-----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, V5scITEvjCSvv/ZpZ9t04UGmSPO5oO9Iiw63yHHskA3P2rviKn2lovQAzuKlrNXa cyhwddNU2bmgxnkgiwIq9w== 0000950152-97-007388.txt : 19971028 0000950152-97-007388.hdr.sgml : 19971028 ACCESSION NUMBER: 0000950152-97-007388 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970913 FILED AS OF DATE: 19971027 SROS: NYSE 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: SEC FILE NUMBER: 001-11573 FILM NUMBER: 97701324 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. 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 September 13, 1997 ------------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to __________. Commission file number 0-10716 CALIBER SYSTEM, INC. --------------------------------------------------- (Exact name of company as specified in its charter) Ohio 34-1365496 ------------------------------ ------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Company's telephone number, including area code is (330) 665-5646 Indicate by check mark whether the company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- ---- The number of shares of common stock without par value outstanding as of October 11, 1997 was 38,945,283. -1- 2 INDEX CALIBER SYSTEM, INC. FORM 10-Q PERIOD ENDED SEPTEMBER 13, 1997 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets--September 13, 1997 and December 31, 1996 Condensed Consolidated Statements of Income--Twelve weeks and thirty-six weeks ended September 13, 1997 and September 7, 1996 Condensed Consolidated Statements of Cash Flows--Thirty-six weeks ended September 13, 1997 and September 7, 1996 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K SIGNATURES - ---------- -2- 3 PART I - FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) CALIBER SYSTEM, INC.
ASSETS SEPT. 13, DECEMBER 31, 1997 1996 ------------------- -------------------- (dollars in thousands) CURRENT ASSETS Cash and cash equivalents $ 20,307 $ 38,829 Accounts receivable 320,427 365,033 Prepaid expenses and supplies 59,443 72,813 Deferred income taxes 58,585 47,801 ------------------- -------------------- TOTAL CURRENT ASSETS 458,762 524,476 PROPERTY AND EQUIPMENT, NET 746,262 848,319 Cost in excess of net assets of businesses acquired, net of amortization 4,891 5,015 Other assets 48,419 54,357 ------------------- -------------------- TOTAL OTHER ASSETS 53,310 59,372 ------------------- -------------------- TOTAL ASSETS $ 1,258,334 $ 1,432,167 =================== ==================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 13,000 $ 230,000 Accounts payable 335,307 262,313 Salaries and wages 61,728 80,259 Other current liabilities 55,486 57,469 ------------------- -------------------- TOTAL CURRENT LIABILITIES 465,521 630,041 LONG-TERM LIABILITIES Long-term debt 200,000 200,000 Self-insurance accruals 32,230 40,809 Deferred income taxes 41,096 22,670 ------------------- -------------------- TOTAL LONG-TERM LIABILITIES 273,326 263,479 SHAREHOLDERS' EQUITY Serial preferred stock - without par value: Authorized - 40,000,000 shares; Issued - none - - Common stock - without par value: Authorized - 200,000,000 shares; Issued - 40,896,414 shares 39,898 39,898 Additional capital 51,417 50,735 Retained earnings 485,526 503,496 ------------------- -------------------- 576,841 594,129 Treasury stock, at cost (1997 - 1,690,000 shares, 1996 - 1,605,000 shares) 57,354 55,482 ------------------- -------------------- TOTAL SHAREHOLDERS' EQUITY 519,487 538,647 ------------------- -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,258,334 $ 1,432,167 =================== ==================== See notes to condensed consolidated financial statements.
-3- 4 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) CALIBER SYSTEM, INC.
TWELVE WEEKS ENDED THIRTY-SIX WEEKS ENDED (THIRD QUARTER) (THREE QUARTERS) ------------------------------------ ------------------------------------------ SEPT. 13, SEPT. 7, SEPT. 13, SEPT. 7, 1997 1996 1997 1996 -------------- ------------------- -------------------- ------------------- (dollars in thousands, except per share data) REVENUE $ 592,488 $ 627,226 $ 1,808,360 $ 1,825,201 OPERATING EXPENSES Salaries, wages and benefits 181,922 247,157 634,048 718,190 Purchased transportation 203,512 182,775 578,675 530,598 Operating supplies and expenses 101,322 135,244 340,413 377,574 Operating taxes and licenses 8,100 13,083 32,361 38,552 Insurance and claims 11,340 14,549 40,177 39,591 Provision for depreciation 27,870 34,194 85,778 100,877 Restructuring charge - - 85,000 - -------------- ------------------- -------------------- ------------------- TOTAL OPERATING EXPENSES 534,066 627,002 1,796,452 1,805,382 -------------- ------------------- -------------------- ------------------- OPERATING INCOME 58,422 224 11,908 19,819 Other expense, net (3,039) (2,965) (5,567) (5,567) -------------- ------------------- -------------------- ------------------- INCOME (LOSS) BEFORE INCOME TAXES 55,383 (2,741) 6,341 14,252 Income tax provision (benefit) 22,934 (771) 9,531 6,381 -------------- ------------------- -------------------- ------------------- NET INCOME (LOSS) $ 32,449 $ (1,970) $ (3,190) $ 7,871 ============== =================== ==================== =================== EARNINGS (LOSS) PER SHARE $ 0.83 $ (0.05) $ (0.08) $ 0.20 ============== =================== ==================== =================== DIVIDENDS DECLARED PER SHARE $ 0.10 $ 0.18 $ 0.38 $ 0.54 ============== =================== ==================== =================== AVERAGE SHARES OUTSTANDING 39,207 39,505 39,221 39,512 ============== =================== ==================== ===================
See notes to condensed consolidated financial statements. -4- 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) CALIBER SYSTEM, INC.
THIRTY-SIX WEEKS ENDED (THREE QUARTERS) --------------------------------------- SEPT. 13, SEPT. 7, 1997 1996 ----------------- -------------------- (dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (3,190) $ 7,871 Restructuring charge 85,000 - Other adjustments 102,310 68,058 ----------------- -------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 184,120 75,929 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (68,800) (203,486) Sales of property and equipment 85,079 4,652 Proceeds from sale of investment 15,995 - Net advances to discontinued operations - (5,927) ----------------- -------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 32,274 (204,761) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (17,916) (27,777) Decrease in short-term debt, net (217,000) (55,400) Proceeds from issuance of long-term debt - 200,000 ----------------- -------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (234,916) 116,823 ----------------- -------------------- CASH FLOWS USED IN CONTINUING OPERATIONS (18,522) (12,009) CASH FLOWS USED IN DISCONTINUED OPERATIONS - (7,402) ----------------- -------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (18,522) (19,411) ----------------- -------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 38,829 34,908 ----------------- -------------------- CASH AND CASH EQUIVALENTS AT END OF THIRD QUARTER $ 20,307 $ 15,497 ================= ==================== See notes to condensed consolidated financial statements.
-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 thirty-six weeks ended September 13, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, Earnings Per Share, which is required to be retroactively adopted on December 31, 1997 with all prior periods being restated. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. This statement will not change earnings per share as reported for the quarter or thirty-six weeks ended September 13, 1997. In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income which is effective beginning in 1998. Statement 130 establishes standards for reporting and display of comprehensive income and its components. Comparative periods are required to be reclassified to reflect the provisions of the Statement. The adoption of this Statement will not affect earnings as previously reported. In June 1997, the FASB issued Statement No. 131, Disclosures About Segments of an Enterprise and Related Information. This statement requires disclosure of selected financial and descriptive information for each operating segment based on management's internal organizational decision-making structure. Additional information is required on a company-wide basis for revenues by product or service, revenues and identifiable assets by geographic location and information about significant customers. The Company will begin presenting any additional information as required by the Statement in its financial statements for the year-ending December 31, 1998. For further information, refer to consolidated financial statements and footnotes thereto included in the company's annual report on Form 10-K for the year ended December 31, 1996. -6- 7 Note B - Viking Restructuring - ----------------------------- The company announced a major restructuring of Viking's operations on March 27, 1997, which included terminating operations at its former Coles Express unit in the Northeast and Spartan Express in the Southeast and Midwest. Operations at these divisions ceased on March 27, 1997. In connection with the Viking restructuring, the company recorded in 1996 a non-cash $225 million asset impairment charge related to the write-down of goodwill of $82 million and property and equipment of $143 million. First quarter 1997 results included a restructuring charge of $85 million for employee-related costs, including severance and benefits, costs related to lease terminations, additional non-cash asset impairments and other expenses resulting from the restructuring. Note C - Deferred Income Taxes - ------------------------------ Net deferred tax assets were $17 million at September 13, 1997 and $25 million at December 31, 1996, reflecting the tax effects of the restructuring charge. The company has determined that no valuation allowance is required on net deferred tax assets based on the ability to recover taxes previously paid. Note D - Accounting Period - -------------------------- The company operates on a 13 four-week period calendar with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. Item 2. Management's Discussion and Analysis of Financial Condition - -------------------------------------------------------------------- and Results of Operations ------------------------- Consolidated revenue for the third quarter ended September 13, 1997 decreased 5.5% to $592.5 million from third quarter 1996 revenue of $627.2 million as a result of the Viking restructuring announced on March 27, 1997. Excluding Viking, revenue increased 26% for the quarter, from $399.4 million in 1996 to $502.6 million in 1997. For the first three quarters of 1997 consolidated revenue of $1.81 billion was slightly below the $1.83 billion realized a year ago. Revenues excluding Viking for the first three quarters amounted to $1.39 billion for 1997, a 19.5% increase over comparable 1996 revenues of $1.16 billion. All business units except Viking experienced revenue improvements over third quarter 1996 levels. RPS, Viking Freight and Roberts Express were positively impacted by the 12-day work stoppage at United Parcel Service (UPS). Revenue at RPS, the company's small package carrier, increased to $388.4 million or 27.7% over third quarter revenue of $304.3 million last year as RPS continued its trend of double-digit growth. The 12-day impact of the UPS strike amounted to approximately $21 million in additional revenue. -7- 8 Daily volume topped 1.5 million packages during the UPS work stoppage, compared to pre-strike levels of approximately 1.2 million packages. On-time service levels fell during and immediately after the UPS strike but have steadily risen since that time. Package quotas for RPS customers will be maintained to preserve RPS' on-time service record throughout the traditional peak season. The revenue increase at RPS also reflects continuing growth in package volume including the retention of approximately 15% of the incremental business experienced during the work stoppage. RPS's terminal network continues to operate near capacity in the aftermath of the new UPS labor agreement, and is expected to be the case through the end of the year. Third quarter net revenues at Caliber Logistics, which are included in consolidated revenues, increased 26.7%, while gross revenues increased 32%. Roberts' Express, the company's expedited carrier, reported revenue growth of 14.2% over the third quarter last year. The restructuring of Viking's operations included terminating operations at its former Coles Express unit in the Northeast and Spartan Express in the Southeast and Midwest. As a result, the company recorded in 1996 a non-cash $225 million asset impairment charge consisting of the write-down of goodwill of $82 million and property and equipment of $143 million. First quarter 1997 results included a restructuring charge of $85 million for employee-related costs, including severance and benefits, costs related to lease terminations, additional non-cash asset impairments and other expenses resulting from the restructuring. Assets held for sale as a result of the restructuring, amounting to $33 million, are included in property and equipment in the accompanying condensed consolidated balance sheet. Through the third quarter, the company received $33 million from the sale of certain Viking property and equipment (other than from the sale of Central Freight) and paid $18 million primarily in severance and related costs associated with the restructuring. During the third quarter, the company finalized the sale of Viking's Southwestern Division, which is now operating under the name Central Freight Lines, Inc. The company received $43 million in cash, retained certain properties that will be sold at a later date, and transferred approximately $22 million in liabilities to Central Freight Lines, Inc. The total value of this transaction, including the anticipated proceeds from the retained properties, is estimated at approximately $80 million. This transaction did not impact third quarter earnings. Results of operations at the former Southwestern Division from the beginning of the quarter until sale of operations, as well as other non-recurring transition costs related to the closing of the former Coles and Spartan Divisions, are included in the consolidated third quarter results. Revenue associated with these divisions was $5.5 million, expenses were $9.8 million, resulting in $4.3 million of transition costs during the third quarter. For the thirty-six weeks, revenue was $55.4 million and expenses were $75.8 million, resulting in $20.4 of transition costs. -8- 9 Viking's ongoing operations now provide regional freight service to customers in 12 western states through 43 terminals. Third quarter revenue from Viking's ongoing operations amounted to $84.4 million. Viking's ongoing operations reported $78.5 million of operating expenses, resulting in a third quarter operating profit of $5.8 million, the second full quarter since the unit's restructuring as a regional carrier. In total, Viking reported operating income of $1.5 million in the third quarter of 1997 compared to an operating loss of $38.2 million for the same period last year. For the thirty-six weeks, Viking's ongoing operations reported revenue of $366.9 million and operating expenses of $392.7, resulting in an operating loss of $25.8 million. Without Viking, third quarter operating expenses were $445.7 million in 1997 compared to $360.9 million in the third quarter of 1996, an increase of 23.5%. This change resulted primarily from higher business volumes at RPS and Logistics, which reported operating expense increases of 25% and 24.5%, respectively. Excluding the restructuring charge and related transition costs, operating income was $62.7 million for the quarter and $117.3 million year-to-date, compared to 1996 third quarter operating income of $.2 million and year-to-date 1996 operating income of $19.8 million. Third quarter operating income without Viking was $56.9 million, an increase of 48% over $38.4 million last year. RPS reported a 52.2% rise in third quarter operating income to $44.8 million from $29.5 million for the same period last year. RPS's third quarter margins increased from 9.7% in 1996 to 11.5% in 1997. The UPS work stoppage increased RPS's operating income by $6 million in the third quarter. Roberts' operating income grew 30% while continuing to maintain excellent margins. Logistic's margins have improved over 1996 for both the third quarter and year-to-date. For the first three quarters, operating income excluding Viking was $143.2 million, a 36% improvement compared to $105.3 million in the first three quarters of 1996. Growth in operating income was due primarily to RPS, where operating income rose 35.7% from $85.4 million in 1996 to $115.8 million in 1997. Year to date margins at RPS improved from 9.55% to 10.87%. Operating income for the first three quarters at RPS was positively impacted by a $5.3 million change in employee benefits. Other expense, net includes interest expense of $3.7 million and $14.4 million for the third quarter of 1997 and first three quarters of 1997, respectively. Other expense, net year-to-date includes a gain on the sale of investments of $7.6 million. The consolidated income tax rate related to ongoing operations was 40.2% year-to-date. This rate exceeded the U.S. federal statutory rate due primarily to state income taxes and non-deductible operating costs. -9- 10 Net income from ongoing operations (net income excluding transition costs) for the third quarter was $35.3 million or $0.90 per share. Including the Viking transition costs, the company's net income for the quarter was $32.4 million or $0.83 per share, compared to a net loss of $1.97 million or $0.05 per share for the third quarter of 1996. Net income for the first three quarters from ongoing operations was $66.8 million or $1.70 per share. First quarter restructuring costs for Viking of $56.4 million or $1.43 per share and transition expenses of $13.6 million or $.35 per share reduced year-to-date earnings to a loss of $3.2 million or $.08 per share, compared to earnings of $7.9 million or $.20 per share for the first three quarters of 1996. Year-to-date net income from ongoing operations was positively impacted by the gain on sale of investment of $4.6 million after tax or $0.12 per share, and the one-time change in RPS's employee benefits of $2.8 million after tax or $0.07 per share. For the three quarters, net cash provided by operating activities of $184.1 million was sufficient to fund net property additions of $68.8 million and dividends of $18 million and to reduce outside borrowings. The company is party to bank credit facilities providing for up to $300 million of term loans and up to $25 million of borrowings under revolving credit. Both agreements are unsecured and interest is based on variable rates. Outstanding bank borrowings, which are classified as short-term debt on the accompanying balance sheet, amounted to $13 million at the end of the third quarter. The bank loan agreements contain covenants requiring the company to maintain a minimum level of consolidated net worth and limiting, among other things, the ratio of debt to earnings, the incurrence of secured debt and sales of certain of the company's assets. Capital expenditures for 1997 are currently estimated to be approximately $105 million, of which 60% is expected to be for technology and highly automated equipment, 30% for real estate and 10% for revenue and support equipment. The company anticipates that through available borrowings and cash flows from operations, it will be able to fund the remaining short-term cash requirements from the Viking restructuring, capital expenditures during 1997 and provide adequate levels of working capital and funds for the payment of dividends and interest. As announced on October 6, 1997, Caliber System has entered into a definitive agreement with Federal Express Corporation. Under the Agreement, FDX Corporation, a new holding company to be formed as part of the transaction, will acquire Caliber in a transaction in which Caliber shareholders will receive 0.8 FDX shares for each Caliber share they hold. The transaction, which is subject to approval by the shareholders of both companies and other customary conditions, is expected to close in early 1998. The foregoing contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive initiatives and pricing pressures; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of -10- 11 industries serviced by the company's businesses; actual future costs including employee wages and benefits; actual costs of continuing investments in technology; the timing and amount of capital expenditures; and actual costs and effects of the restructuring of the business served by Viking. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits -------- 10.1 Amendment No. 1 to Caliber System, Inc. Directors' Deferred Compensation Plan dated August 8, 1997. 10.2 Caliber System, Inc. Deferred Compensation Plan Effective October 1, 1997 10.3 Form of Third Amended and Restated Management Retention Agreement (Tier 1) 10.4 Form of Third Amended and Restated Management Retention Agreement (Tier 2) 10.5 Form of Third Amended and Restated Management Retention Agreement (Tier 2A) 10.6 Form of Third Amended and Restated Management Retention Agreement (Tier 3) 10.7 Form of Amendment to Third Amended and Restated Management Retention Agreement (Specific to Certain Tier 2 Officers) 27 Financial Data Schedule (b) Reports on Form 8-K Filed During the Third Quarter of 1997 ---------------------------------------------------------- On June 25, 1997, a Current Report on Form 8-K was filed by the registrant to announce improved earnings for the Second Quarter. On July 11, 1997, a Current Report on Form 8-K was filed by the registrant to announce the completion of the sale of the operations of Viking Freight, Inc.'s Southwestern Division. On July 15, 1997, a Current Report on Form 8-K was filed by the registrant to report Second Quarter results. On August 15, 1997, a Current Report on Form 8-K was filed by the registrant to report the declaration of dividends. -11- 12 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CALIBER SYSTEM, INC. ------------------------------------- (Registrant) Date: October 24, 1997 By /s/Louis J. Valerio ----------------- ----------------------------------- Louis J. Valerio Senior Vice President-Finance and Chief Financial Officer Date: October 24, 1997 By /s/Kathryn W. Dindo ------------------ ----------------------------------- Kathryn W. Dindo Vice President and Controller -12- 13 EXHIBIT INDEX Item Description - ---- ----------- 10.1 Amendment No. 1 to Caliber System, Inc. Directors' Deferred Compensation Plan dated August 8, 1997. 10.2 Caliber System, Inc. Deferred Compensation Plan Effective October 1, 1997 10.3 Form of Third Amended and Restated Management Retention Agreement (Tier 1) 10.4 Form of Third Amended and Restated Management Retention Agreement (Tier 2) 10.5 Form of Third Amended and Restated Management Retention Agreement (Tier 2A) 10.6 Form of Third Amended and Restated Management Retention Agreement (Tier 3) 10.7 Form of Amendment to Third Amended and Restated Management Retention Agreement (Specific to Certain Tier 2 Officers) 27 Financial Data Schedule EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 AMENDMENT NO. 1 TO THE CALIBER SYSTEM, INC. DIRECTORS' DEFERRED COMPENSATION PLAN (Amended and Restated as of May 8, 1996) THIS AMENDMENT NO. 1, dated as of the 8th day of August 1997 by Caliber System, Inc. ("Caliber"); WITNESSETH WHEREAS, Caliber sponsors the Caliber System, Inc. Directors' Deferred Compensation Plan (the "Plan"); WHEREAS, Caliber wishes to amend the Plan effective January 1, 1997, pursuant to the power reserved to it in Article X of the Plan; NOW THEREFORE, Caliber amends the Plan by: 1) Amending Paragraph 4.2 of the Plan in its entirety to read as follows: 4.2 CREDITING OF DEFERRED FEES. Deferred Fees that a Participant elects to have credited in dollar amounts shall be credited to the Participant's Deferred Benefit Account as they become payable to the Director. Deferred Fees otherwise payable to a Director during a Plan Year that a Participant elects to have credited in Units shall be credited to the Participant's Deferred Benefit Account as of the end of each calendar quarter (and such quarterly credits shall take into account the amount of cash dividends paid by the Company on equivalent amounts of Shares during periods after the dates on which Fees otherwise would have been payable to the Director). The number of Units to be credited to each Participant's Deferred Benefit Account shall be determined on the basis of the average fair market value of Caliber common stock. The average fair market value of Caliber common stock for each calendar quarter shall be determined by averaging the closing prices on the New York Stock Exchange on the last business day of each month in the applicable calendar quarter. (2) Amending Paragraph 5.3 of the Plan in its entirety to read as follows: 5.3 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Benefit Account to which Fees have been credited in Units shall be credited as of the end of each calendar quarter with additional Units equal in value to the amount of cash dividends paid by the Company during each quarter of each Plan Year on the number of Shares equivalent 2 Amendment No. 1 to the Caliber System, Inc. Directors' Deferred Compensation Plan Page 2 of 2 to the number of Units in such Deferred Benefit Account as of the dividend record date. Such dividend equivalents shall be valued on the basis of the average fair market value of Caliber common stock. The average fair value of Caliber common stock for each such calendar quarter shall be determined by averaging the closing prices on the New York Stock Exchange on the last business day of each month in the applicable calendar quarter. Until a Participant or his or her Beneficiary receives his or her entire Deferred Benefit Account, the unpaid balance thereof credited in Units shall earn dividend equivalents as provided in this Section 5.3. (3) Amending Paragraph 6.2 of the Plan in its entirety to read as follows: 6.2 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Share Award Account shall be credited as of the end of each calendar quarter with additional Units equal in value to the amount of cash dividends paid by the Company during each quarter of each Plan Year on the number of Shares equivalent to the number of Units in such Deferred Share Award Account as of the dividend record date. Such dividend equivalents shall be valued on the basis of the average fair market value of Caliber common stock. The average fair market value of Caliber common stock for such calendar quarter shall be determined by average the closing prices on the New York Stock Exchange on the last business day of each month in the applicable calendar quarter. Until a Participant or his or her Beneficiary receives his or her entire Deferred Share Award Account, the unpaid balance thereof credited in Units shall earn dividend equivalents as provided in this Section 6.2. EX-10.2 3 EXHIBIT 10.2 1 EXHIBIT 10.2 CALIBER SYSTEM, INC. DEFERRED COMPENSATION PLAN EFFECTIVE OCTOBER 1, 1997 2 TABLE OF CONTENTS PURPOSE 2 DEFINITION 2 PARTICIPATION 4 Enrollment 5 Balances from Prior Plans 5 Employer Matching Credits 5 Determination of Earnings 5 Statement of Accounts 6 Conversion of Caliber Common Stock 6 DISTRIBUTIONS 6 Employer Matching Account 6 Prior Plan Account 7 Deferral Account 7 Disability Benefit 7 Hardship Withdrawal 7 Special Election for Early Distribution 7 Death Benefit 7 FUNDING OF BENEFITS 7 ADMINISTRATION OF THE PLAN 7 The Committee 7 Expenses of the Committee 8 Bonding and Compensation 8 Information Submitted to the Committee 8 Notices, Statements and Reports 8 Insurance 8 Indemnity 9 CLAIMS PROCEDURE 9 Filing Claim for Benefits 9 Appeals Procedure 10 AMENDMENT, TERMINATION OR SUSPENSION 10 MISCELLANEOUS 11 Participant Rights 11 Alienation 11 Partial Invalidity 11 Choice of Law 11 Share Available Under Plan 11 Adjustments 11 Payment to Minors 12 Inability to Locate 12 Successors 12 Gender, Tense and Headings 12 3 CALIBER SYSTEM, INC, DEFERRED COMPENSATION PLAN This Deferred Compensation Plan (hereinafter referred to as the "Plan") has been adopted by the Board of Directors of Caliber System Inc. (hereinafter referred to as the "Company"), effective as of October 1, 1997 (the "Effective Date"). I. PURPOSE The purpose of the Plan is to provide supplemental retirement income and death benefits for a select group of key management employees of the Employer. II. DEFINITIONS The following definitions, set forth in alphabetical order, are used throughout the Plan. Whenever words or phrases have initial capital letters in the Plan, a special definition for those words or phrases is set forth below. A. "Account" means the record maintained by the Committee of each Participant's interest in the Plan. The Account may consist of the "Deferral Account", the "Employer Matching Account", the "Prior Plan Account", and such other accounts as the Committee shall designate. B. "Beneficiary" means the person, persons or entity designated in writing by the Participant on forms provided by the Committee to receive distribution of his Account balance in the event of the Participant's death. A Participant may change the designated Beneficiary from time to time by filing a new written designation with the Committee, and such designation shall be effective upon receipt by the Committee. If a nonspouse beneficiary is named to receive more than 50% of the Account, the spouse of the Participant must sign a form indicating approval. If a Participant has not designated a Beneficiary, or if a designated Beneficiary is not living or in existence at the time of a Participant's death, any death benefits payable under the Plan shall be paid to the Participant's spouse, if then living, and if the Participant's spouse is not then living, to the Participant's estate. C. "Board of Directors" means the Board of Directors of the Company. D. "Caliber Common Stock" means common stock of the Company. E. "Caliber Stock Fund" means the Fund deemed to be invested in Caliber Common Stock. If, as a result of a merger, acquisition, sale or other disposition of substantially all the assets of the Company, Caliber Common Stock is no longer traded on a national securities exchange, the Caliber Stock Fund shall be deemed to be invested in shares of common stock of the entity resulting from such transaction. F. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. G. "Committee" means the Compensation Committee of the Board of Directors of the Company, which will be responsible for oversight of this Plan. The Committee is authorized to delegate any or all of its authority from time to time in writing. H. "Company" means Caliber System, Inc., or any successor thereto. I. "Compensation" means cash or other property payable with respect to a Plan Year to a Participant under any agreement, plan, program or arrangement of an Employer, including base salary, annual incentive compensation and extraordinary bonuses, including bonuses or other amounts paid in lieu of amounts under a Participant's Management Retention Agreement (or other similar agreement). J. "Deferral Account" means the record maintained by the Committee credited with each Participant's deferred Compensation and showing payments and withdrawals therefrom and the amount of income, expenses, gains and losses attributable thereto. 2 4 K. "Deferral Agreement" means an agreement by a Participant to have a specified percentage or dollar amount of his Compensation deferred under the Plan for a specified period in the future. L. "Determination Date" means the last day of each calendar month or such other date as designated by the Company in accordance with Section III(D)(6). M. "Disabled" means disabled as defined under the Employer's long term disability plan applicable to the Participant. N. "Employer" means Caliber System, Inc. RPS, Inc., Caliber Technology, Inc., Viking Freight, Inc., Caliber Logistics, Inc. and affiliates, and Roberts Express, Inc. 0. "Employer Matching Account" means the record maintained by the Committee of each Participant's Employer Matching Credit, showing payments and Withdrawals therefrom and the amount of income, expenses, gains and losses attributable thereto. P. "Employer Matching Credit" means the matching credits described in Section III(C). Q. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. R. "Funds" means the hypothetical investment options made available to the Participant which shall be used as deemed earnings indices for credits to a Participant's Account. The Committee will determine the Funds which will be available from time to time. S. "Participant" means a key management employee of an Employer who has been specifically designated by the Board of Directors as eligible to make deferrals of Compensation to the Plan or any former employee of an Employer on whose behalf amounts attributable to Prior Plans have been transferred to the Plan. T. "Plan Interest Rate" means for any month the rate of return equal to that which would have been generated had a Participant's Account actually been invested in the Fund or Funds (other than the Caliber Stock Fund) designated by the Participant for such month net of investment-related charges. No provision of this Plan shall be construed as giving any Participant an interest in any of these Funds nor shall any provision require that the Company make any investment in any such Funds. U. "Plan Year" means the calendar year. The initial Plan Year, however, will be October 1, 1997 through December 31, 1997. V. "Prior Plan Account" means the record maintained by the Committee credited with each Participant's balance rolled into the Plan from one or more Prior Plans and showing payments and withdrawals therefrom and the amount of income, expenses, gains and losses attributable thereto. W. "Prior Plans" means the Caliber System, Inc. Long-Term Stock Award Incentive Plan; the Roadway Services, Inc. Stock Credit Plans; the Stock Credit Method Plan, the Spartan Express, Inc. Stock Credit Plan, the Roberts Transportation, Inc. Stock Credit Plan, the Roadway Logistics Systems, Inc. Stock Credit Plan; the Viking Freight, Inc. Stock Credit Plan for 1990. X. "Retirement" means a Participant's termination of employment with an Employer following attainment of age 55 with five (5) or more years of service with the Employers and any predecessor of an Employer. Y. "Retirement Date" means the first day of the month coinciding with or next following Retirement. Z. "Termination" means a Participant's termination of employment with an Employer for reasons other than Retirement, disability or death. 3 5 AA. "Termination Date" means the date on which the Participant's employment with an Employer is terminated for reasons other than Retirement, disability or death. III. PARTICIPATION A. ENROLLMENT A Participant may elect to defer Compensation by delivering an executed Deferral Agreement to the Committee in accordance with the following provisions: 1. Each Participant who is eligible must delivering an executed Deferral Agreement to the Committee no later than September 30, 1997 in order to be able to elect to defer all or any portion of base salary October 1, 1997 and/or all or any portion of annual incentive compensation that may become payable for 1997. 2. For subsequent Plan Years, in order to defer all or any portion of his base salary, a Participant must deliver an executed Deferral Agreement to the Committee prior to the first day of the Plan Year from which such Compensation is to be deferred. 3. For subsequent Plan Years, in order to defer all or any portion of his annual incentive compensation, a Participant must deliver an executed Deferral Agreement to the Committee prior to the first day of July of any Plan Year. 4. In order to defer all or any portion of his Compensation other than base salary or incentive compensation a Participant must deliver an executed Deferral Agreement to the Committee in accordance with procedures established by the Committee for such deferrals. 5. A Participant who first becomes eligible to make deferrals of Compensation to the Plan during a Plan Year may, within 3O days after he becomes a Participant, elect to participate in the Plan for such Plan Year by delivering an executed Deferral Agreement to the Committee and his Deferral Agreement will be effective only with regard to Compensation earned or that becomes determinable and payable during the Plan Year following the delivery of the Deferral Agreement with the Committee. 6. Participants shall make the following elections on each Deferral Agreement: a. The amount to be deferred with respect to each component of his Compensation. Participants may elect to defer all or any portion of his Compensation in one percent (1%) increments. Deferral elections are irrevocable. b. The distribution date with respect to deferrals covered by the Deferral Agreement, pursuant to Section IV(C). The distribution date specified by the Participant must not be less than three years from the end of the Plan Year for which the deferral is made and no later than Retirement. Thereafter, a Participant may make a one-time election to change the distribution date to a later date, change the form of payment from a lump sum to installments and/or increase the number of installments, provided that such election shall not be effective unless the Committee receives the election at least one year and one day before the distribution date initially elected. C. The form of distribution to be made to the Participant at the end of the deferral period, pursuant to Section IV(C). Payment of the Participant's Deferral Account may be made in a single lump sum or in annual installments of up to ten years, adjusted each year to reflect the earnings credited or debited to such Account. The annual payment will be a fraction of a Participant's Account balance based on the number of payment years elected. (Example: over a ten year period, 1/10 of the balance would be paid in the first year, 1/9 in the second year, etc.) 4 6 B. BALANCES FROM PRIOR PLANS Balances as of December 31, 1997 from Prior Plans will be transferred into this Plan effective January 1, 1998 and credited to a Participant's Prior Plan Account. Prior Plan Accounts will at all times be subject to the vesting and distribution provisions of the applicable Prior Plan. The Prior Plan Account shall be deemed to be invested in the Caliber Stock Fund. Participants may not reallocate investment of their Prior Plan Account into other Funds. All or a portion of the Prior Plan Account may be withdrawn pursuant to Section IV(E) (Hardship Withdrawal), but may not be withdrawn pursuant to Sections IV(G)(Early Distributions). C. EMPLOYER MATCHING CREDITS Beginning January 1, 1998, Employer Matching Credits will be credited (as described below) as follows: The first Component is equal to the "matching percentage" (50%, as of the Effective Date) set forth in the Caliber System, Inc. 401(k) Savings Plan (the "Savings Plan"), multiplied by each dollar contributed to the Plan up to 7% (6% for officers of Viking Freight, Inc.) of the Participant's base salary and incentive compensation payable during such Plan Year without regard to deferrals into other plans maintained by the Company, reduced by the amount of matching contributions credited to the Participant's account in the Savings Plan for the same period. The second component is equal to the Participant's base salary and annual incentive bonus that is in excess of the Code Section 401 (a)(17) limit multiplied by the current year allocation percentage in the Caliber System, Inc. Stock Bonus Plan. The Employer Matching Credit will be credited to the Employer Matching Account of each Participant who is employed by any affiliate of the Company on the last day of the Plan Year to which such Credit applies, or who terminated employment during such Plan Year as a result of death, Retirement, becoming Disabled or in connection with a "Change in Control" (as defined in Section VIII(A)) annually on December 31 as units of Caliber Common Stock. The number of units shall be determined by dividing the Employer Matching Credit by the average of the fair market value of Caliber Common Stock on the last business day of each month in the Plan Year. The Employer Matching Account shall be deemed to be invested in the Caliber Stock Fund. Participants may not reallocate this Account into other Funds, and amounts may not be withdrawn pursuant to Sections IV(F) (Early Distributions). D. DETERMINATION OF EARNINGS All amounts deferred pursuant to a Deferral Agreement during a calendar month will be credited to a Participant's Account on the fifteenth day of the month in which the deferral is made. Distributions are deducted as of the first day of the month in which the distribution occurs. I. A Participant must make an investment election at the time of his initial Deferral Election. The investment election shall designate the portion of the amounts deferred which are to be treated as invested in each available Investment Fund. A Participant's investment election shall remain in effect with respect to each subsequent deferral until the Participant files a change in investment election with the Committee. A Participant may change his investment election either with respect to amounts deferred following the change in investment election or with respect to the deemed investment allocation of the Participant's existing Account, as the Participant may elect. A change in election must be filed with the Committee on a form prescribed by the Committee. A change in investment election will become effective on the first business day of the calendar month next following the Committee's receipt of the change in investment election; provided that the Committee receives the change in investment election no later than the 15th day of such month. All investment elections by a Participant shall be subject to approval by the Committee. 5 7 2. If the Committee receives an initial investment preference which it determines to be incomplete, unclear or improper, the Participant shall be deemed to have filed no investment preference and his Account will be deemed to be invested in a conservative fund selected by the Committee. If the Committee receives a revised investment preference which it determines to be incomplete, unclear or improper, the Participant's investment preference then in effect, shall remain in effect until a proper investment preference is received by the Committee. 3. All investment elections shall be advisory only and shall not bind the Company. The Company shall not be obligated to invest any funds or purchase any shares in connection with this Plan. If however, the Company chooses to invest funds to provide for its liabilities under this Plan, the Company shall have complete discretion. 4. As of each Determination Date, the Participant's Deferral Account will be credited with the Plan Interest Rate realized since the immediately preceding Determination Date. Amounts credited to each Participant's Deferral Account shall be determined based upon the balance of the Participant's Deferral Account as of the immediately preceding Determination Date with appropriate adjustments for credits of deferrals and distributions as specified in Section III(D) since the immediately preceding Determination Date. Dividends on Caliber Common Stock shall be converted to deemed shares of Caliber Common Stock based on the closing price of Caliber Common Stock on the dividend payment date. 5. Dividends on Caliber Common Stock in the Participant's Employer Matching Account and Prior Plan Account shall be converted to deemed shares of Caliber Common Stock based on the closing price of Caliber Common Stock on the dividend payment date. 6. If it is determined that the constructive value of an Account as of any date on which distributions are to be made differs materially from the constructive value of the Account on the prior Determination Date upon which the distribution is to be based, the Committee, in its discretion, shall have the right to designate any date in the interim as a Determination Date for the purpose of constructively revaluing the Account so that the Account from which the distribution is being made will, prior to the distribution, reflect its share of such material difference in value. Similarly, the Committee may adopt a policy of providing for regular interim valuations without regard to the materiality of changes in the value of the Accounts. E. STATEMENT OF ACCOUNTS Within a reasonable time after the end of each calendar quarter of the Plan Year, the Committee shall submit to each Participant a statement showing the status of his Account. F. CONVERSION OF CALIBER COMMON STOCK If as a result of a merger, acquisition, sale or other disposition of substantially all the assets of the Common Stock is no longer traded on a national securities exchange, the deemed shares of Caliber Common Stock in the Caliber Stock Fund shall be converted (on such basis as the Committee shall determine) and deemed to be invested in shares of common stock of the entity resulting from such transaction. IV. DISTRIBUTIONS All distributions, other than from the Caliber Stock Fund, shall be in cash. Distributions of the Caliber Stock Fund shall be paid in shares of Caliber Common Stock; however, the Committee may, in its sole discretion, pay all or a portion of the distribution payable from the Caliber Stock Fund in cash. Distributions shall be subject to applicable federal, state, and local withholding for taxes. A. The Employer Matching Account will be paid commencing on February 1 of the year following Retirement in five annual installments. A Participant who terminates employment prior to being eligible for Retirement shall receive a payout of his Employer Matching Account in a single lump sum no later than ninety (90) days following his Termination Date. 6 8 B. PRIOR PLAN ACCOUNT Balances transferred from Prior Plans will be paid in accordance with the payment provisions of Prior Plans. C. DEFERRAL ACCOUNT Subject to the provisions of Section III(A)(6)(b), a Participant's Deferral Account shall be distributed in accordance with the election made on the Participant's Deferral Agreement(s) no later than ninety (90) days following the date(s) specified therein; provided, however, that if a Participant's Termination Date is earlier, distribution will be made in a single lump sum no later that ninety (90) days following his Termination Date. D. DISABILITY BENEFIT If a Participant becomes Disabled as defined in Section II(M), his Account will be paid in a lump sum or a series of up to ten annual payments, as elected by the Participant at the time disability is determined. E. HARDSHIP WITHDRAWAL At any time prior to the commencement of benefits hereunder, a Participant may request in writing that the Committee make a distribution to him from his Account balance due to the unforeseeable financial emergency of the Participant. In the event the Committee determines, in its sole discretion, that the Participant is eligible for a distribution under this Section, the distribution shall be made as soon as practicable following the Committee's determination and may not exceed the amount needed to satisfy the immediate and heavy financial hardship of the Participant. F. SPECIAL ELECTION FOR EARLY DISTRIBUTION A Participant may at any time elect to withdraw all or any part of his Account, excluding amounts from the Employer Matching Account and the Prior Plan Account, less a 10% withdrawal penalty (in addition to any applicable tax withholding). A Participant who elects a withdrawal under this Section shall be prohibited from deferring Compensation pursuant to this Plan for three years following the date of the withdrawal. G. DEATH BENEFIT Following the death of a Participant, the Beneficiary shall receive a lump sum distribution of the Account within 60 days following the death of the Participant. V. FUNDING OF BENEFITS The Plan shall be considered unfunded at all times. All benefits payable under the Plan shall be paid from the Company's general assets, and nothing contained in the Plan shall require the Company to set aside or hold in trust any funds for the benefit of a Participant or his Beneficiary. All Participants shall have the status of a general unsecured creditor with respect to the Company's obligation to make payments under the Plan. However, the Company retains the right to establish a trust and fund a trust at its discretion. Any funds of the Company available to pay benefits under the Plan shall be subject to the claims of general creditors of the Company. VI. ADMINISTRATION OF THE PLAN A. THE COMMITTEE The Committee shall be responsible for the administration of the Plan and shall keep a written record of its actions and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations 7 9 necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee shall include, without limitation, the following: 1. Resolving all questions relating to the eligibility of employees to become Participants; 2. Determining the amount of benefits payable to Participants or their Beneficiaries and authorizing and directing the Company with respect to the payment of benefits under the Plan; 3. Construing and interpreting the Plan whenever necessary to carry out its intention and purpose and making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; 4. Compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan; and 5. Engaging any administrative, actuarial, legal, medical, accounting, clerical, or other service it may deem appropriate to effectuate the Plan. B. EXPENSES OF THE COMMITTEE The expenses of the Committee properly and actually incurred in the performance of its duties under the Plan shall be paid by the Company. C. BONDING AND COMPENSATION The members of the Committee shall serve without bond, and without compensation for their services as Committee members except as the Company may provide in its discretion. D. INFORMATION TO BE SUBMITTED TO THE COMMITTEE To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to Participants as the Committee may require, and shall maintain such other records as the Committee may determine are necessary in order to determine the benefits due or which may become due to Participants or their Beneficiaries under the Plan. The Committee may rely on such records as conclusive with respect to the matters set forth therein. E. NOTICES, STATEMENTS AND REPORTS The Company shall be the "administrator" of the Plan as defined in Title I Section 3(16)(A) of ERISA for purposes of the reporting and disclosure requirements imposed by ERISA and the Code. The Committee shall assist the Company, as requested, in complying with such reporting and disclosure requirements. F. INSURANCE The Company, in its discretion, may obtain, pay for and keep current a policy or policies of insurance, insuring the Committee members, the members of the Board of Directors and other employees to whom any responsibility with respect to the administration of the Plan has been delegated against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable law. 8 10 G. INDEMNITY If the Company does not obtain, pay for and keep current the type of insurance policy or policies referred to in Section VI(F), or if such insurance is provided but any of the parties referred to in Section VI(F) incur any costs or expenses which are not covered under such policies, then the Company shall indemnify and hold harmless, to the extent permitted by law such parties against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such parties in performing their duties and responsibilities under this Plan, provided that such party or parties were not guilty of willful misconduct. In the event that such party is named as a defendant in a lawsuit or proceeding involving the plan (other than in a lawsuit brought against such party by the Company) the party shall be entitled to receive on a current basis the indemnity payments provided for in this subsection, provided however, that if the final judgment entered in the lawsuit or proceeding holds that the party is guilty of willful misconduct with respect to the Plan, the party shall be required to refund the indemnity payments that it has received. VII. CLAIMS PROCEDURE A. FILING CLAIM FOR BENEFITS If a Participant or Beneficiary (hereinafter referred to as the "Applicant") does not receive the timely payment of the benefits which the Applicant believes are due under the Plan, the Applicant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan shall be made in writing and shall be signed by the Applicant. Claims shall be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." The Claims Coordinator may, but need not, be a member of the Committee. If the Applicant does not furnish sufficient information with the claim for the Claims Coordinator to determine the validity of the claim, the Claims Coordinator shall indicate to the applicant any additional information which is necessary for the Claims Coordinator to determine the validity of the claim. Each claim hereunder shall be acted on and approved or disapproved and notice given of its decision by the Claims Coordinator within 90 days following the receipt by the Claims Coordinator of the information necessary to process the claim. In the event the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator shall notify the Applicant in writing of the denial of the claim and notify the Applicant of his right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the Applicant, the specific reason for such denial, the specific provisions of the Plan or Agreement on which the denial is based, a description of any additional material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Applicant's claim within 90 days after receipt by the Claims Coordinator, such claim shall be deemed to be denied for purposes of the following appeals procedure. 9 11 B. APPEALS PROCEDURE An Applicant whose claim for benefits is denied in whole or in part may appeal from such denial to the Committee for a review of the decision by the Committee. Such appeal must be made within three months after the Applicant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must: 1. Request a review by the Committee of the claim for benefits under the Plan; 2. Set forth all of the grounds upon which the Applicants request for review is based and any facts in support thereof, and 3 Set forth any issues or comments which the Applicant deems pertinent to the appeal. The Committee shall regularly review appeals by Applicants. The Committee shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of time for processing, in which case a decision shall be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. The Committee shall make full and fair review of each appeal and any written materials submitted by the Applicant in connection therewith "The Committee may require the Applicant to submit such additional facts, documents or other evidence as the Committee in its discretion deems necessary or advisable in making its review. The Applicant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee, provided the Committee finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee shall make an independent determination of the Applicant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits shall be final and conclusive upon all parties thereto. In the event the Committee denies an appeal in whole or in part, the Committee shall give written notice of the decision to the Applicant, which notice shall set forth, in a manner calculated to be understood by the Applicant, the specific reasons for such denial and which shall make specific reference to the pertinent provisions of the Plan or Agreement on which the Committees decision is based. VIII. AMENDMENT, TERMINATION OR SUSPENSION A. The Plan may be amended or terminated by the Company at any time. Such amendment or termination may modify or eliminate any future deferrals but cannot reduce or eliminate any other benefits under the Plan. Notwithstanding the preceding provisions of this Section, for one year following a Change in Control the Company shall be prohibited from amending the Plan in any way that adversely affects one or more Participants. For purposes of the Plan, "Change in Control" means a "Change in Control " as defined in the most recent Management Retention Agreement (or other contract providing benefits in the event of a change in control of the Company) between the Company and the Company's Chief Executive Officer. B. The Plan is intended to provide benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title 1 of ERISA. Accordingly, in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt, the Plan shall terminate as of the date it became nonexempt. C. The Board of Directors in its sole discretion may accelerate all benefits upon termination of the Plan, and pay such benefits in a single lump sum. 10 12 IX. MISCELLANEOUS A. PARTICIPANT RIGHTS Nothing in the Plan shall confer upon a Participant the right to continue in the employ of an Employer or shall limit or restrict the right of an Employer to terminate the employment of a participant at any time with or without cause. B. ALIENATION Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right of benefit shall be void. No such right or benefit shall in any manner be liable for or subject to the debts, liability or torts of a Participant or Beneficiary. C. PARTIAL INVALIDITY If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue to be in full force and effect without being impaired or invalidated in any way. D. CHOICE OF LAW The Plan shall be construed in accordance with ERISA and, to the extent not pre-empted by ERISA, the laws of the State of Ohio. E. SHARES AVAILABLE UNDER THE PLAN Shares delivered by the Company under the Plan shall be treasury shares or shares that have been or may be acquired by the Company. F. ADJUSTMENTS The Board shall make or provide for such adjustments in the number of units in a Participant's Account as the Board, in its sole discretion, exercised in good faith, shall determine is equitably required to prevent dilution or enlargement of the rights of the Participant that would otherwise result from (a) any stock dividend, stock split, combination of shares, recapitalization or any other change in capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. 11 13 G. PAYMENT TO MINORS OR PERSONS UNDER LEGAL DISABILITY If any benefit becomes payable to a minor or to a person under a legal disability, payment of such benefit shall be made only to the conservator or guardian of the intended recipient appointed by a court of competent jurisdiction or any other individual or institution maintaining or having custody of such intended recipient. A release by such conservator, guardian, individual or institution shall constitute a legal discharge of the Plan's obligation to the intended recipient. H. INABILITY TO LOCATE If the Participant or Beneficiary cannot be located by the Company using the Participant's or Beneficiary's last known address on file with the Company within one year of the Participant's Termination Date or death, all benefits due under the Plan will be forfeited. It is the sole responsibility of the Participant and/or Beneficiary to maintain a current address on file with the Company. I. SUCCESSORS In the event of any consolidation, merger, acquisition, or reorganization of the Company, the obligations of the Company under this Plan shall continue and be binding upon the Company and successors. J. GENDER, TENSE AND HEADINGS Whenever any words are used herein in the masculine gender, they shall be construed as through they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings and Sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan. Executed at _______________, this ________ day of ________________, 1997. CALIBER SYSTEM INC. By ------------------------------ Its ------------------------------ 12 EX-10.3 4 EXHIBIT 10.3 1 EXHIBIT 10.3 THIRD AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (TIER 1) THIS THIRD AMENDED AND RESTATED AGREEMENT ("Agreement") is entered into as of the _____ day of ____________, 1997 (the "Effective Date") by and between Caliber System, Inc., an Ohio corporation (together with its successors and assigns permitted under this Agreement the "Company"), and X ("Executive"). W I T N E S S E T H WHEREAS, Executive currently serves as [title]; and WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Board (as defined in Section 1(b)) has determined that it is in the best interests of the Company and its stockholders to secure Executive's continued services and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1(d)) of the Company, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows: 1. Definitions. ------------ As used in this Agreement, the following terms shall have the respective meanings set forth below: (a) "Affiliate" of a person or other entity means a person or entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified. (b) "Board" means the Board of Directors of the Company. (c) "Cause" means (1) conviction of Executive for a felony or for a misdemeanor involving moral turpitude or (2) a material breach by Executive of the duties and responsibilities associated with his employment and position with the Company (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and 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; (iv) a required relocation of more than 50 miles from Executive's primary office at the time the Company enters into an agreement in principle or other agreement, the consummation of which would constitute a Change in Control; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform the agreement by any successor to all or substantially all of the assets of the Company within 30 days after a merger, consolidation, sale or similar transaction. Notwithstanding anything contained in this Agreement to the contrary, any circumstance described in clauses (i) through (iv) of this Section 1(g) shall not constitute Good Reason unless Executive gives written notice thereof to the Company in accordance with Section 12 and the Company fails to remedy such circumstances within ten days following receipt of such notice. 4 4 (h) "Notice of Termination" means notice of the Date of Termination as described in Section 12(b). (i) "Qualifying Termination" means a termination of Executive's employment as a result of (1) a termination by the Company without Cause, (2) a termination by Executive for Good Reason or (3) a termination by Executive during the 30-day period commencing with the first anniversary date of the Change in Control; provided, however, that a Qualifying Termination shall not include a termination as a result of Executive's death, Disability or Retirement. (j) "Retirement" means Executive's voluntary termination of employment (other than with Good Reason) while eligible for retirement benefits under the terms of the Caliber System, Inc. Pension Plan and Trust. (k) "Retirement and Savings Plans" mean all qualified and nonqualified defined benefit and defined contribution plans, including: [Applicable qualified and nonqualified benefit plans] or any applicable amended, successor or substitute plan or plans of the Company, including any supplemental employee retirement plans, put into effect prior to a Change in Control. The Caliber System, Inc. Long-Term Stock Award Incentive Plan is included in the definition of Retirement and Savings Plans to the extent that it provides Executive with supplemental stock credits. (l) "Transition Period" means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) Executive's death and (2) twenty-four (24) months following such Change in Control. (m) "Voting Securities" mean any shares of capital stock or other securities of the Company that are generally entitled to vote in elections for directors. 2. Term of Agreement. ------------------ This Agreement shall commence on the Effective Date and shall continue in effect until ___________, 1999; provided, however, that commencing on ___________, 1999 and each following anniversary of the Effective Date, the term of this Agreement shall automatically be extended for an additional one-year period, unless at least six months prior to such date, the Company shall have given notice not to extend this Agreement; provided, however, that (i) no such action shall be taken by the Company during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control, and (ii) this Agreement shall continue in effect for at least twenty-four (24) months following the occurrence of a Change in Control. Notwithstanding anything in this Section 2 to the contrary, and subject to the last paragraph of Section 1(d), this Agreement shall terminate upon termination of Executive's employment with 5 5 the Company prior to a Change in Control, in which event the rights and obligations of the parties, except as otherwise expressly provided herein, shall cease. 3. Payments and Benefits Upon Termination of Employment. ----------------------------------------------------- (a) If during the Transition Period the employment of Executive shall terminate, by reason of a Qualifying Termination, then the Company shall pay to Executive (or Executive's beneficiary or estate) within five (5) days following the Date of Termination (except as provided in Section 3(a)(1)(iii)), as compensation for services rendered to the Company: (1) a lump-sum cash amount equal to the sum of (i) Executive's unpaid base salary from the Company and its subsidiaries through the Date of Termination (at the rate in effect (without taking into account any reduction of base salary constituting Good Reason) just prior to the time a Notice of Termination is given); (ii) any benefit awards (including both the cash and stock components) which pursuant to the terms of any Retirement and Savings Plans have been earned or become payable through the Date of Termination, to the extent not theretofore paid or otherwise provided for; (iii) that portion of the annual bonus under the Company's incentive compensation plans determined by multiplying the greater of the actual bonus that would otherwise have been earned for a full year performance or target annual bonus, by the fraction arrived at by dividing the number of full weeks worked by Executive during the calendar year of his Date of Termination by fifty-two (52); plus (iv) any unpaid vacation under the Company's vacation policy in effect at the Date of Termination (or, if more favorable to Executive, immediately prior to a Change in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the Executive the pro-rata portion of the target annual bonus within 5 days following the Date of Termination, and any additional bonus payment to which Executive is entitled on or before January 31 of the year following the year in which the Termination occurs. (2) a lump-sum cash amount equal to (a) 3 times Executive's highest annual rate of base salary from the Company and its subsidiaries in effect during the 12-month period prior to the Date of Termination plus (b) 3 times the target annual bonus in effect for the year in which the Change in Control occurs; provided, that any amount paid pursuant to this Section 3(a)(2) shall be offset by any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any other severance plan, policy, employment agreement or arrangement of the Company. (3) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of: (i) the employer matching contributions that would be made to the Caliber System, Inc. 401(k) Savings Plan; (ii) employer contributions that would be made to the Caliber System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan. This lump sum payment shall be based on the employer contributions and supplemental credits attributable to an additional 36 months of service under the specific plans referenced in this paragraph, or any applicable amended, successor or substitute plan or plans of the Company put into effect prior to a Change in Control. For purposes of the 401(k) Savings Plan and related supplemental stock credits, the calculations shall be made based on the assumption that the Executive made maximum contributions from the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that the matching percentage shall equal the highest matching percentage allowable under the 401(k) Savings Plan as of the Date of 6 6 Termination (in no event less than 3.5% of eligible compensation under the 401(k) Savings Plan). For purposes of the Stock Bonus Plan and related supplemental stock credits, the calculations shall be based on the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which the Date of Termination occurs (but in no event less than the average of the actual contribution/allocation percentages applicable to the 5 calendar years preceding the Date of Termination). For purposes of determining actuarial present value under this Section 3(a)(3), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (4) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits accrued under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc. Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and upon service through the Date of Termination. For purposes of the actuarial present value calculation under this Section 3(a)(4), Executive shall be deemed fully vested for all actual service. (5) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits under the Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17) Benefit Plan, and Caliber System, Inc. Excess Plan based upon: (i) an additional 36 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) above, and (ii) an additional 36 months of age and service, or, if greater, the number of additional months of age and service necessary to provide Executive with 30 years of service and an attained age of 56 under the specific plans referenced in this paragraph or any applicable amended, successor or substitute plan or plans of the Company put into effect prior to a Change in Control. For purposes of this Section 3(a)(5), the additional 36 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year following the Date of Termination, shall be included as the final three years of pensionable wages. For purposes of determining actuarial present value under this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50 percent of male mortality rates and 50 percent female mortality rates) shall be utilized. For purposes of determining actuarial present value under this Section 3(a)(5), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (b) If during the Transition Period, the employment of Executive shall terminate, by reason of a Qualifying Termination, then for a period ending on the earliest of (i) thirty-six (36) months following the Date of Termination, (ii) the commencement date of equivalent benefits from a new employer, or (iii) Executive's attainment of age 65, the Company shall continue to keep in full force and effect (or otherwise provide) each plan and policy providing medical, accident, disability and life coverage with respect to Executive and his dependents with the same level of coverage, upon the same terms and otherwise to the same extent as each such plan and policy shall have been in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control), and the Company and Executive shall share the costs of continuing each such coverage in the same proportion as such costs were shared immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control). If, on or after the end 7 7 of thirty-six (36) months following the Date of Termination, Executive is not then receiving equivalent medical coverage from a new employer, the Company shall provide Executive with coverage equivalent to the Company's early-retiree medical program then in effect. Upon termination of any of the other coverages discussed in this subparagraph, the Executive may convert Executive's and his dependents' coverage under any such plan or policy to individual policies or programs upon the same terms as employees of the Company may apply for such conversions. (c) If during the Transition Period, the employment of Executive shall terminate, by reason of a Qualifying Termination, then for a period of twelve months following the Date of Termination, the Company shall provide, at its expense, executive level outplacement assistance to the Executive by a nationally recognized outplacement firm acceptable to Executive. 4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN ENTITLEMENTS. (a) The consequences of a Change in Control on Executive's stock options and performance shares granted under the Company's 1996 Equity Incentive Compensation Plan ("EICP") shall be determined in accordance with the EICP and Executive's grants pursuant to the EICP. The consequences of a Change in Control on Executive's stock credits under any Retirement and Savings Plans shall be determined in accordance with the provisions of the applicable plans. (b) No later than the occurrence of a Change in Control, the Company shall fund in full that portion, if any, of the obligations to Executive under the Company's Retirement and Savings Plans (other than plans qualified under Section 401(a) of the Internal Revenue Code) that are then unfunded. Such funding shall be provided through an irrevocable trust for the benefit of the Executive which shall be established as promptly as possible following the Effective Date of this Agreement (or, in the case of a Retirement and Savings Plan established after such effective date, then as promptly as possible after such plan is established) for the purpose of receiving contributions from the Company to fund such obligations. To the extent such obligations are covered by a plan other than a plan for which there is a trust already in existence, the Company shall establish a trust for the purpose of funding such obligations. Such trust shall be in a form that provides Executive with the most favorable tax position that reasonably can be determined at the time it is established. The trust shall provide for distribution of amounts to Executive in order to pay taxes, if any, that become due prior to payment of amounts pursuant to the trust. Following the occurrence of a Change in Control, the Company shall make periodic additional contributions (no less frequently than annually) to keep such trust fully funded. The intent is that no later than the Change in Control and annually thereafter (the "Applicable Dates") the amount of such fund shall equal at least the then present value (determined as of each Applicable Date) of any amounts subject to the funding requirement of this Section 4(b) as determined by a nationally recognized firm qualified to provide actuarial services. The establishment and funding of any such trust shall not affect the obligation of the Company to provide the benefits being funded. The trust may be terminated in accordance with the trust agreement between the Company and the trustee and, if so terminated, the Company shall not be required to establish a successor trust under this Section 4(b). The trust described in this Section 4(b) may be part of a trust funding similar obligations for other employees of the Company. 8 8 (c) No later than the occurrence of a Change in Control, the Company shall fund its obligations to provide payments and benefits under this Agreement (other than the obligations which are provided for in Section 4(b)) by the establishment of a trust to which it contributes an amount sufficient to meet such obligations. The establishment and funding of such trust shall not affect the obligations of the Company to provide the benefits subject to this Section 4(c). The trust described in this Section 4(c) may be part of the trust described in Section 4(b). (d) The consequences of a Change in Control upon compensation and benefit plans and programs of the Company, except as otherwise provided in this Agreement, shall be determined in accordance with such plans and programs. 5. Gross-up Payments. ------------------ (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other benefit (including, without limitation, any acceleration of vesting of any benefit) provided by the Company or its subsidiaries to or for the benefit of Executive (a "Payment") (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any Gross-up Payment required under this Section 5) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), (such excise tax, together with any interest and penalties imposed in respect thereto, hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive a Gross-Up Payment in an amount that after payment by Executive of all taxes, including, without limitation, any income, employment, and excise taxes (and any interest and penalties imposed with respect thereto), imposed upon the Gross-Up Payment leaves the Executive a net amount from the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the Company to Executive within five (5) days of the receipt of the Determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and Executive. In the event the Company exhausts its remedies pursuant to Section 5(c) and Executive thereafter is required by a determination of a court or the Internal Revenue Service to make payment of any Excise Tax, the Accounting Firm shall determine 9 9 promptly following receipt of such determination the amount of the Gross-Up Payment that should have been made by the Company (the "Underpayment") and any such Underpayment shall be paid promptly by the Company to or for the benefit of Executive. (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income or employment tax (including interest and penalties with respect thereto) imposed as a result of such proceeding and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder 10 10 and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(c), Executive becomes entitled to receive, and receives, any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 5(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 6. Confidentiality; Non-Competition. --------------------------------- (a) During employment and thereafter, Executive shall keep confidential all "Confidential Information" relating to the Company or any of its subsidiaries, and their respective businesses, obtained by Executive during his employment by the Company or any of its subsidiaries. "Confidential Information" means any non-public, proprietary information that may provide the Company with a competitive advantage, including, without limitation, any trade secrets, formulas, flow charts, computer programs, access codes or other systems information, business, product or marketing plans, sales and other forecasts, financial information, customer lists, and information relating to compensation and benefits, provided that such proprietary information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of Executive's breach of this Section 6(a). Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, videotapes, audiotapes, and oral communications. Anything herein to the contrary notwithstanding, it shall not be a violation of this Section 6(a) for the Executive to disclose information in the ordinary course of properly carrying out his duties and responsibilities on behalf of the Company or to respond to an order of a court or other body having jurisdiction provided that he gives the Company notice of any such order. (b) Executive agrees that he shall not for a period of one (1) year following the Date of Termination, directly or indirectly own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to holding the positions of officer, director, shareholder, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise; provided, however, that Executive may invest without being deemed in violation of this Section 6(b), in stocks, bonds, or other securities of any corporation or other entity (but without participating in the business thereof) if such stocks, bonds, or other securities are listed for trading on a national securities exchange or NASDAQ and Executive's investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding. "Competing Enterprise" shall mean an enterprise that engages in any business that, on the Date of Termination, is engaged in by the Company or any of its subsidiaries if such enterprise 11 11 engages in such business in any geographic area in which the Company or any of its subsidiaries conducts such business. (c) Except as expressly provided herein, promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company then in Executive's possession or under his control, except that Executive may retain his personal notes, diaries, Rolodexes, calendars and correspondence. (d) Executive agrees that any material breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. Executive further agrees that in the event of said material breach or any reasonable threat of material breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such material breach or threatened material breach. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages. Should a court or arbitrator determine that any provision of this Section 6 is unreasonable, the parties agree that such provision shall be interpreted and enforced to the maximum extent such court or arbitrator deems reasonable. (e) The provisions of this Section shall survive any termination of this Agreement and the Transition Period, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section. Anything in this Section 6(e) to the contrary notwithstanding, the provisions of Section 6(b) shall only apply in the event of (i) a termination of the Executive's employment described in the last paragraph of Section 1(d), prior to the occurrence of a Change in Control, (ii) a termination of Executive's employment during the Transition Period that constitutes a Qualifying Termination, or (iii) a termination for Cause at any time during the Term of the Agreement. 7. Indemnification. ---------------- The Company agrees that if Executive is made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's Second Amended Articles of Incorporation, Restated Amended Code of Regulations, Indemnification Agreement between Executive and the Company or, if greater, by the laws of the State of Ohio, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Company provides such coverage for its other executive officers. 12 12 8. Withholding Taxes. ------------------ The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. 9. Reimbursement of Expenses. -------------------------- If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute regardless of the result thereof. 10. Scope of Agreement. ------------------- Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its subsidiaries. 11. Successors; Binding Agreement. ------------------------------ (a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. (b) The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in paragraph (a) of this Section 11, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. (c) (i) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or in connection with the sale or liquidation of all or substantially all of the assets of the Company, or in connection with the disposition of the business of the Company substantially as an entirety, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. (ii) This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement 13 13 to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate. 12. Notice. ------- (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows: If to Executive: [Executive Name and Address] If to the Company: General Counsel Caliber System, Inc. P.O. Box 5459 Akron, OH 44334-0459 or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (b) A written notice (a "Notice of Termination") of Executive's Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) specify the termination date. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. 13. No Set-off; No Mitigation. -------------------------- The Company's obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. 14. Employment with Subsidiaries. ----------------------------- Employment with the Company for purposes of this Agreement shall include employment with any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then 14 14 outstanding securities of such corporation or other entity entitled to vote generally in the election of directors. 15. Governing Law; Validity. ------------------------ The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect. 16. Settlement of Disputes. ----------------------- (a) Any controversy or claim arising out of or relating to this Agreement, any amendment of this Agreement, or any breach of any of the foregoing, shall, subject to the mutual agreement of the Company and the Executive, be settled by confidential arbitration, to be held in Akron, Ohio, in accordance with the Commercial Arbitration Rules of the American Arbitration Association before three (3) arbitrators. The arbitrators shall apply the provisions of this Agreement strictly as written (unless doing so violates the clear intent of this Agreement), and shall explain the reasons and basis of their award in detail and in writing. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All costs and expenses relating to any controversy or claim that is arbitrable under this Section (including reasonable attorney's fees of the Executive) shall be paid by the Company promptly on written demand, except that the arbitrators are authorized to require reimbursement of the Company for moneys paid by it pursuant to this sentence if the arbitrators determine that the substantive positions of the Executive in the arbitration were entirely without merit. Pending final resolution of any arbitration or court proceeding, the Company shall continue prompt payment of all amounts due the Executive under this Agreement or any amendment thereof and prompt provision of all benefits to which the Executive or his beneficiaries are entitled. Notwithstanding the foregoing, nothing contained in this Section 16 shall limit a party's right to seek equitable relief in any court of competent jurisdiction. (b) In the event the parties do not agree to arbitration as provided in 16(a), the parties hereby consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Summit County) or of the United States District Court for the Northern District of Ohio. 17. Counterparts. ------------- This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 18. Survivorship. ------------- The respective rights and obligations of the parties hereunder shall survive the expiration of the term of this Agreement, to the extent necessary to carry out the intentions of the parties, including without limitation any obligations of the Company to make payments and provide benefits hereunder. 15 15 19. Miscellaneous. -------------- No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of the Company. No provision of this Agreement may be waived unless such waiver is agreed to in writing and signed by the waiving party which, in the case of the Company, shall mean by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. This Agreement contains the entire understanding and agreement between the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto. 16 16 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company. Executive has executed this Agreement as of the date and year first written above. CALIBER SYSTEM, INC. By: ---------------------------- Agreed to this ____ day of ___________, 1997. - -------------------------- [Executive's Name] EX-10.4 5 EXHIBIT 10.4 1 EXHIBIT 10.4 THIRD AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (TIER 2) THIS THIRD AMENDED AND RESTATED AGREEMENT ("Agreement") is entered into as of the _____ day of _____________, 1997 (the "Effective Date") by and between Caliber System, Inc., an Ohio corporation (together with its successors and assigns permitted under this Agreement the "Company"), and X ("Executive"). W I T N E S S E T H WHEREAS, Executive currently serves as [title] of [company]; and WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Board (as defined in Section 1(b)) has determined that it is in the best interests of the Company and its stockholders to secure Executive's continued services and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1(d)) of the Company, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows: 1. Definitions. ------------ As used in this Agreement, the following terms shall have the respective meanings set forth below: (a) "Affiliate" of a person or other entity means a person or entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified. (b) "Board" means the Board of Directors of the Company. (c) "Cause" means (1) conviction of Executive for a felony or for a misdemeanor involving moral turpitude or (2) a material breach by Executive of the duties and responsibilities associated with his employment and position with the Company (other than as a 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 3 3 termination was directly related to or in anticipation of such Change in Control, then for all purposes of this Agreement, the date of the Change of Control shall mean the date immediately prior to the date of such termination of Executive's employment. (e) "Date of Termination" means (1) the effective date on which Executive's employment by the Company terminates as specified in a Notice of Termination by the Company or Executive, as the case may be, or (2) if Executive's employment by the Company terminates by reason of death, the date of death of Executive. Notwithstanding the previous sentence, (i) if Executive's employment is terminated for Disability (as defined in Section 1(f)) or (ii) if Executive's employment is terminated by the Company other than for Cause, then such Date of Termination shall be no earlier than thirty (30) days following the date on which a Notice of Termination is received. (f) "Disability" means Executive's absence from his duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive's incapacity due to mental or physical illness. (g) "Good Reason" shall mean termination by Executive of his employment following occurrence of any of the following events without his consent: (i) a reduction in Executive's base salary or target award opportunity as in effect immediately prior to the Change in Control (including a change in performance criteria which impacts negatively on Executive's ability to achieve the target) under the Company's annual or long-term performance incentive plans or programs, the failure to continue Executive's participation in any incentive compensation plan in which he was a participant immediately prior to the Change in Control unless a plan providing a substantially similar opportunity is substituted, or the termination or material reduction of any employee benefit or perquisite enjoyed by him immediately prior to the Change in Control, unless comparable benefits or perquisites (determined in the aggregate) are substituted; (ii) material diminution in Executive's duties as in effect immediately prior to the Change in Control or assignment to Executive of duties materially inconsistent with his duties as in effect immediately prior to the Change in Control; (iii) the loss of any of Executive's titles or positions held immediately prior to the Change in Control; (iv) a required relocation of more than 50 miles from Executive's primary office at the time the Company enters into an agreement in principle or other agreement, the consummation of which would constitute a Change in Control; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform the agreement by any successor to all or substantially all of the assets of the Company within 30 days after a merger, consolidation, sale or similar transaction. Notwithstanding anything contained in this Agreement to the contrary, any circumstance described in clauses (i) through (iv) of this Section 1(g) shall not constitute Good Reason unless Executive gives written notice thereof to the Company in accordance with 4 4 Section 12 and the Company fails to remedy such circumstances within ten days following receipt of such notice. (h) "Notice of Termination" means notice of the Date of Termination as described in Section 12(b). (i) "Qualifying Termination" means a termination of Executive's employment as a result of (1) a termination by the Company without Cause, (2) a termination by Executive for Good Reason or (3) a termination by Executive during the 30-day period commencing with the first anniversary date of the Change in Control; provided, however, that a Qualifying Termination shall not include a termination as a result of Executive's death, Disability or Retirement. (j) "Retirement" means Executive's voluntary termination of employment (other than with Good Reason) while eligible for retirement benefits under the terms of the Caliber System, Inc. Pension Plan and Trust. (k) "Retirement and Savings Plans" mean all qualified and nonqualified defined benefit and defined contribution plans, including: [Applicable qualified and nonqualified benefit plans] or any applicable amended, successor or substitute plan or plans of the Company, including any supplemental employee retirement plans, put into effect prior to a Change in Control. The Caliber System, Inc. Long-Term Stock Award Incentive Plan is included in the definition of Retirement and Savings Plans to the extent that it provides Executive with supplemental stock credits. (l) "Transition Period" means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) Executive's death and (2) twenty-four (24) months following such Change in Control. (m) "Voting Securities" mean any shares of capital stock or other securities of the Company that are generally entitled to vote in elections for directors. 2. Term of Agreement. ------------------ This Agreement shall commence on the Effective Date and shall continue in effect until ____________, 1999; provided, however, that commencing on _______________, 1999 and each following anniversary of the Effective Date, the term of this Agreement shall automatically be extended for an additional one-year period, unless at least six months prior to such date, the Company shall have given notice not to extend this Agreement; provided, however, that (i) no such action shall be taken by the Company during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control, and (ii) this Agreement shall continue in effect for at least twenty-four (24) months following the occurrence of a Change in Control. Notwithstanding anything in this Section 2 to the contrary, and subject to the last paragraph of 5 5 Section 1(d), this Agreement shall terminate upon termination of Executive's employment with the Company prior to a Change in Control, in which event the rights and obligations of the parties, except as otherwise expressly provided herein, shall cease. 3. Payments and Benefits Upon Termination of Employment. ----------------------------------------------------- (a) If during the Transition Period the employment of Executive shall terminate, by reason of a Qualifying Termination, then the Company shall pay to Executive (or Executive's beneficiary or estate) within five (5) days following the Date of Termination (except as provided in Section 3(a)(1)(iii)), as compensation for services rendered to the Company: (1) a lump-sum cash amount equal to the sum of (i) Executive's unpaid base salary from the Company and its subsidiaries through the Date of Termination (at the rate in effect (without taking into account any reduction of base salary constituting Good Reason) just prior to the time a Notice of Termination is given); (ii) any benefit awards (including both the cash and stock components) which pursuant to the terms of any Retirement and Savings Plans have been earned or become payable, through the Date of Termination, to the extent not theretofore paid or otherwise provided for; (iii) that portion of the annual bonus under the Company's incentive compensation plans determined by multiplying the greater of the actual bonus that would otherwise have been earned for a full year performance or target annual bonus by the fraction arrived at by dividing the number of full weeks worked by Executive during the calendar year of his Date of Termination by fifty-two (52); plus (iv) any unpaid vacation under the Company's vacation policy in effect at the Date of Termination (or, if more favorable to Executive, immediately prior to a Change in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the Executive the pro-rata portion of the target annual bonus within 5 days following the Date of Termination, and any additional bonus payment to which Executive is entitled on or before January 31 of the year following the year in which the Termination occurs. (2) a lump-sum cash amount equal to (a) 2 times Executive's highest annual rate of base salary from the Company and its subsidiaries in effect during the 12-month period prior to the Date of Termination plus (b) 2 times the target annual bonus in effect for the year in which the Change in Control occurs; provided, that any amount paid pursuant to this Section 3(a)(2) shall be offset by any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any other severance plan, policy, employment agreement or arrangement of the Company. (3) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of: (i) the employer matching contributions that would be made to the Caliber System, Inc. 401(k) Savings Plan; (ii) employer contributions that would be made to the Caliber System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan. This lump sum payment shall be based on the employer contributions and supplemental credits attributable to an additional 24 months of service under the specific plans referenced in this paragraph, or any applicable amended, successor or substitute plan or plans of the Company put into effect prior to a Change in Control. For purposes of the 401(k) Savings Plan and related supplemental stock credits, the calculations shall be made based on the assumption that the Executive made maximum contributions from the highest annual rate of base salary and target annual bonus 6 6 under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that the matching percentage shall equal the highest matching percentage allowable under the 401(k) Savings Plan as of the Date of Termination (in no event less than 3.5% of eligible compensation under the 401(k) Savings Plan). For purposes of the Stock Bonus Plan and related supplemental stock credits, the calculations shall be based on the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which the Date of Termination occurs (but in no event less than the average of the actual contribution/allocation percentages applicable to the 5 calendar years preceding the Date of Termination). For purposes of determining actuarial present value under this Section 3(a)(3), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (4) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits accrued under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc. Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and upon service through the Date of Termination. For purposes of the actuarial present value calculation under this Section 3(a)(4), Executive shall be deemed fully vested for all actual service. (5) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits under the Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17) Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24 months of age, service, and base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year following the Date of Termination, shall be included as the final two years of pensionable wages. For purposes of determining actuarial present value under this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50 percent of male mortality rates and 50 percent female mortality rates) shall be utilized. For purposes of determining actuarial present value under this Section 3(a)(5), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (b) If during the Transition Period, the employment of Executive terminates by reason of a Qualifying Termination, the Company will: (1) provide Executive and his dependents with health care coverage at the same level as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Continued Medical Coverage") for a period of 42 months from the Date of Termination; and (2) provide Executive and his dependents with accident, disability and life coverage at the same level and upon the same terms and otherwise to the same extent as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Welfare Benefits") for a period of 24 months from the Date of Termination. 7 7 (3) The coverages described in subparagraphs (1) and (2) of this Section may be provided through continued participation in the Company's plans and programs or otherwise, as the Company determines. (4) During the first twenty four (24) months of Continued Medical Coverage, the Company and Executive will share the costs of such coverage in the same proportion as such costs were shared immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control). From the twenty-fifth (25th) through the end of the of the forty-second (42nd) month of Continued Medical Coverage, Executive will be required to pay the cost of such coverage at the rate the Company charges former employees, from time to time, for similar coverage under COBRA. The Company and Executive will share the costs of providing the Welfare Benefits in the same proportion as such costs were shared immediately prior to the Date of Termination (or, of more favorable to Executive, immediately prior to the Change in Control). (5) Continued Medical Coverage will terminate upon the earliest of (i) the expiration of 42 months from the Date of Termination, (ii) the commencement date of equivalent benefits from a new employer, or (iii) Executive's attainment of age 65. Welfare Benefits will terminate upon the earliest of (i) the expiration of 24 months from the Date of Termination, (ii) the commencement date of equivalent benefits a new employer, or (iii) Executive's attainment of age 65. Upon termination of Continued Medical Coverage, Executive may, if eligible, elect special continuation coverage for early retirees under the Caliber System, Inc. Medical, Dental and Vision Care Plan. Upon termination of Welfare Benefits, Executive may, if available, convert one or more of Executive's and his dependent's coverage to individual policies or programs. (c) If during the Transition Period, the employment of Executive shall terminate, by reason of a Qualifying Termination, then for a period of twelve months following the Date of Termination, the Company shall provide, at its expense, executive level outplacement assistance to the Executive by a nationally recognized outplacement firm acceptable to Executive. 4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN ENTITLEMENTS. (a) The consequences of a Change in Control on Executive's stock options and performance shares granted under the Company's 1996 Equity Incentive Compensation Plan ("EICP") shall be determined in accordance with the EICP and Executive's grants pursuant to the EICP. The consequences of a Change in Control on Executive's stock credits under any Retirement and Savings Plans shall be determined in accordance with the provisions of the applicable plans. (b) No later than the occurrence of a Change in Control, the Company shall fund in full that portion, if any, of the obligations to Executive under the Company's Retirement and Savings Plans (other than plans qualified under Section 401(a) of the Internal Revenue Code) that are then unfunded. Such funding shall be provided through an irrevocable trust for the benefit of the Executive which shall be established as promptly as possible following the Effective Date of this Agreement (or, in the case of a Retirement and Savings Plan established after such effective date, then as promptly as possible after such plan is established) for the purpose of receiving contributions from the Company to fund such obligations. To the 8 8 extent such obligations are covered by a plan other than a plan for which there is a trust already in existence, the Company shall establish a trust for the purpose of funding such obligations. Such trust shall be in a form that provides Executive with the most favorable tax position that reasonably can be determined at the time it is established. The trust shall provide for distribution of amounts to Executive in order to pay taxes, if any, that become due prior to payment of amounts pursuant to the trust. Following the occurrence of a Change in Control, the Company shall make periodic additional contributions (no less frequently than annually) to keep such trust fully funded. The intent is that no later than the Change in Control and annually thereafter (the "Applicable Dates") the amount of such fund shall equal at least the then present value (determined as of each Applicable Date) of any amounts subject to the funding requirement of this Section 4(b) as determined by a nationally recognized firm qualified to provide actuarial services. The establishment and funding of any such trust shall not affect the obligation of the Company to provide the benefits being funded. The trust may be terminated in accordance with the trust agreement between the Company and the trustee and, if so terminated, the Company shall not be required to establish a successor trust under this Section 4(b). The trust described in this Section 4(b) may be part of a trust funding similar obligations for other employees of the Company. (c) No later than the occurrence of a Change in Control, the Company shall fund its obligations to provide payments and benefits under this Agreement (other than the obligations which are provided for in Section 4(b)) by the establishment of a trust to which it contributes an amount sufficient to meet such obligations. The establishment and funding of such trust shall not affect the obligations of the Company to provide the benefits subject to this Section 4(c). The trust described in this Section 4(c) may be part of the trust described in Section 4(b). (d) The consequences of a Change in Control upon compensation and benefit plans and programs of the Company, except as otherwise provided in this Agreement, shall be determined in accordance with such plans and programs. 5. Gross-up Payments. ------------------ (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other benefit (including, without limitation, any acceleration of vesting of any benefit) provided by the Company or its subsidiaries to or for the benefit of Executive (a "Payment") (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any Gross-up Payment required under this Section 5) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), (such excise tax, together with any interest and penalties imposed in respect thereto, hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive a Gross-Up Payment in an amount that after payment by Executive of all taxes, including, without limitation, any income, employment, and excise taxes (and any interest and penalties imposed with respect thereto), imposed upon the Gross-Up Payment leaves the Executive a net amount from the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 5(c), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in 9 9 arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the Company to Executive within five (5) days of the receipt of the Determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and Executive. In the event the Company exhausts its remedies pursuant to Section 5(c) and Executive thereafter is required by a determination of a court or the Internal Revenue Service to make payment of any Excise Tax, the Accounting Firm shall determine promptly following receipt of such determination the amount of the Gross-Up Payment that should have been made by the Company (the "Underpayment") and any such Underpayment shall be paid promptly by the Company to or for the benefit of Executive. (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (1) give the Company any information reasonably requested by the Company relating to such claim, (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3) cooperate with the Company in good faith in order effectively to contest such claim, and (4) permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income or employment tax (including interest and penalties with respect thereto) imposed 10 10 as a result of such proceeding and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(c), Executive becomes entitled to receive, and receives, any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 5(c) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 6. Confidentiality; Non-Competition. --------------------------------- (a) During employment and thereafter, Executive shall keep confidential all "Confidential Information" relating to the Company or any of its subsidiaries, and their respective businesses, obtained by Executive during his employment by the Company or any of its subsidiaries. "Confidential Information" means any non-public, proprietary information that may provide the Company with a competitive advantage, including, without limitation, any trade secrets, formulas, flow charts, computer programs, access codes or other systems information, business, product or marketing plans, sales and other forecasts, financial information, customer lists, and information relating to compensation and benefits, provided that such proprietary information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of Executive's breach of this Section 6(a). Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, videotapes, audiotapes, and oral communications. Anything herein to the contrary notwithstanding, it shall not be a violation of this Section 6(a) for the Executive to disclose information in the ordinary course of properly carrying out his duties and responsibilities on behalf of the Company or to 11 11 respond to an order of a court or other body having jurisdiction provided that he gives the Company notice of any such order. (b) Executive agrees that he shall not for a period of one (1) year following the Date of Termination, directly or indirectly own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to holding the positions of officer, director, shareholder, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise; provided, however, that Executive may invest without being deemed in violation of this Section 6(b), in stocks, bonds, or other securities of any corporation or other entity (but without participating in the business thereof) if such stocks, bonds, or other securities are listed for trading on a national securities exchange or NASDAQ and Executive's investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding. "Competing Enterprise" shall mean an enterprise that engages in any business that, on the Date of Termination, is engaged in by the Company or any of its subsidiaries if such enterprise engages in such business in any geographic area in which the Company or any of its subsidiaries conducts such business. (c) Except as expressly provided herein, promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company then in Executive's possession or under his control, except that Executive may retain his personal notes, diaries, Rolodexes, calendars and correspondence. (d) Executive agrees that any material breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. Executive further agrees that in the event of said material breach or any reasonable threat of material breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such material breach or threatened material breach. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages. Should a court or arbitrator determine that any provision of this Section 6 is unreasonable, the parties agree that such provision shall be interpreted and enforced to the maximum extent such court or arbitrator deems reasonable. (e) The provisions of this Section shall survive any termination of this Agreement and the Transition Period, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section. Anything in this Section 6(e) to the contrary notwithstanding, the provisions of Section 6(b) shall only apply in the event of (i) a termination of the Executive's employment described in the last paragraph of Section 1(d), prior to the occurrence of a Change in Control, (ii) a termination of Executive's employment during the Transition Period that constitutes a Qualifying Termination, or (iii) a termination for Cause at any time during the Term of the Agreement. 12 12 7. Indemnification. ---------------- The Company agrees that if Executive is made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's Second Amended Articles of Incorporation, Restated Amended Code of Regulations, Indemnification Agreement between Executive and the Company or, if greater, by the laws of the State of Ohio, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Company provides such coverage for its other executive officers. 8. Withholding Taxes. ------------------ The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. 9. Reimbursement of Expenses. -------------------------- If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute regardless of the result thereof. 10. Scope of Agreement. ------------------- Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its subsidiaries. 11. Successors; Binding Agreement. ------------------------------ (a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. (b) The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in paragraph (a) of this Section 11, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. 13 13 (c) (i) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or in connection with the sale or liquidation of all or substantially all of the assets of the Company, or in connection with the disposition of the business of the Company substantially as an entirety, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. (ii) This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate. 12. Notice. ------- (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows: If to Executive: [Executive's Name and Address] If to the Company: General Counsel Caliber System, Inc. P.O. Box 5459 Akron, OH 44334-0459 or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (b) A written notice (a "Notice of Termination") of Executive's Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) specify the termination date. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. 14 14 13. No Set-off; No Mitigation. -------------------------- The Company's obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. 14. Employment with Subsidiaries. ----------------------------- Employment with the Company for purposes of this Agreement shall include employment with any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors. 15. Governing Law; Validity. ------------------------ The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect. 16. Settlement of Disputes. ----------------------- (a) Any controversy or claim arising out of or relating to this Agreement, any amendment of this Agreement, or any breach of any of the foregoing, shall, subject to the mutual agreement of the Company and the Executive, be settled by confidential arbitration, to be held in Akron, Ohio, in accordance with the Commercial Arbitration Rules of the American Arbitration Association before three (3) arbitrators. The arbitrators shall apply the provisions of this Agreement strictly as written (unless doing so violates the clear intent of this Agreement), and shall explain the reasons and basis of their award in detail and in writing. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All costs and expenses relating to any controversy or claim that is arbitrable under this Section (including reasonable attorney's fees of the Executive) shall be paid by the Company promptly on written demand, except that the arbitrators are authorized to require reimbursement of the Company for moneys paid by it pursuant to this sentence if the arbitrators determine that the substantive positions of the Executive in the arbitration were entirely without merit. Pending final resolution of any arbitration or court proceeding, the Company shall continue prompt payment of all amounts due the Executive under this Agreement or any amendment thereof and prompt provision of all benefits to which the Executive or his beneficiaries are entitled. Notwithstanding the foregoing, nothing contained in this Section 16 shall limit a party's right to seek equitable relief in any court of competent jurisdiction. 15 15 (b) In the event the parties do not agree to arbitration as provided in 16(a), the parties hereby consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Summit County) or of the United States District Court for the Northern District of Ohio. 17. Counterparts. ------------- This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 18. Survivorship. ------------- The respective rights and obligations of the parties hereunder shall survive the expiration of the term of this Agreement, to the extent necessary to carry out the intentions of the parties, including without limitation any obligations of the Company to make payments and provide benefits hereunder. 19. Miscellaneous. -------------- No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of the Company. No provision of this Agreement may be waived unless such waiver is agreed to in writing and signed by the waiving party which, in the case of the Company, shall mean by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. This Agreement contains the entire understanding and agreement between the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto. 16 16 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company. Executive has executed this Agreement as of the date and year first written above. CALIBER SYSTEM, INC. By: ------------------------------- Agreed to this ____ day of _____________, 1997. - -------------------------- [Executive's Name] EX-10.5 6 EXHIBIT 10.5 1 EXHIBIT 10.5 THIRD AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (TIER 2A) THIS THIRD AMENDED AND RESTATED AGREEMENT is entered into as of the _____ day of _______________, 1997 (the "Effective Date") by and between Caliber System, Inc., an Ohio corporation (together with its successors and assigns permitted under this Agreement the "Company"), and X ("Executive"). W I T N E S S E T H WHEREAS, Executive currently serves as [title] of [company]; and WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Board (as defined in Section 1(b)) has determined that it is in the best interests of the Company and its stockholders to secure Executive's continued services and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1(d)) of the Company, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows: 1. Definitions. ------------ As used in this Agreement, the following terms shall have the respective meanings set forth below: (a) "Affiliate" of a person or other entity means a person or entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified. (b) "Board" means the Board of Directors of the Company. (c) "Cause" means (1) conviction of Executive for a felony or for a misdemeanor involving moral turpitude or (2) a material breach by Executive of the duties and 2 2 responsibilities associated with his employment and position with the Company (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on Executive's part, which results in demonstrably material economic injury to the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach. Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the Board and to the extent applicable, three quarters (3/4) of the Incumbent Directors, if any, as defined below, at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Executive was guilty of the conduct set forth in this Section 1(c) and specifying the particulars thereof in detail. (d) "Change in Control" means the occurrence of any of the following events: (1) any "person," as such term is used in Sections 3(a)(9) and 13(d) of the 1934 Act, becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated under the 1934 Act, of 20% or more of the combined voting power of all the Voting Securities of the Company then outstanding; (2) the majority of the Board consists of individuals other than Incumbent Directors, which term means the members of the Board on the date of this Agreement; provided that any person becoming a director subsequent to such date whose election or nomination for election was supported by three-quarters of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director; (3) the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; (4) all or substantially all of the assets of the Company are disposed of pursuant to a merger, consolidation or other transaction (unless the holders of the Voting Securities of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Securities of the Company, all of the Voting Securities or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or (5) the Company combines with another company and is the surviving corporation but, immediately after the combination, the holders of the Voting Securities of the Company immediately prior to the combination hold, directly or indirectly, 50% or less of the Voting Securities of the combined company (there being excluded from the Voting Securities held by such holders of the Voting Securities, but not from the Voting Securities of the combined company, any securities received by Affiliates of such other company in exchange for securities of such other company). Notwithstanding anything contained in this Agreement to the contrary, if Executive's employment is terminated by the Company prior to a Change in Control, which Change in Control in fact occurs, and Executive reasonably demonstrates that such termination 3 3 was at the request of a third party who effectuates such Change in Control or that such termination was directly related to or in anticipation of such Change in Control, then for all purposes of this Agreement, the date of the Change of Control shall mean the date immediately prior to the date of such termination of Executive's employment. (e) "Date of Termination" means (1) the effective date on which Executive's employment by the Company terminates as specified in a Notice of Termination by the Company or Executive, as the case may be, or (2) if Executive's employment by the Company terminates by reason of death, the date of death of Executive. Notwithstanding the previous sentence, (i) if Executive's employment is terminated for Disability (as defined in Section 1(f)) or (ii) if Executive's employment is terminated by the Company other than for Cause, then such Date of Termination shall be no earlier than thirty (30) days following the date on which a Notice of Termination is received. (f) "Disability" means Executive's absence from his duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive's incapacity due to mental or physical illness. (g) "Good Reason" shall mean termination by Executive of his employment following occurrence of any of the following events without his consent: (i) a reduction in Executive's base salary or target award opportunity as in effect immediately prior to the Change in Control (including a change in performance criteria which impacts negatively on Executive's ability to achieve the target) under the Company's annual or long-term performance incentive plans or programs, the failure to continue Executive's participation in any incentive compensation plan in which he was a participant immediately prior to the Change in Control unless a plan providing a substantially similar opportunity is substituted, or the termination or material reduction of any employee benefit or perquisite enjoyed by him immediately prior to the Change in Control, unless comparable benefits or perquisites (determined in the aggregate) are substituted; (ii) material diminution in Executive's duties as in effect immediately prior to the Change in Control or assignment to Executive of duties materially inconsistent with his duties as in effect immediately prior to the Change in Control; (iii) the loss of any of Executive's titles or positions held immediately prior to the Change in Control; (iv) a required relocation of more than 50 miles from Executive's primary office at the time the Company enters into an agreement in principle or other agreement, the consummation of which would constitute a Change in Control; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform the agreement by any successor to all or substantially all of the assets of the Company within 30 days after a merger, consolidation, sale or similar transaction. Notwithstanding anything contained in this Agreement to the contrary, any circumstance described in clauses (i) through (iv) of this Section 1(g) shall not constitute 4 4 Good Reason unless Executive gives written notice thereof to the Company in accordance with Section 12 and the Company fails to remedy such circumstances within ten days following receipt of such notice. (h) "Notice of Termination" means notice of the Date of Termination as described in Section 12(b). (i) "Qualifying Termination" means a termination of Executive's employment as a result of (1) a termination by the Company without Cause, (2) a termination by Executive for Good Reason or (3) a termination by Executive during the 30-day period commencing with the first anniversary date of the Change in Control; provided, however, that a Qualifying Termination shall not include a termination as a result of Executive's death, Disability or Retirement. (j) "Retirement" means Executive's voluntary termination of employment (other than with Good Reason) while eligible for retirement benefits under the terms of the Caliber System, Inc. Pension Plan and Trust. (k) "Retirement and Savings Plans" mean all qualified and nonqualified defined benefit and defined contribution plans, including: [Applicable qualified and nonqualified benefit plans] or any applicable amended, successor or substitute plan or plans of the Company, including any supplemental employee retirement plans, put into effect prior to a Change in Control. The Caliber System, Inc. Long-Term Stock Award Incentive Plan is included in the definition of Retirement and Savings Plans to the extent that it provides Executive with supplemental stock credits. (l) "Transition Period" means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) Executive's death and (2) twenty-four (24) months following such Change in Control. (m) "Voting Securities" mean any shares of capital stock or other securities of the Company that are generally entitled to vote in elections for directors. 2. Term of Agreement. ------------------ This Agreement shall commence on the Effective Date and shall continue in effect until ______________, 1999; provided, however, that commencing on _____________, 1999 and each following anniversary of the Effective Date, the term of this Agreement shall automatically be extended for an additional one-year period, unless at least six months prior to such date, the Company shall have given notice not to extend this Agreement; provided, however, that (i) no such action shall be taken by the Company during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control, and (ii) this Agreement shall continue in effect for at least twenty-four (24) months following the occurrence of a Change in Control. 5 5 Notwithstanding anything in this Section 2 to the contrary, and subject to the last paragraph of Section 1(d), this Agreement shall terminate upon termination of Executive's employment with the Company prior to a Change in Control, in which event the rights and obligations of the parties, except as otherwise expressly provided herein, shall cease. 3. Payments and Benefits Upon Termination of Employment. ---------------------------------------------------- (a) If during the Transition Period the employment of Executive shall terminate, by reason of a Qualifying Termination, then the Company shall pay to Executive (or Executive's beneficiary or estate) within five (5) days following the Date of Termination (except as provided in Section 3(a)(1)(iii)), as compensation for services rendered to the Company: (1) a lump-sum cash amount equal to the sum of (i) Executive's unpaid base salary from the Company and its subsidiaries through the Date of Termination (at the rate in effect (without taking into account any reduction of base salary constituting Good Reason) just prior to the time a Notice of Termination is given); (ii) any benefit awards (including both the cash and stock components) which pursuant to the terms of any Retirement and Savings Plans have been earned or become payable through the Date of Termination, to the extent not theretofore paid or otherwise provided for; (iii) that portion of the annual bonus under the company's incentive compensation plans determined by multiplying the greater of the actual bonus that would otherwise have been earned for a full year performance or target annual bonus by the fraction arrived at by dividing the number of full weeks worked by Executive during the calendar year of his Date of Termination by fifty-two (52); plus (iv) any unpaid vacation under the Company's vacation policy in effect at the Date of Termination (or, if more favorable to Executive, immediately prior to a Change in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the Executive the pro-rata portion of the target annual bonus within 5 days following the Date of Termination, and any additional bonus payment to which Executive is entitled on or before January 31 of the year following the year in which the Termination occurs. (2) a lump-sum cash amount equal to (a) 2 times Executive's highest annual rate of base salary from the Company and its subsidiaries in effect during the 12-month period prior to the Date of Termination plus (b) 2 times the target annual bonus in effect for the year in which the Change in Control occurs; provided, that any amount paid pursuant to this Section 3(a)(2) shall be offset by any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any other severance plan, policy, employment agreement or arrangement of the Company. (3) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of: (i) the employer matching contributions that would be made to the Caliber System, Inc. 401(k) Savings Plan; (ii) employer contributions that would be made to the Caliber System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan. This lump sum payment shall be based on the employer contributions and supplemental credits attributable to an additional 24 months of service under the specific plans referenced in this paragraph, or any applicable amended, successor or substitute plan or plans of the Company put into effect prior to a Change in Control. For purposes of the 401(k) Savings Plan and related supplemental stock credits, the calculations shall be made based on the assumption that the Executive made 6 6 maximum contributions from the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that the matching percentage shall equal the highest matching percentage allowable under the 401(k) Savings Plan as of the Date of Termination (in no event less than 3.5% of eligible compensation under the 401(k) Savings Plan). For purposes of the Stock Bonus Plan and related supplemental stock credits, the calculations shall be based on the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which the Date of Termination occurs (but in no event less than the average of the actual contribution/allocation percentages applicable to the 5 calendar years preceding the Date of Termination). For purposes of determining actuarial present value under this Section 3(a)(3), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (4) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits accrued under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc. Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and upon service through the Date of Termination. For purposes of the actuarial present value calculation under this Section 3(a)(4), Executive shall be deemed fully vested for all actual service. (5) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits under the Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17) Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24 months of age, service, and base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year following the Date of Termination, shall be included as the final two years of pensionable wages. For purposes of determining actuarial present value under this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50 percent of male mortality rates and 50 percent female mortality rates) shall be utilized. For purposes of determining actuarial present value under this Section 3(a)(5), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (b) If during the Transition Period, the employment of Executive terminates by reason of a Qualifying Termination, the Company will: (1) provide Executive and his dependents with health care coverage at the same level as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Continued Medical Coverage") for a period of 42 months from the Date of Termination; and (2) provide Executive and his dependents with accident, disability and life coverage at the same level and upon the same terms and otherwise to the same extent as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Welfare Benefits") for a period of 24 months from the Date of Termination. 7 7 (3) The coverages described in subparagraphs (1) and (2) of this Section may be provided through continued participation in the Company's plans and programs or otherwise, as the Company determines. (4) During the first twenty four (24) months of Continued Medical Coverage, the Company and Executive will share the costs of such coverage in the same proportion as such costs were shared immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control). From the twenty-fifth (25th) through the end of the of the forty-second (42nd) month of Continued Medical Coverage, Executive will be required to pay the cost of such coverage at the rate the Company charges former employees, from time to time, for similar coverage under COBRA. The Company and Executive will share the costs of providing the Welfare Benefits in the same proportion as such costs were shared immediately prior to the Date of Termination (or, of more favorable to Executive, immediately prior to the Change in Control). (5) Continued Medical Coverage will terminate upon the earliest of (i) the expiration of 42 months from the Date of Termination, (ii) the commencement date of equivalent benefits from a new employer, or (iii) Executive's attainment of age 65. Welfare Benefits will terminate upon the earliest of (i) the expiration of 24 months from the Date of Termination, (ii) the commencement date of equivalent benefits a new employer, or (iii) Executive's attainment of age 65. Upon termination of Continued Medical Coverage, Executive may, if eligible, elect special continuation coverage for early retirees under the Caliber System, Inc. Medical, Dental and Vision Care Plan. Upon termination of Welfare Benefits, Executive may, if available, convert one or more of Executive's and his dependent's coverage to individual policies or programs. (c) If during the Transition Period, the employment of Executive shall terminate, by reason of a Qualifying Termination, then for a period of twelve months following the Date of Termination, the Company shall provide, at its expense, executive level outplacement assistance to the Executive by a nationally recognized outplacement firm acceptable to Executive. 4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN ENTITLEMENTS. (a) The consequences of a Change in Control on Executive's stock options and performance shares granted under the Company's 1996 Equity Incentive Compensation Plan ("EICP") shall be determined in accordance with the EICP and Executive's grants pursuant to the EICP. The consequences of a Change in Control on Executive's stock credits under any Retirement and Savings Plans shall be determined in accordance with the provisions of the applicable plans. (b) No later than the occurrence of a Change in Control, the Company shall fund in full that portion, if any, of the obligations to Executive under the Company's Retirement and Savings Plans (other than plans qualified under Section 401(a) of the Internal Revenue Code) that are then unfunded. Such funding shall be provided through an irrevocable trust for the benefit of the Executive which shall be established as promptly as possible following the Effective Date of this Agreement (or, in the case of a Retirement and Savings Plan established after such effective date, then as promptly as possible after such plan is established) 8 8 for the purpose of receiving contributions from the Company to fund such obligations. To the extent such obligations are covered by a plan other than a plan for which there is a trust already in existence, the Company shall establish a trust for the purpose of funding such obligations. Such trust shall be in a form that provides Executive with the most favorable tax position that reasonably can be determined at the time it is established. The trust shall provide for distribution of amounts to Executive in order to pay taxes, if any, that become due prior to payment of amounts pursuant to the trust. Following the occurrence of a Change in Control, the Company shall make periodic additional contributions (no less frequently than annually) to keep such trust fully funded. The intent is that no later than the Change in Control and annually thereafter (the "Applicable Dates") the amount of such fund shall equal at least the then present value (determined as of each Applicable Date) of any amounts subject to the funding requirement of this Section 4(b) as determined by a nationally recognized firm qualified to provide actuarial services. The establishment and funding of any such trust shall not affect the obligation of the Company to provide the benefits being funded. The trust may be terminated in accordance with the trust agreement between the Company and the trustee and, if so terminated, the Company shall not be required to establish a successor trust under this Section 4(b). The trust described in this Section 4(b) may be part of a trust funding similar obligations for other employees of the Company. (c) No later than the occurrence of a Change in Control, the Company shall fund its obligations to provide payments and benefits under this Agreement (other than the obligations which are provided for in Section 4(b)) by the establishment of a trust to which it contributes an amount sufficient to meet such obligations. The establishment and funding of such trust shall not affect the obligations of the Company to provide the benefits subject to this Section 4(c). The trust described in this Section 4(c) may be part of the trust described in Section 4(b). (d) The consequences of a Change in Control upon compensation and benefit plans and programs of the Company, except as otherwise provided in this Agreement, shall be determined in accordance with such plans and programs. 5. Parachute Payment Limitations. ------------------------------ Anything in this Agreement to the contrary, if the aggregate of the amounts due the Executive under this Agreement and any other plan or program of the Company constitutes a "Parachute Payment," as such term is defined in Section 280G of the Internal Revenue Code of 1986 (the "Code"), and the amount of the Parachute Payment, reduced by all Federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount the Executive would receive, after taxes, if he received a Parachute Payment equal to only three times his Base Amount, as defined in Section 280G(b)(3) of the Code, less $1.00, then the amounts due the Executive under this Agreement that are "contingent on a Change in Control" (as defined in the next sentence) shall be reduced so that the aggregate of (i) the amounts due the Executive under this Agreement that are "contingent on a Change in Control" plus 9 9 (ii) the other amounts due the Executive, under other plans and programs of the Company, that are "contingent on a Change in Control" equals three times his Base Amount less $1.00. For purposes of the preceding sentence "contingent on a Change in Control" shall have the same meaning as given that term in Section 280G(b)(2)(A)(i) of the Code. The determinations to be made with respect to this paragraph shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of being requested to do so by the Company or Executive. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. 6. Confidentiality; Non-Competition. --------------------------------- (a) During employment and thereafter, Executive shall keep confidential all "Confidential Information" relating to the Company or any of its subsidiaries, and their respective businesses, obtained by Executive during his employment by the Company or any of its subsidiaries. "Confidential Information" means any non-public, proprietary information that may provide the Company with a competitive advantage, including, without limitation, any trade secrets, formulas, flow charts, computer programs, access codes or other systems information, business, product or marketing plans, sales and other forecasts, financial information, customer lists, and information relating to compensation and benefits, provided that such proprietary information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of Executive's breach of this Section 6(a). Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, videotapes, audiotapes, and oral communications. Anything herein to the contrary notwithstanding, it shall not be a violation of this Section 6(a) for the Executive to disclose information in the ordinary course of properly carrying out his duties and responsibilities on behalf of the Company or to respond to an order of a court or other body having jurisdiction provided that he gives the Company notice of any such order. (b) Executive agrees that he shall not for a period of one (1) year following the Date of Termination, directly or indirectly own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to holding the positions of officer, director, shareholder, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise; provided, however, that Executive may invest without being deemed in violation of this Section 6(b), in stocks, bonds, or other securities of any corporation or other entity (but without participating in the business thereof) if such stocks, bonds, or other securities are listed for trading on a national securities exchange or NASDAQ and Executive's investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding. "Competing Enterprise" shall mean an enterprise that engages in any business that, on the Date of Termination, is engaged in by the Company or any of its subsidiaries if such enterprise 10 10 engages in such business in any geographic area in which the Company or any of its subsidiaries conducts such business. (c) Except as expressly provided herein, promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company then in Executive's possession or under his control, except that Executive may retain his personal notes, diaries, Rolodexes, calendars and correspondence. (d) Executive agrees that any material breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. Executive further agrees that in the event of said material breach or any reasonable threat of material breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such material breach or threatened material breach. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages. Should a court or arbitrator determine that any provision of this Section 6 is unreasonable, the parties agree that such provision shall be interpreted and enforced to the maximum extent such court or arbitrator deems reasonable. (e) The provisions of this Section shall survive any termination of this Agreement and the Transition Period, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section. Anything is this Section 6(e) to the contrary notwithstanding, the provisions of Section 6(b) shall only apply in the event of (i) a termination of the Executive's employment described in the last paragraph of Section 1(d), prior to the occurrence of a Change in Control, (ii) a termination of Executive's employment during the Transition Period that constitutes a Qualifying Termination, or (iii) a termination for Cause at any time during the Term of the Agreement. 7. Indemnification. ---------------- The Company agrees that if Executive is made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's Second Amended Articles of Incorporation, Restated Amended Code of Regulations, Indemnification Agreement between Executive and the Company or, if greater, by the laws of the State of Ohio, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Company provides such coverage for its other executive officers. 11 11 8. Withholding Taxes. ------------------ The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. 9. Reimbursement of Expenses. -------------------------- If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute regardless of the result thereof. 10. Scope of Agreement. ------------------- Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its subsidiaries. 11. Successors; Binding Agreement. ------------------------------ (a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. (b) The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in paragraph (a) of this Section 11, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. (c) (i) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or in connection with the sale or liquidation of all or substantially all of the assets of the Company, or in connection with the disposition of the business of the Company substantially as an entirety, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. (ii) This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, 12 12 unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate. 12. Notice. ------- (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows: If to Executive: [Executive's Name and Address] If to the Company: General Counsel Caliber System, Inc. P.O. Box 5459 Akron, OH 44334-0459. or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (b) A written notice (a "Notice of Termination") of Executive's Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) specify the termination date. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. 13. No Set-off; No Mitigation. -------------------------- The Company's obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. 14. Employment with Subsidiaries. ----------------------------- Employment with the Company for purposes of this Agreement shall include employment with any corporation or other entity in which the Company has a direct or 13 13 indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors. 15. Governing Law; Validity. ------------------------ The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect. 16. Settlement of Disputes. ----------------------- (a) Any controversy or claim arising out of or relating to this Agreement, any amendment of this Agreement, or any breach of any of the foregoing, shall, subject to the mutual agreement of the Company and the Executive, be settled by confidential arbitration, to be held in Akron, Ohio, in accordance with the Commercial Arbitration Rules of the American Arbitration Association before three (3) arbitrators. The arbitrators shall apply the provisions of this Agreement strictly as written (unless doing so violates the clear intent of this Agreement), and shall explain the reasons and basis of their award in detail and in writing. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All costs and expenses relating to any controversy or claim that is arbitrable under this Section (including reasonable attorney's fees of the Executive) shall be paid by the Company promptly on written demand, except that the arbitrators are authorized to require reimbursement of the Company for moneys paid by it pursuant to this sentence if the arbitrators determine that the substantive positions of the Executive in the arbitration were entirely without merit. Pending final resolution of any arbitration or court proceeding, the Company shall continue prompt payment of all amounts due the Executive under this Agreement or any amendment thereof and prompt provision of all benefits to which the Executive or his beneficiaries are entitled. Notwithstanding the foregoing, nothing contained in this Section 16 shall limit a party's right to seek equitable relief in any court of competent jurisdiction. (b) In the event the parties do not agree to arbitration as provided in 16(a), the parties hereby consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Summit County) or of the United States District Court for the Northern District of Ohio. 17. Counterparts. ------------- This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 18. Survivorship. ------------- The respective rights and obligations of the parties hereunder shall survive the expiration of the term of this Agreement, to the extent necessary to carry out the intentions of the parties, including without limitation any obligations of the Company to make payments and provide benefits hereunder. 14 14 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. 15 15 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company. Executive has executed this Agreement as of the date and year first written above. CALIBER SYSTEM, INC. By: ---------------------------- Agreed to this ____ day of _______________, 1997. - -------------------------- [Executive's Name] EX-10.6 7 EXHIBIT 10.6 1 EXHIBIT 10.6 THIRD AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (TIER 3) THIS THIRD AMENDED AND RESTATED AGREEMENT is entered into as of the _____ day of ______________, 1997 (the "Effective Date") by and between Caliber System, Inc., an Ohio corporation (together with its successors and assigns permitted under this Agreement the "Company"), and X ("Executive"). W I T N E S S E T H WHEREAS, Executive currently serves as [title] of [company]; and WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Board (as defined in Section 1(b)) has determined that it is in the best interests of the Company and its stockholders to secure Executive's continued services and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1(d)) of the Company, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows: 1. Definitions. ------------ As used in this Agreement, the following terms shall have the respective meanings set forth below: (a) "Affiliate" of a person or other entity means a person or entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified. (b) "Board" means the Board of Directors of the Company. (c) "Cause" means (1) conviction of Executive for a felony or for a misdemeanor involving moral turpitude or (2) a material breach by Executive of the duties and responsibilities associated with his employment and position with the Company (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and 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; (iv) a required relocation of more than 50 miles from Executive's primary office at the time the Company enters into an agreement in principle or other agreement, the consummation of which would constitute a Change in Control; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform the agreement by any successor to all or substantially all of the assets of the Company within 30 days after a merger, consolidation, sale or similar transaction. Notwithstanding anything contained in this Agreement to the contrary, any circumstance described in clauses (i) through (iv) of this Section 1(g) shall not constitute Good Reason unless Executive gives written notice thereof to the Company in accordance with 4 4 Section 12 and the Company fails to remedy such circumstances within ten days following receipt of such notice. (h) "Notice of Termination" means notice of the Date of Termination as described in Section 12(b). (i) "Qualifying Termination" means a termination of Executive's employment as a result of (1) a termination by the Company without Cause or (2) a termination by Executive for Good Reason; provided, however, that a Qualifying Termination shall not include a termination as a result of Executive's death, Disability or Retirement. (j) "Retirement" means Executive's voluntary termination of employment (other than with Good Reason) while eligible for retirement benefits under the terms of the Caliber System, Inc. Pension Plan and Trust. (k) "Retirement and Savings Plans" mean all qualified and nonqualified defined benefit and defined contribution plans, including: [Applicable qualified and nonqualified benefit plans] or any applicable amended, successor or substitute plan or plans of the Company, including any supplemental employee retirement plans, put into effect prior to a Change in Control. The Caliber System, Inc. Long-Term Stock Award Incentive Plan is included in the definition of Retirement and Savings Plans to the extent that it provides Executive with supplemental stock credits. (l) "Transition Period" means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) Executive's death and (2) twenty-four (24) months following such Change in Control. (m) "Voting Securities" mean any shares of capital stock or other securities of the Company that are generally entitled to vote in elections for directors. 2. Term of Agreement. ------------------ This Agreement shall commence on the Effective Date and shall continue in effect until _____________, 1999; provided, however, that commencing on ______________, 1999 and each following anniversary of the Effective Date, the term of this Agreement shall automatically be extended for an additional one-year period, unless at least six months prior to such date, the Company shall have given notice not to extend this Agreement; provided, however, that (i) no such action shall be taken by the Company during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control, and (ii) this Agreement shall continue in effect for at least twenty-four (24) months following the occurrence of a Change in Control. Notwithstanding anything in this Section 2 to the contrary, and subject to the last paragraph of Section 1(d), this Agreement shall terminate upon termination of Executive's employment with 5 5 the Company prior to a Change in Control, in which event the rights and obligations of the parties, except as otherwise expressly provided herein, shall cease. 3. Payments and Benefits Upon Termination of Employment. ----------------------------------------------------- (a) If during the Transition Period the employment of Executive shall terminate, by reason of a Qualifying Termination, then the Company shall pay to Executive (or Executive's beneficiary or estate) within five (5) days following the Date of Termination (except as provided in Section 3(a)(1)(iii)), as compensation for services rendered to the Company: (1) a lump-sum cash amount equal to the sum of (i) Executive's unpaid base salary from the Company and its subsidiaries through the Date of Termination (at the rate in effect (without taking into account any reduction of base salary constituting Good Reason) just prior to the time a Notice of Termination is given); (ii) any benefit awards (including both the cash and stock components) which pursuant to the terms of any Retirement and Savings Plans have been earned or become payable through the Date of Termination, to the extent not theretofore paid or otherwise provided for; (iii) that portion of the annual bonus under the Company's incentive compensation plans determined by multiplying the greater of the actual bonus that would otherwise have been earned for a full year performance or target annual bonus by the fraction arrived at by dividing the number of full weeks worked by Executive during the calendar year of his Date of Termination by fifty-two (52); plus (iv) any unpaid vacation under the Company's vacation policy in effect at the Date of Termination (or, if more favorable to Executive, immediately prior to a Change in Control). For purposes of Section 3(a)(1)(iii), the Company shall pay the Executive the pro-rata portion of the target annual bonus within 5 days following the Date of Termination, and any additional bonus payment to which Executive is entitled on or before January 31 of the year following the year in which the Termination occurs. (2) a lump-sum cash amount equal to (a) 2 times Executive's highest annual rate of base salary from the Company and its subsidiaries in effect during the 12-month period prior to the Date of Termination plus (b) 2 times the target annual bonus in effect for the year in which the Change in Control occurs; provided, that any amount paid pursuant to this Section 3(a)(2) shall be offset by any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any other severance plan, policy, employment agreement or arrangement of the Company. (3) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of: (i) the employer matching contributions that would be made to the Caliber System, Inc. 401(k) Savings Plan; (ii) employer contributions that would be made to the Caliber System, Inc. Stock Bonus Plan; and (iii) supplemental credits that would be awarded under the Caliber System, Inc. Long-Term Stock Award Incentive Plan. This lump sum payment shall be based on the employer contributions and supplemental credits attributable to an additional 24 months of service under the specific plans referenced in this paragraph, or any applicable amended, successor or substitute plan or plans of the Company put into effect prior to a Change in Control. For purposes of the 401(k) Savings Plan and related supplemental stock credits, the calculations shall be made based on the assumption that the Executive made maximum contributions from the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) to the 401(k) Savings Plan and that the matching percentage shall 6 6 equal the highest matching percentage allowable under the 401(k) Savings Plan as of the Date of Termination (in no event less than 3.5% of eligible compensation under the 401(k) Savings Plan). For purposes of the Stock Bonus Plan and related supplemental stock credits, the calculations shall be based on the highest annual rate of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and the formula in effect for the year in which the Date of Termination occurs (but in no event less than the average of the actual contribution/allocation percentages applicable to the 5 calendar years preceding the Date of Termination). For purposes of determining actuarial present value under this Section 3(a)(3), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (4) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits accrued under the Caliber System, Inc. 401(a)(17) Benefit Plan and Caliber System, Inc. Excess Plan based upon the mortality and interest factors in Section 3(a)(5) and upon service through the Date of Termination. For purposes of the actuarial present value calculation under this Section 3(a)(4), Executive shall be deemed fully vested for all actual service. (5) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the benefits under the Caliber System, Inc. Pension Plan and Trust, Caliber System, Inc. 401(a)(17) Benefit Plan, and Caliber System, Inc. Excess Plan based upon an additional 24 months of age, service, and base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b) above. For purposes of this Section 3(a)(5), the additional 24 months of base salary and target annual bonus under 3(a)(2)(a) and 3(a)(2)(b), and any portion of the annual bonus under 3(a)(1)(iii) paid in the calendar year following the Date of Termination, shall be included as the final two years of pensionable wages. For purposes of determining actuarial present value under this Section 3(a)(5), the 1983 Group Mortality Table (assuming a blend of 50 percent of male mortality rates and 50 percent female mortality rates) shall be utilized. For purposes of determining actuarial present value under this Section 3(a)(5), the interest rate on 30-year Treasury securities for the month of November preceding the calendar year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (b) If during the Transition Period, the employment of Executive terminates by reason of a Qualifying Termination, the Company will: (1) provide Executive and his dependents with health care coverage at the same level as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Continued Medical Coverage") for a period of 42 months from the Date of Termination; and (2) provide Executive and his dependents with accident, disability and life coverage at the same level and upon the same terms and otherwise to the same extent as that in effect immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control) ("Welfare Benefits") for a period of 24 months from the Date of Termination. 7 7 (3) The coverages described in subparagraphs (1) and (2) of this Section may be provided through continued participation in the Company's plans and programs or otherwise, as the Company determines. (4) During the first twenty four (24) months of Continued Medical Coverage, the Company and Executive will share the costs of such coverage in the same proportion as such costs were shared immediately prior to the Date of Termination (or, if more favorable to Executive, immediately prior to the Change in Control). From the twenty-fifth (25th) through the end of the of the forty-second (42nd) month of Continued Medical Coverage, Executive will be required to pay the cost of such coverage at the rate the Company charges former employees, from time to time, for similar coverage under COBRA. The Company and Executive will share the costs of providing the Welfare Benefits in the same proportion as such costs were shared immediately prior to the Date of Termination (or, of more favorable to Executive, immediately prior to the Change in Control). (5) Continued Medical Coverage will terminate upon the earliest of (i) the expiration of 42 months from the Date of Termination, (ii) the commencement date of equivalent benefits from a new employer, or (iii) Executive's attainment of age 65. Welfare Benefits will terminate upon the earliest of (i) the expiration of 24 months from the Date of Termination, (ii) the commencement date of equivalent benefits a new employer, or (iii) Executive's attainment of age 65. Upon termination of Continued Medical Coverage, Executive may, if eligible, elect special continuation coverage for early retirees under the Caliber System, Inc. Medical, Dental and Vision Care Plan. Upon termination of Welfare Benefits, Executive may, if available, convert one or more of Executive's and his dependent's coverage to individual policies or programs. (c) If during the Transition Period, the employment of Executive shall terminate, by reason of a Qualifying Termination, then for a period of twelve months following the Date of Termination, the Company shall provide, at its expense, executive level outplacement assistance to the Executive by a nationally recognized outplacement firm acceptable to Executive. 4. CONSEQUENCES OF A CHANGE IN CONTROL UPON CERTAIN ENTITLEMENTS. (a) The consequences of a Change in Control on Executive's stock options and performance shares granted under the Company's 1996 Equity Incentive Compensation Plan ("EICP") shall be determined in accordance with the EICP and Executive's grants pursuant to the EICP. The consequences of a Change in Control on Executive's stock credits under any Retirement and Savings Plans shall be determined in accordance with the provisions of the applicable plans. (b) No later than the occurrence of a Change in Control, the Company shall fund in full that portion, if any, of the obligations to Executive under the Company's Retirement and Savings Plans (other than plans qualified under Section 401(a) of the Internal Revenue Code) that are then unfunded. Such funding shall be provided through an irrevocable trust for the benefit of the Executive which shall be established as promptly as possible following the Effective Date of this Agreement (or, in the case of a Retirement and Savings Plan established after such effective date, then as promptly as possible after such plan is established) for the purpose of receiving contributions from the Company to fund such obligations. To the 8 8 extent such obligations are covered by a plan other than a plan for which there is a trust already in existence, the Company shall establish a trust for the purpose of funding such obligations. Such trust shall be in a form that provides Executive with the most favorable tax position that reasonably can be determined at the time it is established. The trust shall provide for distribution of amounts to Executive in order to pay taxes, if any, that become due prior to payment of amounts pursuant to the trust. Following the occurrence of a Change in Control, the Company shall make periodic additional contributions (no less frequently than annually) to keep such trust fully funded. The intent is that no later than the Change in Control and annually thereafter (the "Applicable Dates") the amount of such fund shall equal at least the then present value (determined as of each Applicable Date) of any amounts subject to the funding requirement of this Section 4(b) as determined by a nationally recognized firm qualified to provide actuarial services. The establishment and funding of any such trust shall not affect the obligation of the Company to provide the benefits being funded. The trust may be terminated in accordance with the trust agreement between the Company and the trustee and, if so terminated, the Company shall not be required to establish a successor trust under this Section 4(b). The trust described in this Section 4(b) may be part of a trust funding similar obligations for other employees of the Company. (c) No later than the occurrence of a Change in Control, the Company shall fund its obligations to provide payments and benefits under this Agreement (other than the obligations which are provided for in Section 4(b)) by the establishment of a trust to which it contributes an amount sufficient to meet such obligations. The establishment and funding of such trust shall not affect the obligations of the Company to provide the benefits subject to this Section 4(c). The trust described in this Section 4(c) may be part of the trust described in Section 4(b). (d) The consequences of a Change in Control upon compensation and benefit plans and programs of the Company, except as otherwise provided in this Agreement, shall be determined in accordance with such plans and programs. 5. Parachute Payment Limitations. ------------------------------ Anything in this Agreement to the contrary, if the aggregate of the amounts due the Executive under this Agreement and any other plan or program of the Company constitutes a "Parachute Payment," as such term is defined in Section 280G of the Internal Revenue Code of 1986 (the "Code"), and the amount of the Parachute Payment, reduced by all Federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount the Executive would receive, after taxes, if he received a Parachute Payment equal to only three times his Base Amount, as defined in Section 280G(b)(3) of the Code, less $1.00, then the amounts due the Executive under this Agreement that are "contingent on a Change in Control" (as defined in the next sentence) shall be reduced so that the aggregate of (i) the amounts due the Executive under this Agreement that are "contingent on a Change in Control" plus 9 9 (ii) the other amounts due the Executive, under other plans and programs of the Company, that are "contingent on a Change in Control" equals three times his Base Amount less $1.00. For purposes of the preceding sentence "contingent on a Change in Control" shall have the same meaning as given that term in Section 280G(b)(2)(A)(i) of the Code. The determinations to be made with respect to this paragraph shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of being requested to do so by the Company or Executive. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. 6. Confidentiality. ---------------- (a) During employment and thereafter, Executive shall keep confidential all "Confidential Information" relating to the Company or any of its subsidiaries, and their respective businesses, obtained by Executive during his employment by the Company or any of its subsidiaries. "Confidential Information" means any non-public, proprietary information that may provide the Company with a competitive advantage, including, without limitation, any trade secrets, formulas, flow charts, computer programs, access codes or other systems information, business, product or marketing plans, sales and other forecasts, financial information, customer lists, and information relating to compensation and benefits, provided that such proprietary information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of Executive's breach of this Section 6(a). Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, videotapes, audiotapes, and oral communications. Anything herein to the contrary notwithstanding, it shall not be a violation of this Section 6(a) for the Executive to disclose information in the ordinary course of properly carrying out his duties and responsibilities on behalf of the Company or to respond to an order of a court or other body having jurisdiction provided that he gives the Company notice of any such order. (b) Except as expressly provided herein, promptly following Executive's termination of employment, Executive shall return to the Company all property of the Company then in Executive's possession or under his control, except that Executive may retain his personal notes, diaries, Rolodexes, calendars and correspondence. (c) Executive agrees that any material breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law. Executive further agrees that in the event of said material breach or any reasonable threat of material breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such material breach or threatened material breach. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages. Should a court or arbitrator determine that any provision of this 10 10 Section 6 is unreasonable, the parties agree that such provision shall be interpreted and enforced to the maximum extent such court or arbitrator deems reasonable. (d) The provisions of this Section shall survive any termination of this Agreement and the Transition Period, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section. 7. Indemnification. ---------------- The Company agrees that if Executive is made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company, Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's Second Amended Articles of Incorporation, Restated Amended Code of Regulations, Indemnification Agreement between Executive and the Company or, if greater, by the laws of the State of Ohio, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering Executive to the extent the Company provides such coverage for its other executive officers. 8. Withholding Taxes. ------------------ The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. 9. Reimbursement of Expenses. -------------------------- If any contest or dispute shall arise under this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute regardless of the result thereof. 10. Scope of Agreement. ------------------- Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its subsidiaries. 11. Successors; Binding Agreement. ------------------------------ (a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this 11 11 Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. (b) The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in paragraph (a) of this Section 11, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. (c) (i) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or in connection with the sale or liquidation of all or substantially all of the assets of the Company, or in connection with the disposition of the business of the Company substantially as an entirety, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. (ii) This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate. 12. Notice. ------- (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows: If to Executive: [Executive's Name and Address] If to the Company: General Counsel Caliber System, Inc. P.O. Box 5459 Akron, OH 44334-0459 or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12 12 (b) A written notice (a "Notice of Termination") of Executive's Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) specify the termination date. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. 13. No Set-off; No Mitigation. -------------------------- The Company's obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. 14. Employment with Subsidiaries. ----------------------------- Employment with the Company for purposes of this Agreement shall include employment with any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors. 15. Governing Law; Validity. ------------------------ The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect. 16. Settlement of Disputes. ----------------------- (a) Any controversy or claim arising out of or relating to this Agreement, any amendment of this Agreement, or any breach of any of the foregoing, shall, subject to the mutual agreement of the Company and the Executive, be settled by confidential arbitration, to be held in Akron, Ohio, in accordance with the Commercial Arbitration Rules of the American Arbitration Association before three (3) arbitrators. The arbitrators shall apply the provisions of this Agreement strictly as written (unless doing so violates the clear intent of this Agreement), and shall explain the reasons and basis of their award in detail and in writing. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All costs and expenses relating to any controversy or claim that is arbitrable under this Section (including reasonable attorney's fees of the Executive) shall be paid by the Company promptly on written demand, except that the arbitrators are authorized to require 13 13 reimbursement of the Company for moneys paid by it pursuant to this sentence if the arbitrators determine that the substantive positions of the Executive in the arbitration were entirely without merit. Pending final resolution of any arbitration or court proceeding, the Company shall continue prompt payment of all amounts due the Executive under this Agreement or any amendment thereof and prompt provision of all benefits to which the Executive or his beneficiaries are entitled. Notwithstanding the foregoing, nothing contained in this Section 16 shall limit a party's right to seek equitable relief in any court of competent jurisdiction. (b) In the event the parties do not agree to arbitration as provided in 16(a), the parties hereby consent to the jurisdiction of the Common Pleas Court of the State of Ohio (Summit County) or of the United States District Court for the Northern District of Ohio. 17. Counterparts. ------------- This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 18. Survivorship. ------------- The respective rights and obligations of the parties hereunder shall survive the expiration of the term of this Agreement, to the extent necessary to carry out the intentions of the parties, including without limitation any obligations of the Company to make payments and provide benefits hereunder. 19. Miscellaneous. -------------- No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of the Company. No provision of this Agreement may be waived unless such waiver is agreed to in writing and signed by the waiving party which, in the case of the Company, shall mean by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. This Agreement contains the entire understanding and agreement between the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto. 14 14 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company. Executive has executed this Agreement as of the date and year first written above. CALIBER SYSTEM, INC. By: ------------------------------ Agreed to this ____ day of _______________, 1997. - -------------------------- [Executive's Name] EX-10.7 8 EXHIBIT 10.7 1 EXHIBIT 10.7 AMENDMENT TO THIRD AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (SPECIFIC TO CERTAIN TIER 2 OFFICERS) This Amendment to the Third Amended and Restated Management Retention Agreement between Caliber System, Inc. (the "Company") and X (the "Executive") is entered into this 4th day of October, 1997. WHEREAS, the Company and the Executive entered into a Third Amended and Restated Management Retention Agreement on August 28, 1997 (the "Agreement"); WHEREAS, the Company desires to amend the Agreement; and WHEREAS, the Executive agrees to amend the Agreement. NOW THEREFORE, the Company and the Executive agree as follows: Section 3(a)(4) of the Agreement is deleted in its entirety and Section 3(a)(5) is redesignated as Section 3(a)(4). IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by a duly authorized officer of the Company. Executive has executed this Amendment as of the date and year first written above. CALIBER SYSTEM, INC. By: ----------------------------- Agreed to this 4th day of October, 1997. - --------------------------- [Executive's Name] EX-27 9 EXHIBIT 27
5 1,000 3-MOS DEC-31-1997 JUN-22-1997 SEP-13-1997 20,307 0 320,427 37,996 0 458,762 1,499,613 753,351 1,258,334 465,521 200,000 39,898 0 0 479,589 1,258,334 0 592,488 0 534,066 0 0 0 55,383 22,934 32,449 0 0 0 32,449 0.83 0.83
-----END PRIVACY-ENHANCED MESSAGE-----