<PAGE>

                  SECURITIES AND EXCHANGE COMMISSION
                          Washington, D. C. 20549

                                    Form 10-K

(Mark One)

     (X) ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________
         TO ______________.



         Commission file number             0-19791

                            USFREIGHTWAYS CORPORATION

             (Exact name of registrant as specified in its charter)

      Delaware                            36-3790696

(State or other jurisdiction of         (I.R.S. Employer
incorporation or organization)          Identification No.)

8550 W. Bryn Mawr Ave., Ste. 700, Chicago, Il.         60631
(Address of principal executive offices)            (Zip Code)


(Registrant's telephone number, including area code)      (773) 824-1000


Securities registered pursuant to Section 12(b) of the Act:
    Title of each class      Name of each exchange of which registered
Common Stock $.01 Par Value                    NASDAQ
Preferred Stock Purchase Rights

   Securities registered pursuant to Section 12(g) of the Act:
                   6 5/8 % Notes Due May 1, 2000
                   6 1/2 % Notes Due May 1, 2009
                        (Title of Class)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. __X____ Yes________No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K is not contained  herein and will not be  contained,  to the
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference in Part III of this Form 10-K or any amendment to the
Form 10-K ___.

The  number  of  shares  of  common  stock  outstanding  at March  16,  2000 was
26,514,571.  The aggregate market value of the voting stock of the registrant as
of March 13, 2000 was approximately $961,153,199.

                           DOCUMENTS INCORPORATED BY REFERENCE

1)   1999 Annual Report to  Shareholders  for the Fiscal Year Ended December 31,
     1999 (Only those portions  referenced  herein are incorporated in this Form
     10-K).

2)   Proxy Statement to be filed on or about March 23, 2000 (Only those portions
     referenced herein are incorporated in this Form 10-K).

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                                     Page 2

                            USFreightays Corporation

                                    Form 10-K
                          Fiscal Year Ended December 31, 1999


                                     PART I

Item 1.           Business

Background

     USFreightways  Corporation ("the Company")  provides  comprehensive  supply
chain management services.  This is accomplished through the Company's operating
subsidiaries.  Regional less-than-truckload ("LTL") general commodities carriers
provide overnight and second-day  delivery throughout the United States and into
Canada. Logistics subsidiaries provide integrated supply chain solutions,  value
added logistics solutions,  reverse logistics services and software and complete
warehouse  fulfillment  services to its  customers.  The Company  also  provides
domestic and international  freight forwarding,  import and export air and ocean
services as well as premium  regional and  national  truckload  ("TL")  service.
Principal   subsidiaries  in  the  Regional  LTL  group  are  USF  Holland  Inc.
("Holland"),  USF Bestway Inc. ("Bestway"),  USF Red Star Inc. ("Red Star"), USF
Reddaway Inc.  ("Reddaway")  and USF Dugan Inc.  ("Dugan");  the Logistics group
consists of USF Logistics Inc. ("Logistics"),  USF Processors Inc ("Processors")
and USF  Distribution  Services  Inc.  ("Distribution  Services");  the  Freight
Forwarding  group includes  several  companies that all now trade under the name
USF Worldwide Inc.  ("Worldwide");  USF Glen Moore Transport Inc. ("Glen Moore")
is the Company's TL carrier.

     The Company traces its origins to 1984 when TNT Limited, through its wholly
owned subsidiary TNT Transport Group ("Transport Group"), embarked on a strategy
to establish,  through acquisition, a nationwide network of quality regional LTL
carriers.  During the same period,  the group of businesses  that now constitute
the  Company  also  grew  as  a  result  of  internal  expansion  and  increased
penetration of existing markets. In April 1991 the Company was incorporated as a
holding company for regional trucking companies of Transport Group.

     During February 1992 the shareholders of the Company sold 19,593,750 shares
of common stock through an initial  public  offering for which the proceeds were
paid to  Transport  Group.  In a  subsequent  transaction  in 1993,  the Company
purchased from Transport Group all its remaining shares in the Company.

     On May 6, 1993 the Company issued,  through a public offering, 6 5/8% Notes
in the principal  amount of $100,000,000 due May 1, 2000. The proceeds from this
issuance were, in part, used to repay borrowings under existing  revolving lines
of credit which were  partially  used to acquire the common stock from Transport
Group.

     On May 1,  1999 the  Company  issued,  through  a public  offering,  6 1/2%
Guaranteed  Unsecured Notes in the principal  amount of $100,000,000  due May 1,
2009.  The  proceeds  from this  issuance  were,  in large  part,  used to repay
borrowings under existing revolving lines of credit.

     In February  1997,  the Company  sold  3,105,000  of its shares in a public
offering. The net proceeds from the sale, amounting to approximately $69,431,000
were  initially  used to repay  outstanding  debt under the Company's  revolving
credit facility.

     During 1998, under the purchase method of accounting,  the Company acquired
all of the  outstanding  shares of Golden Eagle Group,  Inc.,  an  international
freight  forwarding  company;  Glen Moore Transport,  Inc., a truckload  freight
carrier; Moore and Son Co., a transportation logistics services company; and the
general commodities business of Vallerie's  Transportation  Service,  Inc. for a
total of $66,379,000 of cash and debt incurred.

     During 1999, under the purchase method of accounting,  the Company acquired
all of the outstanding shares of Processors Unlimited Company,  Ltd., a provider
of reverse  logistics  services  to the  grocery  and drug  industries;  Special
Dispatch of Dallas,  Inc., a Texas based provider of assembly and  distributions
services; Cuxhaven Group, Inc., a domestic freight forwarding company and former
Baltimore,  MD agent for Worldwide;  Airgo,  Inc., a domestic freight forwarding
company and former Seattle, WA agent for Worldwide;  Scan Trans, Inc. a domestic
freight  forwarding  company and former San  Francisco,  CA agent for Worldwide;
Pace  Transportation,  Ltd., a domestic  freight  forwarding  company and former
Baltimore, MD agent for Worldwide;  Best Ways Air Cargo, a Puerto Rico-based air
freight forwarder and Underwood  Trucking,  an Indiana -based truckload carrier.
The Company  also  purchased  the general  commodities  business of CBL Trucking
Inc.,  a  Mid-Atlantic  and New  England  LTL  carrier;  certain  assets of Gulf
International  Freight, a domestic freight forwarding company and certain assets
of Pre Trans,  a Puerto  Rico  business  unit of Caro Trans  International  that
provides ocean services.  Total  consideration  for all Fiscal 1999 acquisitions
amounted to $52,054,000 of cash and debt incurred.

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                                PAGE 3

   Following  is a  table  depicting  revenue  by  LTL  trucking,  TL  trucking,
Logistics,  Freight  forwarding and Corporate and other segments for each of the
most recent three fiscal years:

Revenue ($ in millions)

Fiscal Year               1997      %    1998      %    1999      %
                         ------    ---  ------    ---  ------    ---
 LTL trucking            $1,409    90.0 $1,540    83.9 $1,746     78.6
 TL trucking                                13     0.7     44      2.0
 Logistics                  106     6.8    130     7.1    207      9.3
 Freight forwarding          44     2.8    152     8.3    225     10.1
 Corporate and other          6     0.4      -     0.0      -
                         ------   ----  ------    ---- ------    -----
Total                    $1,565   100.0 $1,835   100.0 $2,222    100.0
                         ------   ----- ------   ----- ------    -----




Regional LTL Trucking

     LTL  shipments  are  defined  as  shipments  of less  than  10,000  pounds.
Typically,  LTL carriers  transport freight along scheduled routes from multiple
shippers to multiple  consignees  utilizing a network of terminals together with
fleets of line-haul and pickup and delivery  tractors and  trailers.  Freight is
picked up from  customers by local drivers and  consolidated  for shipment.  The
freight is then loaded into  intercity  trailers  and  transferred  by line-haul
drivers to the terminal  servicing  the  delivery  area.  There,  the freight is
transferred to local trailers and delivered to its destination by local drivers.

     LTL operators are generally  categorized as either regional,  interregional
or long-haul carriers,  depending on the distance freight travels from pickup to
final delivery.  Regional  carriers  usually have average lengths of haul of 500
miles or less and tend to  provide  either  overnight  or  second  day  service.
Regional LTL carriers usually are able to load freight for direct transport to a
destination  terminal,  thereby  avoiding the costly and  time-consuming  use of
breakbulk  terminals  (where  freight is rehandled  and reloaded to its ultimate
destination).  In contrast,  long-haul LTL carriers  (average lengths of haul in
excess of 1,000 miles)  operate  networks of breakbulk and  satellite  terminals
(hub-spoke   systems)  and  rely   heavily  on  interim   handling  of  freight.
Interregional  carriers  (500 to 1,000  miles  per  average  haul)  also rely on
breakbulk terminals but to a lesser degree than long-haul carriers.

     Regional LTL carriers,  including the Company's LTL trucking  subsidiaries,
principally  compete  against other  regional LTL carriers.  To a lesser extent,
they compete against interregional and long-haul LTL carriers. To an even lesser
degree, regional LTL transporters compete against truckload carriers,  overnight
package companies,  railroads and airlines.  Significant  barriers to entry into
the  regional  LTL  market  exist  as  a  result  of  the  substantial   capital
requirements  for  terminals  and  revenue  equipment  and the need for a large,
well-coordinated and skilled work force.

     In the  competitive  environment  of each  of the  Company's  LTL  trucking
subsidiaries,  most LTL carriers have adopted discounting programs that severely
reduce  prices paid by some  shippers.  Additionally,  when new LTL  competitors
enter  a  geographic  region,  they  often  utilize  discounted  prices  to lure
customers away from the Company's trucking  subsidiaries.  Such attempts to gain
market share through price  reduction  programs exert  downward  pressure on the
industry's  price structure and profit margins and have caused many LTL carriers
to cease operations.

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                                PAGE 4

The LTL Trucking Subsidiaries

     The following is a brief description of the Company's LTL regional trucking
subsidiaries. Statistical information for subsidiary's operations is reported in
the Company's 1999 Annual Report to the  Shareholders,  and is  incorporated  by
reference in this Form 10-K as page F22 of Exhibit 13.

     USF  Holland  is the  largest  of  the  Company's  operating  subsidiaries,
transporting LTL shipments  interstate  throughout the central United States and
into the Southeast.  USF Holland uses predominantly single 48 foot trailers. The
average   length  of  line-haul  in  the  year  ended   December  31,  1999  was
approximately 390 miles.

     USF Red Star operates in the eastern United States,  as well as to and from
eastern Canada.  USF Red Star uses a combination of single and double  trailers.
The  average  length  of  line-haul  in the year  ended  December  31,  1999 was
approximately  290 miles. USF Red Star operates in an environment  characterized
by intense price competition.

     USF Bestway  operates  throughout the southwest region of the United States
from Texas to California.  USF Bestway uses double  trailers in its  operations.
For the year ended  December 31, 1999 the average  length of  line-haul  for USF
Bestway was approximately 414 miles.

     USF Reddaway  provides LTL carriage along the I-5 corridor from  California
to Washington,  throughout  the northwest  United States and into western Canada
and Alaska. The average length of line-haul for the year ended December 31, 1999
was  approximately  602 miles. USF Reddaway  operates double trailers and, where
possible, triple trailer combinations.

     USF Dugan  provides  service  to the Plains  states  and into the  southern
states  from  Texas to  Florida.  USF Dugan  operates  with  double  and  triple
trailers,  and the average  length of line-haul for the year ended  December 31,
1999 was approximately 551 miles.

<PAGE>

                                     PAGE 5

Truckload Trucking

     TL shipments are defined as shipments of 10,000 or more pounds.  Typically,
TL carriers  transport  freight along  irregular  routes from single shippers to
single  consignees,  without the necessity of a network of  terminals,  together
with fleets of  line-haul  sleeper  tractors  and  trailers.  Consolidated  full
truckload  freight is picked up from the  customer  and  delivered  to its final
destination  by  either a company  long-haul  driver  or an  independent  owner-
operator that has a leasing agreement with the carrier.

     TL operators  are  generally  categorized  as  long-haul  carriers and to a
lesser  degree  interregional  depending  on the distance  freight  travels from
pickup to final delivery. The average length of haul for most TL operators is in
excess of 1,000 miles.

     TL carriers,  including  the  Company's  trucking  subsidiary,  principally
compete against other TL carriers and to some extent the railroads.  TL carriers
generally  do not compete  against LTL  carriers.  Barriers to entry into the TL
market  exist  as a result  of  substantial  capital  requirements  for  revenue
equipment and the need for a  well-coordinated  and skilled work force. The work
force and revenue equipment requirements,  to some degree, can be offset through
the leasing of independent contractors that own their equipment. This work force
is not as controllable as the company employee work force.

     In the  competitive  environment  of the Company's TL trucking  subsidiary,
most TL carriers have adopted  discounting  programs that severely reduce prices
paid by some shippers. Additionally, when new TL competitors enter the business,
they often utilize  discounted  prices to lure customers away from the Company's
TL  trucking  subsidiary.  Such  attempts  to gain market  share  through  price
reduction programs exert downward pressure on the industry's price structure and
profit margins and have caused TL carriers to cease operations.

The TL Trucking Subsidiary

     The  following  is  a  brief  description  of  the  Company's  TL  trucking
subsidiary.  Statistical  information for subsidiary's operations is reported in
the Company's 1999 Annual Report to the  Shareholders,  and is  incorporated  by
reference in this Form 10-K as page F22 of Exhibit 13.

     Glen  Moore is the  Company's  TL  subsidiary,  transporting  TL  shipments
interstate  throughout  the  United  States  generally  from the  Northeast  and
Southeast states to the West coast and into the North Central  states.Glen Moore
primarily utilizes sleeper line-haul tractors and 53 foot trailers. Glen Moore's
average length of haul is approximately 1,000 miles.

     On August 2, 1999, Glen Moore acquired Underwood Trucking  ("Underwood") an
Indiana  based TL carrier which was merged into Glen Moore.  At the  acquisition
date,  Underwood was operating  approximately 50 tractors and 250 trailers.  For
the five months since its acquisition,  Underwood has contributed  approximately
$1.4  million in revenue.  At the end of the  current  fiscal  year,  Glen Moore
operated 288 tractors (mainly sleeper units) and 864 trailers.

     On  January  10,  2000,  Glen Moore  acquired  Tri-Star  Transportation,  a
Tennessee  based TL carrier.  Tri-Star  operates 170  tractor/trailer  units and
while not included in the Company's  Fiscal 1999 revenue,  generated $28 million
in revenue for 1999, with  approximately  two-thirds coming from dedicated fleet
operations.

The Logistics Subsidiaries

     Logistics  subsidiaries  provide  integrated supply chain solutions,  value
added logistics solutions,  reverse logistics services and software and complete
warehouse fulfillment services to its customers.  These activities are conducted
through USF Logistics,  which provides integrated supply chain solutions for its
clients   including   transportation,    warehousing,   cross-docking,   product
reconfiguration  and reverse  logistics;  USF  Distribution  Services a national
provider of value-added  logistics services to the retail and industrial markets
with a particular focus on consolidation/distribution and fulfillment programs.

     On March 1, 1999,  USF Logistics  acquired  Processors  Unlimited  Company,
Ltd., a Dallas, TX based provider of reverse logistics  services and software to
manufacturers,  distributors and retailers. In October, 1999, Processors changed
its name to USF Processors. USF Processors currently operates from approximately
60 sites across the country,  has in excess of 1,300  employees and  contributed
approximately $43.6 million in revenue since its acquisition.

     In July 1999,  USF  Distribution  Services  acquired  Special  Dispatch  of
Dallas, Inc., a Texas based provider of overnight distribution and consolidation
services  to  all  points  in  north,  central  and  western  Texas.  Since  its
acquisition,  Special  Dispatch has  contributed  approximately  $3.7 million in
revenue.


<PAGE>

                                PAGE 6

The Freight Forwarding Subsidiary

     The Company is engaged,  through its subsidiary USF Worldwide, in providing
domestic and international  freight  forwarding for its customers which includes
air freight services, import and export air and ocean services and customs house
brokerage services.

     During  1999,  USF  Worldwide  acquired  three of its  former  agent  owned
stations and converted them into company owned  stations in key gateway  cities.
USF Worldwide  acquired two other companies,  located in key gateway cities, and
converted them to company owned  stations.  In order to expand its services into
the growing  Caribbean  market,  USF Worldwide also acquired a Puerto Rico based
air  freight  forwarder  and a Puerto  Rico based  Non-vessel  operating  common
carrier.

     In October 1999, USF Worldwide formed a partnership  under the trading name
USF  Asia  Group.  USF  Asia  Group,  based  in  Hong  Kong,   provides  sea/air
consolidation,  local forwarding,  customs clearance,  NVOCC and warehousing and
distribution  services  to  companies  doing  business to and from or within the
Asia-Pacific region.

Terminals for Regional LTL Trucking

     The  Company's  241  terminals  are a key element in the  operation  of its
regional  trucklines.  The terminals vary significantly in size according to the
markets served.  Sales personnel at each terminal are responsible for soliciting
new business. Each terminal maintains a team of dispatchers who communicate with
customers  and  coordinate  local pickup and delivery  drivers.  Terminals  also
maintain teams of dock workers,  line-haul drivers and administrative personnel.
The larger  terminals  also have  maintenance  facilities  and  mechanics.  Each
terminal  is  directed  by  a  terminal  manager  who  has  general  supervisory
responsibilities  and also  plays an  important  role in  monitoring  costs  and
service quality.

Revenue Equipment

     At  December  31,  1999 the  Company  operated  9,019  tractors  and 20,720
trailers. Each trucking subsidiary selects its own revenue equipment to suit the
conditions  prevailing  in its  region,  such as terrain,  climate,  and average
length of line-haul.  Tractors and trailers are built to standard specifications
and generally are not modified to fit special customer situations.

     Each trucking subsidiary has a comprehensive preventive maintenance program
for its  tractors  and  trailers  to  minimize  equipment  downtime  and prolong
equipment  life.  Repairs  and  maintenance  are  performed   regularly  at  the
subsidiaries' facilities and at independent contract maintenance facilities.

     The Company replaces tractors and trailers based on factors such as age and
condition,  the market for equipment  and  improvements  in technology  and fuel
efficiency.  At December  31, 1999 the  average age of the  Company's  line-haul
tractors  was 3.6 years and the average age of its  line-haul  trailers  was 7.1
years.  Older  line-haul  tractors  are often  assigned  to pickup and  delivery
operations,  which are  generally  operated  at lower  speeds  and over  shorter
distances,  allowing  the Company to extend the life of  line-haul  tractors and
improve asset utilization.  The average age of the Company's pickup and delivery
tractors at December 31, 1999 was 8.6 years.

Sales and Marketing

     Sales  personnel  as well as  senior  management  at  each  subsidiary  are
responsible for soliciting new business and maintaining good customer relations.
In addition,  the Company  maintains a corporate sales and marketing  department
consisting of 21 professionals  who are assigned major accounts within specified
geographic  regions of the  continental  United States.  These  corporate  sales
managers  solicit  business for the regional  trucklines from  distribution  and
logistics  executives of large shippers.  In many cases,  targeted  corporations
maintain centralized control of multiple shipping and receiving locations.
<PAGE>
                                PAGE 7

Seasonality

     The  Company's  results,  consistent  with  the  trucking  and air  freight
industry in general,  show seasonal  patterns with tonnage and revenue declining
during the winter months and, to a lesser degree, during vacation periods in the
summer.  Furthermore,  inclement  weather  in  the  winter  months  can  further
negatively affect the Company's results.

Customers

     The Company is not  dependent  upon any  particular  industry  and provides
services to a wide  variety of customers  including  many large,  publicly  held
companies.  During the year ended December 31, 1999 no single customer accounted
for more than two percent of the Company's  operating  revenue and the Company's
ten largest  customers as a group  accounted for  approximately  nine percent of
total operating  revenue.  Many of the national account  customers use more than
one of the Company's regional trucklines for their transportation requirements.


Cooperation Among Trucklines

     The Company's  subsidiaries cooperate with each other to market and provide
services  along  certain  routes   running   between  their  regions.   In  such
circumstances,  the  trucklines  jointly  price  their  service  and then divide
revenue in  proportion  to the amount of carriage  provided  by each  company or
based on predetermined formulae.

Information Technology

     Each of the Company's operating  subsidiaries  maintains its own management
information systems and freight tracking and data processing capabilities. These
systems vary in sophistication in accordance with the size of each operation and
the demands of its  customers.  Software  systems are shared  among the regional
trucklines where sharing is efficient and appropriate.

Year 2000

     During Fiscal 1999, the Company  completed  remediation  and testing of its
business  critical  systems in order to ensure a smooth  transition  to the Year
2000. The Company  expended  approximately $2 million to ensure it was Year 2000
compliant.  The Company experienced no measurable business  interruptions at the
onset of the Year 2000, but continues to monitor its business  critical  systems
for possible Year 2000 failures.

Fuel

     The motor carrier  industry is dependent  upon the  availability  of diesel
fuel.  Shortages of fuel, increases in fuel costs or fuel taxes, or rationing of
petroleum  products could have a material adverse effect on the profitability of
the Company. The Company's LTL regional trucking subsidiaries  maintained a fuel
surcharge,  which was implemented during Fiscal 1996,  throughout most of Fiscal
1997 to partially offset an increase in fuel prices. Fuel prices,  during Fiscal
1998,  were generally  lower than they have been in the prior two years.  Due to
rising fuel prices, the Company's LTL regional trucking subisiiaries  reinstated
a fuel surcharge in the third quarter of Fiscal 1999 which is still in effect in
March 2000. Fuel expense (net of fuel  surcharges),  as a percentage of revenue,
approximated  from 2.5 to 4.1% during  Fiscal 1999 at the Company's LTL trucking
subsidiaries.  Fuel and fuel tax expense in the  Company's TL  subsidiary,  as a
percentage of revenue,  approximated  14% during Fiscal 1999. Fuel surcharges in
the TL industry are more difficult to implement and collect.  In most cases,  TL
operators  generally  recover the increases in fuel costs  through  increases in
rates charged for its services.  The Company has not  experienced any difficulty
in maintaining fuel supplies sufficient to support its operations.

Regulation

     In August  1994,  two pieces of  legislation  passed the  Congress and were
signed into law that  greatly  affected  the  trucking  industry.  The  Trucking
Industry  Regulatory Reform Act ("TIRRA") reduced the ICC's authority over motor
carriers by eliminating the tariff-filing  requirement for motor common carriers
using individually determined rates, classifications,  rules or practices. Under
TIRRA, motor carriers are still required to provide shippers, if requested, with
a copy of the rate,  classification,  rules or practices  of the carrier.  Also,
Title VI of the Federal Aviation Administration  Authorization Act of 1994 ("the
1994 Act")  effectively  prohibited  state  economic  regulation of all trucking
operations  for motor  carriers.  The 1994 Act does allow the states to continue
regulation of safety and insurance programs,  including carrier inspections.  On
December 29, 1995,  President Clinton signed the Interstate  Commerce Commission
Termination  Act of 1995 ("ICCTA") which abolished the ICC as of January 1, 1996
and transferred its residual functions to the Federal Highway Administration and
a newly  created  Surface  Transportation  Board within the U. S.  Department of
Transportation.  Congress  has  prescribed  a  transition  period  during  which
regulations implementing the ICCTA including insurance and safety issues must be
promulgated by the Secretary of Transportation.
<PAGE>
                                PAGE 8

     The trucking  industry remains subject to the possibility of regulatory and
legislative  changes that can influence  operating practices and the demands for
and the costs of providing services to shippers.

     Interstate  motor  carrier  operations  are subject to safety  requirements
prescribed by the U.S. Department of Transportation  ("DOT"), while such matters
as the weight and  dimensions of equipment are also subject to Federal and state
regulations.  Effective  April  1,  1992,  truck  drivers  were  required  to be
commercial vehicle licensed in compliance with the DOT, and legislation subjects
them to strict drug testing standards.  These  requirements  increase the safety
standards  for  conducting  operations,  but add  administrative  costs and have
affected the availability of qualified,  safety conscious drivers throughout the
trucking industry.

The Company uses underground  storage tanks at certain  terminal  facilities and
maintains a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected,  the Company takes prompt remedial
action to remove the contaminants.

Insurance and Safety

     One of the risk areas in the Company's businesses is cargo loss and damage,
bodily  injury,  property  damage  and  workers'  compensation.  The  Company is
effectively  self-insured  on its  significant  operations  up to $2 million per
occurrence  for cargo loss and damage,  bodily injury and property  damage.  The
Company is also predominantly self-insured for workers' compensation for amounts
to $1  million  per  occurrence.  Additionally,  the  Company  insures  workers'
compensation  for amounts in excess of $1 million per  occurrence  and all other
losses in excess of $2 million.

     Each operating  subsidiary  employs safety specialists and maintains safety
programs  designed to meet its specific needs. In addition,  the Company employs
specialists to perform compliance checks and conduct safety tests throughout the
Company's operations. The Company's safety record to date has been good.

Employees

     At December 31, 1999 the Company  employed 22,612  persons,  of whom 13,062
were  drivers,  2,946 were dock  workers,  and the  balance  support  personnel,
including office workers, managers and administrators.  Approximately 47 percent
of all employees were members of unions. Approximately 89 percent of these union
workers  were  employed  by USF  Holland  or USF Red  Star and  belonged  to the
International Brotherhood of Teamsters, Chauffeurs,  Warehousemen and Helpers of
America  (the  "IBT").  Members of the IBT at USF  Holland  and USF Red Star are
presently working under the terms of a five-year,  industry-wide labor agreement
that expires in March 2003.

Item 2.           Properties

     In March,  2000, the Company  rrelocated its executive offices to 8550 West
Bryn Mawr Ave, Ste. 700,  Chicago,  IL 60631.  The Company's 27,500 square foot
facility is occupied under a lease terminating in August 2008.

     Each of the Company's  operating  subsidiaries also maintains a head office
as well as numerous  operating  facilities.  Of the 241  regional  LTL  trucking
terminal  facilities used by the Company as of December 31, 1999, 109 were owned
and 132 were leased.  These  facilities  range in size  according to the markets
served. The Company has not experienced and does not anticipate  difficulties in
renewing  existing  leases on favorable terms or obtaining new facilities as and
when required.

<PAGE>

                                PAGE 9

Item 3.           Legal Proceedings

     The  Company  is a party to a  number  of  proceedings  brought  under  the
Comprehensive Environmental Response,  Compensation and Liability Act, (CERCLA).
The Company has been made a party to these  proceedings as an alleged  generator
of waste  disposed of at  hazardous  waste  disposal  sites.  In each case,  the
Government  alleges  that the parties are jointly and  severally  liable for the
cleanup  costs.   Although  joint  and  several  liability  is  alleged,   these
proceedings  are  frequently  resolved  on the  basis of the  quantity  of waste
disposed of at the site by the  generator.  The  Company's  potential  liability
varies greatly from site to site.  For some sites the potential  liability is de
minimis and for others the costs of cleanup have not yet been determined.  While
it is not feasible to predict or determine the outcome of these  proceedings  or
similar  proceedings  brought by state  agencies  or private  litigants,  in the
opinion of management,  the ultimate  recovery or liability,  if any,  resulting
from such  litigation,  individually  or in the  aggregate,  will not materially
adversely affect the Company's financial condition or results of operations and,
to the Company's best  knowledge,  such  liability,  if any, will represent less
than 1% of its revenues.

     STEVEN MARK WHITWORTH V. TNT BESTWAY TRANSPORTATION, INC. F/K/A TNT BESTWAY
INC. AND WILLIAM ORR, CASE NO. 96-3935-A,  14TH JUDICIAL DISTRICT COURT,  DALLAS
COUNTY, TEXAS.

     On April 19, 1996, Steven Mark Whitworth ("Plaintiff") a former employee of
USF Bestway Inc.  ("USF  Bestway"),  a subsidiary  of the Company,  brought suit
against  USF  Bestway  and one of its  employees,  alleging  claims of fraud and
promissory  estoppel  arising from Plaintiff's  previous  employment as a driver
with USF Bestway.

     On June 10, 1999, the Court of Appeals,  Fifth District,  Texas,  issued an
opinion  reversing the trial court's grant of summary  judgement in favor of the
plaintiff, and remanding the case back to the trial court for a new trial on the
merits.  Plaintiff  has sought review by the Texas Supreme Court of the decision
of the Texas Court of Appeals  reversing its judgement.  That request for review
was denied in an order  released on March 2,2000.  The plaintiff has until March
17, 2000 to file a motion for  rehearing.  On December 27, 1999,  the  plaintiff
filed a petition for relief  under  Chapter 13 of the United  States  Bankruptcy
Code. Texas state rules of procedure may impose a stay on the plaintiff's  state
action as a result of the bankruptcy.  The Company believes that the action will
not have a material adverse effect on the Company's financial condition.

     Also, the Company is involved in other  litigation  arising in the ordinary
course of business,  primarily involving claims for bodily injuries and property
damage.  In the opinion of management,  the ultimate  recovery or liability,  if
any, resulting from such litigation,  individually or in the aggregate, will not
materially  adversely  affect the  Company's  financial  condition or results of
operations.

<PAGE>

                                     PAGE 10

                                     PART II

Item 5.   Market for the Company's Common Stock and related Stockholder Matters

     The  Company's  common  stock  trades on The NASDAQ  Stock Market under the
symbol:  USFC. On February 15, 2000 there were  approximately  12,000 beneficial
holders of the Company's common stock. For the high and low sales prices for the
common stock for each full  calendar  quarterly  period for fiscal year 1998 and
1999,  see  page  F20 of the  Company's  Annual  Report  to the  Shareholders  -
Financial Statements (incorporated by reference under Item 14 herein).

     Since July 2, 1992,  the Company has paid a quarterly  dividend of $.093333
per share.  Although  it is the  present  intention  of the  Company to continue
paying quarterly dividends, the timing, amount and form of future dividends will
be determined by the board of directors and will depend,  among other things, on
the Company's results of operations,  financial  condition,  cash  requirements,
certain legal  requirements  and other factors  deemed  relevant by the board of
directors.  See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations  - Liquidity  and  Capital  Resources"  (incorporated  by
reference under Item 14 herein).

Item 6.           Selected Financial Data

     The  information  set  forth  under  the  caption  "Selected   Consolidated
Financial Data" on page F21 of the Company's  Annual Report to the  Shareholders
Financial  Statements for the year ended December 31, 1999, is  incorporated  by
reference under Item 14 herein.

Item 7.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations

     "Management's Discussion and Analysis of Financial Condition and Results of
Operations"  appearing on pages F2 through F5 of the Company's  Annual Report to
the Shareholders - Financial Statements for the year ended December 31, 1999, is
incorporated by reference under Item 14 herein.

Item 8.           Financial Statements and Supplementary Data

     The  Financial  Statements  and  Supplementary  Data  Appearing on pages F7
through  F20 of the  Company's  Annual  Report to the  Shareholders  - Financial
Statements for the year ended December 31, 1999, are  incorporated  by reference
under Item 14 herein.

Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure

                None
<PAGE>

                                     PAGE 11

                                    PART III

Item 10. Directors and Executive Officers of the Company

     The information for directors is reported in the Company's definitive proxy
statement  to be filed  pursuant  to  Regulation  14A,  and is  incorporated  by
reference. The following table sets forth certain information as of December 31,
1999 concerning the registrant's executive officers:

         Name               Age           Position

John Campbell Carruth        69           Chairman and Chief Executive
                                              Officer and Director

Robert V. Fasso              46           President-RegionalCarrier Group

Christopher L. Ellis         54           Senior Vice President, Finance & CFO


         John  Campbell  Carruth,  69,  was  appointed  as the  Company's  Chief
Executive Officer and President in June of 1991 and Chairman in January of 1998,
and has been a director of the Company since December of 1991.

         Robert V. Fasso, 46, was appointed as the Company's  President-Regional
Carrier Group in September  1997.  Since July 1993, Mr. Fasso has been President
and CEO of the Company's  subsidiary USF Bestway Inc. Prior to that date, he was
with Yellow Freight System.

         Christopher L. Ellis,  54, has been Senior Vice President,  Finance and
Chief Financial Officer of the Company since June 1991.

Item 11. Executive Compensation

     This  information is reported in the Company's  definitive  proxy statement
entitled  "Management  Compensation" and "Compensation  Committee Interlocks and
Insider Participation"  respectively to be filed pursuant to Regulation 14A, and
is incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     This  information is reported in the Company's  definitive  proxy statement
entitled  "Security  Ownership of Principal  Holders and Management" to be filed
pursuant to Regulation 14A, and is incorporated by reference.

Item 13. Certain Relationships and Related Party Transactions

     This  information is reported in the Company's  definitive  proxy statement
entitled "Certain  Relationships and Related  Transactions" to be filed pursuant
to Regulation 14A, and is incorporated by reference.

                                     PART IV

Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K

(a)               (1) Financial Statements

                  The following  consolidated  financial statements appearing in
                  the 1999 Annual Report to the  Shareholders is incorporated by
                  reference in this Annual Report on Form 10-K as Exhibit 13:

                                                                         Page

                  Selected Consolidated Financial Data                  F21

                  Management's Discussion and Analysis of               F2-5

                     Financial Condition and Results of Operations

                  Report of Independent Public Accountants              F6

                  Consolidated Financial Statements                     F7-10

                  Notes to Consolidated Financial Statements            F11-20

  <PAGE>

                                     PAGE 12

                  (2) Financial Statement Schedule:



                  Schedule II - Valuation and Qualifying Accounts

                            USFreightways Corporation

                    Three Years ended December 31, 1999
                         (dollars in thousands)
<TABLE>
<CAPTION>

                                                                        Additions

                                                                 -------------------------

Description                                        Balance at     Charges to     Charged to     Deductions(1)  Balance at
                                                   Beginning      Costs and      Other                         End of
                                                   of Period      Expenses       Accounts                      Period
-----------                                        ---------      ----------     -----------    ----------     ---------

     <S>                                               <C>            <C>            <C>            <C>            <C>
Fiscal year ended January 3,1998
  Accounts receivable allowances                    $7,186         $6,717         $0             $3,836        $10,067
  for revenue adjusmtents and doubtful accounts

Fiscal year ended December 31, 1998
   Accounts receivable allowances                  $10,067         $6,367         $0             $5,275        $11,159
   for revenue adjusmtents and doubtful accounts

Fiscal year ended December 31, 1999
    Accounts receivable allowances                 $11,159         $3,922         $0             $4,458        $10,623
    for revenue adjusmtents and doubtful accounts

(1)  Primarily uncollectible accounts written off net of recoveries.
</TABLE>


               SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders,
USFreightways Corporation:

We have audited in accordance with generally  accepted auditing  standards,  the
consolidated  financial  statements  included in  USFreightways  Corporation and
Subsidiaries  annual report to  stockholders  incorporated  by reference in this
Form 10-K, and have issued our report thereon dated January 19, 2000. Our audits
were made for the purpose of forming an opinion on those  statements  taken as a
whole.  Schedule  II  included  in this Form 10-K is the  responsibility  of the
company's  management,  and is  presented  for  purposes of  complying  with the
Securities  and  Exchange  Commission's  rules  and is  not  part  of the  basic
financial statements.  Schedule II has been subjected to the auditing procedures
applied in the audits of the basic  financial  statements  and, in our  opinion,
fairly  states in all material  respects the  financial  data required to be set
forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP


Chicago, Illinois
January 19, 2000


<PAGE>

                                             PAGE 13

                  (3)  Exhibits

                  Exhibit           Document

                  Number            Description

                  3(a)         Amended and Restated Certificate of Incorporation
                               of  USFreightways  Corporation  (incorporated  by
                               reference  from  Exhibit  3.1  to   USFreightways
                               Corporation  Transition Report on Form 10-K, from
                               June 29, 1991 to December 28, 1991);  Certificate
                               of Designation for Series A Junior  Participating
                               Cumulative   Preferred  Stock   (incorporated  by
                               reference  from  Exhibit  3(a)  to  USFreightways
                               Corporation  Annual  Report  on Form 10-K for the
                               year  ended  January  1,  1994);  Certificate  of
                               Amendment of Restated Certificate of
                               Incorporation of   USFreightways    Corporation
                               (incorporated  by  reference  from  Exhibit  3(i)
                               to  USFreightways Corporation Quarterly Report on
                               Form 10-Q for the quarter ended June 29, 1996).

                  3(b)         Bylaws of USFreightways Corporation,  as restated
                               January 23, 1998  (incorporated by reference from
                               Exhibit 3(b) to USFreightways  Corporation Annual
                               Report on Form 10-K for the year ended January 3,
                               1998).

                  4(a)         Form of Rights Agreement, dated as of February 4,
                               1994,  between   USFreightways   Corporation  and
                               Harris  Trust and Savings  Bank,  as Rights Agent
                               (incorporated   by  reference  to   USFreightways
                               Corporation's  registration statement on Form 8-A
                               filed with the Securities and Exchange Commission
                               on March 18, 1994).

                  4(b)         Form  of  Indenture,  dated  as of  May  1,  1993
                               between  USFreightways   Corporation  and  Harris
                               Trust and Savings Bank, as Trustee  (incorporated
                               by  reference  from  USFreightways  Corporation's
                               Registration  Statement  on Form  S-1,  filed  on
                               April 16, 1993, Registration No. 33-61134).

                  4(c)         Form  of  Indenture,  dated  as of  May  5,  1999
                               between  USFreightways  Corporation and NBD Bank,
                               as  Trustee   (incorporated   by  reference  from
                               USFreightways      Corporation's     Registration
                               Statement on Form S-3/A, filed on April 29, 1999,
                               Registration No. 333-76217).

                  10(d)        USFreightways  Stock Option Plan (incorporated by
                               reference  from  Exhibit  10.18 to  USFreightways
                               Corporation  Transition  Report on Form 10-K from
                               June 29, 1991 to December 28, 1991).

                  10(e)        Agreement dated March 5, 1993  Supplementing  the
                               Tax     Indemnification     Agreement     between
                               USFreightways Corporation and TNT Transport Group
                               (incorporated  by  reference  from  Exhibit 10 to
                               USFreightways  Corporation  Annual Report on Form
                               10-K for the year ended January 2, 1993).

                  10(f)        Stock  Option  Plan  for  Non-Employee  Directors
                               amended  and  restated  as of  December  11, 1998
                               (filed with this Annual Report on Form 10-K).

                  10(g)        Employment  Agreement  of  Christopher  L.  Ellis
                               dated   December   16,  1991   (incorporated   by
                               reference  from  Exhibit  10(g) to  USFreightways
                               Corporation  Annual  Report  on Form 10-K for the
                               year ended January 1, 1994).
<PAGE>
                                                PAGE 14
                  Exhibit      Document

                  Number   Description

                  10(i)        Form of  Election of  Deferral  (incorporated  by
                               reference  from  Exhibit  10(h) to  USFreightways
                               Corporation  Annual  Report  on Form 10-K for the
                               year ended December 31, 1994).

                  10(j)        USFreightways  Long-Term  Incentive  Plan amended
                               and  restated  as of April 30,  1999  (filed with
                               this Annual Report on Form 10-K).

                  10(l)        Employment  Agreement  of Robert V.  Fasso  dated
                               December 12, 1997 (incorporated be reference from
                               Exhibit 10(l) to USFreightways Corporation Annual
                               Report on Form 10-K for the year ended January 3,
                               1998).

                  10(m)        $200,000,000  Credit  Agreement  dated as of
                               November 26, 1997 among  USFreightways
                               Corporation,  the banks named  therein  and NBD
                               Bank,  N. A.  as  agent  (incorporated  by
                               reference  from  Exhibit  10(l)  to USFreightways
                               Corporation Annual Report on Form 10-K for the
                               year ended January 3, 1998).

                  10(n)        Form  of   Irrevocable   Guaranty  and  Indemnity
                               relating  to the Credit  Agreement  described  in
                               Exhibit  10(m)  (incorporated  by reference  from
                               Exhibit 10(l) to USFreightways Corporation Annual
                               Report on Form 10-K for the year ended January 3,
                               1998).

                  10(p)        Restricted  Stock  Agreement  with John  Campbell
                               Carruth  dated  April 27, 1998  (incorporated  by
                               reference  from  Exhibit  10.1  to  USFreightways
                               Corporation Quarterly Report on Form 10-Q for the
                               quarter ended July 4, 1998).

                  10(q)        USFreightways  Corporation Non-Qualified Deferred
                               Compensation Plan (incorporated by reference from
                               Exhibit 10(q) to USFreightways Corporation Annual
                               Report on Form 10-K for the year  ended  December
                               31, 1998).

                  13           The consolidated financial statement portion
                               appearing in the 1999 USFreightways Corporation
                               Annual Report to Shareholders.

                  21           Subsidiaries of  USFreightways  Corporation
                               (incorporated by reference from the 1999
                               USFreightways  Annual Report to Shareholders).

                  23           Consent of Arthur Anderson LLP.

                  24           Powers of Attorney

                  27           Financial Data Schedule

         Exhibits  2, 9, 11, 12, 16,  18, 22 and 28 are not  applicable  to this
filing.


(b)      Reports on Form 8-K
                None
<PAGE>

                                     PAGE 15

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
     Exchange  Act of 1934,  the  registrant  has duly  caused this report to be
     signed on its behalf by the undersigned,  thereunto duly authorized.  Dated
     March 20, 2000.

   USFREIGHTWAYS CORPORATION


   By: /s/Christopher L. Ellis

          --------------------
          Christopher L. Ellis

          Senior Vice President, Finance and Chief Financial Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

         Signatures                         Title             Date


/s/ John Campbell Carruth  *        Chairman of the Board     March 20, 2000
                                    Chief Executive Officer
                                    and Director (Principal
                                    Executive Officer)
---------------------
John Campbell Carruth

/s/ Morley Koffman *                Director                  March 20, 2000
--------------------
Morley Koffman

/s/ William N. Weaver, Jr. *        Director                  March 20, 2000
----------------------------
William N. Weaver, Jr.

/s/ Robert P. Neuschel *            Director                  March 20, 2000
------------------------
Robert P. Neuschel

/s/ Neil A. Springer *              Director                  March 20, 2000
----------------------
Neil A. Springer

/s/ Robert V. Delaney *             Director                  March 20, 2000
-----------------------
Robert V. Delaney

/s/ John W. Puth *                  Director                  March 20, 2000
------------------
John W. Puth

/s/ Anthony J. Paoni *              Director                  March 20, 2000
----------------------
Anthony J. Paoni

/s/ Samuel K. Skinner *             Director                  March 20, 2000
----------------------
Samuel K. Skinner

/s/ Christopher L. Ellis            Chief Financial Officer   March 20, 2000
------------------------            (Principal Financial Officer)
Christopher L. Ellis

/s/ Robert S. Owen                  Controller  (Principal    March 20, 2000
                                    Accounting Officer)
------------------
Robert S. Owen

/s/ Christopher L. Ellis
*  By:   Christopher L. Ellis

         Attorney-in-Fact

<PAGE>

                                PAGE 16



EXHIBIT 10(f)

USFREIGHTWAYS CORPORATION

USFREIGHTWAYS CORPORATION STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
AMENDED AND RESTATED AS OF DECEMBER 11, 1998

I.       DEFINITIONS AND PURPOSE

         A.       Definitions:

                  Unless  otherwise  specified  or unless the context  otherwise
                  requires,  the following terms, as used in this Plan, have the
                  following meanings:

                  1.       Affiliate means a corporation  which, for purposes of
                           Section 422 of the Code, is a parent or subsidiary of
                           the Company, direct or indirect.

                  2.       Board means the Board of Directors of the Company.

                  3.       Code means the Internal Revenue Code of 1986, as
                           amended.

                  4.       Committee  means  the  committee  to which  the
                           Board  delegates  the  power to act under or pursuant
                           to the provisions of the Plan, or the Board if no
                           committee is selected.

                  5.       Company means USFreightways  Corporation,  a Delaware
                           corporation,  and includes any  successor or assignee
                           corporation  or  corporations  into which the Company
                           may  be  merged,   changed,   or  consolidated;   any
                           corporation  for whose  securities  the securities of
                           the Company shall be  exchanged;  and any assignee of
                           or successor to substantially all other assets of the
                           Company.

                  6.       Disability means a permanent and total disability as
                           defined in Section 22(e)(3) of the Code.

                  7.       Eligible Director means each person who is a director
                           of the  Company,  and who is not an  employee  of the
                           Company or any  Affiliate  of the Company and who has
                           not been an employee of the Company or any  Affiliate
                           of the Company  for all or any part of the  preceding
                           fiscal year.  For  purposes of the Plan,  an Eligible
                           Director  shall be deemed to include the  employer of
                           such Eligible Director,  or any delegatee mandated by
                           his employer,  if the Eligible  Director is required,
                           as a condition of his employment, to provide that any
                           Option  granted  hereunder be made to the employer or
                           its delegatee.

                  8.       Option  means a right or  option  granted  under  the
                           Plan,  which right or option shall not be intended to
                           qualify as an  incentive  stock  option as defined in
                           Section 422 of the Code.

                  9.       Option  Agreement  means an  agreement  between the
                           Company and a  Participant  executed  and delivered
                           pursuant to the Plan.

                  10.      Participant means an Eligible Director to whom an
                           Option is granted under the Plan.

                  11.      Plan means this Stock Option Plan for Non-Employee
                           Directors, as amended from time to time.

                  12.      Shares  means the  following  shares  of the  capital
                           stock of the Company as to which Options have been or
                           may  be  granted  under  the  Plan:   authorized  and
                           unissued  common  stock,  $0.01 par  value,  treasury
                           shares  held by the  Company or any shares of capital
                           stock into which the Shares are  changed or for which
                           they are exchanged  within the  provisions of Article
                           VI of the Plan.
<PAGE>
                                        PAGE 17

         B.       Purpose of the Plan:

                  The Plan  intended to promote the interests of the Company and
                  its  stockholders by attracting and retaining highly qualified
                  independent  directors  through an investment  interest in the
                  Company's future success.

II.      SHARES SUBJECT TO THE PLAN

         The aggregate  number of Shares as to which Options may be granted from
         time to time shall be Five Hundred Thousand (500,000) Shares.

         If an  Option  ceases  to be  "outstanding",  in whole or in part,  the
         Shares  which  were  subject  to such  Option,  if the  Option  was not
         exercised,  shall be available for the granting of other  Options.  Any
         Option,  if the Option was not  exercised,  shall be available  for the
         granting of other Options. Any Option shall be treated as "outstanding"
         until such Option is exercised in full,  or terminates or expires under
         the provisions of the Plan or Option Agreement.

         Subject to the provisions of Article VI, the aggregate number of Shares
         as to which  Options may be granted  shall be subject to change only by
         means of an  amendment  of the Plan duly  adopted  by the  Company  and
         approved by the  stockholders of the Company within such time period as
         may be required by the Securities Exchange Act of 1934, as amended from
         time to time.

III.     ADMINISTRATION OF THE PLAN

         The  Plan  shall  be  administered  by the  Committee.  Subject  to the
provisions of the Plan, the Committee is authorized to:

         A.       Interpret  the  provisions  of the Plan or any  Option or
                  Option  Agreement  and to make all rules and determinations
                  which it deems necessary or advisable for the administration
                  of the Plan;

         B.       Determine the Eligible Directors to whom Options shall be
                  granted;

         C.       Determine the number of Shares for which an Option or Options
                  shall be granted;

         D.       Provide for the acceleration of the right to exercise an
                  Option (or any portion thereof); and

         E.       Specify the terms and conditions upon which Options may be
                  granted.

         The  interpretation and construction by the Committee of any provisions
         of the Plan or of any Option granted under it shall be final.

IV.      ELIGIBILITY FOR PARTICIPATION

         Each  Participant  must be an  Eligible  Director of the Company at the
         time an Option is granted.  Each Eligible Director shall be granted, at
         the later of the  effective  date of the Plan or the date such director
         becomes  an  Eligible  Director,  and at such  other  time or  times as
         described in Article V, an Option to purchase Shares under the Plan. In
         addition  to the  formula-based  Shares  set  forth in  Article  V, the
         Committee  may at any  time  and from  time to time  grant  one or more
         additional  Options to one or more Eligible  Directors  ("Discretionary
         Options")  and may designate the number of Shares to be subject to each
         Discretionary  Option so granted,  provided  however that no grant of a
         Discretionary  Option to  purchase  Shares  shall  permit  unrestricted
         ownership  of  Shares  by the  Eligible  Director  for at least six (6)
         months from the date of grant of the Discretionary  Option,  unless the
         Committee  determines  that the grant of such  Discretionary  Option to
         purchase  Shares  otherwise  satisfies  the  then  current  Rule  16b-3
         requirements under the Securities Exchange Act of 1934.
<PAGE>
                                        PAGE 18

V.       TERMS AND CONDITIONS OF OPTIONS

         Each Option shall be set forth in an Option Agreement, duly executed on
         behalf of the  Company  and by the  participant  to whom such Option is
         granted.  Except for the setting of the Option price under  Paragraph A
         of this Article V, no Option shall be granted and no purported grant of
         any Option shall be effective  until such Option  Agreement  shall have
         been duly  executed on behalf of the  Company  and by the  Participant.
         Each such Option  Agreement  shall be subject to at least the following
         terms and conditions:

         A.       OPTION PRICE:

                  The  exercise  price  of the  Shares  covered  by each  Option
                  granted  under  the Plan  shall be equal to 100% of the  "fair
                  market value" of the Shares on the date of the granted Option.
                  If the Shares are listed on any national securities  exchange,
                  the fair market  value  shall be the mean  average of the high
                  and low sales prices,  if any, on the largest such exchange on
                  the date of the grant of the Option,  or, if none, on the most
                  recent  trade date  thirty (30) days or less prior to the date
                  of the grant of the Option.  If the Shares are not then listed
                  on any such  exchange,  the fair  market  value of such Shares
                  shall be the closing "Ask" prices,  if any, as reported on the
                  National Association of Securities Dealers automated Quotation
                  System  ("NASDAQ") for the date of the grant of the Option, or
                  if none,  on the most  recent  trade date  thirty (30) days or
                  less  prior to the date of the grant of the  Option  for which
                  such  quotations  are  reported.  If the  Shares  are not then
                  either  listed on any such  exchange or quoted on NASDAQ,  the
                  fair market value shall be the mean between the average of the
                  "Bid" and the average of the "Ask" prices, if any, as reported
                  in the National  daily  Quotation  Service for the date of the
                  grant of the Option,  or, if none,  for the most recent  trade
                  date  thirty  (30) days or less prior to the date of the grant
                  of the Option for which such quotations are reported.

         B.       NUMBER OF SHARES:

                  Each Eligible  Director shall  automatically,  at the later of
                  the  effective  date of the  Plan or the  date  such  director
                  becomes an Eligible Director,  be granted an Option under this
                  Plan to  acquire  10,000  Shares.  Upon the  fifth  and  tenth
                  anniversaries of such initial grant,  each  Participant  shall
                  automatically be granted Options under this Plan to acquire an
                  additional  10,000 Shares at each such  anniversary,  provided
                  the Participant is an Eligible  Director at such  anniversary.
                  In addition to the foregoing,  each Eligible Director may from
                  time to time be granted by the Committee, in its discretion, a
                  Discretionary Option.

         C.       TERM OF OPTION:

                  No Option  granted under the Plan shall be  exercisable  after
                  the expiration of ten (10) years from the date of the grant.

         D.       DATE OF EXERCISE:

                  1.       Options  granted to an  Eligible  Director  under the
                           Plan  on  the  Plan's  effective  date  shall  become
                           exercisable   cumulatively  in  accordance  with  the
                           following schedule:

                           Years Elapsed Since Cumulative Number of Shares
                           Date of Grant       For Which Option May Be Exercised

                           Less than       1                               2,000
                                           1                               3,600
                                           2                               5,200
                                           3                               6,800
                                           4                               8,400
                                           5 or more                      10,000


                  2.       Options  granted to an  Eligible  Director  under the
                           Plan after the  Plan's  effective  date shall  become
                           exercisable   cumulatively  in  accordance  with  the
                           following schedule:

                           Years Elapsed Since       Cumulative Number of Shares
                           Date of Grant       For Which Option May Be Exercised

                           Less than       1                                   0
                                           1                               2,000
                                           2                               4,000
                                           3                               6,000
                                           4                               8,000
                                           5 or more                      10,000
<PAGE>
                                                PAGE 19

                  The  foregoing  schedules  notwithstanding,  if a  Participant
                  shall cease to be a director  of the Company  because of death
                  or Disability, all Shares for which an Option has been granted
                  shall become immediately  exercisable and shall be exercisable
                  in accordance with Paragraph F.

                  Not  withstanding  anything  herein to the contrary,  upon the
                  authorization  of the grant of a Discretionary  Option,  or at
                  anytime  thereafter,  the  Committee may prescribe the date or
                  dates on which the Discretionary  Option becomes  exercisable,
                  and  may  provide  that  the   Discretionary   Option   become
                  exercisable in  installments  over a period of years,  or upon
                  the attainment of stated goals.

         E.       MEDIUM OF PAYMENT:

                  The  Option  price  shall  be  paid on the  date  of  purchase
                  specified in the notice of exercise, as set forth in Paragraph
                  G. It shall be paid in the legal tender of the United  States,
                  or, at the  election of the  Participant,  by surrender to the
                  Company of  previously  owned  shares with an  aggregate  fair
                  market value (on the date of the exercise) equal to the Option
                  price to be paid; provided,  however, that if such shares were
                  acquired  pursuant  to an  incentive  stock  option  plan  (as
                  defined in Code Section 422) of the Company or Affiliate, then
                  the applicable holding period requirements of said Section 422
                  have  been met with  respect  to such  shares,  and,  provided
                  further,  that if (i) such shares were granted  pursuant to an
                  option,  then such option must have been  granted at least six
                  (6) months prior to the exercise of the Option hereunder;  and
                  (ii),  such shares were purchased other than through the grant
                  and  exercise  of an  option,  such  shares  were owned by the
                  Participant for more than six (6) months prior to the exercise
                  of the Option hereunder.

         F.       TERMINATION OF STATUS:

         1.       In the event that a  Participant  shall cease to be a director
                  of the Company for any reason other than death, Disability, or
                  voluntary termination as a director of the Company on or after
                  the attainment of his or her 65th birthday,  his or her Option
                  shall  be  exercisable,   only  to  the  extent  that  it  was
                  exercisable  at the date he or she ceased to be a director and
                  only  until the first to occur of one (1) year after such date
                  or until  the  date on  which  the  Option  otherwise  expires
                  according to its terms.

         2.       In the event that a Participant  shall cease to be a director
                  of the Company because of death or  Disability,  his or her
                  Option may be  exercised  in its  entirety  (notwithstanding
                  the vesting  schedule  set forth in  Paragraph  D of this
                  Article V or in any Option  Agreement) within the originally
                  prescribed  term of the Option by the  Participant or by any
                  person or persons   designated  by  the  Participant  as  the
                  executors  or   administrators   of  the Participant's
                  estate,  or by any  person or  persons  who shall  have
                  acquired  the  Option directly  from  the  Participant  by his
                  or her will or the  applicable  law of  descent  and
                  distribution.

         3.       In the event that a  Participant  shall cease to be a director
                  of the Company because of voluntary  termination as a director
                  of the Company on or after the  attainment  of his or her 65th
                  birthday and that  Participant has served as a director of the
                  Company  for five (5) years or more,  his or her Option may be
                  exercised  in  its  entirety   (notwithstanding   the  vesting
                  schedule  set forth in Paragraph D of this Article V or in any
                  Option Agreement) within the originally prescribed term of the
                  Option by the Participant; provided that the Committee, in its
                  sole  discretion,  approves  the exercise of the Option in its
                  entirety.

         4.       In the event that a  Participant  shall  cease to be a
                  director  of the  Company  because of voluntary  termination
                  as a director of the Company on or after the attainment of his
                  or her 72nd birthday and that  Participant  has not served as
                  a director of the Company for five (5) years,  his or her
                  Option  shall be  exercisable  (notwithstanding  the vesting
                  schedule set forth in  Paragraph D of this  Article V or in
                  any Option  Agreement)  within the  originally prescribed term
                  of the Option by the  Participant,  to the extent that (a) it
                  was exercisable at the  date  he or she  ceased  to be a
                  director  and  (b) if the  Option  was  exercisable
                  periodically,  to the extent of any additional rights that
                  would have become exercisable (had the Participant not
                  voluntarily  terminated as a director of the Company) during
                  successive one year periods from the  Participant's  date of
                  termination  for each year the  Participant served as a
                  director of the Company.
<PAGE>
                                        PAGE 20

         G.       EXERCISE OF OPTION AND ISSUE OF STOCK:

                  Option  shall be  exercised  by giving  written  notice to the
                  Company.  Such  written  notice  shall:  (1) be  signed by the
                  person  exercising the Option,  (2) state the number of Shares
                  with respect to which the Option is being  exercised,  and (3)
                  specify  a  date  (other  than a  Saturday,  Sunday  or  legal
                  holiday)  not less  than  five (5) nor more than ten (10) days
                  after the date of such  written  notice,  as the date on which
                  the Shares will be purchased. Such tender and conveyance shall
                  take  place at the  principal  office  of the  Company  during
                  ordinary  business  hours,  or at such  other  hour and  place
                  agreed   upon  by  the  Company  and  the  person  or  persons
                  exercising  the Option.  On the date specified in such written
                  notice  (which date may be extended by the Company in order to
                  comply with any law or regulation  which  requires the Company
                  to take any action with respect to the Option  Shares prior to
                  the issuance  thereof,  whether  pursuant to the provisions of
                  Article VI or otherwise), the Company shall accept payment for
                  the Option  Shares and shall  deliver to the person or persons
                  exercising  the Option in  exchange  therefor  an  appropriate
                  certificate or certificates for paid non-assessable Shares. In
                  the event of any  failure to take up and pay for the number of
                  Shares  specified in such written notice on the date set forth
                  therein (or on the extended date as above provided), the right
                  to exercise  the Option shall  terminate  with respect to such
                  number of  Shares,  but shall  continue  with  respect  to the
                  remaining  Shares  covered by the Option and not yet  acquired
                  pursuant thereto.

         H.       RIGHTS AS A STOCKHOLDER:

                  No  Participant  to whom an Option has been granted shall have
                  rights as a stockholder  with respect to any Shares covered by
                  such Option except as to such Shares as have been issued to or
                  registered in the Company's share register in the name of such
                  Participant  upon the due exercise of the Option and tender of
                  the full Option price.

         I.       ASSIGNABILITY AND TRANSFERABILITY OF OPTION:

                  By its terms, an Option granted to a participant  shall not be
                  transferable  by the  Participant  and  shall be  exercisable,
                  during the Participant's  lifetime,  only by such Participant.
                  Such Option shall not be assigned,  pledged or hypothecated in
                  any way (whether by operation of law or  otherwise)  and shall
                  not be subject to execution,  attachment,  or similar process.
                  Any attempted transfer,  assignment,  pledge, hypothecation or
                  other  disposition  of any  Option  or of any  rights  granted
                  thereunder  contrary to the provisions of this Paragraph I, or
                  the levy of any  attachment or similar  process upon an Option
                  or such rights, shall be null and void.

VI.      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

         In the event that the  outstanding  shares of the  Company  are changed
         into or  exchanged  for a  different  number or kind of shares or other
         securities  of the Company or of another  corporation  by reason of any
         reorganization    ,    merger,     consolidation,     recapitalization,
         reclassification,  change in par value, stock split-up,  combination of
         shares or dividend payable in capital stock , or the like,  appropriate
         adjustments  to prevent  dilution or  enlargement of the rights granted
         to, or available for, Participants shall be made in the number and kind
         of shares for the  purchase of which  Options may be granted  under the
         Plan,  and, in addition,  appropriate  adjustment  shall be made in the
         number and kind of Shares and in the Option price per share  subject to
         outstanding options.  Notwithstanding  anything herein to the contrary,
         in the event of an offer for the  Company's  shares,  the adoption of a
         plan of merger or  consolidation  under  which all of the shares of the
         Company  would be  eliminated,  or a sale of  substantially  all of the
         Company's   assets,  a  Participant   shall  be  entitled  to  exercise
         immediately  all or  any  portion  of the  Shares  to  which  he or she
         received an Option, regardless of the number of years elapsed since the
         date of the grant .

VII.     DISSOLUTION OR LIQUIDATION OF THE COMPANY

         Upon the  dissolution  or  liquidation  of the  Company  other  than in
         connection  with a  transaction  to which the  preceding  Article VI is
         applicable,  all Options  granted  hereunder shall terminate and become
         null and void; provided,  however,  that if the rights of a Participant
         under the applicable Options have not otherwise terminated and expired,
         the  Participant  shall  have  the  right  immediately  prior  to  such
         dissolution or liquidation to exercise any Option granted  hereunder to
         the extent  that the right to  purchase  Shares  thereunder  has become
         exercisable  as of the date  immediately  prior to such  dissolution or
         liquidation.
<PAGE>
                                PAGE 21

VIII.    TERMINATION OF THE PLAN

         The  Plan  shall  terminate  fifteen  (15)  years  from the date of its
         adoption.  The Plan may be terminated at an earlier date by vote of the
         Board;  provided,  however, that any such earlier termination shall not
         affect any Options granted or Option  Agreements  executed prior to the
         effective date of such termination. Except as may otherwise by provided
         for under  Articles VI and VII,  and  notwithstanding  anything in this
         Plan to the contrary,  any Options  granted prior to the effective date
         of the Plan's  termination may be exercised,  if otherwise  exercisable
         until ten (10) years have  elapsed from the date the Option is granted,
         and the  provisions  of the Plan  with  respect  to the full and  final
         authority of the Committee under the Plan shall continue to control.

IX.      AMENDMENT OF THE PLAN

         The Plan may be amended by the Board and such  amendment  shall  become
         effective  upon  adoption  by the Board;  provided,  however,  that any
         amendment to Article II above or that  otherwise  requires the approval
         of the  stockholders  of the Company in accordance  with the Rule 16b-3
         requirements  of the  Securities  Exchange Act of 1934, as amended from
         time to time, shall be subject to approval of the  stockholders  within
         the requisite time period of such Act, and provided,  further, that the
         Plan may not be amended more frequently than once every six (6) months,
         unless  an  amendment  is  necessary  to  comply  with  the Code or the
         Employee  Retirement  Income  Security Act of 1974, as amended,  and is
         otherwise permitted by Rule 16b-3.

X.       INDEMNIFICATION OF COMMITTEE

         In addition to such other rights of indemnification as they may have as
         directors  or members of the  Committee,  the members of the  Committee
         shall be  indemnified by the Company  against all reasonable  expenses,
         including   attorneys'  fees,  actually  and  necessarily  incurred  in
         connection  with the defense of any action,  suit or proceeding,  or in
         connection with any appeal therein, to which they or any of them may be
         a party  by  reason  of any  action  taken  by them as  members  of the
         Committee  and against all amounts paid by them in  settlement  thereof
         (provided  such  settlement  is approved by  independent  legal counsel
         selected by the Company) or paid by them in  satisfaction of a judgment
         in any such action,  suit or proceeding,  except in relation to matters
         as to which it shall be adjudged  in such  action,  suit or  proceeding
         that the  Committee  member is liable for gross  negligence  or willful
         misconduct  in the  performance  of his or her duties.  To receive such
         indemnification,  a Committee member must first offer in writing to the
         Company the opportunity, at his own expense, to defend any such action,
         suit or proceeding.

XI.      RESTRICTIONS

         If the Company  shall  determine,  in its  discretion,  that the Shares
         under the Plan must be  registered  or qualified  under any  applicable
         state or federal  securities  law before they may be offered or sold to
         the  Participant,  or that the consent or approval of any  governmental
         regulatory  body is  necessary  or  desirable  in  connection  with the
         issuance  of such  Shares,  such  Option  may not be  exercised  by the
         Participant  unless the Shares have been so registered,  qualified,  or
         listed,  or until such  consent or approval  shall have been  obtained,
         free of any conditions not acceptable to the Company. The Company shall
         use reasonable efforts to qualify the Shares, obtain the benefit of any
         applicable  exemption  from  such  qualification,  or  obtain  any such
         consent or approval,  provided that no Participant shall have any right
         to require the company to undertake  any  registration  or other action
         which the  Company  determines,  in its sole  discretion,  to be unduly
         burdensome.

XII.     SAVINGS CLAUSE

         This Plan  intended to comply in all respects with  applicable  law and
         regulations,  including  Rule  16b-3  of the  Securities  and  Exchange
         Commission.  In case any one or more  provisions  of this Plan shall be
         held invalid, illegal, or unenforceable in any respect under applicable
         law and regulation (including Rule 16b-3), the validity,  legality, and
         enforceability  of the  remaining  provisions  shall  not in any way be
         affected or impaired thereby and the invalid, illegal, or unenforceable
         provisions  shall be  deemed  null and  void;  however,  to the  extent
         permitted  by law,  any  provision  that could be deemed  null and void
         shall first be  construed,  interpreted,  or revised  retroactively  to
         permit this Plan to be construed in compliance  with all applicable law
         (including  Rule  16b-3)  so as to  foster  the  intent  of this  Plan.
         Notwithstanding anything herein to the contrary, no grant of, or Option
         to purchase,  Shares shall permit  unrestricted  ownership of Shares by
         the  Participant  for at least six (6) months from the date of grant or
         Option to purchase.
<PAGE>
                                        PAGE 22

XIII.    EFFECTIVE DATE

         This Plan shall  become  effective  upon  adoption  by the  Board.  The
         adoption  of the Plan shall be subject to  subsequent  approval  by the
         stockholders of the Company at the next annual meeting of the company's
         stockholders  unless  such  approval  is not  required  by any rules or
         regulations promulgated by the Securities and Exchange Commission under
         Section 16(b) of the  Securities  Exchange Act of 1934, as amended from
         time to time.  Notwithstanding  the  foregoing,  if the Plan shall have
         been approved by the Board prior to such annual meeting,  Options shall
         be  granted  to  Eligible  Directors  prior to the date of such  annual
         meeting  in  accordance  with  Article V,  subject  to such  subsequent
         stockholder  approval  but such  Options  shall not become  exercisable
         until such approval is obtained or its is determined that such approval
         is not required.

XIV.     GOVERNING LAW

         This Plan shall be governed  by the laws of the State of  Delaware  and
construed in accordance therewith.

Originally  adopted and effective on the 29th day of October,  1993 by the Board
of  Directors.  Amended and restated this 11th day of December 1998 by the Board
of Directors.
<PAGE>


                                        PAGE 23



EXHIBIT 10(j)

USFREIGHTWAYS CORPORATION

                                              USFREIGHTWAYS CORPORATION
                                              LONG-TERM INCENTIVE PLAN

                                             RESTATED AS OF APRIL 30, 1999




                                              USFREIGHTWAYS CORPORATION
                                              LONG-TERM INCENTIVE PLAN

1.       PURPOSE

The USFreightways  Corporation  Long-Term  Incentive Plan is adopted January 24,
1997.  The Plan is  designed  to attract and retain  selected  employees  of the
Company and its Affiliates,  and reward them for making major  contributions  to
the success of the Company and its Affiliates. These objectives are accomplished
by making long-term incentive awards under the Plan that will offer Participants
an opportunity to have a greater  proprietary  interest in, and closer  identity
with, the Company and its Affiliates and their financial success.

         The Awards may consist of:
                  (a)      Incentive Options;
                  (b)      Nonstatutory Options;
                  (c)      Restricted Stock;
                  (d)      Rights;
                  (e)      Performance Awards; or
                  (f)      Cash Awards

or any combination of the foregoing, as the Committee may determine.

The Plan is intended to qualify certain  compensation awarded under the Plan for
tax  deductibility  under  Section  162(m)  of the  Code  to the  extent  deemed
appropriate  by the  Committee.  The Plan and the grant of Awards  hereunder are
expressly  conditioned  upon the  Plan's  approval  by the  stockholders  of the
Company.  If such  approval  is not  obtained,  then  this  Plan and all  Awards
hereunder shall be null and void ab initio.
<PAGE>
                                PAGE 24


2.       DEFINITIONS

(a)  Affiliate  means any  individual,  corporation,  partnership,  association,
joint-stock company,  trust,  unincorporated  association or other entity (other
than the Company) that, for purposes of Section 422 of the Code, is a subsidiary
of the Company, direct or indirect.

(b) Award  means the grant to any  employee  of any form of  Option,  Restricted
Stock,  Right,  Performance  Award, or Cash Award,  whether  granted singly,  in
combination,  or  in  tandem,  and  pursuant  to  such  terms,  conditions,  and
limitations as the Committee may establish in order to fulfill the objectives of
the Plan.

(c) Award  Agreement  means an agreement  entered into between the Company and a
Participant  under  which an Award is  granted  and which  sets forth the terms,
conditions, and limitations applicable to the Award.

(d)      Board means the Board of Directors of the Company.

(e) Cash Award means an Award of cash, subject to the requirements of Section 11
and such other restrictions as the Committee deems appropriate or desirable.

(f) Code means the Internal  Revenue Code of 1986, as amended from time to time,
or any successor statute thereto.

(g) Committee  means the committee to which the Board delegates the power to act
under or pursuant to the provisions of the Plan, or the Board if no committee is
selected. If the Board delegates powers to a committee, and if the Company is or
becomes  subject to Section 16 of the  Exchange  Act,  then,  if  necessary  for
compliance  therewith,  such committee shall consist  initially of not less than
two (2)  members of the  Board,  each  member of which  must be a  "non-employee
director,"  within the meaning of the applicable rules  promulgated  pursuant to
the  Exchange  Act.  If the  Company is or becomes  subject to Section 16 of the
Exchange Act, no member of the Committee shall receive any Award pursuant to the
Plan or any similar plan of the Company or any  Affiliate  while  serving on the
Committee, unless the Board determines that the grant of such an Award satisfies
the then current Rule 16b-3 requirements under the Exchange Act. Notwithstanding
anything  herein to the  contrary,  and insofar as it is  necessary in order for
compensation  recognized  by  Participants  pursuant  to the  Plan  to be  fully
deductible to the Company for federal  income tax  purposes,  each member of the
Committee  also shall be an "outside  director"  (as defined in  regulations  or
other  guidance  issued by the  Internal  Revenue  Service  under  Code  Section
162(m)).

(h)      Common Stock means the common stock of the Company.

(i) Company means USFreightways  Corporation,  a Delaware  corporation,  and any
successor or assignee  corporation or corporations into which the Company may be
merged,  changed,  or  consolidated;  any corporation  for whose  securities the
securities of the Company  shall be exchanged;  and any assignee of or successor
to substantially all of the assets of the Company.

(j) Disability or Disabled means a permanent and total disability as  defined in
 Section 22(e)(3) of the Code.

(k) Exchange Act means the Securities Exchange Act of 1934, as amended from time
to time, or any successor statute thereto.

(l) Fair Market Value means, if the Shares are listed on any national securities
exchange,  the closing sales price,  if any, on the largest such exchange on the
valuation date, or, if none, on the most recent trade date immediately  prior to
the  valuation  date  provided  such trade date is no more than thirty (30) days
prior to the  valuation  date.  If the  Shares  are not then  listed on any such
exchange,  the fair market value of such Shares shall be the closing sales price
if such is  reported,  or otherwise  the mean between the closing  "Bid" and the
closing  "Ask"  prices,  if any,  as  reported in the  National  Association  of
Securities Dealers Automated Quotation System ("NASDAQ") for the valuation date,
or if none,  on the most recent trade date  immediately  prior to the  valuation
date  provided  such  trade date is no more than  thirty  (30) days prior to the
valuation date. If the Shares are not then either listed on any such exchange or
quoted in NASDAQ,  or there has been no trade date  within  such thirty (30) day
period, the fair market value shall be the mean between the average of the "Bid"
and the average of the "Ask" prices,  if any, as reported in the National  Daily
Quotation  System for the valuation date, or, if none, for the most recent trade
date immediately prior to the valuation date provided such trade date is no more
than  thirty (30) days prior to the  valuation  date.  If the fair market  value
cannot be determined under the preceding three sentences, it shall be determined
in good faith by the Committee.
<PAGE>
                                PAGE 25

(m) Incentive  Option means an Option that,  when granted,  is intended to be an
"incentive stock option," as defined in Section 422 of the Code.

(n) Nonstatutory  Option means an Option that, when granted,  is not intended to
be an "incentive stock option," as defined in Section 422 of the Code.

(o) Normal Retirement means  termination of a Participant's  employment with the
Company or one of its Affiliates after the Participant reaches the age of 65.

(p) Option  means a right or option to purchase  Common  Stock,  including
Restricted  Stock if the  Committee  so determines.

(q) Participant means an employee to whom one or more Awards are granted  under
the Plan.

(r) Performance  Award means an Award subject to the requirements of Section 10,
and such performance conditions as the Committee deems appropriate or desirable.

(s) Plan means the USFreightways Corporation Long-Term Incentive Plan, as
amended from time to time.

(t) Restricted Stock means an Award made in Common Stock or denominated in units
of Common Stock and delivered  under the Plan,  subject to the  requirements  of
Section  8, such  other  restrictions  as the  Committee  deems  appropriate  or
desirable, and as awarded in accordance with the terms of the Plan.

(u) Right means a stock  appreciation right delivered under the Plan, subject to
the requirements of Section 9 and as awarded in accordance with the terms of the
Plan.

(v) Shares means the following  shares of the capital stock of the Company as to
which Options or Restricted Stock have been or may be granted under the Plan and
upon  which  Rights  or units of  Restricted  Stock may be  based:  treasury  or
authorized but unissued  Common Stock,  $.01 par value,  of the Company,  or any
shares of capital  stock into which the Shares are changed or for which they are
exchanged within the provisions of Section 17 of the Plan.

3.       SHARES SUBJECT TO THE PLAN

The  aggregate  number of Shares as to which  Awards may be granted from time to
time shall be two million  nine hundred  fifty  thousand  (2,950,000)  shares of
which no more than  fifty  thousand  (50,000)  shares are for  restricted  stock
awards  having 0% Fair Market  Value basis  (subject  to  adjustments  for stock
splits, stock dividends, and other adjustments described in Section 17 hereof).

In accordance with Code Section 162(m),  if applicable,  the aggregate number of
Shares as to which  Awards may be granted  in any one  calendar  year to any one
employee shall not exceed three hundred  thousand  (300,000)  Shares (subject to
adjustment for stock splits, stock dividends, and other adjustments described in
Section 17 hereof).

From time to time, the Committee and  appropriate  officers of the Company shall
take whatever actions are necessary to file required documents with governmental
authorities  and stock  exchanges  so as to make Shares  available  for issuance
pursuant  to the  Plan.  Shares  subject  to  Awards  that  expire  or that  are
forfeited, terminated, unexercised, canceled by agreement of the Company and the
Participant,  settled in cash in lieu of Common Stock or in such manner that all
or some of the Shares covered by such Awards are not issued to a Participant, or
are exchanged for Awards that do not involve  Common  Stock,  shall  immediately
become available for Awards.  Awards payable in cash shall not reduce the number
of Shares available for Awards under the Plan.

Except as otherwise set forth herein, the aggregate number of Shares as to which
Awards may be granted  shall be subject to change only by means of an  amendment
of the Plan duly adopted by the Company and approved by the  stockholders of the
Company  within  one year  before  or  after  the  date of the  adoption  of the
amendment.
<PAGE>
                                PAGE 26

4.       ADMINISTRATION OF THE PLAN

The Plan shall be  administered  by the  Committee.  A majority of the Committee
shall  constitute  a quorum  at any  meeting  thereof  (including  by  telephone
conference) and the acts of a majority of the members present,  or acts approved
in writing by a majority of the entire Committee without a meeting, shall be the
acts of the Committee for purposes of this Plan. The Committee may authorize one
or more of its  members  or an officer of the  Company  to execute  and  deliver
documents  on  behalf of the  Committee.  A member  of the  Committee  shall not
exercise any discretion  respecting himself or herself under the Plan. The Board
shall have the authority to remove, replace or fill any vacancy of any member of
the Committee upon notice to the Committee and the affected  member.  Any member
of the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members,  or may delegate to one or more of its agents,
such duties and responsibilities as it determines.  Subject to the provisions of
the Plan, the Committee is authorized to:

(a)      Interpret the provisions of the Plan and any Award or Award  Agreement,
         and make all rules and  determinations that it deems necessary or
         advisable to  the administration of the Plan;

(b)      Determine which  employees of the Company or an Affiliate shall be
         designated as Participants  and which of the employees shall be granted
         Awards;

(c)      Determine whether an Option to be granted shall be an Incentive Option
         or Nonstatutory Option;

(d)      Determine the number of Shares for which an Option or Restricted Stock
         shall be granted;

(e)      Determine the number of Rights, the Cash Award or the Performance Award
         to be granted;

(f)      Provide for the acceleration of the right to exercise any Award; and

(g)      Specify the terms, conditions, and limitations upon which Awards may be
         granted;

provided,   however,   that  with  respect  to  Incentive   Options,   all  such
interpretations,  rules, determinations, terms, and conditions shall be made and
prescribed in the context of preserving the tax status of the Incentive  Options
as incentive stock options within the meaning of Section 422 of the Code.

The  Committee may delegate to the chief  executive  officer and to other senior
officers of the Company or its  Affiliates its duties under the Plan pursuant to
such conditions or limitations as the Committee may establish,  except that only
the Committee may select,  and grant Awards to,  Participants who are subject to
Section 16 of the Exchange Act. All  determinations  of the  Committee  shall be
made by a majority of its members.  No member of the  Committee  shall be liable
for any action or  determination  made in good faith with respect to the Plan or
any Award.

The  Committee  shall  have the  authority  at any  time to  cancel  Awards  for
reasonable cause and to provide for the conditions and circumstances under which
Awards shall be forfeited.

Any determination  made by the Committee  pursuant to the provisions of the Plan
shall  be made in its  sole  discretion,  and in the  case of any  determination
relating  to an  Award,  may be made at the time of the  grant of the  Award or,
unless in contravention of any express term of the Plan or an Agreement,  at any
time thereafter.  All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
the  Participants.  No  determination  shall be  subject  to de novo  review  if
challenged in court.
<PAGE>
                                PAGE 27

5.       ELIGIBILITY FOR PARTICIPATION

Awards may be granted  under this Plan only to  employees  of the Company or its
Affiliates.  The  foregoing  notwithstanding,   each  Participant  receiving  an
Incentive  Option must be an employee of the Company or of an  Affiliate  at the
time the Incentive Option is granted.

The  Committee may at any time and from time to time grant one or more Awards to
one or more employees and may designate the number of Shares, if applicable,  to
be subject to each Award so granted,  provided, however that no Incentive Option
shall be granted after the  expiration of ten (10) years from the earlier of the
date of the  adoption of the Plan by the Company or the  approval of the Plan by
the  stockholders  of the Company,  and provided  further,  that the Fair Market
Value of the Shares  (determined  at the time the Option is granted) as to which
Incentive  Options are exercisable for the first time by any employee during any
single  calendar year (under the Plan and under any other incentive stock option
plan of the  Company  or an  Affiliate)  shall not exceed  Two  Million  Dollars
($2,000,000).  To the extent that the Fair Market  Value of such Shares  exceeds
Two Million Dollars ($2,000,000),  the Shares subject to Option in excess of Two
Million  Dollars  ($2,000,000)  shall,  without further action by the Committee,
automatically be converted to Nonstatutory Options.

Notwithstanding any of the foregoing provisions, the Committee may authorize the
grant of an Award to a person  not then in the  employ  of, or  engaged  by, the
Company or of an Affiliate, conditioned upon such person becoming eligible to be
granted an Award at or prior to the execution of the Award Agreement  evidencing
the actual grant of such Award.

6.       AWARDS UNDER THIS PLAN

As the Committee  may  determine,  the following  types of Awards may be granted
under the Plan on a stand alone, combination, or tandem basis:

(a)      Incentive Option

An Award in the form of an Option  that shall  comply with the  requirements  of
Section  422  of the  Code.  Subject  to  adjustments  in  accordance  with  the
provisions of Section 17, the aggregate  number of Shares that may be subject to
Incentive Options under the Plan shall not exceed Two Million (2,000,000).

(b)      Nonstatutory Option

An Award in the form of an Option  that shall not be intended to comply with the
requirements of Section 422 of the Code.

(c)      Restricted Stock

An Award made to a Participant in Common Stock or denominated in units of Common
Stock,  subject to future service and such other  restrictions and conditions as
may be established by the  Committee,  and as set forth in the Award  Agreement,
including  but not  limited  to  continuous  service  with  the  Company  or its
Affiliates,  achievement of specific business objectives, increases in specified
indices,  attaining growth rates, and other measurements of Company or Affiliate
performance.

(d)      Stock Appreciation Right

An Award in the form of a Right to receive the excess of the Fair  Market  Value
of a Share on the date the Right is  exercised  over the Fair Market  Value of a
Share on the date the Right was granted.

(e)      Performance Awards

An  Award  made to a  Participant  that is  subject  to  performance  conditions
specified by the Committee, including but not limited to continuous service with
the Company or its  Affiliates,  achievement  of specific  business  objectives,
increases in specified  indices,  attaining growth rates, and other measurements
of Company or Affiliate performance.

(f)      Cash Awards

An Award  made to a  Participant  and  denominated  in cash,  with the  eventual
payment subject to future service and such other  restrictions and conditions as
may be established by the Committee, and as set forth in the Award Agreement.

Each Award under the Plan shall be evidenced by an Award Agreement.  Delivery of
an Award Agreement to each Participant shall constitute an agreement between the
Company and the Participant as to the terms and conditions of the Award.
<PAGE>
                                        PAGE 28

7.       TERMS AND CONDITIONS OF INCENTIVE OPTIONS AND NONSTATUTORY OPTIONS

Each Option shall be set forth in an Award Agreement, duly executed on behalf of
the Company and by the  Participant  to whom such Option is granted.  Except for
the setting of the Option price under  Section  7(a), no Option shall be granted
and no  purported  grant of any  Option  shall be  effective  until  such  Award
Agreement  shall have been duly  executed  on behalf of the  Company  and by the
Participant.  Each  such  Award  Agreement  shall be  subject  to at  least  the
following terms and conditions:

(a)      Option Price

The purchase  price of the Shares  covered by each Option granted under the Plan
shall be  determined  by the  Committee.  In the case of a grant of an Incentive
Option  (provided the  Participant  owns directly or by reason of the applicable
attribution  rules ten percent (10%) or less of the total combined  voting power
of all classes of share capital of the Company), and in the case of any grant of
a Nonstatutory  Option, the Option price per share of the Shares covered by each
such Option  shall be not less than the Fair  Market  Value of the Shares on the
date of the grant of the Option.  In all cases of Incentive  Options not covered
by the preceding  sentence,  the Option price shall be not less than one hundred
ten percent (110%) of the Fair Market Value on the date of grant.

(b)      Number of Shares

Each Option shall state the number of Shares to which it pertains.

(c)      Term of Option

Each Incentive Option shall terminate not more than ten (10) years from the date
of the  grant  thereof,  or at such  earlier  time as the  Award  Agreement  may
provide, and shall be subject to earlier termination as herein provided,  except
that if the  Option  price is  required  under  Section  7(a) to be at least one
hundred ten percent  (110%) of Fair Market  Value,  each such  Incentive  Option
shall terminate not more than five (5) years from the date of the grant thereof,
and shall be subject to earlier  termination as herein  provided.  The Committee
shall determine the time at which a Nonstatutory Option shall terminate.

(d)      Date of Exercise

Upon the authorization of the grant of an Option, or at any time thereafter, the
Committee may, subject to the provisions of Section 7(c),  prescribe the date or
dates on which the Option becomes  exercisable,  and may provide that the Option
become  exercisable  in  installments  over a  period  of  years,  or  upon  the
attainment of stated goals.

(e)      Medium of Payment

The Option price shall be payable upon the exercise of the Option,  as set forth
in Section 7(j).  It shall be payable in such form  (permitted by Section 422 of
the Code in the case of Incentive  Options) as the  Committee  shall,  either by
rules promulgated pursuant to the provisions of Section 4 of the Plan, or in the
particular Award Agreement, provide.
<PAGE>
                                        PAGE 29

(f)      Termination of Employment

         (1)      A  Participant  who ceases to be an employee of the Company or
                  of an Affiliate  for any reason other than death,  Disability,
                  Normal  Retirement or  termination  "for cause," as defined in
                  Section  7(f)(2),  may  exercise  any  Option  granted to such
                  Participant,  to the extent that the right to purchase  Shares
                  thereunder  has  become   exercisable  on  the  date  of  such
                  termination,  but only within three (3) months after such date
                  of  termination,   or,  if  earlier,   within  the  originally
                  prescribed  term of the  Option.  A  Participant's  employment
                  shall not be deemed  terminated  by  reason of a  transfer  to
                  another employer that is the Company or an Affiliate.

         (2)      A  Participant  who ceases to be an employee of the Company or
                  of an  Affiliate  "for cause"  shall,  upon such  termination,
                  cease to have any right to exercise  any Option.  For purposes
                  of this Plan,  cause shall mean (A) a  Participant's  theft or
                  embezzlement,  or attempted theft or embezzlement, of money or
                  property of the Company or of an  Affiliate,  a  Participant's
                  perpetration   or  attempted   perpetration  of  fraud,  or  a
                  Participant's  participation in a fraud or attempted fraud, on
                  the Company or of an Affiliate or a Participant's unauthorized
                  appropriation    of,   or   a    Participant's    attempt   to
                  misappropriate,  any tangible or intangible assets or property
                  of the  Company  or of an  Affiliate;  (B)  any act or acts of
                  disloyalty,  dishonesty,  misconduct,  moral turpitude, or any
                  other act or acts by a Participant  injurious to the interest,
                  property, operations, business or reputation of the Company or
                  of an Affiliate; (C) a Participant's commission of a felony or
                  any other crime the  commission  of which results in injury to
                  the Company or of an  Affiliate;  or (D) any  violation of any
                  restriction   on  the   disclosure  or  use  of   confidential
                  information   of  the  Company  or  of  an   Affiliate  or  on
                  competition  with the Company or of an Affiliate or any of its
                  businesses  as  then  conducted.   The  determination  of  the
                  Committee as to the existence of cause shall be conclusive and
                  binding upon the Participant and the Company or the Affiliate.

         (3)      A  Participant  who is absent from work with the Company or an
                  Affiliate  because of  temporary  disability  (any  disability
                  other than a  Disability),  or who is on leave of absence  for
                  any  purpose  permitted  by any  authoritative  interpretation
                  (i.e.,  regulation,  ruling, case law, etc.) of Section 422 of
                  the Code, shall not, during the period of any such absence, be
                  deemed,  by virtue of such absence alone,  to have  terminated
                  his or her employment or relationship with the Company or with
                  an Affiliate,  except as the Committee may otherwise expressly
                  provide or determine.

         (4)      Section  7(f)(1)  shall  control  and  fix  the  rights  of  a
                  Participant  who ceases to be an employee of the Company or of
                  an  Affiliate  for any reason  other than  Disability,  death,
                  Normal   Retirement  or  termination   "for  cause,"  and  who
                  subsequently becomes Disabled or dies. Nothing in Section 7(g)
                  and (h) shall be applicable in any such case.

(g)      Total and Permanent Disability

A Participant, who ceases to be an employee of the Company or of an Affiliate by
reason of  Disability,  may  exercise  any Option  granted  to such  Participant
(notwithstanding  that the Participant  might not have been able to exercise the
Option  as to some  or all of the  Shares  if the  Participant  had  not  become
Disabled)  within a period of not more than twelve  (12)  months  after the date
that the  Participant  became  Disabled as determined by the  Committee,  or, if
earlier, within the originally prescribed term of the Option.

(h)      Death

In the event that a Participant  to whom an Option has been granted ceases to be
an employee of the Company or of an  Affiliate  by reason of such  Participant's
death,  any  Option  granted  to  such  Participant  (notwithstanding  that  the
Participant might not have been able to exercise the Option as to some or all of
the  Shares  if  the   Participant  had  not  died)  may  be  exercised  by  the
Participant's estate or personal representative within a period of not more than
twelve (12) months after the date of death of such  Participant  or, if earlier,
within the originally prescribed term of the Option.
<PAGE>
                                PAGE 30

(i)      Normal Retirement

Except as otherwise  mandated by Code Section 422, a Participant,  who ceases to
be an employee of the Company or of an Affiliate by reason of such Participant's
Normal Retirement, may exercise any Option (notwithstanding that the Participant
might not have been able to exercise  the Option as to some or all of the Shares
if the  Participant  had not terminated his or her employment  because of Normal
Retirement)  within a period of not more than twelve (12) months  after the date
of Normal Retirement,  or, if earlier,  within the originally prescribed term of
the Option.

(j)      Exercise of Option and Issuance of Stock

Options shall be exercised by giving written notice to the Company. Such written
notice shall: (1) be signed by the person  exercising the Option,  (2) state the
number of  Shares  with  respect  to which the  Option is being  exercised,  (3)
contain the warranty required by Section 7(n), if applicable,  and (4) specify a
date (other than a Saturday, Sunday or legal holiday) not less than five (5) nor
more than ten (10) days after the date of such  written  notice,  as the date on
which the Shares will be purchased.  Such tender and conveyance shall take place
at the principal  office of the Company during  ordinary  business  hours, or at
such other hour and place  agreed  upon by the Company and the person or persons
exercising the Option.  On the date specified in such written notice (which date
may be extended  by the  Company in order to comply  with any law or  regulation
that  requires the Company to take any action with respect to the Option  Shares
prior to the issuance thereof),  the Company shall accept payment for the Option
Shares in cash, by bank or certified  check, by wire transfer,  or by such other
means as may be approved  by the  Committee  and shall  deliver to the person or
persons exercising the Option in exchange therefor an appropriate certificate or
certificates  for fully  paid  nonassessable  Shares  or  undertake  to  deliver
certificates  within a reasonable period of time. In the event of any failure to
take up and pay for the number of Shares specified in such written notice on the
date set forth therein (or on the extended date as above provided), the right to
exercise the Option shall  terminate with respect to such number of Shares,  but
shall  continue with respect to the remaining  Shares  covered by the Option and
not yet acquired pursuant thereto.

If approved in advance by the Committee,  payment in full or in part also may be
made (1) by delivering  Shares already owned by the  Participant  having a total
Fair Market Value on the date of such delivery equal to the Option price; (2) by
the execution and delivery of a note or other evidence of indebtedness  (and any
security agreement thereunder) satisfactory to the Committee; (3) by authorizing
the Company to retain Shares that  otherwise  would be issuable upon exercise of
the Option having a total Fair Market Value on the date of delivery equal to the
Option  price;  (4) by the  delivery  of cash or the  extension  of  credit by a
broker-dealer  to whom the  Participant  has  submitted  a notice of exercise or
otherwise  indicated  an intent to exercise an Option (in  accordance  with part
220,  Chapter  II,  Title 12 of the Code of  Federal  Regulations,  a  so-called
"cashless" exercise); or (5) by any combination of the foregoing.

(k)      Rights as a Stockholder

No  Participant  to whom an  Option  has been  granted  shall  have  rights as a
stockholder  with respect to any Shares covered by such Option except as to such
Shares as have been  registered in the Company's  share  register in the name of
such  Participant  upon the due  exercise  of the  Option and tender of the full
Option price.

(l)      Assignability and Transferability of Option

Unless otherwise permitted by the Code and by Rule 16b-3 of the Exchange Act, if
applicable,  and approved in advance by the  Committee,  an Option  granted to a
Participant   shall  not  be  transferable  by  the  Participant  and  shall  be
exercisable,  during the Participant's lifetime, only by such Participant or, in
the event of the Participant's incapacity, his guardian or legal representative.
Except as  otherwise  permitted  herein,  such  Option  shall  not be  assigned,
pledged,  or  hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution,  attachment,  or similar  process and any
attempted transfer,  assignment,  pledge,  hypothecation or other disposition of
any Option or of any rights  granted  thereunder  contrary to the  provisions of
this Section  7(l),  or the levy of any  attachment  or similar  process upon an
Option or such rights, shall be null and void.
<PAGE>
                                PAGE 31

(m)      Other Provisions

The Award Agreement for an Incentive  Option shall contain such  limitations and
restrictions upon the exercise of the Option as shall be necessary in order that
such Option can be an "incentive stock option" within the meaning of Section 422
of the Code.  Further,  the Award Agreements  authorized under the Plan shall be
subject  to such  other  terms and  conditions  including,  without  limitation,
restrictions  upon the  exercise  of the  Option,  as the  Committee  shall deem
advisable and which, in the case of Incentive Options, are not inconsistent with
the requirements of Section 422 of the Code.

(n)      Purchase for Investment

If Shares to be issued upon the particular  exercise of an Option shall not have
been effectively registered under the Securities Act of 1933, as now in force or
hereafter amended,  the Company shall be under no obligation to issue the Shares
covered by such  exercise  unless and until the following  conditions  have been
fulfilled.  The person who  exercises  such Option shall  warrant to the Company
that, at the time of such  exercise,  such person is acquiring his or her Option
Shares for  investment  and not with a view to, or for sale in connection  with,
the distribution of any such Shares, and shall make such other  representations,
warranties,  acknowledgments,  and  affirmations,  if any, as the  Committee may
require.  In such event,  the person acquiring such Shares shall be bound by the
provisions of the following  legend (or similar  legend) which shall be endorsed
upon the  certificate(s)  evidencing his or her Option Shares issued pursuant to
such exercise.

                  "The shares represented by this certificate have been acquired
                  for   investment  and  they  may  not  be  sold  or  otherwise
                  transferred by any person, including a pledgee, in the absence
                  of an effective  registration  statement  for the shares under
                  the   Securities   Act  of  1933  or  an  opinion  of  counsel
                  satisfactory   to  the   Company   that  an   exemption   from
                  registration is then available."

                  "The  shares  of stock  represented  by this  certificate  are
                  subject  to all of  the  terms  and  conditions  of a  certain
                  Agreement  dated as of  _________________,  _____,  among  the
                  Company  and  certain  of  its  stockholders.  A  copy  of the
                  Agreement  is on file in the  office of the  Secretary  of the
                  Company.  The  Agreement  provides,  among other  things,  for
                  restrictions  upon the  holder's  right to transfer the shares
                  represented  hereby,  and for certain prior rights to purchase
                  and  certain  obligations  to sell the shares of common  stock
                  evidenced by this  certificate at a designated  purchase price
                  determined  in  accordance   with  certain   procedures.   Any
                  attempted  transfer of these shares  other than in  compliance
                  with  the  Agreement  shall  be  void  and  of no  effect.  By
                  accepting the shares of stock  evidenced by this  certificate,
                  any  permitted  transferee  agrees  to be  bound by all of the
                  terms and conditions of said Agreement."

Without limiting the generality of the foregoing, the Company may delay issuance
of the Shares until  completion  of any action or obtaining any consent that the
Company deems necessary under any applicable law (including  without  limitation
state securities or "blue sky" laws).

(o)      Repricing

The  Committee  may not at any time  reduce  the  exercise  price  of an  Option
previously awarded to any Participant,  whether through amendment,  cancellation
or replacement  grants,  or any other means  (subject to  adjustments  for stock
splits, stock dividends, and other adjustments described in Section 17 hereof).

8.       REQUIRED TERMS AND CONDITIONS OF RESTRICTED STOCK

(a) The Committee may from time to time grant an Award in Shares of Common Stock
or grant an Award denominated in units of Common Stock, for such  consideration,
if any, as the Committee  deems  appropriate  (which amount may be less than the
Fair Market Value of the Common Stock on the date of the Award),  and subject to
such  restrictions and conditions and other terms as the Committee may determine
at the time of the Award (including, but not limited to, continuous service with
the Company or its  Affiliates,  achievement  of specific  business  objectives,
increases in specified  indices,  attaining growth rates, and other measurements
of  Company or  Affiliate  performance),  and  subject  further  to the  general
provisions  of the Plan,  the  applicable  Award  Agreement,  and the  following
specific rules.

(b) If Shares of Restricted  Stock are awarded,  such Shares cannot be assigned,
sold,  transferred,   pledged,  or  hypothecated  prior  to  the  lapse  of  the
restrictions  applicable thereto, and, in no event, prior to six (6) months from
the date of the Award.  The Company shall issue, in the name of the Participant,
stock  certificates  representing the total number of Shares of Restricted Stock
awarded to the Participant,  as soon as may be reasonably  practicable after the
grant of the Award.
<PAGE>
                                PAGE 32

(c) Restricted Stock issued to a Participant under the Plan shall be governed by
an Award Agreement that shall specify whether Shares of Common Stock are awarded
to the  Participant,  or whether  the Award shall be one not of Shares of Common
Stock but one denominated in units of Common Stock, any  consideration  required
thereto, and such other provisions as the Committee shall determine.

(d)  Subject  to  the  provisions  of  Section  8(b)  and  (e)  hereof  and  the
restrictions set forth in the related Award Agreement, the Participant receiving
an Award of Shares of Restricted  Stock shall  thereupon be a  stockholder  with
respect to all of the Shares represented by such certificate or certificates and
shall have the rights of a  stockholder  with respect to such Shares,  including
the right to vote such Shares and to receive  dividends and other  distributions
made with respect to such Shares.  All Common Stock received by a Participant as
the result of any dividend on the Shares of Restricted  Stock,  or as the result
of any stock split, stock  distribution,  or combination of the Shares affecting
Restricted Stock,  shall be subject to the restrictions set forth in the related
Award Agreement.

(e)  Restricted  Stock or units of  Restricted  Stock  awarded to a  Participant
pursuant to the Plan will be forfeited,  and any Shares of  Restricted  Stock or
units of Restricted Stock sold to a Participant pursuant to the Plan may, at the
Company's option, be resold to the Company for an amount equal to the price paid
therefor, and in either case, such Restricted Stock or units of Restricted Stock
shall revert to the Company,  if the Company so determines  in  accordance  with
Section  13 or any  other  condition  set  forth  in the  Award  Agreement,  or,
alternatively,   if  the  Participant's  employment  with  the  Company  or  its
Affiliates terminates,  other than for reasons set forth in Section 12, prior to
the  expiration of the  forfeiture or  restriction  provisions  set forth in the
Award Agreement.

(f) The  Committee,  in its  discretion,  shall have the power to accelerate the
date on which the restrictions contained in the Award Agreement shall lapse with
respect to any or all Restricted Stock awarded under the Plan.

(g) The Committee may prescribe such other restrictions,  conditions,  and terms
applicable to Restricted  Stock issued to a Participant  under the Plan that are
neither  inconsistent  with nor  prohibited by the Plan or the Award  Agreement,
including,  without limitation,  terms providing for a lapse of the restrictions
of this Section or any Award Agreement in installments.

(h) Notwithstanding  anything in this Article 8 to the contrary, any restriction
period imposed hereunder shall be for a period of not less than three (3) years,
if such  restriction  is based upon  continuous  service with the Company or its
Affiliates.

9.       REQUIRED TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

If  deemed  by the  Committee  to be in the best  interests  of the  Company,  a
Participant may be granted a Right.  Each Right shall be granted subject to such
restrictions  and conditions and other terms as the Committee may specify in the
Award  Agreement  at the  time the  Right is  granted,  subject  to the  general
provisions of the Plan, and the following specific rules.

(a) Rights may be granted, if at all, either singly, in combination with another
Award,  or in tandem with another  Award.  At the time of grant of a Right,  the
Committee  shall specify the base price of Common Stock to be used in connection
with the  calculation  described in Section  9(b),  provided that the base price
shall not be less than one hundred  percent (100%) of the Fair Market Value of a
Share of Common Stock on the date of grant, unless approved by the Board.

(b) Upon  exercise of a Right,  which shall be not less than six (6) months from
the  date of the  grant,  the  Participant  shall  be  entitled  to  receive  in
accordance with Section 14, and as soon as  practicable,  the excess of the Fair
Market Value of one Share of Common Stock on the date of exercise  over the base
price  specified  in such  Right,  multiplied  by the number of Shares of Common
Stock then subject to the Right, or the portion thereof being exercised.

(c) Notwithstanding  anything herein to the contrary,  if the Award granted to a
Participant  allows  him or her to  elect to  cancel  all or any  portion  of an
unexercised  Option by exercising an additional or tandem Right, then the Option
price per Share of Common  Stock  shall be used as the base price  specified  in
Section 9(a) to determine  the value of the Right upon such exercise and, in the
event of the exercise of such Right,  the Company's  obligation  with respect to
such Option or portion  thereof  shall be  discharged by payment of the Right so
exercised. In the event of such a cancellation, the number of Shares as to which
such Option was canceled shall become available for use under the Plan, less the
number of Shares,  if any, received by the Participant upon such cancellation in
accordance with Section 14.

(d) A Right may be exercised only by the  Participant  (or, if applicable  under
Section  12, by a legatee or legatees  of such  Right,  or by the  Participant's
executors, personal representatives, or distributees).
<PAGE>
                                        PAGE 33

10.      PERFORMANCE AWARDS

(a) A  Participant  may be  granted  an Award  that is  subject  to  performance
conditions  specified by the Committee.  The Committee may use business criteria
and other  measures of  performance it deems  appropriate  in  establishing  any
performance conditions  (including,  but not limited to, continuous service with
the Company or its  Affiliates,  achievement  of specific  business  objectives,
increases in specified  indices,  attaining growth rates, and other measurements
of Company or Affiliate performance),  and may exercise its discretion to reduce
or  increase  the  amounts  payable  under  any  Award  subject  to  performance
conditions,  except as otherwise  limited under Section 10(c) and (d), below, in
the case of a Performance Award intended to qualify under Code Section 162(m).

(b) Any  Performance  Award will be  forfeited if the Company so  determines  in
accordance  with  Section  13 or any  other  condition  set  forth in the  Award
Agreement,  or, alternatively,  if the Participant's employment with the Company
or its  Affiliates  terminates,  other than for reasons set forth in Section 12,
prior to the expiration of the time period over which the performance conditions
are to be measured.

(c) If the Committee  determines  that a  Performance  Award to be granted to an
employee should qualify as "performance-based compensation" for purposes of Code
Section 162(m),  the grant and/or  settlement of such Performance Award shall be
contingent upon achievement of preestablished  performance goals and other terms
set forth in Section 10(c).

         (1)      Performance  Goals Generally.  The performance  goals for such
                  Performance  Awards  shall  consist  of one or  more  business
                  criteria and a targeted  level or levels of  performance  with
                  respect  to  such  criteria,  as  specified  by the  Committee
                  consistent with this Section 10(c). Performance goals shall be
                  objective and shall  otherwise meet the  requirements  of Code
                  Section 162(m),  including the  requirement  that the level or
                  levels of performance  targeted by the Committee result in the
                  performance   goals  being   "substantially   uncertain."  The
                  Committee may determine  that more than one  performance  goal
                  must  be  achieved  as  a  condition  to  settlement  of  such
                  Performance   Awards.   Performance   goals  may   differ  for
                  Performance  Awards  granted  to  any  one  Participant  or to
                  different Participants.

         (2)      Business  Criteria.  One or  more  of the  following  business
                  criteria for the Company,  on a consolidated basis, and/or for
                  specified  Affiliates or business units of the Company (except
                  with respect to the total stockholder  return and earnings per
                  share criteria), shall be used exclusively by the Committee in
                  establishing  performance  goals for such Performance  Awards:
                  (A)  total  stockholder  return;  (B) such  total  stockholder
                  return as compared to the total return (on a comparable basis)
                  of a publicly available index such as, but not limited to, the
                  Standard  &  Poor's  500 or the  Nasdaq-U.S.  Index;  (C)  net
                  income;   (D)  pre-tax  earnings;   (E)  EBITDA;  (F)  pre-tax
                  operating  earnings after interest expense and before bonuses,
                  service  fees,  and   extraordinary   or  special  items;  (G)
                  operating  margin;  (H)  earnings  per  share;  (I)  return on
                  equity; (J) return on capital;  (K) return on investment;  (L)
                  operating income, excluding the effect of charges for acquired
                  in-process technology and before payment of executive bonuses;
                  (M)  earnings per share,  excluding  the effect of charges for
                  acquired in-process technology and before payment of executive
                  bonuses;  (N) working  capital;  and (O) total  revenues.  The
                  foregoing  business  criteria also may be used in establishing
                  performance  goals for Cash Awards  granted  under  Section 11
                  hereof.

         (3)      Compensation  Limitation.  No  employee  may receive a
                  Performance  Award in excess of $1 million for any three (3)
                  year period.

(d) Achievement of performance goals in respect of such Performance Awards shall
be measured over such periods as may be specified by the Committee.  Performance
goals shall be established on or before the dates that are required or permitted
for "performance-based compensation" under Code Section 162(m).

(e)  Settlement  of  Performance  Awards  may be in cash  or  Shares,  or  other
property,  in the  discretion  of  the  Committee.  The  Committee  may,  in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance  Awards,  but may not exercise  discretion to increase any
such amount  payable in respect of a  Performance  Award subject to Code Section
162(m).
<PAGE>
                                PAGE 34

11.      REQUIRED TERMS AND CONDITIONS OF CASH AWARDS

(a) The  Committee  may from time to time  authorize  the award of cash payments
under the Plan to Participants,  subject to such restrictions and conditions and
other  terms  as the  Committee  may  determine  at the  time  of  authorization
(including,  but not  limited  to,  continuous  service  with the Company or its
Affiliates,  achievement of specific business objectives, increases in specified
indices,  attaining growth rates, and other measurements of Company or Affiliate
performance),  and subject to the general provisions of the Plan, the applicable
Award Agreement, and the following specific rules.

(b) Any Cash Award will be forfeited if Company so determines in accordance with
Section  13 or any  other  condition  set  forth  in the  Award  Agreement,  or,
alternatively,   if  the  Participant's  employment  with  the  Company  or  its
Affiliates terminates,  other than for reasons set forth in Section 12, prior to
the  attainment  of any goals set forth in the Award  Agreement  or prior to the
expiration of the  forfeiture or  restriction  provisions set forth in the Award
Agreement, whichever is applicable.

(c) The Committee, in its discretion, shall have the power to change the date on
which the restrictions contained in the Award Agreement shall lapse, or the date
on which goals are to be measured, with respect to any Cash Award.

(d) Any Cash Award, if not previously forfeited,  shall be payable in accordance
with Section 14 as soon as practicable after the restrictions lapse or the goals
are attained.

(e) The Committee may prescribe such other restrictions,  conditions,  and terms
applicable to the Cash Awards  issued to a  Participant  under the Plan that are
neither  inconsistent  with nor  prohibited by the Plan or the Award  Agreement,
including,  without limitation, terms providing for a lapse of the restrictions,
or a measurement of the goals, in installments.

12.      TERMINATION OF EMPLOYMENT

Except as may  otherwise be (A) provided in Section 7 for Options,  (B) provided
for under the Award Agreement,  or (C) permitted  pursuant to Sections 12(a) and
(c) (subject to the limitations  under the Code for Incentive  Options),  if the
employment of a Participant terminates, all unexpired,  unpaid,  unexercised, or
deferred Awards shall be canceled immediately.

(a)  Retirement   under  a  Company  or  Affiliate   Retirement   Plan.  When  a
Participant's employment terminates as a result of retirement as defined under a
Company  or  Affiliate  retirement  plan  but  such  retirement  is not a Normal
Retirement  as defined  under the Section 2(o) of the Plan,  the  Committee  may
permit  Awards to continue in effect beyond the date of retirement in accordance
with the applicable Award Agreement,  and/or the  exercisability  and vesting of
any Award may be accelerated.

(b)  Resignation  in the Best  Interests of the Company or an Affiliate.  When a
Participant resigns from the Company or an Affiliate and, in the judgment of the
chief executive officer or other senior officer designated by the Committee, the
acceleration  and/or  continuation  of  outstanding  Awards would be in the best
interests of the Company,  the Committee may (i) authorize,  where  appropriate,
the acceleration  and/or continuation of all or any part of Awards granted prior
to such termination and (ii) permit the exercise,  vesting,  and payment of such
Awards for such period as may be set forth in the  applicable  Award  Agreement,
subject to earlier  cancellation  pursuant  to Section 13 or at such time as the
Committee shall deem the  continuation  of all or any part of the  Participant's
Awards are not in the Company's or its Affiliate's best interests.
<PAGE>
                                PAGE 35

(c)      Death or Disability of a Participant

         (1)      In the  event  of a  Participant's  death,  the  Participant's
                  estate or beneficiaries  shall have a period up to the earlier
                  of (A) the expiration  date specified in the Award  Agreement,
                  or (B) the  expiration  date  specified  Section 7(h),  within
                  which to receive or exercise  any  outstanding  Awards held by
                  the  Participant  under such terms as may be  specified in the
                  applicable  Award  Agreement.  Rights to any such  outstanding
                  Awards  shall  pass  by  will  or  the  laws  of  descent  and
                  distribution in the following  order:  (i) to beneficiaries so
                  designated by the Participant;  (ii) to a legal representative
                  of the  Participant;  or (iii) to the persons entitled thereto
                  as determined by a court of competent jurisdiction.  Awards so
                  passing  shall be made at such times and in such  manner as if
                  the Participant were living.

         (2)      In the event a Participant  is determined by the Company to be
                  Disabled,  and  subject to the  limitations  of Section  7(g),
                  Awards may be paid to, or exercised  by, the  Participant,  if
                  legally  competent,  or by a legally  designated  guardian  or
                  other representative if the Participant is legally incompetent
                  by virtue of such Disability.

         (3)      After the death or Disability of a Participant,  the Committee
                  may  in  its  sole   discretion  at  any  time  (A)  terminate
                  restrictions  in Award  Agreements;  (B) accelerate any or all
                  installments  and rights;  and/or (C)  instruct the Company to
                  pay the total of any accelerated payments in a lump sum to the
                  Participant,   the  Participant's  estate,   beneficiaries  or
                  representative,  notwithstanding  that, in the absence of such
                  termination of restrictions  or acceleration of payments,  any
                  or all of the payments due under the Awards  ultimately  might
                  have become payable to other beneficiaries.

13.      CANCELLATION AND RESCISSION OF AWARDS

Unless the Award  Agreement  specifies  otherwise,  the Committee may cancel any
unexpired,   unpaid,  unexercised,  or  deferred  Awards  at  any  time  if  the
Participant  is not in compliance  with the  applicable  provisions of the Award
Agreement, the Plan, or with the following conditions:

(a) A Participant shall not breach any protective agreement entered into between
him or her and  the  Company  or any  Affiliates,  or  render  services  for any
organization  or engage  directly or  indirectly in any business  which,  in the
judgment of the chief  executive  officer of the Company or other senior officer
designated by the  Committee,  is or becomes  competitive  with the Company,  or
which   organization  or  business,   or  the  rendering  of  services  to  such
organization or business,  is or becomes otherwise prejudicial to or in conflict
with the  interests of the  Company.  For a  Participant  whose  employment  has
terminated,  the judgment of the chief executive officer shall be based on terms
of the protective agreement, if applicable, or on the Participant's position and
responsibilities   while  employed  by  the  Company  or  its  Affiliates,   the
Participant's  post-employment  responsibilities  and  position  with the  other
organization or business, the extent of past, current, and potential competition
or conflict between the Company and other  organization or business,  the effect
of the Participant's  assuming the post-employment  position on the Company's or
its Affiliate's customers, suppliers, investors, and competitors, and such other
considerations   as  are  deemed   relevant  given  the  applicable   facts  and
circumstances.  A  Participant  may,  however,  purchase  as  an  investment  or
otherwise,  stock or other securities of any organization or business so long as
they   are   listed   upon  a   recognized   securities   exchange   or   traded
over-the-counter,   and  such   investment  does  not  represent  a  substantial
investment to the Participant or a greater than one percent (1%) equity interest
in the organization or business.

(b) A  Participant  shall not,  without  prior  written  authorization  from the
Company,  disclose to anyone  outside the Company or its  Affiliates,  or use in
other than the Company's or Affiliate's business,  any confidential  information
or materials relating to the business of the Company or its Affiliates, acquired
by the  Participant  either during or after  employment  with the Company or its
Affiliates.
<PAGE>
                                PAGE 36

(c) A Participant  shall disclose  promptly and assign to the Company all right,
title,  and  interest  in any  invention  or idea,  patentable  or not,  made or
conceived by the Participant during employment with the Company or an Affiliate,
relating  in any  manner to the actual or  anticipated  business,  research,  or
development  work of the  Company  or its  Affiliates,  and  shall  do  anything
reasonably necessary to enable the Company or its Affiliates to secure a patent,
trademark,  copyright,  or other  protectable  interest where appropriate in the
United States and in foreign countries.

Upon exercise,  payment, or delivery pursuant to an Award, the Participant shall
certify on a form  acceptable to the  Committee  that he or she is in compliance
with the terms and  conditions  of the Plan,  including  the  provisions of this
Sections  13(a),  (b) or (c).  Failure  to comply  with the  provisions  of this
Sections  13(a),  (b) or (c) prior to, or during the one (1) year period  after,
any  exercise,  payment,  or  delivery  pursuant  to an Award  shall  cause such
exercise,  payment,  or delivery to be  rescinded.  The Company shall notify the
Participant  in writing of any such  rescission  within two (2) years after such
exercise,  payment,  or delivery.  Within ten (10) days after  receiving  such a
notice from the Company,  the Participant shall pay to the Company the amount of
any gain  realized or payment  received as a result of the  rescinded  exercise,
payment, or delivery pursuant to the Award. Such payment shall be made either in
cash or by  returning  to the Company the number of Shares of Common  Stock that
the Participant received in connection with the rescinded exercise,  payment, or
delivery.

14.      PAYMENT OF RESTRICTED STOCK, RIGHTS, PERFORMANCE AWARDS AND CASH AWARDS

Payment of Restricted Stock,  Rights,  Performance Awards and Cash Awards may be
made,  as the Committee  shall  specify,  in the form of cash,  Shares of Common
Stock, or combinations  thereof;  provided,  however, that a fractional Share of
Common  Stock  shall  be paid in cash  equal  to the  Fair  Market  Value of the
fractional Share of Common Stock at the time of payment.

15.      WITHHOLDING

Except as otherwise provided by the Committee,

(a) The Company shall have the power and right to deduct or withhold, or require
a Participant to remit to the Company,  an amount sufficient to satisfy federal,
state, and local taxes required by law to be withheld with respect to any grant,
exercise, or payment made under or as a result of this Plan; and

(b) In the  case  of  payments  of  Awards,  or upon  any  other  taxable  event
hereunder,  a Participant  may elect,  subject to the approval in advance by the
Committee, to satisfy the withholding requirement,  if any, in whole or in part,
by having the Company  withhold  Shares of Common Stock that would  otherwise be
transferred to the  Participant  having a Fair Market Value, on the date the tax
is to be determined,  equal to the minimum marginal tax that could be imposed on
the  transaction.  All  elections  shall be made in  writing  and  signed by the
Participant.


16.      SAVINGS CLAUSE

This  Plan is  intended  to  comply  in all  respects  with  applicable  law and
regulations,  including, (A) with respect to those Participants who are officers
or directors  for purposes of Section 16 of the Exchange  Act, Rule 16b-3 of the
Securities  and  Exchange  Commission,  if  applicable,  and (B) with respect to
executive  officers,  Code Section 162(m). In case any one or more provisions of
this Plan shall be held invalid,  illegal, or unenforceable in any respect under
applicable law and regulation  (including  Rule 16b-3 and Code Section  162(m)),
the validity, legality, and enforceability of the remaining provisions shall not
in any way be  affected  or  impaired  thereby  and  the  invalid,  illegal,  or
unenforceable  provision shall be deemed null and void;  however,  to the extent
permitted by law, any  provision  that could be deemed null and void shall first
be construed,  interpreted,  or revised  retroactively to permit this Plan to be
construed in compliance  with all applicable law (including  Rule 16b-3 and Code
Section  162(m))  so as to  foster  the  intent  of this  Plan.  Notwithstanding
anything herein to the contrary,  with respect to Participants  who are officers
and directors for purposes of Section 16 of the Exchange Act, if applicable, and
if required to comply with rules promulgated thereunder,  no grant of, or Option
to  purchase,  Shares  shall  permit  unrestricted  ownership  of  Shares by the
Participant for at least six (6) months from the date of grant or Option, unless
the Board determines that the grant of, or Option to purchase,  Shares otherwise
satisfies the then current Rule 16b-3 requirements.
<PAGE>
                                PAGE 37

17.      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS

In the event that the  outstanding  Shares of the Company  are  changed  into or
exchanged  for a different  number or kind of shares or other  securities of the
Company  or of  another  corporation  by reason of any  reorganization,  merger,
consolidation,  recapitalization,  reclassification,  change in par value, stock
split-up,  combination of shares or dividends  payable in capital stock,  or the
like,  appropriate  adjustments to prevent dilution or enlargement of the Awards
granted to, or available for,  Participants shall be made in the manner and kind
of Shares for the purchase of which Awards may be granted  under the Plan,  and,
in  addition,  appropriate  adjustment  shall be made in the  number and kind of
Shares and in the Option price per share  subject to  outstanding  Options.  The
foregoing  notwithstanding,  no such  adjustment  shall be made in an  Incentive
Option  which shall,  within the meaning of Section 424 of the Code,  constitute
such a  modification,  extension,  or  renewal of an Option as to cause it to be
considered as the grant of a new Option.

Notwithstanding  anything  herein to the contrary,  the Company may, in its sole
discretion, accelerate the timing of the exercise provisions of any Award in the
event of a tender  offer for the  Company's  Shares,  the  adoption of a plan of
merger or  consolidation  under  which a majority  of the Shares of the  Company
would be eliminated,  or a sale of all or any portion of the Company's assets or
capital stock.  Alternatively,  the Company may, in its sole discretion,  cancel
any or all Awards upon any of the  foregoing  events and provide for the payment
to  Participants  in cash of an amount equal to the value or appreciated  value,
whichever  is  applicable,  of the  Award,  as  determined  in good faith by the
Committee, at the close of business on the date of such event. The preceding two
sentences of this Section 17  notwithstanding,  the Company shall be required to
accelerate  the timing of the exercise  provisions  of any Award if (i) any such
business combination is to be accounted for as a pooling-of-interests  under APB
Opinion  16 and (ii) the  timing  of such  acceleration  does not  prevent  such
pooling-of-interests treatment.

Upon a business  combination  by the Company or any of its  Affiliates  with any
corporation  or  other  entity  through  the  adoption  of a plan of  merger  or
consolidation   or  a  share   exchange  or  through  the  purchase  of  all  or
substantially  all of the capital stock or assets of such other  corporation  or
entity,  the Board or the Committee may, in its sole  discretion,  grant Options
pursuant  hereto  to all or any  persons  who,  on the  effective  date  of such
transaction,  hold  outstanding  options to  purchase  securities  of such other
corporation  or  entity  and  who,  on and  after  the  effective  date  of such
transaction,  will become  employees or directors of, or consultants or advisors
to,  the  Company  or its  Affiliates.  The  number  of Shares  subject  to such
substitute  Options  shall be  determined  in  accordance  with the terms of the
transaction by which the business  combination is effected.  Notwithstanding the
other provisions of this Plan, the other terms of such substitute  Options shall
be  substantially  the same as or  economically  equivalent  to the terms of the
options for which such Options are  substituted,  all as determined by the Board
or by the  Committee,  as the case may be. Upon the grant of substitute  Options
pursuant hereto, the options to purchase securities of such other corporation or
entity for which such Options are substituted shall be cancelled immediately.

18.      DISSOLUTION OR LIQUIDATION OF THE COMPANY

Upon the dissolution or liquidation of the Company other than in connection with
a transaction  to which Section 17 is applicable,  all Awards granted  hereunder
shall terminate and become null and void; provided,  however, that if the rights
of a Participant  under the applicable  Award have not otherwise  terminated and
expired,  the  Participant  may, if the Committee,  in its sole  discretion,  so
permits,  have the right immediately prior to such dissolution or liquidation to
exercise any Award granted hereunder to the extent that the right thereunder has
become  exercisable  as of the date  immediately  prior to such  dissolution  or
liquidation.

19.      TERMINATION OF THE PLAN

The Plan shall terminate (10) years from the earlier of the date of its adoption
by the Board or the date of its  approval by the  stockholders.  The Plan may be
terminated  at an  earlier  date  by  vote  of the  stockholders  or the  Board;
provided,  however, that any such earlier termination shall not affect any Award
Agreements   executed  prior  to  the  effective   date  of  such   termination.
Notwithstanding anything in this Plan to the contrary, any Options granted prior
to the  effective  date of the Plan's  termination  may be  exercised  until the
earlier of (A) the date set forth in the Award Agreement,  or (B) in the case of
an Incentive Option, ten (10) years from the date the Option is granted; and the
provisions  of the Plan  with  respect  to the full and final  authority  of the
Committee under the Plan shall continue to control.
<PAGE>
                                PAGE 38

20.      AMENDMENT OF THE PLAN

The Plan may be amended by the Board and such amendment  shall become  effective
upon  adoption by the Board;  provided,  however,  that any  amendment  that (A)
increases the numbers of Shares that may be granted under this Plan,  other than
as  provided by Section  17, (B)  materially  modifies  the  requirements  as to
eligibility to participate in the Plan, (C) materially increases the benefits to
Participants,  (D)  extends the period  during  which  Incentive  Options may be
granted or exercised,  or (E) changes the  designation of the class of employees
eligible to receive Incentive Options, or otherwise causes the Incentive Options
to no longer  qualify as "incentive  stock options" as defined in Section 422 of
the Code,  also shall be  subject to the  approval  of the  stockholders  of the
Company  within one (1) year either  before or after such adoption by the Board,
subject to the requirements of Section 16 of the Plan.

21.      EMPLOYMENT RELATIONSHIP

Nothing herein  contained shall be deemed to prevent the Company or an Affiliate
from  terminating the employment of a Participant,  nor to prevent a Participant
from terminating the Participant's employment with the Company or an Affiliate.

22.      INDEMNIFICATION OF COMMITTEE

In  addition  to such  other  rights  of  indemnification  as they  may  have as
directors or as members of the Committee,  the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including attorneys'
fees,  actually and  reasonably  incurred in connection  with the defense of any
action,  suit or proceeding,  or in connection with any appeal therein, to which
they or any of them  may be a party by  reason  of any  action  taken by them as
directors  or members of the  Committee  and against all amounts paid by them in
settlement  thereof  (provided such settlement is approved by the Board) or paid
by them in  satisfaction  of a judgment in any such action,  suit or proceeding,
except in relation  to matters as to which it shall be adjudged in such  action,
suit or  proceeding  that the director or  Committee  member is liable for gross
negligence or willful  misconduct in the  performance  of his or her duties.  To
receive such indemnification, a director or Committee member must first offer in
writing to the Company the opportunity,  at its own expense,  to defend any such
action, suit or proceeding.

23.      UNFUNDED PLAN

Insofar as it provides  for payments in cash in  accordance  with Section 14, or
otherwise,  the Plan shall be  unfunded.  Although  bookkeeping  accounts may be
established with respect to Participants who are entitled to cash, Common Stock,
or rights  thereto under the Plan,  any such accounts  shall be used merely as a
bookkeeping  convenience.  The Company  shall not be required to  segregate  any
assets that may at any time be  represented  by cash,  Common  Stock,  or rights
thereto, nor shall the Plan be construed as providing for such segregation,  nor
shall the Company,  the Board, or the Committee be deemed to be a trustee of any
cash,  Common  Stock,  or rights  thereto  to be  granted  under  the Plan.  Any
liability  of the Company to any  Participant  with  respect to a grant of cash,
Common  Stock,  or rights  thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award Agreement;
no such obligation of the Company shall be deemed to be secured by any pledge or
other  encumbrance  on any property of the Company.  Neither the Company nor the
Board nor the  Committee  shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.

24.      MITIGATION OF EXCISE TAX

If any payment or right  accruing to a Participant  under this Plan (without the
application of this Section 24), either alone or together with other payments or
rights  accruing  to the  Participant  from the Company or an  Affiliate,  would
constitute  a  "parachute  payment"  (as defined in Section 280G of the Code and
regulations  thereunder),  such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable or
right  accruing under the Plan being subject to an excise tax under Section 4999
of the Code or being  disallowed as a deduction  under Section 280G of the Code.
The  determination of whether any reduction in the rights or payments under this
Plan is to apply shall be made by the Company.  The Participant  shall cooperate
in good faith with the Company in making such  determination  and  providing any
necessary information for this purpose.

25.      EFFECTIVE DATE

This Plan shall become  effective upon adoption by the Board,  provided that the
Plan is approved by the  stockholders  of the Company before or at the Company's
next annual meeting,  but in no event shall stockholder  approval be sought more
than one (1) year after such adoption by the Board.

26.      GOVERNING LAW

This Plan shall be governed by the laws of the State of Illinois  and  construed
in accordance therewith.

Amended and restated this 30th day of April, 1999.