<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended September 13, 1997
-------------------------
OR
( ) 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 0-10716
CALIBER SYSTEM, INC.
---------------------------------------------------
(Exact name of company as specified in its charter)
Ohio 34-1365496
------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code is (330) 665-5646
Indicate by check mark whether the company (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 company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ----
The number of shares of common stock without par value outstanding as of October
11, 1997 was 38,945,283.
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INDEX
CALIBER SYSTEM, INC.
FORM 10-Q
PERIOD ENDED SEPTEMBER 13, 1997
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--September 13,
1997 and December 31, 1996
Condensed Consolidated Statements of Income--Twelve
weeks and thirty-six weeks ended September 13, 1997
and September 7, 1996
Condensed Consolidated Statements of Cash
Flows--Thirty-six weeks ended September 13, 1997 and
September 7, 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
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PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
ASSETS SEPT. 13, DECEMBER 31,
1997 1996
------------------- --------------------
(dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 20,307 $ 38,829
Accounts receivable 320,427 365,033
Prepaid expenses and supplies 59,443 72,813
Deferred income taxes 58,585 47,801
------------------- --------------------
TOTAL CURRENT ASSETS 458,762 524,476
PROPERTY AND EQUIPMENT, NET 746,262 848,319
Cost in excess of net assets of businesses
acquired, net of amortization 4,891 5,015
Other assets 48,419 54,357
------------------- --------------------
TOTAL OTHER ASSETS 53,310 59,372
------------------- --------------------
TOTAL ASSETS $ 1,258,334 $ 1,432,167
=================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 13,000 $ 230,000
Accounts payable 335,307 262,313
Salaries and wages 61,728 80,259
Other current liabilities 55,486 57,469
------------------- --------------------
TOTAL CURRENT LIABILITIES 465,521 630,041
LONG-TERM LIABILITIES
Long-term debt 200,000 200,000
Self-insurance accruals 32,230 40,809
Deferred income taxes 41,096 22,670
------------------- --------------------
TOTAL LONG-TERM LIABILITIES 273,326 263,479
SHAREHOLDERS' EQUITY
Serial preferred stock - without par value:
Authorized - 40,000,000 shares; Issued - none - -
Common stock - without par value:
Authorized - 200,000,000 shares; Issued - 40,896,414 shares 39,898 39,898
Additional capital 51,417 50,735
Retained earnings 485,526 503,496
------------------- --------------------
576,841 594,129
Treasury stock, at cost
(1997 - 1,690,000 shares, 1996 - 1,605,000 shares) 57,354 55,482
------------------- --------------------
TOTAL SHAREHOLDERS' EQUITY 519,487 538,647
------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,258,334 $ 1,432,167
=================== ====================
See notes to condensed consolidated financial statements.
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED THIRTY-SIX WEEKS ENDED
(THIRD QUARTER) (THREE QUARTERS)
------------------------------------ ------------------------------------------
SEPT. 13, SEPT. 7, SEPT. 13, SEPT. 7,
1997 1996 1997 1996
-------------- ------------------- -------------------- -------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUE $ 592,488 $ 627,226 $ 1,808,360 $ 1,825,201
OPERATING EXPENSES
Salaries, wages and benefits 181,922 247,157 634,048 718,190
Purchased transportation 203,512 182,775 578,675 530,598
Operating supplies and expenses 101,322 135,244 340,413 377,574
Operating taxes and licenses 8,100 13,083 32,361 38,552
Insurance and claims 11,340 14,549 40,177 39,591
Provision for depreciation 27,870 34,194 85,778 100,877
Restructuring charge - - 85,000 -
-------------- ------------------- -------------------- -------------------
TOTAL OPERATING EXPENSES 534,066 627,002 1,796,452 1,805,382
-------------- ------------------- -------------------- -------------------
OPERATING INCOME 58,422 224 11,908 19,819
Other expense, net (3,039) (2,965) (5,567) (5,567)
-------------- ------------------- -------------------- -------------------
INCOME (LOSS) BEFORE INCOME TAXES 55,383 (2,741) 6,341 14,252
Income tax provision (benefit) 22,934 (771) 9,531 6,381
-------------- ------------------- -------------------- -------------------
NET INCOME (LOSS) $ 32,449 $ (1,970) $ (3,190) $ 7,871
============== =================== ==================== ===================
EARNINGS (LOSS) PER SHARE $ 0.83 $ (0.05) $ (0.08) $ 0.20
============== =================== ==================== ===================
DIVIDENDS DECLARED PER SHARE $ 0.10 $ 0.18 $ 0.38 $ 0.54
============== =================== ==================== ===================
AVERAGE SHARES OUTSTANDING 39,207 39,505 39,221 39,512
============== =================== ==================== ===================
</TABLE>
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
(THREE QUARTERS)
---------------------------------------
SEPT. 13, SEPT. 7,
1997 1996
----------------- --------------------
(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,190) $ 7,871
Restructuring charge 85,000 -
Other adjustments 102,310 68,058
----------------- --------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 184,120 75,929
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (68,800) (203,486)
Sales of property and equipment 85,079 4,652
Proceeds from sale of investment 15,995 -
Net advances to discontinued operations - (5,927)
----------------- --------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 32,274 (204,761)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (17,916) (27,777)
Decrease in short-term debt, net (217,000) (55,400)
Proceeds from issuance of long-term debt - 200,000
----------------- --------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (234,916) 116,823
----------------- --------------------
CASH FLOWS USED IN CONTINUING OPERATIONS (18,522) (12,009)
CASH FLOWS USED IN DISCONTINUED OPERATIONS - (7,402)
----------------- --------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (18,522) (19,411)
----------------- --------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 38,829 34,908
----------------- --------------------
CASH AND CASH EQUIVALENTS AT END OF THIRD QUARTER $ 20,307 $ 15,497
================= ====================
See notes to condensed consolidated financial statements.
</TABLE>
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CALIBER SYSTEM, INC.
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirty-six weeks ended September 13,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share, which is required to be retroactively
adopted on December 31, 1997 with all prior periods being restated. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. This statement will not change earnings per
share as reported for the quarter or thirty-six weeks ended September 13, 1997.
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income
which is effective beginning in 1998. Statement 130 establishes standards for
reporting and display of comprehensive income and its components. Comparative
periods are required to be reclassified to reflect the provisions of the
Statement. The adoption of this Statement will not affect earnings as previously
reported.
In June 1997, the FASB issued Statement No. 131, Disclosures About Segments of
an Enterprise and Related Information. This statement requires disclosure of
selected financial and descriptive information for each operating segment based
on management's internal organizational decision-making structure. Additional
information is required on a company-wide basis for revenues by product or
service, revenues and identifiable assets by geographic location and information
about significant customers. The Company will begin presenting any additional
information as required by the Statement in its financial statements for the
year-ending December 31, 1998.
For further information, refer to consolidated financial statements and
footnotes thereto included in the company's annual report on Form 10-K for the
year ended December 31, 1996.
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Note B - Viking Restructuring
- -----------------------------
The company announced a major restructuring of Viking's operations on March 27,
1997, which included terminating operations at its former Coles Express unit in
the Northeast and Spartan Express in the Southeast and Midwest. Operations at
these divisions ceased on March 27, 1997. In connection with the Viking
restructuring, the company recorded in 1996 a non-cash $225 million asset
impairment charge related to the write-down of goodwill of $82 million and
property and equipment of $143 million. First quarter 1997 results included a
restructuring charge of $85 million for employee-related costs, including
severance and benefits, costs related to lease terminations, additional
non-cash asset impairments and other expenses resulting from the restructuring.
Note C - Deferred Income Taxes
- ------------------------------
Net deferred tax assets were $17 million at September 13, 1997 and $25 million
at December 31, 1996, reflecting the tax effects of the restructuring charge.
The company has determined that no valuation allowance is required on net
deferred tax assets based on the ability to recover taxes previously paid.
Note D - Accounting Period
- --------------------------
The company operates on a 13 four-week period calendar with 12 weeks in each of
the first three quarters and 16 weeks in the fourth quarter.
Item 2. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
-------------------------
Consolidated revenue for the third quarter ended September 13, 1997 decreased
5.5% to $592.5 million from third quarter 1996 revenue of $627.2 million as a
result of the Viking restructuring announced on March 27, 1997. Excluding
Viking, revenue increased 26% for the quarter, from $399.4 million in 1996 to
$502.6 million in 1997. For the first three quarters of 1997 consolidated
revenue of $1.81 billion was slightly below the $1.83 billion realized a year
ago. Revenues excluding Viking for the first three quarters amounted to $1.39
billion for 1997, a 19.5% increase over comparable 1996 revenues of $1.16
billion.
All business units except Viking experienced revenue improvements over third
quarter 1996 levels. RPS, Viking Freight and Roberts Express were positively
impacted by the 12-day work stoppage at United Parcel Service (UPS). Revenue at
RPS, the company's small package carrier, increased to $388.4 million or 27.7%
over third quarter revenue of $304.3 million last year as RPS continued its
trend of double-digit growth. The 12-day impact of the UPS strike amounted to
approximately $21 million in additional revenue.
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Daily volume topped 1.5 million packages during the UPS work stoppage, compared
to pre-strike levels of approximately 1.2 million packages. On-time service
levels fell during and immediately after the UPS strike but have steadily risen
since that time. Package quotas for RPS customers will be maintained to preserve
RPS' on-time service record throughout the traditional peak season. The revenue
increase at RPS also reflects continuing growth in package volume including the
retention of approximately 15% of the incremental business experienced during
the work stoppage. RPS's terminal network continues to operate near capacity in
the aftermath of the new UPS labor agreement, and is expected to be the case
through the end of the year. Third quarter net revenues at Caliber Logistics,
which are included in consolidated revenues, increased 26.7%, while gross
revenues increased 32%. Roberts' Express, the company's expedited carrier,
reported revenue growth of 14.2% over the third quarter last year.
The restructuring of Viking's operations included terminating operations at its
former Coles Express unit in the Northeast and Spartan Express in the Southeast
and Midwest. As a result, the company recorded in 1996 a non-cash $225 million
asset impairment charge consisting of the write-down of goodwill of $82 million
and property and equipment of $143 million. First quarter 1997 results included
a restructuring charge of $85 million for employee-related costs, including
severance and benefits, costs related to lease terminations, additional
non-cash asset impairments and other expenses resulting from the restructuring.
Assets held for sale as a result of the restructuring, amounting to $33 million,
are included in property and equipment in the accompanying condensed
consolidated balance sheet. Through the third quarter, the company received $33
million from the sale of certain Viking property and equipment (other than from
the sale of Central Freight) and paid $18 million primarily in severance and
related costs associated with the restructuring.
During the third quarter, the company finalized the sale of Viking's
Southwestern Division, which is now operating under the name Central Freight
Lines, Inc. The company received $43 million in cash, retained certain
properties that will be sold at a later date, and transferred approximately $22
million in liabilities to Central Freight Lines, Inc. The total value of this
transaction, including the anticipated proceeds from the retained properties, is
estimated at approximately $80 million. This transaction did not impact third
quarter earnings.
Results of operations at the former Southwestern Division from the beginning of
the quarter until sale of operations, as well as other non-recurring transition
costs related to the closing of the former Coles and Spartan Divisions, are
included in the consolidated third quarter results. Revenue associated with
these divisions was $5.5 million, expenses were $9.8 million, resulting in $4.3
million of transition costs during the third quarter. For the thirty-six weeks,
revenue was $55.4 million and expenses were $75.8 million, resulting in $20.4 of
transition costs.
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<PAGE> 9
Viking's ongoing operations now provide regional freight service to customers in
12 western states through 43 terminals. Third quarter revenue from Viking's
ongoing operations amounted to $84.4 million. Viking's ongoing operations
reported $78.5 million of operating expenses, resulting in a third quarter
operating profit of $5.8 million, the second full quarter since the unit's
restructuring as a regional carrier. In total, Viking reported operating income
of $1.5 million in the third quarter of 1997 compared to an operating loss of
$38.2 million for the same period last year. For the thirty-six weeks, Viking's
ongoing operations reported revenue of $366.9 million and operating expenses of
$392.7, resulting in an operating loss of $25.8 million.
Without Viking, third quarter operating expenses were $445.7 million in 1997
compared to $360.9 million in the third quarter of 1996, an increase of 23.5%.
This change resulted primarily from higher business volumes at RPS and
Logistics, which reported operating expense increases of 25% and 24.5%,
respectively.
Excluding the restructuring charge and related transition costs, operating
income was $62.7 million for the quarter and $117.3 million year-to-date,
compared to 1996 third quarter operating income of $.2 million and year-to-date
1996 operating income of $19.8 million.
Third quarter operating income without Viking was $56.9 million, an increase of
48% over $38.4 million last year. RPS reported a 52.2% rise in third quarter
operating income to $44.8 million from $29.5 million for the same period last
year. RPS's third quarter margins increased from 9.7% in 1996 to 11.5% in 1997.
The UPS work stoppage increased RPS's operating income by $6 million in the
third quarter. Roberts' operating income grew 30% while continuing to maintain
excellent margins. Logistic's margins have improved over 1996 for both the third
quarter and year-to-date.
For the first three quarters, operating income excluding Viking was $143.2
million, a 36% improvement compared to $105.3 million in the first three
quarters of 1996. Growth in operating income was due primarily to RPS, where
operating income rose 35.7% from $85.4 million in 1996 to $115.8 million in
1997. Year to date margins at RPS improved from 9.55% to 10.87%. Operating
income for the first three quarters at RPS was positively impacted by a $5.3
million change in employee benefits.
Other expense, net includes interest expense of $3.7 million and $14.4 million
for the third quarter of 1997 and first three quarters of 1997, respectively.
Other expense, net year-to-date includes a gain on the sale of investments of
$7.6 million.
The consolidated income tax rate related to ongoing operations was 40.2%
year-to-date. This rate exceeded the U.S. federal statutory rate due primarily
to state income taxes and non-deductible operating costs.
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<PAGE> 10
Net income from ongoing operations (net income excluding transition costs) for
the third quarter was $35.3 million or $0.90 per share. Including the Viking
transition costs, the company's net income for the quarter was $32.4 million or
$0.83 per share, compared to a net loss of $1.97 million or $0.05 per share for
the third quarter of 1996.
Net income for the first three quarters from ongoing operations was $66.8
million or $1.70 per share. First quarter restructuring costs for Viking of
$56.4 million or $1.43 per share and transition expenses of $13.6 million or
$.35 per share reduced year-to-date earnings to a loss of $3.2 million or $.08
per share, compared to earnings of $7.9 million or $.20 per share for the first
three quarters of 1996. Year-to-date net income from ongoing operations was
positively impacted by the gain on sale of investment of $4.6 million after tax
or $0.12 per share, and the one-time change in RPS's employee benefits of $2.8
million after tax or $0.07 per share.
For the three quarters, net cash provided by operating activities of $184.1
million was sufficient to fund net property additions of $68.8 million and
dividends of $18 million and to reduce outside borrowings. The company is party
to bank credit facilities providing for up to $300 million of term loans and up
to $25 million of borrowings under revolving credit. Both agreements are
unsecured and interest is based on variable rates. Outstanding bank borrowings,
which are classified as short-term debt on the accompanying balance sheet,
amounted to $13 million at the end of the third quarter. The bank loan
agreements contain covenants requiring the company to maintain a minimum level
of consolidated net worth and limiting, among other things, the ratio of debt to
earnings, the incurrence of secured debt and sales of certain of the company's
assets.
Capital expenditures for 1997 are currently estimated to be approximately $105
million, of which 60% is expected to be for technology and highly automated
equipment, 30% for real estate and 10% for revenue and support equipment. The
company anticipates that through available borrowings and cash flows from
operations, it will be able to fund the remaining short-term cash requirements
from the Viking restructuring, capital expenditures during 1997 and provide
adequate levels of working capital and funds for the payment of dividends and
interest.
As announced on October 6, 1997, Caliber System has entered into a definitive
agreement with Federal Express Corporation. Under the Agreement, FDX
Corporation, a new holding company to be formed as part of the transaction, will
acquire Caliber in a transaction in which Caliber shareholders will receive 0.8
FDX shares for each Caliber share they hold. The transaction, which is subject
to approval by the shareholders of both companies and other customary
conditions, is expected to close in early 1998.
The foregoing contains forward-looking statements that are based on current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from current expectations due to a number of
factors, including general economic conditions; competitive initiatives and
pricing pressures; availability and cost of capital; shifts in market demand;
weather conditions; the performance and needs of
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<PAGE> 11
industries serviced by the company's businesses; actual future costs including
employee wages and benefits; actual costs of continuing investments in
technology; the timing and amount of capital expenditures; and actual costs and
effects of the restructuring of the business served by Viking.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
10.1 Amendment No. 1 to Caliber System, Inc. Directors' Deferred
Compensation Plan dated August 8, 1997.
10.2 Caliber System, Inc. Deferred Compensation Plan Effective
October 1, 1997
10.3 Form of Third Amended and Restated Management Retention
Agreement (Tier 1)
10.4 Form of Third Amended and Restated Management Retention
Agreement (Tier 2)
10.5 Form of Third Amended and Restated Management Retention
Agreement (Tier 2A)
10.6 Form of Third Amended and Restated Management Retention
Agreement (Tier 3)
10.7 Form of Amendment to Third Amended and Restated Management
Retention Agreement (Specific to Certain Tier 2 Officers)
27 Financial Data Schedule
(b) Reports on Form 8-K Filed During the Third Quarter of 1997
----------------------------------------------------------
On June 25, 1997, a Current Report on Form 8-K was filed by the
registrant to announce improved earnings for the Second Quarter.
On July 11, 1997, a Current Report on Form 8-K was filed by the
registrant to announce the completion of the sale of the operations of
Viking Freight, Inc.'s Southwestern Division.
On July 15, 1997, a Current Report on Form 8-K was filed by the
registrant to report Second Quarter results.
On August 15, 1997, a Current Report on Form 8-K was filed by the
registrant to report the declaration of dividends.
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<PAGE> 12
SIGNATURES
- ----------
Pursuant to the requirements 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.
CALIBER SYSTEM, INC.
-------------------------------------
(Registrant)
Date: October 24, 1997 By /s/Louis J. Valerio
----------------- -----------------------------------
Louis J. Valerio
Senior Vice President-Finance and
Chief Financial Officer
Date: October 24, 1997 By /s/Kathryn W. Dindo
------------------ -----------------------------------
Kathryn W. Dindo
Vice President and Controller
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<PAGE> 13
EXHIBIT INDEX
Item Description
- ---- -----------
10.1 Amendment No. 1 to Caliber System, Inc. Directors' Deferred
Compensation Plan dated August 8, 1997.
10.2 Caliber System, Inc. Deferred Compensation Plan Effective October 1,
1997
10.3 Form of Third Amended and Restated Management Retention Agreement
(Tier 1)
10.4 Form of Third Amended and Restated Management Retention Agreement
(Tier 2)
10.5 Form of Third Amended and Restated Management Retention Agreement
(Tier 2A)
10.6 Form of Third Amended and Restated Management Retention Agreement
(Tier 3)
10.7 Form of Amendment to Third Amended and Restated Management Retention
Agreement (Specific to Certain Tier 2 Officers)
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
AMENDMENT NO. 1
TO THE CALIBER SYSTEM, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
(Amended and Restated as of May 8, 1996)
THIS AMENDMENT NO. 1, dated as of the 8th day of August 1997 by
Caliber System, Inc. ("Caliber");
WITNESSETH
WHEREAS, Caliber sponsors the Caliber System, Inc. Directors' Deferred
Compensation Plan (the "Plan");
WHEREAS, Caliber wishes to amend the Plan effective January 1, 1997,
pursuant to the power reserved to it in Article X of the Plan;
NOW THEREFORE, Caliber amends the Plan by:
1) Amending Paragraph 4.2 of the Plan in its entirety to read as
follows:
4.2 CREDITING OF DEFERRED FEES. Deferred Fees that a Participant
elects to have credited in dollar amounts shall be credited to
the Participant's Deferred Benefit Account as they become payable
to the Director. Deferred Fees otherwise payable to a Director
during a Plan Year that a Participant elects to have credited in
Units shall be credited to the Participant's Deferred Benefit
Account as of the end of each calendar quarter (and such
quarterly credits shall take into account the amount of cash
dividends paid by the Company on equivalent amounts of Shares
during periods after the dates on which Fees otherwise would
have been payable to the Director). The number of Units to be
credited to each Participant's Deferred Benefit Account shall be
determined on the basis of the average fair market value of
Caliber common stock. The average fair market value of Caliber
common stock for each calendar quarter shall be determined by
averaging the closing prices on the New York Stock Exchange on
the last business day of each month in the applicable calendar
quarter.
(2) Amending Paragraph 5.3 of the Plan in its entirety to read as
follows:
5.3 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Benefit
Account to which Fees have been credited in Units shall be
credited as of the end of each calendar quarter with additional
Units equal in value to the amount of cash dividends paid by the
Company during each quarter of each Plan Year on the number of
Shares equivalent
<PAGE> 2
Amendment No. 1 to the Caliber System, Inc.
Directors' Deferred Compensation Plan
Page 2 of 2
to the number of Units in such Deferred Benefit Account as of the
dividend record date. Such dividend equivalents shall be valued
on the basis of the average fair market value of Caliber common
stock. The average fair value of Caliber common stock for each
such calendar quarter shall be determined by averaging the
closing prices on the New York Stock Exchange on the last
business day of each month in the applicable calendar quarter.
Until a Participant or his or her Beneficiary receives his or her
entire Deferred Benefit Account, the unpaid balance thereof
credited in Units shall earn dividend equivalents as provided in
this Section 5.3.
(3) Amending Paragraph 6.2 of the Plan in its entirety to read as
follows:
6.2 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Share Award
Account shall be credited as of the end of each calendar quarter
with additional Units equal in value to the amount of cash
dividends paid by the Company during each quarter of each Plan
Year on the number of Shares equivalent to the number of Units in
such Deferred Share Award Account as of the dividend record date.
Such dividend equivalents shall be valued on the basis of the
average fair market value of Caliber common stock. The average
fair market value of Caliber common stock for such calendar
quarter shall be determined by average the closing prices on the
New York Stock Exchange on the last business day of each month in
the applicable calendar quarter. Until a Participant or his or
her Beneficiary receives his or her entire Deferred Share Award
Account, the unpaid balance thereof credited in Units shall earn
dividend equivalents as provided in this Section 6.2.
<PAGE> 1
EXHIBIT 10.2
CALIBER SYSTEM, INC.
DEFERRED COMPENSATION PLAN
EFFECTIVE OCTOBER 1, 1997
<PAGE> 2
TABLE OF CONTENTS
PURPOSE 2
DEFINITION 2
PARTICIPATION 4
Enrollment 5
Balances from Prior Plans 5
Employer Matching Credits 5
Determination of Earnings 5
Statement of Accounts 6
Conversion of Caliber Common Stock 6
DISTRIBUTIONS 6
Employer Matching Account 6
Prior Plan Account 7
Deferral Account 7
Disability Benefit 7
Hardship Withdrawal 7
Special Election for Early Distribution 7
Death Benefit 7
FUNDING OF BENEFITS 7
ADMINISTRATION OF THE PLAN 7
The Committee 7
Expenses of the Committee 8
Bonding and Compensation 8
Information Submitted to the Committee 8
Notices, Statements and Reports 8
Insurance 8
Indemnity 9
CLAIMS PROCEDURE 9
Filing Claim for Benefits 9
Appeals Procedure 10
AMENDMENT, TERMINATION OR SUSPENSION 10
MISCELLANEOUS 11
Participant Rights 11
Alienation 11
Partial Invalidity 11
Choice of Law 11
Share Available Under Plan 11
Adjustments 11
Payment to Minors 12
Inability to Locate 12
Successors 12
Gender, Tense and Headings 12
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CALIBER SYSTEM, INC, DEFERRED COMPENSATION PLAN
This Deferred Compensation Plan (hereinafter referred to as the "Plan") has been
adopted by the Board of Directors of Caliber System Inc. (hereinafter referred
to as the "Company"), effective as of October 1, 1997 (the "Effective Date").
I. PURPOSE
The purpose of the Plan is to provide supplemental retirement income
and death benefits for a select group of key management employees of
the Employer.
II. DEFINITIONS
The following definitions, set forth in alphabetical order, are used
throughout the Plan. Whenever words or phrases have initial capital
letters in the Plan, a special definition for those words or phrases is
set forth below.
A. "Account" means the record maintained by the Committee of each
Participant's interest in the Plan. The Account may consist of
the "Deferral Account", the "Employer Matching Account", the
"Prior Plan Account", and such other accounts as the Committee
shall designate.
B. "Beneficiary" means the person, persons or entity designated
in writing by the Participant on forms provided by the
Committee to receive distribution of his Account balance in
the event of the Participant's death. A Participant may change
the designated Beneficiary from time to time by filing a new
written designation with the Committee, and such designation
shall be effective upon receipt by the Committee. If a
nonspouse beneficiary is named to receive more than 50% of the
Account, the spouse of the Participant must sign a form
indicating approval. If a Participant has not designated a
Beneficiary, or if a designated Beneficiary is not living or
in existence at the time of a Participant's death, any death
benefits payable under the Plan shall be paid to the
Participant's spouse, if then living, and if the Participant's
spouse is not then living, to the Participant's estate.
C. "Board of Directors" means the Board of Directors of the
Company.
D. "Caliber Common Stock" means common stock of the Company.
E. "Caliber Stock Fund" means the Fund deemed to be invested in
Caliber Common Stock. If, as a result of a merger,
acquisition, sale or other disposition of substantially all
the assets of the Company, Caliber Common Stock is no longer
traded on a national securities exchange, the Caliber Stock
Fund shall be deemed to be invested in shares of common stock
of the entity resulting from such transaction.
F. "Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
G. "Committee" means the Compensation Committee of the Board of
Directors of the Company, which will be responsible for
oversight of this Plan. The Committee is authorized to
delegate any or all of its authority from time to time in
writing.
H. "Company" means Caliber System, Inc., or any successor
thereto.
I. "Compensation" means cash or other property payable with
respect to a Plan Year to a Participant under any agreement,
plan, program or arrangement of an Employer, including base
salary, annual incentive compensation and extraordinary
bonuses, including bonuses or other amounts paid in lieu of
amounts under a Participant's Management Retention Agreement
(or other similar agreement).
J. "Deferral Account" means the record maintained by the
Committee credited with each Participant's deferred
Compensation and showing payments and withdrawals therefrom
and the amount of income, expenses, gains and losses
attributable thereto.
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K. "Deferral Agreement" means an agreement by a Participant to
have a specified percentage or dollar amount of his
Compensation deferred under the Plan for a specified period in
the future.
L. "Determination Date" means the last day of each calendar month
or such other date as designated by the Company in accordance
with Section III(D)(6).
M. "Disabled" means disabled as defined under the Employer's long
term disability plan applicable to the Participant.
N. "Employer" means Caliber System, Inc. RPS, Inc., Caliber
Technology, Inc., Viking Freight, Inc., Caliber Logistics,
Inc. and affiliates, and Roberts Express, Inc.
0. "Employer Matching Account" means the record maintained by the
Committee of each Participant's Employer Matching Credit,
showing payments and Withdrawals therefrom and the amount of
income, expenses, gains and losses attributable thereto.
P. "Employer Matching Credit" means the matching credits
described in Section III(C).
Q. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
R. "Funds" means the hypothetical investment options made
available to the Participant which shall be used as deemed
earnings indices for credits to a Participant's Account. The
Committee will determine the Funds which will be available
from time to time.
S. "Participant" means a key management employee of an Employer
who has been specifically designated by the Board of Directors
as eligible to make deferrals of Compensation to the Plan or
any former employee of an Employer on whose behalf amounts
attributable to Prior Plans have been transferred to the Plan.
T. "Plan Interest Rate" means for any month the rate of return
equal to that which would have been generated had a
Participant's Account actually been invested in the Fund or
Funds (other than the Caliber Stock Fund) designated by the
Participant for such month net of investment-related charges.
No provision of this Plan shall be construed as giving any
Participant an interest in any of these Funds nor shall any
provision require that the Company make any investment in any
such Funds.
U. "Plan Year" means the calendar year. The initial Plan Year,
however, will be October 1, 1997 through December 31, 1997.
V. "Prior Plan Account" means the record maintained by the
Committee credited with each Participant's balance rolled into
the Plan from one or more Prior Plans and showing payments and
withdrawals therefrom and the amount of income, expenses,
gains and losses attributable thereto.
W. "Prior Plans" means the Caliber System, Inc. Long-Term Stock
Award Incentive Plan; the Roadway Services, Inc. Stock Credit
Plans; the Stock Credit Method Plan, the Spartan Express, Inc.
Stock Credit Plan, the Roberts Transportation, Inc. Stock
Credit Plan, the Roadway Logistics Systems, Inc. Stock Credit
Plan; the Viking Freight, Inc. Stock Credit Plan for 1990.
X. "Retirement" means a Participant's termination of employment
with an Employer following attainment of age 55 with five (5)
or more years of service with the Employers and any
predecessor of an Employer.
Y. "Retirement Date" means the first day of the month coinciding
with or next following Retirement.
Z. "Termination" means a Participant's termination of employment
with an Employer for reasons other than Retirement, disability
or death.
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AA. "Termination Date" means the date on which the Participant's
employment with an Employer is terminated for reasons other
than Retirement, disability or death.
III. PARTICIPATION
A. ENROLLMENT
A Participant may elect to defer Compensation by delivering an executed
Deferral Agreement to the Committee in accordance with the following
provisions:
1. Each Participant who is eligible must delivering an executed
Deferral Agreement to the Committee no later than September
30, 1997 in order to be able to elect to defer all or any
portion of base salary October 1, 1997 and/or all or any
portion of annual incentive compensation that may become
payable for 1997.
2. For subsequent Plan Years, in order to defer all or any
portion of his base salary, a Participant must deliver an
executed Deferral Agreement to the Committee prior to the
first day of the Plan Year from which such Compensation is to
be deferred.
3. For subsequent Plan Years, in order to defer all or any
portion of his annual incentive compensation, a Participant
must deliver an executed Deferral Agreement to the Committee
prior to the first day of July of any Plan Year.
4. In order to defer all or any portion of his Compensation other
than base salary or incentive compensation a Participant must
deliver an executed Deferral Agreement to the Committee in
accordance with procedures established by the Committee for
such deferrals.
5. A Participant who first becomes eligible to make deferrals of
Compensation to the Plan during a Plan Year may, within 3O
days after he becomes a Participant, elect to participate in
the Plan for such Plan Year by delivering an executed Deferral
Agreement to the Committee and his Deferral Agreement will be
effective only with regard to Compensation earned or that
becomes determinable and payable during the Plan Year
following the delivery of the Deferral Agreement with the
Committee.
6. Participants shall make the following elections on each
Deferral Agreement:
a. The amount to be deferred with respect to each
component of his Compensation.
Participants may elect to defer all or any portion of
his Compensation in one percent (1%) increments.
Deferral elections are irrevocable.
b. The distribution date with respect to deferrals
covered by the Deferral Agreement, pursuant to
Section IV(C).
The distribution date specified by the Participant
must not be less than three years from the end of the
Plan Year for which the deferral is made and no later
than Retirement. Thereafter, a Participant may make a
one-time election to change the distribution date to
a later date, change the form of payment from a lump
sum to installments and/or increase the number of
installments, provided that such election shall not
be effective unless the Committee receives the
election at least one year and one day before the
distribution date initially elected.
C. The form of distribution to be made to the
Participant at the end of the deferral period,
pursuant to Section IV(C).
Payment of the Participant's Deferral Account may be
made in a single lump sum or in annual installments
of up to ten years, adjusted each year to reflect the
earnings credited or debited to such Account. The
annual payment will be a fraction of a Participant's
Account balance based on the number of payment years
elected. (Example: over a ten year period, 1/10 of
the balance would be paid in the first year, 1/9 in
the second year, etc.)
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B. BALANCES FROM PRIOR PLANS
Balances as of December 31, 1997 from Prior Plans will be transferred
into this Plan effective January 1, 1998 and credited to a
Participant's Prior Plan Account. Prior Plan Accounts will at all times
be subject to the vesting and distribution provisions of the applicable
Prior Plan. The Prior Plan Account shall be deemed to be invested in
the Caliber Stock Fund. Participants may not reallocate investment of
their Prior Plan Account into other Funds. All or a portion of the
Prior Plan Account may be withdrawn pursuant to Section IV(E) (Hardship
Withdrawal), but may not be withdrawn pursuant to Sections IV(G)(Early
Distributions).
C. EMPLOYER MATCHING CREDITS
Beginning January 1, 1998, Employer Matching Credits will be credited
(as described below) as follows:
The first Component is equal to the "matching percentage" (50%, as of
the Effective Date) set forth in the Caliber System, Inc. 401(k)
Savings Plan (the "Savings Plan"), multiplied by each dollar
contributed to the Plan up to 7% (6% for officers of Viking Freight,
Inc.) of the Participant's base salary and incentive compensation
payable during such Plan Year without regard to deferrals into other
plans maintained by the Company, reduced by the amount of matching
contributions credited to the Participant's account in the Savings Plan
for the same period.
The second component is equal to the Participant's base salary and
annual incentive bonus that is in excess of the Code Section 401
(a)(17) limit multiplied by the current year allocation percentage in
the Caliber System, Inc. Stock Bonus Plan.
The Employer Matching Credit will be credited to the Employer Matching
Account of each Participant who is employed by any affiliate of the
Company on the last day of the Plan Year to which such Credit applies,
or who terminated employment during such Plan Year as a result of
death, Retirement, becoming Disabled or in connection with a "Change in
Control" (as defined in Section VIII(A)) annually on December 31 as
units of Caliber Common Stock. The number of units shall be determined
by dividing the Employer Matching Credit by the average of the fair
market value of Caliber Common Stock on the last business day of each
month in the Plan Year.
The Employer Matching Account shall be deemed to be invested in the
Caliber Stock Fund. Participants may not reallocate this Account into
other Funds, and amounts may not be withdrawn pursuant to Sections
IV(F) (Early Distributions).
D. DETERMINATION OF EARNINGS
All amounts deferred pursuant to a Deferral Agreement during a calendar
month will be credited to a Participant's Account on the fifteenth day
of the month in which the deferral is made. Distributions are deducted
as of the first day of the month in which the distribution occurs.
I. A Participant must make an investment election at the time of
his initial Deferral Election. The investment election shall
designate the portion of the amounts deferred which are to be
treated as invested in each available Investment Fund. A
Participant's investment election shall remain in effect with
respect to each subsequent deferral until the Participant
files a change in investment election with the Committee. A
Participant may change his investment election either with
respect to amounts deferred following the change in investment
election or with respect to the deemed investment allocation
of the Participant's existing Account, as the Participant may
elect. A change in election must be filed with the Committee
on a form prescribed by the Committee. A change in investment
election will become effective on the first business day of
the calendar month next following the Committee's receipt of
the change in investment election; provided that the Committee
receives the change in investment election no later than the
15th day of such month. All investment elections by a
Participant shall be subject to approval by the Committee.
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2. If the Committee receives an initial investment
preference which it determines to be incomplete,
unclear or improper, the Participant shall be deemed
to have filed no investment preference and his
Account will be deemed to be invested in a
conservative fund selected by the Committee. If the
Committee receives a revised investment preference
which it determines to be incomplete, unclear or
improper, the Participant's investment preference
then in effect, shall remain in effect until a proper
investment preference is received by the Committee.
3. All investment elections shall be advisory only and
shall not bind the Company. The Company shall not be
obligated to invest any funds or purchase any shares
in connection with this Plan. If however, the Company
chooses to invest funds to provide for its
liabilities under this Plan, the Company shall have
complete discretion.
4. As of each Determination Date, the Participant's
Deferral Account will be credited with the Plan
Interest Rate realized since the immediately
preceding Determination Date. Amounts credited to
each Participant's Deferral Account shall be
determined based upon the balance of the
Participant's Deferral Account as of the immediately
preceding Determination Date with appropriate
adjustments for credits of deferrals and
distributions as specified in Section III(D) since
the immediately preceding Determination Date.
Dividends on Caliber Common Stock shall be converted
to deemed shares of Caliber Common Stock based on
the closing price of Caliber Common Stock on the
dividend payment date.
5. Dividends on Caliber Common Stock in the
Participant's Employer Matching Account and Prior
Plan Account shall be converted to deemed shares of
Caliber Common Stock based on the closing price of
Caliber Common Stock on the dividend payment date.
6. If it is determined that the constructive value of an
Account as of any date on which distributions are to
be made differs materially from the constructive
value of the Account on the prior Determination Date
upon which the distribution is to be based, the
Committee, in its discretion, shall have the right to
designate any date in the interim as a Determination
Date for the purpose of constructively revaluing the
Account so that the Account from which the
distribution is being made will, prior to the
distribution, reflect its share of such material
difference in value. Similarly, the Committee may
adopt a policy of providing for regular interim
valuations without regard to the materiality of
changes in the value of the Accounts.
E. STATEMENT OF ACCOUNTS
Within a reasonable time after the end of each calendar
quarter of the Plan Year, the Committee shall submit to each
Participant a statement showing the status of his Account.
F. CONVERSION OF CALIBER COMMON STOCK
If as a result of a merger, acquisition, sale or other
disposition of substantially all the assets of the Common
Stock is no longer traded on a national securities exchange,
the deemed shares of Caliber Common Stock in the Caliber Stock
Fund shall be converted (on such basis as the Committee shall
determine) and deemed to be invested in shares of common stock
of the entity resulting from such transaction.
IV. DISTRIBUTIONS
All distributions, other than from the Caliber Stock Fund, shall be in
cash. Distributions of the Caliber Stock Fund shall be paid in shares
of Caliber Common Stock; however, the Committee may, in its sole
discretion, pay all or a portion of the distribution payable from the
Caliber Stock Fund in cash. Distributions shall be subject to
applicable federal, state, and local withholding for taxes.
A. The Employer Matching Account will be paid commencing on
February 1 of the year following Retirement in five annual
installments. A Participant who terminates employment prior to
being eligible for Retirement shall receive a payout of his
Employer Matching Account in a single lump sum no later than
ninety (90) days following his Termination Date.
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B. PRIOR PLAN ACCOUNT
Balances transferred from Prior Plans will be paid in
accordance with the payment provisions of Prior Plans.
C. DEFERRAL ACCOUNT
Subject to the provisions of Section III(A)(6)(b), a
Participant's Deferral Account shall be distributed in
accordance with the election made on the Participant's
Deferral Agreement(s) no later than ninety (90) days following
the date(s) specified therein; provided, however, that if a
Participant's Termination Date is earlier, distribution will
be made in a single lump sum no later that ninety (90) days
following his Termination Date.
D. DISABILITY BENEFIT
If a Participant becomes Disabled as defined in Section II(M),
his Account will be paid in a lump sum or a series of up to
ten annual payments, as elected by the Participant at the time
disability is determined.
E. HARDSHIP WITHDRAWAL
At any time prior to the commencement of benefits hereunder, a
Participant may request in writing that the Committee make a
distribution to him from his Account balance due to the
unforeseeable financial emergency of the Participant. In the
event the Committee determines, in its sole discretion, that
the Participant is eligible for a distribution under this
Section, the distribution shall be made as soon as practicable
following the Committee's determination and may not exceed the
amount needed to satisfy the immediate and heavy financial
hardship of the Participant.
F. SPECIAL ELECTION FOR EARLY DISTRIBUTION
A Participant may at any time elect to withdraw all or any
part of his Account, excluding amounts from the Employer
Matching Account and the Prior Plan Account, less a 10%
withdrawal penalty (in addition to any applicable tax
withholding). A Participant who elects a withdrawal under this
Section shall be prohibited from deferring Compensation
pursuant to this Plan for three years following the date of
the withdrawal.
G. DEATH BENEFIT
Following the death of a Participant, the Beneficiary shall
receive a lump sum distribution of the Account within 60 days
following the death of the Participant.
V. FUNDING OF BENEFITS
The Plan shall be considered unfunded at all times. All benefits
payable under the Plan shall be paid from the Company's general assets,
and nothing contained in the Plan shall require the Company to set
aside or hold in trust any funds for the benefit of a Participant or
his Beneficiary. All Participants shall have the status of a general
unsecured creditor with respect to the Company's obligation to make
payments under the Plan. However, the Company retains the right to
establish a trust and fund a trust at its discretion. Any funds of the
Company available to pay benefits under the Plan shall be subject to
the claims of general creditors of the Company.
VI. ADMINISTRATION OF THE PLAN
A. THE COMMITTEE
The Committee shall be responsible for the administration of
the Plan and shall keep a written record of its actions and
proceedings regarding the Plan and all dates, records and
documents relating to its administration of the Plan.
The Committee is authorized to interpret the Plan, to make,
amend and rescind such rules as it deems necessary for the
proper administration of the Plan, to make all other
determinations
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necessary or advisable for the administration of the Plan and
to correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent that
the Committee deems desirable to carry the Plan into effect.
The powers and duties of the Committee shall include, without
limitation, the following:
1. Resolving all questions relating to the eligibility
of employees to become Participants;
2. Determining the amount of benefits payable to
Participants or their Beneficiaries and authorizing
and directing the Company with respect to the payment
of benefits under the Plan;
3. Construing and interpreting the Plan whenever
necessary to carry out its intention and purpose and
making and publishing such rules for the regulation
of the Plan as are not inconsistent with the terms of
the Plan;
4. Compiling and maintaining all records it determines
to be necessary, appropriate or convenient in
connection with the administration of the Plan; and
5. Engaging any administrative, actuarial, legal,
medical, accounting, clerical, or other service it
may deem appropriate to effectuate the Plan.
B. EXPENSES OF THE COMMITTEE
The expenses of the Committee properly and actually incurred
in the performance of its duties under the Plan shall be paid
by the Company.
C. BONDING AND COMPENSATION
The members of the Committee shall serve without bond, and
without compensation for their services as Committee members
except as the Company may provide in its discretion.
D. INFORMATION TO BE SUBMITTED TO THE COMMITTEE
To enable the Committee to perform its functions, the Company
shall supply full and timely information to the Committee on
all matters relating to Participants as the Committee may
require, and shall maintain such other records as the
Committee may determine are necessary in order to determine
the benefits due or which may become due to Participants or
their Beneficiaries under the Plan. The Committee may rely on
such records as conclusive with respect to the matters set
forth therein.
E. NOTICES, STATEMENTS AND REPORTS
The Company shall be the "administrator" of the Plan as
defined in Title I Section 3(16)(A) of ERISA for purposes of
the reporting and disclosure requirements imposed by ERISA and
the Code. The Committee shall assist the Company, as
requested, in complying with such reporting and disclosure
requirements.
F. INSURANCE
The Company, in its discretion, may obtain, pay for and keep
current a policy or policies of insurance, insuring the
Committee members, the members of the Board of Directors and
other employees to whom any responsibility with respect to the
administration of the Plan has been delegated against any and
all costs, expenses and liabilities (including attorneys'
fees) incurred by such persons as a result of any act, or
omission to act, in connection with the performance of their
duties, responsibilities and obligations under the Plan and
any applicable law.
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G. INDEMNITY
If the Company does not obtain, pay for and keep current the
type of insurance policy or policies referred to in Section
VI(F), or if such insurance is provided but any of the parties
referred to in Section VI(F) incur any costs or expenses which
are not covered under such policies, then the Company shall
indemnify and hold harmless, to the extent permitted by law
such parties against any and all costs, expenses and
liabilities (including attorneys' fees) incurred by such
parties in performing their duties and responsibilities under
this Plan, provided that such party or parties were not guilty
of willful misconduct. In the event that such party is named
as a defendant in a lawsuit or proceeding involving the plan
(other than in a lawsuit brought against such party by the
Company) the party shall be entitled to receive on a current
basis the indemnity payments provided for in this subsection,
provided however, that if the final judgment entered in the
lawsuit or proceeding holds that the party is guilty of
willful misconduct with respect to the Plan, the party shall
be required to refund the indemnity payments that it has
received.
VII. CLAIMS PROCEDURE
A. FILING CLAIM FOR BENEFITS
If a Participant or Beneficiary (hereinafter referred to as
the "Applicant") does not receive the timely payment of the
benefits which the Applicant believes are due under the Plan,
the Applicant may make a claim for benefits in the manner
hereinafter provided.
All claims for benefits under the Plan shall be made in
writing and shall be signed by the Applicant. Claims shall be
submitted to a representative designated by the Committee and
hereinafter referred to as the "Claims Coordinator." The
Claims Coordinator may, but need not, be a member of the
Committee. If the Applicant does not furnish sufficient
information with the claim for the Claims Coordinator to
determine the validity of the claim, the Claims Coordinator
shall indicate to the applicant any additional information
which is necessary for the Claims Coordinator to determine the
validity of the claim.
Each claim hereunder shall be acted on and approved or
disapproved and notice given of its decision by the Claims
Coordinator within 90 days following the receipt by the Claims
Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for
benefits in whole or in part, the Claims Coordinator shall
notify the Applicant in writing of the denial of the claim and
notify the Applicant of his right to a review of the Claims
Coordinator's decision by the Committee. Such notice by the
Claims Coordinator shall also set forth, in a manner
calculated to be understood by the Applicant, the specific
reason for such denial, the specific provisions of the Plan or
Agreement on which the denial is based, a description of any
additional material or information necessary to perfect the
claim, with an explanation of why such material or information
is necessary, and an explanation of the Plan's appeals
procedure as set forth in this Section.
If no action is taken by the Claims Coordinator on an
Applicant's claim within 90 days after receipt by the Claims
Coordinator, such claim shall be deemed to be denied for
purposes of the following appeals procedure.
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B. APPEALS PROCEDURE
An Applicant whose claim for benefits is denied in whole or in
part may appeal from such denial to the Committee for a review of
the decision by the Committee. Such appeal must be made within
three months after the Applicant has received actual or
constructive notice of the denial as provided above. An appeal
must be submitted in writing within such period and must:
1. Request a review by the Committee of the claim for benefits
under the Plan;
2. Set forth all of the grounds upon which the Applicants
request for review is based and any facts in support
thereof, and
3 Set forth any issues or comments which the Applicant deems
pertinent to the appeal.
The Committee shall regularly review appeals by Applicants.
The Committee shall act upon each appeal within 60 days
after receipt thereof unless special circumstances require
an extension of time for processing, in which case a
decision shall be rendered by the Committee as soon as
possible but not later than 120 days after the appeal is
received by the Committee.
The Committee shall make full and fair review of each appeal
and any written materials submitted by the Applicant in
connection therewith "The Committee may require the
Applicant to submit such additional facts, documents or
other evidence as the Committee in its discretion deems
necessary or advisable in making its review. The Applicant
shall be given the opportunity to review pertinent documents
or materials upon submission of a written request to the
Committee, provided the Committee finds the requested
documents or materials are pertinent to the appeal.
On the basis of its review, the Committee shall make an
independent determination of the Applicant's eligibility for
benefits under the Plan. The decision of the Committee on
any claim for benefits shall be final and conclusive upon
all parties thereto.
In the event the Committee denies an appeal in whole or in
part, the Committee shall give written notice of the
decision to the Applicant, which notice shall set forth, in
a manner calculated to be understood by the Applicant, the
specific reasons for such denial and which shall make
specific reference to the pertinent provisions of the Plan
or Agreement on which the Committees decision is based.
VIII. AMENDMENT, TERMINATION OR SUSPENSION
A. The Plan may be amended or terminated by the Company at any time.
Such amendment or termination may modify or eliminate any future
deferrals but cannot reduce or eliminate any other benefits under
the Plan. Notwithstanding the preceding provisions of this
Section, for one year following a Change in Control the Company
shall be prohibited from amending the Plan in any way that
adversely affects one or more Participants. For purposes of the
Plan, "Change in Control" means a "Change in Control " as defined
in the most recent Management Retention Agreement (or other
contract providing benefits in the event of a change in control of
the Company) between the Company and the Company's Chief Executive
Officer.
B. The Plan is intended to provide benefits for "a select group of
management or highly compensated employees" within the meaning of
Sections 201, 301, and 401 of ERISA, and therefore to be exempt
from the provisions of Parts 2, 3 and 4 of Title 1 of ERISA.
Accordingly, in the event it is determined by a court of competent
jurisdiction or by an opinion of counsel that the Plan constitutes
an employee pension benefit plan within the meaning of Section
3(2) of ERISA which is not so exempt, the Plan shall terminate as
of the date it became nonexempt.
C. The Board of Directors in its sole discretion may accelerate all
benefits upon termination of the Plan, and pay such benefits in a
single lump sum.
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IX. MISCELLANEOUS
A. PARTICIPANT RIGHTS
Nothing in the Plan shall confer upon a Participant the right to
continue in the employ of an Employer or shall limit or restrict
the right of an Employer to terminate the employment of a
participant at any time with or without cause.
B. ALIENATION
Except as otherwise provided in the Plan, no right or benefit
under the Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge
such right of benefit shall be void. No such right or benefit
shall in any manner be liable for or subject to the debts,
liability or torts of a Participant or Beneficiary.
C. PARTIAL INVALIDITY
If any provision in the Plan is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue to be in full force and
effect without being impaired or invalidated in any way.
D. CHOICE OF LAW
The Plan shall be construed in accordance with ERISA and, to the
extent not pre-empted by ERISA, the laws of the State of Ohio.
E. SHARES AVAILABLE UNDER THE PLAN
Shares delivered by the Company under the Plan shall be treasury
shares or shares that have been or may be acquired by the Company.
F. ADJUSTMENTS
The Board shall make or provide for such adjustments in the number
of units in a Participant's Account as the Board, in its sole
discretion, exercised in good faith, shall determine is equitably
required to prevent dilution or enlargement of the rights of the
Participant that would otherwise result from (a) any stock
dividend, stock split, combination of shares, recapitalization or
any other change in capital structure of the Company, (b) any
merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other
distribution of assets, issuance of rights or warrants to purchase
securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing.
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G. PAYMENT TO MINORS OR PERSONS UNDER LEGAL DISABILITY
If any benefit becomes payable to a minor or to a person under a
legal disability, payment of such benefit shall be made only to
the conservator or guardian of the intended recipient appointed by
a court of competent jurisdiction or any other individual or
institution maintaining or having custody of such intended
recipient. A release by such conservator, guardian, individual or
institution shall constitute a legal discharge of the Plan's
obligation to the intended recipient.
H. INABILITY TO LOCATE
If the Participant or Beneficiary cannot be located by the
Company using the Participant's or Beneficiary's last known
address on file with the Company within one year of the
Participant's Termination Date or death, all benefits due under
the Plan will be forfeited. It is the sole responsibility of the
Participant and/or Beneficiary to maintain a current address
on file with the Company.
I. SUCCESSORS
In the event of any consolidation, merger, acquisition, or
reorganization of the Company, the obligations of the Company
under this Plan shall continue and be binding upon the Company and
successors.
J. GENDER, TENSE AND HEADINGS
Whenever any words are used herein in the masculine gender, they
shall be construed as through they were also used in the feminine
gender in all cases where they would so apply. Whenever any words
used herein are in the singular form, they shall be construed as
though they were also used in the plural form in all cases where
they would so apply. Headings and Sections and subsections as used
herein are inserted solely for convenience and reference and
constitute no part of the Plan.
Executed at _______________, this ________ day of ________________, 1997.
CALIBER SYSTEM INC.
By
------------------------------
Its
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12
<PAGE> 1
EXHIBIT 10.3
THIRD AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 1)
THIS THIRD AMENDED AND RESTATED AGREEMENT ("Agreement") is
entered into as of the _____ day of ____________, 1997 (the "Effective Date") by
and between Caliber System, Inc., an Ohio corporation (together with its
successors and assigns permitted under this Agreement the "Company"), and X
("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title]; and
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders; and
WHEREAS, the Board (as defined in Section 1(b)) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication
and objectivity in the event of any threat or occurrence of, or negotiation or
other action that could lead to, or create the possibility of, a Change in
Control (as defined in Section 1(d)) of the Company, without concern as to
whether Executive might be hindered or distracted by personal uncertainties and
risks created by any such possible Change in Control, and to encourage
Executive's full attention and dedication to the Company, the Board has
authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions.
------------
As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Affiliate" of a person or other entity means a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with the person or other entity specified.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cause" means (1) conviction of Executive for a
felony or for a misdemeanor involving moral turpitude or (2) a material breach
by Executive of the duties and responsibilities associated with his employment
and position with the Company (other than as a result of incapacity due to
physical or mental illness) which is demonstrably willful and
<PAGE> 2
2
deliberate on Executive's part, which results in demonstrably material economic
injury to the Company and which is not remedied in a reasonable period of time
after receipt of written notice from the Company specifying such breach.
Cause shall not exist unless and until the Company
has delivered to Executive a copy of a resolution duly adopted by three-quarters
(3/4) of the Board and to the extent applicable, three quarters (3/4) of the
Incumbent Directors, if any, as defined below, at a meeting of the Board called
and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct set forth in this Section 1(c) and specifying the
particulars thereof in detail.
(d) "Change in Control" means the occurrence of any
of the following events:
(1) any "person," as such term is used in
Sections 3(a)(9) and 13(d) of the 1934 Act, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under the 1934 Act, of 20% or more
of the combined voting power of all the Voting Securities of the Company then
outstanding;
(2) the majority of the Board consists of
individuals other than Incumbent Directors, which term means the members of the
Board on the date of this Agreement; provided that any person becoming a
director subsequent to such date whose election or nomination for election was
supported by three-quarters of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(3) the Company adopts any plan of
liquidation providing for the distribution of all or substantially all of its
assets;
(4) all or substantially all of the assets
of the Company are disposed of pursuant to a merger, consolidation or other
transaction (unless the holders of the Voting Securities of the Company
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Securities of the Company, all of the Voting Securities
or other ownership interests of the entity or entities, if any, that succeed to
the business of the Company); or
(5) the Company combines with another
company and is the surviving corporation but, immediately after the combination,
the holders of the Voting Securities of the Company immediately prior to the
combination hold, directly or indirectly, 50% or less of the Voting Securities
of the combined company (there being excluded from the Voting Securities held by
such holders of the Voting Securities, but not from the Voting Securities of the
combined company, any securities received by Affiliates of such other company in
exchange for securities of such other company).
Notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated by the Company prior to
a Change in Control, which Change in Control in fact occurs, and Executive
reasonably demonstrates that such termination was at the request of a third
party who effectuates such Change in Control or that such termination was
directly related to or in anticipation of such Change in Control, then for all
<PAGE> 3
3
purposes of this Agreement, the date of the Change of Control shall mean the
date immediately prior to the date of such termination of Executive's
employment.
(e) "Date of Termination" means (1) the effective
date on which Executive's employment by the Company terminates as specified in a
Notice of Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date of
death of Executive. Notwithstanding the previous sentence, (i) if Executive's
employment is terminated for Disability (as defined in Section 1(f)) or (ii) if
Executive's employment is terminated by the Company other than for Cause, then
such Date of Termination shall be no earlier than thirty (30) days following the
date on which a Notice of Termination is received.
(f) "Disability" means Executive's absence from his
duties with the Company on a full-time basis for at least one hundred eighty
(180) consecutive days as a result of Executive's incapacity due to mental or
physical illness.
(g) "Good Reason" shall mean termination by Executive
of his employment following occurrence of any of the following events without
his consent:
(i) a reduction in Executive's base salary
or target award opportunity as in effect immediately prior to the Change in
Control (including a change in performance criteria which impacts negatively on
Executive's ability to achieve the target) under the Company's annual or
long-term performance incentive plans or programs, the failure to continue
Executive's participation in any incentive compensation plan in which he was a
participant immediately prior to the Change in Control unless a plan providing a
substantially similar opportunity is substituted, or the termination or material
reduction of any employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted;
(ii) material diminution in Executive's
duties as in effect immediately prior to the Change in Control or assignment to
Executive of duties materially inconsistent with his duties as in effect
immediately prior to the Change in Control;
(iii) the loss of any of Executive's titles
or positions held immediately prior to the Change in Control;
(iv) a required relocation of more than 50
miles from Executive's primary office at the time the Company enters into an
agreement in principle or other agreement, the consummation of which would
constitute a Change in Control; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform the agreement by any
successor to all or substantially all of the assets of the Company within 30
days after a merger, consolidation, sale or similar transaction.
Notwithstanding anything contained in this Agreement
to the contrary, any circumstance described in clauses (i) through (iv) of this
Section 1(g) shall not constitute Good Reason unless Executive gives written
notice thereof to the Company in accordance with Section 12 and the Company
fails to remedy such circumstances within ten days following receipt of such
notice.
<PAGE> 4
4
(h) "Notice of Termination" means notice of the Date
of Termination as described in Section 12(b).
(i) "Qualifying Termination" means a termination of
Executive's employment as a result of (1) a termination by the Company without
Cause, (2) a termination by Executive for Good Reason or (3) a termination by
Executive during the 30-day period commencing with the first anniversary date of
the Change in Control; provided, however, that a Qualifying Termination shall
not include a termination as a result of Executive's death, Disability or
Retirement.
(j) "Retirement" means Executive's voluntary
termination of employment (other than with Good Reason) while eligible for
retirement benefits under the terms of the Caliber System, Inc. Pension Plan and
Trust.
(k) "Retirement and Savings Plans" mean all qualified
and nonqualified defined benefit and defined contribution plans, including:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor or substitute plan or plans of the Company,
including any supplemental employee retirement plans, put into effect prior to a
Change in Control.
The Caliber System, Inc. Long-Term Stock
Award Incentive Plan is included in the definition of Retirement and Savings
Plans to the extent that it provides Executive with supplemental stock credits.
(l) "Transition Period" means the period of time
beginning with a Change in Control and ending on the earlier to occur of (1)
Executive's death and (2) twenty-four (24) months following such Change in
Control.
(m) "Voting Securities" mean any shares of capital
stock or other securities of the Company that are generally entitled to vote in
elections for directors.
2. Term of Agreement.
------------------
This Agreement shall commence on the Effective Date
and shall continue in effect until ___________, 1999; provided, however, that
commencing on ___________, 1999 and each following anniversary of the Effective
Date, the term of this Agreement shall automatically be extended for an
additional one-year period, unless at least six months prior to such date, the
Company shall have given notice not to extend this Agreement; provided, however,
that (i) no such action shall be taken by the Company during any period of time
when the Board has knowledge that any person has taken steps reasonably
calculated to effect a Change in Control until, in the opinion of the Board,
such person has abandoned or terminated its efforts to effect a Change in
Control, and (ii) this Agreement shall continue in effect for at least
twenty-four (24) months following the occurrence of a Change in Control.
Notwithstanding anything in this Section 2 to the contrary, and subject to the
last paragraph of Section 1(d), this Agreement shall terminate upon termination
of Executive's employment with
<PAGE> 5
5
the Company prior to a Change in Control, in which event the rights and
obligations of the parties, except as otherwise expressly provided herein, shall
cease.
3. Payments and Benefits Upon Termination of Employment.
-----------------------------------------------------
(a) If during the Transition Period the employment of
Executive shall terminate, by reason of a Qualifying Termination, then the
Company shall pay to Executive (or Executive's beneficiary or estate) within
five (5) days following the Date of Termination (except as provided in Section
3(a)(1)(iii)), as compensation for services rendered to the Company:
(1) a lump-sum cash amount equal to the sum
of (i) Executive's unpaid base salary from the Company and its subsidiaries
through the Date of Termination (at the rate in effect (without taking into
account any reduction of base salary constituting Good Reason) just prior to the
time a Notice of Termination is given); (ii) any benefit awards (including both
the cash and stock components) which pursuant to the terms of any Retirement and
Savings Plans have been earned or become payable through the Date of
Termination, to the extent not theretofore paid or otherwise provided for; (iii)
that portion of the annual bonus under the Company's incentive compensation
plans determined by multiplying the greater of the actual bonus that would
otherwise have been earned for a full year performance or target annual bonus,
by the fraction arrived at by dividing the number of full weeks worked by
Executive during the calendar year of his Date of Termination by fifty-two (52);
plus (iv) any unpaid vacation under the Company's vacation policy in effect at
the Date of Termination (or, if more favorable to Executive, immediately prior
to a Change in Control). For purposes of Section 3(a)(1)(iii), the Company shall
pay the Executive the pro-rata portion of the target annual bonus within 5 days
following the Date of Termination, and any additional bonus payment to which
Executive is entitled on or before January 31 of the year following the year in
which the Termination occurs.
(2) a lump-sum cash amount equal to (a) 3
times Executive's highest annual rate of base salary from the Company and its
subsidiaries in effect during the 12-month period prior to the Date of
Termination plus (b) 3 times the target annual bonus in effect for the year in
which the Change in Control occurs; provided, that any amount paid pursuant to
this Section 3(a)(2) shall be offset by any other amount of severance relating
to salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any other severance plan, policy, employment
agreement or arrangement of the Company.
(3) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of: (i) the employer
matching contributions that would be made to the Caliber System, Inc. 401(k)
Savings Plan; (ii) employer contributions that would be made to the Caliber
System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be
awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan.
This lump sum payment shall be based on the employer contributions and
supplemental credits attributable to an additional 36 months of service under
the specific plans referenced in this paragraph, or any applicable amended,
successor or substitute plan or plans of the Company put into effect prior to a
Change in Control. For purposes of the 401(k) Savings Plan and related
supplemental stock credits, the calculations shall be made based on the
assumption that the Executive made maximum contributions from the highest annual
rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to
the 401(k) Savings Plan and that the matching percentage shall equal the highest
matching percentage allowable under the 401(k) Savings Plan as of the Date of
<PAGE> 6
6
Termination (in no event less than 3.5% of eligible compensation under the
401(k) Savings Plan). For purposes of the Stock Bonus Plan and related
supplemental stock credits, the calculations shall be based on the highest
annual rate of base salary and target annual bonus under 3(a)(2)(a) and
3(a)(2)(b), and the formula in effect for the year in which the Date of
Termination occurs (but in no event less than the average of the actual
contribution/allocation percentages applicable to the 5 calendar years preceding
the Date of Termination). For purposes of determining actuarial present value
under this Section 3(a)(3), the interest rate on 30-year Treasury securities for
the month of November preceding the calendar year in which the Date of
Termination occurs shall be used (such rate is the "applicable interest rate"
under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(4) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits accrued
under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc.
Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and
upon service through the Date of Termination. For purposes of the actuarial
present value calculation under this Section 3(a)(4), Executive shall be deemed
fully vested for all actual service.
(5) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits under the
Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17)
Benefit Plan, and Caliber System, Inc. Excess Plan based upon: (i) an additional
36 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b)
above, and (ii) an additional 36 months of age and service, or, if greater, the
number of additional months of age and service necessary to provide Executive
with 30 years of service and an attained age of 56 under the specific plans
referenced in this paragraph or any applicable amended, successor or substitute
plan or plans of the Company put into effect prior to a Change in Control. For
purposes of this Section 3(a)(5), the additional 36 months of base salary and
target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and any portion of the
annual bonus under 3(a)(1)(iii) paid in the calendar year following the Date of
Termination, shall be included as the final three years of pensionable wages.
For purposes of determining actuarial present value under this Section 3(a)(5),
the 1983 Group Mortality Table (assuming a blend of 50 percent of male mortality
rates and 50 percent female mortality rates) shall be utilized. For purposes of
determining actuarial present value under this Section 3(a)(5), the interest
rate on 30-year Treasury securities for the month of November preceding the
calendar year in which the Date of Termination occurs shall be used (such rate
is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the
Internal Revenue Code).
(b) If during the Transition Period, the employment
of Executive shall terminate, by reason of a Qualifying Termination, then for a
period ending on the earliest of (i) thirty-six (36) months following the Date
of Termination, (ii) the commencement date of equivalent benefits from a new
employer, or (iii) Executive's attainment of age 65, the Company shall continue
to keep in full force and effect (or otherwise provide) each plan and policy
providing medical, accident, disability and life coverage with respect to
Executive and his dependents with the same level of coverage, upon the same
terms and otherwise to the same extent as each such plan and policy shall have
been in effect immediately prior to the Date of Termination (or, if more
favorable to Executive, immediately prior to the Change in Control), and the
Company and Executive shall share the costs of continuing each such coverage in
the same proportion as such costs were shared immediately prior to the Date of
Termination (or, if more favorable to Executive, immediately prior to the Change
in Control). If, on or after the end
<PAGE> 7
7
of thirty-six (36) months following the Date of Termination, Executive is not
then receiving equivalent medical coverage from a new employer, the Company
shall provide Executive with coverage equivalent to the Company's early-retiree
medical program then in effect. Upon termination of any of the other coverages
discussed in this subparagraph, the Executive may convert Executive's and his
dependents' coverage under any such plan or policy to individual policies or
programs upon the same terms as employees of the Company may apply for such
conversions.
(c) If during the Transition Period, the employment
of Executive shall terminate, by reason of a Qualifying Termination, then for a
period of twelve months following the Date of Termination, the Company shall
provide, at its expense, executive level outplacement assistance to the
Executive by a nationally recognized outplacement firm acceptable to Executive.
4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN
ENTITLEMENTS.
(a) The consequences of a Change in Control on
Executive's stock options and performance shares granted under the Company's
1996 Equity Incentive Compensation Plan ("EICP") shall be determined in
accordance with the EICP and Executive's grants pursuant to the EICP. The
consequences of a Change in Control on Executive's stock credits under any
Retirement and Savings Plans shall be determined in accordance with the
provisions of the applicable plans.
(b) No later than the occurrence of a Change in
Control, the Company shall fund in full that portion, if any, of the obligations
to Executive under the Company's Retirement and Savings Plans (other than plans
qualified under Section 401(a) of the Internal Revenue Code) that are then
unfunded. Such funding shall be provided through an irrevocable trust for the
benefit of the Executive which shall be established as promptly as possible
following the Effective Date of this Agreement (or, in the case of a Retirement
and Savings Plan established after such effective date, then as promptly as
possible after such plan is established) for the purpose of receiving
contributions from the Company to fund such obligations. To the extent such
obligations are covered by a plan other than a plan for which there is a trust
already in existence, the Company shall establish a trust for the purpose of
funding such obligations. Such trust shall be in a form that provides Executive
with the most favorable tax position that reasonably can be determined at the
time it is established. The trust shall provide for distribution of amounts to
Executive in order to pay taxes, if any, that become due prior to payment of
amounts pursuant to the trust. Following the occurrence of a Change in Control,
the Company shall make periodic additional contributions (no less frequently
than annually) to keep such trust fully funded. The intent is that no later than
the Change in Control and annually thereafter (the "Applicable Dates") the
amount of such fund shall equal at least the then present value (determined as
of each Applicable Date) of any amounts subject to the funding requirement of
this Section 4(b) as determined by a nationally recognized firm qualified to
provide actuarial services. The establishment and funding of any such trust
shall not affect the obligation of the Company to provide the benefits being
funded. The trust may be terminated in accordance with the trust agreement
between the Company and the trustee and, if so terminated, the Company shall not
be required to establish a successor trust under this Section 4(b). The trust
described in this Section 4(b) may be part of a trust funding similar
obligations for other employees of the Company.
<PAGE> 8
8
(c) No later than the occurrence of a Change in
Control, the Company shall fund its obligations to provide payments and benefits
under this Agreement (other than the obligations which are provided for in
Section 4(b)) by the establishment of a trust to which it contributes an amount
sufficient to meet such obligations. The establishment and funding of such trust
shall not affect the obligations of the Company to provide the benefits subject
to this Section 4(c). The trust described in this Section 4(c) may be part of
the trust described in Section 4(b).
(d) The consequences of a Change in Control upon
compensation and benefit plans and programs of the Company, except as otherwise
provided in this Agreement, shall be determined in accordance with such plans
and programs.
5. Gross-up Payments.
------------------
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or other benefit (including, without limitation, any acceleration
of vesting of any benefit) provided by the Company or its subsidiaries to or for
the benefit of Executive (a "Payment") (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any Gross-up Payment required under this Section 5)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986 (the "Code"), (such excise tax, together with any interest
and penalties imposed in respect thereto, hereinafter collectively referred to
as the "Excise Tax"), then Executive shall be entitled to receive a Gross-Up
Payment in an amount that after payment by Executive of all taxes, including,
without limitation, any income, employment, and excise taxes (and any interest
and penalties imposed with respect thereto), imposed upon the Gross-Up Payment
leaves the Executive a net amount from the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, Executive shall appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by
the Company to Executive within five (5) days of the receipt of the
Determination. If the Accounting Firm determines that no Excise Tax is payable
by Executive, it shall furnish Executive with a written opinion that failure to
report the Excise Tax on Executive's applicable federal income tax return will
not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Executive. In the event the Company exhausts its remedies pursuant to Section
5(c) and Executive thereafter is required by a determination of a court or the
Internal Revenue Service to make payment of any Excise Tax, the Accounting Firm
shall determine
<PAGE> 9
9
promptly following receipt of such determination the amount of the Gross-Up
Payment that should have been made by the Company (the "Underpayment") and any
such Underpayment shall be paid promptly by the Company to or for the benefit of
Executive.
(c) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:
(1) give the Company any information
reasonably requested by the Company relating to such claim,
(2) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith
in order effectively to contest such claim, and
(4) permit the Company to participate in any
proceeding relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or income or
employment tax (including interest and penalties with respect thereto) imposed
as a result of such proceeding and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided further, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive on an interest-free basis and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income or employment tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder
<PAGE> 10
10
and Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 5(c), Executive becomes entitled to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 5(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to Section
5(c), a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify Executive in writing
of its intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
6. Confidentiality; Non-Competition.
---------------------------------
(a) During employment and thereafter, Executive shall
keep confidential all "Confidential Information" relating to the Company or any
of its subsidiaries, and their respective businesses, obtained by Executive
during his employment by the Company or any of its subsidiaries. "Confidential
Information" means any non-public, proprietary information that may provide the
Company with a competitive advantage, including, without limitation, any trade
secrets, formulas, flow charts, computer programs, access codes or other systems
information, business, product or marketing plans, sales and other forecasts,
financial information, customer lists, and information relating to compensation
and benefits, provided that such proprietary information does not include any
information which is available to the general public or is generally available
within the relevant business or industry other than as a result of Executive's
breach of this Section 6(a). Confidential Information may be in any medium or
form, including, without limitation, physical documents, computer files or
discs, videotapes, audiotapes, and oral communications. Anything herein to the
contrary notwithstanding, it shall not be a violation of this Section 6(a) for
the Executive to disclose information in the ordinary course of properly
carrying out his duties and responsibilities on behalf of the Company or to
respond to an order of a court or other body having jurisdiction provided that
he gives the Company notice of any such order.
(b) Executive agrees that he shall not for a period
of one (1) year following the Date of Termination, directly or indirectly own,
manage, operate, join, control, be employed by, or participate in the ownership,
management, operation or control of or be connected in any manner, including but
not limited to holding the positions of officer, director, shareholder,
consultant, independent contractor, employee, partner, or investor, with any
Competing Enterprise; provided, however, that Executive may invest without being
deemed in violation of this Section 6(b), in stocks, bonds, or other securities
of any corporation or other entity (but without participating in the business
thereof) if such stocks, bonds, or other securities are listed for trading on a
national securities exchange or NASDAQ and Executive's investment does not
exceed 1% of the issued and outstanding shares of capital stock, or in the case
of bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding. "Competing Enterprise" shall mean an enterprise that
engages in any business that, on the Date of Termination, is engaged in by the
Company or any of its subsidiaries if such enterprise
<PAGE> 11
11
engages in such business in any geographic area in which the Company or any of
its subsidiaries conducts such business.
(c) Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company then in Executive's possession or under his
control, except that Executive may retain his personal notes, diaries,
Rolodexes, calendars and correspondence.
(d) Executive agrees that any material breach of the
terms of this Section would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law. Executive
further agrees that in the event of said material breach or any reasonable
threat of material breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such material breach or threatened
material breach. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages. Should a court or
arbitrator determine that any provision of this Section 6 is unreasonable, the
parties agree that such provision shall be interpreted and enforced to the
maximum extent such court or arbitrator deems reasonable.
(e) The provisions of this Section shall survive any
termination of this Agreement and the Transition Period, and the existence of
any claim or cause of action by Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of this Section.
Anything in this Section 6(e) to the contrary notwithstanding, the provisions of
Section 6(b) shall only apply in the event of (i) a termination of the
Executive's employment described in the last paragraph of Section 1(d), prior to
the occurrence of a Change in Control, (ii) a termination of Executive's
employment during the Transition Period that constitutes a Qualifying
Termination, or (iii) a termination for Cause at any time during the Term of the
Agreement.
7. Indemnification.
----------------
The Company agrees that if Executive is made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company, Executive shall be indemnified and
held harmless by the Company to the fullest extent legally permitted or
authorized by the Company's Second Amended Articles of Incorporation, Restated
Amended Code of Regulations, Indemnification Agreement between Executive and the
Company or, if greater, by the laws of the State of Ohio, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
<PAGE> 12
12
8. Withholding Taxes.
------------------
The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
9. Reimbursement of Expenses.
--------------------------
If any contest or dispute shall arise under this
Agreement involving termination of Executive's employment with the Company or
involving the failure or refusal of the Company to perform fully in accordance
with the terms hereof, the Company shall reimburse Executive, on a current
basis, for all legal fees and expenses, if any, incurred by Executive in
connection with such contest or dispute regardless of the result thereof.
10. Scope of Agreement.
-------------------
Nothing in this Agreement shall be deemed to entitle
Executive to continued employment with the Company or its subsidiaries.
11. Successors; Binding Agreement.
------------------------------
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such merger,
consolidation or transfer of assets, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or the person or entity to
which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of this
Section 11, it will cause any successor or transferee unconditionally to assume,
by written instrument delivered to Executive (or his beneficiary or estate), all
of the obligations of the Company hereunder.
(c) (i) No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the business of
the Company substantially as an entirety, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company under this Agreement, either contractually or as a matter
of law.
(ii) This Agreement is personal to Executive
and, without the prior written consent of the Company, shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die while any amounts
would be payable to Executive hereunder had Executive continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement
<PAGE> 13
13
to such person or persons appointed in writing by Executive to receive such
amounts or, if no person is so appointed, to Executive's estate.
12. Notice.
-------
(a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to Executive:
[Executive Name and Address]
If to the Company:
General Counsel
Caliber System, Inc.
P.O. Box 5459
Akron, OH 44334-0459
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of
Executive's Date of Termination by the Company or Executive, as the case may be,
to the other, shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) specify the
termination date. The failure by Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of Executive or the Company hereunder or
preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
13. No Set-off; No Mitigation.
--------------------------
The Company's obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
14. Employment with Subsidiaries.
-----------------------------
Employment with the Company for purposes of this
Agreement shall include employment with any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then
<PAGE> 14
14
outstanding securities of such corporation or other entity entitled to vote
generally in the election of directors.
15. Governing Law; Validity.
------------------------
The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Ohio without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which other provisions shall remain in full force and effect.
16. Settlement of Disputes.
-----------------------
(a) Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach of
any of the foregoing, shall, subject to the mutual agreement of the Company and
the Executive, be settled by confidential arbitration, to be held in Akron,
Ohio, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association before three (3) arbitrators. The arbitrators shall
apply the provisions of this Agreement strictly as written (unless doing so
violates the clear intent of this Agreement), and shall explain the reasons and
basis of their award in detail and in writing. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof. All
costs and expenses relating to any controversy or claim that is arbitrable under
this Section (including reasonable attorney's fees of the Executive) shall be
paid by the Company promptly on written demand, except that the arbitrators are
authorized to require reimbursement of the Company for moneys paid by it
pursuant to this sentence if the arbitrators determine that the substantive
positions of the Executive in the arbitration were entirely without merit.
Pending final resolution of any arbitration or court proceeding, the Company
shall continue prompt payment of all amounts due the Executive under this
Agreement or any amendment thereof and prompt provision of all benefits to which
the Executive or his beneficiaries are entitled. Notwithstanding the foregoing,
nothing contained in this Section 16 shall limit a party's right to seek
equitable relief in any court of competent jurisdiction.
(b) In the event the parties do not agree to
arbitration as provided in 16(a), the parties hereby consent to the jurisdiction
of the Common Pleas Court of the State of Ohio (Summit County) or of the United
States District Court for the Northern District of Ohio.
17. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
18. Survivorship.
-------------
The respective rights and obligations of the parties
hereunder shall survive the expiration of the term of this Agreement, to the
extent necessary to carry out the intentions of the parties, including without
limitation any obligations of the Company to make payments and provide benefits
hereunder.
<PAGE> 15
15
19. Miscellaneous.
--------------
No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. No provision of this Agreement may be waived unless such
waiver is agreed to in writing and signed by the waiving party which, in the
case of the Company, shall mean by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. This
Agreement contains the entire understanding and agreement between the parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
<PAGE> 16
16
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company. Executive has executed
this Agreement as of the date and year first written above.
CALIBER SYSTEM, INC.
By:
----------------------------
Agreed to this ____ day of ___________, 1997.
- --------------------------
[Executive's Name]
<PAGE> 1
EXHIBIT 10.4
THIRD AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 2)
THIS THIRD AMENDED AND RESTATED AGREEMENT ("Agreement") is
entered into as of the _____ day of _____________, 1997 (the "Effective Date")
by and between Caliber System, Inc., an Ohio corporation (together with its
successors and assigns permitted under this Agreement the "Company"), and X
("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title] of [company];
and
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders; and
WHEREAS, the Board (as defined in Section 1(b)) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication
and objectivity in the event of any threat or occurrence of, or negotiation or
other action that could lead to, or create the possibility of, a Change in
Control (as defined in Section 1(d)) of the Company, without concern as to
whether Executive might be hindered or distracted by personal uncertainties and
risks created by any such possible Change in Control, and to encourage
Executive's full attention and dedication to the Company, the Board has
authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions.
------------
As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Affiliate" of a person or other entity means a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with the person or other entity specified.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cause" means (1) conviction of Executive for a
felony or for a misdemeanor involving moral turpitude or (2) a material breach
by Executive of the duties and responsibilities associated with his employment
and position with the Company (other than as a
<PAGE> 2
2
result of incapacity due to physical or mental illness) which is demonstrably
willful and deliberate on Executive's part, which results in demonstrably
material economic injury to the Company and which is not remedied in a
reasonable period of time after receipt of written notice from the Company
specifying such breach.
Cause shall not exist unless and until the
Company has delivered to Executive a copy of a resolution duly adopted by
three-quarters (3/4) of the Board and to the extent applicable, three quarters
(3/4) of the Incumbent Directors, if any, as defined below, at a meeting of the
Board called and held for such purpose (after reasonable notice to Executive and
an opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct set forth in this Section 1(c) and specifying the
particulars thereof in detail.
(d) "Change in Control" means the occurrence of any
of the following events:
(1) any "person," as such term is used in
Sections 3(a)(9) and 13(d) of the 1934 Act, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under the 1934 Act, of 20% or more
of the combined voting power of all the Voting Securities of the Company then
outstanding;
(2) the majority of the Board consists of
individuals other than Incumbent Directors, which term means the members of the
Board on the date of this Agreement; provided that any person becoming a
director subsequent to such date whose election or nomination for election was
supported by three-quarters of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(3) the Company adopts any plan of
liquidation providing for the distribution of all or substantially all of its
assets;
(4) all or substantially all of the assets
of the Company are disposed of pursuant to a merger, consolidation or other
transaction (unless the holders of the Voting Securities of the Company
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Securities of the Company, all of the Voting Securities
or other ownership interests of the entity or entities, if any, that succeed to
the business of the Company); or
(5) the Company combines with another
company and is the surviving corporation but, immediately after the combination,
the holders of the Voting Securities of the Company immediately prior to the
combination hold, directly or indirectly, 50% or less of the Voting Securities
of the combined company (there being excluded from the Voting Securities held by
such holders of the Voting Securities, but not from the Voting Securities of the
combined company, any securities received by Affiliates of such other company in
exchange for securities of such other company).
Notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated by the Company prior to
a Change in Control, which Change in Control in fact occurs, and Executive
reasonably demonstrates that such termination was at the request of a third
party who effectuates such Change in Control or that such
<PAGE> 3
3
termination was directly related to or in anticipation of such Change in
Control, then for all purposes of this Agreement, the date of the Change of
Control shall mean the date immediately prior to the date of such termination of
Executive's employment.
(e) "Date of Termination" means (1) the effective
date on which Executive's employment by the Company terminates as specified in a
Notice of Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date of
death of Executive. Notwithstanding the previous sentence, (i) if Executive's
employment is terminated for Disability (as defined in Section 1(f)) or (ii) if
Executive's employment is terminated by the Company other than for Cause, then
such Date of Termination shall be no earlier than thirty (30) days following the
date on which a Notice of Termination is received.
(f) "Disability" means Executive's absence from his
duties with the Company on a full-time basis for at least one hundred eighty
(180) consecutive days as a result of Executive's incapacity due to mental or
physical illness.
(g) "Good Reason" shall mean termination by Executive
of his employment following occurrence of any of the following events without
his consent:
(i) a reduction in Executive's base salary
or target award opportunity as in effect immediately prior to the Change in
Control (including a change in performance criteria which impacts negatively on
Executive's ability to achieve the target) under the Company's annual or
long-term performance incentive plans or programs, the failure to continue
Executive's participation in any incentive compensation plan in which he was a
participant immediately prior to the Change in Control unless a plan providing a
substantially similar opportunity is substituted, or the termination or material
reduction of any employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted;
(ii) material diminution in Executive's
duties as in effect immediately prior to the Change in Control or assignment to
Executive of duties materially inconsistent with his duties as in effect
immediately prior to the Change in Control;
(iii) the loss of any of Executive's titles
or positions held immediately prior to the Change in Control;
(iv) a required relocation of more than 50
miles from Executive's primary office at the time the Company enters into an
agreement in principle or other agreement, the consummation of which would
constitute a Change in Control; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform the agreement by any
successor to all or substantially all of the assets of the Company within 30
days after a merger, consolidation, sale or similar transaction.
Notwithstanding anything contained in this Agreement
to the contrary, any circumstance described in clauses (i) through (iv) of this
Section 1(g) shall not constitute Good Reason unless Executive gives written
notice thereof to the Company in accordance with
<PAGE> 4
4
Section 12 and the Company fails to remedy such circumstances within ten days
following receipt of such notice.
(h) "Notice of Termination" means notice of the Date
of Termination as described in Section 12(b).
(i) "Qualifying Termination" means a termination of
Executive's employment as a result of (1) a termination by the Company without
Cause, (2) a termination by Executive for Good Reason or (3) a termination by
Executive during the 30-day period commencing with the first anniversary date of
the Change in Control; provided, however, that a Qualifying Termination shall
not include a termination as a result of Executive's death, Disability or
Retirement.
(j) "Retirement" means Executive's voluntary
termination of employment (other than with Good Reason) while eligible for
retirement benefits under the terms of the Caliber System, Inc. Pension Plan and
Trust.
(k) "Retirement and Savings Plans" mean all qualified
and nonqualified defined benefit and defined contribution plans, including:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor or substitute plan or plans of the Company,
including any supplemental employee retirement plans, put into effect prior to a
Change in Control.
The Caliber System, Inc. Long-Term Stock
Award Incentive Plan is included in the definition of Retirement and Savings
Plans to the extent that it provides Executive with supplemental stock credits.
(l) "Transition Period" means the period of time
beginning with a Change in Control and ending on the earlier to occur of (1)
Executive's death and (2) twenty-four (24) months following such Change in
Control.
(m) "Voting Securities" mean any shares of capital
stock or other securities of the Company that are generally entitled to vote in
elections for directors.
2. Term of Agreement.
------------------
This Agreement shall commence on the Effective Date
and shall continue in effect until ____________, 1999; provided, however, that
commencing on _______________, 1999 and each following anniversary of the
Effective Date, the term of this Agreement shall automatically be extended for
an additional one-year period, unless at least six months prior to such date,
the Company shall have given notice not to extend this Agreement; provided,
however, that (i) no such action shall be taken by the Company during any period
of time when the Board has knowledge that any person has taken steps reasonably
calculated to effect a Change in Control until, in the opinion of the Board,
such person has abandoned or terminated its efforts to effect a Change in
Control, and (ii) this Agreement shall continue in effect for at least
twenty-four (24) months following the occurrence of a Change in Control.
Notwithstanding anything in this Section 2 to the contrary, and subject to the
last paragraph of
<PAGE> 5
5
Section 1(d), this Agreement shall terminate upon termination of Executive's
employment with the Company prior to a Change in Control, in which event the
rights and obligations of the parties, except as otherwise expressly provided
herein, shall cease.
3. Payments and Benefits Upon Termination of Employment.
-----------------------------------------------------
(a) If during the Transition Period the employment of
Executive shall terminate, by reason of a Qualifying Termination, then the
Company shall pay to Executive (or Executive's beneficiary or estate) within
five (5) days following the Date of Termination (except as provided in Section
3(a)(1)(iii)), as compensation for services rendered to the Company:
(1) a lump-sum cash amount equal to the sum
of (i) Executive's unpaid base salary from the Company and its subsidiaries
through the Date of Termination (at the rate in effect (without taking into
account any reduction of base salary constituting Good Reason) just prior to the
time a Notice of Termination is given); (ii) any benefit awards (including both
the cash and stock components) which pursuant to the terms of any Retirement and
Savings Plans have been earned or become payable, through the Date of
Termination, to the extent not theretofore paid or otherwise provided for; (iii)
that portion of the annual bonus under the Company's incentive compensation
plans determined by multiplying the greater of the actual bonus that would
otherwise have been earned for a full year performance or target annual bonus by
the fraction arrived at by dividing the number of full weeks worked by Executive
during the calendar year of his Date of Termination by fifty-two (52); plus (iv)
any unpaid vacation under the Company's vacation policy in effect at the Date of
Termination (or, if more favorable to Executive, immediately prior to a Change
in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the
Executive the pro-rata portion of the target annual bonus within 5 days
following the Date of Termination, and any additional bonus payment to which
Executive is entitled on or before January 31 of the year following the year in
which the Termination occurs.
(2) a lump-sum cash amount equal to (a) 2
times Executive's highest annual rate of base salary from the Company and its
subsidiaries in effect during the 12-month period prior to the Date of
Termination plus (b) 2 times the target annual bonus in effect for the year in
which the Change in Control occurs; provided, that any amount paid pursuant to
this Section 3(a)(2) shall be offset by any other amount of severance relating
to salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any other severance plan, policy, employment
agreement or arrangement of the Company.
(3) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of: (i) the employer
matching contributions that would be made to the Caliber System, Inc. 401(k)
Savings Plan; (ii) employer contributions that would be made to the Caliber
System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be
awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan.
This lump sum payment shall be based on the employer contributions and
supplemental credits attributable to an additional 24 months of service under
the specific plans referenced in this paragraph, or any applicable amended,
successor or substitute plan or plans of the Company put into effect prior to a
Change in Control. For purposes of the 401(k) Savings Plan and related
supplemental stock credits, the calculations shall be made based on the
assumption that the Executive made maximum contributions from the highest annual
rate of base salary and target annual bonus
<PAGE> 6
6
under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that the matching
percentage shall equal the highest matching percentage allowable under the
401(k) Savings Plan as of the Date of Termination (in no event less than 3.5% of
eligible compensation under the 401(k) Savings Plan). For purposes of the Stock
Bonus Plan and related supplemental stock credits, the calculations shall be
based on the highest annual rate of base salary and target annual bonus under
3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which the
Date of Termination occurs (but in no event less than the average of the actual
contribution/allocation percentages applicable to the 5 calendar years preceding
the Date of Termination). For purposes of determining actuarial present value
under this Section 3(a)(3), the interest rate on 30-year Treasury securities for
the month of November preceding the calendar year in which the Date of
Termination occurs shall be used (such rate is the "applicable interest rate"
under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(4) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits accrued
under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc.
Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and
upon service through the Date of Termination. For purposes of the actuarial
present value calculation under this Section 3(a)(4), Executive shall be deemed
fully vested for all actual service.
(5) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits under the
Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17)
Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24
months of age, service, and base salary and target annual bonus under 3(a)(2)(a)
and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24
months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b),
and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year
following the Date of Termination, shall be included as the final two years of
pensionable wages. For purposes of determining actuarial present value under
this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50
percent of male mortality rates and 50 percent female mortality rates) shall be
utilized. For purposes of determining actuarial present value under this Section
3(a)(5), the interest rate on 30-year Treasury securities for the month of
November preceding the calendar year in which the Date of Termination occurs
shall be used (such rate is the "applicable interest rate" under Section
417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(b) If during the Transition Period, the employment
of Executive terminates by reason of a Qualifying Termination, the Company will:
(1) provide Executive and his dependents
with health care coverage at the same level as that in effect immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control) ("Continued Medical Coverage") for a period of
42 months from the Date of Termination; and
(2) provide Executive and his dependents
with accident, disability and life coverage at the same level and upon the same
terms and otherwise to the same extent as that in effect immediately prior to
the Date of Termination (or, if more favorable to Executive, immediately prior
to the Change in Control) ("Welfare Benefits") for a period of 24 months from
the Date of Termination.
<PAGE> 7
7
(3) The coverages described in subparagraphs
(1) and (2) of this Section may be provided through continued participation in
the Company's plans and programs or otherwise, as the Company determines.
(4) During the first twenty four (24) months
of Continued Medical Coverage, the Company and Executive will share the costs of
such coverage in the same proportion as such costs were shared immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control). From the twenty-fifth (25th) through the end of
the of the forty-second (42nd) month of Continued Medical Coverage, Executive
will be required to pay the cost of such coverage at the rate the Company
charges former employees, from time to time, for similar coverage under COBRA.
The Company and Executive will share the costs of providing the Welfare Benefits
in the same proportion as such costs were shared immediately prior to the Date
of Termination (or, of more favorable to Executive, immediately prior to the
Change in Control).
(5) Continued Medical Coverage will
terminate upon the earliest of (i) the expiration of 42 months from the Date of
Termination, (ii) the commencement date of equivalent benefits from a new
employer, or (iii) Executive's attainment of age 65. Welfare Benefits will
terminate upon the earliest of (i) the expiration of 24 months from the Date of
Termination, (ii) the commencement date of equivalent benefits a new employer,
or (iii) Executive's attainment of age 65. Upon termination of Continued Medical
Coverage, Executive may, if eligible, elect special continuation coverage for
early retirees under the Caliber System, Inc. Medical, Dental and Vision Care
Plan. Upon termination of Welfare Benefits, Executive may, if available, convert
one or more of Executive's and his dependent's coverage to individual policies
or programs.
(c) If during the Transition Period, the employment
of Executive shall terminate, by reason of a Qualifying Termination, then for a
period of twelve months following the Date of Termination, the Company shall
provide, at its expense, executive level outplacement assistance to the
Executive by a nationally recognized outplacement firm acceptable to Executive.
4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN
ENTITLEMENTS.
(a) The consequences of a Change in Control on
Executive's stock options and performance shares granted under the Company's
1996 Equity Incentive Compensation Plan ("EICP") shall be determined in
accordance with the EICP and Executive's grants pursuant to the EICP. The
consequences of a Change in Control on Executive's stock credits under any
Retirement and Savings Plans shall be determined in accordance with the
provisions of the applicable plans.
(b) No later than the occurrence of a Change in
Control, the Company shall fund in full that portion, if any, of the obligations
to Executive under the Company's Retirement and Savings Plans (other than plans
qualified under Section 401(a) of the Internal Revenue Code) that are then
unfunded. Such funding shall be provided through an irrevocable trust for the
benefit of the Executive which shall be established as promptly as possible
following the Effective Date of this Agreement (or, in the case of a Retirement
and Savings Plan established after such effective date, then as promptly as
possible after such plan is established) for the purpose of receiving
contributions from the Company to fund such obligations. To the
<PAGE> 8
8
extent such obligations are covered by a plan other than a plan for which there
is a trust already in existence, the Company shall establish a trust for the
purpose of funding such obligations. Such trust shall be in a form that provides
Executive with the most favorable tax position that reasonably can be determined
at the time it is established. The trust shall provide for distribution of
amounts to Executive in order to pay taxes, if any, that become due prior to
payment of amounts pursuant to the trust. Following the occurrence of a Change
in Control, the Company shall make periodic additional contributions (no less
frequently than annually) to keep such trust fully funded. The intent is that no
later than the Change in Control and annually thereafter (the "Applicable
Dates") the amount of such fund shall equal at least the then present value
(determined as of each Applicable Date) of any amounts subject to the funding
requirement of this Section 4(b) as determined by a nationally recognized firm
qualified to provide actuarial services. The establishment and funding of any
such trust shall not affect the obligation of the Company to provide the
benefits being funded. The trust may be terminated in accordance with the trust
agreement between the Company and the trustee and, if so terminated, the Company
shall not be required to establish a successor trust under this Section 4(b).
The trust described in this Section 4(b) may be part of a trust funding similar
obligations for other employees of the Company.
(c) No later than the occurrence of a Change in
Control, the Company shall fund its obligations to provide payments and benefits
under this Agreement (other than the obligations which are provided for in
Section 4(b)) by the establishment of a trust to which it contributes an amount
sufficient to meet such obligations. The establishment and funding of such trust
shall not affect the obligations of the Company to provide the benefits subject
to this Section 4(c). The trust described in this Section 4(c) may be part of
the trust described in Section 4(b).
(d) The consequences of a Change in Control upon
compensation and benefit plans and programs of the Company, except as otherwise
provided in this Agreement, shall be determined in accordance with such plans
and programs.
5. Gross-up Payments.
------------------
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or other benefit (including, without limitation, any acceleration
of vesting of any benefit) provided by the Company or its subsidiaries to or for
the benefit of Executive (a "Payment") (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any Gross-up Payment required under this Section 5)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986 (the "Code"), (such excise tax, together with any interest
and penalties imposed in respect thereto, hereinafter collectively referred to
as the "Excise Tax"), then Executive shall be entitled to receive a Gross-Up
Payment in an amount that after payment by Executive of all taxes, including,
without limitation, any income, employment, and excise taxes (and any interest
and penalties imposed with respect thereto), imposed upon the Gross-Up Payment
leaves the Executive a net amount from the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in
<PAGE> 9
9
arriving at such determination, shall be made by the public accounting firm that
is retained by the Company as of the date immediately prior to the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from Executive that there has been a Payment, or such
earlier time as is requested by the Company (collectively, the "Determination").
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control, Executive shall
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5, shall be paid by the Company to Executive within
five (5) days of the receipt of the Determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. In the event
the Company exhausts its remedies pursuant to Section 5(c) and Executive
thereafter is required by a determination of a court or the Internal Revenue
Service to make payment of any Excise Tax, the Accounting Firm shall determine
promptly following receipt of such determination the amount of the Gross-Up
Payment that should have been made by the Company (the "Underpayment") and any
such Underpayment shall be paid promptly by the Company to or for the benefit of
Executive.
(c) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:
(1) give the Company any information
reasonably requested by the Company relating to such claim,
(2) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith
in order effectively to contest such claim, and
(4) permit the Company to participate in any
proceeding relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or income or
employment tax (including interest and penalties with respect thereto) imposed
<PAGE> 10
10
as a result of such proceeding and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided further, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive on an interest-free basis and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income or employment tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 5(c), Executive becomes entitled to
receive, and receives, any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 5(c)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to Section
5(c), a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify Executive in writing
of its intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
6. Confidentiality; Non-Competition.
---------------------------------
(a) During employment and thereafter, Executive shall
keep confidential all "Confidential Information" relating to the Company or any
of its subsidiaries, and their respective businesses, obtained by Executive
during his employment by the Company or any of its subsidiaries. "Confidential
Information" means any non-public, proprietary information that may provide the
Company with a competitive advantage, including, without limitation, any trade
secrets, formulas, flow charts, computer programs, access codes or other systems
information, business, product or marketing plans, sales and other forecasts,
financial information, customer lists, and information relating to compensation
and benefits, provided that such proprietary information does not include any
information which is available to the general public or is generally available
within the relevant business or industry other than as a result of Executive's
breach of this Section 6(a). Confidential Information may be in any medium or
form, including, without limitation, physical documents, computer files or
discs, videotapes, audiotapes, and oral communications. Anything herein to the
contrary notwithstanding, it shall not be a violation of this Section 6(a) for
the Executive to disclose information in the ordinary course of properly
carrying out his duties and responsibilities on behalf of the Company or to
<PAGE> 11
11
respond to an order of a court or other body having jurisdiction provided that
he gives the Company notice of any such order.
(b) Executive agrees that he shall not for a period
of one (1) year following the Date of Termination, directly or indirectly own,
manage, operate, join, control, be employed by, or participate in the ownership,
management, operation or control of or be connected in any manner, including but
not limited to holding the positions of officer, director, shareholder,
consultant, independent contractor, employee, partner, or investor, with any
Competing Enterprise; provided, however, that Executive may invest without being
deemed in violation of this Section 6(b), in stocks, bonds, or other securities
of any corporation or other entity (but without participating in the business
thereof) if such stocks, bonds, or other securities are listed for trading on a
national securities exchange or NASDAQ and Executive's investment does not
exceed 1% of the issued and outstanding shares of capital stock, or in the case
of bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding. "Competing Enterprise" shall mean an enterprise that
engages in any business that, on the Date of Termination, is engaged in by the
Company or any of its subsidiaries if such enterprise engages in such business
in any geographic area in which the Company or any of its subsidiaries conducts
such business.
(c) Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company then in Executive's possession or under his
control, except that Executive may retain his personal notes, diaries,
Rolodexes, calendars and correspondence.
(d) Executive agrees that any material breach of the
terms of this Section would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law. Executive
further agrees that in the event of said material breach or any reasonable
threat of material breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such material breach or threatened
material breach. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages. Should a court or
arbitrator determine that any provision of this Section 6 is unreasonable, the
parties agree that such provision shall be interpreted and enforced to the
maximum extent such court or arbitrator deems reasonable.
(e) The provisions of this Section shall survive any
termination of this Agreement and the Transition Period, and the existence of
any claim or cause of action by Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of this Section.
Anything in this Section 6(e) to the contrary notwithstanding, the provisions of
Section 6(b) shall only apply in the event of (i) a termination of the
Executive's employment described in the last paragraph of Section 1(d), prior to
the occurrence of a Change in Control, (ii) a termination of Executive's
employment during the Transition Period that constitutes a Qualifying
Termination, or (iii) a termination for Cause at any time during the Term of the
Agreement.
<PAGE> 12
12
7. Indemnification.
----------------
The Company agrees that if Executive is made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company, Executive shall be indemnified and
held harmless by the Company to the fullest extent legally permitted or
authorized by the Company's Second Amended Articles of Incorporation, Restated
Amended Code of Regulations, Indemnification Agreement between Executive and the
Company or, if greater, by the laws of the State of Ohio, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
8. Withholding Taxes.
------------------
The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
9. Reimbursement of Expenses.
--------------------------
If any contest or dispute shall arise under this
Agreement involving termination of Executive's employment with the Company or
involving the failure or refusal of the Company to perform fully in accordance
with the terms hereof, the Company shall reimburse Executive, on a current
basis, for all legal fees and expenses, if any, incurred by Executive in
connection with such contest or dispute regardless of the result thereof.
10. Scope of Agreement.
-------------------
Nothing in this Agreement shall be deemed to entitle
Executive to continued employment with the Company or its subsidiaries.
11. Successors; Binding Agreement.
------------------------------
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such merger,
consolidation or transfer of assets, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or the person or entity to
which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of this
Section 11, it will cause any successor or transferee unconditionally to assume,
by written instrument delivered to Executive (or his beneficiary or estate), all
of the obligations of the Company hereunder.
<PAGE> 13
13
(c) (i) No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the business of
the Company substantially as an entirety, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company under this Agreement, either contractually or as a matter
of law.
(ii) This Agreement is personal to Executive and,
without the prior written consent of the Company, shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die while any amounts
would be payable to Executive hereunder had Executive continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to such person or persons appointed in writing by
Executive to receive such amounts or, if no person is so appointed, to
Executive's estate.
12. Notice.
-------
(a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to Executive:
[Executive's Name and Address]
If to the Company:
General Counsel
Caliber System, Inc.
P.O. Box 5459
Akron, OH 44334-0459
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of
Executive's Date of Termination by the Company or Executive, as the case may be,
to the other, shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) specify the
termination date. The failure by Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of Executive or the Company hereunder or
preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
<PAGE> 14
14
13. No Set-off; No Mitigation.
--------------------------
The Company's obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
14. Employment with Subsidiaries.
-----------------------------
Employment with the Company for purposes of this
Agreement shall include employment with any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
15. Governing Law; Validity.
------------------------
The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Ohio without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which other provisions shall remain in full force and effect.
16. Settlement of Disputes.
-----------------------
(a) Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach of
any of the foregoing, shall, subject to the mutual agreement of the Company and
the Executive, be settled by confidential arbitration, to be held in Akron,
Ohio, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association before three (3) arbitrators. The arbitrators shall
apply the provisions of this Agreement strictly as written (unless doing so
violates the clear intent of this Agreement), and shall explain the reasons and
basis of their award in detail and in writing. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof. All
costs and expenses relating to any controversy or claim that is arbitrable under
this Section (including reasonable attorney's fees of the Executive) shall be
paid by the Company promptly on written demand, except that the arbitrators are
authorized to require reimbursement of the Company for moneys paid by it
pursuant to this sentence if the arbitrators determine that the substantive
positions of the Executive in the arbitration were entirely without merit.
Pending final resolution of any arbitration or court proceeding, the Company
shall continue prompt payment of all amounts due the Executive under this
Agreement or any amendment thereof and prompt provision of all benefits to which
the Executive or his beneficiaries are entitled. Notwithstanding the foregoing,
nothing contained in this Section 16 shall limit a party's right to seek
equitable relief in any court of competent jurisdiction.
<PAGE> 15
15
(b) In the event the parties do not agree to
arbitration as provided in 16(a), the parties hereby consent to the jurisdiction
of the Common Pleas Court of the State of Ohio (Summit County) or of the United
States District Court for the Northern District of Ohio.
17. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
18. Survivorship.
-------------
The respective rights and obligations of the parties
hereunder shall survive the expiration of the term of this Agreement, to the
extent necessary to carry out the intentions of the parties, including without
limitation any obligations of the Company to make payments and provide benefits
hereunder.
19. Miscellaneous.
--------------
No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. No provision of this Agreement may be waived unless such
waiver is agreed to in writing and signed by the waiving party which, in the
case of the Company, shall mean by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. This
Agreement contains the entire understanding and agreement between the parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
<PAGE> 16
16
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company. Executive has executed
this Agreement as of the date and year first written above.
CALIBER SYSTEM, INC.
By:
-------------------------------
Agreed to this ____ day of _____________, 1997.
- --------------------------
[Executive's Name]
<PAGE> 1
EXHIBIT 10.5
THIRD AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 2A)
THIS THIRD AMENDED AND RESTATED AGREEMENT is entered into as
of the _____ day of _______________, 1997 (the "Effective Date") by and between
Caliber System, Inc., an Ohio corporation (together with its successors and
assigns permitted under this Agreement the "Company"), and X ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title] of [company];
and
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders; and
WHEREAS, the Board (as defined in Section 1(b)) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication
and objectivity in the event of any threat or occurrence of, or negotiation or
other action that could lead to, or create the possibility of, a Change in
Control (as defined in Section 1(d)) of the Company, without concern as to
whether Executive might be hindered or distracted by personal uncertainties and
risks created by any such possible Change in Control, and to encourage
Executive's full attention and dedication to the Company, the Board has
authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions.
------------
As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Affiliate" of a person or other entity means a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with the person or other entity specified.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cause" means (1) conviction of Executive for a
felony or for a misdemeanor involving moral turpitude or (2) a material breach
by Executive of the duties and
<PAGE> 2
2
responsibilities associated with his employment and position with the Company
(other than as a result of incapacity due to physical or mental illness) which
is demonstrably willful and deliberate on Executive's part, which results in
demonstrably material economic injury to the Company and which is not remedied
in a reasonable period of time after receipt of written notice from the Company
specifying such breach.
Cause shall not exist unless and until the
Company has delivered to Executive a copy of a resolution duly adopted by
three-quarters (3/4) of the Board and to the extent applicable, three quarters
(3/4) of the Incumbent Directors, if any, as defined below, at a meeting of the
Board called and held for such purpose (after reasonable notice to Executive and
an opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct set forth in this Section 1(c) and specifying the
particulars thereof in detail.
(d) "Change in Control" means the occurrence of any
of the following events:
(1) any "person," as such term is used in
Sections 3(a)(9) and 13(d) of the 1934 Act, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under the 1934 Act, of 20% or more
of the combined voting power of all the Voting Securities of the Company then
outstanding;
(2) the majority of the Board consists of
individuals other than Incumbent Directors, which term means the members of the
Board on the date of this Agreement; provided that any person becoming a
director subsequent to such date whose election or nomination for election was
supported by three-quarters of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(3) the Company adopts any plan of
liquidation providing for the distribution of all or substantially all of its
assets;
(4) all or substantially all of the assets
of the Company are disposed of pursuant to a merger, consolidation or other
transaction (unless the holders of the Voting Securities of the Company
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Securities of the Company, all of the Voting Securities
or other ownership interests of the entity or entities, if any, that succeed to
the business of the Company); or
(5) the Company combines with another
company and is the surviving corporation but, immediately after the combination,
the holders of the Voting Securities of the Company immediately prior to the
combination hold, directly or indirectly, 50% or less of the Voting Securities
of the combined company (there being excluded from the Voting Securities held by
such holders of the Voting Securities, but not from the Voting Securities of the
combined company, any securities received by Affiliates of such other company in
exchange for securities of such other company).
Notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated by the Company prior to
a Change in Control, which Change in Control in fact occurs, and Executive
reasonably demonstrates that such termination
<PAGE> 3
3
was at the request of a third party who effectuates such Change in Control or
that such termination was directly related to or in anticipation of such Change
in Control, then for all purposes of this Agreement, the date of the Change of
Control shall mean the date immediately prior to the date of such termination of
Executive's employment.
(e) "Date of Termination" means (1) the effective
date on which Executive's employment by the Company terminates as specified in a
Notice of Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date of
death of Executive. Notwithstanding the previous sentence, (i) if Executive's
employment is terminated for Disability (as defined in Section 1(f)) or (ii) if
Executive's employment is terminated by the Company other than for Cause, then
such Date of Termination shall be no earlier than thirty (30) days following the
date on which a Notice of Termination is received.
(f) "Disability" means Executive's absence from his
duties with the Company on a full-time basis for at least one hundred eighty
(180) consecutive days as a result of Executive's incapacity due to mental or
physical illness.
(g) "Good Reason" shall mean termination by Executive
of his employment following occurrence of any of the following events without
his consent:
(i) a reduction in Executive's base salary
or target award opportunity as in effect immediately prior to the Change in
Control (including a change in performance criteria which impacts negatively on
Executive's ability to achieve the target) under the Company's annual or
long-term performance incentive plans or programs, the failure to continue
Executive's participation in any incentive compensation plan in which he was a
participant immediately prior to the Change in Control unless a plan providing a
substantially similar opportunity is substituted, or the termination or material
reduction of any employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted;
(ii) material diminution in Executive's
duties as in effect immediately prior to the Change in Control or assignment to
Executive of duties materially inconsistent with his duties as in effect
immediately prior to the Change in Control;
(iii) the loss of any of Executive's titles
or positions held immediately prior to the Change in Control;
(iv) a required relocation of more than 50
miles from Executive's primary office at the time the Company enters into an
agreement in principle or other agreement, the consummation of which would
constitute a Change in Control; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform the agreement by any
successor to all or substantially all of the assets of the Company within 30
days after a merger, consolidation, sale or similar transaction.
Notwithstanding anything contained in this Agreement
to the contrary, any circumstance described in clauses (i) through (iv) of this
Section 1(g) shall not constitute
<PAGE> 4
4
Good Reason unless Executive gives written notice thereof to the Company in
accordance with Section 12 and the Company fails to remedy such circumstances
within ten days following receipt of such notice.
(h) "Notice of Termination" means notice of the Date
of Termination as described in Section 12(b).
(i) "Qualifying Termination" means a termination of
Executive's employment as a result of (1) a termination by the Company without
Cause, (2) a termination by Executive for Good Reason or (3) a termination by
Executive during the 30-day period commencing with the first anniversary date of
the Change in Control; provided, however, that a Qualifying Termination shall
not include a termination as a result of Executive's death, Disability or
Retirement.
(j) "Retirement" means Executive's voluntary
termination of employment (other than with Good Reason) while eligible for
retirement benefits under the terms of the Caliber System, Inc. Pension Plan and
Trust.
(k) "Retirement and Savings Plans" mean all qualified
and nonqualified defined benefit and defined contribution plans, including:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor or substitute plan or plans of the Company,
including any supplemental employee retirement plans, put into effect prior to a
Change in Control.
The Caliber System, Inc. Long-Term Stock
Award Incentive Plan is included in the definition of Retirement and Savings
Plans to the extent that it provides Executive with supplemental stock credits.
(l) "Transition Period" means the period of time
beginning with a Change in Control and ending on the earlier to occur of (1)
Executive's death and (2) twenty-four (24) months following such Change in
Control.
(m) "Voting Securities" mean any shares of capital
stock or other securities of the Company that are generally entitled to vote in
elections for directors.
2. Term of Agreement.
------------------
This Agreement shall commence on the Effective Date
and shall continue in effect until ______________, 1999; provided, however, that
commencing on _____________, 1999 and each following anniversary of the
Effective Date, the term of this Agreement shall automatically be extended for
an additional one-year period, unless at least six months prior to such date,
the Company shall have given notice not to extend this Agreement; provided,
however, that (i) no such action shall be taken by the Company during any period
of time when the Board has knowledge that any person has taken steps reasonably
calculated to effect a Change in Control until, in the opinion of the Board,
such person has abandoned or terminated its efforts to effect a Change in
Control, and (ii) this Agreement shall continue in effect for at least
twenty-four (24) months following the occurrence of a Change in Control.
<PAGE> 5
5
Notwithstanding anything in this Section 2 to the contrary, and subject to the
last paragraph of Section 1(d), this Agreement shall terminate upon termination
of Executive's employment with the Company prior to a Change in Control, in
which event the rights and obligations of the parties, except as otherwise
expressly provided herein, shall cease.
3. Payments and Benefits Upon Termination of Employment.
----------------------------------------------------
(a) If during the Transition Period the employment of
Executive shall terminate, by reason of a Qualifying Termination, then the
Company shall pay to Executive (or Executive's beneficiary or estate) within
five (5) days following the Date of Termination (except as provided in Section
3(a)(1)(iii)), as compensation for services rendered to the Company:
(1) a lump-sum cash amount equal to the sum
of (i) Executive's unpaid base salary from the Company and its subsidiaries
through the Date of Termination (at the rate in effect (without taking into
account any reduction of base salary constituting Good Reason) just prior to the
time a Notice of Termination is given); (ii) any benefit awards (including both
the cash and stock components) which pursuant to the terms of any Retirement and
Savings Plans have been earned or become payable through the Date of
Termination, to the extent not theretofore paid or otherwise provided for; (iii)
that portion of the annual bonus under the company's incentive compensation
plans determined by multiplying the greater of the actual bonus that would
otherwise have been earned for a full year performance or target annual bonus by
the fraction arrived at by dividing the number of full weeks worked by Executive
during the calendar year of his Date of Termination by fifty-two (52); plus (iv)
any unpaid vacation under the Company's vacation policy in effect at the Date of
Termination (or, if more favorable to Executive, immediately prior to a Change
in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the
Executive the pro-rata portion of the target annual bonus within 5 days
following the Date of Termination, and any additional bonus payment to which
Executive is entitled on or before January 31 of the year following the year in
which the Termination occurs.
(2) a lump-sum cash amount equal to (a) 2
times Executive's highest annual rate of base salary from the Company and its
subsidiaries in effect during the 12-month period prior to the Date of
Termination plus (b) 2 times the target annual bonus in effect for the year in
which the Change in Control occurs; provided, that any amount paid pursuant to
this Section 3(a)(2) shall be offset by any other amount of severance relating
to salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any other severance plan, policy, employment
agreement or arrangement of the Company.
(3) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of: (i) the employer
matching contributions that would be made to the Caliber System, Inc. 401(k)
Savings Plan; (ii) employer contributions that would be made to the Caliber
System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be
awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan.
This lump sum payment shall be based on the employer contributions and
supplemental credits attributable to an additional 24 months of service under
the specific plans referenced in this paragraph, or any applicable amended,
successor or substitute plan or plans of the Company put into effect prior to a
Change in Control. For purposes of the 401(k) Savings Plan and related
supplemental stock credits, the calculations shall be made based on the
assumption that the Executive made
<PAGE> 6
6
maximum contributions from the highest annual rate of base salary and target
annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that
the matching percentage shall equal the highest matching percentage allowable
under the 401(k) Savings Plan as of the Date of Termination (in no event less
than 3.5% of eligible compensation under the 401(k) Savings Plan). For purposes
of the Stock Bonus Plan and related supplemental stock credits, the calculations
shall be based on the highest annual rate of base salary and target annual bonus
under 3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which
the Date of Termination occurs (but in no event less than the average of the
actual contribution/allocation percentages applicable to the 5 calendar years
preceding the Date of Termination). For purposes of determining actuarial
present value under this Section 3(a)(3), the interest rate on 30-year Treasury
securities for the month of November preceding the calendar year in which the
Date of Termination occurs shall be used (such rate is the "applicable interest
rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(4) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits accrued
under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc.
Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and
upon service through the Date of Termination. For purposes of the actuarial
present value calculation under this Section 3(a)(4), Executive shall be deemed
fully vested for all actual service.
(5) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits under the
Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17)
Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24
months of age, service, and base salary and target annual bonus under 3(a)(2)(a)
and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24
months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b),
and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year
following the Date of Termination, shall be included as the final two years of
pensionable wages. For purposes of determining actuarial present value under
this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50
percent of male mortality rates and 50 percent female mortality rates) shall be
utilized. For purposes of determining actuarial present value under this Section
3(a)(5), the interest rate on 30-year Treasury securities for the month of
November preceding the calendar year in which the Date of Termination occurs
shall be used (such rate is the "applicable interest rate" under Section
417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(b) If during the Transition Period, the employment
of Executive terminates by reason of a Qualifying Termination, the Company will:
(1) provide Executive and his dependents
with health care coverage at the same level as that in effect immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control) ("Continued Medical Coverage") for a period of
42 months from the Date of Termination; and
(2) provide Executive and his dependents
with accident, disability and life coverage at the same level and upon the same
terms and otherwise to the same extent as that in effect immediately prior to
the Date of Termination (or, if more favorable to Executive, immediately prior
to the Change in Control) ("Welfare Benefits") for a period of 24 months from
the Date of Termination.
<PAGE> 7
7
(3) The coverages described in subparagraphs
(1) and (2) of this Section may be provided through continued participation in
the Company's plans and programs or otherwise, as the Company determines.
(4) During the first twenty four (24) months
of Continued Medical Coverage, the Company and Executive will share the costs of
such coverage in the same proportion as such costs were shared immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control). From the twenty-fifth (25th) through the end of
the of the forty-second (42nd) month of Continued Medical Coverage, Executive
will be required to pay the cost of such coverage at the rate the Company
charges former employees, from time to time, for similar coverage under COBRA.
The Company and Executive will share the costs of providing the Welfare Benefits
in the same proportion as such costs were shared immediately prior to the Date
of Termination (or, of more favorable to Executive, immediately prior to the
Change in Control).
(5) Continued Medical Coverage will
terminate upon the earliest of (i) the expiration of 42 months from the Date of
Termination, (ii) the commencement date of equivalent benefits from a new
employer, or (iii) Executive's attainment of age 65. Welfare Benefits will
terminate upon the earliest of (i) the expiration of 24 months from the Date of
Termination, (ii) the commencement date of equivalent benefits a new employer,
or (iii) Executive's attainment of age 65. Upon termination of Continued Medical
Coverage, Executive may, if eligible, elect special continuation coverage for
early retirees under the Caliber System, Inc. Medical, Dental and Vision Care
Plan. Upon termination of Welfare Benefits, Executive may, if available, convert
one or more of Executive's and his dependent's coverage to individual policies
or programs.
(c) If during the Transition Period, the employment
of Executive shall terminate, by reason of a Qualifying Termination, then for a
period of twelve months following the Date of Termination, the Company shall
provide, at its expense, executive level outplacement assistance to the
Executive by a nationally recognized outplacement firm acceptable to Executive.
4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN
ENTITLEMENTS.
(a) The consequences of a Change in Control on
Executive's stock options and performance shares granted under the Company's
1996 Equity Incentive Compensation Plan ("EICP") shall be determined in
accordance with the EICP and Executive's grants pursuant to the EICP. The
consequences of a Change in Control on Executive's stock credits under any
Retirement and Savings Plans shall be determined in accordance with the
provisions of the applicable plans.
(b) No later than the occurrence of a Change in
Control, the Company shall fund in full that portion, if any, of the obligations
to Executive under the Company's Retirement and Savings Plans (other than plans
qualified under Section 401(a) of the Internal Revenue Code) that are then
unfunded. Such funding shall be provided through an irrevocable trust for the
benefit of the Executive which shall be established as promptly as possible
following the Effective Date of this Agreement (or, in the case of a Retirement
and Savings Plan established after such effective date, then as promptly as
possible after such plan is established)
<PAGE> 8
8
for the purpose of receiving contributions from the Company to fund such
obligations. To the extent such obligations are covered by a plan other than a
plan for which there is a trust already in existence, the Company shall
establish a trust for the purpose of funding such obligations. Such trust shall
be in a form that provides Executive with the most favorable tax position that
reasonably can be determined at the time it is established. The trust shall
provide for distribution of amounts to Executive in order to pay taxes, if any,
that become due prior to payment of amounts pursuant to the trust. Following the
occurrence of a Change in Control, the Company shall make periodic additional
contributions (no less frequently than annually) to keep such trust fully
funded. The intent is that no later than the Change in Control and annually
thereafter (the "Applicable Dates") the amount of such fund shall equal at least
the then present value (determined as of each Applicable Date) of any amounts
subject to the funding requirement of this Section 4(b) as determined by a
nationally recognized firm qualified to provide actuarial services. The
establishment and funding of any such trust shall not affect the obligation of
the Company to provide the benefits being funded. The trust may be terminated in
accordance with the trust agreement between the Company and the trustee and, if
so terminated, the Company shall not be required to establish a successor trust
under this Section 4(b). The trust described in this Section 4(b) may be part of
a trust funding similar obligations for other employees of the Company.
(c) No later than the occurrence of a Change in
Control, the Company shall fund its obligations to provide payments and benefits
under this Agreement (other than the obligations which are provided for in
Section 4(b)) by the establishment of a trust to which it contributes an amount
sufficient to meet such obligations. The establishment and funding of such trust
shall not affect the obligations of the Company to provide the benefits subject
to this Section 4(c). The trust described in this Section 4(c) may be part of
the trust described in Section 4(b).
(d) The consequences of a Change in Control upon
compensation and benefit plans and programs of the Company, except as otherwise
provided in this Agreement, shall be determined in accordance with such plans
and programs.
5. Parachute Payment Limitations.
------------------------------
Anything in this Agreement to the contrary, if the
aggregate of the amounts due the Executive under this Agreement and any other
plan or program of the Company constitutes a "Parachute Payment," as such term
is defined in Section 280G of the Internal Revenue Code of 1986 (the "Code"),
and the amount of the Parachute Payment, reduced by all Federal, state and local
taxes applicable thereto, including the excise tax imposed pursuant to Section
4999 of the Code, is less than the amount the Executive would receive, after
taxes, if he received a Parachute Payment equal to only three times his Base
Amount, as defined in Section 280G(b)(3) of the Code, less $1.00, then the
amounts due the Executive under this Agreement that are "contingent on a Change
in Control" (as defined in the next sentence) shall be reduced so that the
aggregate of
(i) the amounts due the Executive under this
Agreement that are "contingent on a Change in Control"
plus
<PAGE> 9
9
(ii) the other amounts due the Executive, under other
plans and programs of the Company, that are "contingent on a Change in Control"
equals three times his Base Amount less $1.00. For purposes of the preceding
sentence "contingent on a Change in Control" shall have the same meaning as
given that term in Section 280G(b)(2)(A)(i) of the Code. The determinations to
be made with respect to this paragraph shall be made by the public accounting
firm that is retained by the Company as of the date immediately prior to the
Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of being requested to do so by the Company or Executive. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Executive shall
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
6. Confidentiality; Non-Competition.
---------------------------------
(a) During employment and thereafter, Executive shall
keep confidential all "Confidential Information" relating to the Company or any
of its subsidiaries, and their respective businesses, obtained by Executive
during his employment by the Company or any of its subsidiaries. "Confidential
Information" means any non-public, proprietary information that may provide the
Company with a competitive advantage, including, without limitation, any trade
secrets, formulas, flow charts, computer programs, access codes or other systems
information, business, product or marketing plans, sales and other forecasts,
financial information, customer lists, and information relating to compensation
and benefits, provided that such proprietary information does not include any
information which is available to the general public or is generally available
within the relevant business or industry other than as a result of Executive's
breach of this Section 6(a). Confidential Information may be in any medium or
form, including, without limitation, physical documents, computer files or
discs, videotapes, audiotapes, and oral communications. Anything herein to the
contrary notwithstanding, it shall not be a violation of this Section 6(a) for
the Executive to disclose information in the ordinary course of properly
carrying out his duties and responsibilities on behalf of the Company or to
respond to an order of a court or other body having jurisdiction provided that
he gives the Company notice of any such order.
(b) Executive agrees that he shall not for a period
of one (1) year following the Date of Termination, directly or indirectly own,
manage, operate, join, control, be employed by, or participate in the ownership,
management, operation or control of or be connected in any manner, including but
not limited to holding the positions of officer, director, shareholder,
consultant, independent contractor, employee, partner, or investor, with any
Competing Enterprise; provided, however, that Executive may invest without being
deemed in violation of this Section 6(b), in stocks, bonds, or other securities
of any corporation or other entity (but without participating in the business
thereof) if such stocks, bonds, or other securities are listed for trading on a
national securities exchange or NASDAQ and Executive's investment does not
exceed 1% of the issued and outstanding shares of capital stock, or in the case
of bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding. "Competing Enterprise" shall mean an enterprise that
engages in any business that, on the Date of Termination, is engaged in by the
Company or any of its subsidiaries if such enterprise
<PAGE> 10
10
engages in such business in any geographic area in which the Company or any of
its subsidiaries conducts such business.
(c) Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company then in Executive's possession or under his
control, except that Executive may retain his personal notes, diaries,
Rolodexes, calendars and correspondence.
(d) Executive agrees that any material breach of the
terms of this Section would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law. Executive
further agrees that in the event of said material breach or any reasonable
threat of material breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such material breach or threatened
material breach. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages. Should a court or
arbitrator determine that any provision of this Section 6 is unreasonable, the
parties agree that such provision shall be interpreted and enforced to the
maximum extent such court or arbitrator deems reasonable.
(e) The provisions of this Section shall survive any
termination of this Agreement and the Transition Period, and the existence of
any claim or cause of action by Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of this Section.
Anything is this Section 6(e) to the contrary notwithstanding, the provisions of
Section 6(b) shall only apply in the event of (i) a termination of the
Executive's employment described in the last paragraph of Section 1(d), prior to
the occurrence of a Change in Control, (ii) a termination of Executive's
employment during the Transition Period that constitutes a Qualifying
Termination, or (iii) a termination for Cause at any time during the Term of the
Agreement.
7. Indemnification.
----------------
The Company agrees that if Executive is made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company, Executive shall be indemnified and
held harmless by the Company to the fullest extent legally permitted or
authorized by the Company's Second Amended Articles of Incorporation, Restated
Amended Code of Regulations, Indemnification Agreement between Executive and the
Company or, if greater, by the laws of the State of Ohio, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
<PAGE> 11
11
8. Withholding Taxes.
------------------
The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
9. Reimbursement of Expenses.
--------------------------
If any contest or dispute shall arise under this
Agreement involving termination of Executive's employment with the Company or
involving the failure or refusal of the Company to perform fully in accordance
with the terms hereof, the Company shall reimburse Executive, on a current
basis, for all legal fees and expenses, if any, incurred by Executive in
connection with such contest or dispute regardless of the result thereof.
10. Scope of Agreement.
-------------------
Nothing in this Agreement shall be deemed to entitle
Executive to continued employment with the Company or its subsidiaries.
11. Successors; Binding Agreement.
------------------------------
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such merger,
consolidation or transfer of assets, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or the person or entity to
which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of this
Section 11, it will cause any successor or transferee unconditionally to assume,
by written instrument delivered to Executive (or his beneficiary or estate), all
of the obligations of the Company hereunder.
(c) (i) No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the business of
the Company substantially as an entirety, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company under this Agreement, either contractually or as a matter
of law.
(ii) This Agreement is personal to Executive
and, without the prior written consent of the Company, shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die while any amounts
would be payable to Executive hereunder had Executive continued to live, all
such amounts,
<PAGE> 12
12
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to such person or persons appointed in writing by Executive to
receive such amounts or, if no person is so appointed, to Executive's estate.
12. Notice.
-------
(a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to Executive:
[Executive's Name and Address]
If to the Company:
General Counsel
Caliber System, Inc.
P.O. Box 5459
Akron, OH 44334-0459.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of
Executive's Date of Termination by the Company or Executive, as the case may be,
to the other, shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) specify the
termination date. The failure by Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of Executive or the Company hereunder or
preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
13. No Set-off; No Mitigation.
--------------------------
The Company's obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
14. Employment with Subsidiaries.
-----------------------------
Employment with the Company for purposes of this
Agreement shall include employment with any corporation or other entity in which
the Company has a direct or
<PAGE> 13
13
indirect ownership interest of 50% or more of the total combined voting power of
the then outstanding securities of such corporation or other entity entitled to
vote generally in the election of directors.
15. Governing Law; Validity.
------------------------
The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Ohio without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which other provisions shall remain in full force and effect.
16. Settlement of Disputes.
-----------------------
(a) Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach of
any of the foregoing, shall, subject to the mutual agreement of the Company and
the Executive, be settled by confidential arbitration, to be held in Akron,
Ohio, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association before three (3) arbitrators. The arbitrators shall
apply the provisions of this Agreement strictly as written (unless doing so
violates the clear intent of this Agreement), and shall explain the reasons and
basis of their award in detail and in writing. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof. All
costs and expenses relating to any controversy or claim that is arbitrable under
this Section (including reasonable attorney's fees of the Executive) shall be
paid by the Company promptly on written demand, except that the arbitrators are
authorized to require reimbursement of the Company for moneys paid by it
pursuant to this sentence if the arbitrators determine that the substantive
positions of the Executive in the arbitration were entirely without merit.
Pending final resolution of any arbitration or court proceeding, the Company
shall continue prompt payment of all amounts due the Executive under this
Agreement or any amendment thereof and prompt provision of all benefits to which
the Executive or his beneficiaries are entitled. Notwithstanding the foregoing,
nothing contained in this Section 16 shall limit a party's right to seek
equitable relief in any court of competent jurisdiction.
(b) In the event the parties do not agree to
arbitration as provided in 16(a), the parties hereby consent to the jurisdiction
of the Common Pleas Court of the State of Ohio (Summit County) or of the United
States District Court for the Northern District of Ohio.
17. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
18. Survivorship.
-------------
The respective rights and obligations of the parties
hereunder shall survive the expiration of the term of this Agreement, to the
extent necessary to carry out the intentions of the parties, including without
limitation any obligations of the Company to make payments and provide benefits
hereunder.
<PAGE> 14
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19. Miscellaneous.
--------------
No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. No provision of this Agreement may be waived unless such
waiver is agreed to in writing and signed by the waiving party which, in the
case of the Company, shall mean by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. This
Agreement contains the entire understanding and agreement between the parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
<PAGE> 15
15
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company. Executive has executed
this Agreement as of the date and year first written above.
CALIBER SYSTEM, INC.
By:
----------------------------
Agreed to this ____ day of _______________, 1997.
- --------------------------
[Executive's Name]
<PAGE> 1
EXHIBIT 10.6
THIRD AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 3)
THIS THIRD AMENDED AND RESTATED AGREEMENT is entered into as
of the _____ day of ______________, 1997 (the "Effective Date") by and between
Caliber System, Inc., an Ohio corporation (together with its successors and
assigns permitted under this Agreement the "Company"), and X ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title] of [company];
and
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders; and
WHEREAS, the Board (as defined in Section 1(b)) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication
and objectivity in the event of any threat or occurrence of, or negotiation or
other action that could lead to, or create the possibility of, a Change in
Control (as defined in Section 1(d)) of the Company, without concern as to
whether Executive might be hindered or distracted by personal uncertainties and
risks created by any such possible Change in Control, and to encourage
Executive's full attention and dedication to the Company, the Board has
authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions.
------------
As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Affiliate" of a person or other entity means a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with the person or other entity specified.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cause" means (1) conviction of Executive for a
felony or for a misdemeanor involving moral turpitude or (2) a material breach
by Executive of the duties and responsibilities associated with his employment
and position with the Company (other than as a result of incapacity due to
physical or mental illness) which is demonstrably willful and
<PAGE> 2
2
deliberate on Executive's part, which results in demonstrably material economic
injury to the Company and which is not remedied in a reasonable period of time
after receipt of written notice from the Company specifying such breach.
Cause shall not exist unless and until the
Company has delivered to Executive a copy of a resolution duly adopted by
three-quarters (3/4) of the Board and to the extent applicable, three quarters
(3/4) of the Incumbent Directors, if any, as defined below, at a meeting of the
Board called and held for such purpose (after reasonable notice to Executive and
an opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct set forth in this Section 1(c) and specifying the
particulars thereof in detail.
(d) "Change in Control" means the occurrence of any
of the following events:
(1) any "person," as such term is used in
Sections 3(a)(9) and 13(d) of the 1934 Act, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under the 1934 Act, of 20% or more
of the combined voting power of all the Voting Securities of the Company then
outstanding;
(2) the majority of the Board consists of
individuals other than Incumbent Directors, which term means the members of the
Board on the date of this Agreement; provided that any person becoming a
director subsequent to such date whose election or nomination for election was
supported by three-quarters of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(3) the Company adopts any plan of
liquidation providing for the distribution of all or substantially all of its
assets;
(4) all or substantially all of the assets
of the Company are disposed of pursuant to a merger, consolidation or other
transaction (unless the holders of the Voting Securities of the Company
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Securities of the Company, all of the Voting Securities
or other ownership interests of the entity or entities, if any, that succeed to
the business of the Company); or
(5) the Company combines with another
company and is the surviving corporation but, immediately after the combination,
the holders of the Voting Securities of the Company immediately prior to the
combination hold, directly or indirectly, 50% or less of the Voting Securities
of the combined company (there being excluded from the Voting Securities held by
such holders of the Voting Securities, but not from the Voting Securities of the
combined company, any securities received by Affiliates of such other company in
exchange for securities of such other company).
Notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated by the Company prior to
a Change in Control, which Change in Control in fact occurs, and Executive
reasonably demonstrates that such termination was at the request of a third
party who effectuates such Change in Control or that such termination was
directly related to or in anticipation of such Change in Control, then for all
<PAGE> 3
3
purposes of this Agreement, the date of the Change of Control shall mean the
date immediately prior to the date of such termination of Executive's
employment.
(e) "Date of Termination" means (1) the effective
date on which Executive's employment by the Company terminates as specified in a
Notice of Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date of
death of Executive. Notwithstanding the previous sentence, (i) if Executive's
employment is terminated for Disability (as defined in Section 1(f)) or (ii) if
Executive's employment is terminated by the Company other than for Cause, then
such Date of Termination shall be no earlier than thirty (30) days following the
date on which a Notice of Termination is received.
(f) "Disability" means Executive's absence from his
duties with the Company on a full-time basis for at least one hundred eighty
(180) consecutive days as a result of Executive's incapacity due to mental or
physical illness.
(g) "Good Reason" shall mean termination by Executive
of his employment following occurrence of any of the following events without
his consent:
(i) a reduction in Executive's base salary
or target award opportunity as in effect immediately prior to the Change in
Control (including a change in performance criteria which impacts negatively on
Executive's ability to achieve the target) under the Company's annual or
long-term performance incentive plans or programs, the failure to continue
Executive's participation in any incentive compensation plan in which he was a
participant immediately prior to the Change in Control unless a plan providing a
substantially similar opportunity is substituted, or the termination or material
reduction of any employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted;
(ii) material diminution in Executive's
duties as in effect immediately prior to the Change in Control or assignment to
Executive of duties materially inconsistent with his duties as in effect
immediately prior to the Change in Control;
(iii) the loss of any of Executive's titles
or positions held immediately prior to the Change in Control;
(iv) a required relocation of more than 50
miles from Executive's primary office at the time the Company enters into an
agreement in principle or other agreement, the consummation of which would
constitute a Change in Control; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform the agreement by any
successor to all or substantially all of the assets of the Company within 30
days after a merger, consolidation, sale or similar transaction.
Notwithstanding anything contained in this Agreement
to the contrary, any circumstance described in clauses (i) through (iv) of this
Section 1(g) shall not constitute Good Reason unless Executive gives written
notice thereof to the Company in accordance with
<PAGE> 4
4
Section 12 and the Company fails to remedy such circumstances within ten days
following receipt of such notice.
(h) "Notice of Termination" means notice of the Date
of Termination as described in Section 12(b).
(i) "Qualifying Termination" means a termination of
Executive's employment as a result of (1) a termination by the Company without
Cause or (2) a termination by Executive for Good Reason; provided, however, that
a Qualifying Termination shall not include a termination as a result of
Executive's death, Disability or Retirement.
(j) "Retirement" means Executive's voluntary
termination of employment (other than with Good Reason) while eligible for
retirement benefits under the terms of the Caliber System, Inc. Pension Plan and
Trust.
(k) "Retirement and Savings Plans" mean all qualified
and nonqualified defined benefit and defined contribution plans, including:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor or substitute plan or plans of the Company,
including any supplemental employee retirement plans, put into effect prior to a
Change in Control.
The Caliber System, Inc. Long-Term Stock
Award Incentive Plan is included in the definition of Retirement and Savings
Plans to the extent that it provides Executive with supplemental stock credits.
(l) "Transition Period" means the period of time
beginning with a Change in Control and ending on the earlier to occur of (1)
Executive's death and (2) twenty-four (24) months following such Change in
Control.
(m) "Voting Securities" mean any shares of capital
stock or other securities of the Company that are generally entitled to vote in
elections for directors.
2. Term of Agreement.
------------------
This Agreement shall commence on the Effective Date
and shall continue in effect until _____________, 1999; provided, however, that
commencing on ______________, 1999 and each following anniversary of the
Effective Date, the term of this Agreement shall automatically be extended for
an additional one-year period, unless at least six months prior to such date,
the Company shall have given notice not to extend this Agreement; provided,
however, that (i) no such action shall be taken by the Company during any period
of time when the Board has knowledge that any person has taken steps reasonably
calculated to effect a Change in Control until, in the opinion of the Board,
such person has abandoned or terminated its efforts to effect a Change in
Control, and (ii) this Agreement shall continue in effect for at least
twenty-four (24) months following the occurrence of a Change in Control.
Notwithstanding anything in this Section 2 to the contrary, and subject to the
last paragraph of Section 1(d), this Agreement shall terminate upon termination
of Executive's employment with
<PAGE> 5
5
the Company prior to a Change in Control, in which event the rights and
obligations of the parties, except as otherwise expressly provided herein, shall
cease.
3. Payments and Benefits Upon Termination of Employment.
-----------------------------------------------------
(a) If during the Transition Period the employment of
Executive shall terminate, by reason of a Qualifying Termination, then the
Company shall pay to Executive (or Executive's beneficiary or estate) within
five (5) days following the Date of Termination (except as provided in Section
3(a)(1)(iii)), as compensation for services rendered to the Company:
(1) a lump-sum cash amount equal to the sum
of (i) Executive's unpaid base salary from the Company and its subsidiaries
through the Date of Termination (at the rate in effect (without taking into
account any reduction of base salary constituting Good Reason) just prior to the
time a Notice of Termination is given); (ii) any benefit awards (including both
the cash and stock components) which pursuant to the terms of any Retirement and
Savings Plans have been earned or become payable through the Date of
Termination, to the extent not theretofore paid or otherwise provided for; (iii)
that portion of the annual bonus under the Company's incentive compensation
plans determined by multiplying the greater of the actual bonus that would
otherwise have been earned for a full year performance or target annual bonus by
the fraction arrived at by dividing the number of full weeks worked by Executive
during the calendar year of his Date of Termination by fifty-two (52); plus (iv)
any unpaid vacation under the Company's vacation policy in effect at the Date of
Termination (or, if more favorable to Executive, immediately prior to a Change
in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the
Executive the pro-rata portion of the target annual bonus within 5 days
following the Date of Termination, and any additional bonus payment to which
Executive is entitled on or before January 31 of the year following the year in
which the Termination occurs.
(2) a lump-sum cash amount equal to (a) 2
times Executive's highest annual rate of base salary from the Company and its
subsidiaries in effect during the 12-month period prior to the Date of
Termination plus (b) 2 times the target annual bonus in effect for the year in
which the Change in Control occurs; provided, that any amount paid pursuant to
this Section 3(a)(2) shall be offset by any other amount of severance relating
to salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any other severance plan, policy, employment
agreement or arrangement of the Company.
(3) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of: (i) the employer
matching contributions that would be made to the Caliber System, Inc. 401(k)
Savings Plan; (ii) employer contributions that would be made to the Caliber
System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be
awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan.
This lump sum payment shall be based on the employer contributions and
supplemental credits attributable to an additional 24 months of service under
the specific plans referenced in this paragraph, or any applicable amended,
successor or substitute plan or plans of the Company put into effect prior to a
Change in Control. For purposes of the 401(k) Savings Plan and related
supplemental stock credits, the calculations shall be made based on the
assumption that the Executive made maximum contributions from the highest annual
rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to
the 401(k) Savings Plan and that the matching percentage shall
<PAGE> 6
6
equal the highest matching percentage allowable under the 401(k) Savings Plan as
of the Date of Termination (in no event less than 3.5% of eligible compensation
under the 401(k) Savings Plan). For purposes of the Stock Bonus Plan and related
supplemental stock credits, the calculations shall be based on the highest
annual rate of base salary and target annual bonus under 3(a)(2)(a) and
3(a)(2)(b), and the formula in effect for the year in which the Date of
Termination occurs (but in no event less than the average of the actual
contribution/allocation percentages applicable to the 5 calendar years preceding
the Date of Termination). For purposes of determining actuarial present value
under this Section 3(a)(3), the interest rate on 30-year Treasury securities for
the month of November preceding the calendar year in which the Date of
Termination occurs shall be used (such rate is the "applicable interest rate"
under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(4) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits accrued
under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc.
Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and
upon service through the Date of Termination. For purposes of the actuarial
present value calculation under this Section 3(a)(4), Executive shall be deemed
fully vested for all actual service.
(5) a lump-sum cash amount equal to the
actuarial present value as of the Date of Termination of the benefits under the
Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17)
Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24
months of age, service, and base salary and target annual bonus under 3(a)(2)(a)
and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24
months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b),
and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year
following the Date of Termination, shall be included as the final two years of
pensionable wages. For purposes of determining actuarial present value under
this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50
percent of male mortality rates and 50 percent female mortality rates) shall be
utilized. For purposes of determining actuarial present value under this Section
3(a)(5), the interest rate on 30-year Treasury securities for the month of
November preceding the calendar year in which the Date of Termination occurs
shall be used (such rate is the "applicable interest rate" under Section
417(e)(3)(A)(ii)(II) of the Internal Revenue Code).
(b) If during the Transition Period, the employment
of Executive terminates by reason of a Qualifying Termination, the Company will:
(1) provide Executive and his dependents
with health care coverage at the same level as that in effect immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control) ("Continued Medical Coverage") for a period of
42 months from the Date of Termination; and
(2) provide Executive and his dependents
with accident, disability and life coverage at the same level and upon the same
terms and otherwise to the same extent as that in effect immediately prior to
the Date of Termination (or, if more favorable to Executive, immediately prior
to the Change in Control) ("Welfare Benefits") for a period of 24 months from
the Date of Termination.
<PAGE> 7
7
(3) The coverages described in subparagraphs
(1) and (2) of this Section may be provided through continued participation in
the Company's plans and programs or otherwise, as the Company determines.
(4) During the first twenty four (24) months
of Continued Medical Coverage, the Company and Executive will share the costs of
such coverage in the same proportion as such costs were shared immediately prior
to the Date of Termination (or, if more favorable to Executive, immediately
prior to the Change in Control). From the twenty-fifth (25th) through the end of
the of the forty-second (42nd) month of Continued Medical Coverage, Executive
will be required to pay the cost of such coverage at the rate the Company
charges former employees, from time to time, for similar coverage under COBRA.
The Company and Executive will share the costs of providing the Welfare Benefits
in the same proportion as such costs were shared immediately prior to the Date
of Termination (or, of more favorable to Executive, immediately prior to the
Change in Control).
(5) Continued Medical Coverage will
terminate upon the earliest of (i) the expiration of 42 months from the Date of
Termination, (ii) the commencement date of equivalent benefits from a new
employer, or (iii) Executive's attainment of age 65. Welfare Benefits will
terminate upon the earliest of (i) the expiration of 24 months from the Date of
Termination, (ii) the commencement date of equivalent benefits a new employer,
or (iii) Executive's attainment of age 65. Upon termination of Continued Medical
Coverage, Executive may, if eligible, elect special continuation coverage for
early retirees under the Caliber System, Inc. Medical, Dental and Vision Care
Plan. Upon termination of Welfare Benefits, Executive may, if available, convert
one or more of Executive's and his dependent's coverage to individual policies
or programs.
(c) If during the Transition Period, the employment
of Executive shall terminate, by reason of a Qualifying Termination, then for a
period of twelve months following the Date of Termination, the Company shall
provide, at its expense, executive level outplacement assistance to the
Executive by a nationally recognized outplacement firm acceptable to Executive.
4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN
ENTITLEMENTS.
(a) The consequences of a Change in Control on
Executive's stock options and performance shares granted under the Company's
1996 Equity Incentive Compensation Plan ("EICP") shall be determined in
accordance with the EICP and Executive's grants pursuant to the EICP. The
consequences of a Change in Control on Executive's stock credits under any
Retirement and Savings Plans shall be determined in accordance with the
provisions of the applicable plans.
(b) No later than the occurrence of a Change in
Control, the Company shall fund in full that portion, if any, of the obligations
to Executive under the Company's Retirement and Savings Plans (other than plans
qualified under Section 401(a) of the Internal Revenue Code) that are then
unfunded. Such funding shall be provided through an irrevocable trust for the
benefit of the Executive which shall be established as promptly as possible
following the Effective Date of this Agreement (or, in the case of a Retirement
and Savings Plan established after such effective date, then as promptly as
possible after such plan is established) for the purpose of receiving
contributions from the Company to fund such obligations. To the
<PAGE> 8
8
extent such obligations are covered by a plan other than a plan for which there
is a trust already in existence, the Company shall establish a trust for the
purpose of funding such obligations. Such trust shall be in a form that provides
Executive with the most favorable tax position that reasonably can be determined
at the time it is established. The trust shall provide for distribution of
amounts to Executive in order to pay taxes, if any, that become due prior to
payment of amounts pursuant to the trust. Following the occurrence of a Change
in Control, the Company shall make periodic additional contributions (no less
frequently than annually) to keep such trust fully funded. The intent is that no
later than the Change in Control and annually thereafter (the "Applicable
Dates") the amount of such fund shall equal at least the then present value
(determined as of each Applicable Date) of any amounts subject to the funding
requirement of this Section 4(b) as determined by a nationally recognized firm
qualified to provide actuarial services. The establishment and funding of any
such trust shall not affect the obligation of the Company to provide the
benefits being funded. The trust may be terminated in accordance with the trust
agreement between the Company and the trustee and, if so terminated, the Company
shall not be required to establish a successor trust under this Section 4(b).
The trust described in this Section 4(b) may be part of a trust funding similar
obligations for other employees of the Company.
(c) No later than the occurrence of a Change in
Control, the Company shall fund its obligations to provide payments and benefits
under this Agreement (other than the obligations which are provided for in
Section 4(b)) by the establishment of a trust to which it contributes an amount
sufficient to meet such obligations. The establishment and funding of such trust
shall not affect the obligations of the Company to provide the benefits subject
to this Section 4(c). The trust described in this Section 4(c) may be part of
the trust described in Section 4(b).
(d) The consequences of a Change in Control upon
compensation and benefit plans and programs of the Company, except as otherwise
provided in this Agreement, shall be determined in accordance with such plans
and programs.
5. Parachute Payment Limitations.
------------------------------
Anything in this Agreement to the contrary, if the
aggregate of the amounts due the Executive under this Agreement and any other
plan or program of the Company constitutes a "Parachute Payment," as such term
is defined in Section 280G of the Internal Revenue Code of 1986 (the "Code"),
and the amount of the Parachute Payment, reduced by all Federal, state and local
taxes applicable thereto, including the excise tax imposed pursuant to Section
4999 of the Code, is less than the amount the Executive would receive, after
taxes, if he received a Parachute Payment equal to only three times his Base
Amount, as defined in Section 280G(b)(3) of the Code, less $1.00, then the
amounts due the Executive under this Agreement that are "contingent on a Change
in Control" (as defined in the next sentence) shall be reduced so that the
aggregate of
(i) the amounts due the Executive under this
Agreement that are "contingent on a Change in Control"
plus
<PAGE> 9
9
(ii) the other amounts due the Executive, under other
plans and programs of the Company, that are "contingent on a Change in Control"
equals three times his Base Amount less $1.00. For purposes of the preceding
sentence "contingent on a Change in Control" shall have the same meaning as
given that term in Section 280G(b)(2)(A)(i) of the Code. The determinations to
be made with respect to this paragraph shall be made by the public accounting
firm that is retained by the Company as of the date immediately prior to the
Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of being requested to do so by the Company or Executive. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Executive shall
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
6. Confidentiality.
----------------
(a) During employment and thereafter, Executive shall
keep confidential all "Confidential Information" relating to the Company or any
of its subsidiaries, and their respective businesses, obtained by Executive
during his employment by the Company or any of its subsidiaries. "Confidential
Information" means any non-public, proprietary information that may provide the
Company with a competitive advantage, including, without limitation, any trade
secrets, formulas, flow charts, computer programs, access codes or other systems
information, business, product or marketing plans, sales and other forecasts,
financial information, customer lists, and information relating to compensation
and benefits, provided that such proprietary information does not include any
information which is available to the general public or is generally available
within the relevant business or industry other than as a result of Executive's
breach of this Section 6(a). Confidential Information may be in any medium or
form, including, without limitation, physical documents, computer files or
discs, videotapes, audiotapes, and oral communications. Anything herein to the
contrary notwithstanding, it shall not be a violation of this Section 6(a) for
the Executive to disclose information in the ordinary course of properly
carrying out his duties and responsibilities on behalf of the Company or to
respond to an order of a court or other body having jurisdiction provided that
he gives the Company notice of any such order.
(b) Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company then in Executive's possession or under his
control, except that Executive may retain his personal notes, diaries,
Rolodexes, calendars and correspondence.
(c) Executive agrees that any material breach of the
terms of this Section would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law. Executive
further agrees that in the event of said material breach or any reasonable
threat of material breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such material breach or threatened
material breach. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages. Should a court or
arbitrator determine that any provision of this
<PAGE> 10
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Section 6 is unreasonable, the parties agree that such provision shall be
interpreted and enforced to the maximum extent such court or arbitrator deems
reasonable.
(d) The provisions of this Section shall survive any
termination of this Agreement and the Transition Period, and the existence of
any claim or cause of action by Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of this Section.
7. Indemnification.
----------------
The Company agrees that if Executive is made a party
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company, Executive shall be indemnified and
held harmless by the Company to the fullest extent legally permitted or
authorized by the Company's Second Amended Articles of Incorporation, Restated
Amended Code of Regulations, Indemnification Agreement between Executive and the
Company or, if greater, by the laws of the State of Ohio, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
8. Withholding Taxes.
------------------
The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
9. Reimbursement of Expenses.
--------------------------
If any contest or dispute shall arise under this
Agreement involving termination of Executive's employment with the Company or
involving the failure or refusal of the Company to perform fully in accordance
with the terms hereof, the Company shall reimburse Executive, on a current
basis, for all legal fees and expenses, if any, incurred by Executive in
connection with such contest or dispute regardless of the result thereof.
10. Scope of Agreement.
-------------------
Nothing in this Agreement shall be deemed to entitle
Executive to continued employment with the Company or its subsidiaries.
11. Successors; Binding Agreement.
------------------------------
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such merger,
consolidation or transfer of assets, the provisions of this
<PAGE> 11
11
Agreement shall be binding upon the surviving or resulting corporation or the
person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of this
Section 11, it will cause any successor or transferee unconditionally to assume,
by written instrument delivered to Executive (or his beneficiary or estate), all
of the obligations of the Company hereunder.
(c) (i) No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the business of
the Company substantially as an entirety, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company under this Agreement, either contractually or as a matter
of law. (ii) This Agreement is personal to Executive and, without the prior
written consent of the Company, shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amounts would be payable
to Executive hereunder had Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to such person or persons appointed in writing by Executive to receive
such amounts or, if no person is so appointed, to Executive's estate.
12. Notice.
-------
(a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to Executive:
[Executive's Name and Address]
If to the Company:
General Counsel
Caliber System, Inc.
P.O. Box 5459
Akron, OH 44334-0459
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
<PAGE> 12
12
(b) A written notice (a "Notice of Termination") of
Executive's Date of Termination by the Company or Executive, as the case may be,
to the other, shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) specify the
termination date. The failure by Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of Executive or the Company hereunder or
preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
13. No Set-off; No Mitigation.
--------------------------
The Company's obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
14. Employment with Subsidiaries.
-----------------------------
Employment with the Company for purposes of this
Agreement shall include employment with any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities of such
corporation or other entity entitled to vote generally in the election of
directors.
15. Governing Law; Validity.
------------------------
The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Ohio without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which other provisions shall remain in full force and effect.
16. Settlement of Disputes.
-----------------------
(a) Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach of
any of the foregoing, shall, subject to the mutual agreement of the Company and
the Executive, be settled by confidential arbitration, to be held in Akron,
Ohio, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association before three (3) arbitrators. The arbitrators shall
apply the provisions of this Agreement strictly as written (unless doing so
violates the clear intent of this Agreement), and shall explain the reasons and
basis of their award in detail and in writing. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof. All
costs and expenses relating to any controversy or claim that is arbitrable under
this Section (including reasonable attorney's fees of the Executive) shall be
paid by the Company promptly on written demand, except that the arbitrators are
authorized to require
<PAGE> 13
13
reimbursement of the Company for moneys paid by it pursuant to this sentence if
the arbitrators determine that the substantive positions of the Executive in the
arbitration were entirely without merit. Pending final resolution of any
arbitration or court proceeding, the Company shall continue prompt payment of
all amounts due the Executive under this Agreement or any amendment thereof and
prompt provision of all benefits to which the Executive or his beneficiaries are
entitled. Notwithstanding the foregoing, nothing contained in this Section 16
shall limit a party's right to seek equitable relief in any court of competent
jurisdiction.
(b) In the event the parties do not agree to
arbitration as provided in 16(a), the parties hereby consent to the jurisdiction
of the Common Pleas Court of the State of Ohio (Summit County) or of the United
States District Court for the Northern District of Ohio.
17. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
18. Survivorship.
-------------
The respective rights and obligations of the parties
hereunder shall survive the expiration of the term of this Agreement, to the
extent necessary to carry out the intentions of the parties, including without
limitation any obligations of the Company to make payments and provide benefits
hereunder.
19. Miscellaneous.
--------------
No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. No provision of this Agreement may be waived unless such
waiver is agreed to in writing and signed by the waiving party which, in the
case of the Company, shall mean by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. This
Agreement contains the entire understanding and agreement between the parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
<PAGE> 14
14
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company. Executive has executed
this Agreement as of the date and year first written above.
CALIBER SYSTEM, INC.
By:
------------------------------
Agreed to this ____ day of _______________, 1997.
- --------------------------
[Executive's Name]
<PAGE> 1
EXHIBIT 10.7
AMENDMENT TO
THIRD AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(SPECIFIC TO CERTAIN TIER 2 OFFICERS)
This Amendment to the Third Amended and Restated Management
Retention Agreement between Caliber System, Inc. (the "Company") and X (the
"Executive") is entered into this 4th day of October, 1997.
WHEREAS, the Company and the Executive entered into a Third
Amended and Restated Management Retention Agreement on August 28, 1997 (the
"Agreement");
WHEREAS, the Company desires to amend the Agreement; and
WHEREAS, the Executive agrees to amend the Agreement.
NOW THEREFORE, the Company and the Executive agree as follows:
Section 3(a)(4) of the Agreement is deleted in its entirety
and Section 3(a)(5) is redesignated as Section 3(a)(4).
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company. Executive has executed
this Amendment as of the date and year first written above.
CALIBER SYSTEM, INC.
By:
-----------------------------
Agreed to this 4th day of October, 1997.
- ---------------------------
[Executive's Name]
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