EXHIBIT 10.4
SERVICES AGREEMENT
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THIS SERVICES AGREEMENT (the "Agreement") is made and entered into as of
the _______ day of August, 1998 by and between Union Pacific Corporation, a Utah
corporation ("UPC"), and Overnite Corporation, a Virginia corporation
("Overnite").
WHEREAS, Overnite intends to issue and sell or cause to be issued and sold
all of its outstanding common stock through an initial public offering (the
closing of which is hereafter referred to as the "Offering"); and
WHEREAS, immediately following the Offering, Overnite intends to purchase
all of the issued and outstanding common stock of Overnite Holding, Inc., a
Delaware corporation ("OHI"), from UPC (the "Acquisition"), with the result that
Overnite will become a publicly-owned company and OHI will become a wholly-
owned, direct subsidiary of Overnite; and
WHEREAS, Overnite Transportation Company, a Virginia corporation ("OTC"),
is a wholly-owned, direct subsidiary of OHI and immediately following the
Acquisition will become a wholly-owned, indirect subsidiary of Overnite; and
WHEREAS, UPC has historically provided to its subsidiaries, including OHI
and OTC, certain corporate and administrative services more particularly
described hereinafter; and
WHEREAS, UPC and Overnite desire that UPC continue to provide such services
following the Offering and Acquisition pursuant to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. Services. Following the Offering and Acquisition, UPC will provide or
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cause to be provided to Overnite and its subsidiaries , those corporate and
administrative services described in Exhibit A hereto (the "Services"). The
scope of the Services shall be adjusted by the parties as needed to conform to
good business practice and the requirements of applicable laws, regulations and
tariffs, and as otherwise agreed to by the parties.
2. Charges for Services. (a) In consideration for the Services provided
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or caused to be provided, Overnite agrees to pay the following charges to UPC:
(i) Charges for Services performed by UPC through a third party
(other than a subsidiary of UPC) shall be equal to the final invoiced costs
charged by such third party to perform those Services. With respect to all
other Services not to be provided through such a third party, UPC and
Overnite will negotiate in good faith fees to be charged on a quarterly or
one-time basis depending on the Services to be provided. Fees for Services
provided directly by UPC or a subsidiary of UPC shall, unless specifically
addressed in Exhibit A hereto, be based on the estimated costs of providing
such Services, which shall include a reasonable allocation of direct and
indirect overhead costs (including, without limitation, employee salaries,
benefits and other costs and reasonable travel and other out-of-pocket
expenses expected to be incurred in connection therewith).
(ii) So long as any Services are provided hereunder, UPC and Overnite
will review all fees negotiated hereunder and the scope of Services being
provided on a quarterly basis. If either party believes that the actual
cost of providing the Services represented by such fees will vary by at
least 10% of the then current cost of providing such Services, the parties
hereto will negotiate in good faith new fees reflecting such variation.
All new fees shall apply prospectively only and no adjustment will be made
to fees payable with respect to a preceding quarter.
(iii) If any additional Services are included hereunder, or if the
scope or nature of Services provided at any time under this Agreement
changes significantly, the parties hereto will negotiate in good faith new
fees based on the estimated cost of providing such additional or revised
Services, as contemplated in Section 2(a)(i).
3. Payments. (a) UPC shall submit to Overnite by the 10th working
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day of each quarter an invoice for all charges associated with Services provided
during the preceding quarter, including any other amounts payable in respect of
the preceding quarter. All invoices shall describe in reasonable detail the
Services provided and the charges associated therewith, any related adjustments
and any other amounts that are payable. Except as provided in subparagraph (b)
below, Overnite shall remit payment in full for all charges invoiced on or
before the last working day of the month in which the invoice is received.
Payment of all invoices shall be made by wire transfer of
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immediately available funds to an account or accounts designated by UPC. Any
late payment shall bear interest at the rate of 1% per month or fraction thereof
until paid.
(b) In the event of a dispute as to an invoiced amount, Overnite
shall promptly pay all undisputed amounts, but shall be entitled to withhold
amounts in dispute, and shall promptly notify UPC of such dispute and the basis
therefor. The parties agree to provide each other with sufficient records and
information to resolve such dispute and, without limiting the rights and
remedies of the parties hereunder, to negotiate in good faith a resolution
thereto. Notwithstanding this clause (b), the late payment interest provision in
Section 3(a) shall apply to all such withheld amounts that are ultimately
determined to be due.
4. Term of Agreement. The term of this Agreement shall commence
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immediately following the Offering and Acquisition and shall continue thereafter
unless terminated by agreement of the parties hereto. Notwithstanding the
foregoing, this Agreement shall become terminable, upon not less than 30 days'
prior written notice (i) with respect to any Services or any part thereof, at
any time by Overnite, or (ii) in whole or in part with respect to any Services,
at any time by UPC on or after the 18th month following the Offering except for
Services or any part thereof described in Item 6 to Exhibit A hereto which may
be terminated at any time by UPC following 30 days prior written notice.
Termination under this Paragraph 4 or otherwise shall have no effect on the
obligations of the parties to provide Services prior to the effective date of
such termination or to make payments in respect of charges incurred in
connection therewith or which relate to events occurring prior to such date.
5. Performance of Services. (a) UPC shall perform the Services or cause
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the Services to be performed with the same degree of care, skill and prudence
customarily exercised for its own operations. It is understood and agreed that
the Services will be substantially identical in nature and quality to the
Services performed by UPC for OTC and its subsidiaries during the year prior to
the commencement of the term of this Agreement, except as required by Overnite's
becoming a public company after the Offering.
(b) Each party acknowledges that the Services will be provided only
with respect to the businesses of Overnite and its subsidiaries as such
businesses exist immediately following the Offering and Acquisition or as
otherwise mutually agreed by the parties. Services will not be
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requested for the benefit of any entity other than Overnite and its
subsidiaries. Overnite agrees that it will use the Services only in accordance
with all applicable federal, state and local laws, regulations and tariffs and
in accordance with the reasonable conditions, rules, regulations and
specifications which are or may be set forth in any manuals, materials,
documents or instructions of UPC. UPC reserves the right to take all actions,
including the termination of any Services or part thereof, in order to assure
that the Services are provided in accordance with any applicable laws,
regulations and tariffs.
(c) Any input or information needed by either party to perform or
utilize the Services pursuant to the provisions of this Agreement shall be
provided by the other party or its subsidiaries, as the case may be, in a manner
consistent with the practices employed by the parties during the year prior to
the Offering. Should the failure by Overnite to provide such input or
information render the performance of the Services impossible or unreasonably
difficult, UPC may, upon reasonable notice, refuse to provide such Services.
6. Liability and Indemnification. Except as provided below, UPC shall
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have no liability under this Agreement for damage or loss of any type suffered
by Overnite or its subsidiaries or any third party as a result of the
performance or non-performance of the Services. Each party shall indemnify,
defend and hold the other party harmless from and against all damages, losses
and out-of-pocket expenses (including fees and disbursements of counsel) caused
by or arising out of any willful breach or gross negligence by such indemnifying
party in the performance or non-performance of any obligation or agreement
contained herein or by the willful misconduct of such indemnifying party. In the
event of a claim against UPC by a third party, Overnite shall indemnify, defend
and hold UPC harmless from and against all damages, losses and out-of-pocket
expenses (including fees and disbursements of counsel) caused by or arising out
of the performance or non-performance of the Services, except where caused by
the willful breach or negligence of UPC or UPC's willful misconduct.
Notwithstanding any other provision of this Agreement, UPC shall have no
liability for the acts or omissions of any third party (other than a subsidiary
of UPC) that provides Services hereunder so long as UPC has not been grossly
negligent in the selection of such third party. For purposes of this section,
Services shall include services performed by UPC pursuant to the Tax Allocation
Agreement, dated August __, 1998, between UPC and Overnite, OHI and OTC.
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7. Confidentiality. The parties each agree to hold in trust and maintain
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confidential, and, except as required by law or applicable rules and regulations
promulgated thereunder or by court order or other legal process, not to disclose
to others without first obtaining the prior written approval of the other party,
any information received by it from the other party or developed or otherwise
obtained by it under this Agreement, including all information resulting from
the provision or utilization of the Services hereunder (collectively, the
"Information"). At the time of termination of this Agreement in whole or in
part, each party shall, within 90 days after the effective date of such
termination, return to each other all written Information that it obtained and
shall not retain or allow any third party to retain photocopies or other
reproductions of such Information, provided that (i) the parties may retain any
Information to the extent reasonably needed to comply with applicable tax,
accounting or financial reporting requirements or to resolve any legal issues
identified at the time of termination, and (ii) in the case of a partial
termination of this Agreement, the parties may retain any Information required
to perform or utilize any remaining Services covered by this Agreement.
Alternatively, each party may, upon receipt of the written consent of the other
party, destroy such Information instead of returning the same pursuant to the
foregoing sentence. The obligations set forth in this Paragraph 7 shall not
apply to any Information which is shown by either party to be or have become
knowledge generally available to the public other than through the acts or
omissions of such party.
8. Assignment. Neither party shall assign or transfer any of its rights
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or delegate any of its obligations under this Agreement without first obtaining
the prior written consent of the other party, which consent may be withheld by
such other party in its sole discretion; provided that UPC shall be permitted to
cause any Services to be provided on UPC's behalf through one or more third
parties selected by UPC; and provided further that the selection of any third
party by UPC shall be subject to the prior written consent of Overnite (which
shall not be unreasonably withheld or delayed) unless such third party shall
have provided the same or similar Services to UPC or its affiliates at any time
during the 12 months immediately preceding the Offering. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns.
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9. Notices. All notices and other communications to be given hereunder
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shall be in writing and delivered in person, mailed postage prepaid or sent by
telegram or other facsimile transmission to the following addresses:
Union Pacific Corporation
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
ATTN: Vice President and Controller
Telecopy No.: (000) 000-0000
Overnite Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
ATTN: Senior Vice President and Chief Financial Officer
Telecopy No.: (000) 000-0000
or to such other addresses as either party may designate in writing. All
notices or communications given by personal delivery or mail shall be effective
upon receipt. Notice given by telecopier or telegram shall be effective upon
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours.
10. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof .
11. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed shall be deemed an original but all
of which shall together constitute but one and the same instrument.
12. Entire Agreement. This Agreement constitutes the entire agreement of
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the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect thereto. This
Agreement may not be amended or otherwise modified except by a written
instrument duly executed by both parties. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any
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other right, power or privilege.
13. Severability. The provisions of this Agreement are severable and
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should any provisions hereof be void, voidable or unenforceable under any
applicable law, such provision shall not affect or invalidate any other
provision of this Agreement, which shall continue to govern the relative rights
and duties of the parties as though such void, voidable or unenforceable
provision were not a part hereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
UNION PACIFIC CORPORATION
By:______________________________________
Title:___________________________________
OVERNITE CORPORATION
By:______________________________________
Title:___________________________________
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Exhibit A
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Description of Services
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1. Financial Reporting and Accounting Research - UPC will assist in the
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preparation of quarterly and annual financial statements and related disclosures
in SEC and shareholder documents for Overnite as well as all SEC-required
filings. UPC will also provide assistance in researching the impact of new and
proposed accounting standards on Overnite and advice on appropriate accounting
treatment for proposed transactions or other issues.
2. Internal Auditing - UPC will assist in the structuring of internal
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audits of Overnite related to internal accounting and administrative controls
over corporate assets as well as reviews of operational and financial
management.
3. Compensation Plans - UPC will assist Overnite through periodic
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consulting regarding the design and implementation of its stock and executive
compensation plans, including its management and executive incentive plans.
4. Insurance - UPC will assist Overnite in structuring and negotiating
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the terms of a property and liability insurance program.
5. Legal - UPC will provide legal assistance and advice to Overnite on
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corporate, SEC and financial matters.
6. Governmental Relations - UPC will make one person in its Washington,
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D.C. office available to Overnite to provide lobbying and legislative affairs
services at the Federal Congressional and Executive levels and advice regarding
political action committees and attendance at political fund raisers; provided
that such person shall be required to devote no more than one-half of such
person's normal work time to providing such Services and such person will not be
required to provide Services which, in the sole judgement of UPC's Vice
President-Government Affairs, are or would be in conflict with or detrimental to
the interests of the UPC Group. Overnite will pay for the Services provided in
this paragraph 6 an amount equal to $12,500 per month, but will not be charged
for any overhead, supplies, and equipment used by such person in performing
Services hereunder, including without limitation any office, fax machine,
telephone, secretarial support and reasonable entertainment expenses. In
addition UPC's Vice President - Government Affairs agrees to request lobbying
firms currently on retainer to UPC to provide services at their hourly rate to
Overnite without requiring any additional or separate retainer, but UPC will
have no obligation to Overnite if such firms refuse to provide such services.
7. Proxy Statement -- UPC will provide assistance in the coordination
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and preparation by Overnite of any Proxy Statement including the calculation and
accumulation of certain components of compensation administered by UPC prior to
the Offering.
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