefit of each other member of the CFI Group, each and all of which shall survive the execution and delivery of this Agreement and the Distribution Date. 6.1 FINANCIAL STATEMENTS. The consolidated balance sheets of the Company and its Subsidiaries and the consolidated statements of earnings and consolidated statement of cash flows for the Company and its Subsidiaries, each in the form included in the Information Statement, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be 22 indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries as of the dates indicated therein and the results of operations and cash flows for the periods indicated therein. 6.2 FORM 10 AND INFORMATION STATEMENT. The Form 10 and the Information Statement each do not misstate any material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, there shall be excluded therefrom any information provided by CFI. 6.3 MARKS. None of CFI's existing trademarks, trade names and service marks that are not also Marks ("CFI marks" as set forth in Schedule 6.3) infringe in any manner any of the Marks or otherwise interfere with the Company's expected use of the Marks, and none of the Company nor any other member of the Company Group shall, at any time, bring or join in any suit, claim or other proceeding or action adverse to CFI or any other member of the CFI Group relating to the use of the CFI marks. ARTICLE VII SHARED CLAIMS 7.1 ACKNOWLEDGMENT. Each party acknowledges that, from and after the Distribution Date, there may be claims and proceedings against such party and its Subsidiaries (other than workers' compensation claims which pertain to any persons who remain employed by LJSC on the day after the Distribution Date ("Excluded Claims") which shall remain the sole responsibility of LJSC) that relate (in whole or in part) to activities alleged to have transpired prior to the Distribution Date and with respect to which it would be fair and appropriate to apportion liability therefor between the parties ("Shared Claims"). 7.2 NOTIFICATION. If any party shall receive notice or otherwise learn of the assertion of any claim or the commencement of any proceeding which such party believes may constitute a Shared Claim (including, without limitation, any such claim or proceeding that names or identifies the other party or any of its Subsidiaries 23 as a responsible party), such party shall (i) immediately assume the defense thereof and shall in all respects respond thereto in a timely manner and (ii) promptly provide written notice thereof to the other party, setting forth the particulars as to such claim or proceeding in reasonable detail; PROVIDED that the failure of such party to give such notice shall not relieve the other party of any obligation to accept liability unless it is actually prejudiced by such failure and then only to the extent of such actual prejudice. 7.3 COOPERATION. The parties shall cooperate with each other in the defense or settlement of Shared Claims to the effect that (i) subject to the provisions of Section 7.2, the party bearing the greater liability shall be responsible for the control and administration of any Shared Claim and (ii) the other party shall cooperate with such party with respect to such control and administration. 7.4 LIABILITY. The parties shall seek to apportion liability between them with respect to any Shared Claim, and in so doing shall take cognizance of all relevant factors, including but not limited to, the time and duration of any alleged activity giving rise thereto. If the parties are unable to agree on an apportionment of liability within thirty days of receipt of notification as provided in Section 7.2, they shall submit the matter for resolution as provided in the ADR Agreement. 7.5 NON-SHARED LIABILITIES. Anything to the contrary contained in this Article VII notwithstanding, claims or proceedings arising out of or relating to LJSC, its employees and operations on or prior to the Distribution Date (other than Excluded Claims) shall be allocated as described below. The Company shall assume and indemnify CFI against all Losses and Liabilities arising out of or related to personnel matters that are caused by employees who are employed by LJSC immediately following the Distribution Date. CFI shall assume and indemnify the Company against all other Losses and Liabilities arising out of or related to LJSC on or prior to the Distribution Date, including all other personnel matters. If employees of both the Company and CFI cause any such Losses or Liabilities relating to LJSC, then they shall be Shared Claims and dealt with as provided in this Article VII. 24 ARTICLE VIII MISCELLANEOUS 8.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the Other Agreements, including any schedules and exhibits hereto or thereto, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 8.2 EXPENSES. Except as otherwise set forth in this Agreement and the Other Agreements, (i) CFI will pay all out-of-pocket costs and expenses that are necessary to effect the Distribution and incurred prior to the Distribution and (ii) each party shall bear its costs and expenses arising after the Distribution in connection with the Distribution; provided, however, CFI shall pay the reasonable moving and relocation costs of separating employees of CFI and CFC in Portland into two buildings, excluding design and architectural fees, phone and data connections infrastructure and labor associated with the move, including any other capital improvements, except that CFI shall pay for the costs of wheelchair ramp access, ADA required upgrades and lobby expansion. 8.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of laws thereof. 8.4 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be delivered by hand, mailed by registered or certified mail (return receipt requested), or sent by cable, telegram, telecopy (confirmed by regular, first-class mail), to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and shall be deemed given on the date on which such notice is received: if to CFI: Consolidated Freightways, Inc. 25 3240 Hillview Avenue Palo Alto, California 94304 Attn: General Counsel if to the Company: Consolidated Freightways Corporation 175 Linfield Drive Menlo Park, California 94025 Attn: General Counsel 8.5 AMENDMENTS AND WAIVERS. This Agreement may not be altered or amended, nor may rights hereunder be waived, except by an instrument in writing executed by the party or parties to be charged with such amendment or waiver. No waiver of any term, provision or condition of or failure to exercise or delay in exercising any rights or remedies under this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, provision, condition, right or remedy or as a waiver of any other term, provision or condition of this Agreement. 8.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement. 8.7 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. 8.8 TERMINATION. This Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the CFI Board without the approval of the Company or the shareholders of CFI. In the event of such termination, no party shall have any liability of any kind to any other party on account of such termination except that expenses incurred in connection with the transactions contemplated hereby shall be paid as provided in Section 8.2. 26 8.9 NO THIRD-PARTY BENEFICIARIES. Except for the provisions of Article IV relating to Indemnitees, this Agreement is solely for the benefit of the parties hereto and their respective Affiliates and should not be deemed to confer upon third parties (including any employee of the CFI Group or the Company Group) any remedy, claim, reimbursement, cause of action or other right other than those existing without reference to this Agreement. 8.10 TITLES AND HEADINGS. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.11 LEGAL ENFORCEABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. 8.12 FURTHER ASSURANCES. In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto will use its reasonable efforts to (i) execute and deliver such further documents and take such other actions as any other party may reasonably request in order to effectuate the purposes of this Agreement and to carry out the terms hereof, and (ii) take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and agreements or otherwise to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, using its reasonable efforts to obtain any consents and approvals and make any filings and applications necessary or desirable in order to consummate the transactions contemplated by this Agreement. 27 8.13 NO SOLICITATION OF EMPLOYEES. For a period of three years after the Distribution Date, neither CFI nor the Company, nor any of their Subsidiaries, will directly solicit the employment of any employee of the other company, or any of its Subsidiaries, without the prior written consent of such other company; PROVIDED, HOWEVER, that if the Company shall cease to receive services provided by CNF Service Company, Inc. pursuant to the Services Agreement after the Distribution Date, it may solicit employees (employed either at the time of notification by the Company of the termination of services, or in the preceding six months) from the groups that had been providing such services. 8.14 DISPUTE RESOLUTION. Any dispute between the parties concerning the performance of this Agreement shall be resolved in accordance with the provisions of the ADR Agreement. 28 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. CONSOLIDATED FREIGHTWAYS, INC. on behalf of itself and its wholly owned subsidiaries By: ------------------------------ Its: CONSOLIDATED FREIGHTWAYS CORPORATION on behalf of itself and its wholly owned subsidiaries By: ------------------------------ Its: 29 EX-3.1 3 CERTIFICATE OF INCORPORATION FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CONSOLIDATED FREIGHTWAYS CORPORATION The undersigned, Maryla R. Boonstoppel, certifies that she is the Secretary of Consolidated Freightways Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), and does hereby further certify as follows: 1. The name of the Corporation is Consolidated Freightways Corporation. 2. The Corporation was originally incorporated under the name LHT Holdings, Inc. Pursuant to an amendment to its Certificate of Incorporation filed on August 26, 1996, the Corporation changed its name to Consolidated Freightways Corporation. 3. The original Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware on March 20, 1996. 4. This Amended and Restated Certificate of Incorporation was duly adopted by stockholder written consent in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. 5. The text of the Certificate of Incorporation of the Corporation as amended hereby is restated to read in its entirety as follows: FIRST. The name of the Corporation is Consolidated Freightways Corporation. SECOND. The address of the Corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover 19901, County of Kent, and the name of its registered agent at such address is the Prentice-Hall Corporation System, Inc. THIRD. The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (the "GCL"). FOURTH. The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 55,000,000, 50,000,000 of which shares shall be common stock having a par value of $.01 per share ("Common Stock") and 5,000,000 of which shares shall be Preferred Stock having no par value ("Preferred Stock"). A description of each of such classes of stock and the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of each class of stock of the Corporation which are fixed by the Certificate of Incorporation of the Corporation, and the express grant of authority to the Board of Directors of the Corporation (the "Board") to fix by resolution or resolutions the designations and the powers, preferences and rights of each other class, and the qualifications, limitations or restrictions thereof, are as follows: 1. The Board shall have authority, by resolution or resolutions, at any time and from time to time to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series, and, without limiting the generality of the foregoing, to fix and determine the designation of each such series, the number of shares which shall constitute such series and the following relative rights and preferences of the shares of each series so established: (a) the annual dividend rate payable on shares of such series, the time of payment thereof, whether such dividends shall be cumulative or non- cumulative, and the date or dates from which any cumulative dividends shall commence to accrue; (b) the price or prices at which and the terms and conditions, if any, on which shares of such series may be redeemed; (c) the amounts payable upon shares of such series in the event of the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation; (d) the sinking fund provisions, if any, for the redemption or purchase of shares of such series; 2 (e) the extent of the voting powers, if any, of the shares of such series; (f) the terms and conditions, if any, on which shares of such series may be converted into shares of stock of the Corporation of any other class or classes or into shares of any other series of the same or any other class or classes; (g) whether, and if so the extent to which, shares of such series may participate with the Common Stock in any dividends in excess of the preferential dividend fixed for shares of such series or in any distribution of the assets of the Corporation, upon a liquidation, dissolution or winding-up thereof, in excess of the preferential amount fixed for shares of such series; and (h) any other designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of shares of such series not fixed and determined by law or in the Certificate of Incorporation of the Corporation, and to increase or decrease the number of shares of any series so created, subsequent to the issue of that series but not below the number of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. 2. There shall be no limitation or restriction on any variation between any of the different series of Preferred Stock as to the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof; and the several series of Preferred Stock may, except as hereinafter in this Article FOURTH otherwise expressly provided, vary in any and all respects as fixed and determined by the resolution or resolutions of the Board providing for the issuance of the various series; provided, however, that all shares of any one series of Preferred Stock shall have the same designation, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions. Different series of Preferred Stock shall not be considered to constitute different classes of shares for the purpose of voting by classes except as otherwise fixed by the Board with respect to any series at the time of the creation thereof. 3. So long as any shares of Preferred Stock are outstanding, the Corporation shall not declare and pay or set apart for payment any dividends (other than dividends payable in Common Stock or other stock of the Corporation ranking 3 junior to the Preferred Stock as to dividends) or make any other distribution on such junior stock, if at the time of making such declaration, payment or distribution the Corporation shall be in default with respect to any dividend payable on, or any obligation to retire, shares of Preferred Stock. 4. Subject to such limitations, if any, as may be contained in the resolution or resolutions providing for the issue of Preferred Stock of any series adopted by the Board, shares of Preferred Stock purchased, redeemed or otherwise acquired by the Corporation (excepting shares of such stock acquired on the conversion or exchange thereof into or for other shares of the Corpora- tion) (a) shall, upon the filing by the Corporation of a certificate pursuant to Delaware law reducing its capital in respect to such shares, have the status of authorized and unissued shares of Preferred Stock and may be reissued by the Corporation at any time as shares of any series of Preferred Stock and (b) shall, unless and until a certificate with respect thereto is filed as aforesaid, constitute treasury stock; and shares of Preferred Stock acquired on the conversion or exchange thereof into or for other shares of the Corporation shall, after such conversion or exchange, have the status of authorized and unissued shares of Preferred Stock and may be reissued by the Corporation at any time as shares of any series of Preferred Stock. 5. Subject to the provisions of any applicable law or the Bylaws of the Corporation as from time to time amended with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, and except as otherwise provided by law or in resolutions of the Board establishing any series of Preferred Stock pursuant to this Article FOURTH, the holders of outstanding shares of Common Stock of the Corporation shall exclusively possess the voting power for the election of directors and for all other purposes. The amount of either the authorized Preferred Stock or Common Stock, or the amount of both such classes of stock, may be increased or decreased by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote. Each holder of record of shares of Common Stock of the Corporation shall be entitled to one vote for each share of such stock standing in such holder's name on the books of the Corporation. FIFTH. A. The business and affairs of the Corporation shall be managed by or under the direction of the Board consisting of not less than five nor more than nine directors, the exact number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board. The directors shall be divided into three groups, designated Group I, Group II and Group III. Each Group of directors shall consist, as nearly as may be 4 possible, of one-third of the total number of directors constituting the entire Board (determined for purposes of the Certificate of Incorporation without regard to whether any vacancies exist on the Board). The term of the initial Group I directors shall terminate on the date of the 1997 annual meeting of stockholders; the term of the initial Group II directors shall terminate on the date of the 1998 annual meeting of stockholders; and the term of the initial Class III directors shall terminate on the date of the 1999 annual meeting of stockholders. At each annual meeting of stockholders beginning with the 1997 annual meeting, successors to the Group of directors whose term expires at that annual meeting shall be elected for a three-year term. B. If the number of directors is changed, any increase or decrease shall be apportioned among the Groups so as to maintain the number of directors in each Group as nearly equal as possible, and any additional director of any Group elected to fill a vacancy resulting from an increase in such Group shall hold office for a term that shall coincide with the remaining term of that Group, but in no case will a decrease in the number of directors shorten the term of any incumbent director. C. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board, however resulting, may be filled by a majority of the Board then in office, even if less than a quorum is present or by a sole remaining director. Any director elected to fill a vacancy shall have the same remaining term as that of his or her predecessor. D. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock shall have the right, voting separately by class or series, to elect directors at an annual or special meet- ing of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Incorporation of the Corporation applicable thereto. SIXTH. Elections of directors at an annual or special meeting of stockholders shall be by written ballot, unless the Bylaws of the Corporation provide otherwise. SEVENTH. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation 5 may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article SEVENTH as one class. EIGHTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (a) to make, alter or repeal the Bylaws of the Corporation; (b) to authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation; (c) to set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve or reserves in the manner in which the same was created; (d) by resolution passed by a majority of the whole Board, to designate one or more committees, each committee to consist of three or more of the directors of the Corporation, which, to the extent provided in the resolution or in the Bylaws of the Corporation, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the Bylaws of the Corporation or as may be determined from time to time by resolution adopted by a majority of the whole Board; and (e) when and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as the Board shall deem expedient and for the best interests of the Corporation. NINTH. A. In addition to any affirmative vote required by law, any other provision of the Certificate of Incorporation of the Corporation, the Bylaws of the Corporation or otherwise, and except as otherwise expressly provided in Sections B or C of this Article NINTH, a Business Transaction with or a Stock Repurchase 6 from, or proposed by or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder shall require the approval by not less than a majority vote of the holders of all of the Corporation's outstanding Voting Stock, voting together as a single class, which is beneficially owned by persons other than such Interested Stockholder and its Affiliates and Associates. Such affirmative vote shall be required notwithstanding the fact that no vote may otherwise be required, or that a lesser percentage or separate class vote may be required, by law, any other provision of the Certificate of Incorporation of the Corporation, the Bylaws of the Corporation or otherwise. B. The provisions of Section A of this Article NINTH shall not be applicable to any Business Transaction involving an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder, and such Business Transaction shall require only such affirmative vote, if any, as is required by law, any other provision of the Certificate of Incorporation of the Corporation, the Bylaws of the Corporation or otherwise, if all of the conditions specified in either of the following Paragraph 1 or 2 are met: 1. The Business Transaction shall have been approved (or shall have been effected in accordance with a written agreement approved) by a majority of the Disinterested Directors, whether such approval is given prior or subsequent to the acquisition of beneficial ownership of the Voting Stock that caused such Interested Stockholder to become an Interested Stockholder. A Business Transaction with an Interested Stockholder or an Affiliate or an Associate of an Interested Stockholder shall be deemed to have been approved by a majority of the Disinterested Directors if such Business Transaction either (i) was expressly approved (or the agreement pursuant to which it was effected was expressly approved) by a majority of Disinterested Directors, or (ii) is within a category of Business Transactions with such Interested Stockholder or its Affiliates or Associates authorized to be entered into by a resolution or resolutions adopted by, and not subsequently rescinded by, a majority of Disinterested Directors. 2. The Business Transaction is a Business Combination and all of the following conditions shall have been met: (a) The aggregate amount of cash and the Fair Market Value as of the date of the consummation of the Business Transaction of consideration other than cash to be received per share by holders of the Corporation's 7 Common Stock in such Business Transaction shall be at least equal to the highest amount determined under clauses (i) and (ii) below: (i) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of such Interested Stockholder or any Affiliate or Associate of such Interested Stockholder for any shares of Common Stock in connection with the acquisition by such Interested Stockholder or any such Affiliate or Associate of beneficial ownership of shares of Common Stock (x) within the two-year period immediately prior to the first public announcement of the proposed Business Transaction (the "Announcement Date"), or (y) in the transaction in which such Interested Stockholder became an Interested Stockholder, whichever is higher; and (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which such Interested Stockholder became an Interested Stockholder (the "Determination Date"), whichever is higher. (b) The aggregate amount of cash and the Fair Market Value as of the date of the consummation of the Business Transaction of consider- ation other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock other than Common Stock shall be at least equal to the highest amount determined under clauses (i), (ii) and (iii) below: (i) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of such Interested Stockholder or any Affiliate or Associate of such Interested Stockholder for any shares of such class or series of Capital Stock in connection with the ac- quisition by such Interested Stockholder or any such Affiliate or Associate of beneficial ownership of shares of such class or series of Capital Stock (x) within the two-year period immediately prior to the Announcement Date, or (y) in the transaction in which such Interested Stockholder became an Interested Stockholder, whichever is higher; 8 (ii) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Deter- mination Date, whichever is higher; and (iii) the highest preferential amount per share, if any, to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, regardless of whether the Business Transaction to be consummated constitutes such an event. The provisions of this Paragraph 2(b) shall be required to be met with respect to every class or series of outstanding Capital Stock, whether or not such Interested Stockholder or any Affiliate or Associate of such Interested Stockholder has previously acquired beneficial ownership of any shares of the particular class or series of Capital Stock. (c) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of such Interested Stockholder and its Affiliates and Associates in connection with their direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by such Interested Stockholder and its Affiliates and Associates. The prices determined in accordance with Paragraphs 2(a) and 2(b) of this Section B shall be subject to an appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (d) After the Determination Date and prior to the consummation of such Business Transaction: (i) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (ii) there shall have been no 9 reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors; (iii) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (iv) neither such Interested Stockholder nor any Affiliate or Associate of such Interested Stockholder shall have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder and except in a transaction that, after giving effect thereto, would not result in any increase in such Interested Stockholder's or any such Affiliate's or Associate's percentage beneficial ownership of any class or series of Capital Stock. (e) A proxy or information statement describing the proposed Business Transaction and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the Corporation at least thirty days prior to the consummation of such Business Transaction (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Transaction that the Disinterested Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Disinterested Directors, the opinion of an investment banking firm selected by a majority of the Disinterested Directors as to the fairness (or not) of the terms of the Business Transaction from a financial point of view to the holders of the outstanding shares of Capital Stock other than such Interested Stockholder and its Affiliates or Associates, such investment banking firm to be paid a reasonable fee for its services by the Corporation. 10 C. The provisions of Section A of this Article NINTH shall not be applicable to a Stock Repurchase with, or proposed by or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockhold- er, and such Stock Repurchase shall require only such affirmative vote, if any, as is required by law, any other provision of the Certificate of Incorporation of the Corporation, the Bylaws of the Corporation or otherwise, if the conditions specified in either of the following Paragraph 1 or 2 are met: 1. The Stock Repurchase is made pursuant to a tender offer or exchange offer for a class of Capital Stock made available on the same basis to all holders of such class of Capital Stock. 2. The Stock Repurchase is made pursuant to an open market purchase program approved by a majority of the Disinterested Directors, PROVIDED that such repurchase is effected on the open market and is not the result of a privately negotiated transaction. D. For the purposes of this Article NINTH: 1. The term "Business Transaction" shall mean: (a) any merger or consolidation of the Corporation with, or any sale or transfer of all or substantially all of the Corporation's assets to, (i) any Interested Stockholder or (ii) any other corporation (whether or not itself an Interested Stockholder) which is or after such merger, consolidation, sale or transfer would be an Affiliate or Associate of an Interested Stockholder, or any liquidation or dissolution of the Corporation (any such merger, consolidation, sale, transfer, liquidation or dissolution being referred to herein as a "Business Combination"); or (b) any other transaction (other than a Stock Repurchase) between the Corporation or any Subsidiary, on the one hand, and any Interested Stockholder or any Affiliate or Associate of an Interested Stockholder, on the other hand, and any amendment to the Bylaws of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of an Interested Stockholder; or (c) any reclassification of securities (including any reverse stock split) or recapitalization of the Corporation, or any merger or 11 consolidation of the Corporation with any Subsidiary, or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the percentage beneficial ownership of any class or series of Capital Stock held by, or the voting power with respect to the Corporation of, any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (d) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (c). 2. The term "Stock Repurchase" shall mean any repurchase by the Corporation or any Subsidiary of any shares of Capital Stock at a price greater than the then Fair Market Value of such shares from an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder if beneficial ownership of one-quarter or more of all shares of Capital Stock beneficially owned by such Interested Stockholder and its Affiliates and Associates were acquired (disregarding shares acquired as part of a pro- rata stock dividend or stock split) within a period of less than two years prior to the date of such repurchase (or the date of an agreement in respect thereof). 3. The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article FOURTH of this Amended and Restated Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 4. The term "person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. 5. The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary, or any pension, profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary, or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who (a) is the beneficial owner of Voting 12 Stock representing ten percent (10%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing ten percent (10%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock. 6. A person shall be a "beneficial owner" of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 5 of this Section D, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of Paragraph 6 of this Section D, but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 7. A person shall be deemed to be an "Affiliate" of a specified person, if such person directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. A person shall be deemed to be an "Associate" of a specified person, if such person is (a) a corporation or organization (other than the Corporation or any Subsidiary) of which such specified person is an officer or partner or of which such specified person is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (b) a trust or other estate (other than any pension, profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary) in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar 13 fiduciary capacity, or (c) a relative or spouse of such specified person, or a relative of such spouse, who has the same home as such specified person. 8. The term "Subsidiary" means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation, as well as any Affiliate of the Corporation which is controlled by the Corporation; PROVIDED, HOWEVER, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 5 of this Section D, the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. 9. With respect to any Business Transaction with, or proposed by or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder, and with respect to any proposal of the kind referred to in Section H of this Article NINTH, which is proposed by or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder, the term "Disinterested Director" means any member of the Board who is not an Affiliate or Associate or representative of such Interested Stockholder and was a member of the Board prior to the time that such Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director, while such successor is a member of the Board, who is not an Affiliate or Associate or representative of such Interested Stockholder and is recommended or elected to succeed the Disinterested Director by a majority of Disinterested Directors. 10. The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith, and (c) in the case of property other than cash or stock, the fair market value of such property 14 on the date in question as determined in good faith by a majority of the Disinterested Directors. 11. In the event of any Business Transaction in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs 2(a) and 2(b) of Section B of this Article NINTH shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. E. A majority of the Disinterested Directors shall have the power and duty to determine for the purposes of this Article NINTH, on the basis of information known to them after reasonable inquiry, all questions arising under this Article NINTH, including, without limitation, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, and (d) whether the consideration to be received in any Stock Repurchase by the Corporation or any Subsidiary exceeds the then Fair Market Value of the shares of Capital Stock being repurchased. Any such determination made in good faith shall be binding and conclusive on all parties. F. Nothing contained in this Article NINTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. G. The fact that any Business Transaction complies with the provisions of Section B of this Article NINTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board, or any member thereof, to approve such Business Transaction or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Transaction. H. Notwithstanding any other provisions of the Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, the Certificate of Incorporation or the Bylaws of the Corporation) and in addition to the voting requirements set forth in Article SEVENTEENTH hereof, any proposal to amend or repeal, or adopt any provision of the Certificate of Incorporation inconsistent with, this Article NINTH which is proposed by or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder shall require approval by a vote of a majority of the holders of all then outstanding shares of Voting Stock which are 15 beneficially owned by persons other than such Interested Stockholder and its Affiliates and Associates, voting together as a single class; PROVIDED, HOWEVER, that this Section H shall not apply to, and such majority vote shall not be required for, any amendment, repeal or adoption which does not affect the provisions of this Article NINTH relating to Stock Repurchases and which is recommended by a majority of the Disinterested Directors, if a majority of the directors then in office are Disinterested Directors. TENTH. Meetings of stockholders may be held outside the State of Delaware, if the Bylaws so provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation. ELEVENTH. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly noticed and called, as provided in the Bylaws of the Corporation, and may not be taken by a written consent of the stockholders pursuant to the GCL. TWELFTH. Special meetings of stockholders of the Corporation for any purpose or purposes may be called at any time by the Chairman of the Board, the President or a majority of the entire Board. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. THIRTEENTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a director to the full extent authorized or permitted by law (as now or hereafter in effect). Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article THIRTEENTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. 16 FOURTEENTH. Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation. FIFTEENTH. The private property of the stockholders of this Corporation shall not be subject to the payment of corporate debts to any extent whatsoever. SIXTEENTH. The officers and directors of the Corporation, and such other persons as authorized by a majority of the entire Board consistent with the provisions of the GCL shall be indemnified by the Corporation to the fullest extent authorized or permitted by law (as now or hereafter in effect). SEVENTEENTH. The Corporation reserves the right to adopt, amend, alter or repeal any provisions contained in the Certificate of Incorporation in the manner now or hereafter prescribed by the statutes of the State of Delaware and the Certificate of Incorporation, and all rights herein conferred on stockholders are expressly subject to this reservation. Notwithstanding anything contained in the Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least eighty percent (80%) of the outstanding stock of the Corporation entitled to vote thereon shall be required to adopt, amend, alter or repeal any provision inconsistent with Articles FIFTH, SEVENTH, EIGHTH, NINTH, ELEVENTH, TWELFTH, THIRTEENTH, SIXTEENTH and SEVENTEENTH of the Certificate of Incorporation. IN WITNESS WHEREOF, Consolidated Freightways Corporation has caused its corporate seal to be affixed and this Amended and Restated Certificate of Incorporation to be signed by Maryla R. Boonstoppel, its Secretary, this day of , 1996. CONSOLIDATED FREIGHTWAYS CORPORATION --------------------------------------- 17 EX-3.2 4 AMENDED BY LAWS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMENDED AND RESTATED AS OF --------------- FORM OF BYLAWS OF CONSOLIDATED FREIGHTWAYS CORPORATION INCORPORATED UNDER THE LAWS OF DELAWARE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS BYLAWS OF CONSOLIDATED FREIGHTWAYS CORPORATION ARTICLE I: LOCATION AND OFFICES SECTION 1:1. Principal Office. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1:2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II: STOCKHOLDERS SECTION 2:1. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2:2. Business to be Conducted at Annual Meeting. . . . . . . . . . 2 SECTION 2:3. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2:4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2:5. Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2:6. Rules of Conduct. . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.7. Quorum and Voting . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2:8. Voting; Proxy . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2:9. Voting by Fiduciaries, Pledgees and Pledgors. . . . . . . . . 6 SECTION 2:10. Nomination of Directors . . . . . . . . . . . . . . . . . . . 6 SECTION 2:11. List of Stockholders. . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III: DIRECTORS SECTION 3:1. General Powers. . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3:2. Number and Qualifications. . . . . . . . . . . . . . . . . . . 8 SECTION 3:3. Election; Resignation . . . . . . . . . . . . . . . . . . . . 8 SECTION 3:4. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3:5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3:6. Committees. . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3:7. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 3:8. Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 3:9. Notice to Members of the Board. . . . . . . . . . . . . . . . 10 SECTION 3:10. Presiding Officer . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3:11. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3:12. Interested Directors. . . . . . . . . . . . . . . . . . . . . 11 ARTICLE IV: OFFICERS SECTION 4:1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4:2. Tenure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4:3. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4:4. Chairman of the Board . . . . . . . . . . . . . . . . . . . . 12 SECTION 4:5. President. . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4:6. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4:7. Secretary.. . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4:8. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4:9. Other Officers. . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE V: CAPITAL STOCK AND DIVIDENDS SECTION 5:1. Certificates for Shares . . . . . . . . . . . . . . . . . . . 15 SECTION 5:2. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 5:3. Regulations Governing Issuance and Transfers of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 5:4. Transfer Agents and Registrars. . . . . . . . . . . . . . . . 16 SECTION 5:5. Lost or Destroyed Certificates. . . . . . . . . . . . . . . . 16 SECTION 5:6. Fractions of Shares . . . . . . . . . . . . . . . . . . . . . 16 SECTION 5:7. Determination of Stockholders . . . . . . . . . . . . . . . . 17 SECTION 5:8. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE VI: OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . . . . . . . . .17 ii ARTICLE VII: INDEMNIFICATION SECTION 7:1. General Indemnification . . . . . . . . . . . . . . . . . . . 18 SECTION 7:2. Insurance, Indemnification Agreements and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 7:3. Nonexclusivity. . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VIII: MISCELLANEOUS SECTION 8:1. Voting Shares in Other Corporations . . . . . . . . . . . . . 19 SECTION 8:2. Execution of Other Papers and Documents . . . . . . . . . . . 19 SECTION 8:3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 8:4. Books and Records . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 8:5. Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 8:6. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 20 iii AMENDED AND RESTATED BYLAWS OF CONSOLIDATED FREIGHTWAYS CORPORATION ARTICLE I: LOCATION AND OFFICES PRINCIPAL OFFICE. SECTION 1:1. The principal office of Consolidated Freightways Corporation (the "Corporation") shall be at such place as the Board of Directors of the Corporation (the "Board") may from time to time determine, but until a change is effected such principal office shall be at 175 Linfield Drive in the City of Menlo Park, California. OTHER OFFICES. SECTION 1:2. The Corporation may also have other offices, in such places (within or without the State of Delaware) as the Board may from time to time determine. ARTICLE II: STOCKHOLDERS ANNUAL MEETING. SECTION 2:1. An annual meeting of the stockholders of the Corporation shall be held at 10:00 o'clock a.m. on the last Monday of April of each year, beginning in 1997, if not a legal holiday, and if a legal holiday then on the next succeeding day not a legal holiday or on such other date as shall be designated from time to time by the Board. The purpose of the meeting shall be to elect directors and to transact such other business as properly may be brought before the meeting. If the Corporation shall fail to hold said meeting for the election of directors on the date aforesaid, the Board shall cause the election to be held by the stockholders as soon thereafter as convenient. BUSINESS TO BE CONDUCTED AT ANNUAL MEETING. SECTION 2:2.1 At an annual meeting of stockholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the Corporation's notice of the meeting, (ii) by or at the direction of the Board (or any duly organized committee thereof), or (iii) by any stockholder of the Corporation who is a stockholder of record on the date of giving of the notice provided for in this Section 2:2 and on the record date for the determination of stockholders entitled to vote at such meeting and who has complied with the notice procedures set forth in this Section 2:2. SECTION 2:2.2 In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice in proper written form to the Secretary which notice is not withdrawn by such stockholder at or prior to such annual meeting. SECTION 2:2.3 To be timely, a stockholder's notice to the Secretary must be delivered or mailed to and received by the Secretary at the principal executive offices of the Corporation, not less than sixty days nor more than ninety days prior to the first anniversary date of the preceding year's annual meeting of stockholders; PROVIDED, HOWEVER, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first. SECTION 2:2.4 To be in proper written form, such stockholder's notice must set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at such meeting; (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class, series and the number of shares of the Corporation's stock which are beneficially owned by such stockholder, and the beneficial owner, if any, on whose behalf the proposal is made; (iv) a description of all arrangements or understandings between such stockholder or beneficial owner and any other person or persons (including their names) in connection with the proposal of such business by such stockholder or beneficial owner and any material interest of the stockholder, and of the beneficial owner, if any, on whose behalf the proposal is made, in such business; and (v) a representation that such stockholder or beneficial owner intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. 2 SECTION 2:2.5 Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2:2. The chairman of the meeting may, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with the provisions of this Section 2:2; and if the chairman should so determine, the chairman shall so declare to the meeting, and any such business not properly brought before the meeting shall not be trans- acted. SPECIAL MEETINGS. SECTION 2:3. Special meetings of stockholders of the Corporation for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer or a majority of the entire Board. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given to each stockholder entitled to vote at such meeting as provided in Section 2:5, and only such business as is stated in such notice shall be acted upon thereat. PLACE OF MEETINGS. SECTION 2:4. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place, within or without the State of Delaware, as may be determined by the Board and stated in the notice of the meeting. NOTICE OF MEETINGS. SECTION 2:5. Written notice of each meeting of the stockholders stating the place, date, and hour of the meeting, and, in case of a special meeting or where otherwise required by statute, the purpose or purposes for which the meeting is called, shall be delivered by mail not less than ten nor more than sixty days before the date of the meeting, by or at the direction of the person calling the meeting, to each stockholder entitled to vote at such meeting. The notice of a stockholders' meeting shall be deemed to be delivered when deposited in the United States mail with postage prepaid, addressed to each stockholder at such stockholder's address as it appears on the records of the Corporation. 3 RULES OF CONDUCT. SECTION 2:6. The Board of the Corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent, determined by the Board or the chairman of the meeting, meeting of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. QUORUM AND VOTING. SECTION 2:7.1 The holders of a majority of the outstanding shares (exclusive of treasury stock) entitled to vote at any meeting of the stockholders, when present in person or by proxy, shall constitute a quorum for the transaction of business, except as otherwise provided by statute, the Certificate of Incorporation of the Corporation or these Bylaws; but in the absence of such a quorum the holders of a majority of the shares represented at the meeting shall have the right successively to adjourn the meeting to a specified date. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 2:7.2 The absence from any meeting of the number of shares required by statute, the Certificate of Incorporation of the Corporation or these Bylaws 4 for action upon one matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shares required in respect of such other matters shall be present. SECTION 2:7.3 When a quorum is present at any meeting of the stockholders, the vote of the holders (present in person or represented by proxy) of a majority of the shares of stock which are actually voted (and have the power to vote) on any proposition or question properly brought to a vote at such meeting shall decide any such proposition or question, unless the proposition or question is one upon which by express provision of statute or of the Certificate of Incorporation, or of these Bylaws, a different vote is required, in which case such express provision shall govern and establish the number of votes required to determine such proposition or question. VOTING; PROXY. SECTION 2:8.1 Whenever the law requires or the chairman of the meeting orders that a vote be taken by ballot, each stockholder entitled to vote on a particular question at a meeting of stockholders, pursuant to law or the Certificate of Incorporation, shall be entitled to one vote for each share of voting stock held by such stockholder. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. The date for determining the stockholders entitled to vote at a meeting of the stockholders shall be determined pursuant to Section 5:8. SECTION 2:8.2 Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy; but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. 5 VOTING BY FIDUCIARIES, PLEDGEES AND PLEDGORS. SECTION 2:9. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation the pledgor has expressly empowered the pledgee to vote thereon, in which case only the pledgee or the pledgee's proxy may represent such stock and vote thereon. NOMINATION OF DIRECTORS. SECTION 2:10.1 Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise expressly provided in the Certificate of Incorporation of the Corporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board may be made at any annual meeting of stockholders, (i) by or at the direction of the Board (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation who is a stockholder of record on the date of the giving of the notice provided for in this Section 2:9 and on the record date for the determination of stockholders entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 2:9. SECTION 2:10.2 In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. SECTION 2:10.3 To be timely, a stockholder's notice to the Secretary must be delivered or mailed to and received by the Secretary at the principal executive offices of the Corporation not less than sixty days nor more than ninety days prior to the first anniversary date of the preceding year's annual meeting of stockholders, PROVIDED, HOWEVER, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first. SECTION 2:10.4 To be in proper written form, a stockholder's notice to the Secretary must set forth (i) as to each person whom the stockholder proposes to 6 nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and the number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice or the beneficial owner on whose behalf the nomination is made, (A) the name and address of such stockholder as they appear on the Corporation's books, (B) the class or series and the number of shares of the Corporation's stock which are beneficially owned by such stockholder or beneficial owner, (C) a description of all arrangements or understandings between such stockholder or beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder or beneficial owner, (D) a representation that such stockholder or beneficial owner intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (E) any other information relating to such stockholder or beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regula- tions promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. SECTION 2:10.5 No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2:10. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. LIST OF STOCKHOLDERS. SECTION 2:11. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten 7 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this Section 2:10 or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III: DIRECTORS GENERAL POWERS. SECTION 3:1. The Board shall control and manage the business and property of the Corporation. The Board may exercise all such powers of the Corporation and do all lawful acts and things as are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done by the stockholders or some particular officer of the Corporation. 8 NUMBER AND QUALIFICATIONS. SECTION 3:2. The number of directors shall be determined from time to time by resolution of the Board in accordance with the terms of Article FIFTH of the Certificate of Incorporation. ELECTION; RESIGNATION. SECTION 3:3. Except as provided in the Certificate of Incorporation with respect to the filling of vacancies, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any director may resign at any time upon written notice to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board. If no such specification is made, it shall be deemed effective at the pleasure of the Board. Directors need not be stockholders. The directors who are to be elected at the annual meeting of the stockholders shall be elected by ballot by the holders of shares entitled to vote. MEETINGS. SECTION 3:4.1. The Board of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as may from time to time be determined by the Board. Special meetings of the Board may be called by the Chairman, if there be one, the President or any director. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or facsimile transmission on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. SECTION 3:4.2. Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participating in the meeting in this manner shall constitute presence in person at such meeting. 9 QUORUM. SECTION 3:5. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board, a majority of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. COMMITTEES. SECTION 3:6. The Board shall have the following committees: a Compensation Committee and an Audit Committee. The Board may, by resolution passed by a majority of the entire Board, designate one or more additional committees. Each committee shall consist of three or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board when required. WAIVER OF NOTICE. SECTION 3:7. Any notice which is required by law or by the Certificate of Incorporation or by these Bylaws to be given to any director may be waived in writing, signed by such director, whether before or after the time stated therein. Attendance of a director at any meeting shall constitute waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 10 CONSENT. SECTION 3:8. Any action required or permitted to be taken at any meeting of the Board (or of any committee thereof) may be taken without a meeting if all members of the Board (or committee) consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board (or committee). NOTICE TO MEMBERS OF THE BOARD. SECTION 3:9. Each member of the Board shall file with the Secretary of the Corporation an address to which mail, by hand deliveries or overnight commercial courier deliveries may be transmitted and, if appropriate, a telephone number to which facsimile notices may be transmitted. A notice mailed, delivered by hand or by overnight commercial courier (receipt requested) or transmitted by facsimile (with confirmation receipt) in accordance with the instructions provided by the director shall be deemed sufficient notice. Such address or telephone number may be changed at any time and from time to time by a director by giving written notice of such change to the Secretary. Failure on the part of any director to keep an address and, if applicable, telephone number on file with the Secretary shall automatically constitute a waiver of notice of any regular or special meeting of the Board which might be held during the period of time that such address and telephone number, if applicable, are not on file with the Secretary. A notice shall be deemed to be mailed when deposited in the United States mail, postage prepaid. A notice shall be deemed to be delivered by hand or by overnight commercial courier or by facsimile transmission when sent to the address or telephone number, as the case may be, which the director has placed on file with the Secretary, and in the case of facsimile transmission, when a confirmation receipt is received. PRESIDING OFFICER. SECTION 3:10. The Chairman of the Board shall preside at all meetings of the Board at which the Chairman is present. In the absence of the Chairman, the Board shall select a chairman of the meeting from among the directors present. COMPENSATION. SECTION 3:11. The directors may be paid their expenses, if any, of attendance at each meeting of the Board and may be paid a fixed sum for attendance at each meeting of the Board or a stated retainer as director. No such payment shall preclude any director from serving the Corporation in any other capacity and 11 receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. INTERESTED DIRECTORS. SECTION 3:12. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other Corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. ARTICLE IV: OFFICERS APPOINTMENT. SECTION 4:1. At the annual meeting of the Board following their election by the stockholders, the directors shall elect from its membership a Chairman of the Board and a President. The Board shall elect such Vice Presidents, a Secretary, a Treasurer, Assistant Secretaries, Assistant Treasurers and such other officers, as the Board may from time to time deem necessary or appropri- ate. 12 TENURE. SECTION 4:2. Officers appointed by the Board shall hold their respective offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board; and all officers of the Corporation shall hold office until their successors are chosen and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any officer appointed by the Board may be removed by the Board with or without a hearing and with or without cause whenever in its judgment the best interests of the Corporation will be served thereby. SALARIES. SECTION 4:3. The salaries of all officers of the Corporation shall be fixed by the Board (or any committee thereof established for such purpose). CHAIRMAN OF THE BOARD. SECTION 4:4. The Chairman of the Board, if there be one, shall preside at all meetings of the stockholders and of the Board. Either the Chairman of the Board or the President shall be the Chief Executive Officer of the Corporation, and except where by law the signature of the President is required, the Chairman of the Board shall possess the same power as the President to sign, with the Secretary (or Assistant Secretary) or Treasurer (or Assistant Treasurer), certificates for the stock of the Corporation, and all bonds, mortgages, contracts, and other instruments of the Corporation which may be authorized by the Board or by such Chairman of the Board or by the President. During the absence or disability of the President, the Chairman of the Board shall exercise all the powers and discharge all the duties of the President. 13 PRESIDENT. SECTION 4:5. The President shall have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board or the Chairman of the Board are carried into effect. The President may sign, with the Secretary (or Assistant Secretary) or Treasurer (or Assistant Treasurer), certificates for stock of the Corporation and execute all deeds, bonds, mortgages, contracts and other instruments of the Corporation authorized by the Board, by the Chairman of the Board or by such President, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board, the Chairman of the Board or the President. In the absence or disability of the Chairman of the Board, or if there be none, the President shall preside at all meetings of the stockholders and the Board. VICE PRESIDENTS. SECTION 4:6. Each Vice President shall have such powers, duties and designations as the Board (or any committee thereof established for such purpose) assigns to such Vice President. In the absence or disability of the President and the Chairman of the Board, the Vice Presidents, in the order designated by the Board, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may also sign, with the Secretary (or Assistant Secretary) or Treasurer (or Assistant Treasurer), certificates for stock of the Corporation, and, when so authorized by the Chairman of the Board or President, may also sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board, and shall perform such other duties as from time to time may be assigned to any Vice President by the Board. SECRETARY. SECTION 4:7. The Secretary shall attend all meetings of the Board and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or the President, under whose supervision such Secretary shall be. If the Secretary shall be unable 14 or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board, and if there be no Assistant Secretary, then either the Board or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by such officer's signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. In the absence of the Secretary from any meeting, the minutes shall be recorded by the person appointed for that purpose by the presiding officer. TREASURER. SECTION 4:8. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the Board, at its regular meetings, or when the Board so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of the office and for the restoration to the Corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. OTHER OFFICERS. SECTION 4:9. In accordance with Section 4:1, such other officers as the Board may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board. The Board may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. 15 ARTICLE V: CAPITAL STOCK AND DIVIDENDS CERTIFICATES FOR SHARES. SECTION 5:1. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. TRANSFERS. SECTION 5:2. Certificates representing shares of stock of the Corporation shall be transferable only on the books of the Corporation by the person or persons named in the certificate or by the attorney lawfully constituted in writing representing such person or persons and upon surrender of the certificate or certificates being transferred which certificate shall be prop- erly endorsed for transfer or accompanied by a duly executed stock power. Whenever a certificate is endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, evidence of authority to transfer shall also be submitted with the certificate. All certificates surrendered to the Corporation for transfer shall be cancelled. REGULATIONS GOVERNING ISSUANCE AND TRANSFERS OF SHARES. SECTION 5:3. The Board shall have the power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. TRANSFER AGENTS AND REGISTRARS. SECTION 5:4. Transfer agents and registrars for the Corporation's stock shall be banks, trust companies or other financial institutions located within or without the State of Delaware as shall be appointed by the Board. The Board shall also define the authority of such transfer agents and registrars. 16 LOST OR DESTROYED CERTIFICATES. SECTION 5:5. Where a certificate for shares of the Corporation has been lost or destroyed, the Board may authorize the issuance of a new certificate in lieu thereof upon satisfactory proof of such loss or destruction, and upon the giving of an open penalty bond with surety satisfactory to the Corporation's Treasurer and General Counsel, if there be one, to protect the Corporation or any person injured by the issuance of the new certificate from any liability or expense which it or they may incur by reason of the original certificate's remaining outstanding, and upon payment of the Corporation's reasonable costs incident thereto. FRACTIONS OF SHARES. SECTION 5:6. The Corporation shall not issue fractions of a share. It shall, however, (1) arrange for the disposition of fractional interests by those entitled thereto, and (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. Scrip or warrants shall not, unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, or to participate in any of the assets of the Corporation in the event of liquidation. The Board may cause scrip or warrants to be issued subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board may impose. DETERMINATION OF STOCKHOLDERS. SECTION 5:7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. RECORD DATE. SECTION 5:8. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allot- 17 ment or any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (2) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board may fix a new record date for the adjourned meeting. ARTICLE VI: OTHER SECURITIES OF THE CORPORATION All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board, the President or any Vice President, or such other person as may be authorized by the Board, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, or such other person as may be authorized by the Board; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate securities shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board, or bear imprinted thereon the facsimile signature such person. In case any person who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be an officer before the bond, debenture or other corporate security so signed or 18 attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VII: INDEMNIFICATION GENERAL INDEMNIFICATION. SECTION 7:1. The Corporation shall indemnify to the fullest extent authorized or permitted by law (as now or hereafter in effect) any person made, or threatened to be made, a party to or otherwise involved in any action or proceeding (whether civil or criminal or otherwise) by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation or by reason of the fact that such director or officer, at the request of the Corporation, is or was serving any other Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity. Nothing contained herein shall affect any rights to indemnification to which employees other than directors and officers may be entitled by law. No amendment or repeal of this Section 6:1 shall apply to or have any effect on any right to indemnification provided hereunder with respect to any acts or omissions occurring prior to such amendment or repeal. INSURANCE, INDEMNIFICATION AGREEMENTS AND OTHER MATTERS. SECTION 7:2. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the law. The Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing for indemnification to the fullest extent authorized or permitted by law and including as part thereof any or all of the foregoing, to ensure the payment of such sums as may become necessary to effect full indemnification. 19 NONEXCLUSIVITY. SECTION 7:3. The rights to indemnification conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Certificate of Incorporation of the Corporation, these Bylaws or any agreement, vote of stockholders or directors or otherwise. ARTICLE VIII: MISCELLANEOUS VOTING SHARES IN OTHER CORPORATIONS. SECTION 8:1. The Corporation may vote any and all shares of stock and other securities having voting rights which may at any time and from time to time be held by it in any other Corporation or Corporations and such vote may be cast either in person or by proxy by such officer of the Corporation as the Board may appoint or, in default of such appointment, the Chairman, the President or a Vice President. EXECUTION OF OTHER PAPERS AND DOCUMENTS. SECTION 8:2. All checks, bills, notes, drafts, vouchers, warehouse receipts, bonds, mortgages, contracts, registration certificates and all other papers and documents of the Corporation shall be signed or endorsed for the Corporation by such of its officers, other employees and agents as the Board may from time to time determine, or in the absence of such determination, by the Chairman of the Board, the President or a Vice President, PROVIDED that instruments requiring execution with the formality of deeds shall be signed by the Chairman of the Board, the President or a Vice President and impressed with the Seal of the Corporation, duly attested by the Secretary or an Assistant Secretary. CORPORATE SEAL. SECTION 8:3. The Board shall provide a suitable seal, containing the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware," which seal shall be in the custody of the Secretary of the Corporation, and may provide for one or more duplicates thereof to be kept in the custody of such other officer of the Corporation as the Board may prescribe. 20 BOOKS AND RECORDS. SECTION 8:4. Except as the Board may from time to time direct or as may be required by law, the Corporation shall keep its books and records at its principal office. FISCAL YEAR. SECTION 8:5. The fiscal year of the Corporation shall be fixed by resolution of the Board. AMENDMENTS. SECTION 8:6. These Bylaws may be amended, altered or repealed, or new Bylaws may be adopted (a) by the affirmative vote of eighty percent of the outstanding stock of the Corporation entitled to vote thereon, or (b) by the affirmative vote of the majority of the Board at any regular or special meeting; PROVIDED that the notice of such meeting of stockholders or directors, whether regular or special, shall specify as one of the purposes thereof the making of such amendment, alteration or repeal. 21 EX-4.1 5 COMMON STOCK CERTIFICATE PAR VALUE OF $.01 PAR VALUE OF $.01 NUMBER SHARES CF_____ ______ COMMON STOCK COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CONSOLIDATED FREIGHTWAYS CORPORATION CUSIP 209232 10 7 SEE REVERSE FOR CERTAIN DEFINITIONS This Certifies that is the registered owner of shares OF THE FULLY PAID AND NON-ASSESSABLE COMMON STOCK OF Consolidated Freightways Corporation, transferable on the books of said Corporation in person or by attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. Witness the signatures of its duly authorized officers. Dated: - -------------------------- ----------------- VICE PRESIDENT AND SECRETARY CHAIRMAN COUNTERSIGNED AND REGISTERED: THE BANK OF NEW YORK TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE CONSOLIDATED FREIGHTWAYS CORPORATION A full statement of the rights, preferences, privileges, and restrictions granted to or imposed upon the respective classes of shares of the Corporation, including the Common Stock, ownership of which is represented by this Certificate, and the Preferred Stock, and upon the respective holders thereof, may be obtained by any shareholder upon request and without charge from the Secretary of the Corporation, at the principal office of the Corporation. The following is only a summary of certain of these rights, preferences and restrictions. 1. Each share of Common Stock is entitled to one vote on all matters submitted to a vote of the holders of shares entitled to vote as set forth in the Articles of Incorporation. 2. The Board of Directors has the authority to fix the number of shares of any series of Preferred Stock, to determine the designation of such series and to determine or alter the rights, preferences, privileges and restrictions upon any wholly unissued series of Preferred Stock. _____________________________________________________________________ ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT -______Custodian______ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with the under Uniform Gifts to Minors right of survivorship and not as tenants in common Act__________________________ (State) Additional abbreviations may also be used though not in the above list. _______________________________________________________________________ For Value Received, ________________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _____________________________________ | | |_____________________________________|________________________________________ _______________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE _______________________________________________________________________________ _______________________________________________________________________________ ________________________________________________________________________ Shares of capital stock represented by the within Certificate, and does hereby irrevocably constitute and appoint ______________________________________________________________________ Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated __________________________________ _______________________________________ Dated __________________________________ _______________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. EX-10.1 6 TRANSITION SERVICES AGREEMENT FORM OF TRANSITION SERVICES AGREEMENT between CNF SERVICE COMPANY, INC. and CONSOLIDATED FREIGHTWAYS CORPORATION TABLE OF CONTENTS ARTICLE 1 SERVICES TO BE PROVIDED Section 1.1 General Description; Provision of Services; Volume Discounts. . . . . . . . . . . . . . . . . 2 Section 1.2 Performance Levels. . . . . . . . . . . . . . . . . . . . . 2 Section 1.3 Instructions. . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.4 Consents; Indemnification; Assets . . . . . . . . . . . . . 3 Section 1.5 Systems Availability and Data Integrity . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.6 Systems Users . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 2 PAYMENT FOR SERVICES Section 2.1 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.2 Invoices; Payment Procedures . . . . . . . . . . . . . . . . 6 Section 2.3 Disputed Fees. . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 3 TERM; TERMINATION OF SERVICES Section 3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 3.2 Termination of Services. . . . . . . . . . . . . . . . . . . 8 ARTICLE 4 COOPERATION Section 4.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4.2 Provider Administrative Records. . . . . . . . . . . . . . . 9 Section 4.3 Periodic Review of Services. . . . . . . . . . . . . . . . . 9 ARTICLE 5 FORCE MAJEURE Section 5.1 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 6 CONFIDENTIALITY Section 6.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . .10 ARTICLE 7 MISCELLANEOUS Section 7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 7.2 Severability . . . . . . . . . . . . . . . . . . . . . . . .13 Section 7.3 Binding Effect; Assignment . . . . . . . . . . . . . . . . .13 Section 7.4 No Third Party Beneficiaries . . . . . . . . . . . . . . . .13 Section 7.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . .13 Section 7.6 Jurisdiction and Consent to Service. . . . . . . . . . . . .13 i Section 7.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . .14 Section 7.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .14 Section 7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .14 Section 7.10 Relationship of the Parties . . . . . . . . . . . . . . . .14 Section 7.11 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section 7.12 Sole Remedy; No Damages . . . . . . . . . . . . . . . . . .15 Section 7.13 Indemnification . . . . . . . . . . . . . . . . . . . . . .15 ii TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT ("Agreement") dated as of __________ __, 1996, by and between CNF Service Company, Inc., a corporation organized under the laws of the State of Delaware (together with its wholly owned subsidiaries, "Provider"), and Consolidated Freightways Corporation, a corporation organized under the laws of the State of Delaware (together with its wholly owned subsidiaries, "Recipient"). W I T N E S S E T H WHEREAS, Provider is a wholly owned subsidiary of Consolidated Freightways, Inc., a Delaware corporation ("CFI"); WHEREAS, pursuant to that certain Distribution Agreement dated as of the date hereof (the "Distribution Agreement"), all of the shares of common stock of Recipient are being distributed (the "Distribution") to the stockholders of CFI; WHEREAS, prior to the Distribution, Leland James Service Corporation, a Delaware corporation ("LJSC") provided services to Consolidated Freightways Corporation of Delaware ("CFCD"), the principal operating subsidiary of Recipient; WHEREAS, in connection with the Distribution, certain service capabilities of LJSC are being transferred to Provider; WHEREAS, in order for Recipient to operate CFCD effectively in a transition period following the consummation of the Distribution, Recipient desires to enter into certain arrangements with Provider with respect to the performance of certain transition services; WHEREAS, Provider is willing to enter into such transition arrangements on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1 ARTICLE 1 SERVICES TO BE PROVIDED Section 1.1 GENERAL DESCRIPTION; PROVISION OF SERVICES; VOLUME DISCOUNTS. (a) The purpose of this Agreement is to set forth the terms upon which Recipient is to receive certain services from Provider on an interim basis after the Distribution on the terms and subject to the conditions herein (the "Services"). (b) Pursuant to the terms and conditions of this Agreement, Provider shall provide, and Recipient shall purchase, the Services as described in Exhibit A hereto. (c) In addition, each party shall provide to the other all information (including, without limitation, discount account numbers) necessary for the other party to (i) make purchases on its own account and (ii) where applicable, receive the discounts formerly available under the agreements identified on Exhibit B hereto (except to the extent that (A) the other party thereto shall object and (B) any such agreement does not permit), until such time as those agreements expire or are replaced or this Agreement expires, but in no event later than the third anniversary of the date hereof. Recipient shall indemnify and hold harmless Provider against all Losses and Liabilities (as defined in that certain Distribution Agreement by and between CFI and Recipient (the "Distribution Agreement")) incurred by Provider and arising from false or misleading information provided by Recipient, such indemnification to be provided in a like manner to the provision of indemnification under the Distribution Agreement. Section 1.2 PERFORMANCE LEVELS. In providing the Services, Provider shall perform according to the performance levels maintained by LJSC in the past; or, should any instance arise in which none of such performance levels applies, Provider shall act to substantially the same extent, in substantially the same manner and with substantially the same degree of care and diligence as LJSC would have acted, prior to the Distribution, if it had provided such Services to CFCD. Each Service shall be provided priority no less favorably than in the 2 past, consistent with past practices and without discrimination against recipient. Section 1.3 INSTRUCTIONS. The parties agree that the Services provided by Provider shall be essentially ministerial in nature so that Provider shall, in all matters requiring the exercise of discretion, follow Recipient's instructions, which shall be promptly provided to Provider by Recipient to the extent requested by Provider and which may be requested in writing. With respect to post-Distribution occurrences for which Provider is to perform Services as set forth in numbers 23, 24, 25, 26, 30 and 37 on Exhibit A, the parties agree that Provider shall be under no obligation to perform any (or any part of) such Services without clear, written instructions from Recipient. Notwithstanding the foregoing, Provider shall not be required to follow any such instructions that, in Provider's reasonable judgment, are inconsistent with the proper performance of its responsibilities, or that require the exercise of discretion, including without limitation the making of decisions regarding the hiring or firing of employees. Section 1.4 CONSENTS; INDEMNIFICATION; ASSETS. (a) If the provision of any of the Services by Provider to Recipient would place CFI, Provider or any other subsidiary of CFI in violation or breach of any contract or license between any such entity and any third party, then Recipient and Provider shall use their respective commercially reasonable efforts, with all costs thereof to be borne by Recipient to obtain forthwith any consent required for Provider to provide such Services to Recipient, and Recipient shall indemnify and hold harmless Provider against all Losses and Liabilities relating to any claims arising from any such alleged violation or breach. If, after the exercise of such efforts, such consent cannot be obtained, Provider shall use commercially reasonable efforts to provide Recipient with functionally equivalent Services with any additional costs required in providing such Services to be borne by Recipient. Recipient shall indemnify and hold harmless Provider against all Losses and Liabilities which arise from or in any way relate to (i) the use of any software or hardware provided by Recipient or (ii) the use of any software or hardware in connection with the performance of the Services hereunder provided by Recipient. Notwithstanding anything to the contrary hereunder, this Section shall not apply to the agreement of Recipient and Provider's parent company as provided in Section 3.1(g) of the Distribution Agreement. (b) The provision of Services by Provider shall include all costs, including but not limited to, personnel (including fringe benefits and management fees 3 relating thereto), computer hardware, computer time, printers, voice and data telecommunications equipment, file cabinets, paper files, administrative records, photocopies, incidental costs and all other assets owned by Provider after the Distribution which are needed in connection with the provision of such Services on a routine and non-routine basis and during peak and non-peak periods; PROVIDED, that any such equipment may be replaced from time to time by Provider with functionally equivalent or upgraded equipment. (c) (i) All data, software or other property or assets owned or created by Recipient (other than the intellectual property rights which Recipient has acknowledged to be vested in CFI pursuant to Section 3.1(f) of the Distribution Agreement) shall remain the sole and exclusive property and responsibility (including, without limitation, with respect to maintenance, modification and upgrade) of Recipient. Provider shall not acquire any rights in any such data, software or other property or assets, including any derivative works of Recipient-owned software or data created by Provider, pursuant to this Agreement or Provider's performance hereunder. (ii) All data, software or other property or assets which are owned by Provider, including without limitation derivative works thereof and new data or software created by Provider at Provider's expense pursuant to the provision of Services ("Provider Software") shall be the sole and exclusive property and responsibility (including, without limitation, with respect to maintenance, modification and upgrade) of Provider and any interest of Recipient therein shall be limited to the Licensed Materials (as defined in the Distribution Agreement). Recipient shall not acquire any other rights in any such data, software or other property or assets pursuant to this Agreement or Recipient's performance hereunder. (d) If as a result of unanticipated events or conditions, Recipient reasonably determines that it requires modification of any of the Services, Provider shall so modify the Services (i) to the extent commercially reasonable, (ii) to the extent such modifications do not adversely affect Provider's ability to maintain its computer systems in connection with its 4 continuing business, and (iii) at Recipient's sole cost and expense subject to Recipient's approval of Provider's estimate. Recipient shall have exclusive ownership rights to any software changes or additions it pays for. (e) Provider shall provide all support and assistance reasonably requested by Recipient, at an arm's-length, negotiated price, but no more than a commercially reasonable price, in connection with the transfer of any and all Services from Provider to Recipient or any of its affiliates or an alternative third-party service provider selected by Recipient. Specifically, upon the request of Recipient, during the term of this Agreement, Provider shall deliver to Recipient (or as directed by Recipient), at the Recipient's request and without interrupting the operations of Provider or its affiliates, all data and programs proprietary to Recipient or licensed by Recipient from third party vendors, and all backup or archival copies thereof (or any part thereof as specified by Recipient), in hard copy, electronic, magnetic or any other form which is then in Provider's possession or control, as requested by Recipient, and copies of all material licensed pursuant to Section 3.1(f) of the Distribution Agreement by Recipient from Provider (with reasonable instructions for the installation and use thereof). Section 1.5 SYSTEMS AVAILABILITY AND DATA INTEGRITY. Provider shall maintain, consistent with past practices, operational recovery procedures to insure the availability of systems and the integrity of data relating to the Services at all times. In the event of the unavailability of any such systems or the loss or destruction of any such data, Provider shall use commercially reasonable efforts consistent with past practices to restore such systems and recover or replace such data as quickly and completely as possible. Section 1.6 SYSTEMS USERS. In each case as it relates to Recipient's employees, consultants, affiliates or authorized customers during the term of this Agreement the addition or deletion of authorized users ("Users"), including persons authorized at the application-level or system-level, in regard to any computer system, the modification of computer system authority or access granted to any person, and the control generally of access to and use of computer systems, is to be at the direction of 5 Recipient, and Provider shall permit no changes in such access or use without prior written notice to and consent from Recipient. No User will be allowed system authority or access greater than at the application level without the prior written consent of Provider. Each party shall indemnify and hold harmless the other against all degradations in performance levels caused by users authorized for system level access, such indemnification to be provided in a like manner to the provision of indemnification under the Distribution Agreement. ARTICLE 2 PAYMENT FOR SERVICES Section 2.1 COSTS. The prices charged for the Services shall initially be those set forth in Exhibit A, which have been negotiated on an arm's length basis (the "Service Fees"). The Service Fees shall be adjusted every 6 months (such adjustment to be determined on a basis consistent with the historical prices for such Services), except that the Service Fees for the first 12-month period shall be as indicated on Exhibit A and Provider shall, not less than six months before any proposed increase in Service Fees, provide Recipient with details of any proposed increase and justification therefor. The Parties shall negotiate in good faith to reach an agreement within 30 days. Recipient shall not be charged a fee for any improvements or upgrades to facilities or equipment without its prior written consent. Section 2.2 INVOICES; PAYMENT PROCEDURES. (a) Not later than 30 days after the end of each calendar month Provider shall send Recipient an invoice that includes a detailed breakdown of all Service Fees for such month. All invoices shall be sent to: Consolidated Freightways Corporation, attention: Controller, mailing address: 175 Linfield Drive, Menlo Park, CA 94025. All payments of such invoices shall be made by wire transfer or interbank transfer in immediately available funds to Provider's account at such banks as Provider shall designate to Recipient in writing and shall be made within 15 days after the date of receipt of any invoice. (b) Notwithstanding any other provision hereof, (i) Recipient shall reimburse Provider for each 6 payroll paid by Provider to the employees of the Recipient for the period contemplated above, and (ii) Recipient shall provide each such reimbursement by wire transfer of immediately available funds on the day prior to the issuance of that payroll to such employees. For purposes of this Agreement, "payroll" shall mean gross payroll (including all taxes) less deductions from payroll which are paid directly by the Recipient, as set forth on Schedule 2.2(b). Section 2.3 DISPUTED FEES. In the event that Recipient and Provider have a good faith dispute with respect to the amount of payment for Services actually rendered (other than with respect to the underlying schedule of fees for Services generally), Recipient shall withhold payment only of any unpaid amount in dispute, and shall deliver to Provider promptly (and within 15 days following receipt of any invoice from Provider that is the basis of such dispute) a written statement describing the dispute, which statement shall provide a reasonably detailed breakdown of the disputed payment amounts. The parties agree to use their best efforts to resolve any such dispute hereunder within 15 days following Provider's receipt of Recipient's statement describing the dispute. In the event the parties cannot resolve the dispute within such time period, each discrepancy or disagreement which cannot be so resolved shall be submitted to a firm of nationally recognized independent certified public accountants (agreed upon by Provider and Recipient), who shall promptly deliver a report setting forth their calculation of each item that was the subject of discrepancy or disagreement, which report shall be final and binding on the parties. The fees and expenses of such firm shall be borne one-half by Provider and one-half by Recipient and each party shall bear its own other expenses in connection therewith. ARTICLE 3 TERM; TERMINATION OF SERVICES Section 3.1 TERM. (a) The term of this Agreement shall commence on the date hereof and shall continue in effect until the close of business on the third anniversary of the date hereof. 7 (b) Notwithstanding anything to the contrary in this Agreement, the provisions of Articles 5 and 6 and Sections 1.1(c), 1.4(a), 1.6, 2.1, 4.2, 7.6, 7.7, 7.8, 7.11, 7.12 and 7.13 shall survive any termination of this Agreement or the provision of Services hereunder. Section 3.2 TERMINATION OF SERVICES. Recipient may at any time, upon six months' irrevocable written notice to Provider, terminate all the Services or any Service (or any portion thereof) on a Service by Service basis. Provider may, at any time after the first anniversary of the date hereof, terminate any or all of the Services identified as numbers _____ on Exhibit A on six months' irrevocable written notice to Recipient; provided, however, Recipient shall be entitled to continue receiving the telecommunication and data processing services through the third anniversary date in its sole discretion. The provision of all Services pursuant hereto shall in any event terminate on or prior to the third anniversary of the date hereof. Upon termination of any Service, all administrative records (which term is not to be construed to include Provider Software) relating to that Service as such records relate solely to Recipient which have not already been transferred to the sole possession of Recipient shall be so transferred, it being understood that Provider may retain copies of such records. ARTICLE 4 COOPERATION Section 4.1 COOPERATION. Each of the parties shall cooperate with and provide assistance to the other consistent with the terms and conditions hereof (including, without limitation, any limitations relating to software) to enable (i) the full performance of all obligations hereunder, (ii) the review and audit of books and administrative records as they relate to the provision of Services, and (iii) Recipient, or any of its affiliates or third party service provider, to assume the performance of any and all Services upon termination or prior thereto; such cooperation and assistance to include without limitation providing the other party, its representatives and its agents (including, without limitation, its outside auditors) with reasonable access, during 8 normal business hours and upon reasonable advance notice, to its employees, representatives and agents and its books, administrative records, offices and properties relating to the Services. Nothing in this section 4.1 shall operate to grant any right to Recipient of Provider-owned software, data or other intellectual property. Section 4.2 PROVIDER ADMINISTRATIVE RECORDS. Provider shall keep administrative records regarding the provision of Services as LJSC has kept records for itself regarding such Services prior to the Distribution, and for each Service shall retain such records for a period of twelve months following the cessation of Provider's provision of that Service to Recipient. Recipient, its agents and representatives shall have reasonable access during normal business hours and upon reasonable advance notice to such records (which term is not to be construed to include Provider Software) from the date hereof through the end of the period for retaining such records pursuant to this Section 4.2. Section 4.3 PERIODIC REVIEW OF SERVICES. From time to time during the term of this Agreement, but not less frequently than once each month, the parties shall meet and discuss the nature, quality, and level of Services covered by this Agreement, any concerns either party may have in regard to such matters, and any amendments either party may wish to make to the Services specified in Exhibit A. ARTICLE 5 FORCE MAJEURE Section 5.1 FORCE MAJEURE. Each party shall be relieved of its obligations hereunder if and to the extent that any of the following events or conditions directly or indirectly hinder, limit or make impracticable the performance by that party of any of its obligations hereunder: Act of God, war, riot, fire, earthquake, explosion, flood, sabotage, national defense requirement, strike, lockout, job action, injunction, act or order of a governmental agency or instrumentality thereof (whether of fact or law), act of a public enemy, embargo or other concerted act of workers, telecommunications failures or electrical failures; PROVIDED that Provider shall contin- 9 ue to have in place at all times disaster recovery procedures consistent with past practices of LJSC regarding CFCD to enable rapid recovery from any such event or condition. Such procedures may be subject to revision by Provider from time to time as may be required in the ordinary course of business, PROVIDED, that such revisions do not adversely affect the levels of protection afforded by such procedures. Prior to being relieved of any obligations hereunder Provider shall have used commercially reasonable efforts (consistent with past practices) to remove or otherwise address the effects of any such event or condition as soon as practicable. Recipient shall be liable for all costs incurred by Provider in connection with any Service that Provider fails to complete and provide as a result of any such event or condition. ARTICLE 6 CONFIDENTIALITY Section 6.1 CONFIDENTIALITY. The parties acknowledge that in connection with the provision of Services hereunder, each may gain access to confidential and proprietary information regarding the other's financial and business affairs (hereinafter "Confidential Information" or "Information"). Each party hereby agrees to use commercially reasonable efforts to: (a) confine its access to and examination of Confidential Information to the minimum Information necessary to enable Provider to provide the Services hereunder and Recipient to operate its business; (b) limit access to such Information only to those individuals who reasonably need to receive such access to enable Provider to provide the Services hereunder and Recipient to operate its business; (c) inform such individuals of the confidential nature of such Information and take all reasonable steps to secure the compliance of such individuals with the terms of this Article 6; 10 (d) use such Information solely to enable Provider to provide the Services hereunder and Recipient to operate its business; (e) keep such Information confidential and not disclose it to any third party in any manner except as may be required by law or court order; and (f) provide the other party with reasonable access to that party's employees, representatives and agents and its books and administrative records relating to the relevant business (including, without limitation, any and all computer access reports and security access reports) in order for the other party to monitor compliance with this Article 6. Notwithstanding the foregoing, disclosures of Information may be made to third parties: (i) with the prior written consent of the party whose Information it is, (ii) if the Information is in the public domain and has entered the public domain through no fault of the party seeking to make such disclosure or its affiliates or representatives, (iii) if the Information is lawfully acquired by the party seeking to make such disclosure or its affiliates or representatives from sources other than the party whose Information it is or its affiliates or representatives and none of the party seeking to make such disclosure, its affiliates or its representatives is aware that such source was under any obligation (whether contractual, legal or fiduciary) to the party whose Information it is or any of its affiliates or representatives to keep such Information confidential or (iv) to the extent disclosure is compelled by law or court order. Each party shall be responsible for any breach of this Article 6 caused by itself or any of its employees, agents or representatives. Anything contained herein to the contrary notwithstanding, the parties acknowledge and agree that irreparable damage would occur in the event that any provision of this Article 6 was not performed in accordance with its terms, and that the parties shall be entitled to specific performance as the sole remedy. 11 ARTICLE 7 MISCELLANEOUS Section 7.1 NOTICES. All notices, requests, demands, consents, waivers and other communications required or permitted to be given under this Agreement (excluding invoices as described in Section 2.2 above) shall be in writing and may be given by any of the following methods: (a) personal delivery; (b) facsimile transmission; (c) registered or certified mail, postage prepaid, return receipt requested; or (d) overnight delivery service. Notices shall be sent to the appropriate party at its address or facsimile number given below (or at such other address or facsimile number for such party or other person as shall be specified by notice given hereunder): If to Provider to: CNF Service Company, Inc. 1717 N.W. 21st Avenue Portland, OR 97209 Attention: Controller Fax No.: with a copy to: Consolidated Freightways, Inc. 3240 Hillview Avenue Palo Alto, CA 94304 Attention: General Counsel Fax No.: (415) 494-8372 If to Recipient to: Consolidated Freightways Corporation 175 Linfield Drive Menlo Park, CA 94025 Attention: General Counsel Fax No.: All such notices, requests, demands, waivers and communications shall be deemed received upon (i) actual receipt thereof by the addressee or (ii) actual delivery thereof to the appropriate address. 12 Section 7.2 SEVERABILITY. Should any provision of this Agreement for any reason be declared invalid or unenforceable, such declaration shall not affect the validity or enforceability of any of the other provisions of this Agreement, which other provisions shall remain in full force and effect and the application of such invalid or unenforceable provision to persons or circumstances other than those as to which it has been held invalid or unenforceable shall be valid and enforced to the fullest extent permitted by law. Section 7.3 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, directly or indirectly, including, without limitation, by operation of law, by any party hereto without the prior written consent of the other party hereto; PROVIDED, (i) that either of the parties hereto may without such prior written consent transfer or assign its rights hereunder to one or more of its affiliates, but no such transfer arrangement shall release the transferring party of its obligations hereunder and (ii) that Provider may subcontract to any party so long as Provider remains liable for the performance of Services provided by any such subcontractor. Section 7.4 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit of the parties and their respective successors and permitted assigns, and shall not be deemed to confer upon or give to any other party any remedy, claim, liability, reimbursement, cause of action or other right. Section 7.5 INTERPRETATION. The section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. Section 7.6 JURISDICTION AND CONSENT TO SERVICE. In accordance with the laws of the State of Oregon, and without limiting the jurisdiction or venue of any other court, the parties (a) agree that any suit, action or proceeding arising out of or relating to this 13 Agreement (other than proceedings arising under Section 2.3 above with respect to the amount of payment for Services) shall be brought solely in the state or federal courts of Oregon; (b) consent to the exclusive jurisdiction of each such court in any suit, action or proceeding relating to or arising out of this Agreement; (c) waive any objection which any of them may have to the laying of venue in any such suit, action or proceeding in any such court; and (d) agree that service of any court paper may be made in any manner as may be provided under the applicable laws or court rules governing service of process in such court. Section 7.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. Any conflicts between the language herein and the language used in the Distribution Agreement shall be resolved in favor of the language used herein. SECTION 7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, PERFORMANCE AND REMEDIES. Section 7.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. Section 7.10 RELATIONSHIP OF THE PARTIES. Provider and Recipient each acknowledge that they are separate entities, each of which has entered into this Agreement for independent business reasons. Except as provided below in this Section 7.10, the relationship of Provider to Recipient hereunder is that of an independent contractor and nothing herein shall be deemed or construed to create a relationship of partnership, employment, agency, joint venture, or any other relationship. Except as provided below in this Section 7.10, neither party shall transact any business in the name of the other party or obligate or commit the other party in any 14 manner. In recognition of the fact that some of the Services to be provided by Provider pursuant to this Agreement will require that personnel employed by Provider engage in business dealings with customers, vendors, or others with whom Recipient does business and that it is to Recipient's advantage for such business dealings to be conducted on behalf of and in the name of Recipient, Recipient may authorize Provider to use any of its names, whenever (a) necessary or appropriate in providing Services or other assistance hereunder and (b) Recipient explicitly so instructs Provider, in writing. Recipient shall indemnify and hold harmless Provider against all Losses and Liabilities incurred by Provider and arising from this Section 7.10, such indemnification to be provided in a like manner to the provision of indemnification under the Distribution Agreement. Section 7.11 WAIVER. Any failure by either party to comply with any obligation, covenant or agreement herein or to fulfill any condition herein may be waived only by a written notice from the party entitled to the benefits thereof. No failure by either party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or future exercise of that right or any other right hereunder by that party. Section 7.12 SOLE REMEDY; NO DAMAGES. If Recipient becomes dissatisfied with the quality or level of Services provided hereunder, its sole remedy shall be termination of all or a part of the Services without right to seek actual, compensatory or consequential damages. Section 7.13 INDEMNIFICATION. Recipient, at its own expense, shall indemnify, defend and hold Provider, its subsidiaries and their present or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, affiliates, insurers, attorneys and assigns (collectively, the "Indemnified Parties") harmless from and against any claims, judgments, losses, deficiencies, damages, punitive or exemplary damages, fines or penalties, liabilities, costs and expenses (including reasonable attorneys' fees, charges and disbursements) whether required to be paid to 15 a third party or otherwise incurred in connection with or arising from any claim, suit, action or proceeding ("Claim") against the Indemnified Party to the extent the basis of such Claim is that: (i) Recipient has failed to pay any amounts owed to third parties in connection with the Services provided by Provider under this Agreement; (ii) a third party has been or may be injured or damaged in any way by any breach of Recipient of any of its duties, representations or warranties under this Agreement; (iii) Recipient or any of its employees, agents, or services acted improperly in connection with the notification, investigation, adjustment or settlement of claims and losses arising out of the Services described in Exhibit A, and (iv) there is any other liability or obligation arising out of Provider's administration or operation of the Services or functions described in Exhibit A, except to the extent that same arises from the gross negligence or willful misconduct of Provider. The provision of indemnification under this Section 7.13 shall be in a like manner to the provision of indemnification under the Distribution Agreement. 16 IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed by its duly authorized representative as of the day and year first above written. CNF SERVICE COMPANY, INC. on behalf of itself and its wholly owned subsidiaries By: _________________________ Name: Title: CONSOLIDATED FREIGHTWAYS CORPORATION on behalf of itself and its wholly owned subsidiaries By: ________________________ Name: Title: 17 EX-10.2 7 ALTERNATIVE DISPUTE RESOLUTION AGREEMENT FORM OF ALTERNATIVE DISPUTE RESOLUTION AGREEMENT ALTERNATIVE DISPUTE RESOLUTION AGREEMENT (the "Agreement") dated as of , 1996, by and between Consolidated Freightways Corporation, a Delaware corporation (the "Company"), and Consolidated Freightways, Inc., a Delaware corporation ("CFI"). RECITALS This Agreement is made pursuant to the Distribution Agreement ("Distribution Agreement") dated as of , 1996 between the Company and CFI. Each term used herein which is defined in the Distribution Agreement shall have the same meaning when used herein as it is given in the Distribution Agreement. The Company and CFI have determined that it is necessary and desirable to agree on the procedures described in this Agreement as the sole and exclusive method for them to resolve any and all disputes which have arisen prior to the distribution (the "Distribution") to the shareholders of CFI of the shares of the Company or which may from time to time arise under the Transaction Documents (as herein defined), and claims which either party may have from time to time against the other as a result of the Transaction Documents or in any way related to the Distribution whether such disputes or claims are based on a breach of one party or its obligations under the Transaction Documents or disagreement between the parties as to the meaning or application of the Transaction Documents or in any manner related to or arising out of the Distribution (any such dispute or claim, a "Dispute"). NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I As used in this Agreement, the following terms shall have the following meaning (such meanings to be equally applicable to both the singular and plural forms of the terms defined): AMOUNT IN CONTROVERSY: the monetary value of any Dispute plus the monetary value of any future Dispute which could reasonably arise under the provision at issue. CPR: the Center for Public Resources, Inc. CPR REGIONAL OFFICE: the office of the CPR located closest to Palo Alto, California, or such other office of the CPR as the parties hereto may agree. DEMAND: a written demand for arbitration under Article IV of this Agreement which shall contain a statement setting forth the nature of the Dispute, the Amount in Controversy and such other information as may be required under the CPR Rules for Non-Administered Arbitration of Business Disputes as in effect from time to time (the "Arbitration Rules"). DISPUTE: as defined in the recitals to this Agreement. REQUEST: a written request for mediation under Article III of this Agreement which shall contain a brief statement of the nature of the Dispute and such other information as may be required under the then current CPR Model Procedure for Mediation of Business Disputes (the "Mediation Rules"). TRANSACTION DOCUMENTS: the Distribution Agreement, the Other Agreements and the other agreements referred to in Section 3.4 of the Distribution Agreement. ARTICLE II RESOLUTION OF DISPUTES All Disputes which cannot be resolved by the parties through good faith negotiation and consultation within sixty (60) days after either party shall have notified the other of such Dispute shall first be submitted to mediation pursuant to Article III hereof and the Mediation Rules and such other rules of procedure as the parties may agree; provided that, in the event of a conflict between Article III and the Mediation Rules, Article III shall govern. If a Dispute cannot be resolved through mediation, then such Dispute shall be submitted to binding arbitration pursuant to Article IV hereof and the Arbi- tration Rules and such other rules of procedure as the parties may agree; provided that, in the event of a conflict between Article IV and the Arbitration Rules, Article IV shall govern. ARTICLE III MEDIATION Section 3.1 REQUEST FOR MEDIATION. Either party to a Dispute may initiate mediation by filing a Request (along with any copies thereof that may be required under the Mediation Rules) and a copy of this Agreement with the CPR Regional Office and by delivering a copy of the Request to the other party. 2 Section 3.2 APPOINTMENT OF MEDIATOR. Unless the parties otherwise agree in writing, the CPR shall appoint a single mediator from the CPR Panel of Neutrals. Section 3.3 DATE, TIME AND PLACE. Unless the parties otherwise agree in writing, all mediation proceedings shall take place in Palo Alto, California. The date, time and place of each mediation session shall be determined by agreement of the parties or, if the parties cannot agree within a reasonable period of time, by the mediator; provided that the first such session shall be held within fifteen (15) days of the date on which the mediator is appointed. Section 3.4 TERMINATION. The mediation proceedings shall be terminated upon the happening of any of the following: (i) by execution of a settlement agreement by the parties; (ii) by written declaration of the mediator that further efforts at mediation are no longer worthwhile; or (iii) by written declaration of one or both parties that the mediation proceedings are terminated. A written declaration hereunder shall not terminate the mediation proceedings until notice thereof has been given to the parties, or to the other party, as appropriate, in accordance with Section 5.4 hereof. ARTICLE IV ARBITRATION Section 4.1 INITIATING ARBITRATION. Either party to a Dispute that has not been settled or resolved through mediation may initiate arbitration by filing a Demand and a copy of this Agreement (along with any copies thereof that may be required under the Arbitration Rules) with the CPR Regional Office within sixty (60) business days following the termination of the mediation proceedings and by delivering a copy of the Demand to the other party. Failure to file a Demand within such period shall constitute an absolute bar to the institution of any proceedings with respect to such Dispute and a waiver of all claims related thereto. Section 4.2 APPOINTMENT OF ARBITRATORS. Unless the parties otherwise agree in writing, a Dispute subject to this Article IV shall be heard by a panel of three (3) arbitrators who shall be appointed according to the procedure contemplated by Rule 6 of the Arbitration Rules. Section 4.3 ABSENCE OF CONFLICTS. No person shall serve as an arbitrator in any Dispute in which the person has any financial or personal interest, except by the written consent of both parties. 3 Section 4.4 DATE, TIME AND PLACE. Unless the parties otherwise agree in writing, all arbitration proceedings shall take place in Palo Alto, California. The date, time and place of each hearing shall be determined by agreement of the parties or, if the parties cannot agree within a reasonable period of time, by the arbitration panel or sole arbitrator (each an "Arbitra- tor"), as appropriate. The first such hearing shall be held as soon as practicable following appointment of the Arbitrator(s), but in no event more than one (1) year after such appointment. Each arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the award rendered by the Arbitrator(s) may be entered by any court having jurisdiction thereof. Section 4.5 AWARD. The Arbitrator(s) may grant any remedy or relief that the Arbitrator(s) deem just and equitable including, but not limited to, injunctive relief, judgment interest, attorneys' fees and specific performance; PROVIDED, HOWEVER, that the Arbitrator(s) shall not be authorized to award punitive damages. ARTICLE V MISCELLANEOUS Section 5.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the Transaction Documents and other agreements and documents referred to therein shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Section 5.2 SURVIVAL OF AGREEMENTS. All covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. Section 5.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of law thereof. Section 5.4 NOTICE. All notices and other communications required or permitted to be given or made under this Agreement shall, unless otherwise provided herein or in the applicable CPR rules, be in writing and shall be deemed to have been given (i) on the date of personal delivery, or (ii) provided such notice or communication is actually received by the party to which it is addressed in the ordinary course of delivery, on the date of (A) deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, (B) transmission by telegram, cable, telex or facsimile transmission, or (C) delivery to a nationally recognized overnight courier service, in each case addressed 4 as set forth below, or to such other person, entity or address as either party shall designate by notice to the other in accordance herewith: To the Company: Consolidated Freightways Corporation 175 Linfield Drive Menlo Park, California 94025 Attention: General Counsel To CFI: Consolidated Freightways, Inc. 3240 Hillview Avenue Palo Alto, CA 94204 Attention: General Counsel Section 5.5 WAIVER. No waiver by any party of any of the provisions of this Agreement will be deemed, or will constitute, a waiver of any other provision, whether similar, nor will any waiver constitute a continuing waiver. No waiver will be binding unless executed in writing by the party making the waiver. Section 5.6 ASSIGNMENT. Neither party may assign, by operation of law, merger or otherwise, license, sublicense or otherwise transfer any or all of its rights or obligations under this Agreement to any other person or entity without obtaining the prior written consent of the other party. Section 5.7 AMENDMENTS. This Agreement may not be modified or amended except by an agreement in writing signed by the parties. Section 5.8 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Section 5.9 SUBSIDIARIES. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements, and obligations set forth herein or arising hereunder to be performed by any Subsidiary of such party on and after the Distribution Date. Section 5.10 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, right or reimbursement or other right. 5 Section 5.11 TITLES AND HEADINGS. Titles and headings to articles and sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Section 5.12 SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unen- forceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. 6 THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. CONSOLIDATED FREIGHTWAYS CORPORATION By: -------------------------- Title: CONSOLIDATED FREIGHTWAYS, INC. By: -------------------------- Title: 7 EX-10.3 8 EMPLOYEE BENEFIT MATTERS AGREEMENT FORM OF EMPLOYEE BENEFIT MATTERS AGREEMENT This EMPLOYEE BENEFIT MATTERS AGREEMENT (the "Agreement") is made as of this ____ of ____________, 1996 by and between CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation ("CFI") and CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation (the "Company"). RECITALS WHEREAS, CFI is the holder of all of the issued and outstanding shares of common stock of the Company; WHEREAS, the employees of the Company and its Subsidiaries are covered by various employee benefit plans sponsored by CFI which are limited to employees of CFI and its Subsidiaries; and WHEREAS, CFI has determined that it will distribute all of the shares of the Company's common stock to the holders of the common stock of CFI, which will cause the Company and its Subsidiaries to no longer be Subsidiaries of CFI; NOW, THEREFORE, CFI and the Company agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings, such meanings to be equally applicable to both the singular and plural forms of the terms defined: ADR AGREEMENT. The Alternative Dispute Resolution Agreement entered into between CFI and the Company dated the same date as this Agreement , the form of which is attached as Annex 1 to the Distribution Agreement. COMPANY EMPLOYEE. A person described in 2.3. DISTRIBUTION AGREEMENT. The Distribution Agreement entered into between CFI and the Company dated the same date as this Agreement and governing the distribution of the Company common stock to the holders of CFI common stock. DISTRIBUTION DATE. The date on which all the shares of Company common stock are delivered to the distribution agent pursuant to the Distribution Agreement. SUBSIDIARY. A corporation that is a member of a controlled group of corporations, within the meaning of Internal Revenue Code Section 1563, with CFI or with the Company, except that the Company and its Subsidiaries shall not be treated as Subsidiaries of CFI. ARTICLE II SEPARATION OF BENEFIT PLANS 2.1 ADOPTION OF COMPANY PLANS. The Company and its Subsidiaries shall, as of the Distribution Date, cease participating in the employee benefit plans sponsored by CFI. As of the Distribution Date, the Company shall adopt employee benefit plans covering Company Employees that are substantially the same as the employee benefit plans sponsored by CFI covering Company Employees prior to the Distribution Date except as follows. The Company shall not be obligated to duplicate or replace the CFI employee benefit plans that are limited to executive employees and may adopt such new executive employee benefit plans as it shall decide in its absolute discretion. 2.2 SEPARATE RESPONSIBILITIES. CFI and the Company agree that CFI shall have sole responsibility for its employee benefit plans, arrangements and policies for employees of CFI and its Subsidiaries and that the Company shall have sole responsibility for its employee benefit plans, arrangements and policies for Company Employees. CFI and the Company intend that, to the extent possible, Company Employees shall look solely to the Company and its plans, arrangements and policies for the provision of employee benefits, except certain executive benefits discussed in this Agreement, and that employees of CFI and its Subsidiaries shall look solely to CFI and its plans, arrangements and policies for the provision of employee benefits. 2.3 IDENTIFICATION OF COMPANY EMPLOYEES. "Company Employees" shall be determined as follows: (a) All persons actively employed by the Company or a Subsidiary of the Company on the Distribution Date are Company Employees, unless described in (b). (b) Persons who accept employment with CNF Service Company, Inc. as of the Distribution Date shall not be Company Employees. (c) All persons formerly employed by the Company or a Subsidiary of the Company who were not subsequently employed by CFI or by a Subsidiary of CFI are Company Employees, unless described in (d). 2 (d) Persons who would be described in (c) but who are listed by the Company and CFI in a schedule attached hereto shall not be Company Employees. It is intended that Company Employees shall not include former employees at CFI's administrative office in Portland, Oregon unless they were part of a service group that worked exclusively for Consolidated Freightways Corporation of Delaware and its subsidiaries at termination of employment. ARTICLE III TAX QUALIFIED RETIREMENT PLANS 3.1 ADOPTION OF COMPANY TASP. The Company shall adopt a Thrift and Stock Plan (the "Company TASP") as follows: (a) The Company TASP shall be effective as of the Distribution Date. (b) Subject to Section 2.1, and to (c), (d) and (e) below, the Company TASP shall be in a form satisfactory to the Company in its sole discretion. (c) The Company TASP shall be qualified under Sections 401(a) and 401(k) of the Code and shall have a related trust qualified under Section 501(a) of the Code. The Company shall file, or cause the administrator of the Company TASP to file, with the Internal Revenue Service an Application for Determination with respect to the Company TASP within the remedial amendment period prescribed by applicable law and regulations. The Company shall amend the Company TASP as may be required by the Internal Revenue Service as a condition for receipt of a favorable determination letter within the time required by the Internal Revenue Service for adoption of such amendment. (d) Subject to the transfer of assets and liabilities provided for in Section 3.2, the Company TASP shall credit service performed before the Distribution Date for CFI and its Subsidiaries under applicable service crediting rules as if such service were performed for the Company. (e) The Company TASP shall provide for matching contributions invested in Company common stock, but need not include an employee stock ownership plan with Company stock purchased by borrowing. 3.2 TASP SPINOFF. The CFI TASP consists of two plans: a 401(k) plan (the "CFI TASP 401(k)") and an employee stock ownership plan (the "CFI TASP ESOP"). Accounts under the CFI TASP 401(k) are invested at the direction of participants in several funds, including a fund for common stock of CFI (the "CFI Stock Fund"). The CFI TASP ESOP is invested primarily in a special class of convertible preferred stock of CFI (the "Preferred Stock") and in common stock of CFI. The CFI TASP ESOP holds shares of 3 Preferred Stock in a suspense account that secures loans to the CFI TASP ESOP. Preferred Stock is converted to Common Stock of CFI before distribution to participants or transfer to a person other than the trustee of the CFI TASP. On the Distribution Date, the CFI TASP will receive common stock of the Company with respect to its shares of CFI common stock. Within 180 days after the Distribution Date, CFI and the Company shall cause the portion of the CFI TASP that covers Company Employees to be spun off from the CFI TASP and to be merged into the Company TASP. In connection with the spinoff and merger, the following shall apply: (a) CFI shall direct the trustee of the CFI TASP to transfer assets held for the benefit of Company Employees under the CFI TASP to the trustee of the Company TASP. The trustee of the CFI TASP shall make such transfer even though the Company TASP has not yet received a favorable determination letter from the Internal Revenue Service with respect to the qualification of the Company TASP under Section 401(a) of the Code if the Company demonstrates to CFI's reasonable satisfaction that the Company has preserved its right to make remedial amendments required by the Internal Revenue Service as a condition of a favorable determination. (b) CFI shall cause the fiduciaries of the CFI TASP to provide an accounting to the fiduciaries of the Company TASP with respect to all assets and accounts transferred to the Company TASP. The accounting shall be reasonably satisfactory to the Company for purposes of proper allocation of assets, earnings, gains and losses to the accounts of participants under the Company TASP. (c) CFI shall cause IRS Form 5310A to be filed with the Internal Revenue Service, giving notice of the spinoff and merger, at least 30 days before the date of the spinoff and merger. (d) The Company TASP shall include a CFI Stock Fund and an investment fund for common stock of the Company (the "Company Stock Fund") for participant-directed investment of accounts. Accounts invested in common stock of the Company and common stock of CFI shall be transferred in kind from the CFI TASP in the spinoff and merger and shall be placed initially in the Company Stock Fund or the CFI Stock Fund according to the stock transferred. The Company TASP shall provide that participants may direct amounts out of the CFI Stock Fund but may not direct investment of any additional amounts into it. As of the next calendar quarter end following the third anniversary of the Distribution Date, the CFI Stock Fund shall be closed and its assets moved into another investment fund selected by each participant or, for participants who fail to make a selection, by the Company. 4 (e) The CFI TASP 401(k) shall include a Company Stock Fund, in addition to the existing CFI Stock Fund, for participant-directed investment of accounts. The Company common stock distributed on shares of CFI common stock held in the CFI Stock Fund shall become the assets of the Company Stock Fund. The CFI TASP shall provide that participants may direct amounts out of the Company Stock Fund but may not direct investment of any additional amounts into it. As of the next calendar quarter end following the third anniversary of the Distribution Date, the Company Stock Fund shall be closed and its remaining assets moved into another investment fund selected by each participant or, for participants who fail to make a selection, by CFI. (f) The accounts to be transferred from the CFI TASP ESOP to the Company TASP will include accounts holding Preferred Stock. Such Preferred Stock will be automatically converted to Common Stock of CFI upon transfer to the trustee of the Company TASP. 3.3 ADOPTION OF COMPANY RETIREMENT PLAN. The Company shall adopt a defined benefit pension plan (the "Company Retirement Plan") to cover Company Employees as follows: (a) The Company Retirement Plan shall be effective as of the Distribution Date. Company Employees shall start to accrue benefits under the Company Retirement Plan and shall cease to accrue benefits under the Consolidated Freightways, Inc. Retirement Plan (the "CFI Retirement Plan") as of the Distribution Date. (b) Subject to Section 2.1, and to (c), (d) and (e) below, the Company Retirement Plan shall be in a form satisfactory to the Company in its sole discretion. (c) The Company Retirement Plan shall be qualified under Section 401(a) of the Code and have a related trust qualified under Section 501(a) of the Code. The Company shall file, or cause the administrator of the Company Retirement Plan to file with the Internal Revenue Service an Application for Determination with respect to the Company Retirement Plan within the remedial amendment period prescribed by applicable law and regulations. The Company shall amend the Company Retirement Plan as may be required by the Internal Revenue Service as a condition for receipt of a favorable determination letter within the time required by the Internal Revenue Service for adoption of any such amendment. (d) Benefits with respect to the transfer described in Section 3.4 below shall be preserved in accordance with applicable law, including but 5 not limited to the requirements of Section 411(d)(6) of the Internal Revenue Code. (e) Subject to the transfer of assets and liabilities provided for under Section 3.4, the Company Retirement Plan shall credit service performed before the Distribution Date for CFI and its Subsidiaries under applicable service crediting rules as if such service were performed for the Company. (f) After the transfer described in Section 3.4, the CFI Retirement Plan shall have no obligation to Company Employees. The Company Retirement Plan shall be a continuation of the CFI Retirement Plan with respect to benefits accrued by Company Employees under the CFI Retirement Plan. The transfer described in Section 3.4 shall not be a plan termination. 3.4 RETIREMENT PLAN SPINOFF. Within 180 days after the Distribution Date, CFI and the Company shall cause the portion of the CFI Retirement Plan consisting of the liability for benefits of Company Employees accrued through the Distribution Date to be spun off from the CFI Retirement Plan along with related assets and to be merged into the Company Retirement Plan. In connection with the spinoff and merger, the following shall apply: (a) The assets of the CFI Retirement Plan to be transferred to the Company Retirement Plan will be equal to the lump sum present value of such liability as of the date of the spinoff and merger. Present value shall be based on the accumulated benefit obligation for benefits already accrued and on an interest rate selected by CFI with the approval of the actuary who performed the most recent annual valuation of the CFI Retirement Plan. CFI shall direct the trustee of the CFI Retirement Plan to transfer such assets to the trustee of the Company Retirement Plan. (b) The parties shall make commercially reasonable efforts to reach an agreement with the Pension Benefit Guaranty Corporation ("PBGC") that the interest rate selected pursuant to (a) is acceptable for calculating the amount of assets to be transferred from the CFI Retirement Plan to the Company Retirement Plan. In the event that no such agreement is reached and a lower interest rate is used in response to actions of the PBGC, the Company shall pay CFI an amount equal to the increase in the amount of assets transferred resulting from use of such lower interest rate. The Company shall pay such amount in cash in five equal annual installments including interest at the prevailing commercial prime lending rate of the bank with which CFI has its principal banking relationship on the date of the transfer of CFI Retirement 6 Plan assets. Such installments shall commence with the first anniversary of the date of such transfer. (c) CFI shall file IRS Form 5310A with the Internal Revenue Service, giving notice of the spinoff and merger, at least 30 days before the date of the spinoff and merger. (d) The trustee of the CFI Retirement Plan shall make the transfer of assets under (a) even though the Company Retirement Plan has not yet received a favorable determination letter with respect to qualification under Section 401(a) of the Internal Revenue Code if the Company demonstrates to CFI's reasonable satisfaction that the Company has preserved its right to make remedial amendments required by the Internal Revenue Service as a condition of a favorable determination. (e) The trustee of the CFI Retirement Plan and any other fiduciary under the CFI Retirement Plan with applicable responsibility shall determine and identify the assets of the CFI Retirement Plan that shall be liquidated for transfer to the Company Retirement Plan. After the transfer, the fiduciaries of the Company Retirement Plan shall be responsible for the custody and investment of Company Retirement Plan assets. (f) If any employees of CNF Service Company, Inc. (or an affiliate) become employed by Leland James Service Corporation within three years after the Distribution Date immediately following termination of employment with CNF Service Company, Inc. with no intervening period as a result of termination of any services under the Transition Services Agreement between CNF Service Company, Inc. and the Company dated the same date as this Agreement, an additional transfer of assets and liabilities shall be made from the CFI Retirement Plan to the Company Retirement Plan. Such transfer shall consist of the liability for benefits accrued for such employees under the CFI Retirement Plan through the date of the employment termination together with assets equal to the present value of such liability determined on the basis described in (a) above. Such transfer of assets and liabilities shall be completed within 90 days after the end of such three-year period. 3.5 ADOPTION OF COMPANY COMMON STOCK FUND. The Company shall adopt a frozen defined contribution plan (the "Company Common Stock Fund") as follows: (a) The Company Common Stock Fund shall be effective as of the Distribution Date. (b) Subject to Section 2.1, and to (c) below, the Company Common Stock Fund shall be in a form satisfactory to the Company in its sole discretion. (c) The Company Common Stock Fund shall be qualified under Section 401(a) of the Code and have a related trust qualified under section 501(a) of the Code. The Company shall file, or cause the administrator of the Company Common Stock Fund to file, with the Internal Revenue Service an Application for Determination with respect to the Company Common Stock Fund within the remedial amendment period prescribed by applicable law and regulations. The Company shall amend the Company Common Stock Fund as may be required by the Internal Revenue Service as a condition for receipt of a favorable determination letter within the time required by the Internal Service for the adoption of any such amendment. (d) Assets of the Company Common Stock Fund shall be invested in accordance with provisions of the plan document and the related trust. 3.6 COMMON STOCK FUND SPINOFF. Within 180 days after the Distribution Date CFI and the Company shall cause the accounts in the CFI Common Stock Fund to be spun 7 off from the CFI Common Stock Fund and to be merged into the Company Common Stock Fund. In connection with the spinoff and merger, the following shall apply: (a) CFI shall direct the trustee of the CFI Common Stock Fund to transfer assets equal in value on the transfer date to the balance of the accounts for the Company Employees to the trustee for the Company Common Stock Fund. The trustee shall use first common stock of the Company received on the plan's shares of CFI common stock on the Distribution Date. Any additional amount to be transferred shall be CFI common stock. The trustee of the CFI Common Stock Fund or the trustee of the Company Common Stock Fund shall sell the stock of the other corporation held after the spinoff and merger at a time selected in its absolute discretion and use the proceeds of sale to acquire stock of the plan sponsor. (b) CFI shall cause the fiduciaries of the CFI Common Stock Fund to provide an accounting to the fiduciaries of the Company Common Stock Fund with respect to all assets and accounts transferred to the Company Common Stock Fund. The accounting shall be reasonably satisfactory to the Company for purposes of proper allocation of assets, earnings, gains and losses to the accounts of participants under the Company Common Stock Fund. (c) CFI shall file IRS Form 5310A with the Internal Revenue Service, giving notice of the spinoff and merger, at least 30 days before the date of the spinoff and merger. ARTICLE IV EXECUTIVE BENEFIT PLANS 4.1 TOP-HAT PLANS. CFI shall retain the obligation to pay Company Employees the accounts in the Consolidated Freightways, Inc. Executive Deferred Compensation Plan (the "CFI Deferral Plan") accumulated from compensation deferred up to the Distribution Date. CFI shall retain the obligation to pay Company Employees benefits accrued under the Consolidated Freightways, Inc. Supplemental Retirement and Excess Benefit Plan (the "CFI SERP") as of the Distribution Date based on service and compensation up to that date and the offsetting CFI Retirement Plan benefits accrued as of that date. Assets in the trust related to the CFI Deferral Plan and the CFI SERP shall remain in such trust. CFI shall amend the CFI Deferral Plan and the CFI SERP to provide that events, such as termination of employment or retirement, triggering distribution of benefits from the CFI Deferral Plan and the CFI SERP shall be determined for Company Employees on the basis of employment with and retirement from the Company and its Subsidiaries. The Company shall provide CFI with information about such events after the Distribution Date to assist CFI in the administration of the CFI Deferral Plan and the CFI SERP. 8 4.2 STOCK OPTION PLANS. The existing stock options of Company Employees should be handled as follows: (a) Each outstanding option held by CFI employees ("CFI Option") as of the Distribution Date shall be adjusted so that the aggregate "spread" (i.e., the excess of the fair market value of a share of CFI stock subject to such option and the per share exercise price) inherent in such option after giving effect to the Distribution, is equal to the aggregate "spread" inherent in such option prior to giving effect to the Distribution ("CFI Spread"). (b) Each outstanding option held by Company employees ("CFI-CFC Option") provides generally that following a termination of employment from CFI or any of its affiliates, an optionee will have 90 days to exercise his or her options before they expire. Prior to the Distribution Date, the stock option agreements under the Consolidated Freightways, Inc. Stock Option Plan of 1988 (the "CFI Stock Plan") that are held by Company employees shall be amended to provide that all options shall become fully vested and exercisable 30 days prior to the Distribution. Accordingly, effective as of the Distribution Date, each Company employee who will be considered a terminated employee under the CFI Stock Plan shall have 90 days after such termination of employment (the "90 Day Period") to exercise his or her CFI-CFC Options to purchase CFI stock. After the 90 Day Period such options shall expire. (c) For purposes of determining the CFI Spread, the fair market value of a share of CFI stock prior to the Distribution shall be deemed to be equal to the average of the daily closing prices for a share of CFI stock on the NYSE for the five trading days immediately preceding the record date; and the fair market value of a share of CFI stock following the Distribution shall be deemed to be equal to the average of the daily closing prices for a share of CFI stock in "when-issued" trading on the NYSE (or, if there shall not have been "when issued" trading on such exchange, in the over-the-counter market) for the five trading days immediately preceding the Distribution Date. (d) For purposes of determining the value of a share of Company Stock, the fair market value of a share of Company stock shall be deemed to be equal to the average of the daily closing prices for a share of Company stock on the NYSE for the five trading days immediately following the 90 Day Period. 9 ARTICLE V WELFARE BENEFIT PLANS 5.1 MEDICAL AND DEPENDANT CARE ACCOUNT BENEFITS. As of the Distribution Date, the Company shall establish a Welfare Benefits Plan (the "Company Welfare Plan") qualified under Section 125 of the Code to provide medical and dependent care account benefits to Company Employees covered under the Consolidated Freightways, Inc. Welfare Benefits Plan (the "CFI Welfare Plan") in 1996 before the Distribution Date, and the following shall apply: (a) Subject to 2.1, and to (b) and (c) below, the Company Welfare Plan shall be in a form satisfactory to the Company in its sole discretion. (b) The Company Welfare Plan shall have a first plan year that is a short plan year beginning on the Distribution Date and ending December 31, 1996. Compensation reduction elections by participants under the CFI Welfare Plan for the 1996 plan year shall continue in effect as to the Company Welfare Plan. (c) For 1996, the Company Welfare Plan shall provide for medical spending accounts and dependent care spending accounts under substantially the same terms as the CFI Welfare Plan. CFI shall transfer to the Company the unused account balances of Company Employees under the CFI Welfare Plan. The Company shall credit the amounts transferred with respect to each participant and each account to corresponding accounts under the Company Welfare Plan. Claims for reimbursement from medical and dependent care spending accounts under the CFI Welfare Plan by Company Employees that have not been paid as of the Distribution Date shall be paid by the Company under the Company Welfare Plan. The fiduciary of the Company Welfare Plan shall have the authority to determine whether or not claims under the Company Welfare Plan are properly submitted or are payable. Upon request, CFI or the administrator of the CFI Welfare Plan shall deliver or make available to the Company and the administrator of the Company Welfare Plan all records of participants that are relevant to administration of the Company Welfare Plan. 5.2 HEALTH PLAN DEDUCTIBLES AND COVERAGE LIMITS, COBRA COVERAGE. The Company shall adopt health plans to cover Company Employees effective as of the Distribution Date and the following shall apply: 10 (a) On and after the Distribution Date neither CFI nor any of the welfare benefit plans sponsored by CFI shall provide coverage to Company Employees. (b) For the period from the Distribution Date to December 31, 1996, Company Employees who were participants under the Consolidated Freightways, Inc. Health Plan (the "CFI Health Plan") as of the Distribution Date shall be credited with amounts paid under the CFI Health Plan for plan deductibles against any corresponding deductibles under a Company plan health or medical plan. Benefits provided under the CFI Health Plan to a Company Employee with respect to 1996 claims will be counted toward any coverage limits applicable to a Company Employee under any Company health or medical plan for the coverage period ending December 31, 1996. For purposes of this paragraph (b), deductibles and benefits paid for eligible dependants of Company Employees shall be taken into account. (c) The Company shall provide group health plan continuation coverage as required under Sections 601 through 607 of ERISA ("COBRA coverage") for Company Employees and related "qualified beneficiaries" for "qualifying events" that occur before or after the Distribution Date. 5.3 RETIREE HEALTH BENEFITS. The Company and its Subsidiaries shall be obligated to provide health benefits to retired Company Employees, with the obligation applying to the entity that employed the retiree at the time of retirement. To the extent permitted by the Company's Health Plan and applicable law, the Company may eliminate or change retiree health benefits. 5.4 LONG-TERM DISABILITY BENEFITS. The Company and its Subsidiaries shall be obligated to provide long-term disability benefits to disabled Company Employees, with the obligation applying to the entity the disabled individual was employed by at the time of disability. 5.5 SEVERANCE BENEFITS. A termination of employment with the Company, CFI, or any subsidiary of the Company or CFI immediately followed by employment with any other such entity shall not be deemed a severance of employment for purposes of any policy, plan, program or agreement that provides for the payment of severance, salary continuation or similar benefits. If any person employed by Leland James Service Corporation immediately prior to the Distribution Date loses employment prior to or simultaneously with the Distribution Date as a direct result of the transaction provided for by the Distribution Agreement and for no other reason, CFI shall be responsible for any severance, salary continuation or similar benefit payable upon such loss of employment. 11 5.6 OTHER WELFARE BENEFITS. Except as otherwise provided in 2.1 and this Article V, welfare benefits provided by CFI and its Subsidiaries and by the Company and its Subsidiaries for their respective employees after the Distribution Date shall not be affected by each other and each company may provide or elect not to provide benefits in its sole discretion. ARTICLE VI MISCELLANEOUS 6.1 RIGHTS OF EMPLOYEES. This Agreement is not intended to give any individual employee or former employee of CFI or the Company or any of their Subsidiaries any personal right or interest. No employee, shall have any right under this Agreement to maintain employment with CFI, the Company or any Subsidiary, become employed by CFI, the Company or any Subsidiary or accrue any benefit with respect to employment. No employee, former employee, beneficiary or dependent shall have any right to be designated as a Company Employee or to be retained as the responsibility of CFI. 6.2 ENTIRE AGREEMENT. This Agreement, together with the Distribution Agreement, embodies the entire Agreement and understanding of the parties with respect to the matters provided for herein and shall supersede any and all prior agreements, arrangements and understanding relating to such matters. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the parties. 6.3 GOVERNING LAW. The interpretation and performance of the Agreement shall be governed by the laws of the state of California without regard tor the choice of law provisions thereof. 6.4 NOTICES. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly delivered on the date of personal delivery or on the date of receipt if mailed by registered or certified mail to the attention of __________ at the addresses stated in the Agreement. 6.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. 6.6 TERMINATION. This Agreement shall be terminated if the Distribution Agreement is terminated or if the distribution of Company stock fails to occur. If the Agreement terminates under this Section 6.5, no party shall have any liability to any person under the Agreement. 12 6.7 DISPUTE RESOLUTION. Any dispute between the parties concerning the performance of this Agreement shall be resolved in accordance with the provisions of the ADR Agreement. CFI CONSOLIDATED FREIGHTWAYS, INC. BY ----------------------------------- EXECUTED: , 1996 ----------------- COMPANY CONSOLIDATED FREIGHTWAYS CORPORATION BY ---------------------------------- EXECUTED: , 1996 ----------------- 13 EX-10.4 9 TAX SHARING AGREEMENT FORM OF TAX SHARING AGREEMENT This Tax Sharing Agreement (the "Agreement"), dated as of this ___ day of _______, 1996, by and between Consolidated Freightways, Inc., a Delaware corporation ("CFI"), and Consolidated Freightways Corporation, a Delaware corporation ("Holdings"). WHEREAS, CFI and Holdings have entered into a Distribution Agreement dated as of ______________, 1996 (the "Distribution Agreement"), providing for the distribution by CFI of the common stock of Holdings to the holders of CFI common stock as of the close of the day on the Distribution Date, and setting forth the terms and conditions which will govern certain relationships between the parties; and WHEREAS, CFI and Holdings desire to set forth their agreement on the proper allocation among CFI, Holdings and their subsidiaries of federal, state, local and foreign taxes and to provide for future cooperation with respect to tax matters; NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined): "AFFILIATE" means any corporation which is a member of the Consolidated Group. CFI TAX SHARING AGREEMENT PAGE 2 "CFI AFFILIATE" means any corporation, partnership or other entity directly or indirectly controlled by CFI, other than Holdings or any Holdings Affiliate. "CFI BUSINESSES" means the present and future subsidiaries, divisions and business of any member of the CFI Group, other than the present and future subsidiaries, divisions and business of any member of the Holdings Group. CFI Businesses shall include all former subsidiaries, divisions and businesses other than the Holdings Businesses. "CFI GROUP" means the group of corporations that immediately after the Distribution Date are members of the affiliated group of which CFI is the common parent (within the meaning of section 1504 of the Code). "CODE" means the Internal Revenue Code of 1986 (or, if relevant, the Internal Revenue Code of 1954), as amended, or any successor thereto, as in effect for the taxable period in question. "COMBINED JURISDICTION" means, for any taxable period, any jurisdiction in which Holdings or a Holdings Affiliate could be or is included in a consolidated or combined return with CFI or a CFI Affiliate for Other Tax purposes for such period. "CONSOLIDATED GROUP" means the affiliated group of corporations (within the meaning of section 1504 of the Code) of which CFI is the common parent. "DISTRIBUTION" means the transfer by CFI of its ownership of Holdings and the Holdings Affiliates from CFI by means of a distribution of the stock of Holdings to CFI shareholders. CFI TAX SHARING AGREEMENT PAGE 3 "DISTRIBUTION DATE" means the date determined by the CFI Board of Directors as of which the Distribution shall be effected. "FINAL DETERMINATION" means the final resolution of liability for any Tax for a taxable period (i) by the appropriate IRS form which binds the taxpayer on the date of acceptance by or on behalf of the IRS, or by a comparable form under the laws of other jurisdictions; except that any such form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency shall not constitute a Final Determination; (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under section 7121 or section 7122 of the Code, or comparable agreements under the laws of other jurisdictions; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the Tax imposing jurisdiction; or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations. "HOLDINGS AFFILIATE" means any former or current corporation, partnership or other entity directly or indirectly controlled by Holdings. "HOLDINGS BUSINESSES" means the present and future subsidiaries, divisions and business of any member of the Holdings Group. Holdings Businesses shall include all former subsidiaries, divisions and businesses. "HOLDINGS GROUP" means the group of corporations that immediately after the Distribution Date are members of the affiliated group of corporations of which Holdings is the common parent (within the meaning of section 1504(a) of the Code). CFI TAX SHARING AGREEMENT PAGE 4 "IRS" means the Internal Revenue Service. "OTHER TAXES" is defined in Section 3.05. "REPRESENTATIVE" means with respect to any person or entity, any of such person's or entity's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives. "RESTRUCTURING TAXES" means all Taxes resulting from the disposition of Holdings stock undertaken to effect the Holdings Distribution. "RULING REQUEST" means the private letter ruling request filed by CFI with the IRS dated February 22, 1996, as supplemented from time to time, with respect to certain tax aspects of the Distribution. "TAX" means any of the Taxes. "TAX CONTROVERSY" is defined in Section 4.02. "TAX RETURN" means any return, filing, questionnaire or other document required to be filed, including requests for extensions of time, filings made with estimated Tax payments, claims for refund and amended returns that may be filed, for any taxable period with any Taxing Authority (whether domestic or foreign) in connection with any Tax (whether or not a payment is required to be made with respect to such filing) or any information reporting requirement. CFI TAX SHARING AGREEMENT PAGE 5 "TAXES" means any and all forms of taxation, whether created or imposed by a national, municipal, state, federal, or other governmental body (a "Taxing Authority") and, without limiting the generality of the foregoing, shall include net income, alternative or add-on minimum, any special estimated tax payments required pursuant to section 847 of the Code, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalties or other additions to tax, or additional amounts imposed by any such Taxing Authority on the Consolidated Group or any member thereof. "TAXING AUTHORITY" is defined under the term "Taxes." ARTICLE II PREPARATION AND FILING OF TAX RETURNS SECTION 2.01. MANNER OF FILING. All Tax Returns (relating to pre- Distribution and post-Distribution taxable periods) filed by CFI and CFI Affiliates and Holdings and Holdings Affiliates after the Distribution Date shall be prepared on a basis which is consistent with the rulings of Taxing Authorities or opinions of tax counsel retained or approved by CFI and which are issued in connection or relate directly to the Distribution and shall be filed on a timely basis (including extensions) by the party responsible for such filing under this Agreement. CFI TAX SHARING AGREEMENT PAGE 6 SECTION 2.02. PRE-DISTRIBUTION FEDERAL TAX RETURNS (a) Holdings will join, and will cause each Holdings Affiliate to join, in all pre-Distribution federal Tax Returns for the Consolidated Group to the extent they are eligible to join in such returns under the provisions of the Code and the regulations thereunder. Holdings will neither elect to file separate returns for such periods nor will it cause or permit any of the Holdings Affiliates to so elect. (b) Holdings hereby irrevocably designates, and Holdings agrees to cause each of the Holdings Affiliates to so designate, CFI as its agent to take any and all actions necessary or incidental to the filing of Form 1122 (or any amendment thereto) with respect to any taxable period in which Holdings or any of the Holdings Affiliates is a member of the Consolidated Group, and Holdings agrees to deliver, and to cause each Holdings Affiliate to deliver, executed copies of Form 1122 (or any amendment thereto) to CFI, if required, with respect to any such year. (c) CFI shall timely prepare and file, or cause to be timely prepared and filed, all pre-Distribution federal Tax Returns for the Consolidated Group. This shall include all tax items required to be reported by the Holdings Group for taxable periods ending before or including the Distribution Date. Holdings shall provide CFI, with respect to Holdings and Holdings Affiliates, its federal Tax Returns and supporting schedules and additional information requested by CFI for the 1996 taxable period ending on the Distribution Date on a timely basis, as reasonably determined by CFI, in order for CFI to timely file the Tax Returns for the Consolidated Group. Upon request, CFI shall deliver to Holdings copies of the relevant portions of the Consolidated Group Tax Return for 1996, as determined by CFI, within 30 days after the day that it is filed. CFI TAX SHARING AGREEMENT PAGE 7 (d) All Tax Returns relating to taxable periods ending before or including the Distribution Date and submitted after the date of this Agreement by Holdings shall be prepared, and all items of such Tax Returns shall be reported (in the absence of a controlling change in law or circumstances, except with the consent of CFI, which consent shall not be unreasonably withheld), in a manner that is consistent with past practices, elections, accounting methods, conventions, and principles of taxation (collectively, "Tax Practices") used for the most recent taxable periods for which Tax Returns involving similar items have been filed prior to the Distribution Date. All decisions relating to the preparation of Tax Returns under Section 2.02 (including whether items are reported consistent with past Tax Practices) shall be made in the reasonable discretion of CFI. However, any decisions regarding intercompany transactions, as defined under Treas. Reg. Section 1.1502-13, shall be made as mutually agreed upon by the parties or by CFI if mutual agreement is not reached, with CFI's decision being subject to arbitration under Section 5.04. SECTION 2.03. POST-DISTRIBUTION FEDERAL TAX RETURNS. Holdings shall prepare and file, or cause to be filed, all post-Distribution federal Tax Returns for the Holdings Group for taxable periods beginning after the Distribution Date. CFI shall prepare and file, or cause to be prepared and filed, all post-Distribution federal Tax Returns for the CFI Group for taxable periods beginning after the Distribution Date. CFI and Holdings agree to notify each other within 60 days after such post-Distribution federal Tax Returns are filed regarding any utilization by either party of minimum tax credits generated in pre-Distribution taxable periods. In addition CFI agrees to provide to Holdings periodic estimates of the amount of minimum tax credits generated in pre-Distribution years which are expected to be utilized in post-Distribution returns of the CFI Group. CFI agrees to provide such estimates within 60 days after each quarterly federal estimated tax payment and within 60 days after an application for automatic extension of time (Form CFI TAX SHARING AGREEMENT PAGE 8 7004) is filed. Holdings acknowledges that such estimates are subject to change and CFI shall have no liability for any changes or inaccuracies in such estimates. ARTICLE III PAYMENT OF TAXES SECTION 3.01. ALLOCATION OF TAX LIABILITY. (a) For purposes of this Agreement, the Consolidated Group's federal regular income tax liability for all periods ending before or including the Distribution Date shall be allocated in accordance with section 1552(a)(2) of the Code and Treasury Regulations sections 1.1552-1(a)(2) and 1.1502-33(d)(3). Accordingly, the consolidated federal regular income tax liability to be allocated to each Affiliate included in the federal Tax Return of the Consolidated Group in the following manner: (1) STEP 1. Each Affiliate shall first be allocated that percentage of the consolidated federal regular income tax liability which is equal to the percentage that the total federal regular income tax liability of such Affiliate, if computed on a separate return basis (with the adjustments provided by Treasury Regulation section 1.1552-1(a)(2)), would be to the total amount of the federal regular income tax of all Affiliates so computed. (2) STEP 2. An additional amount shall be allocated to each Affiliate equal to one hundred percent (100%) of the excess, if any, of (A) the "separate return tax liability" of such Affiliate for the taxable year (as computed pursuant to Treasury Regulation section 1.1552-1(a)(2)), over (B) the tax liability of such Affiliate in accordance with STEP 1 of this Section 3.01(a). CFI TAX SHARING AGREEMENT PAGE 9 (3) STEP 3. The total of any additional amounts allocated to Affiliates pursuant to STEP 2 of this Section 3.01(a) (including amounts allocated as a result of a carryback) shall be paid by such Affiliates to those other Affiliates which had such losses, deductions, or credits in proportion to the tax benefit derived by the Consolidated Group from the losses, credits and deductions of all Affiliates, as determined by CFI. (4) For the purposes of this Agreement, Holdings' allocable share of the consolidated federal regular income tax liability, as determined under this Section, is the aggregate amount of liability allocated to Holdings and any Holdings Affiliate. CFI's allocable share of the consolidated federal income tax liability, as determined under this Section, is the aggregate amount of liability allocated to CFI and any CFI Affiliate. (b) For purposes of this Agreement, the Consolidated Group's federal minimum tax liability and environmental tax liability for all periods ending before or including the Distribution Date shall be allocated in accordance with the allocation method set out in Proposed Regulations Sections 1.1502-55 and 1.1552-1(g) issued on December 30, 1992 (the "Proposed Regulations"). If temporary or final regulations are issued which differ from the Proposed Regulations, this Agreement will be amended to reflect such changes to the extent and for an effective date deemed necessary or desirable by CFI. SECTION 3.02. ALTERNATIVE MINIMUM TAX CREDITS. A portion of any consolidated minimum tax credit of the Consolidated Group will be allocated to a Holdings Affiliate which ceases to be a member of the Consolidated Group on the Distribution Date in accordance with the allocation method set forth in the Proposed Regulations. To the extent such Holdings Affiliate was not allocated a corresponding amount of alternative minimum tax in an earlier or the same tax year, Holdings shall pay to CFI an amount equal to the amount of any such credit utilized by the Holdings Affiliate on an estimated basis on or before June 30 following the taxable year in which the credit is utilized by CFI TAX SHARING AGREEMENT PAGE 10 such Holdings Affiliate. Subsequent thereto, a final settlement payment, if necessary, will be made within 10 days of filing the Tax Return for such taxable year or, if later, 10 days after receipt of notice of the amount of the settlement payment required. Any payment required under this Section shall be accompanied by a calculation setting forth the basis for the amount paid. In calculating minimum tax credit utilization and payment responsibility under this Section, minimum tax credits allocated to Holdings Affiliates under this Section shall be deemed used first. If temporary or final regulations are issued which differ from the Proposed Regulations, this Agreement will be amended to reflect such changes to the extent and for an effective date deemed necessary or desirable by CFI. SECTION 3.03. PAYMENT OF CONSOLIDATED FEDERAL INCOME TAX. (a) CFI shall pay all Taxes due with respect to the consolidated federal income tax liability (including any minimum tax or environmental tax liability) of the Consolidated Group for all taxable periods ending before or including the Distribution Date. Holdings shall pay to CFI an amount equal to Holdings' and Holdings Affiliates' share of such Taxes as determined in the manner provided in Section 3.01. Furthermore, Holdings shall make estimated tax payments to CFI or receive refunds on or before the statutory payment dates under a method generally consistent with past practices as reasonably determined by CFI. CFI hereby acknowledges that, upon resolution of the intercompany accounts as of the Distribution Date, all federal Taxes have been paid by Holdings and Holdings Affiliates with respect to federal consolidated Tax Returns that have been filed for any period up to and including the year ended December 31, 1995, and Holdings and Holdings Affiliates shall have no further liability in respect thereof except as otherwise provided in this Agreement. CFI TAX SHARING AGREEMENT PAGE 11 (b) Except as otherwise provided in this Agreement, Holdings shall pay all Taxes due with respect to the federal income tax liability (including any minimum tax or environmental tax liability) of the Holdings Group for periods beginning after the Distribution Date. SECTION 3.04. TAX DEFICIENCIES AND REFUNDS AS TO CFI FILED RETURNS. (a) If as a result of any audit, amendment or other change in a federal income Tax Return as filed by CFI or any CFI Affiliate with respect to any taxable period ending before or including the Distribution Date, there is an additional amount of federal income Taxes (including minimum tax and environmental tax) due and payable, or a refund of federal income Taxes previously paid (whether by payment, credit, offset against other federal income Taxes due or otherwise), any such deficiency shall be paid by, and any such refund shall be payable to, CFI. (b) Holdings shall pay to CFI any federal income Taxes paid by CFI as a result of any audit, amendment or other change in a Consolidated Group Tax Return allocable to the Holdings' Businesses (as determined under Section 3.01) with respect to any taxable periods ending before or including the Distribution Date. In determining the amount due under this Section 3.04(b), the amount of federal income Taxes paid by CFI shall include any additional tax payments or deposits made by CFI for a taxable year subsequent to the filing of the federal income tax return for the taxable year, it being expressly recognized by Holdings that no portion of such payments were charged to Holdings or a Holdings Affiliate through the intercompany accounts. (c) CFI shall pay to Holdings, reduced by reasonable administrative costs (including legal and accounting expenses) incurred by CFI or a CFI Affiliate, the amount of any refund of federal income Taxes received (including by offset against other federal Taxes CFI TAX SHARING AGREEMENT PAGE 12 due) as a result of any audit, amendment or other change in a Consolidated Group Tax Return allocable to the Holdings Businesses (as determined under Section 3.01) with respect to any taxable period ending before or including the Distribution Date. (d) For purposes of both (b) and (c) of this Section, the amount of any federal Taxes paid or federal Taxes received (including by way of offset) as a result of any audit, amendment or other change to a Consolidated Group Tax Return shall be taken into account in the year to which they relate and the Tax liability (including Other Taxes) for such year shall be recomputed and allocated accordingly. SECTION 3.05 PENALTIES AND INTEREST (a) Any interest incurred by the Consolidated Group shall be paid by the Affiliate to whom it is attributable. The total amount of interest incurred by the Consolidated Group will be apportioned to and paid by each Affiliate according to (1) the ratio of the interest incurred by each Affiliate so computed, plus (2) the additional interest, if any, that such Affiliate would have paid on a separate return basis over the allocated interest determined under (1) above. Interest computed by an Affiliate on a separate return basis shall be calculated using the interest rate or rates applicable to the consolidated deficiency. Any additional amount allocated to an Affiliate determined under (2) above shall be paid to the Affiliate whose income or deduction would have given rise to a refund on a separate return basis, but in no case shall an Affiliate which incurs interest under (2) above be required to pay more interest to such receiving Affiliate than such receiving Affiliate would have received on a separate return basis. In calculating the allocable share of any interest payable by a Holdings Affiliate with respect to any federal audit adjustments, only interest actually payable to the IRS, and not interest abated as a result of tax deposits, shall be taken into account. CFI shall have sole discretion to determine how tax deposits are allocated among taxable periods and audit items. CFI shall act in good faith CFI TAX SHARING AGREEMENT PAGE 13 in making such determination, with an intention to minimize the overall out-of- pocket costs and financial reporting impacts on CFI and Holdings. (b) Any interest received by the Consolidated Group as a result of any refund of Tax shall be allocated to the Affiliate whose income or deductions gave rise to the refund. The amount of interest received by the Consolidated Group will be apportioned to and received by each Affiliate according to (1) the ratio of the interest to be received by each Affiliate computed on a separate return basis to the total of all the interest received by Affiliates so computed, plus (2) the additional interest, if any, that such Affiliate would have received on a separate return basis over the allocated interest determined under (1) above. Any additional amount allocated to an Affiliate determined under (2) above shall be received from the Affiliate whose income or deductions caused such interest not to be received by the Consolidated Group, but in no case shall an Affiliate which receives such interest receive more interest than such Affiliate would have received on a separate return basis. (c) Any penalties incurred by the Consolidated Group shall be paid by the Affiliate whose actions, income or deductions caused such penalties. If a penalty was caused by more than one Affiliate, such penalty shall be allocated proportionately to those Affiliates that would have incurred a penalty on a separate return basis. Any excess penalty will be allocated in proportion to the actions, income or deductions of each Affiliate which caused or contributed to the penalty regardless of whether such Affiliate's actions, income or deductions exceeded the minimum threshold required for the penalty to be imposed. (d) For purposes of this Agreement, Holdings' allocable share of any interest or penalties, as determined under this Section, is the aggregate amount of liability allocated to Holdings and any Holdings Affiliate. CFI's allocable share of any interest or penalties, CFI TAX SHARING AGREEMENT PAGE 14 as determined under this Section, is the aggregate amount of liability allocated to CFI and any CFI Affiliate. SECTION 3.06. OTHER TAX RETURNS OF HOLDINGS. (a) Holdings shall prepare and file, or cause to be prepared and filed, all appropriate Tax Returns or other filings relating to Taxes other than federal income taxes ("Other Taxes") imposed on any member of the Holdings Group or the Holdings Businesses except for returns and filings with respect to Combined Jurisdictions. (b) For any Combined Jurisdictions, CFI or a CFI Affiliate, as appropriate, shall be responsible for the preparation and filing of all returns and filings relating to any Other Taxes imposed upon any member of the Holdings Group for the same taxable periods with respect to which CFI is responsible for filing federal income tax returns under Section 2.02. For this purpose, Holdings (or the appropriate Holdings Affiliate) shall provide CFI (or the appropriate CFI Affiliate) such schedules and additional information requested by CFI for any period for which such Tax Return has not been filed as of the date hereof by the later of (i) 15 days after such request or (ii) 60 days prior to the date on which such Tax Return shall be due. Unless required by law, as reasonably determined by CFI, CFI shall file such Tax Return consistent with such schedules and additional information provided by Holdings or Holdings Affiliates. CFI shall deliver to Holdings copies of relevant portions of each Tax Return no later than 60 days after the day that such Tax Return is filed. Unless required by law, as reasonably determined by CFI, CFI shall not amend any such Tax Return to reflect any change in information provided by Holdings Businesses without the written consent of Holdings. (c) CFI hereby acknowledges that all Other Taxes have been paid with respect to Tax Returns that have been filed (in any Combined Jurisdiction in which unitary or nexus CFI TAX SHARING AGREEMENT PAGE 15 consolidation principles have been agreed upon by CFI and Holdings or a Holdings Affiliate) on or before the Distribution Date. Liability for payment of all Other Taxes imposed by any Combined Jurisdiction shall be allocated between the CFI Group and the Holdings Group. The allocation shall be made in such manner as CFI shall reasonably deem appropriate; provided, however, that the liability of the Holdings Group shall not exceed the greater of (i) the total amount that the Holdings Group would have paid if the members of the Holdings Group filed their own return for Other Taxes not combined with any other member of the CFI Group, or (ii) a pro rata share of the combined liability of the members of the Holdings Group and the CFI Group. CFI shall be liable for the Other Taxes remaining after payment of the Holdings Group's allocable share of the Other Taxes. (d) To the extent there is an Other Tax liability, but the Holdings Group has a net aggregate loss in a Combined Jurisdiction, the Holdings Group shall be entitled to the benefit of the net aggregate loss, to the extent reasonably determined by CFI, except limited (i) to the extent of its nexus within the state, and (ii) to the extent such benefit is eliminated or reduced by the fact that Holding Group's inclusion in the Combined Jurisdiction increases the liability of the combined group. (e) To the extent that a refund is obtained by CFI Businesses or Holdings Businesses and such refund relates to Other Taxes in Combined Jurisdictions, Holdings or a Holdings Affiliate shall be entitled to receive its proportionate share of such refunds as determined by CFI (or a member of the CFI Group, as appropriate), in accordance with the principles of Section 3.06(c) or (d). (f) CFI and Holdings shall be responsible for the filing of their respective Tax Returns for (i) non-Combined Jurisdictions, and (ii) jurisdictions outside the United CFI TAX SHARING AGREEMENT PAGE 16 States that are due with respect to all taxable periods and for the payment of all Taxes due or payable in connection therewith. (g) If as a result of any audit, amendment or other change in a Combined Jurisdiction Tax Return as filed by CFI or a CFI Affiliate with respect to any taxable period ending before or including the Distribution Date, there is an additional amount of Taxes due and payable, or a refund of Taxes previously paid (whether by payment, credit, offset against other Taxes due or otherwise), any such deficiency shall be paid by, and any such refund shall be payable to, CFI or the CFI Affiliate. Holdings shall pay to CFI any Taxes incurred as a result of any audit, amendment or other change in a Combined Jurisdiction Tax Return with respect to any taxable period ending before or including the Distribution Date in a manner consistent with the provisions outlined in Section 3.06(c) and (d). CFI or a CFI Affiliate shall pay to Holdings the amount of any refund of Other Taxes received (including by offset against Other Taxes due) as a result of any audit, amendment or other change to a Tax Return attributable to the Holdings Businesses with respect to any taxable period ending before or including the Distribution Date in a manner consistent with the provisions outlined in Section 3.06(e). (h) Notwithstanding the provisions of Section 3.06(g), if Holdings or a Holdings Affiliate wishes to make advance payment of, or enter into a cash bond with respect to, any Taxes for which it would bear the burden under this Agreement prior to the date that payment of such Taxes is required by the relevant Taxing Authority, CFI shall permit Holdings to make such advance payment or enter into such cash bond and shall take such reasonable actions as may be necessary to effectuate the same. CFI TAX SHARING AGREEMENT PAGE 17 SECTION 3.07. RESTRUCTURING TAXES. (a) Notwithstanding any other provision of this Agreement to the contrary, Holdings shall pay and shall indemnify and hold harmless CFI from and against any and all Restructuring Taxes and from and against any costs whatsoever connected with such taxes, including, but not limited to, fees, interest, penalties and reasonable attorney's fees to the extent any portion of such Restructuring Taxes would not have resulted: (i) but for a Ruling Misrepresentation or Omission (as defined in Section 3.07(b)); or (ii) but for the fact that, within three (3) years after the Distribution Date, either Holdings or any member of the Holdings Group has (A) made a material disposition outside the Holdings Group by means of a sale or exchange of assets or capital stock (except (x) the issuance by Holdings of its own stock in an amount which does not exceed 10% of Holding's issued and outstanding stock immediately following the Distribution Date and (y) dispositions, if any, disclosed in the Ruling Request), (B) made a distribution to its stockholders or otherwise of any assets of the Holdings Group (other than dividends paid in the ordinary course of business), (C) made any repurchase of any Holdings Group capital stock (excluding repurchases in connection with employee benefit plans which comply with Revenue Procedure 91-63), (D) has voluntarily ceased to engage in the active conduct of a trade or business within the meaning of section 355(b)(2) of the Code, or (E) Holdings has liquidated or merged with any other corporation (including a member of the Holdings Group) unless, prior to each of cases (A), (B), (C), (D) and (E), Holdings has received an opinion of counsel to the Holdings Group (which opinion shall be reasonably satisfactory to CFI) or a favorable supplemental ruling letter satisfactory to CFI, that such act would not adversely affect the tax consequences of the Distribution to CFI or the shareholders of CFI, as set forth in any ruling issued by the IRS or in any opinion of counsel to CFI obtained in lieu of such a ruling. CFI TAX SHARING AGREEMENT PAGE 18 (b) For purposes of paragraph (a), a "Ruling Misrepresentation or Omission" means with respect to Holdings or a Holdings Affiliate (i) the failure of Holdings or a member of the Holdings Group to comply in all material respects with each written representation and statement regarding Holdings or a Holdings Affiliate made to the IRS in the Ruling Request or in a certificate provided to counsel to the CFI Group for use in preparing its tax opinion with respect to the Distribution, or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Ruling Request (or certificate provided to counsel) or the omission to state in the Ruling Request (or certificate provided to counsel) a material fact required to be stated therein or necessary to make the statements therein not misleading, but only, in the case of both clause (i) and (ii), insofar as any such statement or omission was made in reliance upon, and in conformity with, written information furnished by Holdings, a Holdings Affiliate, or a Representative of either specifically for use in the preparation of the Ruling Request (or certificate provided to counsel). SECTION 3.08. MANNER OF PAYMENT. (a) Any payment required to be made pursuant to Sections 3.04, 3.05, 3.06, 3.07 or Section 3.10 with respect to any Tax Return shall be made by wire transfer by the party obligated to make such payment (i) in the case of a refund of Tax, within 10 days after receipt (whether by way of payment, credit, or offset against any payments due or otherwise) of such refund or (ii) in the case of the payment of Tax with respect to any such Tax Return, within 10 days after the later of (x) such payment of Tax or (y) the delivery of written demand for the payment hereunder to the party obligated to make such payment hereunder. Any payment described in clause (i) and any demand for payment described in clause (ii) shall be accompanied by a calculation consistent with past Tax Practices setting forth the basis for the amount paid or demanded. Any payment not made within the prescribed time period shall thereafter bear interest at the federal CFI TAX SHARING AGREEMENT PAGE 19 underpayment rate established pursuant to section 6621(a)(2) (substituting "5 percentage points" for "3 percentage points" in the case any demand for payment described in clause (ii) in an amount exceeding $100,000). (b) Notwithstanding the foregoing, in the case of payments due from Holdings as a result of any IRS audit adjustments for tax liability years 1984-1990 which result in a deferred tax asset for Holdings for taxable years following the Distribution Date, at Holdings' request CFI shall enter into a note agreement on reasonable commercial terms permitting Holdings to make installment payments of the amounts due hereunder over a period not longer than the lesser of (i) five years, or (ii) the period over which such deferred tax asset is amortized by Holdings. SECTION 3.09. LIABILITY FOR TAXES WITH RESPECT TO POST-DISTRIBUTION TAXABLE PERIODS. Unless otherwise provided in this Agreement, the CFI Group and the Holdings Group severally shall pay all Taxes and shall be entitled to receive and retain all refunds of Taxes with respect to taxable periods beginning after the Distribution Date which are attributable to the CFI Businesses and the Holdings Businesses, respectively. SECTION 3.10. CARRYBACKS AND CARRYFORWARDS. (a) In the event that Holdings, any Holdings Affiliate or the Holdings Group incurs a loss or realizes a tax credit in a Tax Return filed for periods after the Distribution Date, loss or tax credit will not be carried back to any Consolidated Group Tax Return without the specific consent of CFI. CFI need consent only if the carryback of such loss or credit to the Consolidated Group return will cause no detriment to CFI's tax position. In determining whether a carryback is likely to cause a detriment to its tax position, CFI may take into account audit risks resulting from claiming a carryback. If CFI agrees to carryback such loss or credit, or is required by law to carryback such loss or credit, Holdings shall be entitled to its allocable share of any refund of Tax obtained by the CFI TAX SHARING AGREEMENT PAGE 20 Consolidated Group (or any member of the Consolidated Group in a Combined Jurisdiction) as a result of the carryback of losses or credits of any member of the Holdings Group from any taxable period beginning after the Distribution Date to any taxable period ending before or including the Distribution Date. Such refund is limited to the net amount received by CFI (by refund, offset against other Taxes or otherwise), net of any net Tax cost incurred by CFI or a CFI Affiliate, which would include the reduction of minimum tax credits previously utilized by CFI, resulting from such refund, and shall be paid in the manner and at the time specified in Section 3.08. In determining the net amount received by CFI as a result of a carryback of losses or tax credits by Holdings or a Holdings Affiliate, amounts carried back by Holdings or a Holdings Affiliate shall be considered to reduce the Consolidated Group's tax burden only to the extent that such carrybacks reduce the Consolidated Group's tax burden after first taking into account all other tax credits and carrybacks available to the Consolidated Group. Holdings shall indemnify CFI for any interest, fines and penalties resulting from the carryback of any item under this paragraph. Notwithstanding this Section 3.10, Holdings and any member of the Holdings Group shall have the right, in its sole discretion, to make the election under section 172(b)(3) of the Code, which would eliminate or limit the carryback of any loss or credit of the Holdings Group to any taxable period ending before or including the Distribution Date. (b) If CFI has a carryback of losses or credits from any member of the CFI Group from any taxable period beginning after the Distribution Date to any taxable period ending before or including the Distribution, CFI shall be entitled to any refund received from the Taxing Authority attributable to the carryback. To the extent such refund is reduced as a result of the inclusion of the Holdings Group in the Tax Return to which the item is carried back and results in additional minimum tax credits or other credits being made available to the Holdings Group, Holdings shall pay to CFI the amount of any tax savings when and if the additional benefits are realized by Holdings. CFI TAX SHARING AGREEMENT PAGE 21 (c) Within 180 days following the close of the CFI tax year in which the Distribution Date occurs, CFI shall provide a schedule of the relevant carryforward items allocable to Holdings for tax years following the Distribution Date. CFI shall indemnify Holdings for any interest, fines or penalties resulting from the overstatement of the carryforward items or CFI shall reimburse Holdings for any Tax benefits (including interest at the rate specified in Section 3.08) foregone by Holdings as a result of the understatement of the carryforward items. Notwithstanding the foregoing, CFI shall not be required to so indemnify or reimburse Holdings (i) with respect to any overstated allocation of alternative minimum tax credits made by CFI on a good faith basis, or (ii) to the extent the overstatement or understatement of any carryforward items other than alternative minimum tax credits results (x) from a change in law or regulation (including the retroactive effectiveness of any such law or regulation), (y) from an audit or other adjustments to the Tax Returns as filed, or (z) from incorrect information supplied by Holdings. ARTICLE IV COOPERATION AND EXCHANGE OF INFORMATION SECTION 4.01. COOPERATION. (a) CFI and Holdings shall cooperate (and shall cause any member of their group to cooperate) fully at such time and to the extent reasonably requested by the other party in connection with the preparation and filing of any return or the conduct of any audit, dispute, proceeding suit or action concerning any issues or any other matter contemplated hereunder. Such cooperation shall include, without limitation, (i) the retention and provision on demand of books, records, documentation or other information relating to any Tax Return until the later of (x) the expiration of the applicable federal or state statute CFI TAX SHARING AGREEMENT PAGE 22 of limitation (giving effect to any extension, waiver, or mitigation thereof) and (y) in the event any claim has been made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim; (ii) the provision of additional information with respect to and explanation of Tax Practices and material provided under clause (i) of this section; (iii) the execution of any document that may be necessary or reasonably helpful in connection with the filing of any Tax Return by any member of the CFI Group or the Holdings Group, or in connection with any audit, proceeding, suit or action addressed in the preceding sentence; and (iv) the use of the parties' reasonable best efforts to obtain any documentation from a governmental authority or third party that may be necessary or helpful in connection with the foregoing. Each party shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation. (b) CFI and Holdings shall use reasonable efforts to keep each other advised as to the status of Tax audits and litigation involving any items reportable on a consolidated federal income Tax Return or a combined Tax Return with respect to the Holdings Businesses for pre-Distribution periods and which (i) give rise to a Tax which could be assessed against Holdings (or any Affiliate thereof) or (ii) could give rise to a liability of Holdings (or any Affiliate thereof) under this Agreement (either of which constitutes a "Liability Issue"). The primary person for dealing with the Holdings Liability Issues in Tax audits shall be a Holdings Representative. CFI and Holdings shall promptly furnish each other copies of any inquiries or requests for information from any Taxing Authority or any other administrative, judicial or other governmental authority concerning any Liability Issue. CFI shall notify Holdings as to which inquiries or information requests it desires to monitor and, with respect to such matters, Holdings will submit for CFI approval (which shall not be unreasonably withheld) the information to be provided to a Taxing Authority or any governmental authority in response to the inquiries or requests. Holdings agrees to timely notify CFI regarding any proposed written communication CFI TAX SHARING AGREEMENT PAGE 23 (I.E., communications not related to inquiries or requests for information) by Holdings or a Holdings Affiliate to any such Taxing Authority or other governmental authority with respect to such Liability Issue and CFI shall subsequently notify Holdings as to which Liability Issues CFI desires to monitor. Upon request by CFI, Holdings shall provide copies of such written communications and documents to be submitted therewith and receive approval from CFI to submit such communications (which approval shall not be unreasonably withheld and shall be given on a timely basis) prior to submission to the Taxing Authority or other governmental authority. CFI shall have the right to consult with Holdings regarding any responses attributable to such requests. CFI shall indemnify Holdings for any costs which would not have been incurred, but for CFI's failure to grant approval to Holdings to submit information for which CFI's approval is required by this section; provided, however, this indemnification shall not apply to CFI actions or decisions made pursuant to Section 2.02(b). Furthermore, CFI and Holdings, as the case may be, shall each promptly furnish to the other upon receipt a copy of information document requests, a notice of proposed adjustment, revenue agent's report or similar report or notice of deficiency together with all relevant documents and memos related to the foregoing documents, notices or reports, received by any member of the CFI Group or any member of the Holdings Group, as the case may be, relating to any Liability Issue. (c) CFI shall advise Holdings with respect to items reported in a revenue agent's report and provide periodic updates, as necessary, as to the resolution of any such items relating to the Consolidated Group that may affect any member of the Holdings Group after the Distribution Date. (d) Holdings shall promptly notify CFI of any inquiries by any Taxing Authority or other administrative, judicial or other governmental authority that relates to any Other Taxes that may be imposed on CFI or a CFI Affiliate. CFI TAX SHARING AGREEMENT PAGE 24 SECTION 4.02. CONTEST PROVISIONS. (a) Subject to the cooperation provisions of Section 4.01, CFI shall have full responsibility for and discretion in handling any Tax controversy, including, without limitation, an audit, technical advice request, arbitration or dispute resolution procedure, protest to the Appeals Division of the IRS, and litigation in Tax Court or any other court of competent jurisdiction (a "Tax Controversy"), involving a Tax Return of the Consolidated Group or a Tax Return for a Combined Jurisdiction. However, upon request by Holdings, and subject to CFI approval (which may not be unreasonably withheld) and the cooperation provisions of Section 4.01, Holdings shall have full responsibility and discretion in the handling, at Holdings' expense of any Tax Controversy with respect to any item reported on a Holdings or Holdings Affiliate Tax Return that would give rise to a payment of Tax for which Holdings would be liable, or a refund of Tax for which Holdings would be entitled to receive payment, under Article III hereof. If CFI approval is not granted to Holdings for the handling of a Tax Controversy item, CFI shall provide Holdings with a timely written response which sets out the reasons for not granting the approval. Furthermore, CFI shall be subject to the cooperation provisions of Section 4.01 and shall allow Holdings, at Holdings' expense, the right to consult with CFI with respect to such Tax Controversy. (b) In addition to the cooperation and contest provisions of Section 4.01 and Section 4.02(a), in the event that a notice of deficiency is received by CFI from any Taxing Authority and such notice relates in whole or in part to Restructuring Taxes for which Holdings would be liable to CFI pursuant to Section 3.06 hereof (the "Holdings Restructuring Issue") then -- (1) CFI, upon receiving written request from Holdings, which shall be given no later than a date reasonably necessary to permit preparation and timely filing CFI TAX SHARING AGREEMENT PAGE 25 of a petition in the Tax Court for redetermination of the deficiency, shall timely file such petition at Holdings' expense; provided, however, that upon the request of Holdings, CFI shall, at Holdings' expense: (A) pay the amount of the deficiency (provided that Holdings has loaned to CFI no later than three (3) business days before CFI pays such deficiency, without interest and until a Final Determination of the Holdings Restructuring Issue, 100 percent of the amount of the portion of the deficiency relating to the Holdings Restructuring Issue; (B) file a claim for refund of such Tax; and (C) if the claim is denied, bring an action in a court of competent jurisdiction seeking the refund of such Tax; and (2) In the event that a judgment of the Tax Court or other court of competent jurisdiction results in an adverse determination with respect to the Holdings Restructuring Issue and CFI notifies Holdings that it does not intend to appeal such Holdings Restructuring Issue, then Holdings shall have the right to cause CFI to appeal such adverse determination at Holdings' expense. (3) Holdings and its Representatives, at Holding's expense, shall be entitled to participate in all conferences, meetings, or proceedings with any Tax Authority, the subject matter of which is or includes the Holdings Restructuring Issue. Holdings and its Representatives, at Holding's expense, shall be entitled to participate in all appearances before any court, the subject matter of which includes the Holdings Restructuring Issue. (4) All actions taken under this Section 4.02(b) at Holding's request or direction shall be at Holdings' expense. CFI TAX SHARING AGREEMENT PAGE 26 (5) The right to participate referred to in Section 4.02(b)(3) hereof shall include the submission and content of documentation, protests, memoranda of fact and law and briefs, the conduct of oral arguments or presentations, the selection of witnesses, and the negotiations of stipulations of fact with respect to the Holdings Restructuring Issue. (6) Within five (5) business days of the receipt by CFI of a refund of any amounts loaned to it by Holdings under paragraph (b)(1) above (including any interest received by CFI), CFI shall pay such refunded amount and interest, if any to Holdings net of any net Tax detriment (as determined by CFI) incurred by CFI or a CFI Affiliate resulting from such refund. SECTION 4.03. INFORMATION FOR SHAREHOLDERS. CFI shall provide each shareholder which receives Holdings stock pursuant to the Distribution with the information necessary for each such shareholder to comply with the requirements of section 355 of the Code and the Treasury Regulations with respect to statements that such shareholders must file with their federal income tax returns demonstrating the applicability of section 355 to the Distribution. ARTICLE V MISCELLANEOUS SECTION 5.01. TAX INDEMNIFICATION. (a) Holdings shall indemnify and hold harmless CFI and each CFI Affiliate from and against any liability, cost or expense, including, without limitation, any fine, penalty, interest, charge, attorney's fee or accountant's fee arising out of fraudulent or negligent information, workpapers, documents and other items prepared by Holdings or a Holdings CFI TAX SHARING AGREEMENT PAGE 27 Affiliate used in the preparation of any Tax Return filed by CFI and/or the Consolidated Group for any period during which Holdings or a Holdings Affiliate was or has been a member of the Consolidated Group. (b) Except as set forth in Section 5.01(a), CFI shall indemnify and hold harmless Holdings and each Holdings Affiliate from and against any liability, cost or expense, including, without limitation, any fine, penalty, interest, charge, attorney's fee or accountant's fee arising out of fraudulent or negligent preparation of any Tax Return filed by CFI and/or the Consolidated Group for any period during which Holdings or a Holdings Affiliate was or has been a member of the Consolidated Group. SECTION 5.02. BREACH. CFI shall indemnify and hold harmless each member of the Holdings Group and Holdings shall indemnify and hold harmless each member of the CFI Group from and against any payment required to be made under this Agreement as a result of the breach by a member of the CFI Group or the Holdings Group, as the case may be, of any obligation under this Agreement. SECTION 5.03. DISCLAIMERS. (a) CFI disclaims all knowledge of or responsibility for the content or accuracy of any separate returns or filings made by Holdings or Holdings Affiliates except to the extent such returns include information provided by CFI pursuant to Section 3.10(c). (b) Holdings disclaims all knowledge of or responsibility for the content or accuracy of any (i) separate returns or filings made by CFI or CFI Affiliates, (ii) Tax Returns or filings made by or on behalf of the Consolidated Group or any member thereof for any period except to the extent such federal Tax Returns or filings reflect items of the CFI TAX SHARING AGREEMENT PAGE 28 Holdings Businesses, and (iii) Tax Returns or filings in Combined Jurisdictions, except to the extent such Tax Returns or filings reflect items of the Holdings Businesses. SECTION 5.04. RESOLUTION OF CERTAIN DISPUTES. (a) Disagreements between CFI and Holdings with respect to amounts that either claims is owed by the other (or by an Affiliate of the other) under this Agreement or other matters under this Agreement that are not resolved by mutual agreement shall be resolved by arbitration pursuant to this Section 5.04. Until the time of a final resolution by the arbitrator selected pursuant to Section 5.04(b), the time period for any payments described in Section 3.08 (other than loans required by Section 4.02(c)) shall be tolled. Such tolling, however, shall not affect the accrual of interest. (b) SELECTION OF THE ARBITRATOR. Any arbitrator selected pursuant to this Section 5.04(b) shall have at least ten years of experience in the field of corporate taxation, shall be an attorney licensed to practice law in any state of the United States or a certified public accountant licensed to practice in any state of the United States and shall not be or have been routinely employed by, retained or affiliated with either party. The parties shall first attempt to agree on a mutually satisfactory arbitrator. If the parties are unable to agree on a mutually satisfactory arbitrator within 30 days after either party notifies the other in writing of a disagreement requiring arbitration pursuant to this Section 5.04 (15 days in the case of a disagreement with respect to Section 4.01 or Section 4.02), each party shall select an arbitrator. The two arbitrators thus selected shall agree on and select a third arbitrator. If the two arbitrators cannot agree on such third arbitrator within 30 days (15 days in the case of a disagreement with respect to Section 4.01 or Section 4.02), the parties shall each select a different arbitrator and renew the foregoing procedure. If the position of arbitrator is vacated by virtue of events outside the control of the parties, the person or persons who originally selected the arbitrator to fill CFI TAX SHARING AGREEMENT PAGE 29 such position shall select a new arbitrator to fill the position, unless the parties agree to continue the arbitration with the remaining arbitrators. When used hereafter, the term "arbitrator" may refer to the three arbitrators so selected when appropriate and a decision of a majority of such arbitrators shall constitute a decision by the arbitrator in the appropriate context. (c) ARBITRATION PROCEDURES. (1) The arbitration shall be conducted in accordance with the rules set forth in Exhibit A. The arbitration shall not be conducted under the auspices of the American Arbitration Association. (2) Each party within 30 days after engagement of the arbitrator shall submit to the arbitrator a written statement of the party's position (including, where relevant, the total net amount it asserts is owed by it or is due to it) regarding the total amount in dispute, together with a copy of such calculation. (3) The arbitrator shall base his or her decision on the following standards. In the case of a factual dispute between the parties, the arbitrator shall make a determination of the facts. In the case of a dispute regarding a legal issue, including the proper application of the Tax laws or the proper interpretation of this Agreement, the arbitrator shall make a determination in accordance with his or her best legal judgment. Upon making determinations with respect to all factual and legal issues in dispute, the arbitrator shall determine the amount due by one party to the other or such other matter with respect to the matter subject to the arbitration. Where relevant, as to each matter in dispute, the arbitrator shall find in favor of the party whose statement submitted pursuant CFI TAX SHARING AGREEMENT PAGE 30 to paragraph (2) above proposed the amount closest to the amount so determined. (4) The arbitrator shall render a written decision stating only the result of such decision as soon as practicable. The arbitrator shall also orally explain the bases of such decision to both parties as soon as practicable. If and only if both parties request, the arbitrator shall state the basis of such decision in writing. As to each matter in dispute, the arbitrator's decision shall be in an amount equal to one of the total amounts asserted by one of the parties in the written statements submitted pursuant to paragraph (2) above. The arbitrator shall not, and is not authorized, to render a decision in any other amount. (5) The arbitrator's decision shall be final and binding on the parties. No appeal to any court is contemplated by this Agreement and each party, to the maximum extent permissible by law, waives and relinquishes all rights and entitlements to appeal such decision. CFI TAX SHARING AGREEMENT PAGE 31 SECTION 5.05. NOTICES. Any notice, demand, claim or other communication under this Agreement shall be in writing and shall be deemed given upon delivery if delivered personally or by courier, upon mailing if sent by certified mail, return receipt requested, postage prepaid, or upon completion of transmission if sent by telecopy or facsimile, to the parties at the following address: CFI at: 3240 Hillview Avenue Palo Alto, CA 94304 Attn: General Counsel Holdings at: 175 Linfield Drive Menlo Park, CA 94025 Attn: General Counsel SECTION 5.06. COMPLETE AGREEMENT. This Agreement and the Exhibit thereto constitute the entire agreement of the parties concerning the subject matter hereof, supersede all other agreements, whether or not written, in respect of any Tax between or among CFI and CFI Affiliates, on the one hand, and Holdings and Holdings Affiliates, on the other hand. This Agreement may not be amended except by an agreement in writing, signed by the parties hereto. SECTION 5.07. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the principles of conflict of laws of the State of California. CFI TAX SHARING AGREEMENT PAGE 32 SECTION 5.08. SUCCESSORS AND ASSIGNS. A party's rights and obligations under this Agreement may not be assigned without the prior written consent of the other party. All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. SECTION 5.09. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the benefit of the parties to this Agreement and their respective Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without the Agreement. SECTION 5.10. LEGAL ENFORCEABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability without invalidating the remaining provisions. Any prohibition or unenforceability of any provision of this Agreement in any jurisdiction shall not invalidate or render unenforceable the provision in any other jurisdiction. SECTION 5.11. EXPENSES. Unless otherwise provided in this Agreement, each party shall bear any and all expenses that arise from their respective obligations under this Agreement (including Arbitration). In the event either party to this Agreement brings an action or proceeding for breach or enforcement of this Agreement, the prevailing party in such action or proceeding, whether or not such action or proceeding proceeds to final judgment, shall be entitled to recover as an element of its costs, and not as damages, such reasonable attorneys' fees as may be awarded in the action or proceeding in addition to whatever other relief to which the prevailing party may be entitled. CFI TAX SHARING AGREEMENT PAGE 33 SECTION 5.12. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signature thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. CONSOLIDATED FREIGHTWAYS, INC. By: -------------------------------- Its: ------------------------------- CONSOLIDATED FREIGHTWAYS CORPORATION By: ------------------------------- Its: ------------------------------- EX-10.5 10 REIMBURSEMENT OF INDEMNI AGMT FORM OF REIMBURSEMENT AND INDEMNIFICATION AGREEMENT between CONSOLIDATED FREIGHTWAYS, INC. and CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE TABLE OF CONTENTS PAGE 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Existing and Future Claims. . . . . . . . . . . . . . . . . . . . . . . . 3 3. CFCD Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. CFCD Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6. Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7. Letter of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8. Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9. Release of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10. Change in Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Duration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .10 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . .11 15. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 16. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 17. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 18. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 i PAGE 19. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 20. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 21. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 22. Duty to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 ii REIMBURSEMENT AND INDEMNIFICATION AGREEMENT THIS REIMBURSEMENT AND INDEMNIFICATION AGREEMENT ("Agreement") is entered into as of October 1, 1996 (the "Commencement Date"), by and between Consolidated Freightways, Inc., a Delaware corporation (together with its wholly owned subsidiaries, "CFI"), and Consolidated Freightways Corporation of Delaware, a Delaware corporation (together with its wholly owned subsidiaries, "CFCD"). RECITALS A. CFCD is and will remain, until the distribution of the common stock of Consolidated Freightways Corporation to the stockholders of CFI (the date of such distribution being referred to herein as the "Distribution Date"), a wholly owned subsidiary of CFI. B. CFI administers, either through a subsidiary or with a third-party administrator, an insurance program (the "Insurance Program") for its corporate entities with respect to (i) Workers' Compensation Claims, as defined herein, and (ii) Public Liability and Property Damage Claims, as defined herein. C. Under the Insurance Program, CFI administers claims made against CFCD with respect to CFCD's obligations, including similar obligations relating to Leland James Service Corporation ("LJSC") (collectively, and excluding any such obligations relating to LJSC which arise or are incurred prior to or on the Distribution Date, the "CFCD Obligations"), and provides certain oversight services, at the direction of CFCD, for claims under (i) the workers' compensation statutory, regulatory and common law systems in each of the states in which CFCD does business and, (ii) certain public liability and property damage statutory, regulatory and common law systems in each of the states in which CFCD does business. Where required by law or by contract, CFI provides the necessary insurance, guarantees or collateral for the performance of the CFCD Obligations in each such state. D. Obligations that arise with respect to CFCD under the Insurance Program are the responsibility of CFCD. However, in the past these amounts have been advanced by CFI and CFCD has reimbursed CFI for such payments. 1 E. CFCD and CFI desire to memorialize in writing the reimbursement and indemnification arrangements which have existed between CFI and CFCD with respect to amounts owed and advanced under the Insurance Program. NOW THEREFORE, in consideration of the agreement of CFI to continue administering the Insurance Program as contemplated in Section 2 below and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): CASH COLLATERAL AGREEMENT: shall have the meaning specified in Section 6(a). CLAIM: means any claim, judgment, loss, deficiency, damages, punitive or exemplary damages, fine or penalty, liability, costs and expenses (including reasonable attorneys' fees, charges and disbursements) whether required to be paid to a third party or otherwise incurred in connection with or arising from any claim, suit, action or proceeding. DEPOSIT BANK: shall have the meaning specified in Section 6(a). INDEMNIFIED PARTIES: means CFI, its agents and their present or former officers, directors, shareholders, agents, employees, representatives, successors-in-interest, parents, affiliates, insurers (including, without limitation, insurers for CFI and CFCD), attorneys and assigns. INSUFFICIENCY NOTICE: shall have the meaning specified in Section 6(c). LETTER OF CREDIT: means an irrevocable, unconditional letter of credit with a face amount equal to $30,000,000, issued by a bank approved by CFI. LOSS: means any judgment, loss, deficiency, damages, liability, costs or expenses. MINIMUM BALANCE: means, at any time, an amount equal to the aggregate amount paid during the eight immediately preceding business days for Public Liability and Property Damage Claims, Workers' 2 Compensation Claims and related expenses, which amount shall be subject to increase or decrease in accordance with Section 6(c). MORTGAGE PROPERTY: shall have the meaning specified in Section 8. MORTGAGES: shall have the meaning specified in Section 8. PERMITTED EXCEPTIONS: shall have the meaning specified in Section 10(d). PROPERTY VALUE: means the fair market value of each Mortgage Property. PUBLIC LIABILITY AND PROPERTY DAMAGE CLAIMS: means Claims made against CFCD or LJSC (excluding any such obligations relating to LJSC which arise or are incurred prior to or on the Distribution Date) under certain public liability and property damage statutory, regulatory and common law systems and which CFCD directs CFI to administer under the Insurance Program. REIMBURSEMENT OBLIGATIONS: shall have the meaning specified in Section 6(a). RELEVANT CLAIM: means a Public Liability and Property Damage Claim or a Workers' Compensation Claim. RESERVE ACCOUNT: shall have the meaning specified in Section 6(a). RESERVE OBLIGATION: means CFCD's obligation to deposit sums in the Reserve Account pursuant to Sections 6(b) and 6(c). SECURITY SCHEDULE: shall have the meaning specified in Section 9(a). TITLE COMPANY: means any title company satisfactory to CFI. WORKERS' COMPENSATION CLAIMS: means Claims made against CFCD or LJSC (excluding any such obligations relating to LJSC employees which arise or are incurred prior to or on the Distribution Date, other than relating to employees who remain actively employed by LJSC following the Distribution Date) under the workers' compensation statutory, regulatory and common law systems and which CFCD directs CFI to administer under the Insurance Program. 3 2. EXISTING AND FUTURE CLAIMS. Effective as of the Commencement Date, CFCD will obtain its own insurance for the CFCD Obligations arising from and after the Commencement Date. CFI will not administer (but shall provide certain oversight services for the period beginning the Commencement Date and ending the Distribution Date with respect to) claims against CFCD which are insured under that separate insurance or result from occurrences on or after the Commencement Date. As of the Commencement Date, the only claims which CFI will administer will be claims of the type it has ordinarily and customarily administered and that arise out of occurrences prior to the Commencement Date. CFI will administer these claims either itself or through a third-party administrator. CFI will not provide the necessary insurance, guarantees or collateral for the performance of the CFCD Obligations for any claim occurring after the Commencement Date. CFI will maintain the necessary collateral and security on claims occurring prior to the Distribution Date. 3. CFCD REIMBURSEMENT. Upon demand by CFI, CFCD agrees to immediately reimburse CFI for all amounts advanced and costs reasonably incurred by CFI in connection with the CFCD Obligations which are in excess of the Reserve Amount required under Section 6(a) hereof. 4. CFCD INDEMNIFICATION. CFCD, at its own expense, shall indemnify, defend and hold the Indemnified Parties harmless from and against any Relevant Claim against the Indemnified Parties to the extent the basis of such Relevant Claim is that: (i) CFCD has failed to pay any amounts owed which constitute CFCD Obligations, (ii) a third party has been or may be injured or damaged in any way by any breach by CFCD of any of its duties, representations or warranties under this Agreement, (iii) CFCD or any of its employees, agents, or servants acted improperly in connection with the notification, investigation, adjustment, and settlement of claims and losses arising under the Insurance Program, and (iv) there is any other liability or obligation arising either out of CFI's (or its agents') provision of certain oversight services for the period beginning the Commencement Date and ending the Distribution Date or out of CFI's (or its agents') administration or operation of the Insurance Program, except to the extent that same arises from the gross negligence or willful misconduct of CFI (or its agents). The provision of indemnification under this Section 4 shall be in a like manner to the provision of indemnification under the Distribution Agreement (as defined herein). 5. EXCULPATION. CFI and its agents shall not be liable to CFCD for any Losses which arise in any manner from the operation or administration of the 4 Insurance Program (including but not limited to the handling of insurance claims or any failure to obtain insurance) except to the extent that same arises from the gross negligence or willful misconduct of CFI. CFCD hereby waives all claims against CFI and its agents for such Losses and the cost and expense of defending against claims relating to such Losses, except to the extent that same arises from the gross negligence or willful misconduct of CFI. CFCD expressly waives any and all rights under section 1542 of the Civil Code of California, which provides as follows: "A General Release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the Release, which if known by him must have materially affected his settlement with the debtor." 6. RESERVE ACCOUNT. (a) ESTABLISHMENT OF RESERVE ACCOUNT. As soon as practicable hereafter, but in any event no later than the Distribution Date, CFCD shall establish a deposit account (the "Reserve Account") at a California branch of a bank selected by CFI (the "Deposit Bank"), which Reserve Account shall be established in the name of CFI, as secured party, to hold funds for the payment of CFCD's reimbursement obligations hereunder (collectively, the "Reimbursement Obligations"). CFCD shall deposit the Minimum Balance into the Reserve Account on the date that it is established. Amounts held in the Reserve Account shall be invested at the sole discretion of CFI. Any dividends or interest earned on the Reserve Account shall be added to balance thereof and shall be taxable income to CFCD. Prior to the establishment of the Reserve Account, CFI and CFCD shall execute and deliver a Cash Collateral Agreement in the form of Exhibit A attached hereto (the "Cash Collateral Agreement"), which agreement shall govern the establishment and maintenance of the Reserve Account. (b) USE OF RESERVE ACCOUNT. At any time and from time to time during the term of this Agreement, CFI shall have the right to immediately withdraw funds from the Reserve Account to reimburse itself for any amounts advanced and costs incurred by CFI in connection with CFCD Obligations. The Cash Collateral Agreement shall provide that on the first business day of each week during the term hereof, the Deposit Bank shall deliver written notice to CFI and CFCD by telecopy setting forth the balance of the Reserve Account as of the close of business on the preceding business day. In the event that the balance disclosed in such notice is less than the Minimum Balance, then CFCD shall 5 deposit such shortfall into the Reserve Account within three (3) business days following its receipt of notice from the Deposit Bank. (c) ADJUSTMENT OF MINIMUM BALANCE AMOUNT. In the event that, from time to time, CFI determines based upon an analysis of payments of CFCD Obligations that the amount of the Minimum Balance is insufficient to satisfy the Reimbursement Obligations as they arise, then (i) CFI shall deliver written notice of such insufficiency (the "Insufficiency Notice") to CFCD together with documentation supporting such analysis and (ii) the Minimum Balance shall thereafter for the term of this Agreement (unless thereafter adjusted pursuant to the terms hereof) be increased by an amount equal to such insufficiency. Not later than three (3) business days following CFCD's receipt of an Insufficiency Notice, CFCD shall deposit the amount of such insufficiency into the Deposit Account. Likewise, upon request of CFCD, CFI shall conduct an analysis of payments of CFCD Obligations for the purpose of determining if the Minimum Balance should be reduced, using the standard of eight days of estimated payments, excluding extraordinary payments. In the event that CFI determines that the Minimum Balance should be reduced, then (i) CFI shall promptly deliver written notice thereof to CFCD together with documentation supporting such analysis and (ii) the Minimum Balance shall thereafter for the term of this Agreement (unless thereafter adjusted pursuant to the terms hereof) be reduced in accordance with CFI's analysis. 7. LETTER OF CREDIT. On or prior to the Distribution Date, CFCD shall deliver to CFI a Letter of Credit. CFI shall have the right to draw upon the Letter of Credit in San Francisco, California, in accordance with the terms of this Agreement by presentation to the issuer thereof of (i) CFI's sight draft and (ii) a certificate stating that CFI has the right to draw upon the Letter of Credit in accordance with the terms hereof. In the event that at any time while this Agreement remains in effect, CFCD fails to comply with its Reserve Obligation in accordance with Section 6 hereof, then CFI shall have the right to draw upon the Letter of Credit in an amount equal to the amount CFCD was required to deposit in to the Reserve Account in accordance with Section 6 hereof and deposit such draw proceeds into the Reserve Account. On or before the fifth (5th) business day following any such draw, CFCD shall deliver to CFI an additional Letter of Credit so that the aggregate face amount of all Letters of Credit held by CFI shall equal $30,000,000 (or such lesser amount as provided in Section 9 below). 8. MORTGAGES. On or before the Distribution Date, CFCD shall execute and acknowledge four (4) copies of the mortgage in the form of Exhibit B attached hereto (collectively, the "Mortgages") with respect to each of the real properties identified on Exhibit C attached hereto (the "Mortgage Properties"). The Mortgages shall constitute valid first priority liens against the fee title interest in the Mortgage Properties (subject only to such defects, liens, encum- 6 brances, assessments, security interests, restrictions, easements and other title exceptions as shall be approved by the CFI), which Mortgages shall secure the timely payment and performance of CFCD's obligations hereunder, including, without limitation, the Reimbursement Obligations and the Reserve Obligations. Concurrently with the execution and delivery of the Mortgages, CFCD shall deliver the following to CFI: (a) UCC FINANCING STATEMENTS. UCC-1 financing statements (in form and substance reasonably acceptable to CFI) covering fixtures owned by CFCD and affixed to, or used in connection with, each Mortgage Property, in each case appropriately completed and duly executed, acknowledged and filed in the appropriate land offices. (b) GENERAL ASSIGNMENT. A first priority assignment to CFI (in form and substance reasonably acceptable to CFI) of CFCD's interest in and to all leases relating to each Mortgage Property, material service contracts concerning or affecting such Mortgage Property and all permits, approvals and licenses issued with respect to such Mortgage Property. 9. RELEASE OF SECURITY. (a) ANNUAL RELEASE OF MORTGAGES. On the first anniversary of the Commencement Date and on each anniversary of the Commencement Date thereafter, CFI shall cause one or more Mortgage Properties to be released from the lien(s) of the Mortgages so that the aggregate Property Value of the Mortgage Properties which shall continue to be encumbered by Mortgages immediately following such release shall be as close as possible to (but not less than) the Property Value set forth for the corresponding year on the schedule set forth in Section 9(d) below (the "Security Schedule"). For the purposes of this Section 9(a), CFI and CFCD agree that the Property Value of each Mortgage Property equals the value identified on Exhibit B attached hereto and such value shall be the Property Value used by CFI in determining which Mortgage Properties shall be released from the lien of the Mortgages in accordance with this Agreement; provided, however, that in the event either party reasonably believes that the aggregate value of the Mortgage Properties has increased or decreased by 20% or more, then the parties shall agree on an independent MAI appraiser to determine the Property Value of the Mortgage Properties, which determination shall be binding on the parties for the purposes of this Section 9(a) and Section 10(b) hereof. Subject to the foregoing, CFCD shall have the sole and absolute right to determine which Mortgage 7 Properties are to be released from the lien of the Mortgages in accordance with this Section 9(a). (b) DELIVERIES. In connection with any proposed release of a Mortgage Property, CFCD shall (not later than ten (10) Business Days prior to the proposed date of release) deliver or cause to be delivered to CFI: (i) An officer's certificate setting forth that, to the best knowledge of the certifying Person, no default has occurred and is continuing hereunder or under the Mortgages. (ii) A copy of the instruments necessary to effect the release of the Mortgages. (c) ANNUAL REDUCTION OF LETTER OF CREDIT FACE AMOUNT. On the first anniversary of the Commencement Date and on each anniversary of the Commencement Date thereafter, CFI shall permit the aggregate face amount of the Letter(s) of Credit to be reduced to the face amount set forth for the corresponding year on the Security Schedule. In connection with any release pursuant to this Section 9(b), and after CFCD has delivered the items required pursuant to the subparagraphs (i) and (ii) above, CFI shall promptly execute and deliver any instrument reasonably necessary or appropriate to release the Mortgage Property to be released pursuant to this Section 9(b). (d) SECURITY SCHEDULE. COMMENCEMENT DATE FACE AMOUNT OF PROPERTY VALUE OF ANNIVERSARY LETTER OF CREDIT MORTGAGE PROPERTIES - ------------ ---------------- ------------------- 1997 $30,000,000 $50,000,000 1998 $20,000,000 $30,000,000 1999 $20,000,000 $10,000,000 2000 $10,000,000 $0 2001 - termination $ (1) $0 __________________________ (1) The lesser of $10,000,000 or 100% of the reserve for Relevant Claims. 8 10. CHANGE IN COLLATERAL. (a) Notwithstanding anything to the contrary herein, in the event that, at any time prior to the fourth (4th) anniversary of the Commencement Date, CFI (i) becomes aware of an adverse physical condition or defect affecting any Mortgage Property which diminishes the Property Value of such Mortgage Property by 20% or more from the corresponding value set forth on Exhibit B hereto and (ii) delivers written notice to CFCD of such condition or defect together with a written report, opinion, or appraisal prepared by an independent third party expert (who is licensed to prepare such a report, opinion or appraisal and is an employee or member of a nationally recognized firm), which report, opinion or appraisal confirms unequivocally that the Property Value of the impacted Mortgage Property has diminished by 20% or more as a result of such condition or defect, then CFCD shall either (i) increase the face amount of the Letter of Credit by the amount of such diminution or (ii) execute, acknowledge and deliver to CFI a Mortgage together with the documents identified in Sections 8(a) through 8(c), which encumbers real property (other than the existing Mortgage Properties) owned by CFCD, which (1) has been approved by CFI, which approval shall not be unreasonably withheld, and (2) CFCD can demonstrate to CFI's reasonable satisfaction that the new Mortgage Property has a Property Value equal to or in excess of the amount of such diminution. (b) Notwithstanding anything to the contrary herein, CFCD may, at any time prior to the fourth (4th) anniversary of the Commencement Date, substitute one or more parcels of real property for any Mortgage Property for another, provided that CFCD (i) delivers written notice to CFI of its intention to substitute a Mortgage Property together with a general description of the substitute property and (ii) executes, acknowledges and delivers to CFI a Mortgage together with the documents identified in Sections 8(a) through 8(c), which encumbers the substitute property owned by CFCD and provided further that (1) the substitute has been approved by CFI, which approval shall not be unreasonably withheld, and (2) CFCD can demonstrate to CFI's reasonable satisfaction that the substitute property has a Property Value equal to or in excess of the Property Value of the substituted Mortgage Property. 11. COVENANTS. (a) NOTICE TO ADDITIONAL INSUREDS. CFCD shall promptly provide written notice to all third parties for whom CFCD has agreed to provide insurance that such insurance will, as of the Distribution Date, no longer be 9 provided by CFI or CF Financial Services, and will take steps to ensure that alternative insurance arrangements are made in a timely manner. (b) DEDUCTIBLES AND PREMIUMS. CFCD shall promptly pay all deductibles, retentions and premiums applicable under the Insurance Program. (c) INSURANCE. CFCD will keep insured by financially sound and reputable insurers all property of a character usually insured by parties engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such parties and carry such other insurance as is usually carried by such parties and as required in accordance with the terms of the Mortgages. (d) LIMITATION ON LIENS. CFCD will not create, incur, assume or suffer to exist any lien or encumbrance upon any of the Mortgage Property, except the following liens (referred to herein as "PERMITTED EXCEPTIONS"): (1) liens imposed by any governmental authority for taxes, assessments or charges not yet delinquent; (2) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (3) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Mortgage Property subject thereto or interfere with the ordinary conduct of the business of CFCD; (4) liens arising under the Mortgages and related documents; (5) any other liens approved by CFI in writing (which approval may be withheld in the CFI's sole discretion); and 10 (6) any extensions, renewals or replacements of the foregoing. 12. DURATION OF AGREEMENT. The parties agree that this Agreement shall continue in full force and effect as long as there are any CFCD Obligations outstanding. The parties agree that this Agreement shall continue in full force and effect for the purpose of determining the rights and obligations of the parties in the event such termination has occurred and subsequent thereto either of the following occurs: (a) A Relevant Claim arising under or in connection with the Insurance Program which had been closed prior to the termination of this Agreement is reopened; or (b) A Relevant Claim arises under or in connection with the Insurance Program based on an occurrence allegedly within the Insurance Program, or the administration of a claim within the Insurance Program, but which has not been reported prior to the termination of this Agreement until such claims have been closed. 13. NOTICES. Except as otherwise provided herein, any notice or other communication to be given hereunder shall be in writing and shall be (as elected by the party giving such notice): (i) personally delivered; (ii) transmitted by postage-prepaid registered or certified airmail, return receipt requested; (iii) transmitted by facsimile (with a copy of such transmission by postage prepaid registered or certified airmail, return receipt requested); or (iv) deposited prepaid with a nationally recognized overnight courier service. Unless otherwise provided herein, all notices shall be deemed to have been duly given on: (a) the date of receipt (or if delivery is refused, the date of such refusal) if delivered personally, by facsimile or by courier, or (b) three (3) days after the date of posting if transmitted by mail. Either party may change its address for notice purposes hereof on not less than three (3) days' prior notice to the other party. Notice hereunder shall be directed to a party at the address for such party which is set forth below: Consolidated Freightways, Inc. 3240 Hillview Avenue Palo Alto, California 94304 Attention: General Counsel 11 Consolidated Freightways Corporation of Delaware 175 Linfield Drive Menlo Park, California 94025 Attention: General Counsel 14. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts with the same effect as if all the parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one agreement. 15. ASSIGNABILITY. Without limiting the restrictions upon assignment and transfer set forth herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto. 16. GENDER AND NUMBER. Whenever required by the context hereof, the singular shall include the plural and the plural shall include the singular. The masculine gender shall include the feminine and neuter genders, and the neuter shall include the masculine and feminine. 17. CAPTIONS. Sections, titles or captions in no way define, limit, extend or describe the scope of this Agreement nor the intent of any of its provisions. 18. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 19. INTEGRATION. This Agreement and that certain Distribution Agreement entered into between CFI and Consolidated Freightways Corporation as of __________, 1996, including any schedules, exhibits or other documents ancillary thereto, contain the entire agreement of the parties with respect to the subject matter hereof, and supersede all other agreements or understandings of any kind. 20. AMENDMENTS. This Agreement may not be amended, modified or supplemented by the parties in any manner, except by an instrument in writing 12 signed on behalf of each of the parties by a duly authorized officer or representative. 21. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of laws thereof. 22. DUTY TO COOPERATE. CFCD agrees to cooperate with CFI in the investigation of any Relevant Claim, to provide prompt notice of any Claim and to provide any information CFI shall reasonably request for the purpose of investigating a CFCD obligation. Neither party shall do anything to impair the other party's equitable or contractual rights of subrogation against third parties. 13 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above. CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation, on behalf of itself and its wholly owned subsidiaries By: _______________________________ Name: Title: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware corporation, on behalf of itself and its wholly owned subsidiaries By: _______________________________ Name: Title: 14 EX-10.6 11 CONSOLIDATED FREIGHTWAYS CORP FORM OF CONSOLIDATED FREIGHTWAYS CORPORATION 1996 STOCK OPTION AND INCENTIVE PLAN CONSOLIDATED FREIGHTWAYS CORPORATION 1996 STOCK OPTION AND INCENTIVE PLAN SECTION PAGE - ------- ---- 1. Purpose; Types of Awards; Construction.................................. 1 2. Definitions............................................................. 1 3. Administration.......................................................... 6 4. Eligibility............................................................. 7 5. Stock Subject to the Plan............................................... 7 6. Specific Terms of Awards................................................ 8 7. Change in Control Provisions............................................ 14 8. Loan Provisions......................................................... 14 9. General Provisions...................................................... 14 i CONSOLIDATED FREIGHTWAYS CORPORATION 1996 STOCK OPTION AND INCENTIVE PLAN 1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION. The purpose of the 1996 Stock Option and Incentive Plan of Consolidated Freightways Corporation (the "Plan") is to afford an incentive to non-employee directors, selected employees and consultants of Consolidated Freightways Corporation (the "Company"), or any Subsidiary or Affiliate that now exists or hereafter is organized or acquired, to acquire a proprietary interest in the Company, to continue as employees or consultants, as the case may be, to increase their efforts on behalf of the Company and to promote the success of the Company's business. Pursuant to Section 6 of the Plan, there may be granted Stock Options (including "incentive stock options" and "nonqualified stock options"), stock appreciation rights and limited stock appreciation rights (either in connection with options granted under the Plan or independently of options), restricted stock, restricted stock units, dividend equivalents and other stock- or cash-based awards. The Plan also provides the authority to make loans to exercise options or otherwise purchase shares of stock. The Plan is designed to comply with the requirements for "performance-based compensation" under Section 162(m) of the Code and the conditions for exemption from short- swing profit recovery rules under Rule 16b-3 of the Exchange Act, and shall be interpreted in a manner consistent with the requirements thereof. 2. DEFINITIONS. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Affiliate" means any entity if, at the time of granting of an Award or a Loan, (i) the Company, directly or indirectly, owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity or (ii) such entity, directly or indirectly, owns at least 20% of the combined voting power of all classes of stock of the Company. (b) "Award" means any Option, SAR (including a Limited SAR), Restricted Stock, Restricted Stock Unit, Dividend Equivalent or Other Stock- Based Award or Other Cash-Based Award granted under the Plan. 1 (c) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award. (d) "Beneficiary" means the person, persons, trust or trusts that have been designated by a Grantee in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under the Plan upon his or her death, or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits. (e) "Board" means the Board of Directors of the Company. (f) "Change in Control" means a change in control of the Company, which will be deemed to have occurred if: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (C) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding voting securities; (ii) during any period of two consecutive years individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this Section 2(f)) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corpora- 2 tion, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) 50% or more of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquired 50% or more of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). (g) "Change in Control Price" means the higher of (i) the highest price per share paid in any transaction constituting a Change in Control or (ii) the highest Fair Market Value per share at any time during the 60-day period preceding or following a Change in Control. (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (i) "Committee" means the committee established by the Board to administer the Plan, the composition of which shall at all times satisfy the provisions of Rule 16b-3. (j) "Company" means Consolidated Freightways Corporation, a corporation organized under the laws of the State of Delaware, or any successor corporation. (k) "Dividend Equivalent" means a right, granted to a Grantee under Section 6(g), to receive cash, Stock, or other property equal in value to dividends paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis. 3 (l) "Effective Date" means , 1996, the date that the Plan ---- was adopted by the shareholders of the Company. (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and as now or hereafter construed, interpreted and applied by regulations, rulings and cases. (n) "Fair Market Value" means, with respect to Stock or other property, the fair market value of such Stock or other property determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee in good faith, the per share Fair Market Value of Stock as of a particular date shall mean (i) the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for the last preceding date on which there was a sale of such Stock on such exchange, or (ii) if the shares of Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Stock in such over-the-counter market for the last preceding date on which there was a sale of such Stock in such market, or (iii) if the shares of Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine. (o) "Grantee" means a person who, as a non-employee director, employee or consultant of the Company, a Subsidiary or an Affiliate, has been granted an Award or Loan under the Plan. (p) "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code. (q) "Limited SAR" means a right granted pursuant to Section 6(c) which shall, in general, be automatically exercised for cash upon a Change in Control. (r) "Loan" means the proceeds from the Company borrowed by a Plan participant under Section 8 of the Plan. (s) "NQSO" means any Option that is designated as a nonqualified stock option. 4 (t) "Option" means a right, granted to a Grantee under Section 6(b), to purchase shares of Stock. An Option may be either an ISO or an NQSO, provided that ISO's may be granted only to employees of the Company or a Subsidiary. (u) "Other Cash-Based Award" means cash awarded under Section 6(h), including cash awarded as a bonus or upon the attainment of specified performance criteria or otherwise as permitted under the Plan. (v) "Other Stock-Based Award" means a right or other interest granted to a Grantee under Section 6(h) that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, including, but not limited to (1) unrestricted Stock awarded as a bonus or upon the attainment of specified performance criteria or otherwise as permitted under the Plan, and (2) a right granted to a Grantee to acquire Stock from the Company for cash and/or a promissory note containing terms and conditions prescribed by the Committee. (w) "Plan" means this Consolidated Freightways Corporation 1996 Stock Option and Incentive Plan, as amended from time to time. (x) "Restricted Stock" means an Award of shares of Stock to a Grantee under Section 6(d) that may be subject to certain restrictions and to a risk of forfeiture. (y) "Restricted Stock Unit" means a right granted to a Grantee under Section 6(e) to receive Stock or cash at the end of a specified deferral period, which right may be conditioned on the satisfaction of specified performance or other criteria. (z) "Rule 16b-3" means Rule 16b-3, as from time to time in effect promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, including any successor to such Rule. (aa) "Stock" means shares of the common stock, par value $.01 per share, of the Company. (bb) "SAR" or "Stock Appreciation Right" means the right, granted to a Grantee under Section 6(c), to be paid an amount measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date 5 of exercise of the right, with payment to be made in cash, Stock, or property as specified in the Award or determined by the Committee. (cc) "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of granting of an Award, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. 3. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Awards and make Loans; to determine the persons to whom and the time or times at which Awards shall be granted and Loans shall be made; to determine the type and number of Awards to be granted and the amount of any Loan, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award or Loan; and to determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered; to make adjustments in the terms and conditions of, and the criteria and performance objectives (if any) included in, Awards and Loans in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles; to designate Affiliates; to construe and interpret the Plan and any Award or Loan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the Award Agreements and any promissory note or agreement related to any Loan (which need not be identical for each Grantee); and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee may appoint a chairperson and a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The 6 Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. All decisions, determinations and interpretations of the Committee shall be final and binding on all persons, including the Company, and any Subsidiary, Affiliate or Grantee (or any person claiming any rights under the Plan from or through any Grantee) and any stockholder. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted or Loan made hereunder. 4. ELIGIBILITY. Awards and Loans may be granted to selected employees, consultants and directors (including directors who are not employees of the Company) of the Company and its present or future Subsidiaries and Affiliates, in the discretion of the Committee. In determining the persons to whom Awards and Loans shall be granted and the type of any Award or the amount of any Loan (including the number of shares to be covered by such Award), the Committee shall take into account such factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. 5. STOCK SUBJECT TO THE PLAN. The maximum number of shares of Stock reserved for the grant of Awards under the Plan shall be equal to 15% of all outstanding stock of the Company as of the Distribution Date, subject to adjustment as provided herein. No more than 100% of the total shares available for grant may be awarded to a single individual in a single year. Such shares may, in whole or in part, be authorized but unissued shares or shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Grantee, the shares of stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan; PROVIDED THAT, in the case of forfeiture, cancellation, exchange or surrender of shares of Restricted Stock or Restricted Stock Units with respect to which dividends or Dividend 7 Equivalents have been paid or accrued, the number of shares with respect to such Awards shall not be available for Awards hereunder unless, in the case of shares with respect to which dividends or Dividend Equivalents were accrued but unpaid, such dividends and Dividend Equivalents are also forfeited, cancelled, exchanged or surrendered. Upon the exercise of any Award granted in tandem with any other Awards or awards, such related Awards or awards shall be cancelled to the extent of the number of shares of Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available for Awards under the Plan. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, then the Committee shall make such equitable changes or adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Stock or other property (including cash) issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price, or purchase price relating to any Award; PROVIDED THAT, with respect to ISOs, such adjustment shall be made in accordance with Section 424(h) of the Code. 6. SPECIFIC TERMS OF AWARDS. (a) GENERAL. The term of each Award shall be for such period as may be determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant or thereafter, including, without limitation, cash, Stock, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The Committee may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such payments. In addition to the foregoing, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine. 8 (b) OPTIONS. The Committee is authorized to grant Options to Grantees on the following terms and conditions: (i) TYPE OF AWARD. The Award Agreement evidencing the grant of an Option under the Plan shall designate the Option as an ISO or an NQSO. (ii) EXERCISE PRICE. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee; PROVIDED THAT, in the case of an ISO, such exercise price shall be not less than the Fair Market Value of a share on the date of grant of such Option, and in no event shall the exercise price for the purchase of shares be less than par value. The exercise price for Stock subject to an Option may be paid in cash or by an exchange of Stock previously owned by the Grantee, or a combination of both, in an amount having a combined value equal to such exercise price. A Grantee may also elect to pay all or a portion of the aggregate exercise price by having shares of Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price withheld by the Company or sold by a broker-dealer under circumstances meeting the requirements of 12 C.F.R. Section 220 or any successor thereof. (iii) TERM AND EXERCISABILITY OF OPTIONS. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the day on which such Option is granted. Options shall be exercisable over the exercise period (which shall not exceed ten years from the date of grant), at such times and upon such conditions as the Committee may determine, as reflected in the Award Agreement; PROVIDED THAT, the Committee shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate. An Option may be exercised to the extent of any or all full shares of Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Committee or its designated agent. (iv) TERMINATION OF EMPLOYMENT, ETC. An Option may not be exercised unless the Grantee is then a director of, in the employ of, or then maintains a consulting relationship with, the 9 Company or a Subsidiary or an Affiliate (or a company or a parent or subsidiary company of such company issuing or assuming the Option in a transaction to which Section 424(a) of the Code applies), and unless the Grantee has remained continuously so employed, or continuously maintained such relationship, since the date of grant of the Option; PROVIDED THAT, the Award Agreement may contain provisions extending the exercisability of Options, in the event of specified terminations, to a date not later than the expiration date of such Option. (v) OTHER PROVISIONS. Options may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such Options, as the Committee may prescribe in its discretion or as may be required by applicable law. (c) SARS AND LIMITED SARS. The Committee is authorized to grant SARs and Limited SARs to Grantees on the following terms and conditions: (i) IN GENERAL. Unless the Committee determines otherwise, an SAR or Limited SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter or (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO. An SAR or Limited SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. (ii) SARS. An SAR shall confer on the Grantee a right to receive an amount with respect to each share subject thereto, upon exercise thereof, equal to the excess of (1) the Fair Market Value of one share of Stock on the date of exercise over (2) the grant price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Committee may determine). (iii) LIMITED SARS. A Limited SAR shall confer on the Grantee a right to receive with respect to each share subject thereto, automatically upon the occurrence of a Change in Control, 10 an amount equal in value to the excess of (1) the Change in Control Price (in the case of an LSAR granted in tandem with an ISO, the Fair Market Value), of one share of Stock on the date of such Change in Control over (2) the grant price of the Limited SAR (which in the case of a Limited SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other Limited SAR shall be such price as the Committee determines). (d) RESTRICTED STOCK. The Committee is authorized to grant Restricted Stock to Grantees on the following terms and conditions: (i) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee may determine. Such restrictions may include factors relating to the increase in the value of the stock or individual or Company performance such as the attainment of certain specified individual, divisional or Company-wide performance levels, sales volume increases, or Company-wide earnings per share. The Committee may also impose additional restrictions pursuant to which a Grantee may elect to defer the receipt (or constructive receipt) of a Restricted Stock grant beyond the date the basic restrictions may lapse. Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Grantee granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock and the right to receive dividends thereon. (ii) FORFEITURE. Upon termination of employment with or service to the Company, or upon termination of the director or consulting relationship, as the case may be, during the applicable restriction period, Restricted Stock and any accrued but unpaid dividends or Dividend Equivalents that are at that time subject to restrictions shall be forfeited; PROVIDED THAT, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived 11 in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock. (iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Grantee, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificate. (iv) DIVIDENDS. Dividends paid on Restricted Stock shall be either paid at the dividend payment date, or deferred for payment to such date as determined by the Committee, in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends. Stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. (e) RESTRICTED STOCK UNITS. The Committee is authorized to grant Restricted Stock Units to Grantees, subject to the following terms and conditions: (i) AWARD AND RESTRICTIONS. Delivery of Stock or cash, as determined by the Committee, will occur upon expiration of the deferral period specified for Restricted Stock Units by the Committee. In addition, Restricted Stock Units shall be subject to such restrictions as the Committee may impose, at the date of grant or thereafter, which restrictions may lapse at the expiration of the deferral period or at earlier or later specified times, separately or in combination, in installments or otherwise, as the Committee may determine. Such restrictions may include factors relating to the increase in the value of the stock or individual or Company performance such as the attainment of certain specified individual, divisional or Company-wide performance levels, sales volume increases, or Company-wide earnings per share. The Committee may also impose additional restrictions pursuant to which a Grantee may 12 elect to defer the receipt (or constructive receipt) of a Restricted Stock Unit grant beyond the date the basic restrictions may lapse. (ii) FORFEITURE. Upon termination of employment or termination of the director or consulting relationship during the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of Stock or cash to which such Restricted Stock Units relate, all Restricted Stock Units that are then subject to deferral or restriction shall be forfeited; PROVIDED THAT, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock Units. (f) STOCK AWARDS IN LIEU OF CASH AWARDS. The Committee is authorized to grant Stock as a bonus, or to grant other Awards, in lieu of Company commitments to pay cash under other plans or compensatory arrangements. Stock or Awards granted hereunder shall have such other terms as shall be determined by the Committee. (g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to Grantees. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, or other investment vehicles as the Committee may specify, provided that Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of the underlying Awards to which they relate. (h) OTHER STOCK- OR CASH-BASED AWARDS. The Committee is authorized to grant to Grantees Other Stock-Based Awards or Other Cash-Based Awards as an element of or supplement to any other Award under the Plan, as deemed by the Committee to be consistent with the purposes of the Plan. Such Awards may be granted with value and payment contingent upon performance of the Company or any other factors designated by the Committee, or valued by reference to the performance of specified Subsidiaries or Affiliates. The Committee shall determine the terms and conditions of such Awards at the date of grant or thereafter. 13 7. CHANGE IN CONTROL PROVISIONS. Unless otherwise determined by the Committee prior to the occurrence thereof, in the event of a Change of Control: (a) any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested; and (b) the restrictions, deferral limitations, payment conditions, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested, and any performance conditions imposed with respect to Awards shall be deemed to be fully achieved. 8. LOAN PROVISIONS. Subject to the provisions of the Plan and all applicable federal and state laws, rules and regulations, the Committee shall have the authority to make Loans to Grantees (on such terms and conditions as the Committee shall determine), to enable such Grantees to purchase shares. Loans shall be evidenced by a promissory note or other agreement, signed by the borrower, which shall contain provisions for repayment and such other terms and conditions as the Committee shall determine. 9. GENERAL PROVISIONS. (a) APPROVAL OF SHAREHOLDERS. The Plan shall take effect upon its adoption by the Board but the Plan (and any grants of Awards made prior to the shareholder approval mentioned herein) shall be subject to ratification by the holder(s) of a majority of the issued and outstanding shares of voting securities of the Company entitled to vote, which ratification must occur within twelve (12) months of the date that the Plan is adopted by the Board. In the event that the shareholders of the Company do not ratify the Plan at a meeting of the shareholders at which such issue is considered and voted upon, then upon such event the Plan and all rights hereunder shall immediately terminate and no Grantee (or any permitted transferee thereof) shall have any remaining rights under the Plan or any Award Agreement entered into in connection herewith. (b) NONTRANSFERABILITY. Awards shall not be transferable by a Grantee except by will or the laws of descent and distribution or, if then permitted under Rule 16b-3, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during 14 the lifetime of a Grantee only by such Grantee or his guardian or legal representative. (c) NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan or in any Award or Loan granted or any Award Agreement, promissory note or other agreement entered into pursuant hereto shall confer upon any Grantee the right to continue in the employ of or to continue as a consultant of the Company, any subsidiary or any Affiliate or to be entitled to any remuneration or benefits not set forth in the Plan or such Award Agreement, promissory note or other agreement or to interfere with or limit in any way the right of the Company or any such Subsidiary or Affiliate to terminate such Grantee's employment, director or consulting relationship. (d) TAXES. The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any other payment to a Grantee, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Grantees to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Grantee's tax obligations. (e) AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part; PROVIDED THAT, no amendment that requires stockholder approval in order for the Plan to continue to comply with Rule 16b-3, shall be effective unless the same shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights of any Grantee, without such Grantee's consent, under any Award or Loan theretofore granted under the Plan. (f) NO RIGHTS TO AWARDS OR LOANS; NO STOCKHOLDER RIGHTS. No Grantee shall have any claim to be granted any Award or Loan under the Plan, and there is no obligation for uniformity of treatment of Grantees. Except as provided specifically herein, a Grantee or a transferee of an Award shall have no rights as a stockholder with respect to any shares covered by the Award until the date of the issuance of a stock certificate to him for such shares. 15 (g) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Grantee pursuant to an Award, nothing contained in the Plan or any Award shall give any such Grantee any rights that are greater than those of a general creditor of the Company. (h) NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (i) REGULATIONS AND OTHER APPROVALS. (i) The obligation of the Company to sell or deliver Common Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. (ii) Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Stock, no such Award shall be granted or payment made or Common Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee. (iii) In the event that the disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Common Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a Grantee receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Grantee is acquired for investment only and not with a view to distribution. 16 (j) GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware without giving effect to the conflict of laws principles thereof. (k) EFFECTIVE DATE; PLAN TERMINATION. (i) EFFECTIVE DATE. The Plan shall take effect upon its adoption by the Board (the "Effective Date"), but the Plan (and any grants of Awards made prior to the stockholder approval mentioned herein), shall be subject to the approval of the holder(s) of a majority of the issued and outstanding shares of voting securities of the Company entitled to vote, which approval must occur within twelve months of the date the Plan is adopted by the Board. In the absence of such approval, such Awards shall be null and void. (ii) DURATION. Unless earlier terminated by the Board or the Committee pursuant to the provisons of the Plan, the Plan shall terminate on the fifth anniversary of its Effective Date as hereinbefore specified. No Awards shall be granted under the Plan after such termination date. 17 EX-21.1 12 SUBSIDIARIES OF THE REGISTRANT CONSOLIDATED FREIGHTWAYS CORPORATION SIGNIFICANT SUBSIDIARIES OF THE COMPANY June 30, 1996 The Company and its significant subsidiaries were: STATE OR PERCENT OF PROVINCE OR PARENT AND STOCK OWNED* COUNTRY OF DBA SIGNIFICANT SUBSIDIARIES BY COMPANY INCORPORATION NAMES - ------------------------ ---------- ------------- ----- Consolidated Freightways Corporation Delaware Significant Subsidiaries of Consolidated Freightways Corporation Consolidated Freightways 100 Delaware Nashville Corporation of Delaware Merchandise Store Canadian Freightways Limited 100 Alberta, Canada CF Parcel Express, CF Parcel Service *Directly or indirectly -----END PRIVACY-ENHANCED MESSAGE-----