-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sBFfKdbeKmp0GUdigiWB3SVjsvVlm5BOJF/tGi6yPb9h0acog85kq3UfFgtYmdl5 R/kBPqMxYgzO7kYBq0ORhg== 0000023675-94-000003.txt : 19940331 0000023675-94-000003.hdr.sgml : 19940331 ACCESSION NUMBER: 0000023675-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05046 FILM NUMBER: 94518297 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 10-K 1 10-K PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1993 Commission File Number 132-3 CONSOLIDATED FREIGHTWAYS, INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (415) 494-2900 Securities Registered Pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------------------ ------------------------ Common Stock ($.625 par value) New York Stock Exchange Pacific Stock Exchange $1.54 Depositary Shares each representing one-tenth of a share of Series C Conversion Preferred Stock New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: 9-1/8% Notes Due 1999 Medium-Term Notes, Series A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ___X___ No _______ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes____X____ No__________ Aggregate market value of voting stock held by persons other than Directors, Officers and those shareholders holding more than 5% of the outstanding voting stock, based upon the closing price per share Composite Tape on January 31, 1994: $730,765,672 Number of shares of Common Stock outstanding as of January 31, 1994: 35,816,779 DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV Consolidated Freightways, Inc. 1993 Annual Report to Shareholders (only those portions referenced herein are incorporated in this Form 10-K). Part III Proxy Statement dated March 18, 1994, (only those portions referenced herein are incorporated in this Form 10-K). PAGE 2 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1993 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- INDEX ----- Item Page - ---- ---- PART I ------ 1. Business 3 2. Properties 11 3. Legal Proceedings 12 4. Submission of Matters to a Vote of Security Holders 12 PART II ------- 5. Market for the Company's Common Stock and Related Security Holder Matters 13 6. Selected Financial Data 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 8. Financial Statements and Supplementary Data 13 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III -------- 10. Directors and Executive Officers of the Company 14 11. Executive Compensation 15 12. Security Ownership of Certain Beneficial Owners and Management 15 13. Certain Relationships and Related Transactions 15 PART IV ------- 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16 SIGNATURES 17 INDEX TO FINANCIAL INFORMATION 19 PAGE 3 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1993 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- PART 1 ------ ITEM 1. BUSINESS (a) General Development of Business - ----------------------------------- Consolidated Freightways, Inc. is a holding company which participates through subsidiaries in various forms of long-haul and regional trucking, intermodal rail and ocean services, domestic and international air cargo delivery services and related transportation activities. These operations are organized into three primary business groups: Long-Haul Trucking (CF MotorFreight), Regional Trucking and Intermodal (Con-Way Transportation Services), and Air Freight (Emery Worldwide). Consolidated Freightways, Inc. was incorporated in Delaware in 1958 as a successor to a business originally established in 1929. It is herein referred to as the "Registrant" or "Company". (b) Financial Information About Industry Segments - ------------------------------------------------- The operations of the Company are primarily conducted in the U.S. and Canada and to a lesser extent in major foreign countries. An analysis by industry group of revenues, operating income (loss), depreciation and capital expenditures for the years ended December 31, 1993, 1992 and 1991, and identifiable assets as of those dates is presented in Note 11 on pages 43 and 44 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. Geographic group information is also presented therein. Intersegment revenues are not material. (c) Narrative Description of Business - ------------------------------------- The Company has designated three principal operating groups: the CF MotorFreight Group provides intermediate and long-haul, less-than-truckload freight service in the U.S. and portions of Mexico, Canada, the Caribbean, Latin and Central America and Europe; the Con-Way Transportation Services Group provides regional trucking, intermodal movements of truckload freight, non-vessel operating common carriage and ocean container freight services; and, the Emery Worldwide Group is responsible for all domestic and international air freight activities. PAGE 4 CF MOTORFREIGHT ---------------- CF MotorFreight (CFMF), the Company's largest single operating unit, is based in Menlo Park, California. The group is composed of Consolidated Freightways Corporation of Delaware (CFCD), which includes CF MotorFreight and three other operating units, and three non-carrier component operations. Its carrier group provides general freight services nationwide and in portions of Canada, Mexico, the Caribbean area, Latin and Central America and Europe. General freight is typically shipments of manufactured or non-perishable processed products having high value and requiring expedited service, compared to the bulk raw materials characteristically transported by railroads, pipelines and water carriers. The basic business of the general freight industry is to transport freight that is less-than-truckload (LTL), an industry designation for shipments weighing less than 10,000 pounds. CFMF is one of the nation's largest motor carriers in terms of 1993 revenues. Competition within the industry has intensified since the passage of the Motor Carrier Act of 1980. Consequently, pricing has become increasingly important as a competitive factor. To retain market share, CFMF is also evolving to provide faster, more time definite, higher quality and lower cost services as shippers seek to compress production cycles and cut distribution costs. As a large carrier of LTL general commodity freight, CFMF has pick-up and delivery fleets in each area served, and a fleet of intercity tractors and trailers. It has a network of 539 U.S. and Canadian freight terminals including 28 regional consolidation centers. CFMF is supported by a sophisticated data processing system for the control and management of the business. CFMF provides a regular route, common and contract carrier freight service between points in all 50 states, the Caribbean area, Mexico, Latin and Central America and Europe and to points served by Canadian subsidiaries as discussed below. There is a broad diversity in the customers served, size of shipments, commodities transported and length of haul. No single customer or commodity accounts for more than a small fraction of total revenues. CFMF operates daily schedules utilizing primarily relay drivers driving approximately eight to ten hours each. Some schedules operate with sleeper teams driving designated routes. Road equipment consists of one tractor pulling two 28-foot double trailers or, to a limited extent, one semi-trailer or three 28-foot trailers. Legislation enacted in 1982 has provided for the use of 28-foot double trailers and 48-foot semi-trailers throughout the United States. (See "State Regulation" below.) Trailers in double or triple combination are more efficient and economical than a tractor and single semi-trailer combination. CFMF utilizes trailer equipment 102-inches in width. In 1993, the Company operated in excess of 537 million linehaul miles in North America, about 90% of which was conducted by equipment in doubles and triples configuration. The accident frequency of the triples configuration was better than all other types of vehicle combinations used by the Company. CFMF and other subsidiaries of CFCD serve Canada through terminals in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, Saskatchewan and in the Yukon Territory. PAGE 5 Non-Carrier Operations ---------------------- Menlo Logistics provides logistics management services for industrial and retail businesses including carrier management, dedicated fleet and warehouse operations, just-in-time delivery programs, customer order processing and freight bill payment and auditing. The other non-carrier operations within the CF MotorFreight Group generate a majority of their sales from other companies within the CF Group. Road Systems, Inc. primarily manufactures trailers. Willamette Sales Co. serves as a distributor of heavy-duty truck, marine and construction equipment parts. Employees --------- Approximately 88% of CFMF's domestic employees are represented by various labor unions, primarily the International Brotherhood of Teamsters (IBT). CFMF and the IBT are parties to a National Master Freight Agreement. The current agreement with the IBT expires on March 31, 1994. Labor costs, including fringe benefits, average approximately 65% of revenues. This results in a relatively high proportion of variable costs, which allows CFMF flexibility to adjust certain costs to fluctuations in business levels. CFMF's domestic employment has declined to 21,000 employees at December 31, 1993 from approximately 22,000 at December 31, 1992, primarily the result of declining tonnage and several programs to streamline operations during 1993. Fuel ---- Fuel prices have fluctuated during the last three years with prices declining in 1991 following a resolution of the Middle East conflict and fuel prices continued to decline in 1992. Fuel prices declined slightly in 1993 despite increased fuel taxation and stricter environmental regulations. CFMF's average annual diesel fuel cost per gallon (without tax) declined from $.671 in 1991 to $.632 and $.615 in 1992 and 1993, respectively. Federal and State Regulation ---------------------------- On July 1, 1980, the Motor Carrier Act of 1980 became effective. The Act made substantial changes in federal regulation of the motor carrier industry. It provided for easier access to the industry by new trucking companies and eased restrictions on expansion of services by existing carriers. In addition, CFMF's operations are subject to a variety of economic regulations by state authorities. Historically, such regulations also covered, among other things, size and weight of motor carrier equipment. PAGE 6 Federal legislation applies to the interstate highway system and to other qualifying federal-aid primary system highways in all states. Full implementation of the federal legislation has been hampered by regulations in certain states, which have imposed trailer length, size and weight limitations on access and intercity routes. These limitations do not conform with the federal requirements and therefore are obstacles to efficient operations. CFMF's mainline operations are designed to avoid locales with these limitations. Canadian Regulation ------------------- The provinces in Canada have regulatory authority over intra-provincial operations of motor carriers and have been delegated by the federal authority to regulate inter-provincial motor carrier activity. Federal legislation to phase in deregulation of the inter-provincial motor carrier industry took effect January 1, 1988. The new legislation relaxes economic regulation of inter-provincial trucking by easing market entry regulations, and implements effective safety regulations of trucking services under Federal jurisdiction. The Company wrote-off substantially all of the unamortized cost of its Canadian operating authority in 1992. CON-WAY TRANSPORTATION SERVICES ------------------------------- Con-Way Transportation Services, Inc. (CTS) is a holding company for operations that individually provide various transportation services, specifically regional trucking, trailer-on-flatcar or containerized movements of truckload freight, non-vessel operating common carriage and ocean container freight services. CTS has five operating units and approximately 7,600 employees. The Con-Way's face more competition than in the past as national LTL companies continue to acquire regional operations, combining previously independent carriers into an inter-regional network. However, growth in quick-response logistics and new service product offerings will provide new market opportunities. Refer to the CF MotorFreight section for a discussion of other factors affecting surface transportation. Regional Carriers ----------------- Each of CTS' four regional carriers operates within a defined geographic area to provide primarily next-day and second day service for freight moving up to 1,000 miles. Con-Way Western Express, Inc. (CWX) began operations in May 1983 and operates in California, Nevada, Arizona, New Mexico, western portions of Texas, Hawaii and Mexico. At December 31, 1993, CWX served customers from 51 service centers. Con-Way Central Express, Inc. (CCX) inaugurated operations in June 1983 and provides service in 13 states of the mid-west, east, north-east and eastern Canada. CCX operated 156 service centers at December 31, 1993. PAGE 7 Con-Way Southern Express, Inc. (CSE) began operations in April 1987 and operates in Florida, Alabama, Tennessee, Virginia, North and South Carolina, Maryland, Georgia and Puerto Rico. CSE served customers from 54 service centers at December 31, 1993. Con-Way Southwest Express, Inc. (CSW) began operations in November 1989 and operates in seven southwestern states and Mexico. CSW operated 41 service centers at December 31, 1993. A joint service program initiated by CTS allows the regional carriers to move freight in two-day lanes from a region serviced by one operating unit to regions serviced by other of the operating units within the existing infrastructure. The program allows CTS to compete for second day business not individually serviced by regional carriers. Con-Way Intermodal Inc. ----------------------- The Company offers truckload service and ocean container freight handling. The truckload portion of the Company provides door-to-door intermodal movement of full truckload shipments via rail trailer, and with dedicated containers and pick-up and delivery resources in a nationwide stack train network. The ocean service portion provides international shipping services through offices in more than two dozen international trade centers and serves the U.S., Europe, Hong Kong, Australia, other Pacific Rim nations and most recently Latin America. EMERY WORLDWIDE --------------- Emery Worldwide (EWW), the Company's air freight unit, was formed when the Company purchased Emery Air Freight Corporation in April 1989 and merged it with its air freight operation, CF AirFreight, Inc. The combined companies immediately expanded EWW's ability to deliver air freight within North America and to 88 countries worldwide. EWW provides global air cargo services through an integrated freight system designed for the movement of parcels and packages of all sizes and weights. In North America, EWW provides these services through a system of branch offices and overseas through foreign subsidiaries, branches and agents. EWW provides door-to-door service within North America by using its own airlift system, supplemented with commercial airlines. International services are performed by operating as an air freight forwarder, using commercial airlines, and with controlled lift, only when necessary. Emery also operates approximately 1,590 trucks, vans and tractors. As of December 31, 1993, EWW utilized a fleet of 50 aircraft, 28 of which are leased on a long-term basis, 9 are owned and 13 are contracted on a short- term basis to supplement nightly volumes and to provide feeder services. The nightly lift capacity of the aircraft fleet, excluding charters, is approximately 3.3 million pounds. PAGE 8 Emery Worldwide's hub-and-spoke system is centralized at the Dayton International Airport where a leased air cargo facility (Hub) and related support facilities are located. The Hub handles all types of shipments, ranging from small packages to heavyweight cargo, with a total effective sort capacity of approximately 1 million pounds per hour. The operation of the Hub in conjunction with EWW's airlift system enables it to maintain a high level of service reliability. In addition to its nightly Prime Time system, the Company added a new transcontinental daylight service. In the daylight program, two DC-8 freighters crisscross between Hartford, CT and Los Angeles, CA transconnecting the Dayton HUB. These originating cities then connect with their respective regional HUBs. The company added capacity and scheduled the daylight flights to handle increased business levels, respond to customer service needs in key market lanes. The two daylight aircraft are also used in the Prime Time schedule thus achieving better utilization of our assets. Through a separate subsidiary of the Company, Emery Worldwide Airlines, Inc. (EWA), the Company provides nightly cargo airline services under a contract with the U.S. Postal Service (USPS) to carry Express and Priority Mail, using 21 aircraft, 6 of which are leased on a long-term basis and 15 are owned. The original contract for this operation was awarded to EWA in 1989 and had been renewed and extended through early January 1994. A new ten year USPS contract was awarded to the Company during 1993 with service beginning in January 1994. The contract is similar to the previous USPS contract with the exception that the sortation function is not included. The Company has recognized approximately $138 million, $141 million and $199 million of revenue in 1993, 1992 and 1991, respectively, from contracts to carry Express and Priority Mail for the U.S. Postal Service. Customers --------- EWW services, among others, the aviation, automotive, machinery, metals, electronic and electrical equipment, chemical, apparel and film industries. Service industries and governmental entities also utilize EWW's services. Both U.S. and International operations of EWW have wide customer bases. Competition ----------- The heavy air-freight market within North American is highly competitive and price sensitive. Emery has the largest market share in the heavy air-freight segment. EWW competes with other integrated air freight carriers as well as freight forwarders. Competition in the international markets is also service and price sensitive. In these markets, which are more fragmented than the domestic market, EWW competes with both United States and international airlines and air freight forwarders. The North Atlantic market is especially price sensitive due to the abundance of airlift capacity. PAGE 9 Customers are seeking companies such as EWW with combined integrated carrier and freight forwarding capabilities for flexible, cost effective service. Emery believes this infrastructure and the convenience of its 235 worldwide service locations are its principal methods of competing in the market in which it operates. Regulation ---------- Regulation of Air Transportation -------------------------------- The air transportation industry is subject to federal regulation by the Federal Aviation Act of 1958, as amended (Aviation Act) and regulations issued by the Department of Transportation (DOT) pursuant to the Aviation Act. EWW, as an air freight forwarder, and EWA, as an airline, are subject to different regulations. Air freight forwarders are exempted from most DOT economic regulations and they are not subject to Federal Aviation Administration (FAA) safety regulations so long as they do not have operational control of aircraft. Airlines are subject to economic regulation by DOT and maintenance, operating and other safety-related regulation by FAA. Thus, EWA and other airlines conducting operations for EWW are subject to DOT and FAA regulation while EWW, itself, is not covered by most DOT and FAA regulations. Regulation of Ground Transportation ----------------------------------- When EWW provides ground transportation of cargo having a prior or subsequent air movement, the ground transportation is exempt from regulation by the Interstate Commerce Commission (ICC). However, EWW holds ICC and intrastate motor carrier authorities which can be utilized in providing non-exempt ground transportation. Registration of ICC authorities is required in each state where a motor carrier conducts non-exempt operations, and some states also have required EWW to register as an exempt interstate operator. Environmental Matters --------------------- During recent years, operations at several airports have been subject to restrictions or curfews on arrivals or departures during certain night-time hours designed to reduce or eliminate noise for surrounding residential areas. None of these restrictions have materially affected EWW's operations. If such restrictions were to be imposed with respect to the airports at which EWW's activities are centered and no alternative airports were available to serve the affected areas, EWW's operations could be more adversely affected. PAGE 10 As provided in Section 611 of the Aviation Act, the FAA with the assistance of the Environmental Protection Agency (EPA), is authorized to establish aircraft noise standards. Under the National Emission Standards Act of 1967, as amended by the Clean Air Act Amendments of 1970, the administrator of the EPA is authorized to issue regulations setting forth standards for aircraft emissions. EWW believes that its present fleet of owned, leased or chartered aircraft is operating in compliance with the applicable noise and emission laws. The Aviation Noise and Capacity Act of 1990 was passed in November of 1990 to establish a national aviation noise policy. The FAA has promulgated regulations under this Act regarding the phase-in requirements for compliance. This legislation and the related regulations will require all of EWW's and EWA's owned and leased aircraft to either undergo modifications or otherwise comply with Stage 3 noise restrictions by year-end 1999. Fuel and Supplies Cost ---------------------- EWW purchases substantially all of its jet fuel from major oil companies, refiners and trading companies on annual contracts with prepaid and/or volume discounts. These contract purchases are supplemented by spot purchases. The weighted average price of domestic jet fuel declined in 1993 and 1992, respectively. During 1991, the weighted average price of domestic jet fuel declined following the resolution of the Middle East conflict early in the year. The 1993 domestic cost per gallon was approximately $.64 compared with 1992 and 1991 weighted average prices of approximately $.67 and $.72 per gallon, respectively. EWW believes that it has the flexibility to continue its operations without material interruption unless there are significant curtailments of its jet fuel supplies. Neither Emery Worldwide nor the operators of the aircraft it charters have experienced or anticipate any fuel supply problems. There is a four-million gallon fuel storage facility at the Hub. Employees --------- As of December 31, 1993, Emery Worldwide had approximately 7,500 full and permanent part-time employees as compared to 6,700 in 1992 and 7,000 in 1991. Approximately 15% of these employees are covered by union contracts. GENERAL - ------- The research and development activities of the Company are not significant. During 1993, 1992 and 1991 there was no single customer of the Company that accounted for more than 10% of consolidated revenues. The total number of employees is presented in the "Ten Year Financial Summary" on pages 46 and 47 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. PAGE 11 The Company has been designated a Potentially Responsible Party (PRP) by the EPA with respect to the disposal of hazardous substances at various sites. The Company expects its share of the clean-up cost to be immaterial. The Company expects the costs of complying with existing and future federal, state and local environmental regulations to continue to increase. On the other hand, they do not anticipate that such cost increases will have any materially adverse effects on capital expenditures, earnings or competitive position. (d) Financial Information About Foreign and Domestic Operations and Export Sales ---------------------------------------- Information as to revenues, operating income (loss) and identifiable assets for each of the Company's business segments and for its foreign operations for 1993, 1992 and 1991 is contained in Note 11 on page 43 and 44 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. ITEM 2. PROPERTIES The following summarizes the terminals and freight service centers operated by the Company at December 31, 1993: Owned Leased Total ----- ------ ----- CF MotorFreight 275 264 539 Con-Way Transportation Services 38 264 302 Emery Worldwide 9 226 235 The following table sets forth the location and square footage of the Company's principal freight handling facilities: Location Square Footage -------- -------------- CFMF - motor carrier LTL consolidation center terminals Mira Loma, CA 280,672 Chicago, IL 231,159 * Columbus, OH 118,774 Memphis, TN 118,745 Nashville, TN 118,622 Orlando, FL 101,557 * Minneapolis, MN 94,890 St. Louis, MO 88,640 * Pocono, PA 86,285 Chicopee, MA 85,164 Akron, OH 82,494 Sacramento, CA 81,286 Atlanta, GA 77,920 Houston, TX 77,346 Dallas, TX 75,358 * Fremont, IN 73,760 PAGE 12 Location Square Footage -------- -------------- CFMF - motor carrier LTL consolidation center terminals * Peru, IL 73,760 Buffalo, NY 73,380 Cheyenne, WY 71,298 Milwaukee, WI 70,661 Salt Lake City, UT 68,480 Charlotte, NC 66,896 Seattle, WA 59,720 * York, PA 56,384 Kansas City, MO 55,288 * Indianapolis, IN 54,716 Portland, OR 47,824 Phoenix, AZ 20,237 CTS - freight assembly centers Chicago, IL 113,116 Oakland, CA 85,600 Dallas, TX 82,000 Atlanta, GA 56,160 Cincinnati, OH 55,618 Columbus, OH 48,527 Detroit, MI 46,240 Santa Fe Springs, CA 45,936 Aurora, IL 44,235 Ft. Wayne, IN 35,400 Pontiac, MI 34,450 St. Louis, MO 29,625 Milwaukee, WI 22,940 Emery - facilities *Dayton, OH 620,000 Los Angeles, CA 78,264 Indianapolis, IN 38,500 * Facility partially or wholly financed through the issuance of industrial revenue bonds. Principal amount of debt is secured by the property. ITEM 3. LEGAL PROCEEDINGS The legal proceedings of the Company are summarized in Note 10 on page 43 of the 1993 Annual Report to Shareholders and are incorporated herein by reference. A discussion of certain environmental matters is presented in Item 1 and Item 7. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PAGE 13 PART II ------- ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's common stock is listed for trading on the New York and Pacific Stock Exchanges. The Company's Common Stock Price is included in Note 12 on page 45 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. Cash dividends on common shares had been paid in every year from 1962 to 1990. In June 1990, however, the Company's Board of Directors suspended the quarterly dividend to minimize the Company's cash requirements. Under the terms of the restructured TASP Notes, as set forth on pages 35 and 36 of the 1993 Annual Report to Shareholders, the Company is restricted from paying dividends in excess of $10 million plus 50% of the cumulative net income applicable to common shareholders since the commencement of the agreement. As of December 31, 1993, there were 15,785 holders of record of the common stock ($.625 par value) of the Company. The number of shareholders is also presented in the "Ten Year Financial Summary" on pages 46 and 47 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The Selected Financial Data is presented in the "Ten Year Financial Summary" on pages 46 and 47 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations is presented in the "Financial Review and Management Discussion" on pages 24 through 26, inclusive, of the 1993 Annual Report to Shareholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and Auditors' Report are presented on pages 27 through 33, inclusive, of the 1993 Annual Report to Shareholders and are incorporated herein by reference. The unaudited quarterly financial data is included in Note 12 on page 45 of the 1993 Annual Report to Shareholders and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PAGE 14 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The identification of the Company's Directors is presented on pages 3 through 9, inclusive, of the Proxy Statement dated March 18, 1994 and those pages are incorporated herein by reference. The Executive Officers of the Company, their ages at December 31, 1993 and their applicable business experience are as follows: Donald E. Moffitt, 61, President and Chief Executive Officer. Mr. Moffitt joined Consolidated Freightways Corporation of Delaware, the Company's principal motor carrier subsidiary, as an accountant in 1955 and advanced to Vice President - Finance in 1973. In 1975, he transferred to the Company as Vice President - Finance and Treasurer and in 1981 was elected Executive Vice President - Finance and Administration. In 1983 he assumed the additional duties of President, CF International and Air, Inc., where he directed the Company's international and air freight businesses. Mr. Moffitt was elected Vice Chairman of the Board of the Company in 1986. He retired as an employee and as Vice Chairman of the Board of Directors in 1988 and returned to the Company as Executive Vice President - Finance and Chief Financial Officer in 1990. Mr. Moffitt was named President and Chief Executive Officer of the Company and was elected to the Board of Directors in 1991. Mr. Moffitt serves on the Executive Committee of the Board of Directors of the Highway Users Federation and is a member of the Board of Directors of the Bay Area Council, the Automotive Safety Foundation and the American Red Cross. He is a member of the California Business Roundtable and a member of the Business Advisory Council of the Northwestern University Transportation Center. He also serves on the Advisory Council of the Peninsula Conflict Resolution Center. Mr. Moffitt is a member of the Advisory Nominating and the Executive Committees of the Company. W. Roger Curry, 55, President and Chief Executive Officer of Emery Air Freight Corporation and Senior Vice President of the Company. Mr. Curry joined CFCD in 1969 as a Systems Analyst and became Coordinator, On-Line Systems of the Company in 1970. In 1972 he was named Director of Terminal Properties for CFCD. He became President of CFAF in 1975 and Chief Executive Officer in 1984. Mr. Curry relinquished both offices with CFAF in 1986 when he was elected Senior Vice President - Marketing of the Company. In 1991 he was elected President of Emery Air Freight Corporation. Robert H. Lawrence, 56, Executive Vice President - Operations of the Company and President and Chief Executive Officer of CFCD. Mr. Lawrence joined the Company in 1969 as an Assistant Terminal Manager and advanced to Vice President of the Eastern Area by 1977. He became Vice President of Operations for CFCD in 1979 and President in 1986. In 1989, while continuing as President of CFCD, he was elected a Senior Vice President of the Company. In 1991, he was elected as Executive Vice President - Operations of the Company. PAGE 15 Gregory L. Quesnel, 45, Executive Vice President and Chief Financial Officer. Mr. Quesnel joined Consolidated Freightways Corporation of Delaware in 1975 as Director of Financial Accounting. Through several increasingly responsible financial positions, he advanced to become the top financial officer of CFCD. In 1989 he was elected Vice President-Accounting for the Company and in 1990 was named Vice President and Treasurer. Mr. Quesnel became Senior Vice President-Finance and Chief Financial Officer of the Company in 1991 and later Executive Vice President and Chief Financial Officer in 1993. Robert T. Robertson, 52, President and Chief Executive Officer of Con-Way Transportation Services, Inc. and Senior Vice President of the Company. Mr. Robertson joined CFCD in 1970 as a sales representative and advanced to Manager of Eastern Area Sales by 1973. He transferred to Texas in 1976 where he became involved in CFCD's operations and was promoted to Division Manager in 1978. In 1983 he was named Vice President and General Manager of Con-Way Transportation Services, Inc. In 1986, Mr. Robertson was elected President of CTS. Eberhard G.H. Schmoller, 50, Senior Vice President and General Counsel of the Company. Mr. Schmoller joined CFCD in 1974 as a staff attorney and in 1976 was promoted to CFCD assistant general counsel. In 1983, he was appointed Vice President and General Counsel of CF Airfreight and assumed the same position with Emery after the acquisition in 1989. Mr. Schmoller was named Senior Vice President and General Counsel of the Company in 1993. ITEM 11. EXECUTIVE COMPENSATION The required information for Item 11 is presented on pages 13 through 16, inclusive, of the Proxy Statement dated March 18, 1994, and those pages are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The required information for Item 12 is included on pages 10 and 11 of the Proxy Statement dated March 18, 1994, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PAGE 16 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Exhibits Filed --------------------------------------- 1. Financial Statements See Index to Financial Information. 2. Financial Statement Schedules See Index to Financial Information. 3. Exhibits See Index to Exhibits. (b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed for the three months ended December 31, 1993. PAGE 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED FREIGHTWAYS, INC. (Registrant) March 28, 1994 /s/Donald E. Moffitt -------------------------------------- Donald E. Moffitt President and Chief Executive Officer March 28, 1994 /s/Gregory L. Quesnel -------------------------------------- Gregory L. Quesnel Executive Vice President and Chief Financial Officer March 28, 1994 /s/Robert E. Wrightson -------------------------------------- Robert E. Wrightson Vice President and Controller PAGE 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. March 28, 1994 /s/Raymond F. O'Brien ------------------------------------- Raymond F. O'Brien Chairman of the Board March 28, 1994 /s/Donald E. Moffitt ------------------------------------- Donald E. Moffitt President, Chief Executive Officer and Director March 28, 1994 /s/John C. Bolinger, Jr. ------------------------------------- John C. Bolinger, Jr., Director March 28, 1994 /s/Earl F. Cheit ------------------------------------- Earl F. Cheit, Director March 28, 1994 /s/G. Robert Evans ------------------------------------- G. Robert Evans, Director March 28, 1994 /s/Robert Jaunich II ------------------------------------- Robert Jaunich II, Director March 28, 1994 /s/John S. Perkins ------------------------------------- John S. Perkins, Director PAGE 19 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1993 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- INDEX TO FINANCIAL INFORMATION ------------------------------ Consolidated Freightways, Inc. and Subsidiaries - ----------------------------------------------- The following Consolidated Financial Statements of Consolidated Freightways, Inc. and Subsidiaries appearing on pages 27 through 45, inclusive, of the Company's 1993 Annual Report to Shareholders are incorporated herein by reference: Report of Independent Public Accountants Consolidated Balance Sheets - December 31, 1993 and 1992 Statements of Consolidated Operations - Years Ended December 31, 1993, 1992 and 1991 Statements of Consolidated Cash Flows - Years Ended December 31, 1993, 1992 and 1991 Statements of Consolidated Shareholders' Equity - Years Ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements In addition to the above, the following consolidated financial information is filed as part of this Form 10-K: Page ---- Consent of Independent Public Accountants 20 Report of Independent Public Accountants 20 Schedule V - Property, Plant and Equipment - Years Ended December 31, 1993, 1992 and 1991 21 Schedule VI - Accumulated Depreciation of Property, Plant and Equipment - Years Ended December 31, 1993, 1992 and 1991 22 Schedule VIII - Valuation and Qualifying Accounts 23 Schedule X - Supplementary Income Statement Information 24 PAGE 20 The other schedules (Schedules I through IV, VII, IX and XI through XIV) have been omitted because either (1) they are neither required nor applicable or (2) the required information has been included in the consolidated financial statements or notes thereto. SIGNATURE CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 2-81030, 33-29793, 33-45313 and 33-52599. /s/Arthur Andersen & Co. ------------------------- ARTHUR ANDERSEN & CO. San Francisco, California March 28, 1994 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Shareholders and Board of Directors of Consolidated Freightways, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Consolidated Freightways, Inc.'s 1993 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 28, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules on pages 21 through 24 are the responsibility of the Company's management and are presented for the purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen & Co. -------------------------- ARTHUR ANDERSEN & CO. San Francisco, California January 28, 1994 PAGE 21 SCHEDULE V CONSOLIDATED FREIGHTWAYS, INC. PROPERTY, PLANT AND EQUIPMENT Years Ended December 31, 1993, 1992, 1991 (In thousands)
Translation adjustment Balance at and other Balance at beginning Additions, changes (a) end of Classification of period at cost Retirements add (deduct) period - -------------------------- ----------- --------- --------- --------- ----------- 1993 - ---- Land $145,547 $8,964 ($1,918) ($191) $152,402 Buildings and improvements 468,269 25,511 (4,674) (814) 488,292 Revenue equipment 900,653 132,007 (66,013) (31,165)(b) 935,482 Other equipment and leasehold improvements 336,463 34,728 (23,029) (561) 347,601 ----------- --------- --------- --------- ----------- Total $1,850,932 $201,210 ($95,634) ($32,731) $1,923,777 =========== ========= ========= ========= =========== 1992 - ---- Land $145,753 -- ($2,383) $2,177 $145,547 Buildings and improvements 457,166 19,185 (5,684) (2,398) 468,269 Revenue equipment 836,773 104,439 (36,156) (4,403) 900,653 Other equipment and leasehold improvements 336,398 25,082 (21,658) (3,359) 336,463 ----------- --------- --------- --------- ----------- Total $1,776,090 $148,706 ($65,881) ($7,983) $1,850,932 =========== ========= ========= ========= =========== 1991 - ---- Land $138,957 $4,487 ($324) $2,633 $145,753 Buildings and improvements 417,586 34,060 (924) 6,444 457,166 Revenue equipment 821,038 30,823 (24,051) 8,963 836,773 Other equipment and leasehold improvements 336,406 28,703 (26,184) (2,527) 336,398 ----------- --------- --------- --------- ----------- Total $1,713,987 $98,073 ($51,483) $15,513 $1,776,090 =========== ========= ========= ========= =========== (a) Adjustment required as a result of SFAS No. 52 "Foreign Currency Translation" (b) Consists of purchased overhaul and maintenance reclassified to deferred charges and other assets
PAGE 22 SCHEDULE VI CONSOLIDATED FREIGHTWAYS, INC. ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT Years Ended December 31, 1993, 1992, 1991 (In thousands)
Translation adjustment Classification Balance at and other Balance at - -------------------------- beginning Additions, changes (a) end of 1993 of period at cost Retirements add (deduct) period - ---- ----------- --------- --------- --------- ----------- Buildings and improvements $190,256 $20,972 ($2,480) ($740) $208,008 Revenue equipment 573,274 80,091 (59,850) (4,372) 589,143 Other equipment and leasehold improvements 200,568 35,245 (21,641) 2,010 216,182 ----------- --------- --------- --------- ----------- Total $964,098 $136,308 ($83,971) ($3,102) $1,013,333 =========== ========= ========= ========= =========== 1992 - ---- Buildings and improvements $167,462 $21,292 ($2,831) $4,333 $190,256 Revenue equipment 529,455 78,727 (32,670) (2,238) 573,274 Other equipment and leasehold improvements 182,251 38,784 (19,595) (872) 200,568 ----------- --------- --------- --------- ----------- Total $879,168 $138,803 ($55,096) $1,223 $964,098 =========== ========= ========= ========= =========== 1991 - ---- Buildings and improvements $146,057 $20,094 ($570) $1,881 $167,462 Revenue equipment 465,471 84,889 (22,004) 1,099 529,455 Other equipment and leasehold improvements 148,955 45,081 (20,716) 8,931 182,251 ----------- --------- --------- --------- ----------- Total $760,483 $150,064 ($43,290) $11,911 $879,168 =========== ========= ========= ========= =========== (a) Adjustment required as a result of SFAS No. 52 "Foreign Currency Translation"
PAGE 23 SCHEDULE VIII CONSOLIDATED FREIGHTWAYS, INC. VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1993 (In thousands) DESCRIPTION - ----------- ALLOWANCE FOR DOUBTFUL ACCOUNTS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD ---------- ---------- ---------- ---------- ---------- 1993 $26,198 $27,127 $ - $(23,545) (a) $29,780 ------- ------- -------- --------- ------- 1992 $25,742 $29,707 $ - $(29,251) (a) $26,198 ------- ------- -------- --------- ------- 1991 $30,385 $29,858 $ - $(34,501) (a) $25,742 ------- ------- -------- --------- ------- a) Accounts written off net of recoveries. PAGE 24 SCHEDULE X CONSOLIDATED FREIGHTWAYS, INC. SUPPLEMENTARY INCOME STATEMENT INFORMATION Years Ended December 31, (In thousands) 1993 1992 1991 -------- ------- -------- Maintenance and Repairs $131,512 $146,375 $151,475 ======== ======== ======== Taxes, other than Payroll and Income Taxes: Fuel $ 63,147 $ 56,066 $ 54,385 Other 43,647 39,675 41,142 -------- -------- -------- $106,794 $ 95,741 $ 95,527 ======== ======== ======== PAGE 25 INDEX TO EXHIBITS ITEM 14(a)(3) Exhibit No. - ----------- (3) Articles of incorporation and by-laws: 3.1 Consolidated Freightways, Inc. Certificates of Incorporation, as amended. (Exhibit 3(a)(2) to the Company's Quarterly Report Form 10-Q for the quarter ended March 31, 1987*) 3.2 Consolidated Freightways, Inc. By-laws, as amended March 29, 1993. (4) Instruments defining the rights of security holders, including debentures: 4.1 Consolidated Freightways, Inc. Stockholder Rights Plan. (Exhibit 1 on Form 8-A dated October 27, 1986*) 4.2 Certificate of Designations of the Series B Cumulative Convertible Preferred Stock. (Exhibit 4.1 as filed on Form SE dated May 25, 1989*) 4.3 Indenture between the Registrant and Security Pacific National Bank, trustee, with respect to 9-1/8% Notes Due 1999 and Medium- Term Notes, Series A. (Exhibit 4.1 as filed on Form SE dated March 20, 1990*) 4.4 Form of Security for 9-1/8% Notes Due 1999 issued by Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE dated August 25, 1989*) 4.5 Officers' Certificate dated as of August 24, 1989 establishing the form and terms of debt securities issued by Consolidated Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated August 25, 1989*) 4.6 Form of Security for Medium-Term Notes, Series A to be issued by Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE dated September 18, 1989*) 4.7 Officers' Certificate dated September 18, 1989, establishing the form and terms of debt securities to be issued by Consolidated Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated September 19, 1989*) 4.8 Form of Certificate of Designations of the Series C Conversion Preferred Stock (incorporated by reference to Exhibit 4.3 contained in Form SE dated January 29, 1992*). 4.9 Form of Stock Certificate for Series C Conversion Preferred Stock (incorporated by reference to Exhibit 4.4 contained in Form SE dated January 29, 1992*). 4.10 Subsidiary Guaranty Agreement dated July 30, 1993 among Consolidated Freightways, Inc. and various financial institutions in connection with the $250 million Credit Agreement of the same date. (Exhibit 4.1 to the Company's Form 10-Q for the quarterly period ended June 30, 1993*). * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. PAGE 26 Exhibit No. - ----------- (4) Instruments defining the rights of security holders, including debentures (continued): Instruments defining the rights of security holders of long-term debt of Consolidated Freightways, Inc., and its subsidiaries for which financial statements are required to be filed with this Form 10-K, of which the total amount of securities authorized under each such instrument is less than 10% of the total assets of Consolidated Freightways, Inc. and its subsidiaries on a consolidated basis, have not been filed as exhibits to this Form 10-K. The Company agrees to furnish a copy of each applicable instrument to the Securities and Exchange Commission upon request. (10) Material contracts: 10.1 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1983*) 10.2 Amendments 5, 6 and 7 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10.1 as filed on Form SE dated March 25, 1991*) 10.3 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10(g) to the Company's Form 10-K for the year ended December 31, 1987*) 10.4 Amendment 3 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10.2 as filed on Form SE dated March 25, 1991*) 10.5 Consolidated Freightways, Inc. Stock Option Plan of 1978, as amended through Amendment No. 1. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1981*) 10.6 Consolidated Freightways, Inc. Stock Option Plan of 1988 as amended. (Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1987 as amended in Form S-8 dated December 16, 1992*) 10.7 Forms of Stock Option Agreement (with and without Cash Surrender Rights) under the Consolidated Freightways, Inc. Stock Option Plan of 1988. (Exhibit 10(j) to the Company's Form 10-K for the year ended December 31, 1987*) 10.8 Form of Consolidated Freightways, Inc. Deferred Compensation Agreement. (Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1981*) 10.9 Consolidated Freightways, Inc. Retirement Plan (formerly Emery Air Freight Corporation Pension Plan), as amended effective through January 1, 1985, and amendments dated as of October 30, 1987. (Exhibit 4.22 to the Emery Air Freight Corporation Quarterly Report on Form 10-Q dated November 16, 1987**) * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. ** Incorporated by reference to indicated reports filed under the Securities Act of 1934, as amended, by Emery Air Freight Corporation File No. 1-3893. PAGE 27 Exhibit No. - ----------- 10.10 Emery Air Freight Plan for Retirees, effective October 31, 1987. (Exhibit 4.23 to the Emery Air Freight Corporation Quarterly Report on Form 10-Q dated November 16, 1987**) 10.11 Consolidated Freightways, Inc. Common Stock Fund (formerly Emery Air Freight Corporation Employee Stock Ownership Plan, as effective October 1, 1987 ("ESOP"). (Exhibit 4.33 to the Emery Air Freight Corporation Annual Report on Form 10-K dated March 28, 1988**) 10.12 Employee Stock Ownership Trust Agreement, dated as of October 8, 1987, as amended, between Emery Air Freight Corporation and Arthur W. DeMelle, Daniel J. McCauley and Daniel W. Shea, as Trustees under the ESOP Trust. (Exhibit 4.34 to the Emery Air Freight Corporation Annual Report on Form 10-K dated March 28, 1988**) 10.13 Amended and Restated Subscription and Stock Purchase Agreement dated as of December 31, 1987 between Emery Air Freight Corporation and Boston Safe Deposit and Trust Company in its capacity as successor trustee under the Emery Air Freight Corporation Employee Stock Ownership Plan Trust ("Boston Safe"). (Exhibit B to the Emery Air Freight Corporation Current Report on Form 8-K dated January 11, 1988**) 10.14 Supplemental Subscription and Stock Purchase Agreement dated as of January 29, 1988 between Emery Air Freight Corporation and Boston Safe. (Exhibit B to the Emery Air Freight Corporation Current Report on Form 8-K dated February 12, 1988**) 10.15 Trust Indenture, dated as of November 1, 1988, between City of Dayton, Ohio and Security Pacific National Trust Company (New York), as Trustee and Bankers Trust Company, Trustee. (Exhibit 4.1 to Emery Air Freight Corporation Current Report on Form 8-K dated December 2, 1988**) 10.16 Bond Purchase Agreement dated November 7, 1988, among the City of Dayton, Ohio, the Emery Air Freight Corporation and Drexel Burnham Lambert Incorporated. (Exhibit 28.7 to the Emery Air Freight Corporation Current Report on Form 8-K dated December 2, 1988**) 10.17 Lease agreement dated November 1, 1988 between the City of Dayton, Ohio and Emery Air Freight Corporation. (Exhibit 10.1 to the Emery Air Freight Corporation Annual Report on Form 10-K for the year ended December 31, 1988**) * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. ** Incorporated by reference to indicated reports filed under the Securities Act of 1934, as amended, by Emery Air Freight Corporation File No. 1-3893. PAGE 28 Exhibit No. - ----------- 10.18 Credit Agreement dated January 14, 1993, by and among Emery Receivables Corporation as the borrower, Emery Air Freight Corporation, Consolidated Freightways, Inc., individually and as Servicer and various financial institutions. (Exhibit 10.19 to the Company's Form 10-K for the year ended December 31, 1992*). 10.19 Purchase and Sale Agreement, dated January 14, 1993, among Emery Air Freight Corporation and Emery Distribution Systems, Inc., as Originators, Emery Receivables Corporation, and Consolidated Freightways, Inc., as Servicer. (Exhibit 10.20 to the Company's Form 10-K for the year ended December 31, 1992*). 10.20 Consolidated Freightways, Inc. Directors' Election Form for deferral payment of director's fees. 10.21 Consolidated Freightways, Inc. 1993 Executive Deferral Plan. (Exhibit 10.22 to the Company's Form 10-K for the year ended December 31, 1992*). 10.22 Consolidated Freightways, Inc. Executive Incentive Plan for 1994. 10.23 CF MotorFreight Incentive Plan for 1994. 10.24 Con-Way Transportation Services, Inc. Incentive Plan for 1994. 10.25 Emery Worldwide Incentive Plan for 1994. 10.26 $250 million Credit Agreement dated July 30, 1993 among Consolidated Freightways, Inc. and various financial institutions. (Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended June 30, 1993*). 10.27 Letter of Credit Facility Agreement dated as of July 30, 1993 between Consolidated Freightways, Inc. and Bank of America National Trust and Savings Association. (Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended June 30, 1993*). 10.28 Official Statement of the Issuer's Special Facilities Revenue Refunding Bonds, 1993 Series E and F dated September 29, 1993 among the City of Dayton, Ohio and Emery Air Freight Corporation. (Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.29 Trust Indenture, dated September 1, 1993 between the City of Dayton, Ohio and Banker's Trust Company as Trustee. (Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.30 Supplemental Lease Agreement dated September 1, 1993 between the City of Dayton, Ohio, as Lessor, and Emery Air Freight Corporation, as Lessee. (Exhibit 10.3 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.31 Supplemental Retirement Plan dated January 1, 1990. 10.32 Directors' 24-Hour Accidental Death and Dismemberment Plan. 10.33 Executive Split-Dollar Life Insurance Plan dated January 1, 1994. 10.34 Board of Directors' Compensation Plan dated January 1, 1994. 10.35 Excess Benefit Plan dated January 1, 1987. 10.36 Directors' Business Travel Insurance Plan. * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. PAGE 29 Exhibit No. - ---------- 10.37 Deferred Compensation Plan for Executives dated October 1, 1993. 10.38 1993 Nonqualified Employee Benefit Plans Trust Agreement dated October 1, 1993. (13) Annual report to security holders: Consolidated Freightways, Inc. 1993 Annual Report to Shareholders (Only those portions referenced herein are incorporated in this Form 10-K. Other portions such as "To Our Shareholders and Employees" are not required and, therefore, are not "filed" as part of this Form 10-K.) (22) Significant Subsidiaries of the Company. (28) Additional documents: 28.1 Consolidated Freightways, Inc. 1993 Notice of Annual Meeting and Proxy Statement dated March 18, 1994. (Only those portions referenced herein are incorporated in this Form 10-K. Other portions are not required and, therefore, are not "filed" as a part of this Form 10-K.) 28.2 Note Agreement dated as of July 17, 1989, between the ESOP, Consolidated Freightways, Inc. and the Note Purchasers named therein. (Exhibit 28.1 as filed on Form SE dated July 21, 1989*) 28.3 Guarantee and Agreement dated as of July 17, 1989, delivered by Consolidated Freightways, Inc. (Exhibit 28.2 as filed on Form SE dated July 21, 1989*). 28.4 Form of Restructured Note Agreement between Consolidated Freightways, Inc., Thrift and Stock Ownership Trust as Issuer and various financial institutions as Purchasers named therein, dated as of November 3, 1992. (Exhibit 28.4 to the Company's Form 10-K for the year ended December 31, 1992*). 28.5 Form of Restructured Guarantee and Agreement between Consolidated Freightways, Inc., as Issuer and various financial institutions as Purchasers named therein, dated as of November 3, 1992. (Exhibit 28.5 to the Company's Form 10-K for the year ended December 31, 1992*). The remaining exhibits have been omitted because either (1) they are neither required nor applicable or (2) the required information has been included in the consolidated financial statements or notes thereto. * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. EX-3.2 2 EXHIBIT 3.2 CONSOLIDATED FREIGHTWAYS, INC. EXHIBIT 3.2 BY-LAWS As Amended March 29, 1993 ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle. SECTION 2. Other Offices. The Corporation shall also have and maintain a principal office or place of business at such place as may be fixed by the Board of Directors, and may also have other offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 1. Place of Meetings. Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors or, if not so designated, then at the principal office of the Corporation. SECTION 2. Annual Meetings. The annual meetings of the stockholders of the Corporation for the purpose of election of directors and for such other business as may lawfully come before the meetings shall be held on a date and at a time designated from time to time by the Board of Directors, or, if not so designated, then at 10:00 a.m. on the last Monday in April in each year, if not a legal holiday, or, if a legal holiday at the same hour and place on the next succeeding day not a holiday. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must have been (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary, Consolidated Freightways, Inc. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter that the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the Corporation that are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 3. Special Meetings. Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Chief Executive Officer or the Board of Directors at any time. Upon written request of any stockholder or stockholders holding in the aggregate a majority of the voting power of all stockholders, the Secretary shall call a special meeting of stockholders to be held at a place in San Francisco, California specified in the request for call, at such time as the Secretary may fix, such meeting to be held not less than ten nor more than 60 days after the receipt of the request, and if the Secretary shall neglect or refuse to call the meeting, the stockholder or stockholders making the request may do so. SECTION 4. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten nor more than 50 days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the Corporation; said notice to specify the place, date and hour and purpose or purposes of the meeting. 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 unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. SECTION 5. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by the By-Laws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. SECTION 6. Voting Rights. Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. 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. Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. SECTION 7. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of 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 (10) days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the Certificate of Incorporation, the meeting and vote of stockholders may be dispensed with: (1) if all of the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or (2) if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all of the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent. SECTION 9. Rules of Conduct. The Board of Directors of the Company 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 of Directors, 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 of Directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE III DIRECTORS SECTION 1. Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board of Directors. SECTION 2. Number, Qualifications and Classification. (a) A majority of the directors holding office may by resolution increase or decrease the number of directors, provided, however, that the number thereof shall never be less than twelve nor greater than fifteen. A director need not be a stockholder. The directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as the then total number of directors permits. At the 1985 annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning in 1986, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director 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 vacancy on the Board of Directors, including any vacancy that results from an increase in the number of directors, may be filled by a majority of the Board of Directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall have the same remaining term as that of his predecessor. (b) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting 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 applicable thereto, and such directors so elected shall not be divided into classes pursuant to these By-Laws unless expressly provided by such terms. (c) Any amendment, change or repeal of this Section 2 of Article III, or any other amendment to these By-Laws that will have the effect of permitting circumvention of or modifying this Section 2 of Article III, shall require the favorable vote, at a stockholders' meeting, of the holders of at least 80% of the then-outstanding shares of stock of the Corporation entitled to vote. SECTION 3. Special Elections. If, for any cause, the Board of Directors shall not have been elected at an annual meeting, it may be elected as soon thereafter as is convenient at a special meeting of the stockholders called for that purpose in the manner provided in these By-Laws. SECTION 4. Vacancies. A vacancy in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any director, or if the number of directors constituting the whole Board be increased, or if the stockholders, at any meeting of stockholders at which directors are to be elected, fail to elect the number of directors then constituting the whole Board. SECTION 5. Resignations. Any director may resign at any time by delivering his written resignation 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 of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. SECTION 6. Meetings. (a) The annual meeting of the Board of Directors shall be held immediately after the annual stockholders' meeting and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Regular meetings of the Board of Directors shall be held at such place within or without the State of Delaware, and at such times as the Board may from time to time determine, and if so determined no notice thereof need be given. (c) Special meetings may be called at any time and place within or without the State of Delaware upon the call of the Chief Executive Officer or Secretary or any two directors. Notice of the time, place and purposes of each special meeting shall be sent by mail at least seventy-two hours in advance of the time of the meeting, or by telegram at least forty-eight hours in advance of the time of the meeting, to the address of each director. Notice of any special meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat. SECTION 7. Quorum and Voting. (a) A majority of the whole Board of Directors shall constitute a quorum for all purposes, provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time and place to place, within or without the State of Delaware, without notice other than by announcement at the meeting. (b) At each meeting of the Board at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a different vote be required by law or by the Certificate of Incorporation. SECTION 8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION 9. Fees and Compensation. Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, compensation in a reasonable amount may be fixed by the Board, including, without limitation, compensation in the form of an annual retainer, a fee for each Board or Board Committee meeting attended, reimbursement for expenses of attendance at any such meeting, or any combination of any of the foregoing. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 10. Maximum Age of Directors. Directors who have attained the age of 72 years shall be ineligible to stand for election or re-election as a director. A director who has attained the age of 72 years whose term as a director continues beyond the annual meeting of shareholders next following attainment of 72 years shall retire and resign as a director at the first directors' meeting following such annual meeting of shareholders. For this purpose such resignation will be automatic and need not meet the requirements for resignation set forth in SECTION 5 OF THIS ARTICLE III. SECTION 11. Nominations of Persons for Election to the Board of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the Corporation who is entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 11. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary, Consolidated Freightways, Inc. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation that are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14a under the Securities Exchange Act of 1934; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the Corporation that are beneficially owned by the stockholder. A signed written consent of each proposed nominee to serve as a director of the Corporation shall be appended to the stockholder's notice. The Corporation may require any proposed nominee to furnish any other information that may reasonably be required by the Corporation to determine the qualifications of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of Preferred Stock. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE IV OFFICERS AND COMMITTEES SECTION 1. Officers Designated. The executive officers of the Corporation shall be chosen by the Board of Directors and shall be the Chairman of the Board, the Vice Chairman of the Board, the President, one or more Vice Presidents, the Secretary, one or more Assistant Secretaries, the Treasurer, one or more Assistant Treasurers, and such other executive officers as the Board of Directors from time to time may designate. The Board of Directors shall designate either the Chairman of the Board or the President as the Chief Executive Officer of the Corporation. The officer so designated shall have charge of the actual conduct and operation of the business of the Corporation, subject to the control and direction of the Board of Directors. The Chief Executive Officer shall, with the consent of the Board of Directors, assign such additional titles to Vice Presidents as he shall deem appropriate and designate the succession of officers to act in his stead in his absence or disability. He may appoint additional Vice Presidents who shall not, however, be executive officers. He shall assign all duties not otherwise specified by these By-Laws to all officers and employees of the Corporation. SECTION 2. Election, Qualification, Tenure of Office, and Duties of Executive Officers and Other Officers. (a) At the annual meeting of the Board of Directors following their election by the stockholders, the directors shall elect all executive officers of the Corporation. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The Chairman of the Board shall be a director but no other officer need be a director. (b) Each executive officer shall hold office from the date of his election either until the date of his voluntary resignation, or death, or until the next annual meeting of the Board of Directors and until a successor shall have been duly elected and qualified, whichever shall first occur; provided that any such officer may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation will be served thereby, and the Board may elect another in the place and stead of the person so removed. (c) Chairman of the Board: The Chairman of the Board shall preside at all meetings of the stockholders, of the Board of Directors, and of the Executive Committee. He shall have the responsibility of keeping the directors informed on all policy matters, and shall have such other powers and perform such other duties as may be prescribed by the Board. (d) Vice Chairman of the Board: The Vice Chairman of the Board shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders, the Board of Directors and the Executive Committee. He shall perform such other duties as may be prescribed by the Chairman of the Board. (e) President: The President shall, in the absence of the Chairman of the Board and the Vice Chairman of the Board, preside at all meetings of the stockholders, the Board of Directors and the Executive Committee. He shall exercise all of the powers and discharge all of the other duties of the Chairman of the Board in the absence of the Chairman of the Board. He shall perform such other duties as may be prescribed by the Chairman of the Board. (f) Vice Presidents: The Vice Presidents shall have such duties and have such other powers as shall be prescribed by the Chief Executive Officer. (g) Secretary: The Secretary shall record all the proceedings of the meetings of the Corporation and of the directors in a book or books kept for that purpose. He shall attend to the giving and serving of all notices on behalf of the Corporation. He shall have the custody of the corporate seal and affix the same to such instruments as may be required. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (h) Assistant Secretaries: Assistant Secretaries shall assist the Secretary in the performance of his duties and any one of the Assistant Secretaries may perform all of the duties of the Secretary if at any time he shall be unable to act. Assistant Secretaries shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (i) Treasurer: The Treasurer shall have charge of the custody, control and disposition of all funds of the Corporation and shall account for same. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (j) Assistant Treasurers: Assistant Treasurers shall assist the Treasurer in the performance of his duties and any one of the Assistant Treasurers may perform all of the duties of the Treasurer if at any time he shall be unable to act. Assistant Treasurers shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. SECTION 3. Committees. (a) Executive Committee. The Board of Directors shall, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members, all of whom shall be directors. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all 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. It shall be the duty of the Secretary of the Corporation to record the minutes of all actions of the Executive Committee. (b) Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. The Chief Executive Officer may appoint such other committees as he finds necessary to the conduct of the Corporation's business. Such other committees appointed by the Board of Directors or the Chief Executive Officer shall have such powers and perform such duties as may be prescribed by the body or person appointing such committee. (c) The members of all committees of the Board of Directors shall serve a term co-existent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of sub-section (a) or (b) of this Section 3 may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than three members. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee, 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 of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE V CAPITAL STOCK SECTION 1. Form and Execution of Certificates. Certificates for the shares of stock of the Corporation shall be in such form as are consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Where such certificate is countersigned by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, any other signature on the 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. SECTION 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. Transfers. Transfers of record of shares of the capital stock of the Corporation shall be made upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by a properly endorsed stock power. SECTION 4. Fixing Record Dates. 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 to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of 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 of Directors 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; and (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 of Directors 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 of Directors may fix a new record date for the adjourned meeting. SECTION 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, 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, except as otherwise provided by the laws of Delaware. 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 of Directors, 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 of Directors; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual 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 of Directors, or bear imprinted thereon the facsimile signature of such person. In case any person who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be an officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VII SECURITIES OWNED BY THE CORPORATION Power to Vote. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer, or any officer designated in writing by the Chief Executive Officer, shall have full power and authority in the name and on behalf of the Corporation, to vote and to act either in person or by proxy at any meeting of the holders of stock or securities in any corporation upon and in respect of any securities therein which the Corporation may hold, and shall possess and may exercise in the name of the Corporation any and all rights and powers incident to the ownership of such stock or securities which, as the owner thereof, the Corporation shall possess and might exercise including the right to give written consents in respect to action taken or to be taken. The Board of Directors may from time to time confer like powers upon any other person or persons. ARTICLE VIII CORPORATE SEAL The corporate seal shall consist of a die bearing the inscription, ``Consolidated Freightways, Inc.- Corporate Seal-Delaware.'' ARTICLE IX AMENDMENTS These By-Laws may be repealed, altered or amended or new By-Laws adopted by written consent of stockholders in the manner authorized by Section 8 of Article II or at any meeting of the stockholders, either annual or special, by the affirmative vote of a majority of the stock entitled to vote at such meeting. The Board of Directors shall also have the authority to repeal, alter or amend these By-Laws or adopt new By-Laws by unanimous written consent or by the affirmative vote of a majority of the whole Board at any annual, regular, or special meeting subject to the power of the stockholders to change or repeal such By-Laws. ARTICLE X MISCELLANEOUS SECTION 1. Definitions. As used in these By-Laws and wherever the context shall require, the word ``person'' shall include associations, partnerships and corporations as well as individuals; words in the masculine gender shall include the feminine and associations, partnerships and corporations; words in the singular shall include the plural and words in the plural may mean only the singular, and words ``additional compensation'' shall mean and include all bonus, profit sharing, retirement, deferred compensation, and all other additional compensation plans or arrangements affecting persons individually or as a group. SECTION 2. Notices. Whenever, under any provisions of these By-Laws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by the method hereinabove stated, by personal delivery, or by telegram, except that such notice, other than one which is delivered personally, shall be sent to such address as such director shall have filed in writing with the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the principal office of the Corporation. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram shall be deemed to have been given as at the sending time recorded by the telegraph company transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any directors may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or By-Laws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. SECTION 3. Indemnification of Officers, Directors, Employees and Agents. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a ``Proceeding''), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than were permitted prior to amendment) against all expenses, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that except as to actions to enforce indemnification rights pursuant to paragraph (c) of this Section, the Corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right for the benefit of the Corporation's directors, officers, employees, and agents. (b) Authority to Advance Expenses. Expenses incurred (including attorneys' fees) by an officer or director (acting in his capacity as such) in defending a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the Delaware General Corporation Law, as amended, such expenses shall be advanced only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article or otherwise. Such expenses incurred by other employees or agents of the Corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. (c) Right of Claimant to Bring Suit. If a claim under paragraph (a) or (b) of this Section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys' fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. (d) Provisions Nonexclusive. The rights conferred on any person by this Section shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (e) Authority to Insure. The Corporation may purchase and maintain insurance to protect itself and any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability, expense, or loss asserted against or incurred by such person, whether or not the Corporation would have the power to indemnify him against such liability, expense, or loss under applicable law or the provisions of this Article. (f) Survival of Rights. The rights provided by this Section shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (g) Effect of Amendment. Any amendment, repeal, or modification of this Section shall not (a) adversely affect any right or protection of any director, officer, employee, or agent existing at the time of such amendment, repeal, or modification, or (b) apply to the indemnification of any such person for liability, expense, or loss stemming from actions or omissions occurring prior to such amendment, repeal, or modification. CERTIFICATE The undersigned, Secretary of CONSOLIDATED FREIGHTWAYS, INC., does hereby certify that the foregoing is a true and correct copy of the By-Laws of CONSOLIDATED FREIGHTWAYS, INC., as amended to date hereof. In witness whereof the undersigned has hereunto set his hand and affixed the seal of said corporation this 29th day of March 1993. /s/Maryla R. Boonstoppel Vice President and Secretary of Consolidated Freightways, Inc. CONSOLIDATED FREIGHTWAYS, INC. INCORPORATED IN DELAWARE AUGUST 13, 1958 UNDER THE CORPORATE NAME OF CONSOLIDATED FREIGHTWAYS COMPANY BY-LAWS As Amended March 29, 1993 CFI-0014 (5/93) Litho in U.S.A. EX-10.20 3 EXHIBIT 10.20 EXHIBIT 10.20 ------------- CONSOLIDATED FREIGHTWAYS, INC. ------------------------------ 1994 Director's Election Form ----------------------------- Indicate amount of deferral under (A), timing of deferral under (B), or select (C) if no deferral is elected. In the event I earn any Consolidated Freightways, Inc. director's fees in 1994, I hereby elect to defer payment of such fees and any interest equivalent as follows: A. ( ) To defer annual retainer and all meeting fees and chair fees, if applicable. ( ) To defer the annual retainer portion of such fees. B. ( ) To be paid in the year following the year in which I cease to be a director of Consolidated Freightways, Inc. ( ) To be paid in equal annual installments for _____ year(s) but not to exceed five (5) years, commencing in the year following the year in which I cease to be a director of Consolidated Freightways, Inc. ( ) To be paid in the year following _____ year(s) (insert 1 or any multiple of years) after the year in which fees are deferred (but in no event later than the year following the year I cease to be a director of Consolidated Freightways, Inc.). ( ) To be paid in equal annual installments for _____ year(s) but not to exceed five (5) years, commencing in the year following _______ year(s) (insert 1 or any multiple of years) after the year in which fees are deferred (but in no event later than the year I cease to be a director of Consolidated Freightways, Inc.). I understand that payment of any amount deferred hereunder will be made by January 31st of the year in which such payment is to be made. I further understand that any amount deferred will be credited with interest equivalents at the end of each calendar quarter following the date of deferral and continuing until such deferred amount is paid to me. Interest equivalents shall be calculated at the published Bank of America NT & SA prime rate as of the date credited and shall be paid on prior interest equivalents credited on amounts deferred. I also understand that no trust is created hereby and that in the event of my death, any amounts unpaid shall be paid to my designated beneficiary in a lump sum. I designate as my beneficiary ________________________________________ C. ( ) I do not elect to defer payments of any fees earned in 1994. ________________________ ________________________ Date of this Election Signature of Director EX-10.22 4 EXHIBIT 10.22 Exhibit 10.22 CONSOLIDATED FREIGHTWAYS, INC. EXECUTIVE INCENTIVE PLAN FOR 1994 THE PLAN In order to motivate certain of its employees more effectively and efficiently, Consolidated Freightways, Inc. (CF, Inc.) establishes an Incentive Plan (Plan) under which payments will be made to eligible executive personnel out of calendar year 1994 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in this Plan shall be all full-time executive personnel of CF, Inc. A master list of all Plan participants will be maintained in the office of the Chief Executive Officer of CF, Inc. ELIGIBILITY FOR PAYMENT Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1. An employee who commences participation in the 1994 Plan during the 1994 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by Consolidated Freightways, Inc. or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CF, Inc. or any of its subsidiaries through December 31, 1994 but leaves that employment or otherwise becomes ineligible after December 31, 1994 but before the final payment is made relating to 1994, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1994 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1994 pursuant to the Consolidated Freightways, Inc. Non-Contractual Employees Pension Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1994 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1994, or (4) to an eligible Plan participant who is transferred to another subsidiary of CF, Inc. and who remains an employee through December 31, 1994. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of Annual Salary. Participants will have their participation factor based on CF, Inc. Incentive Profit. Minimum and Incentive Factor Profit Goals are shown on Schedule A. Incentive compensation for the assigned profit goals will be earned on a pro rata basis for accomplishments between the Minimum level and the Incentive Factor Goal and will continue to be earned ratably for performance over the Incentive Factor Goals. No incentive will be earned by a participant until CF, Inc. has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which participant is assigned, (2) his assigned incentive participation factor, (3) the minimum level of achievement required for the profit goal, (4) the incentive factor level of achievement for the profit goal, and (5) the incentive earnings at the incentive factor level for the profit goal. DATE OF PAYMENT The Chief Executive Officer of CF, Inc. may authorize a partial payment of the estimated annual earned incentive, in December, 1994. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1995. INCENTIVE PROFIT Incentive Profit is defined as the earnings of CF, Inc. before deducting any amounts expensed under this or any similar incentive, bonus and/or profit sharing plans and before deducting income taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary before any incentive or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. The term "special compensation" used herein does not include deferred salary arrangements wherein the participant could have chosen to receive the deferred salary in the Plan year. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of CF, Inc. may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1994 only. SCHEDULE A CONSOLIDATED FREIGHTWAYS, INC. INCENTIVE PLAN FOR 1994 PROFIT GOALS Incentive Minimum Factor Incentive Plan Unit Profit Goal Profit Goal Consolidated Freightways, Inc. $108,000,000 $180,000,000 EX-10.23 5 EXHIBIT 10.23 EXHIBIT 10.23 CF MOTORFREIGHT INCENTIVE PLAN FOR 1994 THE PLAN In order to motivate certain employees of CF MotorFreight (CFMF) more effectively and efficiently, Consolidated Freightways Corporation of Delaware (CFCD) establishes an Incentive Plan (Plan) under which payments will be made to eligible supervisory, managerial and regular full-time nonsalaried, noncontractual personnel out of calendar year 1994 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all full-time supervisory, managerial and regular nonsalaried, noncontractual personnel of CFMF. A master list of Plan participants will be maintained in the office of the President of CFCD. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1. An employee who commences participation in the 1994 Plan during the 1994 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by CFCD or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CFCD or any of its subsidiaries through December 31, 1994 but leaves that employment or otherwise becomes ineligible after December 31, 1994, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1994 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1994 pursuant to the Consolidated Freightways, Inc. Non-Contractual Employees Pension Plan or to the provisions of either the Social Security Act or the Old Age Security Acts (of Canada), as applicable, and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1994 and who, at the time of death, was an eligible participant in this Plan,(3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1994, or (4) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1994. METHOD OF PAYMENT Each participant will be assigned an incentive participation factor as a percent of annual compensation in accordance with Schedule A, attached. Each plan participant will be assigned to an operating unit (such as total company, divisions, terminal, etc.) to earn incentive. Incentive earnings may be further allocated to specific Performance Goals for the participant's operating unit such as revenue, profit, service, etc. Incentive Factor Plan goals and Minimum levels of accomplishment will be established for all Performance Goals. As an example, the Minimum and Incentive Factor Plan Profit Goals for CF MotorFreight are shown on Schedule B, attached. Incentive for the assigned Performance Goals will be earned on a prorata basis for accomplishment between Minimum Level and Incentive Factor Plan Goal. The same prorata relationship will apply to any Goal performance over the Incentive Factor Plan goal. No incentive will be earned by a participant until CFMF has achieved its Minimum Profit Goal and his unit achieves its Minimum Profit Goal. Incentive earned from the attainment of Performance Goals other than profit will be restricted to the same percent of accomplishment as profit, until his unit has reached its Incentive Factor Plan Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive partici- pation factor and the allocation of that factor to specific Perfor- mance Goals, (3) the minimum level of achievement required for each assigned goal, (4) the incentive factor level of achievement for each assigned goal, and (5) the incentive point potential at the incentive factor level for each assigned goal. DATE OF PAYMENT The President of CFCD may authorize a partial payment of the estimated annual earned incentive, in December 1994. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1995. INCENTIVE PROFIT Incentive Profit is defined as the earnings of CF MotorFreight before deducting any amounts expensed under this or any similar incentive or bonus plan and before deducting income taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant in his annualized salary or hourly base pay before any incentive, overtime, shift premium, or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION AND ADMINISTRATION OF PLAN The Board of Directors of CFCD may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1994 only. SCHEDULE A CF MOTORFREIGHT INCENTIVE COMPENSATION PLAN PARTICIPATION FACTORS Terminal Reg Non- Quality -------------Hay Points-------------- Contractual Weight Over 621- 380- 301- Under Hourly Accomplishment 925 924 620 379 300 Personnel Over 60 Million Lbs 29.5% 24.0% 18.5% 15.2% 13.0% 7.0% 30-60 Million Lbs 18.5 15.2 13.0 10.8 7.0 Under 30 Million Lbs 15.2 13.0 10.8 8.6 7.0 Adminis- trative Positions 29.5 24.0 18.5 15.2 13.0 7.0 SCHEDULE B CF MOTORFREIGHT INCENTIVE COMPENSATION PLAN FOR 1994 PROFIT GOALS Incentive Minimum Factor Profit Goal Profit Goal CF Motorfreight (Note A) $ 42,000,000 $ 98,000,000 Note A - This unit consists of Consolidated Freightways Corporation of Delaware and Canadian Freightways Eastern, Ltd., net of intercompany eliminations. EX-10.24 6 EXHIBIT 10.24 EXHIBIT 10.24 CON-WAY TRANSPORTATION SERVICES, INC. INCENTIVE PLAN FOR 1994 THE PLAN In order to motivate certain of its employees more effectively and efficiently, Con-Way Transportation Services, Inc. (CTS) establishes an Incentive Plan (Plan) under which payments will be made to eligible supervisory, managerial, and regular full-time nonsalaried personnel out of calendar year 1994 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all full-time supervisory, managerial and regular nonsalaried personnel of CTS. A master list of all Plan participants will be maintained in the office of the President of CTS. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1. An employee who commences participation in the 1994 Plan during the 1994 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by CTS or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CTS or any of its subsidiaries through December 31, 1994 but leaves that employment or otherwise becomes ineligible after December 31, 1994 but before the final payment is made relating to 1994, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1994 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1994 pursuant to the Consolidated Freightways, Inc. Non-Contractual Employees Pension Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1994 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1994, or (4) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1994. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of Annual Compensation in accordance with the enclosed Personal Data Sheet. The Minimum and Incentive Factor Profit Goals for CTS are shown on Schedule A, attached. Incentive for assigned goals will be earned on a pro rata basis for accomplishment between the Minimum level and the Incentive Factor Goal. Incentive earnings over the Incentive Factor Goal will continue to earn at the same pro rata relationship that exists between minimum level and factor goal. No incentive will be earned by a participant until CTS has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive par- ticipation factor, (3) the minimum level of achievement required for the profit goal, (4) the incentive factor level of achievement for the profit goal, and (5) the incentive earnings at the incentive factor level for the profit goal. DATE OF PAYMENT The President of CTS may authorize a partial payment of the estimated annual earned incentive, in December 1994. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1995. INCENTIVE PROFIT Incentive profit is defined as the consolidated earnings of all of the companies comprising CTS, before deducting any amounts expensed under this or any similar incentive or bonus plan and before deducting in- come taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary or hourly base pay before any incentive, overtime, or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of CTS may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as the payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1994 only. SCHEDULE A CON-WAY TRANSPORTATION SERVICES, INC. INCENTIVE PLAN FOR 1994 _____________________________________ PROFIT GOALS Minimum Profit Goal $ 55,000,000 Incentive Factor Profit Goal $ 99,640,000 EX-10.25 7 EXHIBIT 10.25 EXHIBIT 10.25 EMERY WORLDWIDE ____________________________ INCENTIVE PLAN FOR 1994 THE PLAN In order to motivate certain employees more effectively and efficiently, Emery Worldwide (EWW) establishes an Incentive Plan (Plan) under which payments will be made to designated participants out of calendar year 1994 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all supervisory, managerial, and regular full-time and part-time non-contractual (time-sheet) personnel of EWW. A master list of Plan participants will be maintained in the office of the President of EWW. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1 and October 1. An employee who commences participation in the 1994 Plan during the 1994 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by EWW or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by EWW through December 31, 1994 but leaves that employment or otherwise becomes ineligible after December 31, 1994 but before the final payment is made relating to 1994, unless terminated for cause, is entitled to receive payments under this Plan resulting from 1994 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1994 pursuant to the Consolidated Freightways, Inc. Non-Contractual Employees Pension Plan, The Purolator Courier Corporation Hourly Employee Pension Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (ii) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1994 and who, at the time of death, was an eligible participant in this Plan, (iii) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1994, or (iv) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1994. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of annual compensation. The President of Emery will assign each Plan participant to an operating unit (terminal, division, total company, etc.) to earn incentive. The participation factor may be further indexed to specific performance goals such as revenue, profit, service, etc. The Minimum and Incentive Factor Profit Goals for EWW are shown on Schedule A, attached. Incentive compensation will be paid from an ICP pool earned ratably between the Minimum and Incentive Factor Profit Goals and will continue to be earned ratably over the Incentive Factor Goal. Incentive Factor Plan Goals and minimum levels of accomplishment will be established for all performance goals. No incentive will be earned by a participant until their terminal or appropriate unit meets the entry level for the various Performance Goals established. Actual incentive payout is subject to the ICP pool. Incentive Compensation will be adjusted proportionately to the amount in the ICP pool. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive par- ticipation factor and the allocation of that factor to specific Performance Goals, (3) the minimum level of achievement required for the profit goal, (4) the incentive factor level of achievement for each assigned goal, and (5) the incentive point potential at the incentive factor level for each assigned goal. DATE OF PAYMENT The President of EWW may authorize a partial payment of the estimated annual earned incentive, in December 1994. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1995. INCENTIVE PROFIT Incentive Profit is defined as the earnings of Emery Worldwide, Emery Custom Brokers, and Emery Worldwide Airlines before deducting any amounts expensed under this or any similar incentive or bonus plan and before deducting income taxes and excluding interest income and expense. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annual earnings for 1994 before any incentive or bonus payments earned during the period of Plan participation eligibility. MAXIMUM PAYMENT Payments under this plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of EWW may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1994 only. SCHEDULE A EMERY WORLDWIDE, INC. INCENTIVE PLAN FOR 1994 ______________________________ PROFIT GOALS Minimum Profit Goal $ 38,500,000 Incentive Factor Profit Goal 65,300,000 EX-10.31 8 EXHIBIT 10.31 EXHIBIT 10.31 CONSOLIDATED FREIGHTWAYS, INC. SUPPLEMENTAL RETIREMENT PLAN (As amended and restated effective January 1, 1990) Preamble Consolidated Freightways, Inc. (the "Company") hereby amends and restates the Consolidated Freightways, Inc. Supplemental Retirement Plan (the "Plan") for the purpose of providing key executives of the company with retirement benefits in excess of those benefits provided under the Consolidated Freightways, Inc. Retirement Plan, as amended and restated effective January 1, 1990 and the Consolidated Freightways, Inc. Pension Plan, as amended and restated effective January 1, 1988. This Plan is effective January 1, 1990. SECTION 1 DEFINITIONS AND CONSTRUCTION Except as follows or as otherwise provided, all capitalized terms used in this Plan have the same meanings as in the Retirement Plan. 1.1 Adjusted Pension Accrued Benefit means a Participant's Accrued Benefit under the Pension Plan calculated (i) without regard to the limitations imposed by Code Section 415 or Section 14 of the Pension Plan and (ii) using Supplemental Basic Compensation in lieu of Basic Compensation. 1.2 Adjusted Retirement Accrued Benefit means a Participant's Accrued Benefit under the retirement Plan calculated (i) without regard to the limitations imposed by Code Section 415 or Section 14 of the retirement Plan, (ii) using Supplemental Basic Compensation in lieu of Basic Compensation. 1.3 Excess Accrued Benefit has the same meaning as under the Excess Benefit Plan. 1.4 Excess Benefit Plan means the Consolidated Freightways, Inc. Excess Benefit Plan. 1.5 Pension Accrued Benefit has the same meaning as "Accrued Benefit" under the Pension Plan. 1.6 Pension Plan means the Consolidated Freightways, Inc. Pension Plan. 1.7 Retirement Accrued Benefit has the same meaning as "Accrued Benefit" under the Retirement Plan. 1.8 Retirement Plan means the Consolidated Freightways, Inc. Retirement Plan. 1.9 Supplemental Basic Compensation means a Participant's Basic Compensation increased to include (i) any compensation that would have been included in Basic Compensation but for the limitations imposed by Section 401(a)(17); and (ii) any compensation deferred by the Participant pursuant to a nonqualified deferral arrangement that, but for such arrangement, would have been included in Basic Compensation. In the case of compensation described in (i), it shall be included in the year paid, and in the case of compensation described in (ii), it shall be included in the year in which it would have been paid but for such deferral. SECTION II PARTICIPATION The persons entitled to benefits under this plan are those Participants who are credited with an Hour or Service on or after January 1, 1987, and either (i) have elected to defer compensation under the Company's Incentive Compensation/Stock Appreciation Rights Plan or other nonqualified deferral arrangement, or (ii) have Basic Compensation in excess of the limit imposed by Code Section 401(a)(17) for any Plan Year beginning after 1988. SECTION III VESTING A Participant's benefit under this Plan shall become nonforfeitable when the Participant's Accrued Benefit becomes nonforfeitable. SECTION IV AMOUNT OF BENEFITS A Participant's benefit under the Plan shall be the sum of his Adjusted Retirement Accrued Benefit and his Adjusted Pension Accrued Benefit reduced by the sum of his Excess Accrued Benefit and Retirement Accrued Benefit and Pension Accrued Benefit. SECTION V PAYMENT OF BENEFITS 5.1 Any benefit payable pursuant to this Plan shall be paid at the same time and in the same manner as benefits are payable to the Participant under the Retirement Plan. 5.2 If a Participant dies before benefits commence under the Retirement Plan, the Participant's spouse shall be entitled to a survivor benefit equal to (i) the applicable survivor benefit provided in Section 11.2 of the Retirement Plan calculated for this purpose using the Participant's Supplemental Basic Compensation in lieu of his Basic Compensation and without regard to Section 415 of the Code and Section 14 of the Retirement Plan, reduced by (ii) the sum of (A) the survivor benefit paid to the spouse pursuant to Section 5.2 of the Excess Benefit Plan and (B) the applicable survivor benefit paid to the spouse pursuant to Section 11.2 of the retirement Plan and the Section 11.2 of the Pension Plan. Survivor benefits under this Plan shall be paid at the same time and in the same manner as benefits are paid under Section 11.2 of the Retirement Plan and Section 11.2 of the Pension Plan. 5.3 If a Participant dies after benefits under this Plan commence, survivor benefits, if any, shall be paid in accordance with the form of benefit being paid to the Participant. SECTION VI AMENDMENT AND TERMINATION The Board of Directors of the Company shall have the authority to amend or terminate this Plan at any time and from time to time, in whole or in part. Notwithstanding the foregoing, no amendment shall adversely affect the benefits under this Plan of a Participant who would be entitled to benefits under this Plan (whether or not payment would be deferred) if he terminated employment or died on the date of such amendment. SECTION VII MISCELLANEOUS PROVISIONS 7.1 PLAN ADMINISTRATION The general administration of this Plan shall be the responsibility of the Committee. The Committee is authorized to delegate its responsibilities to an administrator or an administrative committee. All actuarial determinations shall be made by the actuary for the Retirement Plan, and the Committee shall be entitled to rely on the determinations of such actuary as conclusive for purposes of determining benefit entitlements under this Plan. 7.2 No Employment Contract The adoption of this plan is not a contract between any employer and any employee, nor does it give any employee any right to continue employment with any employer, or interfere with the right of any employer to discharge any employee with or without cause. 7.3 Non-Alienation of Benefits No benefit payable under this Plan may be assigned, pledged, mortgaged, or hypothecated, or shall be subject to legal process or attachment for the payment of claims of any creditor of a Participant or the surviving spouse of a Participant. 7.4 No Funding Obligation This Plan shall not be construed to require the Company to fund any of the benefits payable under this Plan nor to require the establishment of a trust. The Company, in its sole discretion, may make such arrangements as it desires to provide for the payment of any benefits hereunder, and no person shall have any claim against a particular fund or asset owned by the Company or in which it has an interest to secure the payment of the Company's obligations hereunder. 7.5 Governing Law The provisions of this Plan shall be construed according to the laws of the State of California. Dated: March 26, 1991 CONSOLIDATED FREIGHTWAYS, INC. By /s/John M. Kelly Its Senior Vice President, General Counsel and Secretary EX-10.32 9 EXHIBIT 10.32 EXHIBIT 10.32 DIRECTORS 24-HOUR ACCIDENTAL DEATH AND DISMEMBERMENT PLAN BENEFITS You are automatically insured against accidental death and dismemberment. Coverage begins as soon as you are eligible. The principal sum for which you are insured is $500,000. (Note - The maximum payment under this Plan and the Directors Business Travel Insurance Plan for all losses arising from any one accident is $5,000,000. If several directors are involved in one accident, and the total indemnity exceeds $5,000,000, each individual payment will be reduced proportionately.) ELIGIBILITY You are covered if you are a director of Consolidated Freightways, Inc. and are not covered by CF's 24-Hour Accidental Death and Dismemberment Plan for employees. COST The full cost of this plan is paid by Consolidated Freightways, Inc. TERMINATION Your coverage will terminate when you cease to be an eligible director of Consolidated Freightways, Inc. SUMMARY OF BENEFITS When an accidental injury results in any of the following losses within twelve months from the date of the accident, the insurance company will pay for the loss of : Life...................................The principal sum Both hands or both feet or sight of both eyes....................The principal sum One hand and one foot..................The principal sum One hand and the sight of one eye......The principal sum One foot and the sight of one eye......The principal sum One hand or one foot..............Half the principal sum Sight of one eye..................Half the principal sum Speech or hearing of both ears....Half the principal sum Hearing of one ear.........One Quarter the principal sum Thumb and Index Finger of same hand................One Quarter the principal sum "Loss" as used with reference to a hand or foot means complete severance at or above the wrist joint or ankle joint, as used with reference to an eye means the irrevocable loss of its entire sight and as used with reference to the thumb and index finger means the severance of two or more entire phalanges of both the thumb and the index finger. The loss of hearing or speech means the total and irrevocable loss of hearing or speech. In the event of multiple injuries to an insured person resulting from any one accident, only one amount is payable....the largest applicable. BENEFICIARY You may designate and from time to time thereafter change your beneficiary by completing and returning a beneficiary designation form, which can be obtained from the offices of Consolidated Freightways, Inc. If your named beneficiary or beneficiaries do not survive you, benefits will be paid to your estate, or at the option of the insurance company, to your surviving relations. EXCLUSIONS Benefits are not payable for loss resulting from: 1. Suicide or any attempt thereat while sane or insane; an act of declared or undeclared war or participation in any maneuvers or training exercises of an armed service; 2. Air travel except as a passenger (not a pilot or a crew member) in any properly licensed and operated civil aircraft, any transport type aircraft operated by the Military Air Transport Service of the United States or by similar air transport service of Canada or Great Britain, or any properly operated United States Department of Defense aircraft (other than a single engine jet); making a flight for the purpose of transporting passengers or passengers and cargo and not used for any tactical or test purpose. CLAIMS PROCEDURE If you suffer an injury covered by the Directors 24-Hour Accidental Death and Dismemberment Insurance Plan (accidental death or dismemberment) written notice of the loss should be given to the Administrative Benefits Office, Consolidated Freightways, Inc., P. O. Box 3988, Portland, Oregon 97208 within 20 days or as soon thereafter as is reasonably possible. If you have any questions or complaints regarding the Directors Business Travel Insurance Plan, please contact Eberhard Schmoller or David Slate. Complete terms and conditions of the 24-Hour Accidental Death and Dismemberment Insurance Plan are set forth in the master contract issued to CF by the Hartford Life Insurance Company. Consolidated Freightways, Inc. reserves the right to change or discontinue the Plan at any time. EX-10.33 10 EXHIBIT 10.33 EXHIBIT 10.33 CONSOLIDATED FREIGHTWAYS, INC. EXECUTIVE SPLIT-DOLLAR LIFE INSURANCE PLAN Effective January 1, 1994 Preamble Consolidated Freightways, Inc. established the Executive Split-Dollar Life Insurance Plan, effective January 1, 1994, for the purpose of providing life insurance for certain valuable employees of the Company while they are employed and into their retirement years. The Company reserves the right to determine those employees eligible to participate in the Plan. SECTION 1 Definitions Annual Compensation means the weekly salary of a Participant as determined by using week 1 payroll processing for the calendar year multiplied by 52. Annual Compensation does not include any payments made under the Employer's Incentive Compensation Plan, or any other bonus plan. Annual Compensation is used to determine the initial Face Value of the Policy. Beneficiary means the person or persons who are to receive benefits after the death of the participant. Board of Directors means the Board of Directors of the Company or any committee to which the Board of Directors specifically delegates any authority granted to it under the Plan. Cash Surrender Value of the Policy means the cash value of the Policy, plus the cash value of any paid-up additions, plus any dividend accumulations and unpaid dividends, less any policy loan balance. Cash Value of the Policy means the cash value as illustrated in the table of values shown in the Policy plus the cash value of any paid up additions credited to the Policy. Committee means the Pension and Employee Benefits Committee. Company means Consolidated Freightways, Inc., a Delaware corporation. Current Loan Value of the Policy means the loan value of the Policy reduced by any outstanding policy loan balance. Disability means inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. Early Retirement has the same meaning as defined in the Retirement Plan. Early Retirement Age means the day on which a Participant attains age 55. Effective Date means January 1, 1994 with respect to the Executive Split-Dollar Life Insurance Plan. Eligible Spouse means that spouse to whom a Participant is married on the date of his death. To the extent provided under a "qualified domestic relations order," the term Eligible Spouse shall mean a former spouse in place of the participant's current spouse. Employee means a person employed by the Employer, any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by an Employer, as well as any other person qualifying as a common law employee of an Employer. Employer means the Company or any subsidiary thereof who has adopted the Plan. Employer's Interest in the Policy means the Employer's accumulated premium payments less the accumulated amount reimbursed by the Participant and less any Policy loan balance. Equivalent Compensation means Annual Compensation indexed by 5% compounded annually, except in the third through fifth years where indexing is 33 1/3% annually. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Face Value means the amount of life insurance indicated on an individual Policy or as indexed within the Policy. Incentive Compensation Plan means the short-term annual incentive bonus plan or plans adopted by an Employer from time to time. Insurer means The Northwestern Mutual Life Insurance Company. Loan Value of the Policy means the amount which with loan interest will equal the Cash Value of the Policy and of any paid-up additions on the next loan interest due date or on the next premium due date whichever is the smaller amount. Normal Retirement has the same meaning as defined in the Retirement Plan. Normal Retirement Age means the day on which the Participant attains age 65. Participant means an Employee selected by the Committee who elects to enroll in the Plan. Plan means the Consolidated Freightways, Inc. Executive Split- Dollar Life Insurance Plan set forth herein, and as amended from time to time. Plan Year means the calendar year. Policy means the split-dollar life insurance issued in the name of a Participant. Policy Loan Balance means the policy loans outstanding plus interest accrued to date. Retirement Plan means the Consolidated Freightways, Inc. Retirement Plan, as it may be amended from time to time. Severance Date means the earlier of the date a Participant quits, retires, is discharged or dies. Masculine pronouns used herein shall include the feminine, the singular number shall include the plural, and the plural shall be read as the singular. SECTION 2 Eligibility and Participation Only an Employee selected by the Board of Directors or the Committee is eligible to participate in the Plan. SECTION 3 Allocation of Payment of Premium and Dividends Each premium on the policies shall be paid by the Employer as it becomes due. By weekly payroll deduction (over the first 50 pay periods of the Plan Year) the Participant shall reimburse the Employer for a portion of the premium paid by the Employer. The amount of the reimbursement shall equal the value of the economic benefit attributable to the life insurance protection provided to the Participant under the Plan. The value of the economic benefit shall be calculated by using the lower of the Internal Revenue Service table P.S. 58 rates or the Insurer's term rates times the excess of the current death benefit over the Employer's total value of its share of the premium. Dividends shall be applied as required according to the Policy form chose by the Company. SECTION 4 Assignment of Policy The Employee shall be the sole owner of the Policy. The Employee may exercise all rights, options, and privileges of ownership in the Policy except those granted to the Employer in the assignment. However, to secure premiums paid by the Employer as described above, the Participant shall execute an assignment of the Policy to the Employer as collateral for amounts to be advanced by the Employer by an instrument of assignment, recorded with the Insurer. The Employer will have those rights in the policy given to it in the assignment, except that the Employer will not surrender the Policy for cancellation except upon expiration of the thirty (30) day period described in Section 11, and except that the Employer will not, without written consent of the Employee, assign its rights in the Policy, other than for the purpose of obtaining a loan against the Policy, to anyone other than the Employee. Any payments under the Policy to the Employer in connection with the rights granted to the Employer in the assignment referred to in the prior paragraph shall first be made from Policy cash values attributable to the paid up additional life insurance purchased by Policy dividends. The Employee shall have no interest in the paid up additional life insurance protection except to the extent the death benefit or cash value thereof exceeds the total Employer's share of premiums paid. SECTION 5 Disability and Death In the event a Participant in the Plan suffers a Disability, the Employer will continue to make premium payments under the Plan. The Participant's reimbursement obligations shall be waived during such time of Disability. In the event the Policy becomes a claim by reason of the Participants death, the Employer shall have an interest in the proceeds of the Policy to the total value of its share of the premiums paid under Section 3 of this Plan less any Policy indebtedness to the Insurer. The balance, if any, of the proceeds of the Policy shall be paid directly by the Insurer to the Beneficiary designated by the Participant. SECTION 6 Approved Leaves of Absence A participant on an approved leave of absence, from the Employer shall be required to reimburse the Company, at least monthly, an amount equal to the economic value of the benefit as determined in Section 3. SECTION 7 Possession of the Policy A Participant who becomes ineligible to participate in the Plan or who is not selected by the Committee for further participation in the Plan, shall have the right to take possession of his Policy and continue premium payments, if any, directly to the Insurer. The Cash Surrender Value of the Policy, if any, will be reduced by the Employer's Interest in the Policy. A Participant who retires from the Employer, as defined in the Retirement Plan, shall be entitled to take possession of his Policy. The Company will continue to make premium payments under the terms of the Policy, if necessary. The Participant's Cash Value of the Policy, if any, will be reduced by the Employer's Interest in the Policy. The Face Value of the Policy available to the retiree should equal the Equivalent Compensation of the Participant calculated as of the beginning of the most recent Plan Year. The Company retains the sole right to maintain a lower amount of insurance. At all other times, the Policy will be assigned to the Employer by the Participant in a collateral assignment agreement provided for this purpose. SECTION 8 Loans The Employer shall have the right to borrow on the Policy up to the lesser of (a) the Employer's Interest in the Policy or (b) the Loan Value of the Policy. SECTION 9 Face Value of the Split-Dollar Life Insurance The Company will purchase on behalf of each Participant a Face Value Policy equal to the Annual Compensation of the Participant. In the third through fifth years of the Policy, the face value of the Policy will be increased in approximately equal increments to that the fifth year face value of the Policy will equal twice the Equivalent Compensation of the Participant. In all other years, the Face Value of the Policy will increase at a rate of 5% per annum. During the first four years of the Policy, the Company will coordinate benefits under this plan with benefits payable under the Company's Group Life Insurance Plan so that the Participant will continually have a combined life insurance benefit equal to twice the Annual Compensation of the Participant. Upon reaching twice the Equivalent Compensation on the face value of this policy, coverage in the Company's Basic Group Life Insurance Plan will cease. This will not affect the Employee's eligibility to participate in the Company's Optional Group Life Insurance Plan. SECTION 10 Obligations of the Insurer The Insurer shall be bound only by the provisions of and endorsements on the Policy, and any payments made or action taken by it in accordance therewith shall fully discharge the Insurer from all claims, suits and demands of all persons whatsoever. It shall in no way be bound by or deemed to have notice of the provisions of this Plan. SECTION 11 Termination of Agreement The agreement entered into between the Employer and the Participant under this Plan may be terminated at any time while the Participant is living by written notice thereof by either the Employer or the Participant to the other; and, in any event, said agreement will terminate at the Participant's Severance Date. This agreement may be terminated, by the Employee, subject to the conditions expressed below, with or without the consent of the Employer by giving notice in writing to the Employer. The Employer acknowledges that its present intent is to maintain this agreement with the Employee for the indefinite future but expressly reserves the right to amend or terminate this Plan at any time upon 30 days written notice to the employee if the Employer in good faith determines that such continuation is no longer in its best interest or consistent with its policies. Such amendment or termination, however, shall not reduce or eliminate any benefit or interest that the Employee may have in such Policy subject to the Plan determined as of the effective date of such amendment or termination. In the event that either the Employer or Employee terminates the agreement or it is terminated as of the Employee's Severance Date, the Participant shall take possession of the Policy, and at his discretion, can continue the Policy under the terms and conditions prescribed by the Insurer. The Participant's interest in the Cash Value of the Policy shall be reduced by the Employer's Interest in the Policy in accordance with the collateral assignment agreement. In the event of termination of this agreement as provided above, the Employee shall have the right to repay the Employer within 90 days of the date of termination an amount equal to the Employer's share of the premiums paid under the Policy less and Policy indebtedness to the Insurer or other indebtedness secured by the cash value of the Policies. The Employee will be obligated for all future premium payments under the Policy. If the Employee fails to repay the Employer within 90 days of the date of termination of the agreement, Employee shall execute any and all instruments that may be required to vest ownership of said Policy in the Employer. SECTION 12 Claiming Benefits If the Participant should die while an active Employee, the Retirement Plans Administration Office will notify the Participant's Beneficiary of any necessary documents required. The amount of life insurance payable under the Plan will be paid when the necessary documents have been received and approved. The Retirement Plans Administration Office will file the claim, on behalf of the Beneficiary, with the Insurer. If the Participant should die after his Severance Date, but while the Policy remains in force, his Beneficiary should contact the Retirement Plans Administration Office. That office will instruct the Beneficiary on the necessary documents needed to file a claim against the Policy. The Retirement Plan Administration Office will file the claim, on behalf of the Beneficiary, with the Insurer. SECTION 13 Denial of a Benefit If for any reason a claim for benefits under this Plan is denied by the Employer, the Committee shall deliver to the claimant a written explanation setting forth the specific reasons for the denial, pertinent to the Plan Section on which the denial is based, such other data as may be pertinent and information on the procedures to be followed by the claimant in obtaining a review of his claim, all written in a manner calculated to be understood by the claimant. For this purpose the claimant's claim shall be deemed filed when presented in writing to the Retirement Plans Administration Office, P. O. Box 3680, Portland, OR 97208. The committee's explanation of the denial shall be in writing, delivered to the claimant within 90 days of the date the claim was filed. The claimant shall have 60 days following his receipt of the denial of the claim to file with the Committee a written request for review of the denial. For such review, the claimant or his representative may submit pertinent documents and written issues and comments. The Committee shall decide the issue on review and furnish the claimant's request for review of his claim. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent Plan provisions on which the decision is based. If a copy of the decision is not furnished to the claimant within such 60 days, the claim shall be deemed denied on review. EX-10.34 11 EXHIBIT 10.34 EXHIBIT 10.34 CONSOLIDATED FREIGHTWAYS, INC. BOARD OF DIRECTORS DIRECTORS' COMPENSATION PLAN The new directors' compensation package is designed to: o Bring directors' compensation into the mainstream of current corporate practice; o Recognize attendance at Board and Committee meetings and the inherent responsibilities of Committee Chairmanships; o Approximate current annual cash compensation; and o Provide significant long-term gain potential through restricted stock grants in lieu of a portion of the existing pension accrual. The specific elements of the new plan are: Annual Retainer $15,000 Board Meeting Fees @ 1,000 Committee Fees @ 500 Standing Committee Chair Fees: Audit 3,000 Compensation 3,000 Finance 3,000 Pension and Employee Benefits 3,000 Advisory Nominating 2,000 Charitable Contributions 2,000 Executive 0 Annual Restricted Stock Grant 12,500 (5 years or upon retirement) Annual Retirement Accrual 15,000 The plan is intended to be "tax neutral" relative to the existing directors' compensation plan. It is anticipated that after a 5- year restriction period and assuming annual appreciation of 6-8%, the tax liability (based on the then current market value) arising from "constructive receipt" of the shares could be met by sale of a portion of these shares. Annual stock grants will not be subject to the 20-year limit on retirement accrual. The restricted stock grant is non-discretionary. Vesting occurs automatically in 5 years and, as such, does not constitute a Section 16(B) event, and therefore does not otherwise impact a director's ability to purchase or sell shares. The restricted stock grant is subject to shareholder approval and, accordingly, will be submitted to shareholders for vote at the 1994 annual meeting. The new plan is to become effective January 1, 1994. It is our intention to make the stock grant also effective January 1, subject to shareholder approval. If this is not legally possible, the stock grant will be made at the Annual Meeting of Directors, immediately following the Annual Shareholders Meeting. In the unlikely event that this plan is not approved by shareholders, we would continue to accrue $30,000 per year up to a maximum of 20 years, for each directors' retirement, as is provided for under the current plan. EX-10.36 12 EXHIBIT 10.36 EXHIBIT 10.36 DIRECTORS BUSINESS TRAVEL INSURANCE PLAN BENEFITS You are automatically insured against accidental death and dismemberment that occurs when you are in travel status on CF business. Coverage begins when you leave your home, office, or other location (whichever occurs last) on CF business and continues until you return to your home or office (whichever occurs first) at the end of your trip. During this period, you are covered against all accidents, 24 hours a day, subject to the exclusions listed in the Directors Business Travel Insurance Plan. The principal sum for which you are insured is $500,000. This amount is payable in addition to any benefit you may be entitled to receive under CF's Directors 24-Hour Accidental Death and Dismemberment Plan. (Note - The maximum payment under this plan and the Directors 24-Hour Accidental Death and Dismemberment Plan for all losses arising from any one accident is $5,000,000. If several directors are involved in one accident, and the total indemnity exceeds $5,000,000, each individual payment will be reduced proportionately.) ELIGIBILITY You are covered if you are a director of Consolidated Freightways, Inc. and are not covered by CF's Business Travel Insurance Plan for employees. COST The full cost of this plan is paid by Consolidated Freightways, Inc. TERMINATION Your coverage will terminate when you cease to be an eligible director of Consolidated Freightways, Inc. SUMMARY OF BENEFITS When injury results in any of the following losses within one year after the accident happens, the insurance company will pay for the loss of: Life....................................The principal sum Both hands or both feet or sight of both eyes..........................The principal sum One hand and one foot...................The principal sum One hand and the sight of one eye.......The principal sum One foot and the sight of one eye.......The principal sum One hand or one foot...............Half the principal sum Sight of one eye...................Half the principal sum Thumb and index finger of either hand...............One Quarter the principal sum Speech or hearing of both ears.....Half the principal sum Hearing of one ear..........One Quarter the principal sum "Loss" as used with reference to hand or foot means complete severance, and as used with reference to eye means the irrecoverable loss of its entire sight. BENEFICIARY You may designate and from time to time thereafter change your beneficiary by completing and returning a beneficiary designation form, which can be obtained from the offices of Consolidated Freightways, Inc. If your named beneficiary or beneficiaries do not survive you, benefits will be paid to your estate, or at the option of the insurance company, to your surviving relatives. EXCLUSIONS This Plan does not cover losses which result from: 1. Suicide or intentionally self-inflicted injuries; 2. Illness, disease, pregnancy, childbirth, miscarriage, or any bacterial infection other than bacterial infection occurring as a result of an accidental cut or wound; 3. War or act of war, whether declared or not; 4. Injuries sustained while on full-time active duty in the armed forces of any country or international body; 5. Commuter travel to and from work; 6. Injuries sustained while riding as a passenger in any aircraft owned, leased or operated by or on behalf of CF, a member of your household or yourself; or any aircraft operated by or for or under the direction of any military authority, other than by the Military Airlift Command (MAC) of the United States of America or the similar air transport service of any other country, or any aircraft while being used for firefighting, pipeline inspection, powerline inspection, aerial photography, exploration or any test for experimental purpose; or any aircraft not operated by a properly certified pilot; or any aircraft without a current unrestricted airworthiness certificate; or while operating or serving as a crew member of any aircraft. CLAIMS PROCEDURE If you suffer an injury covered by the Directors Business Travel Insurance Plan (accidental death or dismemberment that occurs when you are in travel status on CF business), written notice of the loss should be given to the Administrative Benefits Office, Consolidated Freightways, Inc., P. O. Box 3988, Portland, Oregon 97208 within 20 days or as soon thereafter as is reasonably possible. If you have any questions or complaints regarding Directors Business Travel Insurance Plan, please contact Eberhard Schmoller or David Slate. Complete terms and conditions of the Business Travel Insurance Plan are set forth in the master contract issued to CF by the Hartford Life Insurance Company. Consolidated Freightways, Inc. reserves the right to change or discontinue the Plan at any time. EX-10.35 13 EXHIBIT 10.35 EXHIBIT 10.35 CONSOLIDATED FREIGHTWAYS, INC. EXCESS BENEFIT PLAN (Effective January 1, 1987) Preamble Consolidated Freightways, Inc. (the "Company") hereby establishes the Consolidated Freightways, Inc. Excess Benefit Plan (the "Plan") for the purpose of providing certain participants in the Consolidated Freightways, Inc. Non- Contractual Employees Pension Plan, effective January 1, 1984, as amended (the "Pension Plan"), with retirement benefits in excess of the limitations on contributions and benefits imposed by Section 415 of the Internal Revenue Code of 1986 and Section 15 of the Pension Plan. This Plan is effective January 1, 1987. SECTION I DEFINITIONS AND CONSTRUCTION Except as follows or as otherwise provided, all capitalized terms used in this plan have the same meanings as in the Pension Plan. 1.1 Excess Accrued Benefit means the Participant's Accrued Benefit calculated without regard to the limitations on contributions and benefits imposed by Section 415 of the Code or Section 15 of the Pension Plan, reduced by the Participant's Accrued Benefit. SECTION II PARTICIPATION The persons entitled to benefits under this Plan shall be those Participants (i) who are credited with an Hour of Service on or after January 1, 1987, and (ii) whose benefits under the Pension Plan would be reduced by operation of Section 415 of the Code (or the regulations thereunder) or Section 15 of the Pension Plan if the benefits were to become payable at the time of the Participant's retirement or death. SECTION III VESTING A Participant's benefit under this Plan shall become nonforfeitable when the Participant's Accrued Benefit under the Pension Plan becomes nonforfeitable. SECTION IV AMOUNT OF BENEFITS A Participant's benefits under this Plan shall be the Participants's Excess Accrued Benefit. SECTION V PAYMENT OF BENEFITS 5.1 Any benefit payable pursuant to this Plan shall be paid at the same time and in the same manner as benefits are paid to the Participant under the Pension Plan. 5.2 If a Participant dies before benefits commence under the Pension Plan, the Participant's spouse shall be entitled to a survivor benefit equal to (i) the applicable survivor annuity provided in paragraph 12.2 of the Pension Plan, calculated for this purpose without regard to Section 415 of the Code and Section 15 of the Pension Plan, reduced by (ii) the survivor benefit paid to the spouse pursuant to paragraph 12.2 of the Pension Plan. Survivor benefits paid under this Plan shall be paid at the same time and in the same manner as benefits are paid under paragraph 12.2 of the Pension Plan. 5.3 If a Participant dies after benefits under this Plan commence, survivor benefits, if any, shall be paid in accordance with the form of benefit being paid to the Participant. SECTION VI AMENDMENT AND TERMINATION The Board of Directors of the Company shall have authority to amend or terminate this Plan, at any time and from time to time, in whole or in part. Notwithstanding the foregoing, no amendment shall adversely affect the benefits of a Participant who would be entitled to benefits under this Plan (whether or not payment would be deferred) if he terminated employment or died on the date of such amendment. SECTION VII MISCELLANEOUS PROVISIONS 7.1 Plan Administration The general administration of the Plan shall be the responsibility of the Committee. The Committee is authorized to delegate its responsibilities to an administrator or administrative committee. All actuarial determinations shall be made by the actuary appointed for the Pension Plan, and the Committee shall be entitled to rely on the good faith determinations of such actuary. 7.2 No Employment Contract The adoption of this Plan is not a contract between any employer and any employee, nor does it give any employee any right to continue employment with any employer, or interfere with the right of an employer to discharge any employee with or without cause. 7.3 Non-Alienation of Benefits No benefit payable under this Plan may be assigned, pledged, mortgaged or hypothecated, or shall be subject to legal process or attachment for the payment of claims of any creditor of a Participant of surviving spouse of a Participant. 7.4 No Funding Obligation This Plan shall not be construed to require the Company to fund any of the benefits payable under this Plan nor to require the establishment of a trust. The Company, it its sole discretion, may make such arrangements as it desires to provide for the payment of benefits hereunder, and no person shall have any claim against a particular fund or asset owned by the Company or in which it has an interest to secure the payment of the Company's obligations hereunder. 7.5 Governing Law This Plan shall be construed according to the laws of the State of California. Dated: December 23, 1987 CONSOLIDATED FREIGHTWAYS, INC By /s/John P. Kelly Its Senior Vice President, General Counsel and Secretary EX-10.37 14 EXHIBIT 10.37 EXHIBIT 10.37 CONSOLIDATED FREIGHTWAYS, INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES (Effective as of October 1, 1993) Preamble The purpose of this Plan is to enhance the motivational value of the salaries and incentive compensation of a select group of management and highly compensated employees who contribute materially to the continued growth, development and future business success of the Company and its subsidiaries by providing them the opportunity to defer cash compensation. The Plan is intended to aid the Company and its subsidiaries in attracting and retaining key employees and give them an incentive to increase the profitability of the Company and its subsidiaries. In the future, the Company, in its discretion, may amend the Plan to include a Company contribution. ARTICLE 1 Definitions For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" means the sum of (i) the total of a Participant's Annual Deferral Amounts, plus (ii) the return credited in accordance with the Plan, reduced (iii) by all distributions made in accordance with the terms and conditions of this Plan. This account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant pursuant to this Plan. 1.2 "Annual Bonus" means any bonus or incentive compensation earned by a Participant in each Plan Year under all cash bonus and incentive plans of the Company, and any subsidiary, whether or not paid in such Plan Year. 1.3 "Annual Deferral Amount" means that portion of a Participant's Base Annual Salary and Annual Bonus that a Participant elects to have and is deferred, in accordance with Article 3, for any one Plan Year. In the event of Retirement, Disability, death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.4 "Base Annual Salary" means a Participant's base annual salary that is to be paid to a Participant for each Plan Year, determined as of the first day of that year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, and other fees, before reduction for compensation deferred pursuant to all qualified, nonqualified and Internal Revenue Code Section 125 plans of the Company or any subsidiary. 1.5 "Beneficiary" means one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.6 "Beneficiary Designation Form" means the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.7 "Board" means the Board of Directors of the Company. 1.8 "Change in Control" means a change in control of the Company described as follows: (a) Any "Person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")) is or becomes the "beneficial owner" (as that term is used in Rule 13(d)3 of the Exchange Act), directly or indirectly, of 20% or more of the total voting power of all classes of such stock of the Company then outstanding which is normally entitled to vote in the election of directors, provided that such 20% shall be 40% with respect to any "employee benefit plan" (as such term is defined in section 3(3) of the Employee Retirement Income Security Act of 1974) maintained by the Company, or any subsidiary, or trust vehicle maintained thereunder; (b) During any period of two consecutive years, individuals who at the beginning of such period constitute the Board (together with any new director whose election by the Board or whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved) cease for any reason to constitute at least a majority thereof; (c) The consolidation or merger of the Company with or into another corporation or the conveyance, transfer or lease by the Company of all or substantially all of its assets to any person, or the consolidation or merger of any other corporation with or into the Company, in either event pursuant to a transaction in which voting stock of the Company is changed into or exchanged for cash, securities or other property, provided that any such transaction that is between the Company and its subsidiaries or between any of its subsidiaries, or involves the exchange of the Company's voting stock as consideration in the acquisition of another business or businesses (without change or exchange of the Company's outstanding voting stock into or for cash, securities or other property) shall be excluded from the operation of this clause; or (d) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. 1.9 "Claimant" means any Participant or Beneficiary of a deceased Participant who makes a claim for determination under Section 13.1. 1.10 "Code" means the Internal Revenue Code of 1986, as amended. 1.11 "Committee" means the Compensation Committee of the Board or its delegates. 1.12 "Company" means Consolidated Freightways, Inc., a Delaware corporation. 1.13 "Disability" means a disability for which a Participant qualifies for benefits under the Consolidated Freightways, Inc. Extended Sick Pay Plan as it may be amended from time to time. 1.14 "Election Form" means the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.15 "Employer" means the Company or any of its subsidiaries that employs a Participant. 1.16 "Moody's Seasoned Corporate Bond Rate," means the arithmetic average of yields of representative bonds, including industrials, public utilities, Aaa, Aa, A and Baa bonds as published by Moody's Investors Service, Inc. or any successor to that service. For each Plan Year, this rate shall be determined by the Committee using the rate most recently published prior to the last day of the November preceding the Plan Year. 1.17 "Participant" for any Plan Year means any employee of an Employer (i) who is selected to participate in the Plan for such Plan Year by the Committee, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form and returns such documents to the Committee within the time required by the Committee, but in no event later than the Plan Entry Date, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan on his Plan Entry Date, and (vi) whose participation has not terminated. 1.18 "Plan" means the Company's Deferred Compensation Plan for Executives (effective as of October 1, 1993), evidenced by this instrument and by each Plan Agreement, as amended from time to time. 1.19 "Plan Agreement" means a written agreement, as may be amended from time to time, which is entered into by and between the Company and a Participant. 1.20 "Plan Entry Date" means the date on which an employee selected by the Committee to participate in the Plan commences participation in the Plan in accordance with Article 2. The Plan Entry Date shall be January 1 of the Plan Year following selection by the Committee; provided, however, for 1993 the Plan Entry Date shall be October 1, 1993. If an employee is first selected for participation in the Plan subsequent to January 1 of a Plan Year, but prior to July 1, the Committee may, in its sole discretion, authorize a Plan Entry Date for that Plan Year of July 1. 1.21 "Plan Year" means the period beginning on January 1 of each year (or, in certain limited cases, July 1) and continuing through December 31 of that year. Notwithstanding the foregoing, the initial Plan Year shall be the period beginning on October 1, 1993 and continuing through December 31, 1993. 1.22 "Pre-Retirement Distribution" means the payout set forth in Section 4.1 below. 1.23 "Pre-Retirement Survivor Benefit" means the benefit set forth in Article 6 below. "Prior Plan" means the Plan immediately in effect prior to October 1, 1993. 1.24 "Retirement", "Retires" or "Retired" means early retirement having attained at least age 55 and completed at least 10 years of service as defined in the Consolidated Freightways, Inc. Retirement Plan, or normal retirement under such Retirement Plan. 1.25 "Retirement Benefit" means the benefit set forth in Article 5. 1.26 "Termination Benefit" means the benefit set forth in Article 7. 1.27 "Termination of Employment" means the ceasing of employment with the Company and its subsidiaries, voluntarily or involuntarily, for any reason other than Retirement, Disability or death. 1.28 "Unforeseeable Financial Emergency" means an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. ARTICLE 2 Selection, Enrollment, Eligibility 2.1 Selection by Committee. Participation in the Plan shall be limited to a select group of management and highly compensated employees (employees whose Base Annual Salary is equal to or exceeds $100,000) of the Company and its subsidiaries. From that group, the Committee shall select for each Plan Year, in its sole discretion, those employees eligible to participate in the Plan for that Plan Year. 2.2 Enrollment Requirement. As a condition to participation, a selected employee shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form for each Plan Year. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. 2.3 Commencement of Participation. Provided an employee selected to participate in the Plan has met all enrollment requirements set forth in the Plan and required by the Committee, that employee shall commence participation in the Plan on the Plan Entry Date that immediately follows his election to participate in the Plan. ARTICLE 3 Deferral Commitments/Returns 3.1 Minimum Deferral. (a) Minimum. To defer compensation under the Plan in any Plan Year, a Participant must elect to defer a minimum of $2,000 of Base Annual Salary, or a minimum of $2,000 of Annual Bonus. (b) Short Participation Year. If a Participant's Plan Entry Date is July 1 of any Plan Year, he must defer a minimum of $1,000 of Base Annual Salary or a minimum of $1,000 of Annual Bonus. (c) First Plan Year. For the Plan Year commencing on October 1, 1993, only Annual Bonus may be deferred, and a Participant must elect to defer a minimum of $2,000 of such Annual Bonus. 3.2 Maximum Deferral. For each Plan Year, a Participant may defer up to 100% of his Base Annual Salary stated as a dollar amount and up to 100% of his Annual Bonus stated as a percentage amount. The amount of Base Annual Salary and/or Annual Bonus that a Participant elects to defer shall be reduced by the Committee, without the consent of the affected Participant, to the extent necessary to provide for (i) other deferrals of Base Annual Salary and/or Annual Bonus, as the case may be, by such Participant under all qualified and nonqualified plans of the Company or any subsidiary and Code Section 125 plans of the Company or any subsidiary, (ii) any taxes that are required to be withheld with respect to deferrals under the Plan, and (iii) any other amounts deducted from Base Annual Salary and/or Annual Bonus pursuant to applicable law or authorization by Participant. 3.3 Election to Defer. In connection with a Participant's first participation in the Plan, the Participant shall make a deferral election by delivering to the Committee a completed and signed Election Form at least 20 days prior to the intended Plan Entry Date, which election form must be accepted by the Committee prior to the Plan Entry Date for a valid election to exist. The Committee shall notify a Participant within ten days of its receipt of the Election Form if the Committee rejects the Election Form. For each succeeding Plan Year, a new Election Form must be delivered to and accepted by the Committee, in accordance with the rules set forth above, before the end of the Plan Year preceding the Plan Year for which the election is made. If the Election Form is not delivered prior to the Plan Entry Date for a Plan Year, no Annual Deferral Amount shall be deferred for that Plan Year. 3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld each payroll period in equal amounts from the Participant's Base Annual Salary. The Annual Bonus portion of the Annual Deferral Amount shall be withheld at the time or times the Annual Bonus is or otherwise would be paid to the Participant. 3.5 FICA Tax. Any applicable FICA and other payroll taxes on amounts deferred under this Article shall be withheld from that portion of the Participant's Base Annual Salary and Annual Bonus that is not being deferred. If necessary, the Committee shall reduce the amount of Base Annual Salary and/or Annual Bonus deferred, in order to comply with this Section 3.5. 3.6 Returns Prior to Distribution. Prior to any distribution of benefits under Articles 4, 5, 6, or 7, returns shall be credited to a Participant's Account Balance and compounded annually on a Participant's Account Balance as though the Annual Deferral Amount for that Plan Year was withheld on the Participant's Plan Entry Date. The rate of return on the Account Balance for each Plan Year shall be the Moody's Seasoned Corporate Bond Rate, or such higher rate as the Committee may determine in its sole discretion prior to the beginning of a Plan Year. In the event of Retirement, death or a Termination of Employment prior to the end of a Plan Year, that Plan Year's return will be calculated using a fraction of a full Plan Year's return, based on the number of days that Participant was employed with the Employer during the Plan Year prior to the occurrence of such event. 3.7 Date on Which Crediting Occurs. Account Balances will be credited with returns in accordance with Section 3.6 up to the date of distribution for a lump sum payment and up to the first date of distribution for installment payments. For purposes of crediting subsequent returns in the event that installment payments are made, the Account Balance shall be reduced as of the day on which the distribution is made. 3.8 Returns and Installment Distributions. In the event a benefit is paid in installments, a Participant's unpaid Account Balance shall be credited as follows: (a) Crediting. For each Plan Year, the undistributed Account Balance shall be credited with a return equal to the Moody's Seasoned Corporate Bond Rate or such higher rate as the Committee may determine in its sole discretion prior to the beginning of a Plan Year. Returns shall start to accrue under this Section 3.8 as of the date that returns cease to accrue under Section 3.7 above. (b) Installments. The installment payments shall be determined by dividing the Participant's Account Balance at the time of the commencement of the installment payments by the number of payments over the installment period. Each payment determined above will be considered the principal portion of the installment payment. In addition, each installment payment will include a return calculated for the preceding quarter using the rate determined in Section 3.8(a) above. Installment payments shall commence on the first day of the quarter following the first full quarter following such Participant's date of Retirement, or when permitted by the Committee in its sole discretion, Termination of Employment or death. All additional installment payments shall be paid on the first day of the remaining calendar quarters of the payment period. 3.9 Statement of Accounts. The Committee shall send to each Participant, within 120 days after the close of each Plan Year, a statement in such form as the Committee deems desirable setting forth the balance standing to the credit of each Participant in his Account Balance. ARTICLE 4 Pre-Retirement Distribution/ Unforeseeable Financial Emergencies 4.1 Pre-Retirement Distributions. In connection with each election to defer an Annual Deferral Amount, a Participant may elect to receive a future distribution from the Plan with respect to that Annual Deferral Amount prior to Retirement. This Pre-Retirement Distribution shall be a lump sum payment in an amount, as chosen by the Participant on the Election Form prior to making the applicable year's deferral, that is equal to either (a) the Annual Deferral Amount, or (b) the sum of: (i) the Annual Deferral Amount and (ii) returns credited in accordance with Section 3.6 above. If a Participant elects to receive only the Annual Deferral Amount, the returns credited on the Annual Deferral Amount shall be distributed to the Participant (or, in the case of the Participant's death, to the Participant's Beneficiary) in accordance with Articles 5, 6, and 7. The Pre-Retirement Distribution shall be paid within 60 days of the first day of the Plan Year chosen by the Participant on the Election Form for distribution. The earliest date that a Participant may receive a Pre-Retirement Distribution is 5 years after the first day of the Plan Year in which the Annual Deferral Amount is actually deferred. 4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant and/or (ii) receive a partial or full payout from the Plan. The Committee may, in its sole discretion, accept or deny such petition. Any payout shall not exceed the lesser of the Participant's Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. The suspension shall continue for such period of time and/or the reinstatement of deferrals shall occur at a date, as specified by the Committee, in its sole discretion. If reinstated, the deduction in each pay period shall not exceed that made immediately prior to the suspension. If the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. ARTICLE 5 Retirement Benefit 5.1 Retirement Benefit. A Participant who Retires shall receive, as a Retirement Benefit, his Account Balance. 5.2 Payment of Retirement Benefit. A Participant shall elect on an Election Form prior to the beginning of a Plan Year to receive the Retirement Benefit for such Plan Year in a lump sum or in quarterly payments over a period of 5, 10, 15 or 20 years. The lump sum payment shall be made within 60 days of the Participant's Retirement. Any installment payment shall be made in accordance with Section 3.8 above. 5.3 Death Prior to Completion of Retirement Benefit. If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant's unpaid Retirement Benefit payments shall continue and shall be paid to the Participant's Beneficiary (i) over the remaining number of calendar quarters and in the same amounts as that benefit would have been paid to the Participant had the Participant survived, or (ii) the then current Account Balance as of the date of death, in a lump sum, if allowed in the sole discretion of the Committee. ARTICLE 6 Pre-Retirement Survivor Benefit 6.1 Pre-Retirement Survivor Benefit. If a Participant dies before he Retires, experiences a Termination of Employment or suffers a Disability, the Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant's Account Balance. 6.2 Payment of Pre-Retirement Survivor Benefit. The Pre-Retirement Survivor Benefit shall be the then current Account Balance as of the date of death, paid in a lump sum or, in the Committee's sole discretion, in installments according to the original election of the Participant. The lump sum payment shall be made within 60 days of the Committee's receiving proof of the Participant's death. ARTICLE 7 Termination Benefit 7.1 Termination Benefit. If a Participant experiences a Termination of Employment prior to his Retirement, death or Disability, the Participant shall receive a Termination Benefit which shall be equal to the Participant's Account Balance determined as of the date of his Termination of Employment. 7.2 Payment of Termination Benefit. The Termination Benefit shall be the then current Account Balance as of the date of Termination of Employment, paid in a lump sum or installments as the Participant originally designated in the applicable Election Form(s), or paid in a lump sum within 60 days of the Termination of Employment if the Participant so elected in the applicable Election Form(s). Notwithstanding the foregoing, if the Participant incurs a Termination of Employment within one year after a Change in Control, the Termination Benefit shall be paid in a lump sum within 20 days of the Termination of Employment. ARTICLE 8 Disability Waiver and Permit 8.1 Disability Waiver. A Participant who is determined by the Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant's Base Annual Salary or Annual Bonus for the Plan Year or portion thereof during which the Participant has a Disability. 8.2 Disability Benefit. A Participant suffering a Disability shall for benefit purposes under this Plan, continue to be considered an employee and shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding, the Committee shall have the right, in its sole discretion, to terminate a Participant's participation in the Plan at any time during which such Participant has a Disability and pay the Account Balance in a lump sum. ARTICLE 9 Beneficiary Designation 9.1 Beneficiary. Each Participant shall designate a Beneficiary to receive any benefits payable under the Plan upon the Participant's death. 9.2 Beneficiary Designation. A Participant shall designate his Beneficiary by completing and signing the Beneficiary Designation Form, and submitting it to the Committee or its delegate. A Participant shall have the right to change a Beneficiary at any time without the consent of the Beneficiary, by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. Upon the receipt by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant with the Committee prior to his death. 9.3 Spousal Consent. In the case of a married Participant, if the Participant names someone other than his spouse as a primary Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. No consent is required if it is established to the satisfaction of the Committee that consent cannot be obtained because the spouse cannot be located. 9.4 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, the Participant's designated Beneficiary shall be deemed to be his surviving spouse. If the Participant has no surviving spouse, the benefits otherwise payable to a Beneficiary shall be paid to the Participant's estate. 9.5 Doubt as to Beneficiaries. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to withhold such payments until the matter is resolved to the Committee's satisfaction, and/or to require indemnification. 9.6 Discharge of Obligations. The payment of benefits under the Plan to a Participant or Participant's Beneficiary shall fully and completely discharge the Company and the Participant's Employer from all obligations under this Plan with respect to the deceased Participant and all of his Beneficiaries and any others that may be entitled to such benefits. ARTICLE 10 Leave of Absence 10.1 Paid Leave of Absence. If a Participant is authorized by the Company to take a paid leave of absence, the Participant shall continue to be considered employed by the Employer and the Base Annual Salary and Annual Bonus deferred by the Participant shall continue to be withheld during such paid leave of absence in accordance with Section 3.4. 10.2 Unpaid Leave of Absence. If a Participant is authorized by the Company to take an unpaid leave of absence, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. ARTICLE 11 Termination, Amendment or Modification 11.1 Termination. The Company reserves the right to terminate the Plan at any time. Prior to a Change in Control, the Committee shall have the right, at its sole discretion, and notwithstanding any elections made by the Participant to pay the then outstanding Account Balance in a lump sum. After a Change in Control the Company shall be required to pay such benefits in a lump sum. 11.2 Amendment. The Company may, at any time, amend or modify the Plan in whole or in part, provided, however, that no amendment or modification shall decrease or restrict a Participant's Account Balance at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification, or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification. The amendment or modification of the Plan shall not affect the payment of benefits to any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification. 11.3 Effect of Payment. The full payment of the applicable benefit under Articles 4, 5, 6 or 7 of the Plan shall completely discharge all obligations to a Participant under this Plan and the Plan Agreement, and the Participant's Plan Agreement shall terminate. ARTICLE 12 Administration 12.1 Committee Duties. This Plan shall be administered by the Committee or its delegates. The Committee shall also have the discretion and authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. A majority of the Committee shall constitute a quorum and a majority of the members present at any meeting at which a quorum is present or acts approved in writing or in a telephone meeting by all of the members shall constitute a decision by the entire Committee. 12.2 Agents. In the administration of this Plan, the Committee may, from time to time, delegate to such persons as it deems appropriate such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Company or a subsidiary. 12.3 Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 12.4 Indemnification. The Company shall indemnify and hold harmless the named fiduciaries and any officers or employees of the Company and its subsidiaries to which fiduciary responsibilities have been delegated from and against any and all liabilities, claims, demands, costs and expenses including attorneys fees, arising out of an alleged breach in the performance of their fiduciary duties under the Plan and ERISA, other than such liabilities, claims, demands, costs and expenses as may result from the gross negligence or willful misconduct of such person. The Company shall have the right, but not the obligation, to conduct the defense of such person in any proceeding to which this paragraph applies. ARTICLE 13 Claims Procedures 13.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 13.2 Notification of Decision. The Committee shall consider a Claimant's claim within a reasonable time, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to clarify or perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 13.3 below. 13.3 Review of a Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 13.4 Decision on Review. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 13.5 Legal Action. A Claimant's compliance with the foregoing provisions of this Article 13 is a mandatory prerequisite to a Participant's right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE 14 Miscellaneous 14.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of the Company or an Employer. Any and all of the Company's assets shall be, and remain, its general, unpledged and unrestricted assets. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 14.2 Employer's Liability. An Employer other than the Company shall have no liability to a Participant or a Participant's Beneficiary for payment of any benefits under the Plan. 14.3 Company's Liability. Amounts payable to a Participant on his Account Balance under Article 3 shall be paid from the general assets of the Company (including without limitation the assets of any trust established to fund payment of obligations hereunder) exclusively. 14.4 Nonassignability. Neither a Participant nor any other person shall have the right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be unassignable and non- transferable, except that the foregoing shall not apply to any family support obligations set forth in a court order. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 14.5 Not a Contract of Employment. The terms and conditions of this Plan nor any actions taken hereunder shall not be deemed to constitute a contract of employment between the Company or an Employer and the Participant, nor give Participant any right to be retained as an employee of the Company or its subsidiaries. Such employment relationship can be terminated at any time for any reason, with or without cause, unless expressly provided in a written employment agreement. This Plan shall only create a contractual obligation on the part of the Company, and shall not be construed as creating a trust or any fiduciary relationship. 14.6 Furnishing Information. A Participant will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 14.7 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 14.8 Governing Use. The provisions of this Plan shall be construed and interpreted according to the laws of the State of California. 14.9 Pronouns. Masculine pronouns wherever used shall include feminine pronouns. 14.10 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, return receipt requested, to: Consolidated Freightways, Inc. Compensation Committee Deferred Compensation Plan for Executives 3240 Hillview Avenue Palo Alto, California 94304 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand- delivered, or sent by mail, to the last known address of the Participant. 14.11 Successors. The provisions of this Plan shall be binding upon and inure to the benefit of the Participant's Company and its successors and assigns and the Participant, the Participant's Beneficiaries, and their permitted successors and assigns. 14.12 Spouse's Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 14.13 Incompetent. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetency, incapacity or guardianship, as it may deem appropriate and/or such indemnification of the Committee, the Company and the Participant's Employer and security, as it deems appropriate, in its sole discretion, prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 14.14 Distribution in the Event of Taxation. If, for any reason, all or any portion of a Participant's benefit under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee for a distribution of assets sufficient to meet the Participant's tax liability (including additions to tax, penalties and interest). Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Company shall distribute to the Participant immediately available funds in an amount equal to that Participant's federal, state and local tax liability associated with such event of taxation (which amount shall not exceed a Participant's accrued benefit under the Plan), such tax liability shall be measured by using that Participant's then current highest federal, state and local marginal tax rate, plus the rates or amounts for the applicable additions to tax, penalties and interest. If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. Such a distribution shall reduce the benefits to be paid under this Plan. 14.15 Legal Fees To Enforce Rights. If the Company has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, the Participant's Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company irrevocably authorizes such Participant to retain counsel of his choice and agrees to pay the reasonable legal fees and expenses of the Participant incurred in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, or any director, officer, shareholder or other person affiliated with the Company, or any successor thereto in any jurisdiction, provided that such Participant prevails in such action. 14.16 Payment of Withholding. As a condition of receiving benefits under the Plan, the Participant shall pay the Company and/or the applicable Employer not less than the amount of all applicable federal, state, local and foreign taxes required by law to be paid or withheld relating to the receipt or entitlement to benefits hereunder. The Company may withhold taxes from any benefits paid and/or from Base Annual Salary or Annual Bonus, in its sole discretion. 14.17 Coordination with Other Benefits. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Company and its subsidiaries. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. In no event shall distributions under the Plan prior to Retirement have the effect of increasing payments otherwise due under the various retirement plans of the Company and its subsidiaries. IN WITNESS WHEREOF, the Company has signed this Plan document as of August 27, 1993 Consolidated Freightways, Inc., a Delaware corporation By: \s\ David F. Morrison Its: Vice President and Treasurer EX-10.38 15 EXHIBIT 10.38 EXHIBIT 10.38 CONSOLIDATED FREIGHTWAYS, INC. 1993 NONQUALIFIED EMPLOYEE BENEFIT PLANS TRUST AGREEMENT (a) This Agreement, effective this 1st day of October, 1993, by and between CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation (Company) and MELLON BANK, N.A., (Trustee); (b) WHEREAS, Company has adopted the nonqualified deferred compensation Plan(s) as listed in Appendix A; (c) WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan(s) with respect to the individuals participating in such Plan(s); (d) WHEREAS, Company now wishes to establish and contribute to this trust (the "Trust") assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan(s); (e) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan(s) as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; (f) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan(s); NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. Establishment of Trust (a) Company hereby deposits with Trustee in trust $100.00, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan(s) and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Within 90 days following the end of each Plan Year, and within 30 days following any change in control, as defined in Section 14(e), below, Company shall irrevocably deposit additional cash or other property to the Trust in an appropriate amount sufficient to pay each Plan participant or beneficiary the benefits payable pursuant to the terms of the Plan(s) as of the close of such Plan Year based on the distributions elected by Plan participants other than upon termination of employment, or as of the date of such change in control (as the case may be). (f) Trustee accepts the Trust established under this Trust Agreement on the terms and subject to the provisions set forth herein, and it agrees to discharge and perform fully and faithfully all of the duties and obligations imposed upon it under this Trust Agreement. Section 2. Payments to Plan Participants and Their Beneficiaries (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan(s)), and the time of commencement for payment of such amounts. Except as otherwise provided in Section 2(c) below or elsewhere herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule and shall make payments of legal fees and expenses as required by the Plan(s). The Trustee shall make provisions for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan(s) and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. Company shall provide Trustee with the rates at which taxes are to be withheld and shall be responsible for providing payees with all required state and federal notices regarding withholding. Company shall also be responsible for depositing all withheld amounts with the appropriate taxing authorities and for providing each Plan participant (or beneficiary) with the appropriate information evidencing such withholding payments. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits or legal fees and expenses under the Plan(s) shall be determined by Company or such party as it shall designate under the Plan(s), and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan(s). (c) Company may make payment of benefits and legal fees and expenses directly to Plan participants or their beneficiaries as they become due under the terms of the Plan(s). Company shall notify Trustee of its decision to make payment of benefits or legal fees and expenses directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), Company shall make the balance of each such payment as it falls due. Trustee shall notify Company when principal and earnings are not sufficient. (d) Trustee shall not be liable for any failure by Company to provide contributions sufficient to pay all benefits and legal fees and expenses under the Plan(s) in full. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Is Insolvent (a) Trustee shall cease payment of benefits and legal fees and expenses to Plan participants and their beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits and legal fees and expenses to Plan participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan(s) or otherwise. (4) Trustee shall resume the payment of benefits and legal fees and expenses to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (5) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits and legal fees and expenses from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan(s) for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to Company (a) Except as provided in Section 3 hereof or in subsection (b) below, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan(s). (b) If Company elects to make payment of benefits directly to Plan participants or their beneficiaries pursuant to the terms of Section 2(c), above, the Trustee shall distribute to Company within 30 days of such payment an amount equal to each such payment made by Company. Section 5. Investment and Administration of the Trust (a) Trustee shall have the power: (i) To invest the assets of the Trust as directed by the Board of Directors of Company or a Committee thereof. Such Board reserves the right to delegate this investment authority to Trustee or an investment manager; (ii) To collect and receive any and all money and other property due to the Trust and to give full discharge therefor; (iii) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings to protect any interest of the Trust; and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; (iv) Generally to do all acts, whether or not expressly authorized, which Trustee may deem necessary or desirable for the protection of the Trust. (b) Persons dealing with Trustee shall be under no obligation to see to the proper application of any money paid or property delivered to Trustee or to inquire into Trustee's authority as to any transaction. (c) Company shall have the right at any time, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. Section 6. Disposition of Income During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. Section 7. Accounting by Trustee (a) Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. All such accounts, books and records shall be open to inspection and audit at all reasonable times by Company or Company's representatives or agents. Within 120 days following the close of each calendar year and within 120 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. (b) The written approval of any accounting by Company shall be final as to all matters and transactions stated or shown therein and shall be binding upon Company and all beneficiaries of the Trust and other persons who then shall be or thereafter become interested in the Trust, except for Trustee's gross negligence or willful misconduct. Failure of Company to notify Trustee within 180 days after receipt of any accounting of its disapproval of such accounting shall be the equivalent of written approval. (c) Trustee shall timely provide Company and each Plan participant (or beneficiary) with such information as Trustee possesses as Company or the Plan participant may need for tax or other reporting purposes. Section 8. Responsibility of Trustee (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company, which is contemplated by, and in conformity with, the terms of the Plan(s) or this Trust and is given in writing by Company, and to that extent, Trustee shall be relieved of liability for the prudent person rule for investments. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust Agreement, unless it be first indemnified by Company against its prospective costs, expenses and liability, and Company hereby agrees to indemnify Trustee for such costs, expenses and liability. (c) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. Expenses of such persons shall be deemed to be expenses of management and administration of the Trust within the meaning of Section 9(b), below. (d) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (e) However, notwithstanding the provisions of Section 8(d) above, Trustee may loan to Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701- 2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. Taxes, Compensation and Expenses of Trustee (a) Company shall from time to time pay taxes (references in this Trust Agreement to the payment of taxes shall include interest and applicable penalties) of any and all kind whatsoever which at any time are lawfully levied or assessed upon or become payable in respect of the Trust, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes levied or assessed upon the Trust are not paid by Company or contested by Company pursuant to the last sentence of this Section 9(a), Trustee shall pay such taxes out of the Trust, and Company shall, upon notice by Trustee, deposit into the Trust an amount equal to the amount paid from the Trust to satisfy such tax liability. If requested by Company, and agreed to by Trustee, Trustee shall at Company's expense, contest the validity of such taxes in any manner deemed appropriate by Company or its counsel, but only if it has received an indemnity bond or other security satisfactory to it to pay any expenses of such contest. Alternatively, Company may itself contest the validity of any such taxes, but any such contest shall not affect Company's obligation to reimburse the Trust for taxes paid from the Trust. (b) Trustee may be paid compensation by Company in accordance with any written agreement for this purpose between them. Trustee shall be reimbursed by Company for its reasonable expenses of management and administration of the Trust, including reasonable compensation of any agent engaged by Trustee to assist it in such management and administration. The fees for Legal Counsel, as defined in Section 10(c), below, and other reasonable expenses, will be paid by Company. Trustee shall be able to charge the Trust for such compensation and for any reasonable expenses including Legal Counsel, appraisal or accounting fees, and the same may be deducted from the Trust unless paid by Company within 60 days after Company receives written billing by Trustee; provided that this paragraph shall not apply while a dispute over the amount of such charges exists. Section 10. For Protection of Trustee (a) Company shall certify to Trustee the name or names of any person or persons authorized to act for Company. Such certification shall be signed by the Chief Executive Officer or other officer of Company duly authorized by the Board of Directors of Company. Until Company notifies Trustee, in a similarly signed notice, that any such person is no longer authorized to act for Company, Trustee may continue to rely upon the authority of such person. Trustee may rely upon any certificate, notice or direction of Company which Trustee reasonably believes to have been signed by a duly authorized officer or agent of Company. (b) Notices to Trustee shall be sent in writing to Trustee's office at One Mellon Bank Center, Room 3346, Pittsburg, Pennsylvania 15258 or to such other address as Trustee may specify. No communication shall be binding upon Trust or Trustee until it is received by Trustee and unless it is in writing and signed by an authorized person. Notices to Company shall be sent in writing, attention General Counsel, to Company's principal office at 3240 Hillview Avenue, Palo Alto, California 94304 or to such other address as Company may specify. No notice shall be binding upon Company until it is received by Company. (c) Trustee may consult with any legal counsel ("Legal Counsel") for the purpose of obtaining advice on topics including but not limited to the construction of this Trust Agreement, its duties hereunder, or any act which it proposes to take or omit, and shall not be liable for any action taken or omitted in good faith pursuant to such advice. Expenses of Legal Counsel shall be deemed to be an expense of management and administration of the Trust within the meaning of Section 9(b), above. (d) Trustee shall discharge its duties under this Trust Agreement in a manner consistent with the objectives of this Trust Agreement. Trustee shall not be liable for any loss sustained by the Trust by reason of the purchase, retention, sale or exchange of any investment in good faith and in accordance with the provisions of this Trust Agreement. Trustee shall have no responsibility or liability for any failure of Company to make contributions to the Trust. Trustee shall not be liable hereunder for any act taken or omitted, except for its own gross negligence or willful misconduct. Trustee's duties and obligations shall be limited to those expressly imposed upon it by this Trust Agreement, and Trustee shall have no responsibility under the Plan(s), notwithstanding any reference to the Plan(s). (e) Company hereby indemnifies and holds Trustee harmless from and against any and all losses, damages, costs, expenses or liabilities (herein, "Liabilities"), including reasonable attorneys' fees and other costs of litigation, to which Trustee may become subject pursuant to, and arising out of, occasioned by, incurred in connection with or in any way associated with this Trust Agreement, except for any act or omission constituting gross negligence or willful misconduct of Trustee. (f) If one or more Liabilities shall arise, or if Company fails to indemnify Trustee as provided herein, then Trustee may engage Legal Counsel of Trustee's choice, but at Company's expense, either to conduct the defence against such Liabilities or to conduct such actions as may be necessary to obtain the indemnity provided for herein, or to take both such actions. Trustee shall notify Company within 15 days after Legal Counsel has been engaged with the name and address of such Legal Counsel. Section 11. Resignation and Removal of Trustee (a) Trustee may resign at any time by written notice to Company, which shall be effective 60 days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on 60 days' notice or upon shorter notice accepted by Trustee. (c) If Trustee resigns or is removed within 2 years of a change in control, as defined in Section 14(e), below, Trustee shall select a successor Trustee in accordance with the provisions of Section 12(b) hereof prior to the effective date of Trustee's resignation or removal. (d) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 60 days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (e) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 12 hereof, by the effective date of resignation or removal under paragraph(s) (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 12. Appointment of Successor (a) If Trustee resigns or is removed in accordance with Section 11(a) or (b) hereof, Company shall appoint a bank or trust company in good standing, organized and doing business under the laws of the United States or a state thereof, with a combined capital and surplus of not less that $50,000,000 and authorized under the laws governing its organization to exercise corporate trustee powers, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) If Trustee resigns or is removed pursuant to the provisions of Section 11(c) hereof and selects a successor Trustee, Trustee shall appoint a bank or trust company in good standing, organized and doing business under the laws of the United States or a state thereof, with a combined capital and surplus of not less that $50,000,000 and authorized under the laws governing its organization to exercise corporate trustee powers. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 5, 7 and 8 hereof. The successor Trustee shall not be responsible for and Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor trustee. Section 13. Amendment or Termination (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company, provided that no amendment which would materially affect the likelihood that assets of the Trust will be available to fund benefits payable under the Plan(s) shall be made unless the prior written approval of 75% of the Plan participants (or beneficiaries as the case may be) has been obtained; and provided further, that no amendment shall increase the duties or responsibilities of Trustee unless Trustee consents thereto in writing. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan(s). The Trust shall terminate at the discretion of Company if the Internal Revenue Service or any court rules that Company is not the owner of the Trust, that Plan participants (or their beneficiaries) are taxable on payment of Plan benefits prior to their becoming payable or that Plan participants (or their beneficiaries) have greater rights to assets of the Trust than other general creditors of Company. (c) Upon written approval of 75 percent of the Plan participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan(s), Company may terminate this Trust prior to the time all benefit payments under the Plan(s) have been made. (d) Upon termination of the Trust, after its final accounting, Trustee shall distribute the net balance of any assets of the Trust remaining after all benefits, legal fees and expenses, and management and administration expenses have been paid. Upon making such a distribution, Trustee shall be relieved from all further liability. Section 14. Miscellaneous (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of such prohibition, without invalidating the remaining provisions hereof. (b) Company shall provide Trustee with a copy of the Plan(s) listed in Appendix A and with a copy of all resolutions of the Board of Directors of Company (and committees thereof) which affect the Plan(s). (c) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (d) This Trust Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (e) For purposes of this Trust, "change in control" shall have the same meaning as provided in the Plan(s). (f) The headings of sections of this Trust Agreement and defined terms are used herein for convenience of reference only and in case of any conflict the text of this Agreement shall control. (g) This Agreement shall be binding upon and inure to the benefit of any successor to Company or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto, and any such successor shall be deemed to be the "Company" under this Agreement. In the event of any such merger, consolidation, reorganization, transfer of asses or other similar transaction, the successor to Company or its business or any subsequent successor thereto shall promptly notify Trustee in writing of its successorship and furnish the Trustee with the information specified in Section 10(a) of this Agreement. In no event shall any such transaction described herein suspend or delay the rights of Plan participants (or their beneficiaries) to receive benefits hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. CONSOLIDATED FREIGHTWAYS, INC. MELLON BANK, N.A. By: By: _____________________ Name: Name: ____________________ Title: Senior Vice President Title: ___________________ and General Counsel EX-13 16 EXHIBIT 13 ANNUAL REPORT PAGE 24 Financial Review and Management Discussion The Company's 1993 operating profit was $120.2 million, a 147.3% increase from 1992. This significant improvement is the result of increased shipment levels and cost containment at Emery and record operating profits at the Con-Ways. Emery achieved its first profitable year of operations since its acquisition in 1989. The Company's 1992 operating income includes $17.3 million of non- recurring charges to restructure CF MotorFreight and write off substantially all of its Canadian operating rights. Excluding these charges, operating income improved $54.3 million or 82.4% over 1992. The 1992 operating income improved $73.2 million from $1.7 million in 1991 excluding the $17.3 million of restructuring charges and $9.0 million of incremental charges related to the Company's 1992 adoption of Statement of Financial Accounting Standards No. 106 "Employer's Accounting for Post Retirement Benefits Other than Pensions" (SFAS 106). Total Company revenues increased $136.2 million or 3.4% over 1992 as Emery regained revenues due to various successful marketing programs while the Con-Ways continued to grow through expansion into new markets. These increases more than offset CF MotorFreight's revenue decline of 3.3% which is attributed to continued rate discounting and tonnage loss associated with market dilution and a management decision to shed less profitable business. Significant variations in segment revenue and operating income are as follows: CF MOTORFREIGHT CF MotorFreight's (CFMF) 1993 revenues decreased 3.3% on a tonnage decline of 3.1% with higher rated less-than-truckload (LTL) tonnage declining 3.0%. The decline in revenues reflects continued price erosion and CFMF's efforts to selectively shed some of its more unprofitable business. The decline also reflects market dilution from new competitors and changes in distribution patterns by customers. In 1992 revenues increased 1.9% on a tonnage increase of 0.7% in contrast to revenue and tonnage declines of 2.0% and 5.0%, respectively, in 1991. In 1993, operating income was $31.7 million compared to $27.5 million in 1992, an increase of 15.4%. The 1992 operating income includes $17.3 million to restructure CFMF operations and write off substantially all of its Canadian operating authority. Excluding these charges, CFMF's 1993 operating income decreased $13.1 million or 29.2% from 1992. Persistent rate discounting and the previously mentioned market dilution have impaired CFMF's ability to retain margins comparable to those in prior years, as margins decreased from 2.4% in 1991 to 2.0% (excluding restructuring charges) in 1992 and 1.5% in 1993. As shipment volumes stabilize, CFMF will size its freight flow infrastructure to expected business levels. Additionally, CFMF has initiated several programs to streamline operations. These include technology enhancements such as dock automation and programs to reduce freight handling and allow flexible services which are more responsive to customer needs. Such programs include utilization of metropolitan area terminals to consolidate freight and a greater use of sleeper teams for more direct freight movement. While short-term margins are expected to remain unsatisfactory, the benefits of these initiatives should improve margins in the long-term. CFMF's ability to successfully negotiate greater flexibility in work-rules and equitable wage increases with various labor unions should also contribute to improving margins. In addition, CFMF must maintain business levels with adequate yields. To this end, CFMF announced a 3% discount rollback in January 1994. Approximately 88% of CFMF's domestic employees are represented by various labor unions, primarily the International Brotherhood of Teamsters (IBT). CFMF and IBT are parties to a National Master Freight Agreement scheduled to expire on March 31, 1994. CON-WAY TRANSPORTATION SERVICES The Con-Way group again produced record revenues for the year. Revenues increased 13.0% on a tonnage increase of 26.3% from 1992 with the higher rated LTL tonnage increasing 13.9%. All of the companies in the Con-Way group experienced revenue growth. In 1993 the Con-Ways expanded service in Florida and into Missouri. In 1992, Con-Way revenues increased 13.3% on a 10.0% increase in tonnage from 1991. PAGE 25 The continued revenue growth combined with successful cost containment efforts produced record operating income for the Con- Way group as operating income increased 33.7% over 1992. The 1993 operating margin was 8.8% compared to 7.4% in the prior year. The improved operating margin in 1993 occurred despite increased costs associated with expansion of service into new areas. Operating income in 1992 increased 61.3% from 1991. The 1992 operating margin of 7.4% compares with a 5.2% margin in 1991. The Con-Ways are seeking to increase business through growth in existing markets and expansion into new geographic markets including New England. Recent joint service agreements between the Con-Way carriers will enhance business levels. However, short-term operating margins may be impacted by start-up costs while establishing freight levels in these new markets. EMERY WORLDWIDE For Emery, 1993 marked the first year of operating profits and the first year since its acquisition that revenues increased over the prior year. Revenues in 1993 increased 10.0% from 1992 due entirely to gains in its commercial business as revenues from the U.S. Postal Service (USPS) contracts declined. Emery revenues in 1992 declined 11.8% from 1991 following the reconfiguration management initiated in 1991 to emphasize parcels, packages and freight shipments 5 lbs. and above, and reduced revenues from USPS contracts. Operating income for 1993 was a $49.2 million improvement from the $32.7 million loss in 1992. These operating results represent a steady improvement that commenced in 1992. All of the profit improvement came from the commercial business as USPS contracts provided 16.7% less income due to lower business levels than in 1992. The successful return to profitability is attributed to stringent cost control measures coupled with an increase in business levels resulting from the success of Emery's marketing initiatives and renewed customer confidence. The 1993 operating results also include $20.4 million of incentive compensation shared by over 6000 employees. In 1992, Emery reduced its operating loss $50.9 million, from $83.6 million in 1991, despite a $13.4 million reduction in operating income from USPS contracts. Emery's management plans to continue its strategy of developing new and existing business while emphasizing cost containment measures, an approach that returned the company to profitability after four years of losses. Emery expects to continue to expand its international and domestic business with marketing programs tailored to the needs of major accounts. In January 1994, Emery continued USPS operations under a new contract that was awarded to them in 1993. The contract provides revenues of approximately $880 million over a 10 year period and $26.9 million per year as reimbursement for certain costs. OTHER INCOME AND (EXPENSE) Other expense, net, decreased 51.6% for the following reasons. Interest expense declined 22.0% from 1992 as the Company reduced borrowing costs with scheduled and early retirement of debt and debt refinancing. In 1992 other income and expense included $10.5 million of non-recurring expenses to reduce the cost of unused properties to their market value and the amortization of deferred financing costs related to credit facilities that have since lapsed. In 1992 investment income included a $5.0 million investment loss related to certain pension related investments. Offsetting the above items is a decline in investment income in 1993 as investments were liquidated to retire debt and purchase assets. NET INCOME (LOSS) TO COMMON SHAREHOLDERS In 1993, net income applicable to common shareholders was $31.6 million. The 1992 net loss applicable to common shareholders of $97.7 million includes a $7.4 million extraordinary charge for the early retirement of debt and a $70.0 million one-time charge for the adoption of SFAS 106 effective January 1, 1992. Also included is the previously mentioned $17.3 million of CFMF charges, $10.5 million to write down property held for sale and certain intangibles and related tax benefits. Excluding the above 1992 charges, the net loss applicable to common shareholders was $2.4 million. PAGE 26 LIQUIDITY AND CAPITAL RESOURCES At December 31, 1993, the Company had $139.0 million in cash and cash equivalents with an additional $13.7 million in long-term investments. Although the Company had positive cash flow from operations, due primarily to income from operations and significant depreciation and amortization, cash and investments decreased from last year due to the retirement of debt and increased capital expenditures. The 1993 capital expenditures include the purchase of approximately $72.2 million of aircraft and related equipment in connection with the USPS contract. Of the $72.2 million, approximately $24.5 million is attributed to acquired maintenance and is included in deferred charges and other assets on the accompanying balance sheet. In 1993, all debt retirement, capital expenditures and dividend requirements were satisfied with cash from operations and sales of marketable securities. Cash flows from operations are expected to provide for capital expenditures and scheduled debt repayments in 1994. In 1993, Emery entered into a $75 million receivable sale facility with several banks. At December 31, 1993, $72 million of letters of credit were issued and secured with eligible Emery receivables. These needs, along with those of the trucking subsidiaries, were previously being satisfied by a $250 million receivable sale facility. In July 1993, the Company entered into a $250 million unsecured credit facility to provide standby availability for the Company's letter of credit and working capital needs. The facility replaces the previous $250 million receivable sale facility entered into in December 1990. A second agreement provides for letter of credit needs of up to $110 million. Letters of credit of $121 million at December 31, 1993, previously financed under the receivable sale facility, are refinanced under these new facilities. The combined cash borrowings and letters of credit outstanding under these two facilities may not exceed $250 million. The Company retired $13.2 million of debt, net, in the year ended December 1993, consisting primarily of industrial revenue bonds. The bonds were retired at or near par. In September 1993, the City of Dayton, Ohio issued $16 million Series E and $16 million Series F, City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds. These bonds replaced $32 million of 1988 Series B City of Dayton, Ohio, Special Facilities Revenue Bonds. This refinancing is expected to result in annual cash savings in borrowing costs of approximately $3 million. In addition, the Company reduced its long-term obligations by $45 million pursuant to a third party assuming the lease obligation related to a previously owned facility. The relief of this obligation also resulted in the removal from the Company's balance sheet of a related $45 million note receivable. At December 31, 1993, the Company's ratio of long-term obligations (including guarantees) to total capital (including long-term obligations) was 39.6% compared with 46.6% at year end 1992. The improvement is primarily attributable to net income and the retirement of debt in 1993. The current ratio at December 31, 1993 and 1992, was 1.1 to 1 and 1.2 to 1, respectively. The Company can successfully maintain this current ratio because of a high turnover of accounts receivable. OTHER The Company's operations necessitate the storage of fuel in underground tanks as well as the disposal of substances regulated by various federal and state laws. The Company adheres to a stringent site by site tank testing and maintenance program performed by a qualified independent party to protect the environment and comply with regulations. Where the need for environmental clean-up is necessary the Company takes appropriate action. The Company has been designated a Potentially Responsible Party (PRP) by the U.S. Environmental Protection Agency with respect to the disposal of hazardous substances at various sites. However, based upon cost studies performed by independent parties, the Company expects its share of the clean-up costs to be minimal. PAGE 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Consolidated Freightways, Inc.: We have audited the accompanying consolidated balance sheets of Consolidated Freightways, Inc. (a Delaware Corporation) and subsidiaries as of December 31, 1993 and 1992, and the related statements of consolidated operations, cash flows and shareholders' equity for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Freightways, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Notes 5 and 7 to the consolidated financial statements, effective January 1, 1992 the Company changed its method of accounting for income taxes to reflect the adoption of the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", and its method of accounting for post retirement benefits to reflect the adoption of the Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post Retirement Benefits Other than Pensions", /s/Arthur Andersen & Co. San Francisco, California January 28, 1994 PAGE 28 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31 (Dollars in thousands) 1993 1992 ASSETS Current Assets Cash and temporary cash investments $139,044 $152,064 Trade accounts receivable, net of allowances (Note 1) 508,669 314,807 Other accounts and notes receivable 35,714 33,820 Notes receivable from sale of trade accounts -- 166,399 Operating supplies, at lower of average cost or market 34,940 33,426 Prepaid expenses 69,009 64,193 Deferred income taxes (Note 5) 108,458 97,884 Total Current Assets 895,834 862,593 Property, Plant and Equipment, at cost Land 152,402 145,547 Buildings and improvements 488,292 468,269 Revenue equipment 935,482 900,653 Other equipment and leasehold improvements 347,601 336,463 1,923,777 1,850,932 Accumulated depreciation and amortization (1,013,333) (964,098) 910,444 886,834 Other Assets Operating rights, net of accumulated amortization 9,129 9,479 Cost in excess of net assets of businesses acquired net of accumulated amortization 354,076 363,710 Long-term receivables 6,600 51,600 Marketable securities, at lower of cost or market 13,727 47,865 Restricted funds 13,954 17,909 Deferred charges and other assets 102,889 53,077 500,375 543,640 Total Assets $2,306,653 $2,293,067 The accompanying notes are an integral part of these statements. PAGE 29 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1992 Current Liabilities Accounts payable and accrued liabilities (Note 2) $634,107 $587,246 Accrued claims costs 138,242 119,798 Current maturities of long-term debt and capital leases (Notes 3 and 4) 39,246 571 Federal and other income taxes (Note 5) 6,158 2,669 Total Current Liabilities 817,753 710,284 Long-Term Liabilities Long-term debt and guarantees (Note 3) 297,215 393,677 Long-term obligations under capital leases (Note 4) 111,194 111,643 Deferred income taxes (Note 5) 22,085 47,081 Accrued claims costs 173,999 199,843 Other liabilities and deferred credits (Note 7) 261,032 251,378 Total Liabilities 1,683,278 1,713,906 Shareholders' Equity (Note 6) Preferred stock, no par value; authorized 5,000,000 shares: Series A, designated 600,000 shares; none issued -- -- Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares issued 968,655 and 974,152 shares, respectively 10 10 Series C, 8.738% cumulative, convertible, $.01 stated value; designated and issued 690,000 shares 7 7 Additional paid-in capital, preferred stock 265,182 266,019 Deferred TASP compensation (Note 8) (129,276) (133,354) Total Preferred Shareholders' Equity 135,923 132,682 Common stock, $.625 par value; authorized 100,000,000 shares; issued 43,340,801 and 43,016,319 shares, respectively 27,090 26,887 Additional paid-in capital, common stock 104,666 99,847 Cumulative translation adjustment 1,229 2,927 Retained earnings 542,811 511,207 Cost of repurchased common stock (7,638,809 and 7,687,539 shares, respectively) (188,344) (189,546) Deferred EMSOP compensation (Note 7) -- (4,843) Total Common Shareholders' Equity 487,452 446,479 Total Shareholders' Equity 623,375 579,161 Total Liabilities and Shareholders' Equity $2,306,653 $2,293,067 The accompanying notes are an integral part of these statements. PAGE 30 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS Years Ended December 31, (Dollars in thousands except per share data) 1993 1992 1991 REVENUES $4,191,811 $4,055,589 $4,082,257 COSTS AND EXPENSES Operating expenses 3,407,996 3,306,732 3,310,184 Selling and administrative expenses 528,022 561,581 624,213 Depreciation 135,636 138,695 146,124 4,071,654 4,007,008 4,080,521 OPERATING INCOME 120,157 48,581 1,736 OTHER INCOME (EXPENSE) Investment income 5,586 5,041 10,558 Interest expense (30,333) (38,893) (46,703) Miscellaneous, net (3,969) (25,462) (8,928) (28,716) (59,314) (45,073) Income (loss) before income taxes (benefits), extraordinary charge and cumulative effect of accounting change 91,441 (10,733) (43,337) Income taxes (benefits) (Note 5) 40,867 (7,077) (2,916) Net income (loss) before extraordinary charge and cumulative effect of accounting change 50,574 (3,656) (40,421) Extraordinary charge from early retirement of debt, net of related income tax benefits of $4,561 -- 7,428 -- Cumulative effect of change in method of accounting for post retirement benefits, net of related income tax benefits of $42,899 (Note 7) -- 69,991 -- Net income (loss) 50,574 (81,075) (40,421) Preferred stock dividends 18,967 16,653 12,691 NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 31,607 $ (97,728) $ (53,112) Primary average shares outstanding (Note 1) 36,187,682 35,195,743 35,033,738 PRIMARY EARNINGS (LOSS) PER SHARE Net income (loss) before extraordinary charge and cumulative effect of accounting change $ 0.87 $ (0.58) $ (1.52) Extraordinary charge -- (0.21) -- Cumulative effect of accounting change -- (1.99) -- Net income (loss) $ 0.87 $ (2.78) $ (1.52) FULLY DILUTED EARNINGS (LOSS) PER SHARE (Note 1) $ 0.77 $ (2.78) $ (1.52) The accompanying notes are an intergral part of these statements. PAGE 31 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS YEARS ENDED DECEMBER 31 (In thousands) 1993 1992 1991 Cash and Temporary Cash Investments, Beginning of Period $152,064 $284,645 $217,680 Cash Flows from Operating Activities Income (loss) before extraordinary charge and cumulative effect of accounting change 50,574 (3,656) (40,421) Adjustments to reconcile income (loss) to net cash provided by operating activities: Depreciation and amortization 146,297 166,917 168,527 Decrease in deferred income taxes (20,298) (28,661) (8,004) Losses (gains) from property disposals, net (607) 6,688 (2,370) Changes in assets and liabilities: Receivables (194,320) (16,139) 110,403 Notes receivable from sale of trade accounts 166,399 15 (32,441) Accrued claims costs (7,400) 20,359 24,956 Accounts payable 17,225 (2,254) (40,601) Income taxes (9,871) (7,313) 8,082 Accrued liabilities, deferred charges and other 24,809 (4,177) 4,225 Net Cash Provided by Operating Activities 172,808 131,779 192,356 Cash Flows from Investing Activities Capital expenditures (201,210) (148,706) (98,073) Purchases of marketable securities (54,749) (47,865) -- Sales of marketable securities 88,887 -- -- Proceeds from sale of property 12,270 4,097 10,563 Net Cash Used by Investing Activities (154,802) (192,474) (87,510) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 32,000 -- -- Repayment of long-term debt and capital lease obligations (45,236) (164,008) (25,514) Premium on early retirement of debt -- (7,586) -- Proceeds from issuance of preferred stock -- 117,867 -- Proceeds from issuance of common stock 5,387 2,808 324 Payments of preferred dividends (23,177) (20,967) (12,691) Net Cash Used by Financing Activities (31,026) (71,886) (37,881) Increase (Decrease) in Cash and Temporary Cash Investments (13,020) (132,581) 66,965 Cash and Temporary Cash Investments, End of Period $139,044 $152,064 $284,645 Supplemental Disclosure Cash paid for income taxes $71,036 $19,053 $ -- Cash paid for interest (net of amounts capitalized) $30,438 $39,035 $45,199 The accompanying notes are an integral part of these statements. PAGE 32 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES (Dollars in thousands)
Preferred Stock Series B Preferred Stock Series C Common Stock Number of Number of Number of Shares Amount Shares Amount Shares Amount Balance, December 31, 1990 984,958 $10 -- -- 42,797,544 $26,750 Exercise of stock options -- -- -- -- 24,000 15 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (6,272) -- -- -- -- -- Net loss -- -- -- -- -- -- Preferred dividends ($12.93 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1991 978,686 10 -- -- 42,821,544 26,765 Issuance of preferred stock -- -- 690,000 7 -- -- Exercise of stock options -- -- -- -- 194,775 122 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (4,534) -- -- -- -- -- Net loss -- -- -- -- -- -- Series B, Preferred dividends ($12.93 per share) net of tax benefits -- -- -- -- -- -- Series C, Preferred dividends ($15.40 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1992 974,152 10 690,000 7 43,016,319 26,887 Exercise of stock options -- -- -- -- 324,482 203 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (5,497) -- -- -- -- -- Net income -- -- -- -- -- -- Series B, Preferred dividends ($12.93 per share) net of tax benefits -- -- -- -- -- -- Series C, Preferred dividends ($15.40 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1993 968,655 $10 690,000 $7 43,340,801 $27,090 The accompanying notes are an intergral part of these statements.
PAGE 33 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (continued) Cost of
Additional Cumulative Repurchased Deferred TASP Paid-in Translation Retained Common and EMSOP Capital Adjustment Earnings Stock Compensation Total Balance, December 31, 1990 $247,716 $7,410 $662,047 ($192,251) ($169,703) $581,979 Exercise of stock options 309 -- -- -- -- 324 Recognition of deferred compensation -- -- -- -- 12,909 12,909 Repurchased common stock issued for conversion of preferred stock (1,608) -- -- 1,608 -- -- Net loss -- -- (40,421) -- -- (40,421) Preferred dividends ($12.93 per share) -- -- (12,691) -- -- (12,691) Translation adjustment -- 4,983 -- -- -- 4,983 Balance, December 31, 1991 246,417 12,393 608,935 (190,643) (156,794) 547,083 Issuance of preferred stock 117,860 -- -- -- -- 117,867 Exercise of stock options 2,686 -- -- -- -- 2,808 Recognition of deferred compensation -- -- -- -- 18,597 18,597 Repurchased common stock issued for conversion of preferred stock (1,097) -- -- 1,097 -- -- Net loss -- -- (81,075) -- -- (81,075) Series B, Preferred dividends ($12.93 per share) net of tax benefits -- -- (8,303) -- -- (8,303) Series C, Preferred dividends ($15.40 per share) -- -- (8,350) -- -- (8,350) Translation adjustment -- (9,466) -- -- -- (9,466) Balance, December 31, 1992 365,866 2,927 511,207 (189,546) (138,197) 579,161 Exercise of stock options 5,184 -- -- -- -- 5,387 Recognition of deferred compensation -- -- -- -- 8,921 8,921 Repurchased common stock issued for conversion of preferred stock (1,202) -- -- 1,202 -- -- Net income -- -- 50,574 -- -- 50,574 Series B, Preferred dividends ($12.93 per share) net of tax benefits -- -- (8,343) -- -- (8,343) Series C, Preferred dividends ($15.40 per share) -- -- (10,627) -- -- (10,627) Translation adjustment -- (1,698) -- -- -- (1,698) Balance, December 31, 1993 $369,848 $1,229 $542,811 ($188,344) ($129,276) $623,375 The accompanying notes are an intergral part of these statements.
PAGE 34 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Principal Accounting Policies Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Consolidated Freightways, Inc. (the Company), its wholly-owned subsidiaries, and those of special purpose financing corporations. Recognition of Revenues: Transportation freight charges are recognized as revenue when freight is received for shipment. The estimated costs of performing the total transportation service are then accrued. Cash and Temporary Cash Investments: Included within cash and temporary cash investments are all items considered to be cash equivalents. The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Trade Accounts Receivable, Net: Trade accounts receivable are net of allowances of $29,780,000 and $26,198,000 at December 31, 1993 and 1992, respectively. Property, Plant and Equipment: Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, which are generally 25 years for buildings and improvements, 10 years or less for aircraft, 10 years for most other equipment and 6 or 7 years for revenue equipment. Leasehold improvements are amortized over the shorter of the terms of the respective leases or the useful lives of the assets. Expenditures for equipment maintenance and repairs, except for aircraft, are charged to operating expenses as incurred; betterments are capitalized. Gains (losses) on sales of equipment are recorded in operating expenses. The costs to perform required maintenance inspections of engines and aircraft frames for leased and owned aircraft are capitalized and amortized to expense over the shorter of the period until the next scheduled maintenance or the remaining term of the lease agreement. Accordingly, the Company has recorded unamortized maintenance of $120,204,000 and $118,184,000 at December 31, 1993 and 1992, respectively. Under the Company's various aircraft lease agreements, the Company is expected to return the aircraft with a stipulated number of hours remaining on the aircraft and engines until the next scheduled maintenance. The Company has recorded $55,468,000 and $101,351,000, at December 31, 1993 and 1992, respectively, to accrue for this obligation and any anticipated unusable maintenance expected at the date of lease return or other disposal. The net amount, which represents the difference between maintenance performed currently and that required or remaining at the expiration of the lease or other disposal, is included in deferred charges and other assets. Operating Rights and Costs in Excess of Net Assets of Businesses Acquired: The costs of operating rights and excess of purchase price over net assets acquired are capitalized and amortized on a straight-line basis up to a 40- year period. Income Taxes: The Company follows the liability method of accounting for income taxes whereby deferred income taxes are recognized for the tax consequences of "temporary differences" to the extent they are not reduced by net operating loss carryforwards, by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of certain assets and liabilities. The cumulative undistributed earnings of the Company's foreign subsidiaries ($60,881,000 at December 31, 1993), which if remitted are subject to withholding tax, have been reinvested indefinitely in the respective foreign subsidiaries' operations unless it becomes advantageous for tax or foreign exchange reasons to remit these earnings. Therefore, no withholding or U.S. taxes have been provided. The amount of withholding tax that would be payable on remittance of the undistributed earnings would approximate $6 million. PAGE 35 Accrued Claims Costs: The Company provides for the uninsured costs of medical, casualty, liability, vehicular, cargo and workers' compensation claims. Such costs are estimated each year based on historical claims and unfiled claims relating to operations conducted through December 31. The long-term portion of accrued claims costs relate primarily to workers' compensation claims which are payable over several years. Earnings Per Share: Primary earnings per common share are based upon the weighted average number of common shares outstanding during each period after consideration of the dilutive effect of stock options. Fully diluted earnings per share are similarly computed, but include the dilutive effect of the Company's TASP shares. The number of shares used for the computation of fully diluted earnings per share for 1993 is 40,857,876 shares. Fully diluted loss per share computations for 1992 and 1991 exclude stock options and TASP shares as their inclusion would be anti-dilutive. 2. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following: As of December 31, 1993 1992 (Dollars in thousands) Accounts payable $206,499 $187,800 Other accrued liabilities 172,702 154,172 Accrued holiday and vacation pay 80,661 78,394 Accrued pension costs 50,728 48,651 Estimated revenue adjustments 26,651 27,329 Wages and salaries 38,409 39,883 Accrued taxes other than income taxes 41,785 34,240 Accrued interest 16,672 16,777 Total accounts payable and accrued liabilities $634,107 $587,246 3. Long-Term Debt and Guarantees As of December 31, long-term debt and guarantees consisted of the following: (Dollars in thousands) 1993 1992 8.75% to 8.88% Medium-Term Notes due 1994 to 1995 ($100 million authorized; interest payable semi-annually) $40,225 $40,225 9-1/8% Notes Due 1999 (interest payable semi-annually) 117,705 117,705 7.0% to 12.0% Industrial Revenue Bonds due through 2014 19,900 34,350 Other debt 1,691 106 TASP Notes guaranteed due through 2009 150,000 150,000 Reimbursable obligations related to previously owned facilities due 2004 and 2014 6,600 51,600 336,121 393,986 Less current maturities of long-term debt (38,906) (309) Total long-term debt and guarantees $297,215 $393,677 In 1989, the Company issued $55 million of medium-term notes with variable terms determined at issuance and $150 million of 9 1/8% notes due 1999. These notes contain certain covenants limiting the incurrence of additional liens. Of the $150 million Thrift and Stock Plan (TASP) Notes, $117 million are subject to earlier repurchase by the Company at the option of the holders, with a yield protection penalty, in the event the Company's long- term senior unsecured indebtedness should be rated by both Moody's and S&P as below investment grade. S&P rates the Company's long-term senior unsecured indebtedness at a rating below investment grade. Moody's rating of such indebtedness is investment grade. PAGE 36 In November 1992, the terms of $33 million of the TASP Notes were modified to exclude the holders' early repurchase option. In exchange, the interest rates on the notes were enhanced by .5% and additional financial covenants. In 1993, the Company entered into an agreement with several banks to establish a $75 million receivable sale facility. The agreement involves the sale of eligible Emery receivables to a special purpose corporation, Emery Receivables Corporation (ERC), for use as collateral for cash or non- transferrable promissory notes and related letters of credit. The letters of credit may be issued only on behalf of Emery Air Freight Corporation and for a term of one year with an option to renew. The letters of credit bear a fee of 1.5% per annum. At December 31, 1993, there were $72.2 million of letters of credit issued and collateralized by receivables under this facility. Under the terms of the agreement, ERC's assets will be available to satisfy its obligations prior to any distribution to its stockholders. The agreement contains various covenants, the most restrictive of which requires the participating companies to maintain specified amounts of tangible net worth. In July 1993, the Company entered into an agreement with several banks to establish a $250 million unsecured credit facility to provide for the Company's letter of credit and working capital needs. The agreement contains various restrictive covenants which limit the incurrence of additional indebtedness, require the Company to maintain minimum amounts of tangible net worth and fixed charge coverage and restrict capital expenditures of specified subsidiaries. At December 31, 1993, there were $73.1 million of letters of credit issued under this agreement. This facility replaces a $250 million receivable sale facility which was terminated in 1993. At December 31, 1992, there were $166,399,000 of purchaser's notes due, for receivables sold, and a comparible amount of letters of credit issued under this receivable sale facility. The Company also entered into a related agreement with a bank in July 1993 to establish a $110 million letter of credit facility to provide for the Company's standby letter of credit needs. At December 31, 1993, there were $48.0 million of letters of credit issued under this agreement. The agreement contains covenants substantially the same as those described in the related $250 million agreement above. The total amounts outstanding under the unsecured facilities may not exceed $250 million at any one time. Based on interest rates currently available to the Company for debt with similar terms and maturities, the fair value of long-term debt is approximately 5% above the carrying amount at December 31, 1993. The aggregate annual maturities and sinking fund requirements of long- term debt for each of the next five years ending December 31 are: 1994, $38,906,000; 1995, $3,707,000; 1996, $2,403,000; 1997, $3,100,000, and, 1998 $4,200,000. The Company's consolidated interest expense as presented on the statements of consolidated operations is net of interest capitalized of $1,224,000, $543,000 and $1,703,000 for each of the three years in the period ended December 31, 1993. The 1992 statement of consolidated operations reflects $7.4 million of expense for the early retirement of indebtedness under Secured Note Purchase Agreement. All other debt retirement was at or near par. PAGE 37 4. Leases The Company and its subsidiaries are obligated under various non- cancelable leases which expire at various dates through 2011. The principal capital lease covers a sorting facility in Dayton, Ohio (Facility) for a 30-year lease term. Included in other equipment and leasehold improvements are $83,741,000 as of December 31, 1993 and 1992, related to this facility. The accumulated depreciation at December 31, 1993 and 1992 was $30,351,000 and $24,677,000, respectively. The Facility was financed by City of Dayton, Ohio revenue bonds Series A, B, C and D (Bonds). In September 1993, Emery redeemed the Series B Bonds and subsequently issued Series E and F Bonds in the same amount, also maturing in 2009. The Series C, D, E and F Bonds bear variable rates of interest, approximately 3% at December 31, 1993. The Series A Bonds are due through 2009 with an effective interest rate of 8%. Rental payments under this lease are equivalent to debt service on the Bonds. The Bonds have various call provisions at Emery's option. Series A Bonds are secured by a debt service reserve fund of $7 million which is classified as restricted funds in the consolidated balance sheets, a first lien on the leasehold interests of Emery in the Facility and the leased real property pursuant to a mortgage, and a pledge agreement of the stock of a wholly-owned subsidiary of Emery, which is the lessee or sublessee of certain aircraft. The Series C, D, E and F Bonds are secured by irrevocable letters of credit. The Series E and F bonds are also secured by a junior lien on the Facility. Future minimum lease payments under all leases with initial or remaining non-cancelable lease terms in excess of one year, at December 31, 1993, are as follows: Capital Operating (Dollars in thousands) Leases Leases Year ending December 31 1994 $7,927 $137,915 1995 7,723 115,869 1996 7,723 88,187 1997 7,723 64,897 1998 7,723 43,394 Thereafter 193,880 92,485 Total minimum lease payments 232,699 $542,747 Less amount representing interest (121,165) Present value of minimum lease payments 111,534 Less current maturities of obligations under capital leases (340) Long-term obligations under capital leases $111,194 Rental expense for operating leases is comprised of the following: 1993 1992 1991 (Dollars in thousands) Minimum rentals $185,425 $176,832 $186,909 Less: Amortization of deferred gains (1,785) (1,785) (1,785) Sublease rentals (10,886) (7,727) (10,969) $172,754 $167,320 $174,155 PAGE 38 5. Income Taxes The components of pretax income (loss) and income taxes (benefits) are as follows: 1993 1992 1991 (Dollars in thousands) Pretax income (loss) U.S. corporations $84,700 $(10,736) $(48,856) Foreign corporations 6,741 3 5,519 Total pretax income (loss) $91,441 $(10,733) $(43,337) Income taxes (benefits) Current U.S. federal $ 63,956 $12,681 $ 3,474 State and local 7,089 6,457 4,873 Foreign 5,475 6,090 4,046 76,520 25,228 12,393 Deferred U.S. federal (31,616) (14,648) (9,580) Tax credit benefits -- (7,600) -- State and local (3,642) (3,705) 2,130 Foreign (395) (6,352) 232 Utilization of net operating loss carryover -- -- (8,091) (35,653) (32,305) (15,309) Total income taxes (benefits) $ 40,867 $ (7,077) $ (2,916) The Company elected to prospectively adopt Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), effective January 1, 1992. The adoption had an immaterial effect on the 1991 net loss applicable to common shareholders. However, the 1991 income tax benefit would be lower by approximately $4.7 million with a corresponding reduction to the preferred dividends. This offset represents the tax benefit related to the TASP preferred dividends which SFAS 109 requires to be reported as a reduction of the preferred dividend. Under SFAS 109, deferred tax assets and liabilities are adjusted for the effect changes in tax laws or rates. The increase in U.S. federal tax rate to 35% effective January 1, 1993 resulted in an increase in the deferred tax asset of $1.6 million and a corresponding reduction in 1993 deferred tax expense. The Company has net operating loss carryforwards from acquired subsidiaries of approximately $103 million, which expire between 2002 and 2003. The net operating loss carryforwards are restricted to offsetting future years' U.S. federal income tax liabilities of the subsidiary which generated the losses. If realized, this benefit will be used to reduce cost in excess of net assets of businesses acquired. The components of deferred tax assets and liabilities on the balance sheets at December 31, relate to the following: (Dollars in thousands) Deferred tax assets 1993 1992 Reserves for accrued claims costs $82,663 $67,863 Reserves for post retirement health benefits 50,235 42,899 Other reserves not currently deductible 38,741 25,577 Reserves for employee benefits 35,311 22,954 Foreign tax and alternative minimum tax credit carryovers 1,011 15,910 Other -- 3,059 207,961 178,262 Deferred tax liabilities Depreciation 87,971 95,709 Tax benefits from leasing transactions 20,013 20,642 Unearned revenue 9,171 7,129 Other 4,433 3,979 121,588 127,459 Net deferred tax asset $86,373 $50,803 Deferred tax assets and liabilities in the balance sheet are classified in accordance with SFAS 109, which generally requires the classification be based on the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based on the estimated period of reversal. PAGE 39 Income tax benefits vary from the amounts calculated by applying the U.S. statutory income tax rate to the pretax income (loss) as set forth in the following reconciliation: 1993 1992 1991 U.S. statutory tax rate 35.0% (34.0)% (34.0)% State income taxes (net of federal income tax benefit) 2.5 5.1 12.9 Foreign taxes in excess of U.S. statutory rate 3.0 (2.4) 5.5 Dividends paid to TASP (.7) (4.0) (9.9) Non-deductible operating expenses 1.9 9.3 5.0 Amortization of cost in excess of net assets of businesses acquired 3.7 31.2 7.6 Tax rate change impact on deferred expense (1.7) -- -- Foreign tax credit benefits, net (1.0) (70.8) -- Other, net 2.0 (.3) 6.2 Effective income tax rate 44.7% (65.9)% (6.7)% 6. Shareholders' Equity In 1986, the Board of Directors designated a series of 600,000 shares as Series A Participating Preferred Stock from the Company's 5,000,000 shares of preferred stock, no par value, which had previously been authorized but unissued. The Board also declared a dividend of one preferred stock purchase right for each outstanding share of the Company's common stock. Under certain conditions, each right may be exercised to purchase one one-hundredth share of the Company's Series A Participating Preferred Stock at an exercise price of $140 per right. The rights may be exercisable only after a party acquires beneficial ownership of 20% or more of the Company's common stock or announces an offer for 30% or more of the Company's common stock. The rights, which do not have voting rights, expire November 7, 1996 and may be redeemed at the Company's option for $.01 per right at any time prior to their expiration or the acquisition of 20% or more of the Company's common stock. In the event that the Company is acquired in a merger or other business combination transaction, each right that has not previously been exercised will entitle its holder, upon exercise thereof at the exercise price, that number of shares of common stock of the surviving company which at the time of such transaction would have a market value of two times the exercise price of the right. The Company intends to redeem these rights on November 7, 1995. In 1989, as part of an amendment to the TASP, the Board of Directors authorized the expenditure of up to $150,000,000 to repurchase up to 7,500,000 shares of the Company's common stock. Under such authorization, the Company repurchased 4,859,029 shares of its outstanding common stock in open market transactions for an aggregate purchase price, including commissions, of approximately $150 million. In 1989, as part of an amendment to the TASP, the Board of Directors designated a series of 1,100,000 preferred shares as Series B Cumulative Convertible Preferred Stock, $.01 stated value. The Series B preferred stock is convertible into common stock at the option of the holder at the rate of four shares for each share of preferred stock subject to antidilution adjustments in certain circumstances. Holders of the Series B preferred stock are entitled to vote with the common stock as a single class on all matters upon which the common stock is entitled to vote and are entitled to a number of votes in such circumstances equal to the product of (a) 1.3 multiplied by (b) the number of shares of common stock into which the Series B preferred stock is convertible (as described above) on the record date of such vote. Holders of the Series B preferred stock are also entitled to vote separately as a class on certain other matters. The TASP trustee is required to vote the allocated shares based upon instructions from the participants; unallocated shares are voted in proportion to the voting instructions received from the participants with allocated shares. The Series B preferred stock is senior to the Company's Series A and C preferred stock with respect to dividends and liquidation. The Series B preferred stock is also subject to automatic conversion into common stock in the manner described in Note 8. PAGE 40 In 1992, the Company issued 6,900,000 depository shares each representing one-tenth of a share of Series C Conversion Preferred Stock, no par value. The depository shares were sold at a price of $17.625. The net capital proceeds of $117.9 million were used to retire debt. The depository shares provide for cumulative quarterly dividends at a per share rate of $1.54 per annum. Each depository share will automatically convert into one share of common stock, plus unpaid dividends in the form of cash or additional common stock, on March 15, 1995. The Company has the option to call any or all of the depository shares prior to March 15, 1995 in exchange for shares of common stock having a market value at issuance equal to $30.17 and declining, by January 15, 1995, to $25.55 plus cash or common stock equal to unpaid dividends. In the event of a merger or consolidation, the holders will receive amounts substantially the same as the amounts determined under the terms outlined above for a Company-initiated call. Holders of the shares will have no voting rights, except as otherwise provided under designated circumstances. In the event of a liquidation or winding up of the Company, an amount equal to the initial offering price plus all accrued and unpaid dividends will be provided to holders of the Series C Preferred Stock after payment of all amounts due to the holders of the Series B Preferred Stock. The Series C Preferred Stock is senior to the Company's Series A Preferred and Common Stock with respect to dividends and liquidation. 7. Employee Benefit Plans The Company has a non-contributory defined benefit pension plan (the Pension Plan) covering non-contractual employees in the United States. Although it is the Company's funding policy to contribute the minimum required tax-deductible contribution for the year, it may increase its contribution above the minimum if appropriate to its tax and cash position and the plan's funded status. Benefits under the Pension Plan are based on a career average final five-year pay formula. The Company's annual pension provision is based on an independent actuarial computation. Based on that computation, a pension provision of $14,165,000 in 1993, $18,045,000 in 1992 and $21,466,000 in 1991 was required. Approximately 85% of the Pension Plan assets are invested in publicly traded stocks and bonds. The remainder is invested in temporary cash investments, real estate funds and investment capital funds. Following is additional information relating to the Pension Plan at December 31: 1993 1992 (Dollars in thousands) Pension Plan assets at market value $326,915 $279,516 Less actuarial present value of projected benefit obligation Vested benefits (250,564) (212,917) Non-vested benefits (27,299) (23,200) Accumulated benefit obligation (277,863) (236,117) Effect of projected future compensation levels (88,922) (83,321) Projected benefit obligation (366,785) (319,438) Pension Plan assets under projected benefit obligation (39,870) (39,922) Unrecognized prior service costs 29,897 32,290 Unrecognized net gain (7,174) (8,999) Unrecognized net asset at transition, being amortized over 18 years (22,329) (24,562) Pension Plan liability $(39,476) $(41,193) Weighted average discount rate 7.5% 8.0% Expected long-term rate of return on assets 9.5% 10.0% Rate of increase in future compensation levels 5.5% 6.0% PAGE 41 Net pension cost includes the following: 1993 1992 1991 (Dollars in thousands) Cost of benefits earned during the year $15,789 $ 18,236 $ 17,266 Interest cost on projected benefit obligation 26,378 24,857 23,725 Actual gain arising from plan assets (41,891) (12,976) (44,910) Amortization of unrecognized net asset at transition (2,233) (2,233) (2,233) Amortization of unrecognized net (gain) loss (111) -- 308 Deferred investment gain (loss) 13,658 (12,397) 24,752 Amortization of unrecognized prior service cost 2,575 2,558 2,558 Net pension cost $14,165 $ 18,045 $ 21,466 The Company's Pension Plan includes programs to provide additional benefits for compensation excluded from the basic Pension Plan. The annual provision for these programs is based on independent actuarial computations using assumptions consistent with the Pension Plan. In 1993 and 1992, the total pension liability was $10,202,000 and $10,681,000, respectively, and the total pension cost was $1,633,000 in 1993, $1,767,000 in 1992 and $1,584,000 in 1991. Approximately 55% of the Company's employees are covered by union- sponsored, collectively bargained, multi-employer pension plans. The Company contributed and charged to expense $98,090,000 in 1993, $97,048,000 in 1992 and $91,693,000 in 1991 for such plans. Those contributions were made in accordance with negotiated labor contracts and generally were based on time worked. In the fourth quarter of 1992, the Company elected to prospectively adopt, effective January 1, 1992, the Financial Accounting Standards Board Statement No. 106, "Employer's Accounting for Post Retirement Benefits Other Than Pensions" (SFAS 106). This statement requires the accrual of the total cost of post retirement benefits during the period up to the date employees are eligible to retire. Previously, those costs were recorded at the time the benefits were provided. Adoption of SFAS 106 had no impact on the Company's cash flows and the Company continues to fund benefits as claims are paid. The Company made benefit payments totaling $3,709,000 in 1993, $4,170,000 in 1992 and $2,588,000 in 1991. The Company's retiree health plan provides benefits to all non- contractual employees at least 55 years of age with 10 years or more of service. In 1992, the plan was amended to modify benefits for all future participants unless they were eligible to retire at January 1, 1993. The most significant amendments limit the benefits for participants to a defined dollar amount based on age and years of service and eliminate employer- subsidized retiree health care benefits for employees hired on or after January 1, 1993. At adoption of SFAS 106 in 1992, the Company elected to take $112.9 million as a one-time charge in the statement of consolidated operations net of related income tax benefits. The following information sets forth the total post retirement benefit amounts accrued in Other Liabilities and Deferred Credits in the Company's consolidated balance sheets at December 31. (Dollars in thousands) 1993 1992 Accumulated post retirement benefit obligation Retirees and other inactives $62,161 $64,094 Participants currently eligible to retire 29,699 32,870 Other active participants 26,085 21,626 117,945 118,590 Unrecognized valuation gain 15,349 -- Accrued post retirement benefit cost $133,294 $118,590 Weighted average discount rate 7.5% 8.0% Average health care cost trend rate First year 12.5% 13.5% Declining to (year 2000) 6.5% 6.5% PAGE 42 Net periodic post retirement benefit costs include the following components: (Dollars in thousands) 1993 1992 Cost of benefits earned during the year $2,877 $3,340 Interest cost on accumulated post retirement obligation 8,683 9,746 Amortization of unrecognized net gain (411) -- Net periodic post retirement benefit cost $11,149 $13,086 The increase in the accumulated post retirement benefit obligation and the net periodic post retirement benefit cost, given a 1 percent increase in the health care cost trend rate assumption, would be 9.6% and 10.8%, respectively. In 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employer's Accounting for Post- employment Benefits" (SFAS 112). This statement requires the accrual of costs for benefits provided to former or inactive employees after termination, but before retirement. The Company's existing accounting practice is substantially the same as this new statement. As such, the adoption of this statement in 1994 will not have a material impact on the Company's financial statements. The Company and each of its subsidiaries have adopted various plans relating to the achievement of specific goals to provide incentive compensation for designated employees. Total incentive compensation earned by the participants of those plans is as follows: (Dollars in thousands) 1993 1992 1991 Incentive compensation $54,600 $22,509 $ 9,365 Participants 17,200 8,900 5,400 All shares under the CF Common Stock Fund (EMSOP) have been allocated to plan participants at December 31, 1993. 8. Thrift and Stock Plan On January 1, 1988, the Company adopted a 401(k) Plan for non- contractual U.S. employees to which it makes contributions to be used to purchase the Company's common stock. The Company's contribution vests immediately with the employee and totaled $7,248,000 in 1993, $6,852,000 in 1992 and $6,675,000 in 1991. The Company's contributions were substantially all in the form of preferred stock as described below. On May 18, 1989, the Company issued 986,259 shares of Series B Cumulative Convertible Preferred Stock to the Consolidated Freightways Thrift and Stock Plan (TASP) for an aggregate purchase price of $150,010,000. The Series B preferred stock is issuable only to the TASP trustee. Upon termination of an employee's participation in the TASP, the Series B preferred stock is automatically converted into common stock at a rate generally equal to that number of shares of common stock that could be purchased for $152.10, but not less than the minimum conversion rate of four shares of common stock for each share of Series B preferred stock. The preferred stock is allocated among participants by the Company matching participants' contributions at a rate of 50% of the first three percent of the participants' basic compensation. The total preferred shares allocated annually are based upon the principal and interest method. If the allocated preferred shares do not meet the Company's matching requirement, an additional cash contribution is made to the TASP. Deferred compensation expense is recognized as the preferred shares are allocated to participants; the amount recognized is equivalent to the interest on the TASP debt plus shares allocated to participants less preferred dividends paid to the TASP. During 1993, 1992 and 1991, $5,598,000, $5,359,000, and $6,506,000, respectively, of deferred compensation expense was recognized. The TASP guarantees are reduced as principal is paid. At December 31, 1993, the TASP owned 968,655 shares of Series B preferred stock, of which 137,631 shares have been allocated to employees. At December 31, 1993, PAGE 43 the Company has reserved, authorized and unissued common stock adequate to satisfy the conversion feature of the Series B preferred stock. 9. Stock Option Plans Officers and key employees have been granted options under the Company's stock option plans to purchase common stock of the Company at prices not less than the fair market value of the stock on the date of grant. Outstanding options become fully exercisable one year after date of grant; any unexercised options expire after 10 years. A stock option plan under which options may be granted to purchase up to 3,000,000 shares of common stock of the Company became effective January 1, 1988. In 1992, the plan was amended to include authority to grant an additional 3,000,000 options. Following is a summary of stock option unit data: 1993 1992 1991 Outstanding at January 1 3,552,068 3,516,634 3,186,847 Granted 650,000 300,000 580,000 Exercised (324,482) (194,775) (24,000) Expired, canceled or surrendered (63,987) (69,791) (226,213) Outstanding at December 31 3,813,599 3,552,068 3,516,634 Options which became exercisable during the year 300,000 580,000 2,211,725 Options exercisable at December 31 3,163,599 3,252,068 2,936,634 Shares reserved at December 31 For future option grants 2,119,200 2,725,975 87,150 For issuance (including future, option grants, if any) 5,932,799 6,278,043 3,603,784 Exercise prices related to options outstanding at December 31, 1993 ranged from $10.75 to $32.75 per share and aggregated $65,420,341. Exercise prices related to options exercised during 1993 ranged from $12.19 to $19.94, during 1992 were $12.19 to $16.40 and during 1991 were $13.50. 10. Contingencies The Company and its subsidiaries are defendants in various lawsuits incidental to their businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material impact on the Company's financial position or results of operations. 11. Industry Group Analysis and Foreign Operations The operations of the Company and its subsidiaries, which are conducted primarily in the United States and Canada, encompass principally three business segments: Long-Haul Trucking (CF MotorFreight), Regional Trucking and Intermodal (Con-Way Transportation Services), and Air Freight (Emery Worldwide). The activities of these groups are fully described elsewhere in this Annual Report. Revenues and expenses are allocated between U.S. and international depending on whether the shipments are between locations within the United States or between locations where one or both are outside of the United States. Following is an analysis by geographic and industry group. Operating income is net of general corporate expenses, a portion of which has been allocated to subsidiaries on a revenue and capital basis. Intersegment revenues are not material. The identifiable assets of the parent consist principally of cash, temporary cash investments and receivables. GEOGRAPHIC GROUP INFORMATION (Dollars in thousands) Consolidated U.S. International Year Ended December 31, 1993 Revenues $4,191,811 $3,665,654 $526,157 Operating income 120,157 113,179 6,978 Identifiable assets 2,306,653 2,221,772 84,881 Year Ended December 31, 1992 Revenues $4,055,589 $3,542,521 $513,068 Operating income (loss) 48,581 56,437 (7,856) Identifiable assets 2,293,067 2,198,386 94,681 Year Ended December 31, 1991 Revenues $4,082,257 $3,561,417 $520,840 Operating income (loss) 1,736 (1,797) 3,533 Identifiable assets 2,285,466 2,140,027 145,439 PAGE 44 Consolidated Freightways, Inc. and Subsidiaries INDUSTRY GROUP INFORMATION
(Dollars in thousands) Industry Group ---------------------------------------- Con-Way CF Motor Transportation Emery Consolidated Corporate Freight Services Worldwide Year Ended December 31, 1993 Revenues $4,191,811 $2,112,237 $818,301 $1,261,273 Operating expenses 3,407,996 1,770,148 615,585 1,022,263 Selling and administrative expenses 528,022 226,405 101,144 200,473 Depreciation 135,636 83,972 29,718 21,946 Operating income 120,157 $31,712 $71,854 $16,591 Other income (expense) (28,716) Income before income taxes $91,441 Capital expenditures $201,210 $2,789 $52,470 $63,823 $82,128 Identifiable assets $2,306,653 $195,583 $864,748 $338,567 $907,755 Year Ended December 31, 1992 Revenues $4,055,589 $2,184,190 $724,195 $1,147,204 Operating expenses 3,306,732 1,803,854 532,476 970,402 Selling and administrative expenses 561,581 269,849 105,001 186,731 Depreciation 138,695 83,002 32,971 22,722 Operating income (loss) 48,581 $27,485 $53,747 ($32,651) Other income (expense) (59,314) Loss before income tax benefits ($10,733) Capital expenditures $148,706 $1,267 $91,026 $36,317 $20,096 Identifiable assets $2,293,067 $392,120 $803,300 $228,565 $869,082 Year Ended December 31, 1991 Revenues $4,082,257 $2,142,603 $639,443 $1,300,211 Operating expenses 3,310,184 1,713,201 458,320 1,138,663 Selling and administrative expenses 624,213 292,099 114,778 217,336 Depreciation 146,124 85,312 33,027 27,785 Operating income (loss) 1,736 $51,991 $33,318 ($83,573) Other income (expense) (45,073) Loss before income tax benefits ($43,337) Capital Expenditures $98,073 $15,222 $60,977 $10,598 $11,276 Identifiable assets $2,285,466 $243,033 $935,471 $233,695 $873,267
PAGE 45 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES 12 Quarterly Financial Data (Unaudited) (Dollars in thousands except per share data)
1993 - Quarter Ended March 31 June 30 September 30 December 31 Revenues $992,981 $1,020,224 $1,067,003 $1,111,603 Operating income 21,350 25,315 38,448 35,044 Income before income taxes 15,481 16,937 31,678 27,345 Income taxes 7,213 8,545 14,599 10,510 Net income applicable to common shareholders 3,519 3,645 12,382 12,061 Net income per share: Primary 0.10 0.10 0.35 0.33 Fully diluted 0.09 0.09 0.31 0.29 Market price $16.25-$20.38 $14.75-$18.75 $13.63-$16.88 $15.50-$24.00 1992 - Quarter Ended March 31* June 30* September 30* December 31 Revenues $990,627 $1,002,767 $1,037,843 $1,024,352 Operating income 11,093 16,206 17,819 3,463 Income (loss) before income tax (benefits) (1,652) 5,288 8,334 (22,703) Income taxes (benefits) (833) (4,510) 6,771 (8,505) Extraordinary charge -- 7,428 -- -- Cumulative effect of accounting change 69,991 -- -- -- Net loss applicable to common shareholders (73,340) (2,495) (3,269) (18,624)** Net income (loss) per share Net income (loss) before extraordinary charge and cumulative effect of accounting change (0.10) 0.14 (0.09) (0.53) Extraordinary charge -- (0.21) -- -- Cumulative effect of accounting change (1.99) -- -- -- Net loss (2.09) (0.07) (0.09) (0.53) Market price $14.38-$19.63 $12.63-$19.00 $12.50-$14.75 $13.00-$19.13 * Restated for the prospective adoption, effective January 1, 1992, of SFAS No. 109 and SFAS No. 106 in the second and and fourth quarters, respectively. The effects on the losses per common share from what was previously reported were $(2.00), $(.03) and $(.04) for the first, second and third quarters, respectively. **Includes special charges of $27.8 million for the restructuring of CF MotorFreight, write off of Canadian operating authorities , write down of properties and certain other intangibles and related tax benefits.
PAGE 46 Ten Year Financial Summary Consolidated Freightways, Inc. and Subsidiaries Years Ended December 31 (Dollars in thousands except per share data)
SUMMARY OF OPERATIONS: 1993 1992 1991 1990 1989(d) Revenues $4,191,811 $4,055,589 $4,082,257 $4,208,527 $3,760,193 CF MotorFreight 2,112,237 2,184,190 2,142,603 2,185,271 1,996,681 Con-Way Transportation Services 818,301 724,195 639,443 638,098 558,517 Emery Worldwide 1,261,273 1,147,204 1,300,211 1,385,158 1,204,995 Operating income (loss) 120,157 48,581 1,736 6,044 50,855 CF MotorFreight 31,712 27,485 (a) 51,991 108,462 107,895 Con-Way Transportation Services 71,854 53,747 33,318 25,547 (c) 40,365 Emery Worldwide 16,591 (32,651) (83,573) (127,965) (97,405) Depreciation and amortization 146,297 166,917 168,527 170,757 159,282 Investment income 5,586 5,041 10,558 2,531 5,418 Interest expense 30,333 38,893 46,703 40,178 38,471 Income (loss) before income taxes 91,441 (10,733) (43,337) (32,678) 24,297 Income taxes (benefits) 40,867 (7,077) (2,916) (4,697) 15,685 Net income (loss) applicable to common shareholders 31,607 (97,728)(b) (53,112) (40,727) 12,048(e) Cash from operations 172,808 131,779 192,356 194,821 81,031 PER SHARE Net income (loss) applicable to common shareholders .87 (2.78)(b) (1.52) (1.16) .33(e) Dividends on common stock -- -- -- .530 1.040 Common shareholders' equity 13.47 12.69 15.33 16.50 17.13 FINANCIAL POSTION Cash and temporary cash investments 139,044 152,064 284,645 217,680 111,081 Property, plant and equipment, net 910,444 886,834 896,922 953,504 1,016,325 Total assets 2,306,653 2,293,067 2,285,466 2,412,003 2,391,826 Capital expenditures 201,210 148,706 98,073 141,784 255,793 Long-term debt and capital leases 408,409 505,320 646,655 673,611 652,169 Shareholders' equity 623,375 579,161 547,083 581,979 630,122 RATIOS AND STATISTICS Current ratio 1.1 to 1 1.2 to 1 1.2 to 1 1.2 to 1 1.2 to 1 Income (loss) as % of revenues .75% (2.4)% (1.3)% (1.0)% .3% Effective income tax rate 44.7% (65.9%) (6.7%) (14.4)% 64.6% Long-term debt and capital leases as % of total capitalization 40% 47% 54% 54% 51% Return on average invested capital 5% -- (3)% (2)% 2% Return on average shareholders' equity 8% (1)% (7)% (7)% 2% Common dividends as % of net income (loss) -- -- -- 46% 315% Average shares outstanding 36,187,682 35,195,743 35,033,738 34,988,778 36,791,182 Market price range $24.00-$13.63 $19.63-$12.50 $21.50-$9.50 $26.88-$10.75 $37.75-$25.25 Number of common shareholders 15,785 15,260 14,300 14,500 13,427 Number of employees 39,100 37,900 37,700 41,300 40,800 (a) Includes special charges of $17.3 million related to the restructuring of CFMotorFreight and write off of Canadian operating authority. (b) Includes $70 million ($1.99 per share) cumulative effect of change in method of accounting for post retirement benefits and $7.4 million ($.21 per share) extraordinary charge from early retirement of debt. Also included are special charges of $17.3 million, $10.5 million of charges for the write down of properties held for sale and certain other intangibles and related tax benefits. (c) Includes one-time subsidiary closure costs of $11.3 million. (d) Includes the results of operations of Emery Air Freight Corporation since its acquisition in April. (e) Includes $11.3 million ($.31 per share) cumulative effect of change in method of accounting for income taxes.
PAGE 47 Ten Year Financial Summary (continued)
SUMMARY OF OPERATIONS 1988 1987 1986 1985 1984 Revenues $2,689,075 $2,296,911 $2,124,467 $1,882,142 $1,704,909 CF MotorFreight 1,836,141 1,621,148 1,524,336 1,382,637 1,330,856 Con-Way Transportation Services 463,918 370,940 318,841 233,930 149,300 Emery Worldwide 389,016 304,823 281,290 265,575 224,753 Operating income (loss) 162,727 101,248 135,045 112,235 118,202 CF MotorFreight 119,116 92,456 128,927 109,005 106,359 Con-Way Transportation Services 33,373 6,404 11,359 (731) (5,667) Emery Worldwide 10,238 2,388 (5,241) 3,961 17,510 Depreciation and amortization 116,204 102,165 94,262 85,953 71,037 Investment income 13,950 25,182 16,942 22,468 20,991 Interest expense 6,324 6,016 7,298 6,159 7,379 Income (loss) before income taxes 173,330 119,311 147,639 127,408 128,735 Income taxes (benefits) 60,177 44,741 58,530 48,117 54,270 Net income (loss) applicable to common shareholders 113,153 74,570 89,109 79,291 74,465 Cash from operations 243,595 206,841 224,242 176,356 153,082 PER SHARE Net income (loss) applicable to common shareholders 3.00 1.93 2.31 2.06 1.88 Dividends on common stock .960 .880 .798 .717 .650 Common shareholders' equity 20.32 18.16 17.22 15.69 14.42 FINANCIAL POSTION Cash and temporary cash investments 134,783 161,590 153,334 119,614 141,594 Property, plant and equipment, net 760,349 622,181 573,092 537,659 465,639 Total assets 1,536,099 1,377,329 1,288,063 1,134,430 1,060,574 Capital expenditures 258,368 155,127 136,278 164,862 122,977 Long-term debt and capital leases 47,677 50,935 58,700 62,539 62,645 Shareholders' equity 766,248 687,857 665,048 603,794 552,836 RATIOS AND STATISTICS Current ratio 1.3 to 1 1.4 to 1 1.5 to 1 1.6 to 1 1.5 to 1 Income (loss) as % of revenues 4.2% 3.2% 4.2% 4.2% 4.4% Effective income tax rate 34.7% 37.5% 39.6% 37.8% 42.2% Long-term debt and capital leases as % of total capitalization 6% 7% 8% 9% 10% Return on average invested capital 12% 9% 11% 10% 11% Return on average shareholders' equity 16% 11% 14% 14% 14% Common dividends as % of net income (loss) 32% 46% 35% 35% 35% Average shares outstanding 37,712,402 38,579,572 38,586,375 38,428,242 39,680,006 Market price range $34.75-$25.25 $41.25-$22.75 $36.50-$23.67 $27.50-$18.67 $19.58-$13.42 Number of common shareholders 12,789 12,202 11,622 10,901 10,089 Number of employees 29,400 26,300 24,600 21,700 20,600
EX-22 17 EXHIBIT 22 EXHIBIT 22 CONSOLIDATED FREIGHTWAYS, INC. SIGNIFICANT SUBSIDIARIES OF THE COMPANY December 31, 1993 The Company and its significant subsidiaries were: State or Percent of Province or Stock Owned Country of Parent and Significant Subsidiaries by Company Incorporation - ----------------------------------- --------------- --------------- Consolidated Freightways, Inc. Delaware Significant Subsidiaries of Consolidated Freightways, Inc. - ---------------------------------------------------------- Consolidated Freightways Corporation of Delaware 100 Delaware Canadian Freightways, Limited 100 Alberta, Canada Milne & Craighead Customs Brokers (Canada) Ltd. 100 Canada Canadian Freightways Eastern Limited 100 Ontario, Canada Milne & Craighead Customs Brokers (USA), Inc. 100 Delaware KAM Container Line (USA), Inc. 100 Delaware United Terminals LTD. 100 Canada Menlo Logistics, Inc. 100 California Road Systems, Inc. 100 California Willamette Sales Co. 100 Oregon Con-Way Transportation Services, Inc. 100 Delaware Con-Way Western Express, Inc. 100 Delaware Con-Way Central Express, Inc. 100 Delaware Con-Way Southern Express, Inc. 100 Delaware Con-Way Southwest Express, Inc. 100 Delaware Con-Way Intermodal, Inc. 100 Delaware Emery Air Freight Corporation 100 Delaware Emery Worldwide Airlines, Inc. 100 Nevada -----END PRIVACY-ENHANCED MESSAGE-----