CSX CORPORATION FORM OF CHANGE OF CONTROL AGREEMENT
Exhibit
10.35
CSX
CORPORATION
FORM OF CHANGE OF CONTROL
AGREEMENT
AGREEMENT
by and between CSX CORPORATION, a Virginia corporation (the “Company”), and
____________________ (the “Executive”), dated as of the ____ day of ___________,
201_.
The Board
of Directors of the Company (the “Board”) has determined that it is in the best
interests of the Company and its shareholders to ensure that the Company will
have the continued dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the
Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive’s full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. [The Board previously caused the Company to enter into
an agreement with Executive to accomplish these objectives. That
agreement and any amendments thereto are replaced by this
Agreement.] [To accomplish these objectives, the Board has caused the
Company to enter into this Agreement.]
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain
Definitions.
a. “Effective Date” means
the first date during the Term (as defined in Section l(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs, and (i) the
Executive’s employment with the Company is terminated by the Company without
Cause or (ii) the Executive ceases to be an officer of the Company in either
case prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment or
cessation of status as an officer (i) was at the request of a third party who
has taken steps reasonably calculated to effect such Change of Control or (ii)
otherwise arose in connection with or anticipation of such Change of Control,
then, in each such case, for all purposes of this Agreement “Effective Date”
shall mean the date immediately prior to the date of such termination of
employment or cessation of status as an officer.
b. The
“Term” means
the period commencing on the date hereof and ending on the earlier to occur of
(i) the third anniversary of such date or (ii) the first day of the month next
following the Executive’s normal retirement date (“Normal Retirement Date”)
under the principal pension plan in which the Executive participates (the
“Pension Plan”); provided, however, that the
Term shall end on an earlier date if the Company gives the Executive at least
one year’s advance written notice thereof.
2. Change of
Control. For the purpose of this Agreement, a “Change of
Control” shall mean:
a. Stock
Acquisition. The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of
beneficial ownership (within the meaning of Rule 13(d)-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that
notwithstanding any determination by any court or governmental agency to the
contrary, under no circumstances shall shares of common stock of the Company
referenced in total return swaps that are or were the subject of the lawsuit
filed by the Company in the United States District Court for the Southern
District of New York on March 17, 2008, against The Children’s Investment Master
Fund, 3G Capital Partners, Ltd. and certain of their affiliates (the
“Defendants”) be deemed to be beneficially owned for purposes of this subsection
(a) except to the extent that any of such swaps are converted or changed into
direct ownership of shares of common stock of the Company by any of the
Defendants, their affiliates or any other person acting in concert with any of
them, and provided further, that for
purposes of this subsection (a), the following acquisitions shall not constitute
a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 2; or
b. Board
Composition. Individuals who, as of the date hereof,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to such date whose election, or
nomination for election by the Company’s shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
c. Business
Combination. Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company or its principal subsidiary (a “Business Combination”)
that is not subject, as a matter of law or contract, to approval by the Surface
Transportation Board or any successor agency or regulatory body having
jurisdiction over such transactions (the “Agency”), in each case, unless, following
such Business Combination:
(i) all
or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or its principal subsidiary or all or
substantially all of the assets of the Company or its principal subsidiary
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
(ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination; and
(iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
d. Regulated Business
Combination. Consummation of a Business Combination that is
subject, as a matter of law or contract, to approval by the Agency (a “Regulated
Business Combination”) unless such Business
Combination complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
e. Liquidation or
Dissolution. Consummation of a complete liquidation or
dissolution of the Company or its principal subsidiary approved by the Company’s
shareholders.
If any
Change of Control is a Regulated Business Combination, but its implementation
involves another “Change of Control” that is not a Regulated Business
Combination within the meaning of this Section 2, then for all purposes of this
Agreement, such Change of Control shall not be deemed to be a Regulated Business
Combination, the provisions governing a Regulated Business Combination shall not
apply, and the provisions governing such other Change in Control shall
apply.
3. Employment
Period.
a. Generally. Subject
to Section 3(b), the Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the Company
subject to the terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such date (the
“Employment Period”).
b. Regulated Business
Combination. Notwithstanding the foregoing, in the case of a
Change of Control that is a Regulated Business Combination, then for all
purposes of this Agreement, the “Employment Period” shall mean the longer of (i)
the period commencing on the Effective Date and ending on the third anniversary
of such date or (ii) the period commencing on the Effective Date and ending
twelve months from the effective date of a final decision by the Agency on the
proposed Regulated Business Combination (“Final Regulatory Action”), provided, however, that (x) if
the Final Regulatory Action is a denial of the Regulated Business Combination
then for all purposes of this Agreement the “Employment Period” shall end upon
the sixtieth (60th) day following such Final Regulatory Action and (y) if the
Final Regulatory Action is an approval of the Regulated Business Combination,
but the Regulated Business Combination is not consummated by the first
anniversary of the Final Regulatory Action, then for all purposes of this
Agreement the “Employment Period” shall end upon such first anniversary, of the
Final Regulatory Action.
4. Terms of
Employment.
a. Position and
Duties. (i) During the Employment
Period: (A) the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date, and (B) the Executive’s services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, Executive agrees during normal business hours
to diligently discharge the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive’s reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive’s responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive’s responsibilities to the
Company.
b. Compensation. (i) Base
Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at least
annually. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase, and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. Notwithstanding the preceding, an
across-the-board reduction in Annual Base Salary applicable to all similarly
situated peer executives implemented out of extreme business necessity and
unrelated to a contemplated or anticipated Change of Control shall not be a
violation of this section. As used in this
Agreement, the term “affiliated companies” shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual
Bonus. In addition to Annual Base Salary, the Executive shall
be eligible to earn, for each calendar year ending during the Employment Period,
an annual bonus (the “Annual Bonus”) in cash, at a minimum, target and maximum
level not less favorable (in terms both of dollar amounts and difficulty of
achievement) to the Executive than the Executive’s opportunity to earn such
annual cash bonuses under the Company’s annual incentive plans, or any
comparable bonus under any predecessor or successor plan, for the last three
full calendar years prior to the Effective Date (annualized in the event that
the Executive was not employed by the Company for the whole of such calendar
year). Notwithstanding the preceding, an across-the-board reduction
of minimum, target and maximum Annual Bonus opportunities applicable to all
similarly situated peer executives implemented out of extreme business necessity
and unrelated to a contemplated or anticipated Change of Control shall not be a
violation of this section. Each
such Annual Bonus shall be paid no later than March 15 of the calendar year next
following the calendar year for which the Annual Bonus is awarded, unless
deferred pursuant to the terms of a deferred compensation plan maintained by the
Company.
(iii) Incentive, Savings and
Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of the Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit
Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans practices, policies
and programs provide the Executive with benefits which are less favorable, in
the aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(v) Expenses. During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in carrying
out Executive’s duties hereunder, in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect and applicable to the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies. Any required
reimbursements shall be paid to Executive no later than the last day of the
calendar year following the calendar year in which the underlying expense was
incurred by the Executive, and the amount of expenses eligible for reimbursement
during any year shall not affect the expenses eligible for reimbursement in any
other year.
(vi) Fringe
Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vii) Office and Support
Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its affiliated companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(viii) Vacation. During
the Employment Period, the Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of
the Company and its affiliated companies as in effect for the Executive at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
Notwithstanding
Section 4(b)(iii)-(viii), benefits payable under a plan, practice, policy, or
program that has been amended to reduce benefits or terminated within the
120-day period immediately preceding the Effective Date for reasons unrelated to
affecting benefits due hereunder shall not be taken into account under such
provisions. In the case of a plan, practice, policy or program
amended to reduce benefits, only the higher pre-amendment benefit shall be
disregarded.
5. Termination of
Employment.
a. Death or
Disability. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(c) of this Agreement of its intention to
terminate the Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties. For
purposes of this Agreement, “Disability” shall mean the absence of the Executive
from the Executive’s duties with the Company on a full-time basis for 180
consecutive business days as a result of the Executive’s inability to engage in
any substantial gainful activity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the Executive’s legal
representative. Executive agrees to cooperate with the Company and
the selected physician so that such determination can be made.
b. Cause. The
Company may terminate the Executive’s employment during the Employment Period
for Cause. For purposes of this Agreement, “Cause” shall
mean:
(i) the
willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board [or the Chief Executive Officer of the Company] which specifically
identifies the manner in which the Board [or the Chief Executive Officer]
believes that the Executive has not substantially performed the Executive’s
duties,
(ii) the
willful engaging by the Executive in illegal conduct or gross misconduct which
is materially and demonstrably injurious to the Company, or
(iii) the
violation of any Company policy by Executive, or the commission by Executive of
an act involving moral turpitude, in each case, that adversely affects the
reputation or business of the Company or any affiliate.
For
purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in
detail.
c. Good
Reason. The Executive’s employment may be terminated by the
Executive during the Employment Period for Good Reason. For purposes
of this Section 5(c), any good faith determination of “Good Reason” made by the
Executive shall be conclusive. For purposes of this Agreement, “Good
Reason” shall mean:
(i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any
failure by the Company to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the
Executive to travel on Company business to a materially greater extent than
required immediately prior to the Effective Date, in either case without the
Executive’s prior consent;
(iv) any
purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or
(v) any
failure by the Company to comply with and satisfy Section 12(c) of this
Agreement.
d. Regulated Business
Combination. Notwithstanding the foregoing, in the case of a
Change of Control that is a Regulated Business Combination, then for all
purposes of this Agreement, during that portion of the Employment Period prior
to Final Regulatory Action, the Executive may not exercise his or her rights to
terminate the Executive’s employment under this Agreement for “Good
Reason.” During such period, the Executive may only terminate his or
her employment under this Agreement and receive benefits under Section 6 if the
Executive is “Constructively Terminated” by the Company. Moreover,
except to the extent expressly set forth in the definition of “Constructive
Termination,” the Executive shall have no remedy for any breach by the Company
of the provisions of Section 4; provided, however, that any
failure of the Company to comply in any material respect with the provisions of
Section 4 shall create a rebuttable presumption that a Constructive Termination
has occurred.
For
purposes of this Agreement, a “Constructive Termination” shall
mean:
(i) substantial
diminution of the Executive’s duties or responsibilities as contemplated by
Section 4(a) of this Agreement, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) a
reduction in the Executive’s Annual Base Salary;
(iii) a
failure by the Company to comply with Section 4(b)(ii) regarding the Annual
Bonus;
(iv) a
reduction in the Executive’s other incentive opportunities, benefits or
perquisites described in Section 4(b) unless the Executive’s peer executives
suffer a comparable reduction;
(v) the
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the
Executive to travel on Company business to a materially greater extent than
required immediately prior to the Effective Date, in either case without the
Executive’s prior consent; or
(vi) any
purported termination by the Company of the Executive’s employment otherwise
than for Cause or Disability.
During
that portion of the Employment Period after Final Regulatory Action, the
Executive may terminate his or her employment under this Agreement for “Good
Reason.”
e. Notice of
Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason or Constructive Termination, shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 13(c) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason, Cause or Constructive Termination shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive’s or the Company’s rights hereunder.
f. Date of
Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason or Constructive Termination, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive’s employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination, and (iii) if the Executive’s
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be. For purposes of any benefit to be
provided or any amount payable under this Agreement that is subject to Section
409A of the Code, termination of employment shall not be deemed to occur unless
it is reasonably expected that Executive will provide no further services to the
Company or its affiliates, as defined in Section 414(b) or (c) of the Code, or
that the level of bona
fide services will drop to 20% or less of the average level of services
provided by Executive over the thirty-six (36) months preceding Executive’s
termination of employment. If Executive continues to provide bona fide services to the
Company or any of its affiliates at a level that is more than 20% of the average
level of services provided by Executive over such thirty-six (36) month period,
then Executive shall be deemed not to have experienced a termination of
employment.
6. Obligations of the Company
upon Termination.
a. Without Cause, Good Reason
or Constructive Termination. If, during the Employment Period,
the Company shall terminate the Executive’s employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason or
Constructive Termination, then the Company shall provide the following payments
and benefits:
(i) The
Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of (A), plus (B), plus (C), plus (D) as
follows:
A. the
sum of (1) the Executive’s Annual Base Salary through the Date of Termination to
the extent not theretofore paid and (2) any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts described in clauses
(1) and (2) shall be hereinafter referred to as the “Accrued Obligations”);
and
B. an
amount equal to the product of (1) [two/ 2.99] and (2) the sum of (x) the
Executive’s Annual Base Salary in effect on the date of Executive’s termination
of employment (or, if greater, the Executive’s Annual Base Salary in effect
immediately before any salary reduction therein triggering the event leading to
Executive’s termination) and (y) the Target Bonus; and
C. an
amount equal to 100% of the estimated aggregate cost of the benefits to be
provided to Executive under Section 6(a)(ii) for the [two/three] year period
during which such benefits may be provided to Executive, as determined by the
Company in good faith (which determination shall be final and
binding).
D. the product of (x) the
Annual Bonus the Executive would have received for the year of termination
(based upon the Executive’s target opportunity and the annual incentive plan’s
achievement percentage) had he remained employed for the entire performance
period to which such Annual Bonus relates and (y) a fraction, the numerator of
which is the number of days in the current calendar year through the Date of
Termination, and the denominator of which is 365.
The amounts set forth in
(A), (B) and(C) shall be paid to the Executive in a lump sum in cash within 30
days after the Date of Termination. The amount set forth in (D) shall
be paid following completion of the relevant performance period at the same time
Annual Bonuses are normally paid pursuant to the terms of the applicable
plan.
In the
event that Executive is a “specified employee” within the meaning of Section
409A of the Code (as determined by the Company or its delegate), any payments
hereunder subject to Section 409A of the Code shall not be paid or provided
until the earlier of (A) the Executive’s death, or (B) the expiration of the
6-month period following Executive’s termination of employment (the “Delay
Period”). Any payments that are delayed by virtue of this
subparagraph shall (I) be paid in one payment at the conclusion of the Delay
Period and (II) include interest computed at five percent (5%) per annum for the
duration of the Delay Period.
(ii) For
[two/three] years after the Executive’s Date of Termination, or such longer
period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue medical, group life, and
disability benefits to the Executive and/or the Executive’s family equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this Agreement
if the Executive’s employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families; provided, however, that any such benefits that are fully insured will
only be provided to the extent the underlying insurance policy provides or can
be amended to provide coverage for such benefits, and provided further, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical, group life, or disability benefits under another
employer-provided plan, then the medical, group life, or disability, benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. With respect to any
benefits provided to Executive under this Section 6(a)(ii), the Executive shall
pay one hundred percent of the cost of such coverage (one hundred two percent
with respect to medical benefits) on an after-tax basis. In the event
medical coverage is provided under the Company’s existing plan, any COBRA
continuation coverage obligation under Section 4980B of the Code will run
concurrently with the benefits provided hereunder.
(iii) The
Company shall during the period commencing on the Date of Termination and ending
on the last day of the second calendar year following the calendar year in which
Executive’s termination of employment occurred, at its sole expense as incurred,
provide the Executive with outplacement services, the scope and provider of
which shall be selected by the Executive in his or her sole discretion, but at a
cost not in excess of $20,000.
(iv) To
the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy or practice or contract or agreement of the Company and its affiliated
companies, including earned but unpaid stock and similar compensation (such
other amounts and benefits shall be hereinafter referred to as the “Other
Benefits”).
b. Death. If
the Executive’s employment is terminated by reason of the Executive’s death
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive’s legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive’s
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive’s estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive’s estate and/or the
Executive’s beneficiaries, as in effect on the date of the Executive’s death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries. Notwithstanding the preceding,
benefits payable under a plan, practice, policy, or program that has been
amended to reduce benefits or terminated within the 120-day period immediately
preceding the Effective Date for reasons unrelated to affecting benefits due
hereunder shall not be taken into account. In the case of a plan,
practice, policy or program amended to reduce benefits, only the higher
pre-amendment benefit shall be disregarded.
c. Disability. If
the Executive’s employment is terminated by reason of the Executive’s Disability
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued Obligations and
the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive’s family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families. Notwithstanding the
preceding benefits payable under a plan, practice, policy, or program that has
been amended to reduce benefits or terminated within the 120-day period
immediately preceding the Effective Date for reasons unrelated to affecting
benefits due hereunder shall not be taken into account. In the case
of a plan, practice, policy or program amended to reduce benefits, only the
higher pre-amendment benefit shall be disregarded.
d. Cause; Other than for Good
Reason or Constructive Termination. If the Executive’s
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) the Executive’s Annual Base
Salary through the Date of Termination, and (y) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a termination for
Good Reason or Constructive Termination, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and the
timely payment or provision of Other Benefits. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
7. Non-exclusivity of
Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies for which
the Executive may qualify, nor, subject to Section 13(g), shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated companies
at or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
8. Full
Settlement. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest regardless of the outcome thereof by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment, at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
provided, that the Executive shall repay to the Company all such amounts paid by
the Company, and shall not be entitled to any further payments hereunder, in
connection with a contest originated by the Executive if the trier of fact in
such contest determines that the Executive’s claim was not brought in good faith
or was frivolous.
9. Limitations on Payments by
the Company.
a. Except
as provided in Section 8, the Company shall determine whether to reduce any
payment or distribution to be made by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or under another plan or arrangement) (a “Payment”)
in accordance with paragraph (i) of this Section 9(a), or to make such Payments
in full in accordance with paragraph (ii) of this Section 9(a).
(i) If
any Payment or Payments would otherwise constitute an “excess parachute
payment,” as defined in Section 280G of the Code, the Payment or Payments shall
be reduced (but not below zero) to the largest amount that will result in no
portion of the Payments being subject to the excise tax imposed under Section
4999 of the Code (the “Reduced Amount”).
(ii)
Notwithstanding Section 9(a)(i), Executive shall receive full Payment if it is
determined that the net after-tax benefit the Executive would receive, after
taking into account both income taxes and any excise tax imposed under Section
4999 of the Code (“Excise Tax”), is greater than the net after-tax amount the
Executive would receive based on the application of Section
9(a)(i). In this event, Executive shall be responsible for the
payment of any Excise Tax.
To the
extent Payments are reduced pursuant to Section 9(a)(i), Payments shall be reduced by
the Company in its reasonable discretion in the following order: (A) reduction
of any cash payment, excluding any cash payment with respect to the acceleration
of equity awards, that is otherwise payable to the Executive that is exempt from
Section 409A of the Code, (B) reduction of any other payments or benefits
otherwise payable to the Executive on a pro-rata basis or such other manner that
complies with Section 409A of
the Code and (C) reduction of any payment with respect to the acceleration of
equity awards that is otherwise payable to the Executive that is exempt from
Section 409A of the Code.
b. Subject
to the provisions of Section 9(c), all determinations required to be made under
this Section 9, including whether Executive will receive a Reduced Amount or
full Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a certified public accounting firm, law firm, or
other advisor as may be designated by the Company (the “Advisor”) which shall
provide detailed supporting calculations both to the Company and the Executive
at least 7 business days prior to the date any Payment is scheduled to be made
or commence. In the event that the Advisor is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Company shall appoint another recognized firm to make the determinations
required hereunder (which firm shall then be referred to as the
Advisor). All fees and expenses of the Advisor shall be borne solely
by the Company. Any determination by the Advisor shall be binding
upon the Company and the Executive. As a result of the uncertainty in
the application of the Excise Tax at the time of the initial determination by
the Advisor hereunder, it is possible that Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. The Advisor shall
determine the amount of any Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
c. If
the Executive Receives a Reduced Amount under Section 9(a)(i), the Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Executive of an Excise
Tax. Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in writing of such
claim and shall apprise the Company 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 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give
the Company any information reasonably requested by the Company relating to such
claim,
(ii) take
such action in connection with contesting such claim as the Company 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 the Company,
(iii) cooperate
with the Company in good faith in order to effectively contest such claim,
and
(iv) permit
the Company to participate in any proceedings relating to such
claim;
provided, however, that the
Company 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
unintended tax liability (including interest and penalties with respect thereto)
resulting from such representation and the payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 the Company shall
determine; provided, however, that if the
Company directs the Executive to pay such claim and xxx for a refund, the
Company 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 unintended tax liability (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, the Company’s control of the contest shall be
limited to issues with respect to which an Excise Tax would be payable hereunder
with respect to a Reduced Amount 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. If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 9(c), the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the Company’s complying
with the requirements of Section 9(c)) promptly pay to the Company 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 advanced by the Company pursuant to Section 9(c), a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid.
10. Confidential
Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all confidential or proprietary information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive’s employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive’s employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In addition, to the extent that the
Executive is a party to any other agreement relating to confidential
information, inventions or similar matters with the Company, the Executive shall
continue to comply with the provisions of such agreements. In no
event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Arbitration. The
Company and the Executive agree that all disputes, controversies, and claims
arising between them concerning the subject matter of this Agreement, other than
Sections 9 and 10, shall be settled by arbitration in accordance with the rules
and procedures of the American Arbitration Association then in
effect. The location of the arbitration will be Jacksonville, Florida
or such other place as the parties may mutually agree. In rendering
any award or ruling, the arbitrator or arbitrators shall determine the rights
and obligations of the parties according to the substantive and procedural laws
of the State of Florida. The parties to any such dispute,
controversy, or claim shall attempt to agree upon the selection of a single
arbitrator. If after a reasonable period of time the parties are
unable to agree upon such a single arbitrator, then three arbitrators will be
appointed with each party selecting an arbitrator from the American Arbitration
Association’s available panel of arbitrators, and the parties agreeing upon the
selection of a third arbitrator. If the parties cannot agree upon the
selection of a third arbitrator, then the two arbitrators selected by the
parties shall agree upon a third arbitrator from the panel of American
Arbitration Association arbitrators. If the two arbitrators are
unable to so agree on a third arbitrator, the third arbitrator shall be selected
by the American Arbitration Association. Any arbitration pursuant to
this section shall be final and binding on the parties, and judgment upon any
award rendered in such arbitration may be entered in any court, state or
federal, having jurisdiction. All fees and expenses of the
arbitration shall be born in accordance with Section 8. The
arbitrator or arbitrators shall have no authority to award provisional relief,
injunctive remedies, or punitive damages. The parties expressly
acknowledge that they are waiving their right to seek remedies in court,
including without limitations the right if any to a jury trial.
12. Successors.
a. This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive’s legal
representatives.
b. This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
c. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used
in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
13. Miscellaneous.
a. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
b. This
Agreement is intended to be fully compliant with the requirements of Section
409A of the Code and the final regulations promulgated thereunder, taking into
account any and all transition rules and relief promulgated by the Internal
Revenue Service or the U.S. Department of Treasury regarding compliance
therewith, and, to the maximum extent permitted by law, shall be administered,
operated and construed consistent with this intent. Any amounts
payable solely on account of an involuntary separation from service within the
meaning of Section 409A shall be excludible from the requirements of Section
409A, either as involuntary separation pay or as short-term deferral amounts
(e.g., amounts payable
under the schedule prior to March 15 of the calendar year following the calendar
year of involuntary separation) to the maximum possible
extent. Further, any reimbursements or in-kind benefits provided
under this Agreement shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, where applicable, the
requirement that (i) any reimbursement is for expenses incurred during the
period of time specified in this Agreement, (ii) the amount of expenses eligible
for reimbursement, or in-kind benefits provided, during a calendar year may not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other calendar year, (iii) the reimbursement of an eligible
expense will be made no later than the last day of the calendar year following
the year in which the expense is incurred, and (iv) the right to reimbursement
or in-kind benefits is not subject to liquidation or exchange for another
benefit.
c. All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the
Executive:
If to the
Company:
CSX
Corporation
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention:
Senior Vice President, Human Resources and Labor Relations
or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
d. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
e. The
Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
f. The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason or Constructive Termination
pursuant to Section 5 of this Agreement, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this
Agreement.
g. The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and, subject to Section
1(a) hereof, prior to the Effective Date, the Executive’s employment may be
terminated by either the Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof.
[14.] Waiver and Release with
Respect to Prior Agreement. In exchange for the compensation
and benefits promised herein and other valuable consideration, the Executive
hereby waives and releases the Company and its affiliates from any and all
claims the Executive ever had or may have arising from or in connection with the
[Employment Agreement/Change of Control Agreement] dated _______________,
between the Company and the Executive and any amendments thereto (the “Prior
Agreement”), and the Executive acknowledges that this Agreement supersedes and
renders null and void in all respects the Prior Agreement.]
[14. /15. ] Other Agreements
Unaffected. Except [for the Prior Agreement, or] as otherwise
expressly provided herein, this Agreement shall have no effect on any other
agreement between the Executive and the Company or any of its affiliates, and
any such agreement is ratified and confirmed in all respects and shall remain in
full force and effect in accordance with its terms.
IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
[Name of Executive]
CSX
CORPORATION
|
|
By
|
[Chairman,
Chief Executive Officer and President / Senior Vice President, Human Resources
& Labor Relations]
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