Exhibit 10.6
COMPENSATION ARRANGEMENT
AGREEMENT
THIS COMPENSATION ARRANGEMENT
AGREEMENT (this
“Agreement”) is made this 5 th day of November, 2003 (the
“Effective Date”), by and between UNION PACIFIC
CORPORATION, a Utah corporation (“Union Pacific”),
OVERNITE CORPORATION, a Virginia corporation
(“Overnite”), and OVERNITE TRANSPORTATION COMPANY, a
Virginia corporation (“OTC”).
BACKGROUND
WHEREAS, Union Pacific announced its intention to sell
its entire interest in Overnite Holding, Inc. by an initial public
offering of Overnite common stock;
WHEREAS, Union Pacific and Overnite desire to enter into
this Agreement evidencing their understanding and obligations with
respect to various Union Pacific employee benefit, incentive and
deferred compensation plans; and
WHEREAS, Union Pacific and Overnite agree that certain
special terms should apply to individuals who are employed by
Overnite or an affiliate of Overnite on the Effective Date and who
participate in certain employee benefit, incentive and deferred
compensation plans of Union Pacific on the Effective Date
(“Employees”)
NOW THEREFORE,
in consideration of the mutual
agreements, provisions, and covenants contained in this Agreement
and in order to facilitate the initial public offering of the
Overnite common stock, Union Pacific and Overnite, intending to be
bound hereby, agree as follows:
1. Stock
Options
(a) This Section 1 applies to the
Union Pacific Stock Options. The term “Union Pacific Stock
Options” means an option (whether vested or nonvested) to
purchase Union Pacific common stock granted under a Union Pacific
stock option plan and that, on the Effective Date, is held by an
Employee.
(b) Each Union Pacific Stock Option
that is intended to be an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the
“Code”), and that was granted before 1996 shall remain
outstanding and shall continue to vest (or become exercisable) in
accordance with its original terms as if the Employee’s
employment with Overnite or an affiliate after the Effective Date
was employment with Union Pacific; provided, however, that
such options shall expire and shall not be exercisable after the
earlier of (i) the original expiration date of such option and (ii)
the date that is three months after the Effective Date.
(c) Each Union Pacific Stock Option
that is intended to be an incentive stock option under Section 422
of the Code, and that was granted after 1995 shall remain
outstanding and shall continue to vest (or become exercisable) in
accordance with its original terms as if the Employee’s
employment with Overnite or an affiliate after the Effective Date
was employment with Union Pacific; provided, however , that
such options shall expire and shall not be exercisable after the
earlier of (i) the original expiration date of such option and (ii)
the fifth anniversary of the Effective Date and shall by virtue of
this Section 1(c) become nonqualified options under the
Code.
(d) Each Union Pacific Stock Option
that is not intended to be an incentive stock option under Section
422 of the Code, shall remain outstanding and shall continue to
vest (or become
exercisable) in accordance with its original
terms as if the Employee’s employment with Overnite or an
affiliate after the Effective Date was employment with Union
Pacific; provided, however , that such options shall expire
and shall not be exercisable after the earlier of (i) the original
expiration date of such option and (ii) the fifth anniversary of
the Effective Date.
2. Retention
Shares
Each Retention Share that is
outstanding on the Effective Date and that is held by an Employee
shall be vested and transferable as of the Effective Date. The term
“Retention Share” means a “Retention Share”
as defined in the Union Pacific 2001 Stock Incentive
Plan.
3. 2001 Long-Term
Plan
Awards under the Union Pacific 2001
Long-Term Plan (the “LTP”), whether denominated as
retention shares, retention stock units, cash awards or otherwise,
held by Employees on the Effective Date (the “LTP
Awards”) shall remain outstanding, and Union Pacific waives
as of the Effective Date all employment requirements set forth in
the LTP All of the LTP Awards shall be paid in accordance with the
2001 Long-Term Plan to the extent that the applicable Union Pacific
performance objectives are achieved.
4. Supplemental Executive
Retirement Plan
(a) Union Pacific agrees to
guarantee payment of the benefit accrued under Overnite’s
Supplemental Executive Retirement Plan (“SERP”) to each
of the Employees identified on Schedule I to this Agreement (and
their respective beneficiaries in accordance with the applicable
terms of the SERP) in the event Overnite fails to pay all or part
of the benefit payable under the SERP to such Employee or
beneficiary: provided, (i) Union Pacific’s obligation under
this Section 4 with respect to any Employee shall not exceed the
benefit accrued und
