<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[x] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1996
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OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from ________________ to _______________
Commission file number 0-10716
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CALIBER SYSTEM, INC.
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(Exact name of registrant as specified in its charter)
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 665-5646
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
None on which registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock-without par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1997 was $630,986,000.
The number of shares of the issuer's common stock outstanding as of February
28,1997 was 38,916,795.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's proxy statement for the annual meeting of
shareholders to be held on May 14, 1997 are incorporated by reference into Part
III.
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PART I
Item 1. - Business.
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Caliber System, Inc., an Ohio corporation, is engaged through its
subsidiaries in a broad range of transportation, logistics, and related
information services. The Company's operations include a small-package carrier,
a superregional freight carrier, a surface expedited carrier and a contract
logistics provider. These operations provide services and solutions to meet
customer requirements based upon shipment size, distance, time in transit, and
distribution needs. The Company conducts these operations principally through
RPS, Inc. (RPS), Viking Freight, Inc. (Viking), Roberts Express, Inc. (Roberts)
and Caliber Logistics, Inc. (Logistics).
RPS, Caliber's largest operating unit, is the second-largest ground
small package carrier in the United States. RPS serves customers in the
small-package market in North America and between North America and Europe,
focusing primarily on the business-to-business delivery of packages weighing up
to 150 pounds. RPS provides ground service to 100% of the United States
population and overnight service to 45% of the United States population. Through
its subsidiary, RPS, Ltd., service is provided to 100% of the Canadian
population. Additionally, RPS provides service to Mexico through an arrangement
with another transportation provider. RPS service extends to 27 European
countries through an alliance with General Parcel Logistics, GmbH. RPS also
offers service offshore to Puerto Rico, Alaska and Hawaii via a ground/air
network operation in cooperation with other transportation providers. RPS
provides other specialized transportation services to meet specific customer
requirements in the small-package market. RPS conducts its operations primarily
with 8,300 owner-operated vehicles and, in addition, owns over 8,100 trailers.
Competition for high volume, profitable shipping business focuses largely on
providing economical pricing and dependable service.
In 1995, Caliber commenced the consolidation of its four regional
freight carriers into Viking Freight, Inc. to form a superregional freight
carrier. In March 1997, Caliber announced that it was restructuring Viking by
terminating operations at its former Coles Express unit in the Northeast and
Spartan Express in the Southeast and Midwest and seeking to sell its
former Central Freight Lines unit in the Southwest. The restructured Viking will
provide next- and second-day less-than-truckload service through 43 terminals
and more than 4,000 employees serving 12 western states. (See Item 7. --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".)
Roberts is the largest surface expedited carrier in North America,
providing time definite shipping and transportation for emergency shipments.
Roberts also provides similar service in Europe. Utilizing over 2,200 vehicles,
Roberts delivers shipments within 15 minutes of the promised delivery time in
96% of all cases. Roberts also offers White Glove Services, requiring specially
equipped vehicles and highly trained teams to handle such items as electronics,
medical equipment, radioactive materials, pressurized gases, trade show exhibits
and works of art. Roberts transports freight by utilizing independent
owner-operators. Roberts competes principally with companies that specialize in
transporting time definite shipments. Competition is based primarily on meeting
exacting service requirements. Roberts competes by providing extremely reliable,
fast delivery of shipments at competitive prices.
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Caliber Logistics is a contract logistics provider with expertise across
the entire supply chain, from inbound materials management through distribution
to the final consumer. Services provided include transportation management,
dedicated transportation, warehouse operations and management, just-in-time
delivery programs (including light assembly and manufacturing), customer order
processing, returnable container management, freight bill payment and auditing
and other management services outsourced by its customers. Competition for the
provision of logistics services is vigorous.
The operations of the Company's subsidiaries in interstate commerce are
currently regulated by the Department of Transportation ("DOT") and Federal
Highway Administration, which retain limited oversight authority over motor
carriers. Federal legislation has been enacted that preempted regulation by the
states of rates and service in intrastate freight transportation.
The Company's subsidiaries, like other interstate motor carriers, are
subject to certain DOT safety requirements governing interstate operations. In
addition, vehicle weight and dimensions remain subject to both Federal and state
regulations.
The Company and its subsidiaries are subject to federal, state and local
environmental laws and regulations relating to, among other things, contingency
planning for spills of petroleum products and the disposal of waste oil.
Additionally, the Company and its subsidiaries are subject to significant
regulations dealing with underground fuel storage tanks and has environmental
management programs to conform with these regulations. The Company's
subsidiaries store fuel for trucks and tractors in approximately 151 underground
tanks located in 23 states.
The transportation and logistics industry is affected directly by the
state of the overall economy. Seasonal fluctuations affect tonnage, revenues,
and earnings. Normally, the fall of each year is the busiest shipping period for
each of the Company's operating subsidiaries; the months of December and January
of each year are the slowest. Shipment levels, operating costs and earnings can
also be adversely affected by inclement weather.
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Item 2. - Properties.
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Caliber System, Inc.
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Corporate offices of the registrant and its information systems
subsidiary, Caliber Technology, Inc. are located in Akron, Ohio in leased
facilities.
RPS, Inc.
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As of December 31, 1996, RPS operated 370 facilities, including 25 hubs.
Fifty-seven of the facilities, 23 of which are hubs, are owned; and 313
facilities are leased, generally for terms of three years or less. Twelve of the
facilities are operated by RPS, Ltd., RPS' subsidiary operating in Canada. The
25 hub facilities are strategically located to cover the geographic area served
by RPS. These facilities, averaging 85,411 square feet, range in size from
24,000 to 185,000 square feet.
RPS' corporate offices and information and data centers are located in
the Pittsburgh, Pennsylvania area in an approximately 350,000 square foot
building owned by a subsidiary of RPS.
Viking Freight, Inc.
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Subsequent to the restructuring announced in March 1997, Viking will
operate 43 terminals. The company's general offices are located in leased
facilities in San Jose, California.
Roberts Express, Inc.
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Roberts' general offices are located in Akron, Ohio in owned facilities.
Roberts does not use terminal facilities in its business.
Caliber Logistics, Inc.
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Caliber Logistics' general offices are located in Hudson, Ohio in
leased facilities.
Item 3. - Legal Proceedings.
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The registrant is involved in various lawsuits arising in the ordinary
course of its business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the financial condition or
results of operations of the registrant.
Item 4. - Submission of Matters to a Vote of Security Holders.
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None.
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Executive Officers of the Registrant.
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Name and Age Present Positions and Recent Business Experience
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Donald C. Brown Vice President-Human Resources since January 1996;
previously he served as Vice President-Corporate
Support Services during 1995; Assistant Controller
from January 1992 through 1994; and Assistant to
Vice President and Controller from December 1990
through 1991. Age 41.
John P. Chandler Vice President and Treasurer since January 1996;
previously he served as Vice
President-Administration and Treasurer from
January 1994 through 1995; Vice
President-Administration during 1993; and
President of RPS from July 1990 to December 1992.
Age 53.
Kathryn W. Dindo Vice President and Controller since January 1996;
previously she served as Assistant Controller from
August 1994 through 1995. Prior to employment with
the registrant, she was a partner with Ernst &
Young LLP since 1985. Age 47.
John E. Lynch, Jr. Vice President, General Counsel and Secretary
since July 1996. Prior to employment with the
registrant, he was a partner with Squire,
Sanders and Dempsey. Age 44.
Robert J. Quinn Vice President-Corporate Planning since April 1996.
Previously he served as Special Assistant to the
Chairman from July 1995 through April 1996 and was
on special assignment in Boston and Europe from
July 1993 to June 1995. Prior to employment with
the registrant, he was a principal at Mercer
Management Consulting. Age 42.
Daniel J. Sullivan Chairman since October 1995; President and Chief
Executive Officer since August 1995; President and
Chief Operating Officer from January 1994 to
August 1995; Senior Vice President and
President-National Carrier Group during 1993; Vice
President and President-National Carrier Group
during 1992; Vice President and Group Executive
from July 1990 through 1991 and President of RPS
through June 1990. Age 50.
Louis J. Valerio Senior Vice President-Finance and Chief
Financial Officer since October 1996. Prior to
employment with the registrant, he was the
Corporate Controller at Westinghouse Corporation
during 1995, and from
1988 to 1994 he was employed by
United Airlines in various officer
level positions. In his last
position at United, he served as
Senior Vice
President-Finance/Corporate Finance.
Age 47.
Officers are elected to serve on a calendar year basis except for the Chairman,
President, Treasurer and Secretary, who are elected for an annual term following
the annual meeting of shareholders. No family relationships exist between any of
the executive officers named above or between any executive officer and any
director of the registrant.
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PART II
Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters.
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Caliber System, Inc. common stock began trading on the New York Stock Exchange
under the symbol "CBB" on November 29, 1995. The company is included in the Dow
Jones Transportation Average, a major barometer of the U.S. transportation
industry.
The number of holders of record of the company's common stock at December 31,
1996 was approximately 7,964. The high and low prices at which Caliber System,
Inc. common stock traded for each calendar quarter in 1996 and 1995 are shown
below.
<TABLE>
<CAPTION>
Dividend Declared
Price Range Per Share
1996 High 1996 Low 1995 High 1995 Low 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 $ 50 1/4 $ 35 7/16 $ 56 3/4 $ 47 3/4 $ 0.18 $ 0.35
June 30 43 7/8 33 3/4 49 1/2 42 0.18 0.35
September 30 34 1/4 15 5/8 56 1/2 45 1/2 0.18 0.35
December 31 21 1/8 15 7/8 53 1/2 42 11/16 0.18 0.35
- -----------------------------------------------------------------------------------------------------------------
$ 0.72 $ 1.40
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The 1995 high and low stock prices have not been adjusted to reflect the
spin-off of Roadway Express.
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ITEM 6. - SELECTED FINANCIAL DATA.
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Amounts in thousands, except per share data
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE $ 2,718,142 $ 2,448,172 $ 2,327,523 $ 1,822,490 $ 1,391,898
OPERATING EXPENSES
Salaries, wages and benefits 1,054,785 937,972 876,694 677,226 473,711
Purchased transportation 792,153 694,275 700,016 527,118 432,634
Operating supplies and expenses 574,653 428,980 362,219 288,089 217,626
Operating taxes and licenses 55,083 48,282 43,818 36,624 23,330
Insurance and claims 59,757 50,552 59,644 44,685 31,667
Provision for depreciation 148,715 132,383 120,029 97,565 74,599
Impairment charge(1) 225,036 -- -- -- --
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 2,910,182 2,292,444 2,162,420 1,671,307 1,253,567
----------- ----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (192,040) 155,728 165,103 151,183 138,331
Other income (expense), net (10,316) 6,407 6,377 10,486 11,886
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (202,356) 162,135 171,480 161,669 150,217
Income tax provision (benefit) (37,233) 69,726 72,943 70,064 63,722
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (165,123) 92,409 98,537 91,605 86,495
DISCONTINUED OPERATIONS(2)
Income (loss) from discontinued operations,
net of income taxes -- (69,950) (78,977) 27,730 60,912
Loss on discontinuance, net of income taxes -- (49,664) -- -- --
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS -- (119,614) (78,977) 27,730 60,912
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (165,123) (27,205) 19,560 119,335 147,407
CUMULATIVE EFFECT OF ACCOUNTING CHANGES(3)
Continuing operations -- -- -- (3,440) --
Discontinued operations -- -- -- (14,691) --
----------- ----------- ----------- ----------- -----------
-- -- -- (18,131) --
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (165,123) $ (27,205) $ 19,560 $ 101,204 $ 147,407
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE(4)
Income (loss) from continuing operations $ (4.18) $ 2.34 $ 2.50 $ 2.32 $ 2.19
Discontinued operations:
Income (loss) from discontinued operations -- (1.77) (2.00) 0.70 1.54
Loss on discontinuance -- (1.26) -- -- --
----------- ----------- ----------- ----------- -----------
-- (3.03) (2.00) 0.70 1.54
Cumulative effect of accounting changes:
Continuing operations -- -- -- (0.09) --
Discontinued operations -- -- -- (0.37) --
----------- ----------- ----------- ----------- -----------
-- -- -- (0.46) --
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (4.18) $ (0.69) $ 0.50 $ 2.56 $ 3.73
=========== =========== =========== ----------- ===========
Cash dividends declared per share $ 0.72 $ 1.40 $ 1.40 $ 1.37 $ 1.27
Average number of shares of common stock outstanding 39,484 39,459 39,392 39,521 39,521
Total Assets $ 1,432,167 $ 1,389,270 $ 1,509,846 $ 1,466,509 $ 1,350,072
Long-Term Debt $ 200,000 $ -- $ -- $ -- $ --
Total Shareholders' Equity $ 538,647 $ 736,301 $ 1,015,394 $ 1,047,151 $ 1,021,360
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<FN>
Notes:
1) The company announced a major restructuring of the Viking operations on
March 27, 1997. Nonrecurring charges relating to the restructuring of
$225 million are included in 1996 operating expenses. See Note K to the
consolidated financial statements.
2) Includes spin-off of Roadway Express, Inc. and the exit from the air
freight business served by Roadway Global Air, Inc. as described in Note
I to the consolidated financial statements.
3) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
4) Earnings per share are computed on the average number of shares of
common stock outstanding during each year.
ACQUISITIONS
- - June 1992 - Codes Express acquired
- - April 1993 - Central Freight Lines acquired
</TABLE>
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Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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On December 14, 1995, the shareholders of Caliber System, Inc.
(formerly Roadway Services, Inc.) approved the spin-off to the company's
shareholders of approximately 95% of the stock of its wholly-owned subsidiary,
Roadway Express (REX), the company's national long haul, less-than-truckload
(LTL) motor freight carrier. In addition, during the last quarter of 1995, the
company exited the air freight business served by Roadway Global Air (RGA), a
wholly-owned subsidiary. Therefore, this discussion and analysis does not
include the operations of REX and RGA.
RESULTS OF OPERATIONS - 1996 VS. 1995
Consolidated revenue in 1996 amounted to $2.72 billion, an increase of
11% over 1995 revenue of $2.45 billion. All operating units experienced revenue
growth over 1995 levels.
Revenue for 1996 at RPS, the company's small package carrier, increased
to $1.34 billion or 4% over 1995 revenue of $1.29 billion. The increase was
primarily attributable to higher package volume from the growth of its Overnight
Ground(sm) product where capacity was added in several next day markets
increasing service during 1996 to 45% of the nation's population. A rate
increase implemented in February 1996 also marginally contributed to
the year over year revenue improvement as an intensely competitive pricing
environment resulted in significant rate erosion during the year. RPS revenue
for the fourth quarter grew 6.2% over 1995 levels, the highest quarterly year
over year growth in 1996. Increased volume in the fourth quarter was positively
affected by RPS' better than 95% on-time service. However, modest retail sales
in the non-durable goods sectors, which represent over 50% of RPS' volume,
continued to affect revenue growth.
Revenue at Viking Freight (Viking), the company's superregional
carrier, amounted to $965.8 million for 1996, an increase of 15.8% over 1995
revenues of $834.1 million. Revenues increased at Viking due to volume growth
but were negatively impacted by continued discounting within the industry.
Viking's revenue growth for the fourth quarter slowed to 13.6% over fourth
quarter 1995 levels reflecting the impact of Viking's revenue yield improvement
strategy to reduce unprofitable business.
Growth at Caliber Logistics (Logistics) contributed significantly to
the overall increase in revenue during 1996. 1996 net revenues at Logistics,
which are included in consolidated revenues, increased 48.7% over 1995 while
gross revenues were $506 million, an increase of 59% over 1995 levels. Roberts
Express (Roberts), the company's expedited carrier, experienced a 6% growth in
year over year revenues. Each of these units generated approximately $200
million of net revenue.
Consolidated operating expenses, excluding the impairment charge for
Viking discussed below, increased $392.7 million or 17.1% over 1995 levels. This
change was primarily due to increases at Viking of $228 million or 26.3% over
1995 levels, and higher fixed costs at RPS resulting from the unit's continuing
expansion and investment in technology and equipment. In addition, operating
expenses increased due to higher business levels at all units in 1996 over 1995.
During 1996, Viking experienced significant one-time costs and operating
inefficiencies associated with the consolidation of the company's regional
carriers. Tonnage growth beyond planned levels generated additional expenses
because of lower productivity, excessive overtime, hiring and training of new
employees, equipment rentals and purchased transportation. Operating expenses at
Viking were also negatively affected by higher than expected provisions for
uncollectible accounts receivable. Increased fuel prices also contributed to the
overall increase in operating expenses.
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A major restructuring of the Viking operations was announced on March
27, 1997. As a result of this restructuring, the company recorded a non-cash
$225 million asset impairment charge ($175 million net of tax or $4.43 per
share) related to the write-down of goodwill of $82 million and property and
equipment of $143 million which has been reflected in the 1996 operating
results. Additional restructuring charges, which include employee severance and
other restructuring costs, will be included in the company's operating results
for the first quarter of 1997.
The consolidated operating loss for 1996 was $192 million, including
the impairment charge for Viking; operating income was $33 million excluding
this charge. 1996 operating income, excluding the Viking impairment charge,
decreased $122.7 million from 1995 resulting in a 1996 operating margin of 1.2%
compared to 6.4% in 1995. Overall operating results were negatively affected by
the impairment charge at Viking, inefficiencies and costs related to Viking's
consolidation process, higher fixed costs at RPS, aggressive discounting and
overcapacity in the freight industry. Operating income at RPS amounted to $119
million for 1996, a decline of $42 million from 1995 levels. Viking's operating
loss for 1996 was $352.8 million including the impairment charge and $127.8
million excluding this charge. This compares to a loss of $31.5 million last
year at Viking. Roberts continues to maintain excellent margins. Logistics'
margins improved over 1995 levels. Operating results were positively impacted by
an overall reduction in pension expense of approximately $13 million primarily
due to a higher level of pension fund assets coupled with an increase in the
expected long-term rate of return on plan assets.
Increased interest expense of $10.6 million reflecting higher borrowing
levels and the loss of interest income from discontinued operations of $8.2
million were the principal factors impacting other income (expense), net in
1996.
The income tax benefit was 18.4% of loss before income taxes. This rate
differed from the U.S. federal statutory rate due primarily to the effects of
the write off of goodwill, state income taxes and non-deductible operating
costs.
The loss per share from continuing operations amounted to $4.18 in 1996
compared to income per share from continuing operations of $2.34 in 1995.
Excluding the Viking impairment charge, income per share from continuing
operations would have been $0.25 in 1996.
RESULTS OF OPERATIONS - 1995 VS. 1994
Consolidated revenue in 1995 amounted to a record $2.45 billion, an
increase of $120.6 million or 5.2% over 1994, when revenues were positively
impacted by the 24-day strike by the Teamsters against most unionized LTL
carriers. Revenue increased in 1995 at all operating units except Roberts. The
largest share of the revenue growth was attributable to RPS which reported
revenue of $1.29 billion, an increase of $77.2 million or 6.3% over 1994. This
increase was a result of growth in package volume and the effects of a rate
increase implemented in early 1995. Caliber Logistics contributed significantly
to the revenue increase due to on-going expansion of the business, reporting a
45.9% increase in revenue over 1994. Revenues at Viking Freight (formerly the
Roadway Regional Group) amounted to $834.1 million or an increase of 3.4% over
1994. This increase was experienced despite a decline in revenue at Central
Freight Lines (Central) of 8.6% due to the impact of intrastate deregulation in
Texas. Overall, revenue fell short of plan at Viking as a result of the slowing
economy and the aggressive discounting and overcapacity being experienced in the
industry. Roberts experienced a revenue decline of 13.2% due principally to the
sluggish economy.
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<PAGE> 10
Operating expenses increased $130 million or 6% over 1994. This
increase resulted primarily from higher business volumes at all business units
except Roberts, with RPS and Viking reporting operating expense increases of
5.2% and 8.6%, respectively. Operating supplies and expenses at Viking were
impacted by costs of $6.6 million associated with the consolidation of the
company's regional carriers and the write-off of $3.1 million of goodwill for
Coles Express as a result of the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." As planned, Viking also incurred
additional costs related to PRISM, a major reengineering and information
technology project that was launched in 1994. Depreciation expense during 1995
at the company's information and technology unit was $6.7 million lower than
1994 due to certain information processing equipment becoming fully depreciated
in 1994. Insurance and claims related expenses declined $9.1 million in 1995
primarily as a result of on-going claims management and safety-related programs.
Higher than normal operating expenses were incurred in 1994 which included the
effect of a settlement with the IRS as described in Note J to the consolidated
financial statements. The net after-tax cost of the settlement amounted to $13.7
million or $.35 per share in 1994. Also included in 1994 was a charge to
operating expenses of $5.8 million related to federal legislation that required
the write-off of the remaining asset values of intrastate operating rights.
Operating income amounted to $155.7 million for 1995 compared to $165.1
million in 1994. Overall operating results were negatively impacted by the
aggressive discounting of freight rates and the effects of the sluggish economy.
The resulting lower-than-planned volumes and higher operating expenses
negatively impacted margins in 1995, which declined from 7.1% in 1994 to 6.4% in
1995. RPS was negatively impacted by the economy, particularly in the retail
industry, which affected its rate of growth. Despite stringent cost controls,
operating income was 2% below 1994 before the charge for the IRS settlement
mentioned above. Viking's margins were impacted by the consolidation costs and
the write-off of goodwill, previously mentioned, along with PRISM project costs,
resulting in an operating loss for Viking in 1995 of $31.5 million compared to
an operating profit in 1994 of $9.5 million. Caliber Logistics experienced
improved margins over the prior year. Effective cost controls at Roberts allowed
it to maintain its margins despite a decline in volume.
Other income, net, includes increased interest expense of $3.8 million
as a result of borrowings under new debt agreements put into place during 1995.
Also included is interest income on intercompany advances to discontinued
operations of $8.2 million in 1995 and $3.9 million in 1994 that will not
continue in future years.
Income taxes were 43% of income before income taxes. This rate exceeded
the U.S. federal statutory rate due primarily to state income taxes and
non-deductible operating costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities of $102.3 million was $215.2
million less than net property additions of $282.7 million and dividends of
$34.8 million. The shortfall was funded by borrowings. In August 1996, the
company sold $200 million of 7.8% notes due August 1, 2006. The company is a
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
amounted to $230 million at year end with $95 million available for future
borrowings subject to the limitations of the loan covenants. 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.
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<PAGE> 11
1997 capital expenditures are currently estimated to approximate $140
million of which 60% is expected to be for technology and highly automated
freight handling equipment, 30% for real estate and 10% for revenue and support
equipment. The company anticipates that through available borrowing capacity and
cash flows from operations it will be able to fund short-term cash requirements
from the Viking restructuring, capital expenditures during 1997 and provide
adequate levels of working capital and funds for payment of dividends and
interest. The sale of Central and elimination of Viking's unprofitable
divisions are expected to have a positive effect on earnings and cash flows.
Net proceeds from the sale of Viking's assets, as a result of the restructuring,
will be used to reduce outstanding debt. To further lower debt, in March 1997
the Board of Directors reduced the regular quarterly dividend from $0.18 per
share to $0.10 per share payable August 1, 1997. The future amount of cash
dividends is subject to the discretion of the Board. Future dividend decisions
will be affected by a number of factors, including the company's future
operating results, financial conditions and other factors.
CURRENT TRENDS AND OUTLOOK
The transportation, intermodal and logistics marketplace continues to
experience rapid change in response to demands for quality and time-based
management. Discounting and the effects of overcapacity in the industry are
anticipated to continue throughout 1997 in many of the markets served by the
company's operations, and it is expected that industry margins will remain under
pressure. During 1997, the company's operating units will focus on their core
business segments while seeking to control headcount and other costs. At RPS, it
is anticipated that net rate levels will improve as a result of a rate increase
effective on February 3, 1997, although discounting will continue. RPS plans to
continue the expansion of next-day delivery service in 1997, with the continuing
objective of serving 95% of the U.S. population with next-day delivery service
by the year 2001. The restructured Viking will provide next- and second-day
less-than-truckload service through 43 terminals and more than 4,000 employees
serving 12 western states. Viking will continue to work with Caliber's other
operating units to offer integrated, customized solutions for customers who need
a comprehensive transportation and logistics program.
CERTAIN FORWARD-LOOKING STATEMENTS
This Form 10-K, including information under the captions "Liquidity and
Capital Resources" and "Current Trends and Outlook" 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
industries serviced by the company's businesses; actual future costs and
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.
Item 8. - Financial Statements and Supplementary Data.
- ------------------------------------------------------
The response to this Item is submitted in a separate section of this report.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
- ----------------------------------------------------------------------------
Financial Disclosure.
---------------------
None.
-11-
<PAGE> 12
PART III
Item 10. - Directors and Executive Officers of the Registrant.
- --------- ----------------------------------------------------
In response to the information called for by Item 401 of Regulation S-K
with respect to directors of the registrant, the material set forth under the
heading "Information About Nominees for Directors" in the registrant's proxy
statement for the annual meeting of shareholders to be held on May 14, 1997,
which will be filed pursuant to Regulation 14A with the Securities and Exchange
Commission, is incorporated herein by reference.
In response to the information called for by Item 401 of Regulation S-K
with respect to executive officers of the registrant, the material set forth
under the heading "Executive Officers of the Registrant" in Part I of this Form
10-K Annual Report for the year ended December 31, 1996, is incorporated herein
by reference.
Item 11. - Executive Compensation.
- --------- ------------------------
In response to the information called for by this Item with respect to
directors of the registrant, the material set forth under the heading "Director
Compensation" in the registrant's proxy statement for the annual meeting of
shareholders to be held on May 14, 1997, which will be filed pursuant to
Regulation 14A with the Securities and Exchange Commission, is incorporated
herein by reference.
In response to the information called for by this Item with respect to
executive officers of the registrant, the material set forth under the heading
"Executive Compensation and Shareholdings by Executive Officers" in the
registrant's proxy statement for the annual meeting of shareholders to be held
on May 14, 1997, which will be filed pursuant to Regulation 14A with the
Securities and Exchange Commission, is incorporated herein by reference.
Item 12. - Security Ownership of Certain Beneficial Owners and Management.
- --------- ----------------------------------------------------------------
In response to the information called for by this Item, the material set
forth under the heading "Principal Holders of Company Common Stock on February
28, 1997," including the notes thereto; the material set forth under the heading
"Information About Nominees for Directors," including the notes thereto; the
material set forth under the heading "Ownership of Company Common Stock by
Management," including the notes thereto; and the material set forth under
"Section 16(a) Beneficial Ownership Reporting Compliance" in the registrant's
proxy statement for the annual meeting of shareholders to be held on May 14,
1997, which will be filed pursuant to Regulation 14A with the Securities and
Exchange Commission, is incorporated herein by reference.
-12-
<PAGE> 13
Item 13. - Certain Relationships and Related Transactions.
- --------- ------------------------------------------------
None.
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) and (2) List of Financial Statements and Financial Statement
Schedules--The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Exhibit Index--The response to this portion of Item 14 is
submitted as a separate section of this report.
(b) Reports on Form 8-K Filed in the Fourth Quarter of 1996:
- A report on Form 8-K as of September 23, 1996 was filed
under Item 5 announcing Third Quarter 1996 results.
- A report on Form 8-K as of October 14, 1996 was filed under
Item 5 announcing the election of Louis J. Valerio, Senior
Vice President-Finance and Chief Financial Officer.
- A report on Form 8-K as of November 13, 1996 was filed under
Item 5 announcing the declaration of dividend by the Board
of Directors and several management changes at the
registrant's subsidiary, Viking Freight, Inc.
- A report on Form 8-K as of December 19, 1996 was filed under
Item 5 announcing the election of Rodger G. Marticke as the
President and Chief Executive Officer of Viking Freight,
Inc. replacing Ronald G. Pelzel who will retire at year end;
the election of Thomas I. Escott as President of Caliber
Logistics, Inc. replacing Rodger G. Marticke; and
operational changes at Viking Freight, Inc. which would
result in the closing of 30 terminals and elimination of
1,500 positions.
(c) Exhibits--The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules--The response to this portion
of Item 14 is submitted as a separate section of this
report.
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CALIBER SYSTEM, INC.
Date March 27, 1997 By Daniel J. Sullivan
--------------- ------------------------------------
Daniel J. Sullivan, Chairman,
President and Chief Executive Officer
Date March 27, 1997 By L.J. Valerio
--------------- --------------------------------------
L. J. Valerio, Senior Vice President-
Finance and Chief Financial Officer
Date March 27, 1997 By Kathryn W. Dindo
--------------- ---------------------------------------
Kathryn W. Dindo,
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CALIBER SYSTEM, INC.
Date March 27, 1997 By G. B. Beitzel
--------------- ---------------------------------------
G. B. Beitzel, Director
Date March 27, 1997 By R. A. Chenoweth
--------------- ---------------------------------------
R. A. Chenoweth, Director
Date March 27, 1997 By Charles R. Longsworth
--------------- ---------------------------------------
Charles R. Longsworth, Director
Date March 27, 1997 By Daniel J. Sullivan
--------------- ---------------------------------------
Daniel J. Sullivan, Director
Date March 27, 1997 By H. Mitchell Watson, Jr.
--------------- ---------------------------------------
H. Mitchell Watson, Jr., Director
-14-
<PAGE> 15
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a) (1) AND (2), AND 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1996
CALIBER SYSTEM, INC.
AKRON, OHIO
-15-
<PAGE> 16
FORM 10-K--ITEM 14(a) (1) AND (2)
CALIBER SYSTEM, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Caliber System, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Shareholder's Equity - Years ended December
31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements - December 31, 1996
Summary of Quarterly Results of Operations - Years ended December 31,
1996 and 1995
The following consolidated financial statement schedule of Caliber System, Inc.
and subsidiaries is included in Item 14(d):
Schedule II-Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
-16-
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Caliber System, Inc.
We have audited the accompanying consolidated balance sheets of Caliber System,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Caliber System,
Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Akron, Ohio ERNST & YOUNG LLP
January 23, 1997,
except for Note K, as to which the date is
March 27, 1997
-17-
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
ASSETS DECEMBER 31
1996 1995
--------- --------
(dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 38,829 $ 34,908
Accounts receivable, net of allowances
of $32,000 in 1996 and $13,000 in 1995 365,033 273,124
Prepaid expenses and supplies 72,813 66,630
Deferred income taxes 47,801 27,562
---------- ----------
TOTAL CURRENT ASSETS 524,476 402,224
PROPERTY AND EQUIPMENT, NET 848,319 857,347
Cost in excess of net assets of businesses acquired, net of amortization 5,015 89,761
Other assets 54,357 39,938
---------- ----------
TOTAL ASSETS $1,432,167 $1,389,270
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31
1996 1995
--------- --------
(dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt $230,000 $197,500
Accounts payable 262,313 219,406
Salaries and wages 80,259 74,790
Self-insurance accruals 50,439 49,992
Dividend payable 7,030 13,671
---------- ----------
TOTAL CURRENT LIABILITIES 630,041 555,359
LONG-TERM LIABILITIES
Long-term debt 200,000 --
Self-insurance accruals 40,809 39,832
Deferred income taxes 22,670 57,778
---------- ----------
TOTAL LONG-TERM LIABILITIES 263,479 97,610
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 50,735 51,322
Retained earnings 503,496 696,803
---------- ----------
594,129 788,023
Treasury stock, at cost
(1996 - 1,605,000 shares, 1995 - 1,394,000 shares) 55,482 51,722
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 538,647 736,301
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,432,167 $1,389,270
========== ==========
</TABLE>
See notes to consolidated financial statements.
-18-
<PAGE> 19
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
CALIBER SYSTEM, INC.
YEARS ENDED DECEMBER 31
1996 1995 1994
----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
REVENUE $ 2,718,142 $ 2,448,172 $ 2,327,523
OPERATING EXPENSES
Salaries, wages and benefits 1,054,785 937,972 876,694
Purchased transportation 792,153 694,275 700,016
Operating supplies and expenses 574,653 428,980 362,219
Operating taxes and licenses 55,083 48,282 43,818
Insurance and claims 59,757 50,552 59,644
Provision for depreciation 148,715 132,383 120,029
Impairment charge 225,036 -- --
----------- ----------- -----------
TOTAL OPERATING EXPENSES 2,910,182 2,292,444 2,162,420
----------- ----------- -----------
OPERATING INCOME (LOSS) (192,040) 155,728 165,103
Other income (expense), net (10,316) 6,407 6,377
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (202,356) 162,135 171,480
Provision (benefit) for income taxes (37,233) 69,726 72,943
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (165,123) 92,409 98,537
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of income taxes -- (69,950) (78,977)
Loss on discontinuance, net of income taxes -- (49,664) --
----------- ----------- -----------
LOSS FROM DISCONTINUED OPERATIONS -- (119,614) (78,977)
----------- ----------- -----------
NET INCOME (LOSS) $ (165,123) $ (27,205) $ 19,560
=========== =========== ===========
EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations $ (4.18) $ 2.34 $ 2.50
Discontinued operations:
Loss from discontinued operations -- (1.77) (2.00)
Loss on discontinuance -- (1.26) --
----------- ----------- -----------
-- (3.03) (2.00)
----------- ----------- -----------
NET INCOME (LOSS) $ (4.18) $ (0.69) $ 0.50
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-19-
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations $(165,123) $ 92,409 $ 98,537
Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 151,425 138,342 122,859
Deferred taxes (55,347) 7,866 (14,288)
Impairment charge 225,036 -- --
Changes in operating assets and liabilities:
Accounts receivable (91,909) (14,093) (56,850)
Accounts payable and accrued items 48,823 7,465 111,993
Other assets and liabilities (10,643) 7,607 20,146
-------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 102,262 239,596 282,397
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (292,387) (288,134) (226,559)
Sales of property and equipment 9,700 4,472 4,185
Net advances to discontinued operations (2,527) (60,000) (57,000)
-------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (285,214) (343,662) (279,374)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (34,825) (54,688) (54,613)
Dividends received from discontinued operations -- 7,500 12,000
Increase in short-term debt, net 32,500 197,500 --
Proceeds from issuance of long-term debt 200,000 -- --
-------- -------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 197,675 150,312 (42,613)
-------- -------- ---------
CASH FLOWS PROVIDED BY (USED IN) CONTINUING OPERATIONS 14,723 46,246 (39,590)
CASH FLOWS USED IN DISCONTINUED OPERATIONS (10,802) (26,118) (40,764)
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,921 20,128 (80,354)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34,908 14,780 95,134
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 38,829 $ 34,908 $ 14,780
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE> 21
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CALIBER SYSTEM, INC.
COMMON STOCK TREASURY STOCK TOTAL
---------------- ADDITIONAL RETAINED ----------------- SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------ ------ ---------- -------- ------ ------ ------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 40,896 $39,898 $ 50,446 $ 1,013,519 1,527 $(56,712) $ 1,047,151
Net income -- -- -- 19,560 -- -- 19,560
Cash dividends declared ($1.40 per share) -- -- -- (54,620) -- -- (54,620)
Net shares issued in connection with
stock plans -- -- 707 -- (50) 2,596 3,303
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1994 40,896 39,898 51,153 978,459 1,477 (54,116) 1,015,394
Net loss -- -- -- (27,205) -- -- (27,205)
Cash dividends declared ($1.40 per share) -- -- -- (54,706) -- -- (54,706)
Distribution of Roadway Express -- -- -- (199,745) -- -- (199,745)
Net shares issued in connection with
stock plans -- -- 169 -- (83) 2,394 2,563
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1995 40,896 39,898 51,322 696,803 1,394 (51,722) 736,301
Net loss -- -- -- (165,123) -- -- (165,123)
Cash dividends declared ($.72 per share) -- -- -- (28,184) -- -- (28,184)
Net shares repurchased in connection with
stock plans -- -- (587) -- 211 (3,760) (4,347)
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1996 40,896 $39,898 $ 50,735 $ 503,496 1,605 $(55,482) $ 538,647
====== ======= ======== =========== ====== ======== ==========
</TABLE>
See notes to consolidated financial statements.
-21-
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Caliber System, Inc.
December 31, 1996
Effective January 2, 1996, the company spun-off its wholly-owned subsidiary,
Roadway Express, Inc. (REX) to the company's shareholders. Also, during 1995 the
company announced plans to exit the air freight business served by Roadway
Global Air, Inc. (RGA). REX and RGA have been reflected as discontinued
operations in the accompanying financial statements. Accordingly, unless
otherwise stated, the accompanying notes for all years presented exclude these
businesses.
NOTE A - ACCOUNTING POLICIES
Operations and Principles of Consolidation
- ------------------------------------------
The company's operations are exclusively in the transportation industry.
Operations, listed in relative significance based on consolidated revenues,
include a small-package carrier, a superregional freight carrier, a contract
logistics provider and a surface expedited carrier . The company serves
customers in most industries, with a concentration in the retail and
manufacturing industries. The consolidated financial statements include the
accounts and operations of the company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
- -------------------------
The company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.
Property and Equipment
- ----------------------
Depreciation of property and equipment is computed by the straight line method
based on the useful lives of the assets. Interest costs for the construction of
certain long-term assets are capitalized and amortized over the useful life of
the related asset. The company capitalized interest costs of $6.3 million during
1996 and $5.4 million in 1995. See Note K.
Cost in Excess of Net Assets of Businesses Acquired
- ---------------------------------------------------
These costs ($7.5 million) are being amortized on the straight line method over
a 40-year period from the respective acquisition dates of the acquired
businesses. The carrying value of cost in excess of net assets of businesses
acquired ("goodwill") is reviewed to determine if an impairment is suggested. If
this review indicates that goodwill may not be recoverable, the company's
carrying value of the goodwill will be reduced. See Note K.
Self-Insurance Accruals
- -----------------------
The company is self-insured up to certain levels for health care, workers'
compensation, property damage, public liability and cargo claims. Accruals are
estimated each year based on historical claim costs and include estimated
amounts for incurred but not reported claims. Expenses resulting from workers'
compensation and health care claims are included in salaries, wages and benefits
in the consolidated statement of income.
Revenue
- -------
The company recognizes revenue on the date freight is delivered.
Income Taxes
- ------------
Deferred income taxes are provided for temporary differences between the basis
of the company's assets and liabilities for financial reporting and income tax
purposes.
-22-
<PAGE> 23
NOTE A - ACCOUNTING POLICIES, CONTINUED
Earnings Per Share
- ------------------
Earnings per share is computed on the average number of shares of common stock
outstanding during each year: 39,484,000 in 1996, 39,459,000 in 1995 and
39,392,000 in 1994.
Use of Estimates in the Financial Statements
- --------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Although actual results could differ from these
estimates, significant adjustments to these estimates historically have not been
required.
Change in Accounting Principles
- -------------------------------
Effective January 1, 1996, the company adopted Statement of Financial Accounting
Standards No. (SFAS) 123, "Accounting for Stock-Based Compensation." Under SFAS
123, companies may elect to adopt the fair value method of accounting for
stock-based compensation or continue to use Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) to measure expense
associated with stock-based compensation. The company has elected to continue
to follow APB 25 which results in net income (loss) and earnings(loss) per
share that are not materially different from amounts determined using the fair
value method of SFAS 123.
During 1995, the company adopted the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires impairment losses to be recognized for long-lived assets
used in continuing operations when indicators of impairment are present and the
assets' carrying value is not anticipated to be recovered through future
operations or sale. The application of SFAS 121 resulted in a charge to 1996
operating results of $225 million ($175 million net of tax or $4.43 per share).
See Note K.
Reclassifications
- -----------------
Certain amounts presented in prior years' financial statements have been
reclassified to conform with the 1996 presentation.
NOTE B - FINANCING ARRANGEMENTS
In July 1996, the company filed a shelf registration statement to issue up to
$400 million in unsecured debt securities. These securities may be offered as a
separate series in amounts, at prices and on terms to be determined by market
conditions at the time of sale. Net proceeds from the sale of the securities may
be used for working capital and general corporate purposes.
During the third quarter of 1996, the company issued $200 million of unsecured
notes under this registration statement which are included in long-term debt.
The notes mature on August 1, 2006 and bear interest at 7.80%. Net proceeds
received from the issuance of these notes were used to temporarily reduce
outstanding borrowings on the company's short-term bank loans.
The notes contain restrictive covenants limiting the ability of the company and
its subsidiaries to incur liens on assets and enter into certain leasing
transactions.
-23-
<PAGE> 24
NOTE B - FINANCING ARRANGEMENTS, CONTINUED
Short-term debt consisted of borrowings of $230 million and $185 million at
December 31, 1996 and 1995, respectively, under an unsecured $300 million Credit
Agreement with several banks which expires in March 1999. Borrowings also
consisted of $12.5 million in 1995 under an unsecured $25 million revolving bank
line of credit which expires in April 1998. Interest on outstanding borrowings
is based on various rates as defined in the agreements. These 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. The
weighted average interest rate on all short-term borrowings during 1996 was
5.76% and 6.44% in 1995. Total interest payments amounted to $13.5 million and
$8.5 million during 1996 and 1995, respectively.
The outstanding balance of long-term and short-term debt approximates fair value
at December 31, 1996 and 1995.
NOTE C - OTHER FINANCIAL DATA
Property and equipment (at cost) consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(dollars in thousands)
<S> <C> <C>
Land $ 103,331 $ 111,453
Structures 413,584 377,002
Equipment 1,052,097 986,479
---------- ----------
1,569,012 1,474,934
Less allowance for depreciation 720,693 617,587
---------- ----------
Total Property and Equipment $ 848,319 $ 857,347
========== ==========
Accounts payable consists of the following:
1996 1995
---------- ----------
(dollars in thousands)
Trade and other payables $ 207,079 $ 177,015
Drafts outstanding 39,595 27,854
Taxes, other than income 15,639 14,537
---------- ----------
Total Accounts Payable $ 262,313 $ 219,406
========== ==========
</TABLE>
-24-
<PAGE> 25
NOTE C - OTHER FINANCIAL DATA, CONTINUED
Other income (expense), net consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1996 1995 1994
-------- -------- -------
(dollars in thousands)
<S> <C> <C> <C>
Interest income $ 830 $ 982 $2,357
Interest income from discontinued operations -- 8,227 3,899
Interest expense (14,391) (3,800) --
Other, net 3,245 998 121
-------- ------- ------
Other Income (Expense), net $(10,316) $ 6,407 $6,377
======== ======= ======
</TABLE>
Interest income from discontinued operations represented intercompany interest
charged to REX and RGA for borrowings directly attributable to these entities.
NOTE D - EMPLOYEE BENEFIT PLANS
Retirement Plans
- ----------------
The company has defined benefit pension plans covering certain employees. The
benefits are based on, among other things, years of service and average
compensation during employment with the company. The company's funding policy is
to contribute amounts to the plans sufficient to meet the minimum funding
requirements, plus such additional amounts the company may determine to be
appropriate.
The following table reconciles the funded status of the company's pension plans
to prepaid pension cost which is reflected in other assets in the consolidated
balance sheet.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(dollars in thousands)
<S> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligation, including vested benefits of $182,190
in 1996 and $177,369 in 1995 $ 206,240 $ 201,995
========= =========
Projected benefit obligation for service rendered to date $ 239,499 $ 231,774
Plan assets at fair value, primarily listed stocks, bonds and U.S. government
securities 339,387 305,378
--------- ---------
Plan assets greater than projected benefit obligation 99,888 73,604
Unrecognized net gain (57,217) (46,019)
Unrecognized prior service cost 18,398 20,102
Unrecognized net asset at transition (16,864) (18,269)
--------- ---------
Prepaid Pension Cost $ 44,205 $ 29,418
========= =========
</TABLE>
-25-
<PAGE> 26
NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED
Net pension cost consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 13,952 $ 12,685 $ 11,845
Interest cost on projected benefit obligation 15,616 8,495 7,450
Actual return on plan assets (39,571) (10,615) (5,517)
Net amortization and deferral 10,985 3,367 274
-------- -------- --------
Net Pension Cost $ 982 $ 13,932 $ 14,052
======== ======== ========
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7% and 4% in 1996 and 1995, respectively. The expected long-term
rate of return on assets was 8.75% in 1996 and 7.75% in 1995 and 1994. The
change in the expected long-term rate of return decreased pension cost in 1996
by approximately $3 million.
The company contributed $16.6 million in 1996, $14.6 million in 1995 and $14
million in 1994 to various employee defined contribution plans which invest
primarily in company stock. Annual contributions are related primarily to
employees' salaries and wages.
Postretirement Health Care Benefits
- -----------------------------------
The company provides health care benefits to certain retirees who contribute to
the costs of these benefits. The following table sets forth the amounts
reflected in long-term self-insurance accruals in the consolidated balance
sheet:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
(dollars in thousands)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees $ (4,917) $ (4,590)
Fully eligible active plan participants (3,791) (4,131)
Other active plan participants (7,237) (9,910)
-------- --------
(15,945) (18,631)
Unrecognized net gain (5,202) (1,545)
-------- --------
Accrued Postretirement Benefit Cost $(21,147) $(20,176)
======== ========
</TABLE>
-26-
<PAGE> 27
NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED
Net periodic postretirement benefit cost consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
(dollars in thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 878 $ 1,523 $1,263
Interest cost on accumulated postretirement benefit
obligation 1,071 1,302 1,202
Net amortization and deferral (252) (22) 10
------- ------- ------
Net Postretirement Benefit Cost $ 1,697 $ 2,803 $2,475
======= ======= ======
</TABLE>
At December 31, 1996, the assumed health care cost trend rate was 9.1% for 1997
and is assumed to decrease gradually to 5.5% by 2004 and remain at that level
thereafter. Increasing the assumed health care cost trend rates by one
percentage point in each year would not have a material effect. The weighted
average discount rate used in determining the actuarial present value of the
accumulated postretirement benefit obligation was 7% at December 31, 1996 and
1995.
NOTE E - INCOME TAXES
Significant components of the company's deferred tax liabilities and assets
consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(dollars in thousands)
<S> <C> <C>
Deferred Tax Liabilities
Property & Equipment $19,787 $ 57,465
Pensions 18,830 27,107
------- --------
Total Deferred Tax Liabilities 38,617 84,572
Deferred Tax Assets
Self-insurance accruals 34,241 37,592
Allowance for uncollectible accounts 11,597 3,801
Other employee benefits 10,877 12,006
State income taxes 4,760 475
Other 2,273 482
------- --------
Total Deferred Tax Assets 63,748 54,356
------- --------
Net Deferred Tax Asset (Liability) $25,131 $(30,216)
======= ========
</TABLE>
The company has determined no valuation allowance is required on the above net
deferred tax asset based on the ability to recover taxes previously paid.
-27-
<PAGE> 28
NOTE E - INCOME TAXES, CONTINUED
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Taxes Currently Payable
Federal $ 8,597 $ 55,436 $ 75,871
State and local 9,517 6,424 11,360
-------- -------- --------
18,114 61,860 87,231
Deferred Taxes (Credits)
Federal (50,140) 7,059 (12,823)
State and local (5,207) 807 (1,465)
-------- -------- --------
(55,347) 7,866 (14,288)
-------- -------- --------
Provision (Benefit) for Income Taxes $(37,233) $ 69,726 $ 72,943
======== ======== ========
</TABLE>
Income tax payments, including amounts for discontinued operations, totaled
$10.6 million in 1996, $41 million in 1995 and $60.2 million in 1994.
The company has net operating loss carryforwards of approximately $130 million
for state income tax purposes which are available to offset future taxable
income. These carryforwards expire from 2001 to 2111.
The effective tax rate differs from the federal statutory rate as set forth in
the following reconciliation:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Federal statutory tax rate (35.0)% 35.0% 35.0%
State and local income taxes, net of federal tax benefit 1.4 2.9 3.8
Non-deductible operating costs 1.8 2.1 1.8
Goodwill impairment 14.2 .7 --
Other, net (.8) 2.3 1.9
---- ---- ----
Effective Tax Rate (18.4)% 43.0% 42.5%
==== ==== ====
</TABLE>
NOTE F - SHAREHOLDERS' EQUITY
The Board of Directors is authorized to issue shares of serial preferred stock
in one or more series and to fix the terms and conditions of the preferred
shares, including: dividend rates and payment dates; liquidation prices;
redemption rights and prices; sinking fund requirements; conversion rights; and
restrictions on issuance. Voting rights would be on the same basis as
outstanding common shares.
On August 14, 1996, the Board of Directors approved the adoption of a
shareholder rights plan. Under the plan, the Board declared a dividend of one
right for each outstanding share of company common stock held of record as of
the close of business on August 26, 1996. Each right entitles the holder to
purchase from the company a defined number of common shares at 50% of the then
market price, subject to adjustment. The rights, which expire on August 28,
2006, unless redeemed, will not be exercisable, and no rights certificate will
be distributed, until 10 calendar days following a public announcement that a
person or group has acquired 20% of the company's common stock and as otherwise
set forth in the rights agreement. Subject to certain exceptions, the company
generally will be entitled to redeem the rights at $0.001 per right at any time.
-28-
<PAGE> 29
NOTE G - STOCK OPTIONS
During 1996, the company's shareholders approved the adoption of the 1996 Equity
Incentive Compensation Plan which authorized up to 1,900,000 shares of common
stock to be granted to key employees in the form of stock options and other
stock-based awards. In 1996, the company awarded approximately 828,000 stock
options exercisable primarily at $38.50 per share of which 754,000 were
outstanding at December 31, 1996. The options vest over a five year period and
expire in 2006. At December 31, 1996, none of the options was exercisable.
NOTE H - OPERATING LEASES
The company leases various facilities and equipment under noncancelable
operating leases requiring minimum future rentals aggregating $166.8 million
payable as follows: 1997-$40.7 million, 1998-$29.2 million, 1999-$18.9 million,
2000-$13.5 million, 2001-$10.7 million and thereafter $53.8 million. Rental
expense for operating leases was $56 million in 1996, $46 million in 1995 and
$36.4 million in 1994.
NOTE I - DISCONTINUED OPERATIONS
On January 2, 1996, the company distributed to shareholders 95% of the issued
and outstanding shares of common stock of REX, its wholly-owned subsidiary. This
distribution, which was tax-free for federal income tax purposes to the company
and its shareholders, was made to holders of record of the company's common
stock at the close of business on December 29, 1995. Shareholders received one
share of REX common stock for every two shares of company common stock held on
that date. The consolidated financial statements reflect the distribution as of
December 31, 1995, which resulted in a reduction of the company's shareholders'
equity of $199.7 million, representing the book value of the net assets
distributed. The company's remaining investment in REX amounted to $8.4 million
and $10.5 million at December 31, 1996 and 1995, respectively, and is included
in other assets.
On November 6, 1995, the company announced plans to exit the air freight
business served by its wholly-owned subsidiary, RGA. All domestic air freight
operations of RGA ceased November 20, 1995. All international operations ceased
prior to year end. The company recorded a pre-tax charge of $64.9 million
related to the discontinuance of this business.
-29-
<PAGE> 30
NOTE I - DISCONTINUED OPERATIONS, CONTINUED
Loss from discontinued operations for 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED REX RGA TOTAL
- ---------- ----------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C>
December 31, 1995
- -----------------
Revenue $ 2,288,845 $ 99,425 $ 2,388,270
Operating expenses 2,299,615 180,557 2,480,172
----------- --------- -----------
Operating loss (10,770) (81,132) (91,902)
Other expense, net (3,103) (6,571) (9,674)
----------- --------- -----------
Loss before income taxes (13,873) (87,703) (101,576)
Income tax benefit (1,206) (30,420) (31,626)
----------- --------- -----------
Loss from Discontinued Operations $ (12,667) $ (57,283) $ (69,950)
=========== ========= ===========
December 31, 1994
- -----------------
Revenue $ 2,171,117 $ 73,364 $ 2,244,481
Operating expenses 2,200,055 157,792 2,357,847
----------- --------- -----------
Operating loss (28,938) (84,428) (113,366)
Other expense, net (1,775) (3,901) (5,676)
----------- --------- -----------
Loss before income taxes (30,713) (88,329) (119,042)
Income tax benefit (9,268) (30,797) (40,065)
----------- --------- -----------
Loss from Discontinued Operations $ (21,445) $ (57,532) $ (78,977)
=========== ========= ===========
The loss on discontinuance for 1995 consists of the following:
Loss on Discontinuance Before Income Taxes
Shut-down costs related to the discontinuance of
RGA's air freight business $ 64,925
Transaction costs for the spin-off of REX 7,518
-----------
72,443
Income tax benefit (22,779)
-----------
Loss on Discontinuance $ 49,664
===========
</TABLE>
-30-
<PAGE> 31
NOTE J - COMMITMENTS AND CONTINGENCIES
During 1994, the company reached agreement with the Internal Revenue Service and
the Department of Justice related to the classification of certain drivers at
the company's small-package carrier for employment tax purposes. The net
after-tax cost of the settlement amounted to $13.7 million or $.35 per share and
is included in the 1994 consolidated statement of income.
Various legal proceedings arising from the normal conduct of business are
pending, but, in the opinion of management, the ultimate disposition of these
matters will have no material effect on the financial condition of the company.
NOTE K - SUBSEQUENT EVENTS
A major restructuring of the Viking operations was announced on March 27, 1997.
As a result of this restructuring, the company recorded a non-cash $225 million
asset impairment charge ($175 million net of tax or $4.43 per share) related to
the write-down of goodwill of $82 million and property and equipment of $143
million which has been reflected in the 1996 operating results. The impaired
assets were written down to fair value based on estimates of appraised values
for real estate and quoted prices for equipment. Additional restructuring
charges, which include employee severance and other restructuring costs, will be
included in the company's operating results for the first quarter of 1997.
-31-
<PAGE> 32
<TABLE>
<CAPTION>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
CALIBER SYSTEM, INC.
Income
Income (Loss)From Loss From
Operating (Loss) From Loss From Continuing Discontinued Net Average
Income Continuing Discontinued Net Operations Operations Income (Loss) Shares
Quarter Ended Revenue (Loss) Operations Operations Income(Loss) Per Share Per Share Per Share Outstanding
- ------------- ------- --------- ----------- ------------ ------------ ---------- ------------ ------------ ------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996
March 23 $ 582,074 $ 18,181 $ 9,621 $ - $ 9,621 $ 0.24 $ - $ 0.24 39,505,000
June 15 615,901 1,414 220 - 220 0.01 - 0.01 39,525,000
September 7 627,226 224 (1,970) - (1,970) (0.05) - (0.05) 39,505,000
December 31(a) 892,941 (211,859) (172,994) - (172,994) (4.38) - (4.38) 39,421,000
---------- --------- ----------- ------------ ------------ ---------- ------------ ------------
Total $2,718,142 $(192,040) $ (165,123) $ - $ (165,123) $ (4.18) $ - $ (4.18)
========== ========= =========== ============ ============ ========== ============ ============
1995
March 25 $ 543,469 $ 33,472 $ 21,530 $ (15,679) $ 5,851 $ 0.54 $ (0.39) $ 0.15 39,434,000
June 17 550,779 31,739 22,357 (24,359) (2,002) 0.57 (0.62) (0.05) 39,467,000
September 9 552,741 33,029 22,218 (19,890) 2,328 0.56 (0.50) 0.06 39,470,000
December 31 (b) 801,183 57,488 26,304 (59,686) (33,382) 0.67 (1.52) (0.85) 39,463,000
---------- --------- ----------- ------------ ------------ ---------- ------------ ------------
Total $2,448,172 $ 155,728 $ 92,409 $ (119,614) $ (27,205) $ 2.34 $ (3.03) $ (0.69)
========== ========= =========== ============ ============ ========== ============ ============
<FN>
Notes:
(a) The company announced a major restructuring of the Viking operations on
March 27, 1997. Nonrecurring charges relating to the restructuring of $225
million are included in 1996 operating expenses. See Note K to the
consolidated financial statements.
(b) Includes costs associated with the consolidation of the company's regional
carriers ($6.6 million) and adoption of SFAS 121 ($3.1 million) as
described in Management's Discussion and Analysis.
</TABLE>
The company uses a 13 four-week period calendar with 12 weeks in each of the
first three quarters and 16 weeks in the fourth quarter.
Effective for 1997, the company has changed the methodology by which certain
corporate costs are allocated to operating units. As a result, 1996 operating
income (loss) for RPS and Viking will be restated as follows in millions: RPS -
First Quarter $27.7; Second Quarter $28.2; Third Quarter $29.5; and Fourth
Quarter $50.3. Viking - First Quarter $(14); Second Quarter $(33.3); Third
Quarter $(38.2); and Fourth Quarter $(276.3).
-32-
<PAGE> 33
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CALIBER SYSTEM, INC.
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL.C COL.D COL.E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE ----------------------------
DESCRIPTION AT BEGINNING (1) (2) DEDUCTIONS- BALANCE AT END
OF PERIOD CHARGED CHARGED TO DESCRIBE OF PERIOD
TO COST OTHER ACCOUNTS-
AND EXPENSES DESCRIBE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Reserve related to
discontinuance of RGA $49,934 $ -- $ -- $37,097 (A) $12,837
Allowance for uncollectible
accounts $12,586 $37,439 $ -- $18,070 (C) $31,955
1995
Reserve related to
discontinuance of RGA $ -- $64,925 $ -- $14,991 (A) $49,934
Allowance for uncollectible
accounts $ 9,639 $12,737 $ -- $ 9,790 (C) $12,586
1994
Allowance for uncollectable
accounts (B) $ 6,891 $ 9,274 $ -- $ 6,526 (C) $ 9,639
<FN>
(A) Charges against reserve.
(B) Restated to reflect the spin-off of Roadway Express, Inc. and exit from
the air freight business served by Roadway Global Air, Inc. (RGA).
(C) Uncollectible accounts written off, net of recoveries.
</TABLE>
-33-
<PAGE> 34
EXHIBIT INDEX
3.1 Second Amended Articles of Incorporation of the Registrant effective
February 29, 1996 (filed as Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, and
incorporated herein by reference).
3.2 Restated Amended Code of Regulations of the Registrant effective May
10, 1989 (filed as Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and
incorporated herein by reference).
4.1 Caliber System, Inc. and Keybank National Association Rights Agreement
dated August 22, 1996 including Form of Rights Certificate (Exhibit A)
and Summary of Rights (Exhibit B) (filed as Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated August 22, 1996 and Form
8-K/A dated September 12, 1996, and incorporated herein by reference).
4.2 Indenture between Caliber System, Inc. and Chase Manhattan Bank
(formerly known as Chemical Bank) dated as of August 1, 1996 (a form
of which was filed as Exhibit 4 to the Registrant's Form S-3
Registration Statement No. 333-07473 dated July 12, 1996, and
incorporated herein by reference).
9 Amended Restated Voting Trust Agreement effective November 1, 1992
(filed as Exhibit 9 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, and incorporated herein by
reference).
10.1 Distribution Agreement between Roadway Services, Inc. and Roadway
Express, Inc. dated December 29, 1995 (filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated January 18, 1996, and
incorporated herein by reference).
10.2(a) Credit Agreement among Roadway Services, Inc., Several Lenders and
Chase Manhattan Bank (formerly known as Chemical Bank) dated as of
March 24, 1995 (filed as Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q dated March 25, 1995, and incorporated herein by
reference).
10.2(b) Form of First Amendment and Waiver to Credit Agreement among Roadway
Services, Inc., Several Lenders and Chase Manhattan Bank (formerly
known as Chemical Bank) dated as of September 29, 1995 (filed as
Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated
January 18, 1996, and incorporated herein by reference).
10.2(c) Form of Second Amendment to Credit Agreement among Caliber System,
Inc., Several Lenders and Chase Manhattan Bank.
_______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
<PAGE> 35
10.3 Credit Agreement entered into between Caliber System, Inc. and Morgan
Guaranty Trust Company of New York on July 8, 1996 (filed as Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q dated June 15,
1996, and incorporated herein by reference).
10.4* Caliber System, Inc. Directors' Deferred Compensation Plan effective
May 8, 1996 (filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.5* Caliber System, Inc. Nonemployee Directors' Stock Retainer Plan
effective May 8, 1996 (filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q dated June 15, 1996, and incorporated
herein by reference).
10.6* Caliber System, Inc. Nonemployee Directors' Stock Plan (1989)
effective May 8, 1996 (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q dated June 15, 1996, and incorporated
herein by reference).
10.7* Caliber System, Inc. 1994 Nonemployee Directors' Stock Plan effective
May 8, 1996 (filed as Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.8* Caliber System, Inc. Retirement Plan for Nonemployee Directors
effective May 8, 1996.
10.9* Caliber System, Inc. 1997 Officers' Incentive Compensation Plan dated
December 18, 1996.
10.10* Caliber System, Inc. Long-Term Stock Award Incentive Plan effective
January 2, 1996 (filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q dated March 23, 1996, and incorporated herein by
reference).
10.11* Caliber System, Inc. 1996 Equity Incentive Compensation Plan effective
May 8, 1996 (filed as Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.12(a)* Caliber System, Inc. Excess Plan effective January 2, 1996 (filed as
Exhibit 10.7(a) to the Registrant's Quarterly Report on Form 10-Q
dated June 15, 1996, and incorporated herein by reference).
10.12(b)* Caliber System, Inc. 401(a)(17) Benefit Plan effective January 2, 1996
(filed as Exhibit 10.7(b) to the Registrant's Quarterly Report on Form
10-Q dated June 15, 1996, and incorporated herein by reference).
10.12(c)* Caliber System, Inc. Administrative Document for Excess Plan and
401(a)(17) Benefit Plan effective January 2, 1996 (filed as Exhibit
10.7(c) to the Registrant's Quarterly Report on Form 10-Q dated June
15, 1996, and incorporated herein by reference).
10.13(a)* Form of Caliber System, Inc. Indemnification Agreement for Directors.
______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
<PAGE> 36
10.13(b)* Form of Caliber System, Inc. Indemnification Agreement for Officers.
10.14(a)* Form of Second Amended and Restated Management Retention Agreement
(Tier 1).
10.14(b)* Form of Second Amended and Restated Management Retention Agreement
(Tier 2).
10.14(c)* Form of Second Amended and Restated Management Retention Agreement
(Tier 2A).
10.14(d)* Form of Second Amended and Restated Management Retention Agreement
(Tier 3).
10.15(a)* Form of Employment Agreement (Form A).
10.15(b)* Form of Employment Agreement (Form B).
10.15(c)* Form of Agreement Regarding Change in Management and Termination of
Employment.
21 Significant Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
<PAGE> 1
Exhibit 10.2(c)
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT, dated as of March 12, 1997 (this
"AMENDMENT"), to the Credit Agreement, dated as of March 24, 1995
(the "CREDIT AGREEMENT"), among CALIBER SYSTEM, INC. (formerly
ROADWAY SERVICES, INC.), an Ohio corporation (the "BORROWER"),
the several banks and other financial institutions parties
thereto (the "LENDERS") and THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank), a New York banking corporation, as agent
(in such capacity, the "AGENT") for the Lenders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower has requested the Agent and the
Lenders to agree to amend certain provisions of the Credit
Agreement; and
WHEREAS, the Agent and the Lenders are willing to agree
to such amendments, but only on the terms and subject to the
conditions set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein
defined.
2. AMENDMENTS TO SUBSECTION 1.1. Subsection 1.1 is
hereby amended by:
(a) deleting the definitions of "Applicable Margin"
and "Minimum Consolidated Net Worth" and substituting in lieu of
thereof the following:
"APPLICABLE MARGIN" for any day, with respect to any
Eurodollar Loan, or with respect to the facility fees and
utilization fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption
"Eurodollar Spread," "Facility Fee Rate" or "Utilization Fee
Rate," as the case may be, based upon the ratings by Moody's
and S&P, respectively, applicable on such date to the Index
Debt:
"MINIMUM CONSOLIDATED NET WORTH": for the fiscal year
1996, $600,000,000 and for each fiscal quarter thereafter,
the sum of (a) 50% of the Borrower's consolidated net income
after dividends for such period (but only if the amount
calculated pursuant to this clause (a) is positive) and (b)
the Minimum Consolidated Net Worth for the prior period.
<PAGE> 2
2
Eurodollar Facility Fee Utilization
Index Debt Ratings: Spread Rate Fee Rate
------------------- ---------- ------------ -----------
Category 1 .15% .10% .075%
Category 2 .235% .125% .100%
Category 3 .3125% .1875% .125%
Category 4 .50% .25% .125%
For purposes of the foregoing, (i) if either
Moody's or S&P shall not have in effect a rating for the
Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then
such rating agency shall be deemed to have established a
rating in Category 4 and (ii) if the ratings established or
deemed to have been established by Moody's and S&P for the
Index Debt shall be changed (other than as a result of a
change in the rating system of Moody's or S&P), such change
shall be effective as of the date on which it is first
announced by the applicable rating agency. Each change in
the Applicable Margin shall apply during the period
commencing on the effective date of such change and ending
on the date immediately preceding the effective date of the
next such change. If the rating system of Moody's or S&P
shall change, or if either such rating agency shall cease to
be in the business of rating corporate debt obligations, the
Borrower and the Lenders shall negotiate in good faith to
amend this definition to reflect such changed rating system
or the unavailability of ratings from such rating agency
and, pending the effectiveness of any such amendment, the
Applicable Margin shall be determined by reference to the
rating most recently in effect prior to such change or
cessation.
(b) adding thereto the following definitions in the
proper alphabetical order:
"CATEGORY 1": applies on any day on which the S&P
Rating of the Index Debt is at least A- and the Moody's
rating of the Index Debt is at least A3.
"CATEGORY 2": applies on any day on which (a) Category
1 does not apply and (b) the S&P rating of the Index Debt is
at least BBB+ and the Moody's rating of the Index Debt is at
least Baa1.
"CATEGORY 3": applies on any day on which (a) neither
Category 1 nor Category 2 applies and (b) the S&P rating of
the Index Debt is at least BBB- and the Moody's rating of
the Index Debt is at least Baa3.
<PAGE> 3
3
"CATEGORY 4": applies on any day on which neither
Category 1, Category 2 nor Category 3 applies.
"EBITDA": for any fiscal period, Net Income or Net Loss,
as the case may be, for such fiscal period, after restoring
thereto amounts deducted for, without duplication,
(a) interest expense, (b) taxes based upon net income, (c)
depreciation and amortization, (d) other non-cash charges and
(e) rental expense.
"INDEX DEBT": senior, unsecured, long-term indebtedness
for borrowed money of the Borrower that is not guaranteed by
any other Person or subject to any other credit enhancement.
"MOODY'S": Moody's Investors Service, Inc.
"NET INCOME" or "NET LOSS": for any fiscal period, the
amount which, in conformity with GAAP, would constitute the
net income or net loss, as the case may be, of the Borrower
and its Subsidiaries for such fiscal period; PROVIDED that Net
Income or Net Loss for the Borrower's 1996 fiscal year and for
any fiscal period during the Borrower's 1997 fiscal year shall
exclude extraordinary, unusual and non-recurring gains and
losses relating to the Viking Restructuring (but only to the
extent any such losses do not exceed $275,000,000 during the
Borrower's 1996 and 1997 fiscal years).
"S&P": Standard & Poor's.
"TOTAL DEBT": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices),
(b) any other indebtedness of such Person which is evidenced
by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances issued or
created for the account of such Person and with respect to
unpaid reimbursement obligations related to letters of credit
issued for the account of such Person, (e) all liabilities
secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable
for the payment thereof, (f) the present value (discounted at
a rate per annum equal to 8.00%) of the future committed
rental payments of such Person under operating leases which
would be required in accordance with GAAP to be described in
the footnotes to an audited financial statement of such Person
prepared as of such date and (g) all Guarantee Obligations of
such Person in respect of Total Debt of other Persons (other
than any such Guarantee Obligation that would result from a
sublease by such Person in any case where the obligations of
such Person under such sublease would not be required in
accordance with GAAP to be described in the footnotes to an
audited financial statement of such Person prepared as of such
date).
<PAGE> 4
4
"VIKING RESTRUCTURING": the sale or liquidation of the
business of Viking Freight Systems other than the Western
Division thereof.
"VIKING RESTRUCTURING CHARGES": all charges to income
and expenses incident to the Viking Restructuring
(including, without limitation, impairment charges,
transition expenses and certain related asset writedowns).
(c) deleting the definition of "Debt/Capitalization
Ratio."
3. AMENDMENT TO SUBSECTIONS 2.4 AND 2.4A.
Subsections 2.4 and 2.4A of the Credit Agreement are hereby
amended to read in their entirety as follows:
2.4 FACILITY FEE. The Borrower agrees to pay to the
Agent for the account of each Lender a facility fee (the
"FACILITY FEE") on the amount of such Lender's Commitment
for the period from and including the date of this Agreement
to the Termination Date, payable quarterly in arrears on the
last day of each March, June, September and December and on
the Termination Date or such earlier date as the Commitments
shall terminate as provided herein, commencing on the first
of such dates to occur after the date hereof. The Facility
Fee will be equal to the applicable rate per annum set forth
under the heading "Facility Fee Rate" in the definition of
the term "Applicable Margin."
2.4A UTILIZATION FEE. The Borrower agrees to pay to
the Agent for the account of each Lender a utilization fee
(the "UTILIZATION FEE") on the aggregate principal amount of
the Loans outstanding for each day during which the
aggregate principal amount of the Loans exceeds 66 2/3% of
the Commitments, payable quarterly in arrears on the last
day of each March, June, September and December and, if
applicable, on the Termination Date or such later date upon
which the Loans shall be paid in full. The Utilization Fee
will be equal to the applicable rate per annum set forth
under the heading "Utilization Fee Rate" in the definition
of the term "Applicable Margin."
4. AMENDMENT TO SUBSECTION 6.1. Subsection 6.1 of
the Credit Agreement is hereby amended to read in its entirety as
follows:
6.1 MAINTENANCE OF CONSOLIDATED NET WORTH; LIMITATION
ON LEVERAGE. (a) Permit at any time the sum of (i)
Consolidated Net Worth plus (ii) the aggregate amount (but
in no event more than $275,000,000) of Viking Restructuring
Charges for the Borrower's 1996 and 1997 fiscal years to be
less than the applicable Minimum Consolidated Net Worth.
(b) Permit the aggregate amount of Total Debt
outstanding on the last day of any fiscal quarter to EBITDA
of the Borrower and its Subsidiaries for the period of four
<PAGE> 5
5
consecutive fiscal quarters then ending to exceed (i) in the
case of the first two fiscal quarters of the Borrower's 1997
fiscal year, 3.00 to 1.00 or (ii) in the case of any
subsequent fiscal quarter, 2.75 to 1.00.
5. AMENDMENT TO SUBSECTION 6.4. Subsection 6.4 of
the Credit Agreement is hereby amended by deleting the word "and"
in subsection 6.4(d) and by adding the following paragraphs in
their proper order:
(f) the Viking Restructuring; and
(g) the sale, in connection with a sale and leaseback
transaction, of the RPS headquarters building located in the
Pittsburgh, Pennsylvania area; PROVIDED that the net cash
proceeds thereof shall be applied to prepay the Loans.
6. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby confirms that, after giving effect to the amendments
provided for herein, (i) the representations and warranties
contained in Section 3 of the Credit Agreement are true and
correct in all material respects on and as of the date hereof and
no Default or Event of Default has occurred and is continuing and
(ii) the Borrower has all necessary power and has taken all
corporate action necessary to approve and authorize this
Amendment.
7. NO OTHER AMENDMENTS. Except as expressly amended
hereby, the Credit Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms.
8. COUNTERPARTS. This Amendment may be executed by
the parties hereto in any number of separate counterparts, and
all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
9. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective on the date on which the Borrower and each of
the Lenders shall have executed a counterpart of this Amendment,
and the Agent shall have received confirmation of such execution
and a fee payable to each Lender in an amount equal to 0.10% of
such Lender's Commitment.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
11. COSTS AND EXPENSES. The Borrower agrees to pay
all reasonable costs and expenses (including reasonable
attorneys' fees) incurred by the Agent in connection with the
preparation, execution and delivery of this Amendment.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the date set forth above.
CALIBER SYSTEM, INC.
By: /s/
------------------------------
Title:
THE CHASE MANHATTAN BANK, as Agent and
as a Lender
By:
-------------------------------
Title:
ABN-AMRO BANK N.V.
By:
-------------------------------
Title:
NATIONAL CITY BANK
By:
-------------------------------
Title:
SOCIETY NATIONAL BANK
By:
-------------------------------
Title:
BANK ONE, AKRON, N.A.
By:
-------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------
Title:
<PAGE> 1
Exhibit 10.8
CALIBER SYSTEM, INC.
RETIREMENT PLAN FOR
NONEMPLOYEE DIRECTORS
(As Amended as of May 8, 1996)
<PAGE> 2
CALIBER SYSTEM, INC.
--------------------
RETIREMENT PLAN FOR NONEMPLOYEE DIRECTORS
(AS AMENDED AS OF MAY 8, 1996)
------------------------------
ARTICLE I
---------
PURPOSE
-------
The purpose of the Caliber System, Inc. Retirement Plan for
Nonemployee Directors (the Plan) is to provide a retirement benefit to
nonemployee Directors of Caliber System, Inc. (formerly Roadway Services, Inc.)
for service prior to July 1, 1996.
ARTICLE II
----------
DEFINITIONS
-----------
For the purposes of the Plan, the following words and phrases shall
have the meanings indicated:
2.1 BOARD. Board means the Board of Directors of the Company.
2.2 COMPANY. Company means Caliber System, Inc., an Ohio corporation,
and any successor thereto.
2.3 CREDITED SERVICE. Credited Service means all service prior to July
1, 1996 as a Director of the Company or of its predecessor, Roadway Express,
Inc., including service as a Director prior to the Effective Date.
2.4 DIRECTOR. Director means a member or former member of the Board
who is not and has never been an employee of the Company or any of its
subsidiaries.
2.5 EFFECTIVE DATE. Effective Date of the Plan means January 1, 1989.
<PAGE> 3
2.6 PLAN ADMINISTRATOR. Plan Administrator means the Treasurer of the
Company or any other officer designated by the chief executive officer of the
Company to serve as administrator of the Plan.
2.7 RETAINER. Retainer means the annual fees payable in cash or shares
of the Company's common stock for service as a Director, but excluding meeting
fees, fees paid for service on Committees of the Board and expense
reimbursement; provided, however, that for all terminations of service on or
after December 31, 1995, Retainer shall mean $18,000 plus 100 shares of the
Company's common stock.
2.8 STOCK EQUIVALENT BENEFIT. An annual benefit payable in cash equal
to the fair market value of 200 shares of the Company's common stock, as
determined and redetermined annually by the Plan Administrator, as of December
31 of the year preceding each year in which payment of a Stock Equivalent
Benefit is to be made.
ARTICLE III
-----------
PARTICIPATION
-------------
All persons who are Directors on or after the Effective Date shall be
eligible to participate in the Plan; provided, however, that no person who first
becomes a Director after June 30, 1996 shall be eligible to participate in the
Plan. Each such person shall be deemed a participant in the Plan unless he or
she delivers written notice to the Company that he or she does not wish to
participate.
ARTICLE IV
----------
PLAN BENEFITS
-------------
The annual amount of the benefit payable under the Plan shall be the
sum of (a) the Retainer in effect on the date the Director's service terminates,
plus (b) in the case of a former Director with 5 or more years of Credited
Service, a Stock Equivalent Benefit. Such annual benefit shall be paid to the
2
<PAGE> 4
former Director, or his or her surviving spouse, if applicable, in quarterly
installments on the last day of each calendar quarter commencing with the first
full calendar quarter following his or her termination of service as a Director
for any reason, including death, provided that a Director may elect, by notice
in writing delivered to the Company within 30 days after his or her election to
the Board, to defer the commencement of payment of benefits hereunder until he
or she reaches a specified age (if later than the date of termination of service
as Director).
ARTICLE V
---------
DURATION OF BENEFITS
--------------------
Subject to Article VI, quarterly benefit payments under the Plan shall
continue during the joint lives of the former Director and his or her surviving
spouse until the aggregate number of such payments equals the total number of
quarters of Credited Service by the individual as a Director, except that the
Stock Equivalent Benefit shall continue for at least 32 quarters so long as the
former Director or his or her spouse shall survive.
ARTICLE VI
----------
SUSPENSION OF BENEFITS
----------------------
If a former Director who is receiving benefits under the Plan returns
to service as a Director, payment of benefits under the Plan shall be suspended
during such service and shall commence again on the last day of the first full
calendar quarter following the date on which such subsequent service terminates.
Other provisions of the Plan notwithstanding, the total number of quarterly
benefit payments hereunder to a former Director and his or her surviving spouse,
including payments both before and after a period of subsequent service, shall
not exceed the applicable maximum number specified in Article V.
3
<PAGE> 5
ARTICLE VII
-----------
EMPLOYMENT BY THE COMPANY
-------------------------
If a Director or former Director becomes an employee of the Company or
any of its subsidiaries, benefit payments under the Plan shall cease, and such
individual shall have no right to any further benefits under the Plan.
ARTICLE VIII
------------
FUNDING
-------
Neither participants, nor their surviving spouses, nor their heirs,
successors or assigns, shall have any secured interest or claim in any property
or assets of the Company. The Company's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Company to pay money in
the future. The Company may create a trust to hold funds to be used in payment
of its obligations under the Plan, and may fund such trust, provided that any
funds contained therein shall remain liable for the claims of the Company's
general creditors.
ARTICLE IX
----------
ADMINISTRATION
--------------
The Plan Administrator shall have full power and authority to
administer the Plan, including the power to promulgate rules of Plan
administration, the power to settle any disputes as to rights or benefits
arising from the Plan, the power to appoint agents and delegate duties, and the
power to make such decisions or take such action as the Plan Administrator, in
his or her sole discretion, deems necessary or advisable to aid in the proper
administration of the Plan.
ARTICLE X
---------
ALIENATION OF BENEFITS
----------------------
4
<PAGE> 6
No right or interest under the Plan of a participant (or any person
claiming through or under him or her), other than the surviving spouse of any
deceased participant, shall be assignable or transferable in any manner or be
subject to alienation, anticipation, sale, pledge, encumbrance or other legal
process or in any manner be liable for or subject to the debts or liabilities of
any such participant. If any participant or such other person (other than the
surviving spouse of any deceased participant) shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve upon
anyone else or would not be enjoyed by him or her, then the Plan Administrator,
in his or her discretion, may terminate his or her interest in any such benefit
to the extent the Plan Administrator considers necessary or advisable to prevent
or limit the effects of such occurrence. Termination shall be effected by filing
a written "termination declaration" with the Secretary of the Company and making
reasonable efforts to deliver a copy to the participant whose interest is
adversely affected (the Terminated Participant).
As long as the Terminated Participant is alive, any benefits affected
by the termination shall be retained by the Company and, in the Plan
Administrator's sole and absolute judgment, may be paid to or expended for the
benefit of the Terminated Participant, his or her spouse, his or her children or
any other person or persons in fact dependent upon him or her in such a manner
as the Committee shall deem proper. Upon the death of the Terminated
Participant, all benefits withheld from him or her and not paid to others in
accordance with the preceding sentence shall be disposed of according to the
provisions of the Plan that would apply if he or she died prior to the time that
all benefits to which he or she was entitled were paid to him or her.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 WITHHOLDING. The Company shall deduct from the amount of any
payments hereunder all taxes and other amounts required to be withheld by
applicable laws.
5
<PAGE> 7
11.2 GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of Ohio.
11.3 AMENDMENT; TERMINATION. The Board at any time may amend or modify
in any respect or terminate the Plan, provided that no such amendment,
modification or termination shall adversely affect any rights to benefits under
the Plan relating to Credited Service prior to the effective date of such
amendment, modification or termination without the consent of the Director
affected thereby.
11.4 CAPTIONS. The captions contained herein are for convenience only
and shall not control or affect the meaning or construction hereof.
11.5 SUCCESSORS. The provisions of the Plan shall bind and inure to
the benefit of the Company and its successors and assigns. The term successors
as used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of the Company and successors of
any such corporation or other business entity.
11.6 RIGHT TO CONTINUED SERVICE. Nothing contained herein shall be
construed to confer upon any Director the right to continue to serve as a
Director of the Company or in any other capacity.
11.7 ADJUSTMENT OF STOCK EQUIVALENT BENEFIT. The Plan Administrator
shall make or provide for such adjustments in the number and kind of shares of
stock specified in Section 2.8 hereof as may be equitably required to prevent
dilution or enlargement of the benefits payable under the Plan that otherwise
would result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the 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,
or 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.
Moreover, in the event of any such transaction or event, the Plan Administrator,
with the approval
6
<PAGE> 8
of the Board, in his or her discretion, may provide in substitution for the
Stock Equivalent Benefit such alternative consideration as he or she, in good
faith, may determine to be equitable in the circumstances. Notwithstanding the
foregoing, no adjustment in the number or kind of shares shall be made hereunder
as a result of the spin-off on January 2, 1996 of Roadway Express, Inc.
7
<PAGE> 1
Exhibit 10.9
CALIBER SYSTEM, INC.
OFFICERS' INCENTIVE COMPENSATION PLAN
1997
PURPOSE:
The Caliber System, Inc. 1997 Officers' Incentive Compensation Plan is a profit
sharing plan that is designed to increase the company's consolidated net income.
CALCULATION:
When actual income from continuing operations for the year is equal to or less
than 80% of budgeted income from continuing operations, no incentive
compensation is earned. When actual income from continuing operations equals
budgeted income from continuing operations, target incentive compensation as
approved by the Board of Directors is earned. When actual income from continuing
operations equals or exceeds 120% of budgeted income from continuing operations,
200% of target incentive compensation is earned. When actual income from
continuing operations falls between 80% and 120% of budgeted income from
continuing operations, incentive compensation is interpolated between zero and
200% of target.
Notwithstanding the above calculations, a dollar amount of up to 10% of a
participant's target incentive compensation shall be payable as additional
incentive compensation or withheld from the amount otherwise computed at the
discretion of the Compensation Committee.
CONDITIONS OF PAYMENT:
If the participant is not in the Company's employ on December 31 of the plan
year due to death, disability, or retirement, the participant shall be allocated
a pro rata portion (based upon full weeks of service during the plan year) of
the amount that would otherwise have been earned for a full year performance. A
participant that voluntarily terminates during the year will also receive a pro
rata allocation provided that the participant does not accept employment with or
render service in any manner to a competitor of Caliber or any of its affiliates
for the period ending with the final payment of incentive compensation, and the
participant does not disclose to anyone confidential and secret information that
is a competitive asset of Caliber or any of its affiliates. If termination of
employment is initiated by the Company, the participant shall receive the pro
rata allocation provided that the Board of Directors determines that the
participant acted at all times in good faith and in a manner the participant
reasonably believed to be in or not opposed to the best interests of the
Company.
TIMING OF PAYMENT:
No amount of incentive compensation earned under this Plan shall be paid to the
participant, either as an advance or as partial or as full settlement, prior to
January 1, 1998: and all incentive compensation earned under this Plan shall be
credited or paid to the participant prior to March 15, 1998.
<PAGE> 1
Exhibit 10.13(a)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the _______
day of ____________________, 19___ by and between Caliber System, Inc., an Ohio
corporation (the "Company"), and _______________________ (the "Indemnitee"), a
Director of the company.
RECITALS
A. The Indemnitee is presently serving as a Director of the Company and
the Company desires the Indemnitee to continue in that capacity. The Indemnitee
is willing, subject to certain conditions, including, without limitation, the
execution and performance of this Agreement by the Company, to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the Restated Amended Code of Regulations of the Company, (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and Directors, including the Indemnitee,
against certain losses arising out of actual or threatened actions, suits or
proceedings to which such persons may be made or threatened to be made parties.
However, as a result of circumstances having no relation to, and beyond the
control of, the Company and the Indemnitee, there can be no assurance of the
continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue to serve
in his present capacity, the Company and the Indemnitee agree as follows:
1. CONTINUED SERVICE. The Indemnitee shall continue to
serve, at the will of the Company as a Director of the Company, so long as he is
duly elected and qualified in accordance with the Regulations or until he
resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY.
(a) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was a Director of the Company or is or was
serving at the request of the Company as a director, trustee, officer, employee
or agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, or by reason of any
action alleged to have been taken or omitted in any such capacity, against any
and all costs, charges, expenses (including, without limitation, fees and
expenses of attorneys and/or others; all such costs, charges and expenses being
herein jointly referred to as "Expenses"), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by the Indemnitee in connection
therewith including any appeal of or from any judgment or decision, unless it is
proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company. In addition, with
respect to any criminal action or proceeding,
<PAGE> 2
indemnification hereunder shall be made only if the Indemnitee had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
"nolo contendere" or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was a Director of the Company or is or was serving at the request of the Company
as a director, trustee, officer, employee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise, against any and all Expenses actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement thereof
or any appeal of or from any judgment or decision, unless it is proved by clear
and convincing evidence in a court of competent jurisdiction that the
Indemnitee's action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company, except that no
indemnification shall be made in respect of any action or suit in which the only
liability asserted against Indemnitee is pursuant to Section 1701.95 of the Ohio
Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 2(a) or 2(b). Such authorization shall be made ( i
) by the Directors of the Company (the "Board") by a majority vote of a quorum
consisting of Directors who were not and are not parties to or threatened with
such action, suit, or proceeding, or (ii) if such a quorum of disinterested
Directors is not available or if a majority of such quorum so directs, in a
written opinion by independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated with it an
attorney, who has been retained by or who has performed services for the
Company, or any person to be indemnified, within the five years preceding such
determination, or (iii) by the shareholders of the Company (the "Shareholders"),
or (iv) by the court in which such action, suit or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Section 2(a) or 2(b), or in defense of any claim, issue or matter therein,
he shall be indemnified against Expenses actually and reasonably incurred by him
in connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit or proceeding shall be paid by the
Company as they are incurred in advance of the final disposition of such action,
suit or proceeding under the procedure set forth in Section 4(b) hereof.
-2-
<PAGE> 3
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and VICE VERSA.
3. ADDITIONAL INDEMNIFICATION. Pursuant to Section 1701.13(E)(6) of the
ORC, without limiting any right which the Indemnitee may have pursuant to
Section 2 hereof or any other provision of this Agreement or the Second Amended
Articles of Incorporation of the Company (the "Articles"), the Restated Amended
Code of Regulations (the "Regulations"), the ORC, any policy of insurance, or
otherwise, but subject to any limitation on the maximum permissible indemnity
which may exist under applicable law at the time of any request for indemnity
hereunder and subject to the following provisions of this Section 3, the Company
shall indemnify the Indemnitee against any amount which he is or becomes
obligated to pay relating to or arising out of any claim made against him
because of any act, failure to act or neglect or breach of duty, including any
actual or alleged error, misstatement or misleading statement, which he commits,
suffers, permits or acquiesces in while acting in his capacity as a Director of
the Company. The payments which the Company is obligated to make pursuant to
this Section 3 shall include, without limitation, judgments, fines, and amounts
paid in settlement and any and all Expenses actually and reasonably incurred by
the Indemnitee in connection therewith including any appeal of or from any
judgment or decision; PROVIDED, HOWEVER, that the Company shall not be obligated
under this Section 3 to make any payment in connection with any claim against
the Indemnitee:
(a) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law from paying which
results from a final, nonappealable order; or
(b) to the extent based upon or attributable to the Indemnitee
having actually realized a personal gain or profit to which he was not legally
entitled, including, without limitation, profit from the purchase and sale by
the Indemnitee of equity securities of the Company which are recoverable by the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, or
profit arising from transactions in publicly traded securities of the Company
which were effected by the Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to which
this Section 3 applies shall be paid by the Company as they are actually and
reasonably incurred in advance of the final disposition of such claim under the
procedure set forth in Section 4(b) hereof.
-3-
<PAGE> 4
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION.
(a) For purposes of pursuing his rights to indemnification
under Section 3 hereof, the Indemnitee shall ( i ) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit 1
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within sixty (60) calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless ( i ) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
Directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (ii) such vote shall be
based upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (iii) the Indemnitee shall have received within such period
notice in writing of such vote, which notice shall disclose with particularity
the evidence upon which the vote is based. The foregoing notice shall be sworn
to by all persons who participated in the vote and voted to deny
indemnification. The provisions of this Section 4(a) are intended to be
procedural only and shall not affect the right of Indemnitee to indemnification
under Section 3 of this Agreement so long as Indemnitee follows the prescribed
procedure and any determination by the Board that Indemnitee is not entitled to
indemnification and any failure to make the payments requested in the
Indemnification Statement shall be subject to judicial review by any court of
competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance
of final disposition pursuant to the second sentence of Section 2(d) or the last
sentence of Section 3 hereof, the Indemnitee shall submit to the Company a sworn
request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred actual Expenses in defending an action, suit or proceeding
referred to in Section 2(a) or 2(b) or any claim referred to in Section 3, or
pursuant to Section 7 hereof. Unless at the time of the Indemnitee's act or
omission at issue, the Articles or Regulations of the Company prohibit such
advances by specific reference to ORC Section 1701.13(E)(5)(a) and unless the
only liability asserted against the Indemnitee in the subject action, suit or
proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be eligible
to execute Part A of the Undertaking by which he undertakes to (a) repay such
amount if it is proved by clear and convincing evidence in a court of competent
jurisdiction that the Indemnitee's action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the Company or
undertaken with reckless disregard for the best interests of the Company and (b)
reasonably cooperate with the Company concerning the action, suit, proceeding or
claim. In all cases, the Indemnitee shall be eligible to execute Part B of the
Undertaking by which he undertakes to repay such amount if it ultimately is
determined that he is not entitled to be indemnified by the Company under this
Agreement or otherwise. In the event that the Indemnitee is eligible to and does
execute both Part A and Part B of the Undertaking, the Expenses which are paid
by the Company pursuant thereto shall be required to be repaid by the Indemnitee
only if he is required to do so under the terms of both Part A and Part B of the
Undertaking. Upon receipt
-4-
<PAGE> 5
of the Undertaking, the Company shall thereafter promptly pay such Expenses of
the Indemnitee as are noticed to the Company in writing and in reasonable detail
arising out of the matter described in the Undertaking. No security shall be
required in connection with any Undertaking.
5. LIMITATION ON INDEMNITY. Notwithstanding anything contained herein
to the contrary, the Company shall not be required hereby to indemnify the
Indemnitee with respect to any action, suit, or proceeding that was initiated by
the Indemnitee unless ( i ) such action, suit, or proceeding was initiated by
the Indemnitee to enforce any rights to indemnification arising hereunder and
such person shall have been formally adjudged to be entitled to indemnity by
reason hereof; (ii) authorized by another agreement to which the Company is a
party whether heretofore or hereafter entered, or (iii) otherwise ordered by the
court in which the suit was brought.
6. SUBROGATION, DUPLICATION OF PAYMENTS.
(a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to the
extent the Indemnitee has actually received payment (under any insurance policy,
the Company's Regulations or otherwise) of the amounts otherwise payable
hereunder.
7. FEES AND EXPENSES OF ENFORCEMENT. It is the intent of the Company
that the Indemnitee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitee hereunder. Accordingly, if it
should appear to the Indemnitee that the Company has failed to comply with any
of its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any action, suit or proceeding to deny, or to recover from, the
Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the
Company irrevocably authorizes the Indemnitee from time to time to retain
counsel of his choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder, or other person affiliated with the Company, in
any jurisdiction. Regardless of the outcome thereof, the Company shall pay and
be solely responsible for any and all costs, charges and expenses, including,
without limitation, fees and expenses of attorneys and others, reasonably
incurred by the Indemnitee pursuant to this Section 7.
8. MERGER OF CONSOLIDATION. In the event that the Company shall be a
constituent corporation in a consolidation, merger, or other reorganization, the
Company, if it shall not be the
-5-
<PAGE> 6
surviving, resulting, or acquiring corporation therein, shall require as a
condition thereto that the surviving, resulting or acquiring corporation agree
to assume all of the obligations of the Company hereunder and to indemnify the
Indemnitee to the full extent provided herein. Regardless of whether the Company
is the resulting, surviving or acquiring corporation in any such transaction,
the Indemnitee shall also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he would have
with respect to the Company if its separate existence had continued.
9. NONEXCLUSIVITY AND SEVERABILITY.
(a) The rights to indemnification provided by this Agreement
shall not be exclusive of any other rights of indemnification to which the
Indemnitee may be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of shareholders or
directors or otherwise, as to any actions or failures to act by the Indemnitee,
and shall continue after he has ceased to be a director, officer, employee or
agent of the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators. In the event of any payment under this Agreement, the Company
shall be subrogated to the extent thereof to all rights of recovery previously
vested in the Indemnitee, who shall execute all instruments and take all other
actions as shall be reasonably necessary for the Company to enforce such right.
(b) If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable, or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
11. MODIFICATION. This Agreement and the rights and duties
of the Indemnitee and the Company hereunder may be modified only by an
instrument in writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
CALIBER SYSTEM, INC.
By:
--------------------------------------- -----------------------------
Chairman, President and Chief Executive Director/Indemnitee
Officer
-6-
<PAGE> 7
EXHIBIT 1
---------
INDEMNIFICATION STATEMENT
STATE OF )
--------------------
) SS
COUNTY OF )
------------------
I, ___________________________, being first duly sworn, do depose and
say as follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated ___________________, between Caliber System,
Inc. (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges,
expenses (which may include fees and expenses of attorneys and/or others),
judgments, fines, and amounts paid in settlement (collectively, "Liabilities"),
which have been actually and reasonably incurred by me in connection with a
claim referred to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I
am entitled to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have,
I am requesting indemnification against Liabilities which have or may arise
out of _______________________________________________.
-----------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public, in and for said
County and State, this _________ day of _____________________, 19____.
-----------------------------------
[Seal]
<PAGE> 8
EXHIBIT 2
----------
UNDERTAKING
STATE OF )
--------------------
) SS
COUNTY OF )
-------------------
I, ____________________________, being first duly sworn do depose and
say as follows:
1. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated ____________________, between Caliber System,
Inc. (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting payment of costs, charges, and expenses
which I have reasonably incurred or will reasonably incur in defending an
action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 7, of the aforesaid
Indemnification Agreement.
3. The costs, charges, and expenses for which payment is
requested are, in general, all expenses related to
___________________________________________________________
- -----------------------------------------------------------------------------.
I hereby undertake to (a) repay all amounts paid pursuant hereto if it
is proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
-------------------------------
[Signature of Indemnitee]
<PAGE> 9
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ________ day of _____________________, 19______.
---------------------------------
[Seal]
<PAGE> 1
Exhibit 10.13(b)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the _____
day of _____________, 19__ by and between Caliber System, Inc., an Ohio
corporation (the "Company"), and ______________________ (the "Indemnitee"), an
officer of the company.
RECITALS
A. The Indemnitee is presently serving as an officer of the Company and
the Company desires the Indemnitee to continue in that capacity. The Indemnitee
is willing, subject to certain conditions, including, without limitation, the
execution and performance of this Agreement by the Company, to continue in that
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the Restated Amended Code of Regulations of the Company, (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and Directors, including the Indemnitee,
against certain losses arising out of actual or threatened actions, suits or
proceedings to which such persons may be made or threatened to be made parties.
However, as a result of circumstances having no relation to, and beyond the
control of, the Company and the Indemnitee, there can be no assurance of the
continuation or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue to serve
in his present capacity, the Company and the Indemnitee agree as follows:
1. CONTINUED SERVICE. The Indemnitee shall continue to serve, at the
will of the Company as an officer of the Company, so long as he is duly elected
and qualified in accordance with the Regulations or until he resigns in writing
in accordance with applicable law.
2. INITIAL INDEMNITY.
(a) The Company shall indemnify the Indemnitee, if or when he is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was an officer of the Company or is or was
serving at the request of the Company as a director, trustee, officer, employee
or agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, or by reason of any
action alleged to have been taken or omitted in any such capacity, against any
and all costs, charges, expenses (including, without limitation, fees and
expenses of attorneys and/or others; all such costs, charges and expenses being
herein jointly referred to as "Expenses"), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by the Indemnitee in connection
therewith including any appeal of or from any judgment or decision, unless it is
proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company. In addition, with
respect to any criminal action or proceeding,
<PAGE> 2
indemnification hereunder shall be made only if the Indemnitee had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
"nolo contendere" or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was an officer of the Company or is or was serving at the request of the Company
as a director, trustee, officer, employee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise, against any and all Expenses actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement thereof
or any appeal of or from any judgment or decision, unless it is proved by clear
and convincing evidence in a court of competent jurisdiction that the
Indemnitee's action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company, except that no
indemnification shall be made in respect of any action or suit in which the only
liability asserted against Indemnitee is pursuant to Section 1701.95 of the Ohio
Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered
by a court) shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 2(a) or 2(b). Such authorization shall be made ( i ) by the Directors of
the Company (the "Board") by a majority vote of a quorum consisting of Directors
who were not and are not parties to or threatened with such action, suit, or
proceeding, or (ii) if such a quorum of disinterested Directors is not available
or if a majority of such quorum so directs, in a written opinion by independent
legal counsel (designated for such purpose by the Board) which shall not be an
attorney, or a firm having associated with it an attorney, who has been retained
by or who has performed services for the Company, or any person to be
indemnified, within the five years preceding such determination, or (iii) by the
shareholders of the Company (the "Shareholders"), or (iv) by the court in which
such action, suit or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to in
Section 2(a) or 2(b), or in defense of any claim, issue or matter therein, he
shall be indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit or proceeding shall be paid by the
Company as they are incurred in advance of the final disposition of such action,
suit or proceeding under the procedure set forth in Section 4(b) hereof.
-2-
<PAGE> 3
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and VICE VERSA.
3. ADDITIONAL INDEMNIFICATION. Pursuant to Section 1701.13(E)(6) of the
ORC, without limiting any right which the Indemnitee may have pursuant to
Section 2 hereof or any other provision of this Agreement or the Second Amended
Articles of Incorporation of the Company (the "Articles"), the Restated Amended
Code of Regulations (the "Regulations"), the ORC, any policy of insurance, or
otherwise, but subject to any limitation on the maximum permissible indemnity
which may exist under applicable law at the time of any request for indemnity
hereunder and subject to the following provisions of this Section 3, the Company
shall indemnify the Indemnitee against any amount which he is or becomes
obligated to pay relating to or arising out of any claim made against him
because of any act, failure to act or neglect or breach of duty, including any
actual or alleged error, misstatement or misleading statement, which he commits,
suffers, permits or acquiesces in while acting in his capacity as an officer of
the Company. The payments which the Company is obligated to make pursuant to
this Section 3 shall include, without limitation, judgments, fines, and amounts
paid in settlement and any and all Expenses actually and reasonably incurred by
the Indemnitee in connection therewith including any appeal of or from any
judgment or decision; PROVIDED, HOWEVER, that the Company shall not be obligated
under this Section 3 to make any payment in connection with any claim against
the Indemnitee:
(a) to the extent of any fine or similar governmental imposition
which the Company is prohibited by applicable law from paying which results from
a final, nonappealable order; or
(b) to the extent based upon or attributable to the Indemnitee
having actually realized a personal gain or profit to which he was not legally
entitled, including, without limitation, profit from the purchase and sale by
the Indemnitee of equity securities of the Company which are recoverable by the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, or
profit arising from transactions in publicly traded securities of the Company
which were effected by the Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to which
this Section 3 applies shall be paid by the Company as they are actually and
reasonably incurred in advance of the final disposition of such claim under the
procedure set forth in Section 4(b) hereof.
-3-
<PAGE> 4
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION.
(a) For purposes of pursuing his rights to indemnification under
Section 3 hereof, the Indemnitee shall ( i ) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit 1
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within sixty (60) calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless ( i ) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
Directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (ii) such vote shall be
based upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (iii) the Indemnitee shall have received within such period
notice in writing of such vote, which notice shall disclose with particularity
the evidence upon which the vote is based. The foregoing notice shall be sworn
to by all persons who participated in the vote and voted to deny
indemnification. The provisions of this Section 4(a) are intended to be
procedural only and shall not affect the right of Indemnitee to indemnification
under Section 3 of this Agreement so long as Indemnitee follows the prescribed
procedure and any determination by the Board that Indemnitee is not entitled to
indemnification and any failure to make the payments requested in the
Indemnification Statement shall be subject to judicial review by any court of
competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of
final disposition pursuant to the second sentence of Section 2(d) or the last
sentence of Section 3 hereof, the Indemnitee shall submit to the Company a sworn
request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred actual Expenses in defending an action, suit or proceeding
referred to in Section 2(a) or 2(b) or any claim referred to in Section 3, or
pursuant to Section 7 hereof. Unless at the time of the Indemnitee's act or
omission at issue, the Articles or Regulations of the Company prohibit such
advances by specific reference to ORC Section 1701.13(E)(5)(a) and unless the
only liability asserted against the Indemnitee in the subject action, suit or
proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be eligible
to execute Part A of the Undertaking by which he undertakes to (a) repay such
amount if it is proved by clear and convincing evidence in a court of competent
jurisdiction that the Indemnitee's action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the Company or
undertaken with reckless disregard for the best interests of the Company and (b)
reasonably cooperate with the Company concerning the action, suit, proceeding or
claim. In all cases, the Indemnitee shall be eligible to execute Part B of the
Undertaking by which he undertakes to repay such amount if it ultimately is
determined that he is not entitled to be indemnified by the Company under this
Agreement or otherwise. In the event that the Indemnitee is eligible to and does
execute both Part A and Part B of the Undertaking, the Expenses which are paid
by the Company pursuant thereto shall be required to be repaid by the Indemnitee
only if he is required to do so under the terms of both Part A and Part B of the
Undertaking. Upon receipt
-4-
<PAGE> 5
of the Undertaking, the Company shall thereafter promptly pay such Expenses of
the Indemnitee as are noticed to the Company in writing and in reasonable detail
arising out of the matter described in the Undertaking. No security shall be
required in connection with any Undertaking.
5. LIMITATION ON INDEMNITY. Notwithstanding anything contained herein
to the contrary, the Company shall not be required hereby to indemnify the
Indemnitee with respect to any action, suit, or proceeding that was initiated by
the Indemnitee unless ( i ) such action, suit, or proceeding was initiated by
the Indemnitee to enforce any rights to indemnification arising hereunder and
such person shall have been formally adjudged to be entitled to indemnity by
reason hereof; (ii) authorized by another agreement to which the Company is a
party whether heretofore or hereafter entered, or (iii) otherwise ordered by the
court in which the suit was brought.
6. SUBROGATION, DUPLICATION OF PAYMENTS.
(a) In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
the Indemnitee, who shall execute all papers required and shall do everything
that may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Indemnitee to the extent
the Indemnitee has actually received payment (under any insurance policy, the
Company's Regulations or otherwise) of the amounts otherwise payable hereunder.
7. FEES AND EXPENSES OF ENFORCEMENT. It is the intent of the Company
that the Indemnitee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitee hereunder. Accordingly, if it
should appear to the Indemnitee that the Company has failed to comply with any
of its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any action, suit or proceeding to deny, or to recover from, the
Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the
Company irrevocably authorizes the Indemnitee from time to time to retain
counsel of his choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder, or other person affiliated with the Company, in
any jurisdiction. Regardless of the outcome thereof, the Company shall pay and
be solely responsible for any and all costs, charges and expenses, including,
without limitation, fees and expenses of attorneys and others, reasonably
incurred by the Indemnitee pursuant to this Section 7.
8. MERGER OF CONSOLIDATION. In the event that the Company shall be a
constituent corporation in a consolidation, merger, or other reorganization, the
Company, if it shall not be the
-5-
<PAGE> 6
surviving, resulting, or acquiring corporation therein, shall require as a
condition thereto that the surviving, resulting or acquiring corporation agree
to assume all of the obligations of the Company hereunder and to indemnify the
Indemnitee to the full extent provided herein. Regardless of whether the Company
is the resulting, surviving or acquiring corporation in any such transaction,
the Indemnitee shall also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he would have
with respect to the Company if its separate existence had continued.
9. NONEXCLUSIVITY AND SEVERABILITY.
(a) The rights to indemnification provided by this Agreement shall
not be exclusive of any other rights of indemnification to which the Indemnitee
may be entitled under the Articles, the Regulations, the ORC or any other
statute, any insurance policy, agreement, or vote of shareholders or directors
or otherwise, as to any actions or failures to act by the Indemnitee, and shall
continue after he has ceased to be a director, officer, employee or agent of the
Company or other entity for which his service gives rise to a right hereunder,
and shall inure to the benefit of his heirs, executors and administrators. In
the event of any payment under this Agreement, the Company shall be subrogated
to the extent thereof to all rights of recovery previously vested in the
Indemnitee, who shall execute all instruments and take all other actions as
shall be reasonably necessary for the Company to enforce such right.
(b) If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable,
or otherwise illegal, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
11. MODIFICATION. This Agreement and the rights and duties of the
Indemnitee and the Company hereunder may be modified only by an instrument in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
CALIBER SYSTEM, INC.
By:
---------------------------------------- -------------------------------
Chairman, President and Chief Executive Officer/Indemnitee
Officer
-6-
<PAGE> 7
EXHIBIT 1
---------
INDEMNIFICATION STATEMENT
STATE OF ___________________)
)SS
COUNTY OF___________________)
I, ___________________________, being first duly sworn, do depose and
say as follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated ___________________, between Caliber System,
Inc. (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
_______________________________________________.
-----------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public, in and for said
County and State, this _________ day of _____________________, 19____.
-----------------------------------
[Seal]
<PAGE> 8
EXHIBIT 2
---------
UNDERTAKING
STATE OF ______________________)
) SS
COUNTY OF______________________)
I, ____________________________, being first duly sworn do depose and
say as follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated ____________________, between Caliber System, Inc. (the
"Company"), an Ohio corporation, and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 7, of the aforesaid Indemnification Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to ___________________________________________
_______________________________________________________________________________.
I hereby undertake to (a) repay all amounts paid pursuant hereto if it
is proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
-------------------------------
[Signature of Indemnitee]
<PAGE> 9
4. PART B
------
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ________ day of _____________________, 19______.
--------------------------------
[Seal]
<PAGE> 1
Exhibit 10.14(a)
SECOND AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 1)
THIS SECOND AMENDED AND RESTATED AGREEMENT ("Agreement") is
entered into as of the _____ day of March, 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.
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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 deliberate
on Executive's part, which results in demonstrably material economic injury to
the
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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 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.
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(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; or
(iv) 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 (iii) 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.
(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
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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.
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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 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.
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(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, as
compensation for services rendered to the Company:
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(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 target annual bonus under the Company's incentive
compensation plans determined by multiplying the 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).
(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.
(4) 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 age and service, or (ii), 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.
(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
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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 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.
4. Consequences of a Change in Control upon Certain
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Entitlements.
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(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.
(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.
(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).
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(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.
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(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 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
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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 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
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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.
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(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 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
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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.
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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.
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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.
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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.
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Nothing in this Agreement shall be deemed to entitle
Executive to continued employment with the Company or its subsidiaries.
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11. Successors; Binding Agreement.
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(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 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
<PAGE> 12
12
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 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
<PAGE> 13
13
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.
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 March, 1997.
------
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.14(b)
SECOND AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 2)
THIS SECOND AMENDED AND RESTATED AGREEMENT ("Agreement") is
entered into as of the _____ day of March, 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 Mr. 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; or
(iv) 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 (iii) 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.
(h) "Notice of Termination" means notice of the
Date of Termination as described in Section 12(b).
<PAGE> 4
4
(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 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.
<PAGE> 5
5
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, 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 target annual bonus under the Company's incentive
compensation plans determined by multiplying the 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).
(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 the benefits that
would be attributable to an additional twenty-four (24) months of age and
service under the Retirement and Savings Plans.
(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.
(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.
<PAGE> 6
6
(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.
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.
(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
<PAGE> 7
7
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 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
<PAGE> 8
8
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 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
<PAGE> 9
9
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 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
<PAGE> 10
10
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.
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.
<PAGE> 11
11
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 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
<PAGE> 12
12
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 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.
<PAGE> 13
13
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.
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
<PAGE> 14
14
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 March, 1997.
-----
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.14(c)
SECOND AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 2A)
THIS SECOND AMENDED AND RESTATED AGREEMENT is entered into as
of the _____ day of March, 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 Mr. 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 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; or
(iv) 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 (iii) 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.
(h) "Notice of Termination" means notice of the
Date of Termination as described in Section 12(b).
<PAGE> 4
4
(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 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.
<PAGE> 5
5
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, 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 target annual bonus under the company's incentive
compensation plans determined by multiplying the 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).
(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 the benefits that
would be attributable to the additional twenty-four (24) months of age and
service under the Retirement and Savings Plans.
(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.
(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.
<PAGE> 6
6
(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.
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.
(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
<PAGE> 7
7
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
(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.
<PAGE> 8
8
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 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
<PAGE> 9
9
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.
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.
<PAGE> 10
10
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 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.
<PAGE> 11
11
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 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
<PAGE> 12
11
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.
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> 13
13
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 March, 1997.
----
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.14(d)
SECOND AMENDED AND RESTATED
MANAGEMENT RETENTION AGREEMENT
(TIER 3)
THIS SECOND AMENDED AND RESTATED AGREEMENT is entered into as
of the _____ day of March, 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 Mr. 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 deliberate
on Executive's part, which results in demonstrably material economic injury to
the
<PAGE> 2
2
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
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.
<PAGE> 3
3
(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; or
(iv) 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 (iii) 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.
(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
<PAGE> 4
4
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 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, as compensation for services
rendered to the Company:
<PAGE> 5
5
(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 target annual bonus under the Company's incentive
compensation plans determined by multiplying the 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).
(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 the benefits that would be
attributable to the additional twenty-four (24) months of age and service under
the Retirement and Savings Plans.
(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.
(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
<PAGE> 6
6
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.
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.
(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.
(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
<PAGE> 7
7
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
(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
<PAGE> 8
8
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 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.
<PAGE> 9
9
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 to
<PAGE> 10
10
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 indirect ownership interest of 50% or more of the total
combined voting power of the then
<PAGE> 11
11
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> 12
12
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> 13
13
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 March, 1997.
-----
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.15(a)
EMPLOYMENT AGREEMENT
(FORM A)
THIS AGREEMENT ("Agreement") is entered into as of the _____
day of January, 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 Mr. X ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title] of [Company or
Operating 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, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks, 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, including the Board Compensation Committee.
(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 deliberate
on Executive's part, which results in demonstrably material economic injury to
the
<PAGE> 2
2
Company and which is not remedied in a reasonable period of time after receipt
of written notice from the Company specifying such breach. Executive's
employment shall in no event be considered to have been terminated by the
Company for Cause if such termination took place as the result of (a) bad
judgment or negligence, or (b) any act or omission believed in good faith to
have been in or not opposed to the interest of the Company.
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 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) "Contract Term" has the meaning set forth in
Section 2.
(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:
(1) Failure by the Company to honor
any of its obligations under this Agreement, including those related to
assignment of duties and responsibilities, election to positions, compensation,
Retirement and Savings Plans, benefits, or successors; or
(2) Any purported termination by the
Company of this Agreement or of Executive's employment that is not expressly
authorized by this Agreement or not effected pursuant to a Notice of Termination
satisfying the requirements of Section 12; for purposes of this Agreement, no
such purported termination shall be effective.
(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.
<PAGE> 3
3
(j) "Retirement" means Executive's voluntary
termination of employment while eligible for retirement benefits under the terms
of the Retirement and Savings Plans.
(k) "Retirement and Savings Plans" means all
qualified and nonqualified defined benefit and defined contribution plans,
including without limitation:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor, additional or substitute plan or plans of
the Company put into effect prior to an Executive's Date of Termination.
2. Contract Term.
--------------
(a) This Agreement shall commence on the
Effective Date and shall continue in effect until January ____, 1999; provided,
however, that commencing on January ____, 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 or Executive shall have given notice not to extend this
Agreement. Notwithstanding anything in this Section 2 to the contrary, this
Agreement shall terminate upon termination of Executive's employment with the
Company in which event the rights and obligations of the parties, except as
otherwise expressly provided herein, shall cease.
(b) Nothing contained in this Agreement shall
prevent the Company at any time from terminating Executive's right and
obligation to perform service for the Company or prevent the Company from
removing Executive from any position which Executive holds in the Company,
subject to the obligation of the Company to make payments and provide benefits
if and to the extent required under this Agreement, which payments and benefits
shall be full and complete liquidated damages and Executive's exclusive remedy
for any such action taken by the Company.
3. Payments and Benefits Upon Termination of Employment.
-----------------------------------------------------
(a) If 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, as compensation for services rendered to the Company,
for severance and in consideration for Section 6 [50% of Section 3(a)(2) for the
latter]:
(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 in connection with the
termination) 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 Company plans have been earned or become payable, to the extent
not theretofore paid; plus (iii) that portion of the target annual bonus under
the Company's incentive compensation plans determined by multiplying the 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).
<PAGE> 4
4
(2) a lump-sum cash amount equal to
2 times (a) 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) the target annual bonus in effect for the year in which the
termination occurs; provided, that any amount paid pursuant to this Section
3(a)(2) shall offset and reduce 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, agreement or arrangement of
the Company.
(b) If the employment of Executive shall
terminate, by reason of a Qualifying Termination, then for a period ending on
the earliest of (i) twenty-four (24) months following the Date of Termination,
(ii) the commencement date of equivalent benefits from a new employer, or (iii)
Executive's Normal Retirement Date under the terms of the Retirement and Savings
Plans, the Company shall continue to keep in full force and effect (or otherwise
provide) all plans and policies of medical, accident, disability and life
insurance with respect to Executive and his dependents with the same level of
coverage, upon the same terms and otherwise to the same extent as such plans and
policies shall have been in effect immediately prior to the Date of Termination
(or, if more favorable to Executive, immediately after the termination), and the
Company and Executive shall share the costs of continuing such insurance
coverage in the same proportion as such costs were shared immediately prior to
the Date of Termination (or, if more favorable to Executive, immediately after
the termination). In addition, upon such termination, the Company shall pay
Executive, as promptly as the amount can be determined following such
termination, the then actuarial present value of the pension benefits that would
be attributable to an additional 24 months of credited age and service under the
Retirement and Savings Plans. If, at the end of twenty-four (24) months
following the Date of Termination, Executive has not reached his Normal
Retirement Date under the Retirement and Savings Plans, and is not then
receiving equivalent benefits from a new employer, the Company shall arrange, to
the extent it can reasonably do so, to enable Executive to convert Executive's
and his dependents' coverage under any such insurance policies and plans (e.g.,
medical, life insurance) to individual policies or programs upon the same terms
as employees of the Company may apply for such conversions.
(c) If the employment of Executive shall
terminate, by reason of a Qualifying Termination, then any stock credit benefits
provided to Executive under any Retirement and Savings Plans shall become fully
vested and payable within five (5) days following the Date of Termination.
(d) If Executive's employment shall be
terminated for Cause, the Company shall pay Executive his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Executive under this Agreement.
4. Nature of Duties.
-----------------
(a) Executive agrees to serve the Company
during the Contract Term. Executive agrees to devote his full business time
during normal business hours to the business and affairs of the Company (except
as otherwise provided herein) and to use his best efforts to promote the
interests of the Company and to perform faithfully and efficiently the
responsibilities assigned to him in accordance with the terms of this Agreement
to the extent
<PAGE> 5
5
necessary to discharge such responsibilities, except for (i) service on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities, and (ii) periods of
vacation and sick leave or other legitimate absences under Company benefit plans
and established practices.
(b) The Company agrees that it will not,
without Executive's express written consent (which consent will not be
unreasonably withheld), (i) assign to Executive duties inconsistent with his
current positions, duties, responsibilities and status with the Company, or (ii)
change his titles as currently in effect, or (iii) remove him from, or fail to
re-elect him to, any of such positions, except in connection with the
termination for Cause, Disability or Retirement or as a result of his death or
voluntary termination. Except as so limited, the powers and duties of Executive
are to be more specifically determined and set by the Company from time to time.
(c) During the Contract Term, Executive may be
required by the Company to relocate to one or more locations of the Company, or
its subsidiaries under Section 14, in order to fulfill Executive's duties under
this Agreement.
5. Compensation and Benefit Plans.
-------------------------------
(a) During the Contract Term, Executive
shall receive an annual base salary, payable in installments, substantially in
accordance with current practice, at an annual rate at least equal to the
aggregate annual base salary payable to Executive as of the Effective Date. The
base salary may be increased [but may not be decreased without Executive's
express written consent (which consent will not be unreasonably withheld)] at
any time and from time to time by action of the Board, and, if so increased,
such increased base salary shall thereafter be the base salary for the purposes
of this Agreement; provided, however, that the Company may decrease Executive's
base salary so long as such decreases (a) are generally applicable to all
salaried employees of the Company, and (b) do not discriminate against
highly-paid employees of the Company.
(b) During the Contract Term, Executive shall
participate in the Company's annual incentive compensation plans pursuant to the
terms thereof. The Company agrees to continue Executive as a participant in the
Company's incentive compensation plans as in effect for each applicable year,
and giving effect to the highest position in the Company held by Executive
during the Contract Term.
(c) During the Contract Term, the Company
agrees to continue the Company's Retirement and Savings Plans (but excluding the
Company's stock option plan and performance share plan, participation in which
shall be at the sole discretion of the Company's Board), as the same may be
modified from time to time but substantially in the form presently in effect.
The Company agrees to continue Executive as a participant in the Retirement and
Savings Plans on a basis at least equivalent to the present basis of his
participation for the calendar year in which the Effective Date of this
Agreement occurs.
(d) During the Contract Term, the Company
agrees to continue in effect any perquisite, benefit or compensation plan (in
addition to the Retirement and Savings Plans) including its dental plan, life
insurance plan, health and accident plan or disability plan in which Executive
is currently participating or to maintain plans and policies providing
substantially the same level of coverage, upon the same terms and otherwise to
the same extent
<PAGE> 6
6
as such plans and policies shall have on the Effective Date; provided, however,
that the Company may make modifications in such plans and policies so long as
such modifications (a) are generally applicable to all salaried employees of the
Company, and (b) do not discriminate against highly-paid employees of the
Company.
(e) During the Contract Term, except as
permitted in the proviso contained in paragraph (d) above, the Company agrees
not to take any action that would adversely affect Executive's participation in,
or materially reduce the benefits under, any of the Retirement and Savings
Plans.
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 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 during employment and
for a period of one (1) year following the Date of Termination, he shall not
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
<PAGE> 7
7
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) Prior to the Date of Termination,
Executive agrees not to accept any other employment or engage in any outside
business or enterprise without the Company's written consent. It is understood,
however, that outside activities are not prohibited provided they are legal; do
not impair or interfere with the conscientious performance of Company duties and
responsibilities; do not involve the misuse of the Company's influence,
facilities or other resources; and do not reflect discredit upon the good name
and reputation of the Company.
(f) The provisions of this Section shall
survive any termination of this Agreement, 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.
--------------------------
<PAGE> 8
8
The Company shall pay all reasonable legal fees and
expenses incurred by Executive, if any, as a result of a Qualifying Termination.
10. Scope of Agreement.
-------------------
(a) Except as expressly provided herein,
nothing in this Agreement shall amend any provisions of the Company's Retirement
and Savings Plans and policies of medical, accident, disability and life
insurance with respect to Executive and his dependents.
(b) This Agreement shall not apply to any
termination of employment pursuant to, in connection with, or in anticipation of
a Change in Control, if as a result of said termination Executive receives
payments and benefits under a Management Retention Agreement in effect between
the Company and Executive.
(c) This Agreement is not intended by either
the Company or the Executive to amend Executive's Performance Share Award
Agreement under the Company's 1996 Equity Incentive Compensation Plan or the
Executive's Stock Option Agreement under the Company's 1996 Equity Incentive
Compensation Plan.
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
<PAGE> 9
9
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 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.
-----------------------------
<PAGE> 10
10
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
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 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
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 Executive under this Agreement or any
amendment thereof and prompt provision of all benefits to which 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.
-------------
<PAGE> 11
11
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.
20. Release and Reaffirmation.
--------------------------
The Company may, as a condition to the payment by
the Company to Executive of any post employment benefits payable under this
Agreement, condition such payment upon the execution and delivery by Executive
to the Company of:
(a) A release, in form reasonably acceptable to
the Company, releasing the Company from any further obligations to Executive,
except for obligations under Retirement and Savings Plans which remain in favor
of Executive and any other remaining obligations under the specific terms of
this Agreement or any other written agreement in effect between the Company and
Executive; and
(b) A reaffirmation by Executive of his
obligations under this Agreement or any other agreement theretofore in effect
between Executive and the Company relating to confidentiality or intellectual
property rights.
<PAGE> 12
12
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 January, 1997
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.15(b)
EMPLOYMENT AGREEMENT
(FORM B)
THIS AGREEMENT ("Agreement") is entered into as of the _____
day of January, 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 Mr. X ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as [title] of [Company or
Operating 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, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks, 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, including the Board Compensation Committee.
(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 deliberate
on Executive's part, which results in demonstrably material economic injury to
the
<PAGE> 2
2
Company and which is not remedied in a reasonable period of time after
receipt of written notice from the Company specifying such breach. Executive's
employment shall in no event be considered to have been terminated by the
Company for Cause if such termination took place as the result of (a) bad
judgment or negligence, or (b) any act or omission believed in good faith to
have been in or not opposed to the interest of the Company.
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 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) "Contract Term" has the meaning set forth in
Section 2.
(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:
(1) Failure by the Company to honor
any of its obligations under this Agreement, including those related to
assignment of duties and responsibilities, election to positions, compensation,
Retirement and Savings Plans, benefits, or successors; or
(2) Any purported termination by the
Company of this Agreement or of Executive's employment that is not expressly
authorized by this Agreement or not effected pursuant to a Notice of Termination
satisfying the requirements of Section 12; for purposes of this Agreement, no
such purported termination shall be effective.
(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.
<PAGE> 3
3
(j) "Retirement" means Executive's voluntary
termination of employment while eligible for retirement benefits under the terms
of the Retirement and Savings Plans.
(k) "Retirement and Savings Plans" means all
qualified and nonqualified defined benefit and defined contribution plans,
including without limitation:
[Applicable qualified and nonqualified benefit plans]
or any applicable amended, successor, additional or substitute plan or plans of
the Company put into effect prior to an Executive's Date of Termination.
2. Contract Term.
--------------
(a) This Agreement shall commence on the
Effective Date and shall continue in effect until January ____, 1999; provided,
however, that commencing on January ____, 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 or Executive shall have given notice not to extend this
Agreement. Notwithstanding anything in this Section 2 to the contrary, this
Agreement shall terminate upon termination of Executive's employment with the
Company in which event the rights and obligations of the parties, except as
otherwise expressly provided herein, shall cease.
(b) Nothing contained in this Agreement shall
prevent the Company at any time from terminating Executive's right and
obligation to perform service for the Company or prevent the Company from
removing Executive from any position which Executive holds in the Company,
subject to the obligation of the Company to make payments and provide benefits
if and to the extent required under this Agreement, which payments and benefits
shall be full and complete liquidated damages and Executive's exclusive remedy
for any such action taken by the Company.
3. Payments and Benefits Upon Termination of Employment.
-----------------------------------------------------
(a) If 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, as compensation for services rendered to the Company,
for severance and in consideration for Section 6 [50% of Section 3(a)(2) for the
latter]:
(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 in connection with the
termination) 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 Company plans have been earned or become payable, to the extent
not theretofore paid; plus (iii) that portion of the target annual bonus under
the Company's incentive compensation plans determined by multiplying the 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).
<PAGE> 4
4
(2) a lump-sum cash amount equal to
1 times (a) 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) the target annual bonus in effect for the year in which the
termination occurs; provided, that any amount paid pursuant to this Section
3(a)(2) shall offset and reduce 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, agreement or arrangement of
the Company.
(b) If the employment of Executive shall
terminate, by reason of a Qualifying Termination, then for a period ending on
the earliest of (i) twelve (12) months following the Date of Termination, (ii)
the commencement date of equivalent benefits from a new employer, or (iii)
Executive's Normal Retirement Date under the terms of the Retirement and Savings
Plans, the Company shall continue to keep in full force and effect (or otherwise
provide) all plans and policies of medical, accident, disability and life
insurance with respect to Executive and his dependents with the same level of
coverage, upon the same terms and otherwise to the same extent as such plans and
policies shall have been in effect immediately prior to the Date of Termination
(or, if more favorable to Executive, immediately after the termination), and the
Company and Executive shall share the costs of continuing such insurance
coverage in the same proportion as such costs were shared immediately prior to
the Date of Termination (or, if more favorable to Executive, immediately after
the termination). In addition, upon such termination, the Company shall pay
Executive, as promptly as the amount can be determined following such
termination, the then actuarial present value of the pension benefits that would
be attributable to an additional 12 months of credited age and service under the
Retirement and Savings Plans. If, at the end of twelve (12) months following the
Date of Termination, Executive has not reached his Normal Retirement Date under
the Retirement and Savings Plans, and is not then receiving equivalent benefits
from a new employer, the Company shall arrange, to the extent it can reasonably
do so, to enable Executive to convert Executive's and his dependents' coverage
under any such insurance policies and plans (e.g., medical, life insurance) to
individual policies or programs upon the same terms as employees of the Company
may apply for such conversions.
(c) If the employment of Executive shall
terminate, by reason of a Qualifying Termination, then any stock credit benefits
provided to Executive under any Retirement and Savings Plans shall become fully
vested and payable within five (5) days following the Date of Termination.
(d) If Executive's employment shall be
terminated for Cause, the Company shall pay Executive his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Executive under this Agreement.
4. Nature of Duties.
-----------------
(a) Executive agrees to serve the Company
during the Contract Term. Executive agrees to devote his full business time
during normal business hours to the business and affairs of the Company (except
as otherwise provided herein) and to use his best efforts to promote the
interests of the Company and to perform faithfully and efficiently the
responsibilities assigned to him in accordance with the terms of this Agreement
to the extent
<PAGE> 5
5
necessary to discharge such responsibilities, except for (i) service on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities, and (ii) periods of
vacation and sick leave or other legitimate absences under Company benefit plans
and established practices.
(b) The Company agrees that it will not,
without Executive's express written consent (which consent will not be
unreasonably withheld), (i) assign to Executive duties inconsistent with his
current positions, duties, responsibilities and status with the Company, or (ii)
change his titles as currently in effect, or (iii) remove him from, or fail to
re-elect him to, any of such positions, except in connection with the
termination for Cause, Disability or Retirement or as a result of his death or
voluntary termination. Except as so limited, the powers and duties of Executive
are to be more specifically determined and set by the Company from time to time.
(c) During the Contract Term, Executive may be
required by the Company to relocate to one or more locations of the Company, or
its subsidiaries under Section 14, in order to fulfill Executive's duties under
this Agreement.
5. Compensation and Benefit Plans.
-------------------------------
(a) During the Contract Term, Executive
shall receive an annual base salary, payable in installments, substantially in
accordance with current practice, at an annual rate at least equal to the
aggregate annual base salary payable to Executive as of the Effective Date. The
base salary may be increased [but may not be decreased without Executive's
express written consent (which consent will not be unreasonably withheld)] at
any time and from time to time by action of the Board, and, if so increased,
such increased base salary shall thereafter be the base salary for the purposes
of this Agreement; provided, however, that the Company may decrease Executive's
base salary so long as such decreases (a) are generally applicable to all
salaried employees of the Company, and (b) do not discriminate against
highly-paid employees of the Company.
(b) During the Contract Term, Executive shall
participate in the Company's annual incentive compensation plans pursuant to the
terms thereof. The Company agrees to continue Executive as a participant in the
Company's incentive compensation plans as in effect for each applicable year,
and giving effect to the highest position in the Company held by Executive
during the Contract Term.
(c) During the Contract Term, the Company
agrees to continue the Company's Retirement and Savings Plans (but excluding the
Company's stock option plan and performance share plan, participation in which
shall be at the sole discretion of the Company's Board), as the same may be
modified from time to time but substantially in the form presently in effect.
The Company agrees to continue Executive as a participant in the Retirement and
Savings Plans on a basis at least equivalent to the present basis of his
participation for the calendar year in which the Effective Date of this
Agreement occurs.
(d) During the Contract Term, the Company
agrees to continue in effect any perquisite, benefit or compensation plan (in
addition to the Retirement and Savings Plans) including its dental plan, life
insurance plan, health and accident plan or disability plan in which Executive
is currently participating or to maintain plans and policies providing
substantially the same level of coverage, upon the same terms and otherwise to
the same extent
<PAGE> 6
6
as such plans and policies shall have on the Effective Date; provided, however,
that the Company may make modifications in such plans and policies so long as
such modifications (a) are generally applicable to all salaried employees of the
Company, and (b) do not discriminate against highly-paid employees of the
Company.
(e) During the Contract Term, except as
permitted in the proviso contained in paragraph (d) above, the Company agrees
not to take any action that would adversely affect Executive's participation in,
or materially reduce the benefits under, any of the Retirement and Savings
Plans.
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 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 during employment and
for a period of one (1) year following the Date of Termination, he shall not
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
<PAGE> 7
7
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) Prior to the Date of Termination,
Executive agrees not to accept any other employment or engage in any outside
business or enterprise without the Company's written consent. It is understood,
however, that outside activities are not prohibited provided they are legal; do
not impair or interfere with the conscientious performance of Company duties and
responsibilities; do not involve the misuse of the Company's influence,
facilities or other resources; and do not reflect discredit upon the good name
and reputation of the Company.
(f) The provisions of this Section shall
survive any termination of this Agreement, 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.
--------------------------
<PAGE> 8
8
The Company shall pay all reasonable legal fees and
expenses incurred by Executive, if any, as a result of a Qualifying Termination.
10. Scope of Agreement.
-------------------
(a) Except as expressly provided herein,
nothing in this Agreement shall amend any provisions of the Company's Retirement
and Savings Plans and policies of medical, accident, disability and life
insurance with respect to Executive and his dependents.
(b) This Agreement shall not apply to any
termination of employment pursuant to, in connection with, or in anticipation of
a Change in Control, if as a result of said termination Executive receives
payments and benefits under a Management Retention Agreement in effect between
the Company and Executive.
(c) This Agreement is not intended by either
the Company or the Executive to amend Executive's Performance Share Award
Agreement under the Company's 1996 Equity Incentive Compensation Plan or the
Executive's Stock Option Agreement under the Company's 1996 Equity Incentive
Compensation Plan.
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
<PAGE> 9
9
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 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.
-----------------------------
<PAGE> 10
10
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
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 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
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 Executive under this Agreement or any
amendment thereof and prompt provision of all benefits to which 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.
-------------
<PAGE> 11
11
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.
20. Release and Reaffirmation.
--------------------------
The Company may, as a condition to the payment by
the Company to Executive of any post employment benefits payable under this
Agreement, condition such payment upon the execution and delivery by Executive
to the Company of:
(a) A release, in form reasonably acceptable to
the Company, releasing the Company from any further obligations to Executive,
except for obligations under Retirement and Savings Plans which remain in favor
of Executive and any other remaining obligations under the specific terms of
this Agreement or any other written agreement in effect between the Company and
Executive; and
(b) A reaffirmation by Executive of his
obligations under this Agreement or any other agreement theretofore in effect
between Executive and the Company relating to confidentiality or intellectual
property rights.
<PAGE> 12
12
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 January, 1997.
- --------------------------
[Executive's Name]
<PAGE> 1
Exhibit 10.15(c)
AGREEMENT REGARDING CHANGE IN MANAGEMENT
AND TERMINATION OF EMPLOYMENT
THIS AGREEMENT is entered into as of the [ ]day of November,
1996 (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 [ ] ("Executive").
W I T N E S S E T H
WHEREAS, Executive currently serves as a Senior Vice
President-Finance and Chief Financial Officer; 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(a)) 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 a Change in Management (as defined in Section
1(c)) without a Change in Control of the Company (as defined in the Management
Retention Agreement between Executive and the Company dated November ___, 1996),
without concern as to whether Executive might be hindered or distracted by
personal uncertainties and risks created by any such possible Change in
Management, and to encourage Executive's full attention and dedication to the
Company.
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) "Board" means the Board of Directors of the
Company.
<PAGE> 2
2
(b) "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
deliberate on Executive's part, which is committed in bad faith or without
reasonable belief that such breach is in, or not opposed to, the best interests
of the Company and which is not remedied in a reasonable period of time after
receipt of written notice from the Company specifying such breach.
(c) "Change in Management" means any diminution
in Daniel J. Sullivan's current duties and responsibilities with the
Company. However, the termination of Mr. Sullivan's duties and responsibilities
with the Company by reason of death, Disability or natural causes, shall not be
a Change in Management. Moreover, a Change in Management is not related to the
revenue or size of the Company. For purposes of this Agreement, the date of a
Change in Management shall be the earliest date on which a Change in Management
occurs in accordance with this Section 1(c).
(d) "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(e)) 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.
(e) "Disability" means absence from one's duties
and responsibilities with the Company on a full-time basis for at least one
hundred eighty (180) consecutive days as a result of incapacity due to mental or
physical illness.
(f) "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 Management (including a change in performance criteria
<PAGE> 3
3
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 Management
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 Management, unless comparable
benefits or perquisites (determined in the aggregate) are substituted;
(ii) diminution in Executive's duties and
responsibilities as in effect immediately prior to the Change in Management
or assignment to Executive of duties materially inconsistent with his duties as
in effect immediately prior to the Change in Management; or
(iii) the loss of any of Executive's titles
or positions held immediately prior to the Change in Management.
Notwithstanding anything contained in this Agreement
to the contrary, any circumstance described in clauses (i) through (iii) of
this Section 1(f) shall not constitute Good Reason unless Executive gives
written notice thereof to the Company in accordance with Section 8 and the
Company fails to remedy such circumstances within ten days following receipt of
such notice.
(g) "Notice of Termination" means notice of the
Date of Termination as described in Section 8(b).
(h) "Payment" means the following amounts
payable to Executive as compensation for services rendered to the Company:
(1) a lump-sum amount equal to the sum
of 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) plus any benefit awards (including both
the cash and stock components) and bonus payments which pursuant to the terms of
any plans have been earned and vested; and
<PAGE> 4
4
(2) a lump-sum cash amount equal to two
(2) times (a) 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) the target annual bonus in effect for the year in
which the Change in Management occurs; except as provided in Section 7(a), any
amount paid pursuant to this Agreement shall offset any other amount of
severance to be received by Executive upon termination of employment of
Executive under any other severance plan, policy, or employment agreement of the
Company. Notwithstanding the timing of any Changes in Management or Termination
of Employment without Cause, Executive shall only be entitled to one Payment.
(i) "Qualifying Termination" means a termination
of Executive's employment 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 termination of employment
by either Executive or the Company on or after Executive's normal
retirement date under the terms of the Retirement Plan.
(k) "Retirement Plan" means the Company's
Retirement Plan or any successor or substitute plan or plans of the Company
put into effect prior to a Change in Management.
(l) "Transition Period" means the period of time
beginning with a Change in Management and ending on the earlier to occur of
(1) Executive's death and (2) expiration or termination of this Agreement
pursuant to Section 2.
2. Term of Agreement.
------------------
(a) This Agreement shall commence on the
Effective Date and shall continue in effect until November [ ], 1998;
provided, however, that commencing on November [ ], 1998 and each following
annual anniversary of the Effective Date, the term of this Agreement shall
automatically be extended for an additional one-year period, unless at least
three 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 Management
until, in the opinion of the Board, any efforts to effect a Change in Management
have been abandoned or terminated, and (ii)
<PAGE> 5
5
this Agreement shall continue in effect for at least twenty-four (24)
months following the occurrence of a Change in Management.
(b) Notwithstanding anything in this Section 2
to the contrary:
(i) in the event of Executive's voluntary
termination of his employment with the Company without Payment, this
Agreement shall automatically expire upon Executive's Notice of Termination;
(ii) if the Company makes Payment to
Executive pursuant to this Agreement, this Agreement shall automatically expire
upon such Payment; and
(iii) Executive's entitlement to Payment
pursuant to Section 3 shall terminate automatically upon election or
appointment of Executive to fill one or more of the positions of Chairman of the
Board, Chief Executive Officer, President or Chief Operating Officer of the
Company.
3. Payment Upon Change in Management or Qualifying
-----------------------------------------------
Termination.
- -----------
(a) Following a Change in Management (other than
a Change in Management that consists (i) solely of the assignment of Daniel
J. Sullivan's duties and responsibilities as President to an individual other
than Executive, or (ii) solely of the appointment of a Chief Operating Officer
other than Mr. Sullivan or Executive) Executive may elect to terminate his
employment with or without Good Reason by giving a Notice of Termination
pursuant to Section 8 on or before forty-five (45) days following the Change in
Management. If Executive provides such notice, then the Company shall make
Payment to Executive (or Executive's beneficiary or estate) within five (5)
business days following Date of Termination.
(b) If during the Transition Period the
employment of Executive shall terminate by reason of a Qualifying
Termination, then the Company shall make Payment to Executive (or Executive's
beneficiary or estate) within five (5) business days following Date of
Termination.
4. Payment Upon Termination of Employment Without Cause.
-----------------------------------------------------
<PAGE> 6
6
If at any time during the term of this Agreement all
employment of Executive with the Company shall terminate involuntarily and
without Cause, then Company shall make Payment to Executive (or Executive's
beneficiary or estate) within five (5) business days following Date of
Termination.
5. 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 have intrinsic value to the Company or its subsidiaries, its clients or
other parties with which the Company has a relationship, or 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 5(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 5(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 prompt 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 5(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
<PAGE> 7
7
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 5 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 expiration or 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 5(e) to the contrary notwithstanding, the
provisions of Section 5(b) shall not apply in the event of a voluntary
termination by Executive of his employment provided Executive does not receive
Payment pursuant to this Agreement in connection with such a termination.
6. Withholding Taxes.
------------------
<PAGE> 8
8
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.
7. Successors; Binding Agreement; Survivorship.
--------------------------------------------
(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. Notwithstanding anything to the contrary in
this Agreement, if as a result of any such merger, consolidation or transfer of
assets, Executive is entitled to a payment under any applicable change in
control management retention arrangements, then no payment shall be payable
under this Agreement.
(b) (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.
<PAGE> 9
9
(c) The respective rights and obligations of the
parties hereunder shall not survive the termination or expiration of this
Agreement except:
(i) to the extent necessary to carry out
the intentions of the parties (including without limitation any obligations of
the Company to make Payment hereunder), or
(ii) to the extent otherwise expressly
provided herein.
8. 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:
If to the Company:
General Counsel
Caliber System, Inc.
3560 West Market Street, 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
<PAGE> 10
10
or the Company from asserting such fact or circumstance in enforcing
Executive's or the Company's rights hereunder.
9. 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
conflict 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.
10. 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 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
reasonable 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 by
Executive 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 10 shall limit
a party's right to seek equitable relief in any court of competent jurisdiction.
(b) In the event the Company and Executive do not agree to
arbitrate disputes as provided in Section 10(a), each hereby consents to the
jurisdiction of the Summit County Common Pleas
<PAGE> 11
11
Court of the State of Ohio, or (provided the amount in controversy is
appropriate) of the United States District Court for the Northern District of
Ohio.
11. 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.
12. 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. 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. This
Agreement is not intended by either the Company or the Executive to amend
Executive's Performance Share Award Agreement under the Company's 1996 Equity
Incentive Compensation Plan or the Executive's Stock Option Agreement under the
Company's 1996 Equity Incentive Compensation Plan.
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 November, 1996.
--------
- ------------------------------------
Executive
<PAGE> 1
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
State or Jurisdiction
Subsidiary of Incorporation
---------- ----------------
RPS, Inc. Delaware
RPS, Ltd. Wyoming
RPS de Mexico, S.A. de C.V. Mexico
Caliber Direct, Inc. Delaware
Caliber Customer Support, Inc. Delaware
Services Development Corporation Delaware
Circle Investment Co. Delaware
Caliber Logistics, Inc. Ohio
Caliber Logistics Healthcare, Inc. Ohio
Caliber Dedicated Transportation, Inc. Delaware
Caliber Intermodal, Inc. Delaware
Caliber Logistics de Mexico, S.A. de C.V. Mexico
Caliber Logistics (Canada), Ltd. Ontario
Caliber Logistics Europe, B.V. Netherlands
Roberts Express, Inc. Ohio
Roberts Express, B.V. Netherlands
Roberts Express, GmbH Germany
Roberts Express, SARL France
Roberts Express, BEL Belgium
Roberts Express, S.r.L. Italy
Roberts Express, S.L. Spain
Roberts Express, UK, Inc. Delaware
North Coast Express, Inc. Ohio
Roberts Air Freight, Inc. Ohio
Autoquik, Inc. Delaware
Third Party Services, Inc. Delaware
Viking Freight, Inc. California
Caliber System (Canada), Inc. Canada
Caliber Technology, Inc. Ohio
Triangle Investment Co. Delaware
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated January 23,
1997 (except Note K, as to which the date is March 27, 1997), with respect to
the consolidated financial statements and schedule of Caliber System, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 1996
in the following Registration Statements and related Prospectuses:
<TABLE>
<CAPTION>
Registration
Number Description of Registration Statement Filing Date
- -------------------------------------------------------------------------------------------------------------
<S> <C>
33-44757 Roadway Services, Inc. Nonemployee Directors' Stock December 31, 1991
Plan' Form S-8 (now Caliber System, Inc.)
33-52605 Roadway Services, Inc. Stock Savings and Retirement Income December 28, 1995
Plan and Trust' Form S-8 (now Caliber System, Inc.)
34-65449 Viking Financial Security Plan-Form S-8 December 28, 1995
34-65499 The Merrill Lynch, Pierce, Fenner & Smith Incorporated December 29, 1995
Special Prototype Profit Sharing Plan and Trust for
Independent Contractors-Form S-3
333-03295 1994 Nonemployee Directors' Stock Plan-Form S-8 May 8, 1996
333-03297 1996 Equity Incentive Compensation Plan-Form S-8 May 8, 1996
333-03299 Nonemployee Directors' Stock Retainer Plan-Form S-8 May 8, 1996
333-07473 $400 million Debt Securities-Form S-3 July 12, 1996
ERNST & YOUNG LLP
Akron, Ohio
March 27, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 38,829
<SECURITIES> 0
<RECEIVABLES> 365,033
<ALLOWANCES> 31,955
<INVENTORY> 0
<CURRENT-ASSETS> 524,476
<PP&E> 1,712,012
<DEPRECIATION> 863,693
<TOTAL-ASSETS> 1,432,167
<CURRENT-LIABILITIES> 630,041
<BONDS> 200,000
<COMMON> 39,898
0
0
<OTHER-SE> 498,749
<TOTAL-LIABILITY-AND-EQUITY> 1,432,167
<SALES> 0
<TOTAL-REVENUES> 2,718,142
<CGS> 0
<TOTAL-COSTS> 2,910,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,391
<INCOME-PRETAX> (202,356)
<INCOME-TAX> (37,233)
<INCOME-CONTINUING> (165,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,123)
<EPS-PRIMARY> (4.18)
<EPS-DILUTED> (4.18)
</TABLE>
