1
Exhibit (10)
Executive Officers'
------------------
Agreements
----------
2
Exhibit 10.01
EMPLOYMENT AGREEMENT
AGREEMENT, made this 20th day of March, 1996, by and between
YELLOW CORPORATION, a Delaware corporation ("Yellow"), and A. XXXXXXX XXXXX
(the "Executive").
W I T N E S S E T H
WHEREAS, the Board of Directors of Yellow has approved the
employment of the Executive on the terms and conditions set forth in this
Agreement; and
WHEREAS, the Executive is willing, for the consideration
provided, to enter into employment with Yellow on the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound,
agree as follows:
1. Employment. Yellow hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, upon the terms
and conditions set forth in this Agreement.
2. Term. The term of this Agreement shall be the period
commencing on the date hereof (the "Effective Date") and ending on date of
termination of the Executive's employment
19
3
determined pursuant to Section 5, 6 or 7, whichever shall be applicable.
3. Position and Duties. The Executive shall serve as
President and Chief Executive Officer of Yellow effective as of the Effective
Date, and shall have such responsibilities and authority as commensurate with
such offices and as may from time to time be prescribed by or pursuant to
Yellow's By-laws. The Executive shall devote substantially all of his working
time and efforts to the business and affairs of the Company, provided, however,
that the Executive may, with prior approval of Yellow's Board of Directors,
(a) serve on corporate, civic or charitable boards or committees, and (b)
deliver lectures, fulfill speaking engagements or teach at educational
institutions, and the Executive may manage his personal investments, so long
as such activities do not interfere materially with his responsibilities under
this Agreement. The Executive shall be a member of the Board of Directors of
Yellow effective as of the Effective Date.
4. Compensation.
During the period of the Executive's employment, Yellow shall
provide the Executive with the following compensation and other benefits:
20
4
(a) Base Salary. Yellow shall pay to the Executive base
salary at the initial rate of $550,000 per annum, which shall be payable in
accordance with the standard payroll practices of Yellow. Such base salary
rate shall be reviewed annually in accordance with Yellow's normal policies
beginning in calendar year 1997; provided, however, that at no time during the
term of this Agreement shall the Executive's base salary be decreased from the
rate then in effect except (i) in connection with across-the-board reductions
similarly affecting substantially all senior executives of Yellow or (ii) with
the written consent of the Executive.
(b) Bonus. The Executive shall participate in a bonus
program maintained by Yellow pursuant to which a target award in the amount of
60% of the Executive's base salary with a maximum of 100% of base salary shall
be established for the Executive in respect of each fiscal year of Yellow
commencing with 1996, provided that payment under such award shall be
conditioned upon satisfaction of the target. The criteria
for establishment of the target and the parameters for payments at, above or
below the target shall be determined annually by the Compensation Committee of
the Board of Directors of Yellow. The Compensation Committee shall consult with
the Executive prior to establishing the target. At least 80% of the criteria
21
5
established by the Compensation Committee which would result in a payment of
60% of base salary to the Executive shall be based on specific measurements of
financial performance of Yellow during the applicable fiscal year and the
remaining percentage may be based on non-financial criteria.
(c) Stock Options. Simultaneously with the execution of this
Agreement, Yellow has granted to the Executive, effective as of the Effective
Date, an option to purchase 400,000 shares of Common Stock of Yellow with an
option term of ten years and an option price per share equal to the closing
price of a share of Common Stock of Yellow as reported on the NASDAQ National
Market System on the day before the date of release of the public announcement
of the Executive's election as Chief Executive Officer of Yellow (if such
stock traded on that date or, if not, on the next preceding date on which such
stock traded); provided, however, that such option shall vest and become
exercisable at the rate of (i) 50% on the first anniversary of the Effective
Date; (ii) 25% on the second anniversary of the Effective Date; and (iii) 25%
on the third anniversary of the Effective Date. On the first anniversary of
the Effective Date, the Executive shall be granted an option to purchase
170,000 shares of Common Stock of Yellow with an option term of ten years and
an option price per share equal to
22
6
the closing price of a share of Common Stock of Yellow as reported on the
NASDAQ National Market System on the date of grant (if such stock traded on
that date or, if not, on the next preceding date on which such stock traded);
provided, however, that such option shall vest and become exercisable at the
rate of (i) 50% on the first anniversary of the date of grant, (ii) 25% on the
second anniversary of the date of grant, and (iii) 25% on the third anniversary
of the date of grant. With respect to succeeding years, the Compensation
Committee of the Board of Directors of Yellow shall determine the number of
stock options, if any, to be granted to the Executive and the
terms and conditions of any such options.
(d) Supplemental Retirement Benefits. Yellow shall enter
into a supplemental retirement benefit agreement with the Executive pursuant to
which the Executive shall receive from Yellow upon his termination of
employment with Yellow (and subject to the vesting provision hereinafter set
forth), the difference between (i) the benefits that he would have received
under the Yellow Freight Office, Clerical, Sales and Supervisory Personnel
Pension Plan (the "Pension Plan") if the service credited for benefit accrual
purposes under the Pension Plan were 20 years plus his actual such service, if
any, after his Normal Retirement Date (as defined under the Pension Plan)
23
7
credited under the Pension Plan and (ii) the benefits actually payable
to the Executive under the Pension Plan. The Executive shall vest in the
supplemental retirement benefit described in this subsection (d) at the rate of
20% per year commencing on the first anniversary of the Effective Date (so
that he would become 100% vested on the fifth anniversary of the Effective
Date), provided, however, that the Executive shall forfeit any unvested
portion in the event of the termination of his employment prior to becoming
100% vested. Notwithstanding the foregoing, the Executive shall immediately
become 100% vested in the event of the termination of his employment under
circumstances entitling the Executive to benefits pursuant to Section 8. The
supplemental retirement benefit described in this subsection (d) shall be
payable monthly commencing as of the last day of the month following the month
of termination of the Executive's employment and shall continue until the
Executive's death. Upon the Executive's death, if he is survived by and still
married to the person who was his spouse on the Effective Date, the same
monthly supplemental retirement benefit shall continue to said surviving
spouse until her death. If the Executive at the time of his death is either
not survived by or not married to the person who was his spouse on the
24
8
Effective Date, no further supplemental retirement benefits shall be payable
under this subsection (d) following his death.
(e) Other Benefits. In addition to the compensation and
benefits otherwise specified in this Agreement, the Executive (and, if provided
for under the applicable plan or program, his spouse) shall be entitled to
participate in, and to receive benefits under, Yellow's employee benefit plans
and programs that are or may be available to senior executives generally and
on terms and conditions that are no less favorable than those generally
applicable to other senior executives of Yellow. At no time during the term of
this Agreement shall the Executive's participation in or benefits received
under such plans and programs be decreased except (i) in connection with
across-the-board reductions similarly affecting substantially all senior
executives of Yellow or (ii) with the written consent of the Executive. The
Executive shall be treated as having satisfied any otherwise applicable waiting
period requirement for coverage under Yellow's disability insurance plan,
effective as of the Effective Date. For the three-month period beginning on
the Effective Date (the normal waiting period under Yellow's health insurance
program), Yellow shall reimburse the Executive for any medical payments on
behalf of himself and his spouse that would otherwise be covered under
25
9
Yellow's health insurance program. In addition, Yellow shall pay to
the Executive an additional amount (the "Gross-Up Reimbursement Payment") such
that the net amount retained by the Executive from the amount reimbursed
pursuant to the preceding sentence of this subsection (e) (the "Medical
Reimbursement") and the Gross-Up Reimbursement Payment, after reduction for any
Federal, state and local income and employment tax on the Medical
Reimbursement and the Gross-Up Reimbursement Payment, shall be equal to the
Medical Reimbursement. For purposes of determining the Gross-Up Reimbursement
Payment, the Executive shall be deemed to pay Federal income taxes at the
highest marginal rate of Federal income taxation in the calendar year in which
the Gross-Up Reimbursement Payment is to be made and state and local income
taxes at the highest marginal rate of taxation to which such payment could be
subject based upon the state and locality of the Executive's residence or
employment, net of the maximum deduction in Federal income taxes which could be
obtained from deduction of such state and local taxes. In addition, for
purposes of determining the amount of the Gross-Up Reimbursement Payment,
Yellow shall make a determination of the amount of any employment taxes
required on the Gross-Up Reimbursement Payment.
26
10
(f) Expenses. The Executive shall be entitled to prompt
reimbursement of all reasonable expenses incurred by him in performing services
hereunder, provided he properly accounts therefore in accordance with Yellow's
policies.
(g) Office and Services Furnished. Yellow shall furnish
the Executive with office space, secretarial assistance and such other
facilities and services as shall be suitable to the Executive's position and
adequate for the performance of his duties hereunder.
5. Termination of Employment by Yellow.
(a) Cause. Yellow may terminate the Executive's
employment for Cause if the Executive willfully engages in conduct which is
materially and demonstrably injurious to Yellow or if the Executive willfully
engages in an act or acts of dishonesty resulting in material personal gain to
the Executive at the expense of Yellow. Yellow shall exercise its right to
terminate the Executive's employment for Cause by (i) giving him written notice
of termination at least 30 days before the date of such termination specifying
in reasonable detail the circumstances constituting such Cause; and (ii)
delivering to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership
27
11
of the Board of Directors (except the Executive), after reasonable
notice to the Executive and an opportunity for the Executive and his counsel to
be heard before the Board of Directors, finding that the Executive has engaged
in the conduct set forth in this subsection (a). In the event of such
termination of the Executive's employment for Cause, the Executive shall be
entitled to receive (i) his base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned pursuant to this
Agreement or any benefit plan or program of Yellow as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits and (ii) any amounts owing under Section 4(f). In addition, in the
event of such termination of the Executive's employment for Cause, all
outstanding options held by the Executive at the effective date of such
termination which had not already been exercised shall be forfeited. Except as
provided in Section 9, the Executive shall receive no other compensation or
benefits from Yellow.
(b) Disability. If the Executive incurs a Permanent and Total
Disability, as defined below, Yellow may terminate the Executive's employment
by giving him written notice of termination at least 30 days before the date of
such termination. In the event of such termination of the Executive's
employment
28
12
because of Permanent and Total Disability, (i) the Executive shall be
entitled to receive his base salary pursuant to Section 4(a) and any other
compensation and benefits to the extent actually earned by the Executive
pursuant to this Agreement or any benefit plan or program of Yellow as of the
date of such termination of employment at the normal time for payment of such
salary, compensation or benefits, and any amounts owing under Section 4(f),
and (ii) all outstanding stock options held by the Executive at the time of
his termination of employment shall become immediately exercisable at that
time, and the Executive shall have one year from the date of such termination
of employment to exercise any or all of such outstanding options (but not
beyond the term of such option). For purposes of this Agreement, the
Executive shall be considered to have incurred a Permanent and Total Disability
if he is unable to engage in any substantial gainful employment by reason of
any materially determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. The existence of such Permanent
and Total Disability shall be evidenced by such medical certification as the
Secretary of Yellow shall require and shall be subject to the
29
13
approval of the Compensation Committee or the Board of Directors of Yellow.
(c) Without Cause. Yellow may terminate the Executive's
employment at any time and for any reason, other than for Cause or because of
Permanent and Total Disability, by giving him a written notice of termination
to that effect at least 30 days before the date of termination. In the event
of such termination of the Executive's employment without Cause, the Executive
shall be entitled to the benefits described in Section 8.
6. Termination of Employment by the Executive.
(a) Good Reason. The Executive may terminate his
employment for Good Reason by giving Yellow a written notice of termination at
least 30 days before the date of such termination specifying in reasonable
detail the circumstances constituting such Good Reason. In the event of the
Executive's termination of his employment for Good Reason, the Executive shall
be entitled to the benefits described in Section 8. For purposes of this
Agreement, Good Reason shall mean the failure of Yellow in any material way
either (i) to pay or provide to the Executive the compensation and benefits
that he is entitled to receive pursuant to this Agreement by the later of (A)
60 days
30
14
after the applicable due date or (B) 30 days after the Executive's
written demand for payment, or (ii) to maintain the titles, positions and
duties of the Executive commensurate with those titles and positions and as
required by this Agreement except with the Executive's written consent.
(b) Following Change of Control. The Executive may
terminate his employment at any time within the three-month period
which begins six months after a Change of Control of the Company by giving
Yellow a written notice of such termination at least 30 days before the date
of termination. In the event of the Executive's termination of employment
within such three-month period, the Executive shall be entitled to the
benefits described in Section 8. For purposes of this Agreement, a Change of
Control of Yellow shall be deemed to have taken place if: (i) a third person,
including a "group " as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, purchases or otherwise acquires shares of Yellow after the date
hereof and as a result thereof becomes the beneficial owner of shares of Yellow
having 20% or more of the total number of votes that may be cast for the
election of directors of Yellow; or (ii) as the result of, or in connection
with any cash tender or exchange offer, merger or other Business Combination,
or contested election, or any combination of the foregoing
31
15
transactions, the Continuing Directors shall cease to constitute a
majority of the Board of Directors of Yellow or any successor to Yellow. For
this purpose, (i) Business Combination means any transaction which is referred
to in any one or more of clauses (a) through (e) of Section 1 of Subparagraph A
of Article Seventh of the Certificate of Incorporation of Yellow, and (ii)
Continuing Director means a director of Yellow who meets the definition of
Continuing Director contained in Section 7 of Subparagraph C of Article Seventh
of the Certificate of Incorporation of Yellow.
(c) Other. The Executive may terminate his employment at
any time and for any reason, other than pursuant to subsection (a) or (b)
above, by giving Yellow a written notice of termination to that effect at least
30 days before the date of termination. In the event of the Executive's
termination of his employment pursuant to this subsection (c), the Executive
shall be entitled to receive (i) his base salary pursuant to Section 4(a) and
any other compensation and benefits to the extent actually earned by the
Executive pursuant to this Agreement or any benefit plan or program of Yellow
as of the date of such termination at the normal time for payment of such
salary, compensation or benefits, and (ii) any amounts owing under Section
4(f). In addition, in the event of the Executive's
32
16
termination of his employment pursuant to this subsection (c), (i) all
outstanding options held by the Executive at the time of such termination which
had not already become exercisable shall be forfeited, and (ii) all outstanding
options held by the Executive at the time of such termination which had already
become exercisable shall expire 90 days after he date of such termination (or,
if earlier, upon the expiration of the term of the option). Except as provided
in Section 9, the Executive shall receive no other compensation or benefits
from Yellow.
7. Termination of Employment By Death. In the
event of the death of the Executive during the course of his
employment hereunder, (i) the Executive's estate shall be entitled to receive
his base salary pursuant to Section 4(a) and any other compensation and
benefits to the extent actually earned by the Executive pursuant to this
Agreement or any other benefit plan or program of Yellow as of the date of such
termination at the normal time for payment of such salary, compensation or
benefits, and any amounts owing under Section 4(f), (ii) any death benefit due
under the Pension Plan and under Section 4(d) upon the Executive's death shall
be paid to the Executive's beneficiary under the applicable plan, and (iii) all
outstanding stock options held by the Executive at the time of his death shall
become immediately exercisable upon
33
17
his death, and the Executive's spouse or, if predeceased, the
Executive's estate, shall have one year from the date of his death to exercise
any or all of such outstanding options (but not beyond the term of such
option).
8. Benefits Upon Termination Without Cause, For Good
Reason, or Following Change of Control. If the Executive's employment
with Yellow shall terminate (i) because of termination by Yellow pursuant to
Section 5(c) other than for Cause or because of Permanent and Total Disability,
(ii) because of termination by the Executive for Good Reason pursuant to
Section 6(a), or (iii) because of termination by the Executive within the
three-month period which begins six months after a Change of Control of Yellow
pursuant to Section 6(b), the Executive shall be entitled to the following:
(a) Yellow shall pay to the Executive his base salary
pursuant to Section 4(a) and any other compensation and benefits to the
extent actually earned by the Executive under this Agreement or any benefit
plan or program of Yellow as of the date of such termination at the normal
time for payment of such salary, compensation or benefits.
(b) Yellow shall pay the Executive any amounts owing under
Section 4(f).
34
18
(c) Yellow shall pay to the Executive as a severance
benefit an amount equal to twice the sum of (i) his annual rate of base salary
immediately preceding his termination of employment, and (ii) the target bonus
payable pursuant to subsection (d) below. Such severance benefit shall be paid
in a lump sum within 30 days after the date of such termination of employment.
(d) Yellow shall pay to the Executive his target bonus
under Yellow's target bonus plan for the fiscal year in which his termination
of employment occurs as if the target had been exactly met. Such payment shall
be made in a lump sum within 30 days after the date of such termination of
employment, and the Executive shall have no right to any further bonuses under
said program.
(e) The Executive shall become 100% vested in all
benefits accrued to the date of termination of his employment but not
previously paid under the Pension Plan, the supplemental retirement benefit
pursuant to Section 4(d), and Yellow's qualified and nonqualified defined
contribution plans. Payment of benefits under such plans shall be made at the
time and in the manner determined under the applicable plan.
35
19
(f) During the period of 24 months beginning on the date
of the Executive's termination of employment, the Executive (and, if
applicable under the applicable plan or program, his spouse) shall remain
covered by the employee benefit plans and programs that covered him immediately
prior to his termination of employment as if he had remained in employment
for such period, provided, however, that there shall be excluded for this
purpose any plan or program providing payment for time not worked (including
without limitation holiday, vacation, and long- and short-term disability). In
the event that the Executive's participation in any such employee benefit plan
or program is barred, Yellow shall arrange to provide the Executive with
substantially similar benefits. Any medical insurance coverage for such
two-year period pursuant to this subsection (f) shall become secondary upon the
earlier of (i) the date on which the Executive begins to be covered by
comparable medical coverage provided by a new employer, or (ii) the earliest
date upon which the Executive becomes eligible for Medicare or a comparable
Government insurance program.
(g) All outstanding stock options held by the Executive
at the time of termination of his employment shall become fully
exercisable upon such termination of employment and may be exercised for the
balance of the term of such option.
36
20
(h) If any payment or benefit received by or in respect
of the Executive under this Agreement or any other plan, arrangement or
agreement with Yellow (determined without regard to any additional payments
required under this subsection (h) and Appendix A of this Agreement) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that
may hereafter be imposed) or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,together with any
such interest and penalties, being hereinafter collectively referred to as the
"Excise Tax"), Yellow shall pay to the Executive with respect to such Payment
at the time specified in Appendix A an additional amount (the "Gross-up
Payment") such that the net amount retained by the Executive from the Payment
and the Gross-up Payment, after reduction for any Excise Tax upon the payment
and any Federal, state and local income and employment tax and Excise Tax upon
the Gross-up Payment, shall be equal to the Payment. The calculation and
payment of the Gross-up Payment shall be subject to the provisions of Appendix
A.
9. Entitlement To Other Benefits. Except as provided in
this Agreement, this Agreement shall not be construed
37
21
as limiting in any way any rights or benefits that the Executive may have
pursuant to any other plan or program of Yellow.
10. Relocation Benefits. Yellow shall pay all reasonable
costs of relocation of the Executive and his family to the Kansas City
area, provided, however, that Yellow shall pay for temporary housing up to a
maximum of $3,500 per month until the earlier of (i) the Executive's permanent
relocation to the Kansas City area or (ii) the sale of the Executive's current
residence in Phoenix. In addition, Yellow shall pay to the Executive an
additional amount (the "Gross-Up Relocation Payment") such that the net amount
retained by the Executive from the amount payable pursuant to this Section 10
determined without regard to this sentence (the "Relocation Payment") and the
Gross-Up Relocation Payment, after reduction for any Federal, state and local
income and employment tax on the Relocation Payment and the Gross-Up Relocation
Payment, shall be equal to the Relocation Payment. For purposes of determining
the Gross-Up Relocation Payment, the Executive shall be deemed to pay Federal
income taxes at the highest marginal rate of Federal income taxation in the
calendar year in which the Gross-Up Relocation Payment is to be made and state
and local income taxes at the highest marginal rate of taxation to which such
payment could be subject based upon the state and locality of
38
22
the Executive's residence or employment, net of the maximum reduction
in Federal income taxes which could be obtained from deduction of such state
and local taxes. In addition, for purposes of determining the amount of the
Gross-Up Relocation Payment, Yellow shall make a determination of the amount of
any employment taxes required to be paid on the Gross-Up Relocation Payment.
11. Legal Expenses of Preparing this Agreement. Yellow
shall pay all of the Executive's reasonable attorneys' fees and related
expenses involved in the negotiation and preparation of this Agreement.
12. Arbitration.
(a) Arbitration of Disputes. Any dispute between the
parties hereto arising out of, in connection with, or relating to this
Agreement or the breach thereof shall be settled by arbitration in Overland
Park, Kansas, in accordance with the rules then in effect of the American
Arbitration Association ("AAA"). Arbitration shall be the exclusive remedy for
any such dispute except only as to failure to abide by an arbitration award
rendered hereunder. Regardless of whether or not both parties hereto
participate in the arbitration proceeding, any arbitration award rendered
hereunder shall be final and
39
23
binding on each party hereto and judgment upon the award rendered may be
entered in any court having jurisdiction thereof.
The party seeking arbitration shall notify the other party in
writing and request the AAA to submit a list of 5 or 7 potential
arbitrators. In the event the parties do not agree upon an arbitrator, each
party shall, in turn, strike one arbitrator from the list, Yellow having the
first strike, until only one arbitrator remains, who shall arbitrate the
dispute. The parties shall have the opportunity to conduct reasonable
discovery as determined by the arbitrator, and the arbitration hearing shall be
conducted within 30 to 60 days of the selection of an arbitrator or at the
earliest date thereafter that the arbitrator is available or as otherwise set
by the arbitrator.
(b) Indemnification. If arbitration occurs as provided
for herein and the Executive is awarded more than Yellow has asserted
is due him or otherwise substantially prevails therein, Yellow shall reimburse
the Executive for his reasonable attorneys' fees, costs and disbursements
incurred in such arbitration and hereby agrees to pay interest on any money
award obtained by the Executive from the date payment should have been made
until the date payment is made, calculated at
40
24
the prime interest rate of Boatmen's First National Bank of Kansas
City, N.A., Kansas City, Missouri, in effect from time to time from the date
that payment(s) to him should have been made under this Agreement. If the
Executive enforces the arbitration award in court, Yellow shall reimburse the
Executive for his reasonable attorneys' fees, costs and disbursements incurred
in such enforcement.
13. Confidential Information. The Executive shall retain
in confidence any confidential information known to him concerning
Yellow, its subsidiaries, and their respective businesses until such
information is publicly disclosed. This provision shall survive the
termination of the Executive's employment for any reason under this Agreement.
14. Indemnification under Bylaws. Yellow shall provide
the Executive with rights to indemnification by Yellow that are no less
favorable to the Executive than those set forth in Article V of Yellow's
Bylaws as in effect as of the Effective Date.
15. Successors. This Agreement shall be binding upon and
inure to the benefit of the Executive and his estate and Yellow and any
successor of Yellow, but neither this
41
25
Agreement nor any rights arising hereunder may be assigned or pledged by the
Executive.
16. Severability. Any provision in this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
17. Notices. All notices required or permitted to be
given under this Agreement shall be given in writing and shall be
deemed sufficiently given if delivered by hand or mailed by registered mail,
return receipt requested, to his residence in the case of the Executive and to
its principal executive offices in the case of Yellow. Either party may by
giving written notice to the other party in accordance with this Section 17
change the address at which it is to receive notices hereunder.
18. Controlling Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws of
the State of Delaware.
42
26
19. Changes to Agreement. This Agreement may not be
changed orally but only in a writing, signed by the party against whom
enforcement is sought.
20. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed
an original but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the 20th day of March, 1996.
EXECUTIVE: YELLOW CORPORATION
_____________________________ By: ______________________
A. Xxxxxxx Xxxxx Xxxxxxx X. Xxxxxx, Xx.
ATTEST:
By: _______________________
X.X. Xxxxxxxxx
43
27
Appendix A
Gross-up Payments
The following provisions shall be applicable with respect to
the Gross-Up Payments described in Section 8(h) of this Agreement.
(a) For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Payments received or to be received shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax unless, in the opinion of
tax counsel selected by Yellow, the Payments (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, or excess parachute payments (as determined after application of
Section 280G(b)(4)(B) of the Code), and (ii) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by independent auditors
selected by Yellow in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay Federal income taxes at the
highest marginal rate of Federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation to which such payment could be subject based
upon the state and locality of the Executive's residence or employment, net of
the maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes. In addition, for purposes of
determining the amount of the Gross-Up Payment, Yellow shall make a
determination of the amount of any employment taxes required to be paid on the
Gross-Up Payment. In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the
Gross-up Payment is made, the Executive shall repay Yellow, at the time that
the amount of such reduction in Excise Tax is finally determined, the portion
of the Gross-up Payment attributable to such reduction (plus the portion of the
Gross-up Payment attributable to the Excise Tax and Federal and state and local
income and employment tax imposed on the portion of the Gross-up Payment being
repaid by the Executive if such repayment results in a reduction in
44
28
Excise Tax and/or a Federal and state and local income or employment tax
deduction), plus interest on the amount of such repayment at the Federal
short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payments the existence or amount of which cannot be determined at the time of
the Gross-up Payment), Yellow shall make an additional gross-up payment in
respect of such excess (plus any interest, penalties or additions payable with
respect to such excess) at the time that the amount of such excess is finally
determined. Notwithstanding the foregoing, Yellow shall withhold from any
payment due to the Executive the amount required by law to be so withheld under
Federal, state or local wage or employment tax withholding requirements or
otherwise (including without limitation Section 4999 of the Code), and shall
pay over to the appropriate government authorities the amount so withheld.
(b) The Gross-up Payment with respect to a Payment shall
be paid not later than the thirtieth day following the date of the Payment;
provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, Yellow shall pay to
the Executive on such date an estimate, as determined in good faith by Yellow,
of the amount of such payments and shall pay the remainder of such payments
(together with interest at the Federal short-term rate provided in Section
1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by Yellow to the Executive, payable on the fifth day after demand by Yellow
(together with interest at the Federal short-term rate provided in Section
1274(d)(1)(C)(i) of the Code). At the time that payments are made under
Section 8(h) and this Appendix A, Yellow shall provide the Executive with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations, including, without limitation,
any opinions or other advice Yellow has received from outside counsel, auditors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
45
