-----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, IposJH6IqwzTKcghNx//txAnCaAQcnJ+ngAtJBEmeq/M18TlXanLngp1d6Va1NDz YcvReCSFOFNzfiaG/SW+4Q== 0000950152-97-005534.txt : 19970804 0000950152-97-005534.hdr.sgml : 19970804 ACCESSION NUMBER: 0000950152-97-005534 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970621 FILED AS OF DATE: 19970801 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11573 FILM NUMBER: 97649980 BUSINESS ADDRESS: STREET 1: 3925 EMBASSY PARKWAY STREET 2: P O BOX 5459 CITY: AKRON STATE: OH ZIP: 44334-0459 BUSINESS PHONE: 2163848184 MAIL ADDRESS: STREET 1: 3925 EMBASSY PARKWAY 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-Q 1 CALIBER SYSTEM, INC./QUARTERLY REPORT/ FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (MARK ONE) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the period ended June 21, 1997 ----------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to __________. Commission file number 0-10716 CALIBER SYSTEM, INC. -------------------- (Exact name of company as specified in its charter) Ohio 34-1365496 - ------------------------------- ----------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Company's telephone number, including area code is (330) 665-5646 Indicate by check mark whether the company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ---- The number of shares of common stock without par value outstanding as of July 19, 1997 was 38,935,452. - 1- 2 INDEX CALIBER SYSTEM, INC. FORM 10-Q PERIOD ENDED JUNE 21, 1997 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets--June 21, 1997 and December 31, 1996 Condensed Consolidated Statements of Income--Twelve weeks and twenty-four weeks ended June 21, 1997 and June 15, 1996 Condensed Consolidated Statements of Cash Flows--Twenty-four weeks ended June 21, 1997 and June 15, 1996 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION - --------------------------- Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES - ---------- -2- 3 PART I - FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) CALIBER SYSTEM, INC.
ASSETS JUNE 21, DECEMBER 31, 1997 1996 ----------- --------- (dollars in thousands) CURRENT ASSETS Cash and cash equivalents $ 23,148 $ 38,829 Accounts receivable 302,280 365,033 Prepaid expenses and supplies 59,659 72,813 Deferred income taxes 68,960 47,801 ---------- ---------- TOTAL CURRENT ASSETS 454,047 524,476 PROPERTY AND EQUIPMENT, NET 819,283 848,319 Cost in excess of net assets of businesses acquired, net of amortization 4,933 5,015 Other assets 45,764 54,357 ---------- ---------- TOTAL OTHER ASSETS 50,697 59,372 ---------- ---------- TOTAL ASSETS $1,324,027 $1,432,167 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 115,000 $ 230,000 Accounts payable 337,051 262,313 Salaries and wages 57,742 80,259 Other current liabilities 55,897 57,469 ---------- ---------- TOTAL CURRENT LIABILITIES 565,690 630,041 LONG-TERM LIABILITIES Long-term debt 200,000 200,000 Self-insurance accruals 41,299 40,809 Deferred income taxes 26,174 22,670 ---------- ---------- TOTAL LONG-TERM LIABILITIES 267,473 263,479 SHAREHOLDERS' EQUITY Serial preferred stock - without par value: Authorized - 40,000,000 shares; Issued - none -- -- Common stock - without par value: Authorized - 200,000,000 shares; Issued - 40,896,414 shares 39,898 39,898 Additional capital 51,243 50,735 Retained earnings 456,975 503,496 ---------- ---------- 548,116 594,129 Treasury stock, at cost (1997 - 1,687,000 shares, 1996 - 1,605,000 shares) 57,252 55,482 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 490,864 538,647 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,324,027 $1,432,167 ========== ==========
See notes to condensed consolidated financial statements. -3- 4 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) CALIBER SYSTEM, INC.
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED (SECOND QUARTER) (FIRST HALF) --------------------------- --------------------------- JUNE 21, JUNE 15, JUNE 21, JUNE 15, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (dollars in thousands, except per share data) REVENUE $ 574,676 $ 615,901 $ 1,215,872 $ 1,197,975 OPERATING EXPENSES Salaries, wages and benefits 204,700 241,010 452,126 471,033 Purchased transportation 185,453 181,332 375,163 347,823 Operating supplies and expenses 109,933 131,535 239,091 242,330 Operating taxes and licenses 10,775 13,426 24,261 25,469 Insurance and claims 10,917 13,848 28,837 25,042 Provision for depreciation 27,938 33,336 57,908 66,683 Restructuring charge - - 85,000 - ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 549,716 614,487 1,262,386 1,178,380 ----------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 24,960 1,414 (46,514) 19,595 Other expense, net (2,403) (1,370) (2,528) (2,602) ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 22,557 44 (49,042) 16,993 Income tax provision (benefit) 8,972 (176) (13,403) 7,152 ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 13,585 $ 220 $ (35,639) $ 9,841 =========== =========== =========== =========== EARNINGS (LOSS) PER SHARE $ 0.34 $ 0.01 $ (0.91) $ 0.25 =========== =========== =========== =========== DIVIDENDS DECLARED PER SHARE $ 0.10 $ 0.18 $ 0.28 $ 0.36 =========== =========== =========== =========== AVERAGE SHARES OUTSTANDING 39,208 39,525 39,228 39,515 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. -4- 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) CALIBER SYSTEM, INC.
Twenty-Four Weeks Ended (First Half) ------------------------- June 21, June 15, 1997 1996 ---------- ---------- (dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (35,639) $ 9,841 Restructuring charge 85,000 - Other adjustments 76,854 32,651 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 126,215 42,492 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (49,665) (126,769) Sales of property and equipment 20,793 4,345 Proceeds from sale of investment 15,995 - Net advances to discontinued operations - (10,227) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (12,877) (132,651) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (14,019) (20,725) Increase (decrease) in short-term debt, net (115,000) 87,200 --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (129,019) 66,475 --------- --------- CASH FLOWS USED IN CONTINUING OPERATIONS (15,681) (23,684) CASH FLOWS USED IN DISCONTINUED OPERATIONS - (3,102) --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (15,681) (26,786) --------- --------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 38,829 $ 34,908 --------- --------- CASH AND CASH EQUIVALENTS AT END OF SECOND QUARTER $ 23,148 $ 8,122 ========= =========
See notes to condensed consolidated financial statements. -5- 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CALIBER SYSTEM, INC. Note A - Basis of Presentation - ------------------------------ The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-four weeks ended June 21, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be retroactively adopted on December 31, 1997 with all prior periods being restated. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. This statement will not change earnings per share as reported for the quarter or first half ended June 21, 1997. For further information, refer to consolidated financial statements and footnotes thereto included in the company's annual report on Form 10-K for the year ended December 31, 1996. Note B - Viking Restructuring - ----------------------------- The company announced a major restructuring of Viking's operations on March 27, 1997, which included terminating operations at its former Coles Express unit in the Northeast and Spartan Express in the Southeast and Midwest. Operations at these divisions ceased on March 27, 1997. In connection with the Viking restructuring, the company recorded in 1996 a non-cash $225 million asset impairment charge related to the write-down of goodwill of $82 million and property and equipment of $143 million. First quarter 1997 results included a restructuring charge of $85 million for employee-related costs, including severance and benefits, costs related to lease terminations, additional non - cash asset impairments and other expenses resulting from the restructuring. Subsequent to the end of the second quarter, the company finalized the sale of Viking's Southwestern Division, which is now operating under the name Central Freight Lines, Inc. Caliber received $43 million in cash, retained certain properties that will be sold at a later date, and transferred approximately $22 million in liabilities to Central Freight Lines, Inc. The total value of this transaction, including the anticipated proceeds from the retained properties, is estimated at approximately $80 million. This transaction is not anticipated to materially impact earnings. -6- 7 Results of operations at the former Coles, Spartan, and Southwestern Division from the beginning of the quarter until shut down or sale of operations are included in the consolidated second quarter results. Revenue associated with these divisions was $49.9 million, expenses were $66 million, resulting in $16.1 million of transition costs attributable to operating losses at the former Southwestern Division and to other non-recurring costs related to the closing of the former Coles and Spartan divisions. Assets held for sale from the restructuring are included in property and equipment in the accompanying condensed consolidated balance sheet. In the second quarter, the company received $16.2 million from the sale of certain Viking property and equipment, and paid $13.2 million primarily in severance and related costs associated with the restructuring. Note C - Deferred Income Taxes - ------------------------------ Net deferred tax assets increased to $43 million at June 21, 1997 from $25 million at December 31, 1996, reflecting the tax effects of the restructuring charge. The company has determined that no valuation allowance is required on net deferred tax assets based on the ability to recover taxes previously paid. Note D - Accounting Period - -------------------------- The company operates on a 13 four-week period calendar with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. -7- 8 Item 2. Management's Discussion and Analysis of Financial Condition - -------------------------------------------------------------------- and Results of Operations ------------------------- Consolidated revenue for the second quarter ended June 21, 1997 decreased 6.7% to $574.7 million over second quarter 1996 revenue of $615.9 million as a result of the Viking restructuring announced on March 27, 1997. Excluding Viking, revenue increased 14% for the quarter, from $389.6 million in 1996 to $443.4 million in 1997. For the twenty-four weeks constituting the company's first half, consolidated revenue was $1,215.9 million, an increase of $17.9 million or 1.5% from $1,198.0 million for the first half of 1996. First half revenues excluding Viking amounted to $883.5 million for 1997, a 16.2% increase over comparable 1996 first half revenues of $760.4 million. First half 1997 revenues benefited from three more shipping days than first half 1996. All business units except Viking experienced revenue improvements over second quarter 1996 levels. The general strength of the economy has contributed to increased demand for transportation services. Revenue at RPS, the company's small package carrier, increased to $338.7 million or 12.0% over second quarter revenue of $302.5 million last year. Package volume increased 13% over last year; however, lower package weights and a greater percentage of overnight ground packages in RPS's mix reduced revenue yields even though indexed rates were up slightly over last year. On-time service at RPS continues to run at record levels and approximates 96%. Second quarter net revenues at Caliber Logistics, which are included in consolidated revenues, increased 34%, while gross revenues increased 35%. Roberts' Express, the company's expedited carrier, reported revenue growth of 6% over the second quarter last year. The company announced a major restructuring of Viking's operations on March 27, 1997, which included terminating operations at its former Coles Express unit in the Northeast and Spartan Express in the Southeast and Midwest. As a result of the Viking restructuring, the company recorded in 1996 a non-cash $225 million asset impairment charge related to the write-down of goodwill of $82 million and property and equipment of $143 million. First quarter 1997 results included a restructuring charge of $85 million for employee-related costs, including severance and benefits, costs related to lease terminations, additional non - cash asset impairments and other expenses resulting from the restructuring. In the second quarter, the company received $16.2 million from the sale of certain Viking property and equipment and paid $13.2 million primarily in severance and related costs associated with the restructuring. Subsequent to the end of the second quarter, the company finalized the sale of Viking's Southwestern Division, which is now operating under the name Central Freight Lines, Inc. Caliber received $43 million in cash, retained certain properties that will be sold at a later date, and transferred approximately $22 million in liabilities to Central Freight Lines, Inc. The total value of this transaction, including the anticipated proceeds from the retained properties, is estimated at approximately $80 million. This transaction is not anticipated to materially impact earnings. -8- 9 Results of operations at the former Coles, Spartan, and Southwestern Division from the beginning of the quarter until shut down or sale of operations are included in the consolidated second quarter results. Revenue associated with these divisions was $49.9 million, expenses were $66 million, resulting in $16.1 million of transition costs attributable to operating losses at the former Southwestern Division and to other non-recurring costs related to the closing of the former Coles and Spartan Divisions. Viking's ongoing operations now provide regional freight service to customers in 12 western states through 43 terminals. Second quarter revenue from Viking's ongoing operations amounted to $81.4 million. Viking's ongoing operations reported $80 million of operating expenses, resulting in a second quarter operating profit of $1.4 million in the first full quarter since the unit's restructuring as a regional carrier. In total, Viking reported operating losses of $14.7 million in the second quarter of 1997 compared to $33.3 million for the same period last year. Without Viking, second quarter operating expenses were $403.7 million in 1997 compared to $355 million in the second quarter of 1996, an increase of 13.7%. This change resulted primarily from higher business volumes at RPS and Logistics, which reported operating expense increases of 11.7% and 33.3%, respectively. Excluding the restructuring charge and related transition costs, operating income was $41.1 million for the quarter and $54.6 million for the first half, compared to 1996 second quarter operating income of $1.4 million and first half 1996 operating income of $19.6 million. Second quarter operating income without Viking was $39.7 million, an increase of 14.4% over $34.7 million last year. RPS reported a 15% rise in second quarter operating income to $32.3 million from $28.2 million for the same period last year. RPS's second quarter margins increased from 9.3% in 1996 to 9.5% in 1997. Roberts continues to maintain excellent margins, while Logistic's margins have improved over 1996 for both the second quarter and first half. For the first half, operating income was $86.3 million without Viking, a 29.2% improvement compared to $66.8 million in the first half of 1996. Growth in first half operating income was due primarily to RPS, where operating income rose 27% from $55.9 million in 1996 to $71 million in 1997. First half margins at RPS improved from 9.48% to 10.48%. RPS's first half operating income was positively impacted by a $5.3 million change in employee benefits. Excluding the impact of the change in employee benefits, RPS's first half margin was 9.7% compared to 9.48% in the first half of 1996. The change in "other expense, net" of $1 million for the second quarter and $0.1 million for the first half consisted primarily of additional net interest expense of $3.1 million for the quarter and $6.7 million for the first half over 1996 levels offset by a gain on the sale of investment of $2.3 million for the quarter and $7.6 million for the first half. The consolidated income tax benefit rate was 27.3% for the first half. The income tax expense rate related to ongoing operations was 39.5% for the first half. Both rates differed from the U.S. federal statutory rate due primarily to state income taxes and non-deductible operating costs. -9- 10 Net income from ongoing operations (net income excluding transition costs) for the second quarter was $24.3 million or $0.62 per share. Including the Viking transition costs, the company's net income for the quarter was $13.6 million or $0.34 per share, compared to net income of $220,000 or $0.01 per share for the second quarter of 1996. Transition costs negatively impacted net income for the quarter by $10.7 million or $0.28 per share. Net income from ongoing operations was positively affected by the gain on sale of investment of $1.8 million or $0.05 per share. Net income for the first half from ongoing operations was $31.5 million or $0.80 per share. Including the second quarter net transition costs of $10.7 million or $0.28 per share and the first quarter restructuring charge of $56.4 million or $1.43 per share, net loss for the first half was $35.6 million or $0.91 per share compared to net income of $9.8 million or $0.25 per share in 1996. First half net income from ongoing operations was positively impacted by the gain on sale of investment of $4.6 million or $0.12 and by the one-time after tax change in RPS's employee benefits of $2.8 million or $0.07 per share. For the first half, net cash provided by operating activities of $126.2 million was sufficient to fund net property additions of $28.9 million and dividends of $14 million and to reduce outside borrowings. The company is party to bank credit facilities providing for up to $300 million of term loans and up to $25 million of borrowings under revolving credit. Both agreements are unsecured and interest is based on variable rates. Outstanding bank borrowings, which are classified as short-term debt on the accompanying balance sheet, amounted to $115 million at the end of the second quarter with $210 available for future borrowings subject to the limitations of the loan covenants. Outstanding bank borrowings as of July 18, 1997 (the end of the seventh accounting period) have been further reduced to $50 million as a result of the proceeds from the sale of Viking's Southwestern Division and cash flows from operating activities. 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. 1997 capital expenditures are currently estimated to approximate $125 million, of which 60% is expected to be for technology and highly automated equipment, 30% for real estate and 10% for revenue and support equipment. The company anticipates that through available borrowings and cash flows from operations, it will be able to fund the remaining short-term cash requirements from the Viking restructuring, capital expenditures during 1997 and provide adequate levels of working capital and funds for the payment of dividends and interest. In March 1997, the Board of Directors reduced the 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. The foregoing contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive initiatives and pricing pressures; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of industries serviced by the company's businesses; actual future costs including employee wages and benefits; actual costs of continuing investments in technology; the timing and amount of capital expenditures; and actual costs and effects of the restructuring of the business served by Viking. -10- 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- At the annual meeting of shareholders on May 14, 1997, the following proposals were voted upon: Concerning Election of Directors
Nominees for Director Votes Cast For Votes Withheld - --------------------- -------------- -------------- George B. Beitzel 34,458,582 1,186,568 Richard A. Chenoweth 34,509,199 1,135,951 Norman C. Harbert 34,525,173 1,119,977 Harry L. Kavetas 34,513,343 1,131,807 Charles R. Longsworth 34,479,279 1,165,871 G. James Roush 34,528,753 1,116,397 Daniel J. Sullivan 34,134,678 1,510,472 H. Mitchell Watson, Jr. 34,464,209 1,180,941
Concerning Ratification of the Designation of Independent Auditors Votes Cast For: 35,142,050 Votes Cast Against: 309,157 Abstentions: 193,943 Broker Non-Votes: N/A Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits -------- 10.1 Trust Agreement between Caliber System, Inc. and Bank One Trust Company, N.A., dated April 30, 1997 10.2 Rider No. 1 to Caliber System, Inc. Long-Term Stock Award Incentive Plan effective January 2, 1996 -11- 12 10.3 Rider No. 2 to Caliber System, Inc. Long-Term Stock Award Incentive Plan effective January 2, 1996 27 Financial Data Schedule (b) Reports on Form 8-K Filed During the Second Quarter of 1997 ----------------------------------------------------------- On April 21, 1997, a Current Report on Form 8-K was filed by the registrant to report First Quarter results. On April 30, 1997, a Current Report on Form 8-K was filed by the registrant to announce an agreement in principal to sell the operations of Viking Freight, Inc.'s Southwestern Division. On May 28, 1997, a Current Report on Form 8-K was filed by the registrant to announce the signing of a definitive agreement to sell the operations of Viking Freight, Inc.'s Southwestern Division. -12- 13 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CALIBER SYSTEM, INC. --------------------------- (Registrant) Date: August 1, 1997 By [Louis J. Valerio] --------------- -------------------- Louis J. Valerio Senior Vice President-Finance and Chief Financial Officer Date: August 1, 1997 By [Kathryn W. Dindo] ---------------- -------------------- Kathryn W. Dindo Vice President and Controller -13- 14 EXHIBIT INDEX 10.1 Trust Agreement between Caliber System, Inc. and Bank One Trust Company, N.A. dated April 30, 1997 10.2 Rider No. 1 to 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). 10.3 Rider No. 2 to 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). 27 Financial Data Schedule EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 - -------------------------------------------------------------------------------- TRUST AGREEMENT Between CALIBER SYSTEM, INC. and BANK ONE TRUST COMPANY, N.A. ----------------- April 30, 1997 ----------------- - -------------------------------------------------------------------------------- 2
TABLE OF CONTENTS Page ---- I. TRUST FUND........................................................................................... 2 II. PAYMENTS TO TRUST BENEFICIARIES...................................................................... 5 III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT............................................. 8 IV. PAYMENTS TO COMPANY.................................................................................. 10 V. INVESTMENT OF TRUST FUND............................................................................. 11 VI. INCOME OF THE TRUST.................................................................................. 13 VII. ACCOUNTING BY TRUSTEE................................................................................ 13 VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE........................................................ 14 IX. AMENDMENTS, ETC., TO MANAGEMENT RETENTION AGREEMENTS AND EXHIBITS......................................................................................... 19 X. REPLACEMENT OF TRUSTEE............................................................................... 21 XI. AMENDMENT OR TERMINATION OF AGREEMENT................................................................ 22 XII. SPECIAL DISTRIBUTIONS................................................................................ 24 XIII. GENERAL PROVISIONS................................................................................... 26 XIV. NOTICES.............................................................................................. 29
3 TRUST AGREEMENT --------------- This trust agreement ("Agreement") made as of the 30th day of April, 1997 by and between Caliber System, Inc., an Ohio corporation (the "Company"), and Bank One Trust Company, N.A. (the "Trustee"). WITNESSETH: ----------- WHEREAS, certain employees of the Company, or of an affiliate of the Company, listed on Exhibit A (the "Participants") and their beneficiaries may become entitled to benefits under the provisions of certain management retention agreements listed on Exhibit B (the "Management Retention Agreements"), as the same have been or in the future may be amended or restated, or any successor thereto; WHEREAS, the Management Retention Agreements provide for certain severance, retention and/or other benefits in the event of a Change in Control (as that term is defined in Section 1.7), and the Company wishes to assure the payment to the Participants and their beneficiaries (the Participants and their respective beneficiaries are collectively referred to as the "Trust Beneficiaries") of amounts due under such agreements (the amounts so payable are collectively referred to as the "Benefits"); WHEREAS, the Company wishes to establish a trust (the "Trust") and to transfer to the Trust assets which shall be held subject to the claims of the creditors of the Company to the extent set forth in Article III until (i) paid in full to all Trust Beneficiaries as Benefits in such manner and as specified 4 in this Agreement unless the Company is Insolvent (as that term is defined below) at the time that such Benefits become payable or (ii) otherwise disposed of pursuant to the terms of this Agreement; and WHEREAS, the Company shall be considered "Insolvent" for purposes of this Agreement at such time as the Company (i) is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, as amended from time to time, or (ii) is unable to pay its debts as they become due. NOW, THEREFORE, the parties establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: I. TRUST FUND ---------- 1.1 Subject to the claims of creditors to the extent set forth in Article III, the Company shall deposit with the Trustee in trust One Hundred Dollars ($100), which shall become the principal of this Trust, to be held, administered and disposed of by the Trustee as provided in this Agreement. 1.2 This Trust shall be irrevocable. In the event that a Change in Control has occurred, the Chief Executive Officer of the Company (the "CEO") or the Secretary of the Company shall notify the Trustee promptly. The Trustee shall be entitled to rely upon such notice as to whether and when a Change in Control has occurred and shall not be required to make any independent verification of a Change in Control. 1.3 The principal of the Trust and any earnings shall be held in trust separate and apart from other funds of the Company 5 and shall be used exclusively for the uses and purposes set forth in this Agreement. No Trust Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust prior to the time that such assets are paid to a Trust Beneficiary as Benefits. Any rights created under the Management Retention Agreements and this Agreement shall be mere unsecured contractual rights of Trust Beneficiaries with respect to the Company. The obligation of the Trustee to pay Benefits pursuant to this Agreement constitutes merely an unfunded and unsecured promise to pay such benefits. 1.4 (a) The Company may at any time or from time to time make additional deposits of cash or other property as may be acceptable to the Trustee in the Trust, or make provision for cash or other property as may be acceptable to the Trustee to be transferred to the Trust, such as by means of a letter of credit or otherwise, to augment the principal to be held, administered and disposed of by the Trustee, but no payment of all or any portion of the principal of the Trust or earnings shall be made to the Company or any other person or entity on behalf of the Company except as expressly provided in this Agreement. (b) Within 30 days following the occurrence of a Potential Change in Control (as that term is defined in this Section 1.4), the Company shall make a contribution to the Trust that is sufficient, taking into account the assets of the Trust prior to such contribution, to provide for the payment of all Benefits and any other amounts payable or reimbursable pursuant to the terms of this Agreement. 3 6 (c) Within 30 days after the end of each calendar year ending after a Change in Control, the Company shall make an additional contribution to the Trust that is sufficient, taking into account the assets of the Trust prior to such contribution, to provide for the payment of all Benefits and any other amounts payable or reimbursable pursuant to the terms of this Agreement. (d) A "Potential Change in Control" means the occurrence of any of the following events: (i) The Company enters into a letter of intent, agreement in principle or other agreement, the consummation of which would constitute a Change in Control; (ii) any person (including the Company) makes a public announcement (including, without limitation, an announcement made by filing a Schedule 13D or Schedule 14D-1 (or any successor schedule, form, report or item), each as promulgated pursuant to the Securities Exchange Act of 1934 (the "Exchange Act")) stating a present intention to take actions that, if consummated, would constitute a Change in Control; or (iii) any "person," as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act, becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 20% or more of the combined power of all the voting stock of the Company then outstanding. 1.5 Not later than the date of a Change in Control, the Company shall (a) specify the nature, estimated amounts, methods of computation and timing of the Benefits to which each 4 7 Trust Beneficiary may become entitled, subject to Article IX, in an exhibit ("Exhibit C") which shall become a part of this Agreement and be incorporated by this reference, (b) provide any corresponding revisions to Exhibits A and B that may be required and (c) provide the Trustee with copies of the Management Retention Agreements and any amendments. 1.6 The Trust is intended to be a grantor trust, within the meaning of section 671 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision, and shall be construed accordingly. The purpose of the Trust is to assure that the Company's obligations to the Participants pursuant to the Management Retention Agreements are fulfilled. The Trust is neither intended nor designed to qualify under section 401(a) of the Code or to be subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 1.7 As used in this Agreement, the term "Change in Control" has the meaning set forth in section 1(d) of the Second Amended and Restated Management Retention Agreement dated March 18, 1997 between the Company and its then CEO. II. PAYMENTS TO TRUST BENEFICIARIES ------------------------------- 2.1 Provided that the Company is not Insolvent and commencing with the earlier to occur of (a) appropriate notice to the Trustee by the Company, or (b) the date of a Change in Control, the Trustee shall make payments of Benefits to each Trust Beneficiary from the assets of the Trust in compliance and conformity with the terms of the Management Retention Agreements and in accordance with Exhibit C, and subject to Article IX. 5 8 2.2 The Trustee shall continue to pay Benefits to the Trust Beneficiaries until the assets of the Trust are depleted, subject to Section 11.2. If any current payment by the Trustee under the terms of this Agreement would deplete the assets of the Trust below the amount necessary to provide adequately for Benefits known to the Trustee to be payable in the future, the Trustee shall nevertheless make the current payment when due. If, after application of the preceding sentence, amounts in the Trust are not sufficient to provide for full payment of the Benefits to which any Trust Beneficiary is entitled as provided in this Agreement, the Company shall make the balance of each such payment directly to the Trust Beneficiary as it becomes due. 2.3 The Company may make payments of Benefits directly to each or any Trust Beneficiary. The Company shall notify the Trustee of its decision to pay Benefits directly at least 3 days prior to the time amounts are due to be paid to a Trust Beneficiary. 2.4 Nothing in this Agreement shall in any way diminish any rights of any Trust Beneficiary to pursue such Trust Beneficiary's rights as a general creditor of the Company with respect to Benefits or otherwise, and the rights of each Trust Beneficiary under the respective Management Retention Agreement shall in no way be affected or diminished by any provision of this Agreement or action taken pursuant to this Agreement, except that any payment actually received by any Trust Beneficiary shall reduce dollar-per-dollar amounts otherwise due to such Trust Beneficiary pursuant to such Management Retention Agreement. 6 9 2.5 The Trustee shall withhold from any payment to a Trust Beneficiary the amount required by law to be so withheld under federal, state and local tax withholding requirements, and shall pay over to the appropriate government authority the amounts withheld. Unless notified by the Company, the Trustee shall be entitled to treat the payment of any Benefit as "supplemental wages" under Treas. Reg. Section 31.3402(g)-1 or any successor provision and as "supplemental compensation" under applicable state and local withholding tax provisions. On or before the date of a Change in Control, the Company shall furnish the Trustee with a schedule which lists for each Participant the withholding rates then applicable to supplemental wages or supplemental compensation for federal, state and local tax purposes in the event of the termination of each of the Participant's employment with the Company immediately following the Change in Control. 7 10 III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO -------------------------------------------------- A TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT ------------------------------------------------- 3.1 At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of creditors of the Company as set forth in this Section 3.1. The Board of Directors of the Company (the "Board") and the CEO shall have the duty to inform the Trustee in writing if either the Board or the CEO believes that the Company is Insolvent. If the Trustee receives a notice in writing from the Board or the CEO stating that the Company is Insolvent or if a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall independently determine within 30 days after receipt of such notice whether the Company is Insolvent. In making this determination, the Trustee may engage the outside accountants of the Company, or other qualified accountants, as may be dictated by prudence, to render an opinion as to the solvency of the Company and shall be fully protected under Section 8.7 in relying upon the advice of such accountants. In addition, the Company shall provide the Trustee or its agents, including the outside accountants of the Company, with any information reasonably requested, and otherwise cooperate with the Trustee or its agents in making the determination. Pending such determination, or if the Trustee has actual knowledge or has determined that the Company is Insolvent, the Trustee shall discontinue or refrain from making payments to any Trust Beneficiary and hold the Trust assets for the benefit of the general creditors of the Company. The Trustee shall pay any undistributed principal and income in 8 11 the Trust to the extent necessary to satisfy the claims of the creditors of the Company as a court of competent jurisdiction may direct. If the Trustee has discontinued or refrained from making payments to any Trust Beneficiary pursuant to this Section 3.1, the Trustee shall pay or resume payments to such Trust Beneficiary in accordance with this Agreement if the Trustee has determined that the Company is not Insolvent, or is no longer Insolvent (if the Trustee initially determined the Company to be Insolvent), or pursuant to the order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of Insolvency, or has received notice from the Board, the CEO or a person claiming to be a creditor of the Company alleging that the Company is Insolvent, the Trustee shall have no duty to inquire as to whether the Company is Insolvent and may rely on information concerning the Insolvency of the Company that has been furnished to the Trustee by any creditor of the Company or by any person (other than an employee or director of the Company) acting with apparent or actual authority with respect to the Company. 3.2. If the Trustee is precluded from paying Benefits from the Trust assets pursuant to Section 3.1 and such prohibition is subsequently removed, the Trustee shall pay the aggregate amount of all Benefits that would have been paid to the Trust Beneficiaries in accordance with this Agreement during the period of such prohibition, less the aggregate amount of Benefits otherwise paid to any Trust Beneficiary by the Company during any such period, together with interest on the delayed amount 9 12 determined at a rate equal to the rate actually earned (including, without limitation, market appreciation or depreciation, plus receipt of interest and dividends) during such period with respect to the assets of the Trust corresponding to such net amount delayed. IV. PAYMENTS TO COMPANY ------------------- 4.1 The Company shall have no right or power to direct the Trustee to return any of the Trust assets to the Company before all payments of Benefits have been made to all Trust Beneficiaries as provided in this Agreement. 4.2 For purposes of this Agreement, the term "Executives" shall mean at all times the CEO, the President, the Chief Financial Officer, the General Counsel and the Vice President (responsible for human resources) of the Company. Notwithstanding the above, after a Change in Control, the term "Executives" shall not mean the persons from time to time holding the positions referred to above, but shall mean those specific persons who constituted the "Executives" immediately prior to the Change in Control. In the event that, following a Change in Control, an Executive resigns from such position or is unable to serve due to death or disability, then the four remaining Executives shall appoint a successor who shall constitute an Executive under this Agreement. Except as otherwise expressly provided, the Executives shall be considered to have "agreed" or "consented" to, or "approved" or "requested", a proposed action or decision under the terms of this Agreement when three or more of the Executives so indicate in writing to the Trustee. 10 13 V. INVESTMENT OF TRUST FUND ------------------------ 5.1 Prior to the date of a Change in Control, the Trustee shall invest and reinvest the assets of the Trust as the Company shall prescribe in writing from time to time. 5.2 On or after the date of a Change in Control, or in the absence of the instructions from the Company specified in Section 5.1, the provisions of this Section 5.2 shall apply to the investment of the Trust assets. The investment objective of the Trustee shall be to preserve the principal of the Trust while obtaining a reasonable total rate of return, measurement of which shall include, without limitation, market appreciation or depreciation plus receipt of interest and dividends. The Trustee shall be mindful, in the course of its management of the Trust, of the liquidity demands on the Trust. 5.3 The Trustee shall have the sole power to invest the assets of the Trust, in accordance with the provisions of Sections 5.1 and 5.2. The Trustee shall not be liable for any failure to maximize income on such portion of the Trust assets as may be from time to time invested or reinvested as set forth above, nor for any loss of principal or income due to the liquidation of any investment that the Trustee, in its sole discretion, believes necessary to make payments or to reimburse expenses under the terms of this Agreement. The Trustee shall have the right to invest assets of the Trust for short-term investment periods, pending distribution, or long-term investment of such assets, as the Trustee may deem proper in the 11 14 circumstances. In addition, the Trustee shall have the authority, in its sole discretion: (a) to invest and reinvest the Trust assets in any kind of real or personal property without regard to any law restricting investment by trustees, including, but not limited to, securities of any open-end management type investment company or investment trust registered under the Investment Company Act of 1940, as amended, which would be regarded by prudent businessmen as a safe investment. The fact that the Trustee, any affiliate of the Trustee or any affiliate of BANK ONE CORPORATION is providing services to and receiving remuneration from the foregoing investment company or trust as investment advisor, custodian, transfer agent, registrar, or otherwise shall not preclude the Trustee from investing in the securities of such investment company or investment trust. (b) to invest and reinvest or otherwise deposit the Trust assets in savings accounts, time deposit accounts, certificates of deposit, money market funds, or other evidences of deposit issued by Trustee and/or any other national bank, savings and loan institution, state member bank, state non-member bank, or other depository institution which now or in the future is an affiliate or subsidiary of Trustee or of BANK ONE CORPORATION. 5.4 In no event may the Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by the Company, other than a de minimis amount held in common investment vehicles in which the Trustee invests. 12 15 The Trustee is not authorized and shall not disclose the name, address, or security positions of the beneficial owners of the Trust in response to requests concerning shareholder communications under Section 14 of the Securities Exchange Act of 1934, the rules and regulations thereunder, or any similar statute, regulation, or rule in effect from time to time. VI. INCOME OF THE TRUST ------------------- 6.1 During the continuance of this Trust, all net income of the Trust shall be retained in the Trust. VII. ACCOUNTING BY TRUSTEE --------------------- 7.1 The Trustee shall maintain such books, records and accounts as may be necessary for the proper administration of the Trust assets, including such specific records as shall be agreed upon in writing by the Company and the Trustee. Within 60 days following the close of each calendar year that includes or commences after the date of this Trust until the termination of this Trust or the removal or resignation of the Trustee (and within 60 days after the date of such termination, removal or resignation), the Trustee shall render to the Company an accounting with respect to the Trust assets as of the end of the then most recent calendar year (and as of the date of such termination, removal or resignation, as the case may be). The Trustee shall furnish to the Company on a quarterly basis (or as the Company shall direct from time to time) and in a timely manner such information regarding the Trust as the Company shall require for purposes of preparing its statements of financial condition. Upon the written request of the Company or, on or 13 16 after the date of a Change in Control, an Executive, the Trustee shall deliver to the Executive or the Company, as the case may be, a written report setting forth the amount held in the Trust and a record of the deposits made to the Trust by the Company. VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE --------------------------------------------- 8.1 The duties and responsibilities of the Trustee shall be limited to those expressly set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. 8.2 In addition to and without limiting any other provision of this Agreement, on or after the date of a Change in Control, the Trustee shall, in its sole discretion, based upon the information furnished to it by the Company and/or the Participants and any additional information that it may reasonably request, (a) make all decisions regarding whether a Trust Beneficiary is eligible for the payment of Benefits, the nature, amount and timing of such benefits, and any other decisions pertinent to the exercise of the Trustee's duties and responsibilities under this Agreement, and (b) exercise any power or discretion granted pursuant to the Management Retention Agreements to the Board, any committee of the Board, or to any other committee, entity or person. On or before the date of a Change in Control, the Company shall furnish the Trustee with calculations and supporting schedules showing in detail the payments required under this Agreement in the event of the termination of each of the Participant's employment with the Company immediately following the Change in Control, and at any 14 17 time thereafter. The Trustee shall determine amounts due under this Agreement in a manner consistent with these calculations and supporting schedules. In connection with the exercise of the duties, responsibilities, power and discretion of the Trustee under this Agreement, the Trustee may employ legal counsel to aid its determinations and shall be fully protected under Section 8.7 in relying upon the advice of counsel in making such determinations. 8.3 If all or any part of the Trust assets are at any time attached, garnished, or levied upon by any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by a court affecting such property or any part of such property, then and in any of such events the Trustee shall be authorized, in its sole discretion, to rely upon and comply with any such order, judgment or decree, and it shall not be liable to the Company or any Trust Beneficiary by reason of such compliance even though such order, judgment or decree subsequently may be reversed, modified, annulled, set aside or vacated. 8.4 The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to anyone for any action taken pursuant to a direction, request, or approval given by the Company or any 15 18 Executive or Trust Beneficiary contemplated by and complying with the terms of this Agreement. The Trustee shall discharge its responsibility for the investment, management and control of the Trust assets solely in the interest of the Trust Beneficiaries and for the exclusive purpose of assuring that, to the extent of available Trust assets, and in accordance with the terms of this Agreement, all payments of Benefits are made when due to the Trust Beneficiaries. 8.5 The Trustee may consult with legal counsel (who shall not be counsel for the Company) to be selected by it. 8.6 The Trustee shall be entitled to compensation for its services as set forth in Schedule A attached hereto and made a part hereof (the "Fee Schedule"), for reimbursement of its out of pocket expenses as provided in this Agreement, and for all other necessary and proper disbursements made or incurred by the Trustee in the performance of its duties and obligations under this Agreement. The Company shall promptly pay or reimburse the Trustee for the payment of any expense or liability incurred by the Trustee in connection with the performance of its duties, including but not limited to the following payments on the account of the Company: delivery charges, insurance, interest, taxes, management, accountant and legal fees, and other operating expenses of the Trustee. Such compensation and reimbursement shall be paid in the manner provided by Section 8.7. 8.7 The Company agrees to indemnify and hold harmless the Trustee from and against any and all damages, losses, claims or expenses as incurred (including expenses of investigation and 16 19 fees and disbursements of counsel to the Trustee and any taxes imposed on the Trust assets or income of the Trust) arising out of or in connection with the performance by the Trustee of its duties, other than such damages, losses, claims or expenses arising out of the Trustee's gross negligence or willful misconduct. The Trustee shall not be required to undertake or to defend any litigation arising in connection with this Agreement unless it be first indemnified by the Company against its prospective costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses), and the Company agrees to indemnify the Trustee and be primarily liable for such costs, expenses, and liabilities. Any amount payable to the Trustee under Section 8.6 or this Section 8.7 shall be paid by the Company promptly upon demand by the Trustee or, in the event that the Company fails to make such payment within 30 days of such demand, from the Trust assets. In the event that payment is made to the Trustee from the Trust assets, the Trustee shall promptly notify the Company in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it will deliver to the Trustee to be held in the Trust an amount in cash equal to any payments made from the Trust assets to the Trustee pursuant to Section 8.6 or this Section 8.7. The failure of the Company to transfer any such amount shall not in any way impair the Trustee's right to indemnification, reimbursement and payment pursuant to Section 8.6 or this Section 8.7. The Company's indemnity shall be a continuing obligation of the Company, its 17 20 successors and assigns, notwithstanding the termination of this Agreement. 8.8 The Trustee may vote any stock or other securities and exercise any right appurtenant to any stock, other securities or other property it holds, either in person or by general or limited proxy, power of attorney or other instrument. 8.9 The Trustee may hold securities in bearer form and may register securities and other property held in the Trust fund in its own name or in the name of a nominee, combine certificates representing securities with certificates of the same issue held by the Trustee in other fiduciary capacities, and deposit, or arrange for deposit of, property with any depository; provided that the books and records of the Trustee shall at all times show that all such securities are part of the assets of the Trust. 8.10 The Trustee may exercise all rights appurtenant to any letter of credit made payable to the Trustee of the Trust for the benefit of the Trust in accordance with the terms of such letter of credit. 8.11 The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals, who may be agents, accountants, actuaries, investment advisors, financial consultants, or otherwise act in a professional capacity, as the case may be, for the Company or with respect to any Management Retention Agreement, to assist the Trustee in performing any of its duties. 18 21 8.12 The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law unless expressly provided otherwise in this Agreement. 8.13 Notwithstanding any other provision of this Agreement, in the event of the termination of the Trust, or the resignation or discharge of the Trustee, the Trustee shall have the right to a settlement of its accounts in accordance with the procedures set forth in Section 7.1, which may be made, at the option of the Trustee, either (a) by a judicial settlement in a court of competent jurisdiction, or (b) by agreement of settlement, release and indemnity from the Company to the Trustee. IX. AMENDMENTS, ETC., TO MANAGEMENT RETENTION AGREEMENTS AND EXHIBITS ----------------------------------------- 9.1 On or after the date of a Change in Control, the provisions of this Section 9.1 shall apply. 9.1.1 Not later than 45 calendar days after the end of each calendar year and at such other time as may in the judgment of the Company be appropriate in view of a change in circumstances, the Company and each Participant shall agree upon and furnish any amendment to Exhibit C (but only with respect to such Participant's Benefits) as shall be required to reflect: (a) any required change in the amounts of Benefits as a result of any change in such Participant's compensation (or otherwise) during the prior calendar year, or (b) any amendment, restatement or other change in or to the Management Retention Agreements, which agreements to amendments to such Exhibit C shall be furnished to the Trustee by the Company or the Participants and thereafter be deemed to be a 19 22 part of this Agreement; provided, however, that in the event of the failure of the Company and any Participant to reach such agreement, the provisions of Section 9.1.2 shall control. 9.1.2 The Company shall, and any Trust Beneficiary may, promptly furnish the Trustee true and correct copies of any amendment, restatement or successor to any of the Management Retention Agreements. Upon written notification to the Trustee by the Company or any Participant of the failure of the Company and such Participant to agree as provided in Section 9.1.1, the Trustee shall, to the extent necessary in the sole judgment of the Trustee, (a) recompute the amount payable in accordance with Exhibit C to any Trust Beneficiary, and (b) notify the Company and the Participant in writing of its computations. In making these determinations, the Trustee may employ legal counsel and shall be fully protected under Section 8.7 in relying upon the advice of counsel in relying on such determinations. Thereafter, this Agreement and all Exhibits shall be amended to the extent of such Trustee determinations without further action; provided, however, that the failure of the Company to furnish any such amendment, restatement, successor or compensation information shall in no way diminish the rights of any Trust Beneficiary. 9.2 Amendments to Exhibit A (and directly corresponding amendments to Exhibit B) that modify one or more lists of Participants shall be made only in accordance with Section 1.5. No amendment to Exhibit A (and no amendment to Exhibit B that would delete a Participant in a Management Retention Agreement) 20 23 may be made on or after the date on which a Change in Control occurs, except in accordance with Article XI. X. REPLACEMENT OF TRUSTEE ---------------------- 10.1 The Trustee may resign and be discharged from its duties after providing not less than 90 days' notice in writing to the Company. On or after the date of a Change in Control, the Trustee shall also provide notice of its resignation to all of the Executives. Prior to the date of a Change in Control, the Trustee may be removed at any time upon notice in writing by the Company. On or after such date, removal shall also require the agreement of the Executives. Prior to the date of a Change in Control, a replacement or successor trustee shall be appointed by the Company. On or after such date, appointment shall also require the agreement of the Executives. No such removal or resignation shall become effective until the effectiveness of the acceptance of the trust by a successor trustee designated in accordance with this Article X. If, after making reasonable efforts to appoint a successor trustee, the Trustee has been unable to do so, the Trustee shall petition a court of competent jurisdiction to appoint a successor trustee. Upon the acceptance of the trust by a successor trustee, the Trustee shall release all of the moneys and other property in the Trust to its successor, who after such time shall for all purposes of this Agreement be considered to be the "Trustee." In the event of its removal or resignation, the Trustee shall duly file with the Company and, after the Trust becomes irrevocable, all of the Executives, a written statement or statements of accounts and 21 24 proceedings as provided in Section 7.1 for the period since the last previous accounting of the Trust. XI. AMENDMENT OR TERMINATION OF AGREEMENT ------------------------------------- 11.1 This Agreement may be amended at any time and to any extent by a written instrument executed by the Trustee and the Company; provided, however, that no amendment shall have the effect of (a) making the Trust revocable or (b) altering Section 11.2. 11.2 The Trust shall terminate upon the earliest to occur of (i) a joint determination by the Trustee and the Executives made on or after the fifth anniversary of a Change in Control that no Trust Beneficiary is or will be entitled to any further payment of Benefits or (ii) such time as the Trustee shall have received consents from all of the Executives to the termination of this Agreement. Notwithstanding the previous sentence, if payments under an Management Retention Agreement with respect to any Trust Beneficiary are the subject of litigation or arbitration, the Trust shall not terminate and the funds held in the Trust with respect to such Trust Beneficiary shall continue to be held by the Trustee until the final resolution of such litigation or arbitration. The Trustee may assume that no Management Retention Agreement is the subject of such litigation or arbitration unless the Trustee receives written notice from a Trust Beneficiary or the Company with respect to such litigation or arbitration. The Trustee may rely upon written notice from a Trust Beneficiary as to the final resolution of such litigation or arbitration. 22 25 11.3 Upon a termination of the Trust as provided in Section 11.2, any assets remaining in the Trust, less all payments, expenses, taxes and other charges under this Agreement as of such date of termination, shall be returned to the Company. Delivery and release of Trust assets shall be made provided the Trustee shall have no liability for shipping or insurance costs associated therewith and full payment has been made to Trustee of all of its compensation, costs, expenses and other amounts hereunder. 23 26 XII. SPECIAL DISTRIBUTIONS --------------------- 12.1 It is intended that (a) the creation of, and transfer of assets to the Trust will not cause any of the Plans to be other than "unfunded" for purposes of title I of ERISA; (b) transfers of assets to the Trust will not be transfers of property for purposes of section 83 of the Code, or any successor provision thereto, nor will such transfers cause a currently taxable benefit to be realized by a Trust Beneficiary pursuant to the "economic benefit" doctrine; and (c) pursuant to section 451 of the Code, or any successor provision thereto, amounts will be includible as compensation in the gross income of a Trust Beneficiary in the taxable year or years in which such amounts are actually distributed or made available to such Trust Beneficiary by the Trustee. 12.2 Notwithstanding anything to the contrary contained in any Plan, if the Trustee obtains an opinion of tax counsel selected by the Trustee to the effect that based upon any of the following occurring after the date of this Agreement: (a) change in the federal tax or revenue laws, (b) a decision in a controlling case, (c) a published ruling or similar announcement issued by the Internal Revenue Service, (d) a regulation issued by the Secretary of the Treasury, (e) a decision by a court of competent jurisdiction involving a Trust Beneficiary, or (f) a closing agreement made under section 7121 of the Code, or any successor provision thereto, that is approved by the Internal Revenue Service and involves a Trust Beneficiary, it is more likely than not that an 24 27 amount is includible in the gross income of a Trust Beneficiary in a taxable year that is prior to the taxable year or years in which such amount would, but for this Section 12.2, otherwise actually be distributed or made available to such Trust Beneficiary by the Trustee, then the Trustee shall distribute to each affected Trust Beneficiary an amount equal to the amount which, after taking into account the federal, state and local income tax consequences of the special distribution itself, is equal to the sum of any federal, state and local income taxes, interest due thereon, and penalties assessed with respect thereto which are attributable to amounts that are so includible in the gross income of such Trust Beneficiary. The Trustee shall seek such an opinion of tax counsel if and only if requested to do so by the Executives. 12.3 Notwithstanding anything to the contrary contained in any Plan, if a Trust Beneficiary provides evidence satisfactory to the Trustee demonstrating that, as a result of an assertion by the Internal Revenue Service, a final nonappealable binding determination has been made with respect to a taxable year of such Trust Beneficiary that an amount is includible in the gross income of such Trust Beneficiary in a taxable year that is prior to the taxable year in which such amount would, but for this Section 12.3, otherwise actually be distributed or made available to such Trust Beneficiary by the Trustee, then the Trustee shall distribute to such Trust Beneficiary an amount equal to the amount which, after taking into account the federal, state and 25 28 local income tax consequences of the special distribution itself, is equal to the sum of any federal, state and local income taxes, interest due thereon, and penalties assessed with respect thereto which are attributable to amounts that are so includible in the gross income of such Trust Beneficiary. XIII. GENERAL PROVISIONS ------------------- 13.1 The Company shall, at any time and from time to time, upon the reasonable request of the Trustee, provide information, execute and deliver such further instruments and do such further acts as may be necessary or proper to effectuate the purposes of this Trust. 13.2 Each Exhibit referred to in this Agreement shall become a part of this Agreement and is expressly incorporated by reference. 13.3 This Agreement sets forth the entire understanding of the parties with respect to its subject matter and supersedes any and all prior agreements, arrangements and understandings. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. 13.4 This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. 13.5 In the event that any provision of this Agreement or the application of any provision to any person or circumstances shall be determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to persons or 26 29 circumstances other than those as to which it is held invalid or unenforceable, shall not be affected, and each provision of this Agreement shall be valid and enforced to the maximum extent permitted by law. 13.6 (a) The preamble to this Agreement shall be considered a part of the agreement of the parties as if set forth in a section of this Agreement. (b) The headings and table of contents contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 13.7 The right of any Trust Beneficiary to any benefit or to any payment may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process except as required by law. Any attempt by any Trust Beneficiary. to anticipate, alienate, assign, sell, transfer, pledge, encumber or charge the same shall be void. The Trust assets shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any Trust Beneficiary. 13.8 Any dispute between the Participants and the Company or the Trustee as to the interpretation or application of the provisions of this Agreement and amounts payable may, at the election of any party to such dispute (or, if more than one Participant is such a party, at the election of two-thirds of such Participants), be determined by binding arbitration in accordance with the rules of the American Arbitration Association 27 30 then in effect. Judgment may be entered on the arbitrator's award in any court of competent jurisdiction. All fees and expenses of such arbitration shall be paid by the Trustee and considered an expense of the Trust under Section 8.7. 13.9 Each Participant is an intended beneficiary under this Trust, and as an intended beneficiary shall be entitled to enforce all terms and provisions with the same force and effect as if such person had been a party to the Agreement. 13.10 The Trustee shall be permitted to withhold from any payment due to a Participant the amount required by law to be so withheld under federal, state and local withholding requirements or otherwise, and shall pay over to the appropriate government authority the amounts so withheld. The Trustee may rely on reasonable instructions from the Company as to any required withholding and shall be fully protected under Section 8.7 in relying on such instructions. 13.11 Notwithstanding any other provision, the parties' respective rights and obligations under Section shall survive any termination or expiration of this Agreement. 13.12 The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Agreement arising out of or caused directly or indirectly, by circumstances beyond its reasonable control, including without limitation: acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunction of utilities or communication services; accidents; labor disputes; acts of civil or military 28 31 authority; governmental action; or inability to obtain labor, material, equipment or transportation. 13.13 The Company shall provide, and the Trustee shall receive, a certified resolution of the Board of Directors of the Company as conclusive proof of the names and authority of the persons entitled to act hereunder, including Committee members, if applicable. XIV. NOTICES ------- 14.1 For all purposes of this Agreement, any communication, including without limitation, any notice, consent, report, demand or waiver required or permitted to be given shall be in writing and, unless otherwise provided in this Agreement, shall be deemed to have been duly given when hand delivered or dispatched by telegram or electronic facsimile transfer (confirmed in writing by mail simultaneously dispatched), or two business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or one business day after having been dispatched by a nationally recognized overnight courier service to the appropriate party at the address specified below: If to the Company, to: Caliber System, Inc. ---------------------- 3560 West Market Street Akron, Ohio 44333 Attention: Secretary If to the Trustee, to: Bank One Trust Company, N.A. ---------------------- 50 South Main Street Akron, OH 44308 Attention: Paul J. Kipfstuhl If to a Participant, to: the address of such Participant as ------------------------ listed next to such Participant's name on Exhibit A, 29 32 provided, however, that if any party or such party's successors shall have designated a different address by notice to the other parties, then to the last address so designated. IN WITNESS WHEREOF, the Company and the Trustee caused this Agreement to be executed on its behalf as of the date first above written. Attested CALIBER SYSTEM, INC. By: By: ------------------------- ------------------------------- Its: Its: --------------------- --------------------------- Attested BANK ONE TRUST COMPANY, N.A. By: By: ------------------------- ------------------------------- Its: Its: --------------------- --------------------------- 30 EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 RIDER NO. 1 TO CALIBER SYSTEM, INC. LONG-TERM STOCK AWARD INCENTIVE PLAN (AMENDED AND RESTATED AS OF JANUARY 2, 1996) 1. Effective July 1, 1996, all references in the Plan to the Caliber System, Inc. Stock Savings and Retirement Income Plan or Stock Savings and Retirement Income Plan shall be deemed to be references to the Caliber System, Inc. 401(k) Savings Plan or 401(k) Savings Plan. 2. Effective January 2, 1996, Paragraph 3.3 of the Plan is hereby amended in its entirety to read as follows: 3.3 For each Officer, a provisional cash account will be carried for amounts equal to dividends that would be payable on the number of Stock Credits credited to his account as of December 31 of the previous year as if such shares had been distributed. As of the end of the then current Plan Year, such cash credits accumulated in the account of each Officer under this Plan, less all amounts previously converted to credits for shares of Caliber Common Stock hereunder, shall be converted to Stock Credits equal to the number of shares of Caliber Common Stock which could have been purchased had the cash been so applied. Said conversion shall be at the average of the fair market values for said Caliber Common Stock on the dividend payment dates; provided, however, that the value of the common stock of REX received as a dividend upon the spin-off of REX from Caliber shall be determined based on the average of the closing price of the common stock of REX on the first 15 trading days after the spin-off of REX from Caliber and the value of Stock Credits to be added pursuant to this sentence shall be determined based on the average of the closing price of Caliber Common Stock on the first 15 trading days after the spin-off of REX from Caliber. 3. Effective January 1, 1997, Paragraph 5.3 of the Plan is hereby amended in its entirety to read as follows: 5.3 After December 31, 1995, but prior to March 16, 2000, Basic Stock Credits awarded may be converted by a participant, a trustee of any trust to which Basic Stock Credits have been transferred, or a beneficiary who received Basic Stock Credits as a result of the death of a participant but excluding any ("Alternate Payee" as such term is defined in Section 414(p)(8) of the Internal Revenue Code of 1986) up to a maximum of fifty percent (50%) of their value to cash on terms established by Caliber from time to time. 4. Effective January 2, 1996, Paragraph 5.4 of the Plan is hereby amended in its entirety to read: 5.4 [Reserved] 5. Effective January 2, 1996, Subparagraph 5.4.1 of the Plan is hereby amended in its entirety to read: 5.4.1 [Reserved] EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 RIDER NO. 2 TO THE CALIBER SYSTEM, INC. LONG-TERM STOCK AWARD INCENTIVE PLAN (AMENDED AND RESTATED AS OF JANUARY 2, 1996) -------------------------------------------- 1. A new Section 1.4A is added to the Plan immediately following Section 1.4 to read as follows: 1.4A The term "Change in Control" means the occurrence of any of the following events: 1.4A.1 any "person," as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (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 Caliber then outstanding; 1.4A.2 the majority of the Board of Directors of Caliber (the "Board") consists of individuals other than Incumbent Directors, which term means the members of the Board on March 1, 1997; 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; 1.4A.3 Caliber adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; 1.4A.4 all or substantially all of the assets of Caliber are disposed of pursuant to a merger, consolidation or other transaction (unless the holders of the Voting Securities of Caliber 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 Caliber, all of the Voting Securities or other ownership interests of the entity or entities, if any, that succeed to the business of Caliber); or 1.4A.5 Caliber combines with another company and is the surviving corporation but, immediately after the combination, the holders of the Voting Securities of Caliber immediately prior to the 2 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 Related Entities of such other company in exchange for securities of such other company). For purposes of this Section, the term "Voting Securities" means any shares of capital stock or other securities of Caliber that are generally entitled to vote in elections for directors; and the term "Related Entities" 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. 2. Section 3.2 of the Plan is amended by the addition of a new sentence at the end thereof to read as follows: Notwithstanding the preceding sentence, Stock Credits earned since the preceding December 31 through the date of a Change in Control shall be entered on the date of the Change in Control for Officers employed by Caliber or an Affiliate on the date immediately preceding the Change in Control and for a pro rata fraction of the award for Officers terminated on account of death, disability or retirement. 3. Section 3.3 of the Plan is amended by the addition of a new sentence at the end thereof to read as follows: Upon the occurrence of a Change in Control, the cash credits provided for in the first sentence of this Section shall be converted to Stock Credits equal to the number of shares of Caliber Common Stock which could have been purchased had the cash been so applied. Said conversion shall be at the average of the fair market values for said Caliber Common Stock on the dividend payment dates. 4. Section 5.5 of the Plan is amended in its entirety to read as follows: 5.5 Notwithstanding anything to the contrary contained herein, in the event of a Change in Control, any Stock Credit awards made to an Officer under the Plan shall immediately vest and become subject to immediate distribution. Subject to the provisions of Section 5.2.3, distribution under this 3 Section shall be made in the form of shares of Caliber Common Stock and cash in lieu of fractional shares unless the Compensation Committee of the Board determines that it is necessary to adjust the form of such distribution to take into account the occurrence of the Change in Control. 5. Section 7.3 of the Plan is amended in its entirety to read as follows: 7.3 Notwithstanding anything to the contrary contained herein, in the event of a Change in Control, any Stock Credit awards made to an Expatriate under the Plan shall immediately vest and become subject to immediate distribution. Subject to the provisions of Section 7.2.3, distribution under this Section shall be made in the form of shares of Caliber Common Stock and cash in lieu of fractional shares unless the Compensation Committee of the Board determines that it is necessary to adjust the form of such distribution to take into account the occurrence of the Change in Control. IN WITNESS WHEREOF, this Rider has been executed this 10th day of April, 1997 on behalf of Caliber System, Inc. by its duly authorized officer. ATTEST CALIBER SYSTEM, INC. /s/ Tammy L. Youngblood By /s/ Donald C. Brown - ----------------------------- --------------------------------- Title: V.P - Human Resources EX-27 5 EXHIBIT 27
5 1,000 U.S. DOLLARS OTHER DEC-31-1996 MAR-30-1997 JUN-21-1997 1 23,148 0 302,280 45,920 0 454,047 1,590,912 771,629 1,324,027 565,690 200,000 39,898 0 0 450,966 1,324,027 0 574,676 0 549,716 0 0 0 22,557 8,972 13,585 0 0 0 13,585 .34 .34
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