Exhibit 10.3

 

SERVICES AGREEMENT

 

THIS SERVICES AGREEMENT (this “Agreement”) is made and entered into as of the
5th day of November, 2003 by and between Union Pacific Corporation, a Utah
corporation, including all of its subsidiaries and affiliates (“UPC”), and
Overnite Corporation, a Virginia corporation, including all of its now or
hereafter existing subsidiaries and affiliates (“Overnite”).

 

WHEREAS, UPC intends to sell its entire interest in Overnite Holding, Inc., a
Delaware corporation (“OHI”), in connection with an underwritten initial public
offering (the closing of which is hereafter referred to as the “Offering”);

 

WHEREAS, immediately prior to the Offering, Overnite will acquire from UPC all
of the outstanding common stock of OHI in exchange for, inter alia, all of the
outstanding common stock of Overnite (the “Divestiture Transaction”), such that
OHI will become a wholly-owned subsidiary of Overnite and, immediately following
the Offering, Overnite will be a publicly-owned company;

 

WHEREAS, Overnite Transportation Company, a Virginia corporation (“OTC”), and
Motor Cargo Industries, Inc., a Utah corporation (“Motor Cargo”), each a
wholly-owned, indirect subsidiary of OHI, will each become a wholly-owned,
indirect subsidiary of Overnite immediately following the Divestiture
Transaction;

 

WHEREAS, UPC historically provided certain corporate and administrative services
to its subsidiaries, including OHI, OTC, and Motor Cargo; and

 

WHEREAS, UPC and Overnite desire that UPC continue to provide certain services
to Overnite and its subsidiaries following the Offering and the Divestiture
Transaction pursuant to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement,
intending to be bound hereby, agree as follows:

 

1. Services. Following the Offering and the Divestiture Transaction, UPC will
provide or cause to be provided to Overnite, those corporate and administrative
services described in Exhibit A hereto (the “Services”), as requested by
Overnite from time to time. The scope of the Services may be adjusted by the
mutual agreement of the parties hereto.

 

2. Charges for Services. As consideration for the Services provided hereunder,
Overnite agrees to pay the following fees and expenses to UPC:

 

(a) Fees for Services performed for Overnite by a vendor, contractor or similar
third party (other than UPC) shall be equal to the final invoiced costs charged
by such third party to UPC for the performance of such Services. With respect to
all other Services provided by UPC, Overnite will pay to UPC a fee equivalent to
$150 per hour, which includes, without limitation, a reasonable allocation of
direct and indirect overhead costs (including, without limitation, employee
salaries, benefits and other costs) In addition, Overnite will pay reasonable
travel and other out-of-pocket expenses incurred in connection therewith. All
travel and out-of-pocket expenses of UPC made in accordance with the then
effective policies of UPC governing such expenses will be deemed reasonable and
may not be subject to any dispute. Notwithstanding the foregoing, the parties
agree that there shall not be any charges for Incidental Services provided
directly by UPC. For purposes of this Agreement, the term Incidental Services
shall mean advice or assistance provided to Overnite by UPC via telephone or
electronic mail

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(excluding the preparation or review by UPC of any agreements or other documents
delivered by or included in any electronic mail) which shall not exceed a total
of five hours per month for each of the service categories set forth on Exhibit
A hereto.

 

(b) If any additional Services not specifically provided for herein are provided
to Overnite by UPC, Overnite will pay the fees and expenses for such services in
accordance with Section 2(a) of this Agreement.

 

3. Payments.

 

(a) UPC shall submit to Overnite by the 10th working 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
business day of the month in which the invoice is received. Payment of all
invoices shall be made by wire transfer of immediately available funds to an
account or accounts designated by UPC. Any late payment shall bear interest at
the rate of 0.5% 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 and payable, which amounts, including any interest, shall be promptly
remitted to UPC in the manner provided herein.

 

(c) In the event that UPC provides to Overnite any one-time services not
contemplated by this Agreement, UPC may invoice Overnite separately for all
reasonable fees and expenses for such services, which fees and expenses will be
calculated in accordance with Section 2(a) of this Agreement. In connection with
such one-time or other similar extraordinary projects or services undertaken or
provided by UPC, UPC may invoice Overnite separately for such services on a
monthly basis on the first business day of each month and Overnite shall remit
payment in full for all fees invoiced on or before the last business day of the
month in which the invoice is received, subject to the invoicing provisions set
forth in Sections 3(a) and 3(b) above.

 

4. Term of Agreement. The term of this Agreement shall commence immediately
following the Offering and the Divestiture Transaction and shall continue for a
period of 18 months unless terminated by agreement of the parties hereto (except
with respect to the services identified in Paragraph 7 of Exhibit A, which shall
be provided until December 31, 2004). Notwithstanding the foregoing this
Agreement shall become terminable (i) at any time by Overnite upon delivery of
written notice to UPC with respect to any Services or any part thereof or (ii)
by UPC immediately upon the acquisition by any third party (including any group
of investors or acquirors acting in concert with the intent to acquire or
acquire control of Overnite) of all or substantially all of the assets of
Overnite or a majority of the issued and outstanding common stock of Overnite or
that amount of any other voting security or securities of Overnite that would
constitute a majority of the voting securities of Overnite or other similar
disposition or transaction. Termination under this Section 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.

 

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5. Performance of Services.

 

(a) UPC shall perform the Services or cause the Services to be performed with
the same degree of care, skill, timeliness and prudence customarily exercised
with respect to 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 OHI and its subsidiaries during the year prior to the
commencement of the term of this Agreement, except with respect to such services
required to effect the Divestiture Transaction and the Offering.

 

(b) Each party acknowledges that the Services will be provided only with respect
to the businesses of Overnite as such businesses exist immediately following the
Offering and the Divestiture Transaction or as otherwise mutually agreed by the
parties. Services will not be requested for the benefit of any entity other than
Overnite. 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 ensure 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 and all of its
directors, officers, agents and employees shall have no liability, whether
direct or indirect, in contract, tort or otherwise, under this Agreement for any
damage, loss or other harm (including, without limitation, out-of-pocket
expenses and fees and disbursements of counsel) of any type suffered by Overnite
or any third party in connection with the performance or non-performance of this
Agreement or the Services contemplated hereby or any action or in-action of any
of the indemnified parties in connection with the foregoing, except for any such
damage, loss or other harm directly caused by or directly resulting from the
gross negligence or willful misconduct of UPC in connection with the performance
or non-performance of this Agreement or the Services contemplated hereby or the
action or inaction of any of the indemnified parties in connection with the
foregoing. In the event of a third party claim, Overnite, including its
successors and assigns, for itself and on behalf of all of its subsidiaries and
affiliates, including their respective successors and assigns, shall indemnify,
defend and hold harmless UPC and all of its directors, officers, agents and
employees from and against any and all such damages, losses and other harms
(including, without limitation, out-of-pocket expenses and fees and
disbursements of counsel) caused by or arising out of the performance or
non-performance of this Agreement or the Services contemplated hereby or the
actions or in-actions of any of the indemnified parties in connection with the
foregoing other than any such damage, loss or other harm directly caused by or
directly resulting from the gross negligence or willful misconduct of UPC in
connection with the performance or non-performance of this Agreement or the
Services contemplated hereby or the actions or in-actions of any of the
indemnified parties in connection with the foregoing. The total liability of UPC
under this Section 6 will not under any circumstances exceed the aggregate
amount of fees paid to UPC by Overnite. Notwithstanding any other provision of
this Agreement, UPC shall have no liability for (i) any lost profits or any
incidental, consequential, special, indirect or similar damages of any kind or
nature whatsoever of Overnite or any third party (including the fees and
expenses of counsel) or (ii) the acts or omissions of any third party (other
than UPC) that provides Services hereunder. This Section 6 shall survive the
termination of this Agreement until such time as the obligations of the parties
(including their respective successors and assigns) set forth in this Section 6
have been fully satisfied.

 

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7. Confidentiality. The parties each agree to hold in trust and maintain
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 Section 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 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 or caused to be provided by UPC 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.

 

9. Notices. All notices and other communications hereunder shall be in writing
and shall be delivered in person, by United States mail, certified, return
receipt requested, postage prepaid, by express mail by a nationally recognized
carrier, or by facsimile transmission (provided, if sent by facsimile
transmission, such notice shall also be sent by one of the other methods
provided under this section within 24 hours after initially sent by facsimile
transmission) to the following:

 

Union Pacific Corporation

1416 Dodge Street

Omaha, Nebraska 68179-0605

Attn: Senior Vice President – Finance

Fax No.: (402) 271-4048

 

Overnite Corporation

1000 Semmes Avenue

Richmond, VA 23224-2246

Attn: Senior Vice President and Chief Financial Officer

Fax No.: (804) 231-8501

 

or to such other addresses as either party may designate from time to time in
writing. The date of any notice so sent will be deemed to be the date of receipt
(or refusal), in the case of United States mail, the following business day, in
the case of overnight express mail, and, in the case of facsimile transmission,
upon receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day if not received during the
recipient’s normal business hours.

 

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10. Governing Law. This Agreement shall be governed by and construed in
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 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. Headings. The headings and captions set forth in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation hereof.

 

13. Severability. The provisions of this Agreement are severable and 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.

 

14. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with respect
thereto. This Agreement may not be amended or otherwise modified or supplemented
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 other
right, power or privilege.

 

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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,

  

OVERNITE CORPORATION,

By:

 

/s/ Carl W. von Bernuth

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By:

 

/s/ Patrick D. Hanley

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Name:

 

Carl W. von Bernuth

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Name:

 

Patrick D. Hanley

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Title:

 

Senior Vice President, Secretary and General Counsel

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Title:

 

Senior Vice President and Chief Financial Officer

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EXHIBIT A

TO

SERVICES AGREEMENT

 

DESCRIPTION OF SERVICES

 

A-1

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1. Financial Reporting and Accounting – UPC will provide Overnite with such
historical data maintained by UPC that may be necessary for the preparation of
financial statements to the extent that either or both of Overnite and their
independent auditor do not already have such historical data. Notwithstanding
the foregoing or anything set forth in this Exhibit or the Services Agreement to
the contrary, UPC will not at any time be involved in the preparation of
Overnite’s financial statements and SEC filings and will not provide any
services that would normally be provided by the independent auditor of a company
required to submit filings to the SEC pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

2. Internal Auditing – UPC will provide advice with respect to the structure of,
and procedures applicable to, the conduct of internal audits of Overnite related
to internal accounting, administrative controls over corporate assets and
operational and financial management. Notwithstanding the foregoing or anything
set forth in this Agreement, UPC will not at any time conduct any internal
audits of Overnite or provide any judgments as to the adequacy of any internal
audit conducted by Overnite or recommend any corrective actions to be taken by
Overnite in response to the outcome of any of its internal audits.

 

3. Compensation Plans – UPC will provide advice and respond to general inquiries
to Overnite with respect to the design and implementation of its stock and
executive compensation plans. Notwithstanding the foregoing or anything set
forth in this Agreement, UPC will not provide any consulting services that can
be obtained from a third party consultant or perform any of the functions that
are normally performed by the compensation or similar committee of a company
required to submit filings to the SEC pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.

 

4. Insurance – UPC will provide advice with respect to the structure and terms
of the property and liability insurance programs of Overnite.

 

5. Legal – UPC will respond to inquiries from Overnite with respect to matters
customarily handled by the General Counsel of UPC and the staff of the General
Counsel. Notwithstanding the foregoing or anything set forth in this Agreement,
UPC will not review or participate in the preparation of any of Overnite’s
filings with the SEC, nor will it act as counsel to Overnite or otherwise
provide to Overnite any legal advice, assistance or services, which are of the
nature that a reasonable attorney would only provide such services with an
adequate professional liability insurance policy in full force and effect.

 

6. External Relations – UPC will provide assistance and advice to Overnite with
respect to political action committees and lobbying and legislative matters at
the Federal Congressional and Executive levels. In connection with the provision
of such services by UPC’s employees, UPC’s Vice President – External Relations
shall have the sole authority and discretion to determine whether such services
will be provided by UPC and its employees. In addition, UPC’s Vice
President—External Relations agrees to request lobbying firms or lobbyists
currently employed by UPC to provide services at their hourly rate to Overnite
without requiring any additional or separate retainer. UPC will have no
obligation to Overnite, if such firms or individuals refuse to provide such
services. Notwithstanding the foregoing or anything set forth in this Agreement,
UPC will not be required to request any such lobbying firm or individual,
including its own Governmental Relations staff, to provide services to Overnite
that in the sole and exclusive opinion of UPC conflict with, or otherwise
adversely affect, the business or interests of UPC.

 

7. Proxy Statement – Upon request, UPC will provide Overnite with data and
information maintained by UPC required to calculate certain components of
compensation administered by UPC prior to the Offering that must be reported in
the Proxy Statement of Overnite to the extent that either or both of Overnite
and their independent auditor do not already have such data and information.
Notwithstanding the foregoing or anything set forth in this Agreement, (a) UPC
will not at any time be involved in the preparation of Overnite’s Proxy
Statement or be responsible for ensuring that Overnite’s Proxy Statement
complies with applicable laws, rules and regulations or otherwise provide any
services with respect to such Proxy Statement that would

 

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normally be provided by the independent auditors, general counsel or other
counsel of a company required to submit filings to the SEC pursuant to Sections
13 or 15(d) of the Exchange Act and (b) Overnite shall be solely responsible for
verifying such data with its employees and any other third parties maintaining
information regarding the assets or compensation of any of its employees.

 

8. Treasury, Banking, Pension and Investor Relations – UPC will respond to
inquiries from Overnite regarding the operation by Overnite of its Treasury,
Banking, Pension and Investor Relations functions. Notwithstanding the foregoing
or anything set forth in this Agreement, UPC will not (i) provide any advice to
Overnite with respect to the compliance by Overnite with applicable laws, rules,
and regulations, including, without limitation, the Exchange Act or the rules or
regulations promulgated thereunder, or the advisability of any investment or
financing arrangement entered into or contemplated by Overnite or on behalf of
any pension plans or funds maintained by Overnite or (ii) provide any advice or
assistance that could be considered or construed as fiduciary activities for any
pension plans or funds maintained by Overnite.

 

A-3