-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q/vHJmN8HxWVul8qDc6Frs4hd8IDr6KWyLxFWRguYUViLphB+kyjhTcH40FK7wUX vgjFiwANNK5f+v/KQuD22g== 0000950152-97-002302.txt : 19970329 0000950152-97-002302.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950152-97-002302 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIBER SYSTEM INC CENTRAL INDEX KEY: 0000701708 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 341365496 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11573 FILM NUMBER: 97565948 BUSINESS ADDRESS: STREET 1: 3560 W MARKET ST STREET 2: P O BOX 5459 CITY: AKRON STATE: OH ZIP: 44334-0459 BUSINESS PHONE: 2163848184 MAIL ADDRESS: STREET 1: 3560 W MARKET ST STREET 2: P O BOX 5459 CITY: AKRON STATE: OH ZIP: 44334-0459 FORMER COMPANY: FORMER CONFORMED NAME: ROADWAY SERVICES INC DATE OF NAME CHANGE: 19920703 10-K 1 CALIBER SYSTEM, INC. 10-K 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 ----------------- 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 ------- CALIBER SYSTEM, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 34-1365496 ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459 ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (330) 665-5646 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange None on which registered ------------------- --------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock-without par value ------------------------------------------------------------------------- (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 ----- ----- 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. - 1 - 2 PART I Item 1. - Business. - ------- --------- 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. -2- 3 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. -3- 4 Item 2. - Properties. - ------- ----------- Caliber System, Inc. - -------------------- Corporate offices of the registrant and its information systems subsidiary, Caliber Technology, Inc. are located in Akron, Ohio in leased facilities. RPS, Inc. - --------- 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. - -------------------- 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. - --------------------- Roberts' general offices are located in Akron, Ohio in owned facilities. Roberts does not use terminal facilities in its business. Caliber Logistics, Inc. - ----------------------- Caliber Logistics' general offices are located in Hudson, Ohio in leased facilities. Item 3. - Legal Proceedings. - ------- ------------------ 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. - ------- ---------------------------------------------------- None. -4- 5 Executive Officers of the Registrant. - ------------------------------------- Name and Age Present Positions and Recent Business Experience - ------------ ------------------------------------------------ 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. -5- 6 PART II Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters. - ------- --------------------------------------------------------------------- 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.
Dividend Declared Price Range Per Share 1996 High 1996 Low 1995 High 1995 Low 1996 1995 - ----------------------------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------------------------------------------
The 1995 high and low stock prices have not been adjusted to reflect the spin-off of Roadway Express. -6- 7 ITEM 6. - SELECTED FINANCIAL DATA. - ------ ----------------------- Amounts in thousands, except per share data
Years Ended December 31, 1996 1995 1994 1993 1992 ----------- ----------- ---------- ---------- ----------- 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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
-7- 8 Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations. - ------ --------------------------------------------------------------- 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. -8- 9 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. -9- 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. -10- 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- 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- 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- 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- 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- 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- 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- 18 CONSOLIDATED BALANCE SHEETS CALIBER SYSTEM, INC.
ASSETS DECEMBER 31 1996 1995 --------- -------- (dollars in thousands) 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 ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY DECEMBER 31 1996 1995 --------- -------- (dollars in thousands) 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 ========== ==========
See notes to consolidated financial statements. -18- 19
CONSOLIDATED STATEMENTS OF INCOME CALIBER SYSTEM, INC. YEARS ENDED DECEMBER 31 1996 1995 1994 ----------- ----------- ----------- (dollars in thousands, except per share data) 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 =========== =========== ===========
See notes to consolidated financial statements. -19- 20 CONSOLIDATED STATEMENTS OF CASH FLOWS CALIBER SYSTEM, INC.
YEARS ENDED DECEMBER 31 1996 1995 1994 -------- -------- -------- (dollars in thousands) 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 ======== ======== =========
See notes to consolidated financial statements. -20- 21
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) 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 ====== ======= ======== =========== ====== ======== ==========
See notes to consolidated financial statements. -21- 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- 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- 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:
1996 1995 ---------- ---------- (dollars in thousands) 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 ========== ==========
-24- 25 NOTE C - OTHER FINANCIAL DATA, CONTINUED Other income (expense), net consists of the following:
Year Ended December 31 ---------------------- 1996 1995 1994 -------- -------- ------- (dollars in thousands) 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 ======== ======= ======
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.
1996 1995 --------- --------- (dollars in thousands) 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 ========= =========
-25- 26 NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED Net pension cost consists of the following:
1996 1995 1994 -------- -------- -------- (dollars in thousands) 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 ======== ======== ========
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:
1996 1995 -------- --------- (dollars in thousands) 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) ======== ========
-26- 27 NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED Net periodic postretirement benefit cost consists of the following:
1996 1995 1994 ------- ------- ------ (dollars in thousands) 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 ======= ======= ======
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:
1996 1995 -------- -------- (dollars in thousands) 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) ======= ========
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- 28 NOTE E - INCOME TAXES, CONTINUED The provision for income taxes consists of the following:
1996 1995 1994 -------- -------- -------- (dollars in thousands) 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 ======== ======== ========
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:
1996 1995 1994 ------ ------ ------- 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% ==== ==== ====
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- 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- 30 NOTE I - DISCONTINUED OPERATIONS, CONTINUED Loss from discontinued operations for 1995 and 1994 consists of the following:
YEAR ENDED REX RGA TOTAL - ---------- ----------- --------- ----------- (dollars in thousands) 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 ===========
-30- 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- 32
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) 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) ========== ========= =========== ============ ============ ========== ============ ============ 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.
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- 33
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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 (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.
-33- 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. 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. 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. EX-10.2.C 2 EXHIBIT 10.2(C) 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. 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. 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). 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 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. 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: EX-10.8.A 3 EXHIBIT 10.8(A) 1 Exhibit 10.8 CALIBER SYSTEM, INC. RETIREMENT PLAN FOR NONEMPLOYEE DIRECTORS (As Amended as of May 8, 1996) 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. 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 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 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 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 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 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 EX-10.9.A 4 EXHIBIT 10.9(A) 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. EX-10.13.A 5 EXHIBIT 10.13(A) 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, 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- 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- 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- 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- 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- 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] 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] 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] EX-10.13.B 6 EXHIBIT 10.13(B) 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, 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- 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- 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- 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- 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- 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] 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] 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] EX-10.14.A 7 EXHIBIT 10.14(A) 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. ------------ 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 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. 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, (2) a termination by 4 4 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. 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: 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) 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 6 6 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 ------------------------------------------------- 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 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). 7 7 (d) The consequences of a Change in Control upon compensation and benefit plans and programs of the Company, except as otherwise provided in this Agreement, shall be determined in accordance with such plans and programs. 5. Gross-up Payments. ------------------- (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other benefit (including, without limitation, any acceleration of vesting of any benefit) provided by the Company or its subsidiaries to or for the benefit of Executive (a "Payment") (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any Gross-up Payment required under this Section 5) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), (such excise tax, together with any interest and penalties imposed in respect thereto, hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive a Gross-Up Payment in an amount that after payment by Executive of all taxes, including, without limitation, any income, employment, and excise taxes (and any interest and penalties imposed with respect thereto), imposed upon the Gross-Up Payment leaves the Executive a net amount from the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the Company to Executive within five (5) days of the receipt of the Determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and Executive. In the event the Company exhausts its remedies pursuant to Section 5(c) and Executive thereafter is required by a determination of a court or the Internal Revenue Service to make payment of any Excise Tax, the Accounting Firm shall determine 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 8 8 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 9 9 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 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 10 10 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. 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 11 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 Name and Address] If to the Company: General Counsel Caliber System, Inc. P.O. Box 5459 Akron, OH 44334-0459 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 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. 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] EX-10.14.B 8 EXHIBIT 10.14(B) 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 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 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). 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. 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. 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 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 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 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 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. 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 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. 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 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. 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] EX-10.14.C 9 EXHIBIT 10.14(C) 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 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 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). 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. 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. 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 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. 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 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. 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. 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 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. 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] EX-10.14.D 10 EXHIBIT 10.14(D) 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 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. 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 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: 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 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 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 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. 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 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 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. 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. 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] EX-10.15.A 11 EXHIBIT 10.15(A) 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 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. 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). 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 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 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 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. -------------------------- 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 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. ----------------------------- 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. ------------- 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. 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] EX-10.15.B 12 EXHIBIT 10.15(B) 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 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. 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). 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 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 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 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. -------------------------- 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 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. ----------------------------- 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. ------------- 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. 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] EX-10.15.C 13 EXHIBIT 10.15(C) 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. 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 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 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) 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. ----------------------------------------------------- 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 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. ------------------ 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. 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 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 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 EX-21 14 EXHIBIT 21 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 EX-23 15 EXHIBIT 23 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:
Registration Number Description of Registration Statement Filing Date - ------------------------------------------------------------------------------------------------------------- 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
EX-27 16 EXHIBIT 27
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 38,829 0 365,033 31,955 0 524,476 1,712,012 863,693 1,432,167 630,041 200,000 39,898 0 0 498,749 1,432,167 0 2,718,142 0 2,910,182 0 0 14,391 (202,356) (37,233) (165,123) 0 0 0 (165,123) (4.18) (4.18)
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