EXHIBIT 10.1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Yellow Corporation, a Delaware corporation ("Yellow")
and [executive] (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
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 an 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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