EXHIBIT 10.1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Yellow Corporation, a Delaware corporation ("Yellow")
and Xxxxxx X. Xxxxxx (the "Executive"),
WITNESSETH:
WHEREAS, the Compensation Committee of the Board of Directors (the
"Board") of Yellow has recommended, and the Board has approved, Yellow entering
into severance agreements with key executives of Yellow and its Subsidiaries
(hereinafter sometimes collectively referred to as the "Corporation"; and
WHEREAS, the Executive is a key executive of Yellow or one of its
subsidiaries and has been selected by the Board as a key executive; and
WHEREAS, should Yellow receive any proposal from a third person
concerning a possible Business Combination with, or acquisition of equity
securities of, Yellow, the Board believes it important that the Corporation and
the Board be able to rely upon the Executive to continue in his position, and
that Yellow have the benefit of the Executive performing his duties without his
being distracted by the personal uncertainties and risks created by such a
proposal;
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
(a) "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 Corporation.
(b) "Cause" means conviction of a felony involving moral turpitude
by a court of competent jurisdiction, which is no longer
subject to direct appeal, or an adjudication by a court of
competent jurisdiction, which is no longer subject to direct
appeal, that the Executive is mentally incompetent or that he
is liable for willful misconduct in the performance of his
duty to the Corporation which is demonstrably and materially
injurious to the Corporation.
(c) "Change of Control," for the purposes of this Agreement, 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 the Corporation after the date hereof and
as a result thereof becomes the beneficial owner of shares of
the Corporation having 20% or more of the total number of
votes that may be cast for 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
transactions, the Continuing Directors shall cease to
constitute a majority of the Board of Directors of Yellow or
any successor to Yellow.
(d) "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 Corporation.
(e) "Corporation" means Yellow Corporation and its subsidiaries.
(f) "Normal Retirement Age" means the last day of the calendar
month in which the Executive's 65th birthday occurs.
(g) "Permanent Disability" means a physical or mental condition
which permanently renders the Executive incapable of
exercising the duties and responsibilities of the position he
held immediately prior to any Change of Control.
(h) "Subsidiary" means any domestic or foreign corporation, a
majority of whose shares normally entitled to vote in electing
directors is owned directly or indirectly by Yellow or by
other Subsidiaries.
2. Services During Certain Events. In the event a third person
begins a tender or exchange offer, circulates a proxy to
shareholders, or takes other steps seeking to effect a Change
of Control (as herein defined), the Executive agrees that he
will not voluntarily leave the employ of the Corporation
without the consent of the Corporation, and will render the
services contemplated in the recitals to this Agreement, until
the third person has abandoned or terminated his or its
efforts to effect a Change of Control or until 90 days after a
Change of Control has occurred. In the event the Executive
fails to comply with the provisions of this paragraph, the
Corporation will suffer damages which are difficult, if not
impossible, to ascertain. Accordingly, should the Executive
fail to comply with the provisions of this paragraph, the
Corporation shall retain the amounts which would otherwise be
payable to the Executive hereunder as fixed, agreed and
liquidated damages but shall have no other recourse against
the Executive.
3. Termination After Change of Control. "Termination" shall
include (a) termination by the Corporation of the employment
of the Executive with the Corporation within two years after a
Change of Control for any reason other than death, Permanent
Disability, retirement at or after his Normal Retirement Age,
or Cause or (b) resignation of the Executive after the
occurrence of any of the following events within two years
after a Change of Control of Yellow:
a) An adverse change of the Executive's title or a reduction or
adverse change in the nature or scope of the Executive's
authority or duties from those being exercised and performed
by the Executive immediately prior to the Change of Control.
b) A transfer of the Executive to a location which is more than
35 miles away from the location where the Executive was
employed immediately prior to the Change of Control.
c) Any reduction in the rate of the Executive's annual salary
below his rate of annual salary immediately prior to the
Change of Control.
d) Any reduction in the level of the Executive's fringe benefits
or bonus below a level consistent with the Corporation's
practice prior to the Change of Control.
4. Termination of Payments. In the event of a Termination, as
defined in Paragraph 3, Yellow shall provide to the Executive
the following benefits:
a) Yellow shall pay to the Executive on or before the Executive's
last day of employment with the Corporation, as additional
compensation for services
rendered to the Corporation, a lump sum cash amount (subject
to the minimum applicable federal, state or local lump sum
withholding requirements, if any, unless the Executive
requests that a greater amount be withheld) equal to two times
the highest base salary and bonuses paid or payable to the
Executive by the Corporation with respect to any 12
consecutive month period during the three years ending with
the date of the Executive's Termination. In the event there
are fewer than 120 whole or partial months remaining from the
date of the Executive's Termination to his Normal Retirement
Age, the Executive shall be paid three times such highest base
salary and bonuses.
b) During the "Applicable Period" (as hereinafter defined),
following the Executive's Termination, the Executive shall be
deemed to remain an employee of the Corporation for purposes
of the applicable medical, life insurance and long-term
disability plans and programs covering key executives of the
Corporation and shall be entitled to receive the benefits
available to key executives thereunder, provided, however,
that in the event the Executive's participation in any such
employee benefit plan or program is barred, the Corporation
shall arrange to provide the Executive with substantially
similar benefits. For purposes of this Agreement, the
"Applicable Period" shall mean (i) if there are fewer than 120
whole or partial months remaining from the date of the
Executive's Termination to his Normal Retirement Date, three
years, or (ii) if subclause (i) above is not applicable, two
years.
c) The Executive shall be entitled to the Gross-Up Payment, if
any, described in Paragraph 6.
5. Stock-Out of Options. In the event of a Change of Control, the
Executive shall receive in exchange for his non-qualified
stock options and incentive stock options granted by the
Corporation which are outstanding on the date of the Change of
Control, common stock of Yellow (or, if Yellow or its
successor becomes a subsidiary of another company, common
stock of such other company) having a fair market value equal
to the fair market value of such stock options on the
effective date of the Change of Control (such value to be
determined by an independent accounting firm retained by
Yellow using a Black-Scholes based pricing formula without
giving consideration to the lack of transferability and the
risk of forfeiture). Such options shall thereupon terminate.
For as long as this Agreement shall be in effect, the
provisions of this Paragraph 5 shall be deemed to have amended
the terms of any and all existing option agreements between
the Executive and the Corporation except any option agreements
representing incentive stock options outstanding on the date
of this Agreement.
6. Additional Payments by Yellow.
a) Gross-Up Payment. In the event it shall be determined that any
payment or benefit of any type by the Corporation to or for
the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (determined without regard to any
additional payments required under this Paragraph 6) (the
"Total Payments") 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 with respect to such
excise tax (such excise tax, together with any such interest
and penalties, are collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Total Payments. Payment of
the Gross-Up Payment shall be made promptly following the
determination by the Accounting Firm as described in
subparagraph (b) of this Paragraph 6 or in accordance with
subparagraph (c) of this Paragraph 6.
b) Determination by Accountant. All determinations required to be
made under this Paragraph 6, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment,
shall be made by an independent accounting firm retained by
Yellow (the "Accounting Firm"), which shall provide detailed
supporting calculations both to Yellow and the Executive
within 15 business days of the date of Termination, if
applicable, or such earlier time as is requested by Yellow. If
the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with an
opinion that he has substantial authority not to report any
Excise Tax on his federal income tax return. Any determination
by the Accounting Firm shall be binding upon Yellow and the
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by Yellow
should have been made ("Underpayment") consistent with the
calculations required to be made hereunder. In the event that
Yellow exhausts its remedies pursuant to subparagraph (c) of
this Paragraph 6 and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by Yellow to or
for the benefit of the Executive. Yellow shall promptly pay
all expenses of the Accounting Firm pursuant to this Paragraph
6.
c) Notification Required. The Executive shall notify Yellow in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by Yellow of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive knows of such claim and shall apprise Yellow of the
nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the thirty-day period following the
date on which it gives such notice to Yellow (or such shorter
period ending on the date that any payment of taxes with
respect to such claim is due). If Yellow notifies the
Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give Yellow any information reasonably
requested by Yellow relating to such claim,
(ii) take such action in connection with
contesting such claim as Yellow 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 Yellow,
(iii) cooperate with Yellow in good faith in order
to effectively contest such claim,
(iv) permit Yellow to participate in any
proceedings relating to such claim,
provided, however, that Yellow 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 the
Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including
interest and penalties with respect thereto,
imposed as a result of such representation
and payment of costs and expenses. Without
limitation on the foregoing provisions of
this subparagraph (c), Yellow 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 the Executive to pay
the tax claimed and xxx for a refund, or
contest the claim in any permissible manner,
and the 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 Yellow shall determine;
provided, however, that if Yellow directs
the Executive to pay such claim and xxx for
a refund, Yellow shall advance the amount of
such payment to the Executive, on an
interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income 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
further provided that any extension of the
statute of limitations relating to payment
of taxes for the taxable year of the
Executive with respect to which such
contested amount is claimed to be due is
limited solely to such contested amount.
Furthermore, Yellow's control of the contest
shall be limited to issues with respect to
which a Gross-Up Payment would be payable
hereunder and the 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) Repayment. If, after the receipt by the Executive of an amount
paid or advanced by Yellow pursuant to this Paragraph 6, the
Executive becomes
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entitled to receive any refund with respect to such claim, the
Executive shall (subject to Yellow's complying with the
requirements of this Paragraph 6), promptly pay to Yellow the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount paid or advanced by
Yellow pursuant to this Paragraph 6, a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and Yellow does not notify the Executive
in writing of its intent to contest such denial of refund
prior to the expiration of thirty days after such
determination, then such payment or advance shall be forgiven
and shall not be required to be repaid and the amount of such
payment or advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
7. General.
a) Arbitration. 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 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 on
arbitrator from the list, the Corporation having the first
strike, until only one arbitrator remains, who shall arbitrate
the dispute. The arbitration hearing shall be conducted within
30 days of the selection of an arbitrator or at the earliest
date thereafter that the arbitrator is available.
b) Indemnification. If arbitration occurs as provided for herein
and the Executive is awarded more than the Corporation has
asserted is due him or otherwise substantially prevails
therein, the Corporation 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 the prime interest rate of NationsBank, 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, the Corporation shall reimburse the Executive for his
reasonable attorneys' fees, costs and disbursements incurred
in such enforcement.
c) Payment Obligations Absolute. Yellow's obligation to pay the
Executive the compensation and to make the arrangements
provided herein shall be absolute and unconditional and shall
not be affected by any circumstance, including, without
limitation, any setoff, counterclaim, recoupment, defense or
other right which the Corporation may have against him or
anyone else, except as provided in paragraph 2 hereof. All
amounts payable by Yellow hereunder shall be paid
without notice or demand. Each and every payment made
hereunder by Yellow shall be final and Yellow will not seek to
recover all or any part of such payment from the Executive or
from whosoever may be entitled thereto, for any reason
whatsoever. The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event
affect any reduction of Yellow's obligations to make the
payments required to be made under this Agreement.
d) Continuing Obligations. The Executive shall retain in
confidence any confidential information known to him
concerning the Corporation and its respective businesses until
such information is publicly disclosed.
e) Successors. This Agreement shall be binding upon and insure to
the benefit of the Executive and his estate and the
Corporation and any successor of the Corporation, but neither
this Agreement nor any rights arising hereunder may be
assigned or pledged by the Executive.
f) 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.
g) Controlling Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the
State of Delaware.
h) Termination. This Agreement shall terminate if a majority of
the Continuing Directors determines that the Executive is no
longer a key executive and so notifies the Executive; except
that such determination shall not be made, and if made shall
have no effect, (i) within two years after the Change of
Control in question or (ii) during any period of time when
Yellow has knowledge that any third person has taken steps
reasonably calculated to effect a Change of Control until, in
the opinion of a majority of the Continuing Directors the
third person has abandoned or terminated his efforts to effect
a Change of Control. Any decision by a majority of the
Continuing Directors that the third person has abandoned or
terminated his efforts to effect a Change of Control shall be
conclusive and binding on the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_______ day of _____________, _________.
EXECUTIVE: YELLOW CORPORATION
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ATTEST:
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