Amended and Restated Change in Control Agreement as of December 31, 2007
Amended
and Restated Change in Control Agreement as of December 31,
2007
Mr.
XXXXXXXXXXXXXX:
Burlington
Northern Santa Fe Corporation (the “Corporation”) considers it essential to the
best interests of its stockholders to xxxxxx the continuous employment of
key
management personnel. In this connection, the Board of Directors of
the Corporation (the “Board”) recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control (as defined in
Section
2) may exist, and that such possibility, and the uncertainty and questions
which
it may raise among management, may result in the departure or distraction
of
management personnel to the detriment of the Corporation and its
stockholders.
The
Board
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Corporation’s
management, including yourself, to their assigned duties without distraction
in
the face of potentially disturbing circumstances arising from the possibility
of
a Change in Control.
In
order
to induce you to remain in the employ of the Corporation or any entity with
which the Corporation is considered to be a single employer under Section
414
(b) or Section 414(c) of the Internal Revenue Code of 1986, as amended from
time
to time (the “Code”) (all such entities, collectively, “Affiliates”), the
Corporation agrees that you shall receive the severance benefits set forth
in
this letter agreement (the “Agreement”) in the event your employment with the
Corporation is terminated under the circumstances described below subsequent
to
a Change in Control, and that you shall be eligible for the parachute tax
gross-up and certain other benefits described in this Agreement.
1. TERM. The
“Agreement Term” shall begin on December 31, 2007 (the “Effective Date” of this
Agreement), and shall end on December 31, 2008, subject to the
following:
(i) As
of
January 1, 2009, and each January 1 thereafter, the Agreement Term shall
automatically be extended to the next following December 31; provided,
however, that no such extension shall take place if, on or before
the
September 30 next preceding the date on which the extension would otherwise
take
place, the Corporation has given notice that it does not wish to extend the
Agreement Term; and further provided that no such extension shall take place
if
the effect of the extension would be to extend the Agreement Term beyond
the
December 31 coincident with or next following the two-year anniversary of
the
date on which you cease to be in a position that is at or above salary band
36
(unless, as of such December 31, you are again in a position that is at or
above
salary band 36); and further provided that subject to paragraph 1(ii) below
no
such extension shall take place if a Change in Control has occurred prior
to the
date on which the extension would otherwise take place. For the
avoidance of doubt, it is recited here that if a Change in Control described
in
paragraph 2(i) or 2(iii) occurs, and your Date of Termination occurs after
the
24-month anniversary of the date of the Change in Control but before
consummation of the transaction approved by the shareholders and before the
Agreement Term expires by reason of paragraph (iii) below (relating to a
Board
determination that consummation will not occur), the Agreement Term shall
be
extended to your Date of Termination.
1
(ii) Subject
to paragraph 1(iii) next below, if a Change in Control occurs during the
Agreement Term (as it may be extended from time to time), the Agreement Term
shall be extended for a period of twenty-four (24) months beyond the last
day of
the calendar month in which the Change in Control occurs, but in no event
less
than twelve (12) months beyond the date of the consummation of the Change
in
Control.
(iii) If
a
Change in Control described in paragraph 2(iii) or 2(iv) occurs during the
Agreement Term (as it may be extended from time to time), but the Board
thereafter determines that it will not consummate the transaction or regulatory
approval for the transaction is not obtained, then the Board may reduce the
24-month extension period set forth in paragraph 1(ii) next above;
provided that the Agreement Term may not end earlier than six (6) months
after such notice of reduction is provided by the Board or, if earlier, the
date
such Agreement Term would end in the absence of action under this paragraph
1(iii).
(iv) In
no
event, however, shall the Agreement Term extend beyond the end of the calendar
month in which your 65th birthday occurs if you are subject to mandatory
retirement at such age or to the extent permitted by law.
2. CHANGE
IN
CONTROL. A “Change in Control” shall be deemed to have occurred
if:
(i) Any
“person” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (other than the
Corporation, any trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation, or any company owned, directly or indirectly,
by the stockholders of the Corporation in substantially the same proportions
as
their ownership of stock of the Corporation), is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25% or more of
the
combined voting power of the Corporation’s then outstanding
securities.
(ii) During
any period of two consecutive years (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute
the
Board, and any new director (other than a director designated by a person
who
has entered into an agreement with the Corporation to effect a transaction
described in paragraphs (i), (iii) or (iv) of this definition) whose election
by
the Board or nomination for election by the Corporation’s stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any
reason to constitute at least a majority thereof.
(iii) The
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other company other than (a) a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting securities
of
the Corporation (or such surviving entity) outstanding immediately after
such
merger or consolidation, or (b) a merger or consolidation effected to implement
a recapitalization of the Corporation (or similar transaction) in which no
“person” (as hereinabove defined) acquires more than 25% of the combined voting
power of the Corporation’s then outstanding securities.
2
(iv) The
stockholders of the Corporation adopt a plan of complete liquidation of the
Corporation or approve an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation’s
assets. For purposes of this paragraph 2(iv), the term “the sale or
disposition by the Corporation of all or substantially all of the Corporation’s
assets” shall mean a sale or other disposition transaction or series of related
transactions involving assets of the Corporation or of any direct or indirect
subsidiary of the Corporation (including the stock of any direct or indirect
subsidiary of the Corporation) in which the value of the assets or stock
being
sold or otherwise disposed of (as measured by the purchase price being paid
therefor or by another objective method in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the fair
market value of the Corporation (as hereinafter defined). For
purposes of the preceding sentence, the “fair market value of the Corporation”
shall be the aggregate market value of the outstanding shares of common stock
of
the Corporation (on a fully diluted basis) plus the aggregate market value
of
the Corporation’s other outstanding equity securities (excluding employee stock
options). The aggregate market value of the shares of common stock of
the Corporation (on a fully diluted basis) outstanding on the date of the
execution and delivery of a definitive agreement with respect to the transaction
or series of related transactions (the “Transaction Date”) shall be determined
by the average closing price of the shares of common stock of the Corporation
for the ten trading days immediately preceding the Transaction
Date. The aggregate market value of any other equity securities of
the Corporation shall be determined in a manner similar to that prescribed
in
the immediately preceding sentence for determining the aggregate market value
of
the shares of common stock of the Corporation.
A
Change
in Control that occurs prior to the beginning of the Agreement Term shall
be
disregarded for purposes of this Agreement.
3. BASIS
OF
EMPLOYMENT TERMINATION. If (x) your Date of Termination (or the date
of delivery of the applicable Notice of Termination) occurs during the Agreement
Term and is coincident with or follows the occurrence of a Change in Control
or
(y) if you have a disability during the Agreement Term after the occurrence
of a
Change in Control, then you shall be eligible for payments and benefits in
accordance with, and to the extent provided by, Section 4, with such eligibility
determined on the basis for your termination of employment. For
purposes of this Agreement, the basis for your termination of employment
shall
be determined in accordance with this Section 3.
(i) Disability. If,
as a result of your incapacity due to physical or mental illness or injury,
you
shall have been absent from the full-time performance of your duties with
the
Corporation for six (6) consecutive months, and within thirty (30) days after
written Notice of Termination is given by the Corporation, you shall not
have
returned to the full-time performance of your duties, your employment may
be
terminated by the Corporation for unavailability due to
“Disability.” Notwithstanding any other provision of this Agreement,
a termination of employment under this paragraph 3(i) shall not cause you
to be
considered a terminated employee within the meaning of the Corporation’s long
term disability plan and your rights thereunder shall not be affected by
this
Agreement.
3
(ii) Cause. Your
Date of Termination shall be deemed to have occurred for “Cause,” if your Date
of Termination occurs because of circumstances described in paragraph 3(ii)(a)
or paragraph 3(ii)(b) next below, as determined in accordance with the
procedures set forth in paragraphs 3(ii)(A), (B) and (C) next
below:
(a) the
willful and continued failure by you to substantially perform your duties
with
the Corporation (other than any such failure resulting from your incapacity
due
to physical or mental illness or injury, or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason);
or
(b) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise.
For
purposes of this paragraph 3(ii), no act, or failure to act, on your part
shall
be deemed “willful” unless done, or omitted to be done, by you not in good faith
and without a reasonable belief that your action or omission was in the best
interest of the Corporation. Your Date of Termination shall not be
deemed to have occurred for “Cause” unless the procedures described in
paragraphs 3(ii)(A), (B) and (C), next below, have been satisfied:
(A) A
written
notice of alleged Cause is delivered to you by the Board or a member of the
Board. In the case of “Cause” described in paragraph 3(ii)(a)
(relating to a failure to perform your duties), the written notice shall
consist
of specific identification of the manner in which the Board or such Board
member
believes that you have not substantially performed your duties, and shall
include a demand for such performance. In the case of “Cause”
described in paragraph 3(ii)(b) (relating to conduct injurious to the
Corporation), the written notice shall consist of specific identification
of the
manner in which the Board or such Board member believes that you have engaged
in
conduct which is demonstrably and materially injurious to the
Corporation.
(B) You
have
received an opportunity to be heard by the Board or a member of the Board,
which
will consist of delivery to you of reasonable advance written notice of a
Board
meeting (to be delivered at or after the time you receive the notice of alleged
Cause, described in paragraph 3(ii)(A) next above), at which you, together
with
your counsel, may be heard by the Board, concerning the contents of the notice
of alleged Cause and, in the case of “Cause” described in paragraph 3(ii)(a),
the manner in which you intend to achieve substantial performance.
(C) You
have
received a copy of your Notice of Termination, which will include a copy
of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board, which
occurs after your opportunity to be heard by the Board (at that meeting or
a
subsequent meeting), and which finds that in the good faith opinion of the
Board
you were guilty of conduct set forth in the notice of alleged Cause and which
specifies the particulars thereof in detail. The Date of Termination
set forth in the Notice of Termination shall be not earlier than thirty (30)
days after the notice of alleged Cause has been delivered to you in accordance
with paragraph 3(ii)(A).
4
(iii) Good
Reason. Subject to the procedures set forth in paragraphs 3(iii)(A),
(B) and (C) next below, you shall be entitled to terminate your employment
for
Good Reason. For purposes of this Agreement, “Good Reason” shall
mean, without your express written consent, the occurrence, after a Change
in
Control, of any of the circumstances described in paragraphs 3(iii)(a) through
(h) next below. However, “Good Reason” shall not exist if such
circumstances are fully corrected (or in the case of a relocation described
in
paragraph 3(iii)(c) next below, if the request to relocate your base of
operations is withdrawn) prior to the Date of Termination specified in the
Notice of Termination given in respect thereof.
(a) The
assignment to you of any duties with a level of responsibility materially
inconsistent with the position in the Corporation that you held immediately
prior to the Change in Control, or a significant adverse alteration in the
status of your responsibilities from those in effect immediately prior to
such
Change in Control.
(b) A
material reduction by the Corporation in your annual base salary as in effect
on
the Effective Date, and adjusted to reflect such increases as may be made
after
the Effective Date and prior to the occurrence of a Change in Control, and
also
adjusted to reflect such decreases as may be made after the Effective Date,
but
taking decreases into account only to the extent that they are part of
across-the-board salary reductions similarly affecting all management personnel
of the Corporation and all management personnel of any person in control
of the
Corporation.
(c) The
relocation of your base of operations for the Corporation or any of its
Affiliates to a place that is fifty (50) miles farther from your residence
immediately prior to the Change in Control than the distance from such residence
to your former base of operations for the Corporation or such
Affiliate. The determination of whether the distance exceeds 50 miles
shall be performed in a manner that is consistent with Internal Revenue Service
rules applicable to the determination of deductibility of moving
expenses.
(d) The
failure by the Corporation to pay to you any material portion of your current
compensation or to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the Corporation when
such compensation is due.
(e) The
failure by the Corporation to continue in effect any compensation plan in
which
you participate immediately prior to the Change in Control that is material
to
your total compensation, including but not limited to a material reduction
in
the benefits (or, in the case of incentive- or performance-based compensation,
opportunities) provided to you under the Corporation’s Retirement Plan,
Supplemental Retirement Plan, Investment and Retirement Plan, Supplemental
Investment and Retirement Plan, Incentive Compensation Plan, Stock Incentive
Plan, or any substitute plans adopted prior to the Change in Control, unless
an
equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Corporation
to
continue your participation therein (or in such substitute or alternative
plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to other
participants, as existed at the time of the Change in Control.
5
(f) The
failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation’s
life insurance, medical, health and accident, or disability plans in which
you
were participating at the time of the Change in Control, the taking of
any
action by the Corporation which would directly or indirectly materially
reduce
any of such benefits or deprive you of any material fringe benefit enjoyed
by
you at the time of the Change in Control, or the provision by the Corporation
to
you of a number of paid vacation days that is materially less than the
number of
vacation days to which you were entitled on the basis of years of service
with
the Corporation in accordance with the Corporation’s normal vacation policy in
effect at the time of the Change in Control.
(g) The
failure of the Corporation to obtain an agreement from any successor to assume
and agree to perform this Agreement, as contemplated in Section 7.
(h) Any
purported termination of your employment that is not effected pursuant to
a
Notice of Termination in material compliance with the requirements of paragraph
3(vi) (and, if applicable, the requirements of paragraph 3(ii)), which purported
termination shall not be effective for purposes of this Agreement.
You
shall
not be deemed to have terminated employment for Good Reason unless, within
a
reasonable time (not more than six (6) months) after the initial existence
of
the circumstances constituting Good Reason, you have delivered a written
Notice
of Termination, which:
(A) identifies
the circumstances, and the provisions of this paragraph 3(iii), which form
the
basis for your termination for Good Reason;
(B) demands
correction; and
(C) specifies
a Date of Termination which is not less than fifteen (15) days nor more than
sixty (60) days after the Notice of Termination has been provided to the
Corporation;
provided
that if the Corporation is reasonably unable to correct the circumstances
described in your Notice of Termination within the time period prior to your
scheduled Date of Termination, and responds to you in writing within seven
(7)
days of the receipt of your Notice of Termination notifying you of the time
reasonably required to correct the circumstances (which may not be more than
thirty (30) days after receipt of your Notice of Termination), your scheduled
Date of Termination in your Notice of Termination will be deemed to be postponed
until the end of such correction period, and Good Reason will not exist if
the
circumstances are fully corrected (or, if applicable, the request for relocation
is withdrawn) within that correction period. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder, and your failure
to
relocate after filing the Notice of Termination will not adversely affect
the
characterization of the Corporation’s relocation request as Good Reason under
paragraph 3(iii)(c) above.
6
(iv) Discharge
Absent Cause or Disability. You shall be deemed to have been
discharged by the Corporation absent Cause or Disability if your employment
is
terminated by the Corporation other than in accordance with paragraph 3(i)
(relating to Disability) or paragraph 3(ii) (relating to Cause). Your
Date of Termination under this paragraph 3(iv) may not be earlier than sixty
(60) days after the written Notice of Termination is delivered to you, except
that the sixty (60) day notice requirement shall not apply to the extent
the
Date of Termination occurs prior to the date of a Change in
Control. If your employment is terminated in accordance with this
paragraph 3(iv) and the Notice of Termination is delivered to you within
sixty
(60) days prior to the occurrence of a Change in Control, your Date of
Termination shall be deemed to be, for purposes of Section 4(iii), the day
after
such Change in Control; provided that, for purposes of the
timing of any payments or benefits owed to you under Section 4, the Date
of
Termination shall be the date specified in the Notice of
Termination.
(v) Payment
in Lieu of Notice. The Corporation shall be deemed to have complied
with the requirement of this Section 3 relating to advance Notice of Termination
notwithstanding that the Corporation may have provided you with fewer days’
notice than otherwise required pursuant to this Section 3, and in the event
of a
termination of employment by you for Good Reason, the Corporation may waive
your
obligation to provide the number of days of notice otherwise required pursuant
to this Section 3 (and thereby cause your Date of Termination to occur earlier
than the Date of Termination specified in your Notice of Termination for
Good
Reason) (the days of notice otherwise required to be given by the Corporation
or
you, as applicable, the “Required Notice Days” and the number of Required Notice
Days less the number of days of notice actually provided by the Corporation
or
you, as applicable, the “Waived Notice Days”); provided that the
Corporation shall pay you a cash amount equal to the base salary that you
would
have earned during the Waived Notice Days had the Corporation provided you
with,
or you provided the Corporation with, as applicable, the number of Required
Notice Days. Such payment shall be made in a lump sum no later than
the fifth day following your Date of Termination.
(vi) Notice
of
Termination. “Notice of Termination” shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon,
shall
set forth in reasonable detail the facts and circumstances claimed to provide
a
basis for termination of your employment under the provision so indicated
and
shall specify a Date of Termination in accordance with this Section
3.
(vii) Date
of
Termination. “Date of Termination” shall mean your ceasing to be
employed by the Corporation and the Affiliates; provided that the
employment relationship will be deemed to have ended at the time you and
your
employer reasonably anticipate that the level of bona fide services you would
perform for the Corporation and the Affiliates after such date (whether as
an
employee or independent contractor, but not as a director) would permanently
decrease to no more than 20% of the average level of bona fide services
performed over the immediately preceding 36 month period (or the full period
of
service to the Corporation and the Affiliates if you have performed services
for
the Corporation and the Affiliates for less than 36 months). In the
absence of an expectation that you will perform at the above-described level,
the Date of Termination of employment will not be delayed solely by reason
of
your continuing to be on the Corporation’s and the Affiliates’ payroll after
such date. The employment relationship will be treated as continuing
intact while you are on a bona fide leave of absence (determined in accordance
with Treas. Reg. §1.409A-1(h)).
7
4. COMPENSATION
UPON TERMINATION OR DURING DISABILITY. If (x) your Date of
Termination (or the date of delivery of the applicable Notice of Termination)
occurs during the Agreement Term and is coincident with or follows the
occurrence of a Change in Control or (y) if you have a disability during
the
Agreement Term and after the occurrence of a Change in Control, then you
shall
be entitled to payments and benefits in accordance with, and to the extent
provided by, this Section 4.
(i) Discharge
for Cause and Voluntary Resignation. If your employment is terminated
by the Corporation for Cause, or is terminated by you other than for Good
Reason, the Corporation shall pay you your full base salary through the Date
of
Termination at the rate in effect at the time Notice of Termination is given,
with payment to be made no later than the fifth day following your Date of
Termination, plus all other amounts to which you are entitled under any
compensation plan of the Corporation or any Affiliate at the time such payments
are due, and the Corporation shall have no further obligations to you under
this
Agreement.
(ii) Disability. During
any period that you fail to perform your full-time duties with the Corporation
as a result of incapacity due to physical or mental illness or injury, you
shall
continue to receive your base salary at the rate in effect at the commencement
of any such period, together with all compensation payable to you under any
long
term disability plan or other similar plan during such period, until your
employment is terminated pursuant to paragraph 3(i). Thereafter, or
in the event your employment shall be terminated by reason of your death,
your
benefits shall be determined under the Corporation’s retirement, insurance and
other compensation programs then in effect in accordance with the terms of
such
program; however, your receipt of benefits under the long term disability
plan
will not be affected by your termination under this Agreement.
(iii) Termination
for Good Reason and Discharge Absent Cause or Disability. If your
employment is terminated by you for Good Reason, or by the Corporation absent
Cause or Disability (as described in paragraph 3(iv)), then you shall be
entitled to the payments and benefits described below, subject to
Section 14:
(a) Prior
Salary and Deferrals. The Corporation shall pay to you (1) your full
base salary through your Date of Termination at the rate in effect at the
time
the Notice of Termination is given, with payment to be made no later than
the
fifth day following your Date of Termination; (2) a lump sum cash payment
equal
to your Bonus Rate (defined below) for the year in which your Date of
Termination occurs, subject to a pro rata reduction for the portion of the
year
after your Date of Termination, with payment to be made at the time specified
in
paragraph 4(iv)(a); and (3) all other amounts to which you are entitled under
any compensation plan of the Corporation, at the time such payments are due
under the terms of such plans.
(b) Additional
Salary and Severance. In lieu of any further salary or bonus payments
to you for periods subsequent to your Date of Termination, and except as
provided in paragraph 4(iv)(b), the Corporation will pay to you, at the time
specified in paragraph 4(iv)(a), a lump sum salary and bonus distribution,
in an
amount equal to the sum of: (I) a severance payment of (1)
2.0 times your Salary Rate plus (2) 2.0 times your Bonus Rate plus (II) a
payment in return for the imposition of the requirements of paragraph 4(iv)(b)
(relating to competition) equal to (1) 0.5 times your Salary Rate plus (2)
0.5
times your Bonus Rate.
8
For
purposes of this paragraph 4(iii)(b):
(A) Your
“Salary Rate” shall be equal to the greatest of: (1) your annual
salary as in effect as of the Date of Termination, inclusive of amounts that
would have been included in annual salary if such amounts had not been deferred
under the Burlington Northern Santa Fe Corporation Supplemental Investment
and
Retirement Plan or foregone under any other arrangement of the Corporation
or
its Affiliates providing for the elective deferral of salary, (2) your highest
consecutive twelve (12) months’ salary over the twenty-four (24) month period
preceding the Date of Termination, or (3) your annual salary as in effect
immediately prior to the Change in Control.
(B) Your
“Bonus Rate” shall be the amount which you would have received under the
Corporation’s Incentive Compensation Plan (or other successor annual bonus plan)
for the calendar year in which your Date of Termination occurs, if you had
remained employed by the Corporation for that entire year, and the target
level
of performance established annually by the Corporation had been achieved
for the
year. For the avoidance of doubt, it is recited here that achievement
of target level of performance shall mean the achievement of a performance
level
whereby all of the performance objectives for the year are at planned and
budgeted levels of performance (as provided in the bonus plan); and such
level
of performance shall be greater than threshold level of performance (which
is
the minimum level of performance that will result in payment of any bonus),
and
shall be less than the maximum level of performance, which is a level of
performance above the performance level planned and budgeted for the year,
which
would result in maximum bonus.
(c) Outstanding
Stock Awards. The following provisions of this paragraph 4(iii)(c)
shall apply to stock awards granted under the Corporation’s 1996 Stock Incentive
Plan, 1999 Stock Incentive Plan, or any similar successor plan:
(A) Except
as
provided in paragraph 4(iii)(d) below, the restrictions shall lapse (to the
extent that they have not previously lapsed) on any stock option award or
stock
appreciation right award outstanding on the Date of Termination, such stock
options and stock appreciation rights shall become fully exercisable beginning
as of the Date of Termination, and such exercisability shall continue until
it
would otherwise terminate in accordance with the terms of the applicable
award
agreement.
(B) Except
as
provided in paragraph 4(iii)(c)(C) below and paragraph 4(iii)(d) below, the
restricted period (or other vesting or similar period) with respect to any
restricted stock, restricted stock units and, except for stock options and
stock
appreciation rights, all other stock-based awards granted to you as of a
date
prior to the date of the Change in Control shall lapse on your Date of
Termination, and such shares shall be distributed to you at the same time
as the
cash payments described in paragraph 4(iv) are paid. However, any
change in the time or form of distribution otherwise provided under this
paragraph (B) shall be disregarded to the extent that such change would
otherwise result in the application of penalties under Section
409A.
9
(d) Awards
Granted after Change in Control. For any stock option, stock
appreciation right, restricted stock, restricted stock unit, or other
stock-based award granted after a transaction that constitutes a Change in
Control, such preceding transaction will not be treated as a Change in Control
for purposes of paragraph 4(iii)(c) above.
(e) Legal
Fees. The Corporation shall pay to you all legal fees and expenses
incurred by you at any time during your lifetime as a result of such termination
including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right
or
benefit provided by this Agreement; provided, however, that
payment with respect to any legal action other than in connection with a
tax
dispute (which is addressed in Section 5) shall be made only if you are
successful in the action. With respect to any such fees or expenses
paid with respect to any legal action other than a tax dispute, any such
payment
to you shall be made no later than the end of the calendar year next following
the year in which such legal fees or expenses are incurred by you; the amount
of
fees and expenses reimbursed in any calendar year shall not affect the amount
reimbursed in any other year; and such right to reimbursement may not be
liquidated or exchanged for any other benefit.
(f) Group
Health Coverage. You and your eligible family members shall be
entitled to group health coverage to the extent that such coverage is required
to be provided in accordance with the provisions of Section 4980B of the
Code
and Section 601 of the Employee Retirement Income Security Act (sometimes
referred to as “COBRA coverage”); provided that your eligibility for such
coverage shall be determined as though such coverage was required for the
greater of twenty-four (24) months after your Date of Termination or the
period
otherwise required under the applicable COBRA coverage
provisions. For the twenty-four (24) month period during which you
are entitled to such medical benefit coverage under this paragraph 4(iii)(f),
the premiums for such coverage shall be paid by the Corporation (either by
direct payment of such premiums, or by reimbursing you for the premiums,
at the
election of the Corporation), and the period of such coverage provided under
this paragraph 4(iii)(f) shall be counted toward the Corporation’s obligation to
provide COBRA coverage. (For the avoidance of doubt, it is recited
that the value of all or a portion of such coverage may be included in your
taxable gross income as reported by the Corporation.) Except as
specifically permitted by Section 409A of the Code and the regulations
thereunder as in effect from time to time (collectively, “Section 409A”), the
amount of coverage provided pursuant to this paragraph 4(iii)(f) to you and
your
eligible family members during any calendar year will not affect the amount
of
such coverage to be provided to you and your eligible family members in any
other calendar year, and any reimbursement for any premiums pursuant to this
paragraph 4(iii)(f) shall be paid to you no later than the end of the calendar
year next following the year in which you pay such
premiums.
10
(g) Welfare
Benefits. For the twenty-four (24) month period after your Date of
Termination, the Corporation shall arrange to provide you with life and
disability insurance benefits substantially similar to those which you
were
receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this paragraph 4(iii)(g) shall
be
reduced to the extent comparable benefits are actually received by you
from
another employer or otherwise during the twenty-four (24) month period
following
your termination, and any such benefits actually received by you shall
be
reported to the Corporation. Except as specifically permitted by
Section 409A, the amount of coverage provided to you pursuant to this
paragraph 4(iii)(g) during any calendar year will not affect the amount
of such
coverage to be provided to you in any other calendar year.
(h) Retiree
Coverage. You and your eligible family members shall be eligible for
(I) retiree medical benefits under the Corporation’s applicable plan, and (II)
retiree life insurance coverage under the Corporation’s applicable plan to the
extent that if, on your Date of Termination, you had terminated employment
with
the Corporation and its Affiliates and you would have become eligible for
severance benefits under the BNSF Railway Company Severance Plan (the “Severance
Plan”) if you had not been covered by this Agreement, and by reason of the terms
of the Severance Plan, you would otherwise have qualified for medical or
life
coverage or benefits, respectively, either upon your Date of Termination
or at
such later date as provided in the Severance Plan. In determining
whether you would have become eligible for severance benefits under the
Severance Plan for purposes of the foregoing provisions of this paragraph
4(iv)(h), you will be treated as having been involuntarily terminated by
the
Corporation for reasons other than Cause under the Severance Plan, and thereby
became an “Eligible Employee” under the Severance Plan, if your employment is
terminated by you for Good Reason (as defined in this
Agreement). Notwithstanding the foregoing, nothing in this paragraph
4(iv)(h) shall be construed to require your being provided with the benefits
described in clause (I) or clause (II) above to the extent that:
(A) you
would
not have been covered by the Severance Plan as of your Date of Termination,
or
(B) you
would
not have been eligible for such benefits under the Severance Plan as of your
Date of Termination,
11
(i) Outplacement
and Financial Assistance. The Corporation shall pay you a lump sum
cash payment equal to $20,000 to be used for outplacement and financial
assistance following your Date of Termination (provided that the financial
assistance will not be available to you if, during the year in which your
Date
of Termination occurs, you are expected by the Corporation to be a named
executive officer for that year for proxy reporting purposes), with payment
to
be made at the time specified in paragraph 4(iv)(A); provided that you
must submit documentation of any such expenses to the
Corporation. If, as of the date that is 12 months following your Date
of Termination, you have not provided the Corporation with documentation
showing
that you have spent $20,000 on outplacement and financial assistance, you
shall
repay to the Corporation in cash within five (5) business days after written
demand made therefor by the Corporation an amount equal to $20,000 less the
amount you have spent on outplacement and financial assistance within the
12-month period following your Date of Termination.
(iv) Form
of
and Restrictions on Payment. The payments provided for in paragraph
4(iii)(a)(2), paragraph 4(iii)(b) and paragraph 4(iii)(i) (the “Severance
Payments”) shall be paid in accordance with the following:
(a) The
Severance Payments shall be made not later than the 60th day following your
Date
of Termination or, if earlier, the fifth day after the General Release and
Covenant Not to Xxx (as defined below) becomes irrevocable in accordance
with
its terms.
(b) If
you
are treated as terminating your employment for Good Reason, or if your
employment is terminated by the Corporation without Cause, then, for the
12-month period immediately following your Date of Termination, you agree
that:
(I) You
will
not, without the express written consent of the Chief Executive Officer of
the
Corporation, be in Competition. For purposes of this
paragraph 4(iv)(b)(I), you shall be considered to be in “Competition”
during any period in which you are employed by, perform any material services
for, or own any interest in (except for an interest of not more than 1% in
any
publicly traded business) any “Competitor.” The term “Competitor”
shall mean:
(A) any
Class
I railroad;
12
(B) any
company or other enterprise that offers shipping services to the public
(including, without limitation, trucking services, rail services, air-freight
services, and water-going freight services);
(C) any
shipper for or customer of the Corporation; and
(D) any
Affiliate or agent of any entity described in paragraphs (A), (B) or (C)
above,
if the provision of services to or ownership of the interest in such Affiliate
or agent could conflict with or impair the interests of the Corporation,
in the
reasonable judgment of its chief legal officer.
(II) You
will
not, without the express written consent of the Chief Executive Officer of
the
Corporation, solicit or attempt to solicit any party who is then or, during
the
12-month period prior to such solicitation or attempt by you was (or was
solicited to become), a customer or supplier of the Corporation or Affiliate;
provided that the restriction in this paragraph 4(iv)(b)(II) shall
not apply to any activity on behalf of a business that is not a
Competitor.
(III) You
will
not, without the express written consent of the Chief Executive Officer of
the
Corporation, solicit, entice, persuade or induce any individual who is employed
by the Corporation or any Affiliate of the Corporation (or was so employed
within 90 days prior to your action) to terminate or refrain from renewing
or
extending such employment or to become employed by or enter into contractual
relations with any other individual or entity other than the Corporation
or its
Affiliates, and you will not approach any such employee for any such purpose
or
authorize or knowingly cooperate with the taking of any such actions by any
other individual or entity.
If,
during the 12-month period after your Date of Termination, you violate any
of
the foregoing provisions of this paragraph (b), you shall not be paid any
of the
Severance Payments if you have not yet been paid them as of the date of such
violation, and the Corporation may, in its discretion, require you to
immediately (or at such other time determined by the Corporation) repay to
the
Corporation all (or, in the discretion of the Corporation, less than all)
Severance Payments previously paid to you. You agree that the
Corporation, in addition to any other remedies available to it for such breach
or threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, or other equivalent relief, restraining you from any actual
or threatened breach of the foregoing provisions of this paragraph
4(iv)(b).
(v) Mitigation
and Set-Off. Except as provided in paragraph 4(iii)(f), paragraph
4(iii)(g) and paragraph 4(iv)(b), you shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for
in
this Section 4 be reduced by any compensation earned by you as the result
of
employment by another employer or by retirement benefits, or be offset against
any amount claimed to be owed by you to the Corporation, or
otherwise.
13
(vi) Section
409A. It is intended that the provisions of this Agreement comply
with Section 409A, and all provisions of this Agreement shall be construed
and
interpreted in a manner consistent with the requirements for avoiding taxes
or
penalties under Section 409A.
(a) Neither
you nor any of your creditors or beneficiaries shall have the right to subject
any deferred compensation (within the meaning of Section 409A) payable under
this Agreement or under any other plan, policy, arrangement or agreement
of or
with the Corporation or any of its Affiliates (this Agreement and such other
plans, policies, arrangements and agreements, the “Corporation Plans”) to any
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment. Except as permitted under Section 409A,
any deferred compensation (within the meaning of Section 409A) payable to
you or
for your benefit under the Corporation Plans may not be reduced by, or offset
against, any amount owing by you to the Corporation or any of its
Affiliates.
(b) If,
at
your separation from service (as defined under Treas. Reg. §1.409A-1(h)), (I)
you are a Specified Employee and (II) the Corporation makes a good faith
determination that an amount payable under a Corporation Plan constitutes
deferred compensation (within the meaning of Section 409A) the payment of
which
is required to be delayed pursuant to the six-month delay rule set forth
in
Section 409A in order to avoid taxes or penalties under Section 409A, then
the
Corporation (or its Affiliate, as applicable) shall not pay such amount on
the
otherwise scheduled payment date but shall instead accumulate such amount
and
pay it, without interest, on the first day of the seventh month following
such
separation from service. “Specified Employee” shall be defined in
accordance with Treas. Reg. §1.409A-1(i) and such rules as may be established by
the Chief Executive Officer of the Corporation or his or her delegate from
time
to time.
(c) Notwithstanding
any provision of any Corporation Plan to the contrary, in light of the
uncertainty with respect to the proper application of Section 409A, the
Corporation reserves the right to make amendments to this Agreement and any
Corporation Plan as the Corporation deems necessary or desirable to avoid
the
imposition of taxes or penalties under Section 409A. In any case,
except as specifically provided in Section 5, you are solely responsible
and
liable for the satisfaction of all taxes (together with interest and penalties
thereon) that may be imposed on you or for your account in connection with
any
Corporation Plan (including any taxes and penalties under Section 409A),
and
neither the Corporation nor any Affiliate shall have any obligation to indemnify
or otherwise hold you harmless from any or all of such taxes or
penalties.
(vii) Vesting
Of Stock Awards. Notwithstanding the foregoing provisions of this
Section 4, the following provisions of this paragraph (vii) shall apply to
awards described in this paragraph (vii) that were granted on or before
September 21, 2006:
(a) If
the
consummation of a Change in Control occurs before your Date of Termination,
the
restrictions shall lapse (to the extent that they have not previously lapsed)
on
any stock option award or stock appreciation right award outstanding on such
consummation, such stock options and stock appreciation rights shall become
fully exercisable upon such consummation, and such exercisability shall continue
until it would otherwise terminate in accordance with the terms of the
applicable award agreement.
14
(b) If
the
consummation of a Change in Control occurs before your Date of Termination,
the
restricted period (or other vesting or similar period) with respect to
any
restricted stock, restricted stock units and, except for stock options
and stock
appreciation rights, all other stock based awards granted to you shall
lapse on
such consummation, and such shares shall be distributed to you at the same
time
as the cash payments described in paragraph 4(iv) are paid. However,
any change in the time or form of distribution otherwise provided under
this
paragraph (b) shall be disregarded to the extent that such change would
otherwise result in the application of penalties under Code Section
409A.
(c) If
your
Date of Termination occurs prior to the consummation of a Change in Control,
the
vesting in the awards described in this paragraph (vii) shall be determined
in
accordance with paragraphs 4(i), (ii), (iii), and (iv), to the extent
applicable, without regard to this paragraph (vii).
5. PARACHUTE
TAX.
(i) In
the
event it shall be determined that any payment, benefit or distribution (or
combination thereof) by the Corporation, any affiliate (as that term is used
in
Treas. Reg. §1.280G-1, Q/A-46) or associated company or any trust established by
the Corporation, any such affiliate or associated company for the benefit
of its
employees, to or for your benefit (whether paid or payable or distributed
or
distributable pursuant to the terms of this Agreement, or otherwise) (a
“Payment”) would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties are incurred by you with respect to such
excise tax (such excise tax, together with any such interest and penalties,
hereinafter collectively referred to as the “Excise Tax”), you shall be entitled
to receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by you of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and the Excise
Tax
imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. For purposes of
this Section 5, “Payments” will include any payments, benefits or distributions
to other persons with respect to awards granted to you and transferred by
you to
such other person in accordance with the terms of the awards, to the extent
that
such awards result in taxable income being attributable to you.
Notwithstanding
the foregoing provisions of this paragraph (5)(i), if it is determined that
you are entitled to a Gross-Up Payment, but that the value of the Parachute
Payments (as defined below) does not exceed 110% (105% if you are Recently
Hired
(as defined below) by the Corporation) of the Safe Harbor Amount (as defined
below), then no Gross-Up Payment will be made to you and the Payments, in
the
aggregate, will be reduced to the Safe Harbor Amount. The reduction
of the Payments to the Safe Harbor Amount will be made in the following
order:
|
|
(a)
|
First,
by reducing the cash amounts of Parachute Payments (including welfare
benefits described in paragraph 4(iii)(g)) that would not constitute
deferred compensation (within the meaning of Section 409A) subject
to
Section 409A (with the Payments subject to such reduction to be
determined
by you), to the extent necessary to decrease the Payments that
would
otherwise constitute Parachute Payments to the Safe Harbor
Amount.
|
15
|
|
(b)
|
Next,
if after the reduction to zero of the amounts described in paragraph
(a)
above, the remaining scheduled Parachute Payments are greater than
the
Safe Harbor Amount, then by reducing the cash amounts of Payments
(excluding welfare benefits described in paragraph 4(iii)(g)) that
constitute deferred compensation (within the meaning of Section
409A)
subject to Section 409A, with the reductions to be applied first
to the
Payments scheduled for the latest distribution date, and then applied
to
distributions scheduled for progressively earlier distribution
dates, to
the extent necessary to decrease the Payments that would otherwise
constitute Parachute Payments to the Safe Harbor
Amount.
|
|
|
(c)
|
Next,
if after the reduction to zero of the amounts described in paragraphs
(a)
and (b) above, the remaining scheduled Parachute Payments are greater
than
the Safe Harbor Amount, then, by reducing any of the remaining
scheduled
Payments, in an order to be determined by the Corporation, to the
extent
necessary to decrease the Payments that would otherwise constitute
Parachute Payments to the Safe Harbor
Amount.
|
The
term
“Parachute Payment” is the portion of the Payments that would be treated as
parachute payments under Code Section 280G. The “Safe Harbor Amount”
is the maximum amount of Payments that could be made to you without giving
rise
to any Excise Tax. You will be treated as “Recently Hired” by the
Corporation if you were first employed by the Corporation or any of its
Affiliates in a calendar year that is less than three years prior to the
calendar year in which the change in control occurs for purposes of Code
Section
280G.
(ii) Subject
to the provisions of paragraph 5(iii), all determinations required to be
made
under this Section 5, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment, whether a reduction to the Safe
Harbor
amount is required and, if so, the amount of the reduction, and the assumptions
to be utilized in arriving at such determination, shall be made by such
nationally recognized certified public accounting firm as may be designated
by
the Corporation (the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Corporation and you within fifteen (15) business
days
of the receipt of notice from you that there has been a Payment, or such
earlier
time as is requested by the Corporation. All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation. Any
Gross-Up Payment, as determined pursuant to this Section 5, shall be paid
by the
Corporation to you within five (5) days after the receipt of the Accounting
Firm’s determination. If the Accounting Firm determines that no
Excise Tax is payable by you, it shall so indicate to you in
writing. Any determination by the Accounting Firm shall be binding
upon the Corporation and you. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Corporation should have been made
(“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts its remedies
pursuant to paragraph 5(iii) and you thereafter are required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid
by the Corporation to you or for your benefit.
16
(iii) You
shall
notify the Corporation in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Corporation of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after you are informed
in
writing of such claim and shall apprise the Corporation of the nature of
such
claim and the date on which such claim is requested to be paid. You
shall not pay such claim prior to the expiration of the thirty (30) day period
following the date on which you give such notice to the Corporation (or such
shorter period ending on the date that any payment of taxes with respect
to such
claim is due). If the Corporation notifies you in writing prior to
the expiration of such period that it desires to contest such claim, you
shall:
|
(a)
|
give
the Corporation any information requested by the Corporation relating
to
such claim;
|
|
(b)
|
take
such action in connection with contesting such claim as the Corporation
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
Corporation;
|
|
(c)
|
cooperate
with the Corporation in good faith in order to effectively contest
such
claim; and
|
|
(d)
|
permit
the Corporation to participate in any proceedings relating to such
claim;
|
provided,
however, that the Corporation 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 you harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties
with
respect thereto) imposed as a result of such representation and payment of
costs
and expenses. Without limitation on the foregoing provisions of this
paragraph 5(iii), the Corporation shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego
any
and all administrative appeals, proceedings, hearings and conferences with
the
taxing authority in respect of such claim and may pay the tax claimed on
your
behalf and direct you to xxx for a refund or contest the claim in any
permissible manner, and you agree 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 Corporation shall determine;
provided, however, that if the Corporation pays the tax claimed on
your behalf and directs you to xxx for a refund, the Corporation shall indemnify
and hold you harmless, on an after-tax basis, from any Excise Tax or income
tax
(including interest or penalties with respect thereto) imposed with respect
to
such payment; and provided, further, that if you are required to
extend the statute of limitations to enable the Corporation to contest such
claim, you may limit this extension solely to such contested
amount. The Corporation’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and
you 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.
17
(iv) If,
after
the payment by the Corporation of any tax claim pursuant to paragraph 5(iii),
you become entitled to receive any refund with respect to such claim, you
shall
(subject to the Corporation’s complying with the requirements of paragraph
5(iii)) promptly pay to the Corporation the amount of such refund (together
with
any interest paid or credited thereon after taxes applicable
thereto). If, after the payment by the Corporation of any tax claim
pursuant to paragraph 5(iii), a determination is made that you shall not
be
entitled to any refund with respect to such claim and the Corporation does
not
notify you in writing of its intent to contest such denial of refund prior
to
the expiration of thirty (30) days after such determination, then the amount
the
Corporation paid in respect of such claim shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(v) You
shall
be eligible for benefits under this Section 5, and shall be subject to the
terms
of this Section 5, regardless of whether the Change in Control occurs or
the
payments are made during the Agreement Term, regardless of whether you are
employed by the Corporation on or after the occurrence of a Change in Control
and, if your Date of Termination shall have occurred, regardless of the reason
for such termination.
(vi) Any
amounts that you become entitled to receive in respect of taxes, interest
and
penalties pursuant to this Section 5 shall be paid to you (or to the applicable
taxing authority on your behalf) not later than the last day of the calendar
year after the calendar year in which you remit the underlying taxes to the
applicable taxing authority, and any amounts that you become entitled to
receive
in respect of costs and expenses incurred in connection with a contest pursuant
to this Section 5 shall be paid not later than the later of (a) the last
day of
the calendar year after the calendar year in which you remit the underlying
taxes to the applicable taxing authority and (b) the last day of the calendar
year after the calendar year in which the applicable contest is
concluded. The foregoing provisions of this paragraph (vi) are
intended to conform the payments under this paragraph 5 and reimbursements
under
this Agreement to the requirements of Section 409A, and shall not be construed
to permit delay by the Corporation of payment of amounts due earlier in
accordance with this Agreement.
6. RIGHTS
OF
EMPLOYMENT, CONTINUATION OF EQUITY AWARDS. Except as otherwise
expressly provided in this Agreement:
(i) Nothing
in this Agreement shall be construed as limiting your right to resign prior
to
the beginning or after the end of the Agreement Term.
(ii) Nothing
in this Agreement shall be construed as limiting the Corporation’s right to
discharge you at any time prior to the beginning or after the end of the
Agreement Term, or to renegotiate the terms of your employment for any period
prior to the beginning or after the end of the Agreement Term.
(iii) Except
as
otherwise provided in paragraph 3(iv) (relating to discharge absent Cause
or
Disability), or as otherwise expressly provided in this Agreement, this
Agreement shall be inapplicable to the determination of your rights to payments
and benefits, if your Date of Termination occurs prior to the occurrence
of a
Change in Control, or if your Date of Termination occurs after the end of
the
Agreement Term and you are not subject to a disability after a Change in
Control.
18
(iv) This
paragraph 6(iv) will apply to any stock awards granted to you under the
Corporation’s 1996 Stock Incentive Plan, 1999 Stock Incentive Plan, or any
similar successor Plan that you hold immediately before a Change in Control
(“Equity Awards”).
(a) The
Board
(as constituted immediately prior to the Change in Control) shall determine,
not
later than immediately before the Change in Control date, whether immediately
after the Change in Control, the Equity Awards in each Award Category (as
defined below) will be Comparable (as defined below) to the Equity Awards
in
that Award Category that you held immediately before the Change in
Control. The three “Award Categories” are: (1)
Appreciation Awards, which includes stock options, stock appreciation rights,
and other similar awards based on appreciation in the price of the Corporation’s
stock after the grant date; (2) Non-Performance Based Full Value Awards,
which
includes restricted stock, restricted stock units, and other awards the value
of
which is based on the full value of the Corporation’s stock (rather than being
based on appreciation), and no portion of the value of which is based on
performance measures other than stock value; and (3) Performance Based Full
Value Awards, which includes restricted stock, restricted stock units and
other
awards (but not Performance Stock), the value of which is based in part on
the
full value of the Corporation’s stock, where vesting or other aspects of the
value of the awards is based on performance measures other than the value
of the
Corporation’s stock. The following shall apply to that
determination:
(I) The
category of Appreciation Awards will not be treated as Comparable if, for
any of
the awards in that category, the intrinsic value of such award (that is,
the
excess of the fair market value of the shares covered by such award over
the
exercise price) immediately after the Change in Control is less than the
intrinsic value of such award immediately before the Change in
Control.
(II) The
category of Performance Based Full Value Awards and the category of
Non-Performance Based Full Value Awards, respectively, will not be treated
as
Comparable for any of the awards in that category unless the fair market
value
of the stock covered by the award immediately after the Change in Control
is at
least equal to the fair market value of the stock subject to the award prior
to
the Change in Control.
(III) In
determining whether awards are Comparable, the Board shall take into account
such factors as it determines to be relevant, including the credit quality
of
the acquiring or remaining entity, the business fundamentals of the entity
whose
shares are covered by the awards, and whether the shares subject to the awards
will be readily tradable or saleable to the Corporation or its successor
at fair
market value after the Change in Control.
(IV) In
determining whether awards are Comparable, the Board shall disregard reductions
in value that are not material.
19
(b) If
the
Board determines in accordance with paragraph 6(iv)(a) that awards in any
Award
Category will not be Comparable after the Change in Control, the following
will
apply:
(I) If
Appreciation Awards are determined not to be Comparable after a Change in
Control, the restrictions on exercise (or any similar limitations) shall
lapse
(to the extent that they have not previously lapsed) for all awards in that
category outstanding immediately prior to the Change in Control, all awards
in
that category shall become fully exercisable beginning immediately prior
to the
Change in Control, and to the extent such awards would otherwise remain
outstanding, such exercisability shall continue until they would otherwise
terminate in accordance with the terms of the applicable award
agreement.
(II) If
Non-Performance Based Full Value Awards, or Performance Based Full Value
Awards,
respectively, are determined not to be Comparable after a Change in Control,
the
restricted period (or other vesting or similar period) for all awards in
the
applicable category or categories shall lapse immediately before the Change
in
Control, and shares covered by the awards in the applicable category or
categories shall be distributed to you immediately before the Change in
Control. However, any change in the time or form of distribution
otherwise provided under this paragraph 6(iv)(b)(II) shall be disregarded
to the
extent that such change would otherwise result in the application of penalties
under Section 409A, and such shares shall instead be delivered at the earliest
time that would not result in such penalties.
(III) If
such
determination applies to Performance Based Full Value Awards, the performance
objectives for all awards in that category will be deemed to have been achieved
at the target level of performance (without reduction to reflect that the
Change
in Control occurred prior to the end of the performance
period). However, the foregoing provisions of this paragraph
6(iv)(b)(III) shall not be applicable to Performance Stock, and the effect
of a
Change in Control with respect to such stock shall be determined in accordance
with the provisions of the agreement governing the terms of such
award.
(c) Nothing
in this paragraph 6(iv) shall be construed to authorize the cancellation
of
Equity Awards without the grant of replacement awards in the absence of such
authorization under the applicable Equity Award and/or stock plan or payment
of
cash or other property therefor.
7. SUCCESSORS;
BINDING AGREEMENT.
(i) The
Corporation will require (a) 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 Corporation or (b) in the event of a transaction
described in paragraph 2(iii) or (iv), the acquiring or surviving entity
in such
transaction, in each case, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation
would
be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of
this Agreement. As used in this Agreement, “Corporation” shall mean
the Corporation as hereinbefore defined and any successor to its business
and/or
assets or acquiring or surviving entity as aforesaid which assumes and agrees
to
perform this Agreement by operation of law, or otherwise, and “Board” shall mean
the Board as hereinbefore defined or equivalent governing body of such successor
or other entity, as applicable.
20
(ii) This
Agreement shall inure to the benefit of and be enforceable by you and your
personal or legal representatives, executors, administrators, successors,
heirs,
distributees, devisees and legatees. If you should die while any
amount would still be payable to you hereunder had you continued to live,
all
such amounts, unless otherwise provided herein, shall be paid in accordance
with
the terms of this Agreement to your devisee, legatee or other designee or,
if
there is no such designee, to your estate.
8. NOTICE. For
the purpose of this Agreement, notices and all other communications provided
for
in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notices
to the
Corporation shall be directed to the attention of the Board with a copy to
the
Secretary of the Corporation, or to such other address as either party may
have
furnished to the other in writing in accordance herewith, except that notice
of
change of address shall be effective only upon receipt.
9. MISCELLANEOUS.
(i) Subject
to paragraph 4(vi), no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to
in
writing and signed by you and such officer as may be specifically designated
by
the Board. No amendment, modification, or termination of this
Agreement shall be adopted or effective if it would result in accelerated
recognition of income or imposition of additional tax under Section
409A. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision
of
this Agreement to be performed by such other party shall be deemed a waiver
of
similar or dissimilar provisions or conditions at the same or at any prior
or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by
either party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this Agreement
shall
be governed by the laws of the State of Texas without regard to its conflicts
of
law principles. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of
any applicable withholding required under federal, state or local
law. Except as otherwise specifically provided in this Agreement, to
the extent that the provision of payments or benefits to you results in your
being liable for taxes, you shall not be entitled to any make-whole, gross-up,
or other indemnification with respect to such taxes. The obligations
of the parties to this Agreement shall survive the expiration of the Agreement
Term. Capitalized terms used in this Agreement shall be defined as
set forth in this Agreement.
21
(ii) If
any
amount owed to you hereunder is not paid on the applicable due date, then,
upon
the actual payment of such amount to you, you shall also receive interest
thereon from the original due date until the date of actual payment at an
annual
rate of interest equal to the Prime Rate reported in The Wall Street Journal,
Northeast Edition, on the last business day of the month preceding the Payment
Date, compounded annually.
10. VALIDITY. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11. COUNTERPARTS. This
Agreement may be executed in several counterparts, each of which shall be
deemed
to be an original but all of which together will constitute one and the same
instrument.
12. ARBITRATION. Any
dispute or controversy arising under or in connection with this Agreement
shall
be settled exclusively by arbitration, conducted before a panel of three
arbitrators in Ft. Worth, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on
the arbitrator’s award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance
of your
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
13. AMENDMENT. This
Agreement may be amended or canceled only by mutual agreement of the parties
in
writing without the consent of any other person. So long as you shall
live, no person, other than the parties hereto, shall have any rights under
or
interest in this Agreement or the subject matter hereof.
14. GENERAL
RELEASE AND COVENANT NOT TO XXX. You agree that as a condition of
receiving the Severance Payments and other benefits under paragraph 4(iii)
of
this Agreement in connection with your termination of employment, you shall
execute the attached General Release and Covenant Not to Xxx within thirty
(30)
days following your Date of Termination. You will be deemed to have
executed a general release as described in the preceding sentence only if
such
release is properly executed by you and returned to the Corporation within
such
thirty (30) day period. Notwithstanding any other provision herein,
unless the executed General Release and Covenant Not to Xxx has been received
by
the Corporation within such thirty (30) day period and a seven (7) day
revocation period from the date of execution has expired without your revoking
such release, (i) no Severance Payments shall be provided and all
entitlements to Severance Payments shall expire and be forfeited, (ii) the
Corporation shall be relieved of all obligations to make any further payments,
or provide or make available any further benefits, to you pursuant to xxxxxxxxxx
0(xxx)(x), 0(xxx)(x), 0(xxx)(x) and 4(iii)(h), (iii) you shall be required
to repay the Corporation, in cash within five (5) business days after written
demand is made therefor by the Corporation, an amount equal to the value
of any
benefits received by your pursuant to xxxxxxxxx 0(xxx)(x), 0(xxx)(x), 0(xxx)(x)
or 4(iii)(h) and (iv) you shall forfeit any stock awards that vested or became
exercisable pursuant to paragraph 4(iii)(c)(A) or 4(iii)(B) and any other
stock-based or other awards that otherwise vested (without regard to this
Agreement) under the terms of the applicable plan or award agreements by
reason
of your termination of employment following a change in control, as defined
in
this Agreement or any applicable plan or award agreement, and you shall not
receive any shares with respect thereto.
22
15. ENTIRE
AGREEMENT. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled. This Agreement constitutes an amendment, restatement,
and continuation of your Change in Control Agreement. The terms of
this Agreement, as set forth herein, shall apply with respect to any Change
in
Control that occurs on or after December 31, 2007, and the terms of your
Agreement in effect prior to this amendment and restatement shall be deemed
to
be completely replaced by the terms set forth herein. For the
avoidance of doubt, it is recited here that this Agreement shall not apply
to
any award (regardless of when granted) if the document(s) applicable to such
award provide that the terms of the award will be determined based solely
on the
provisions of such award document(s), or determined without regard to the
terms
of any other change in control arrangement.
If
this
letter sets forth our agreement on the subject matter hereof, kindly sign
and
return to the Corporation the enclosed copy of this letter, which will then
constitute our agreement on this subject.
Sincerely,
Burlington
Northern
Santa
Fe
Corporation
By:
Xxxxx
X.
Xxxxxxxx
Vice
President & Corporate General Counsel
Agreed
to
this _________ day of ________________, 20__.
_____________________________________
Person’s
Name
23
Attachment
GENERAL
RELEASE AND COVENANT NOT TO XXX
For
and
in consideration of the terms of the Agreement between Burlington Northern
Santa
Fe Corporation and its Affiliates and _____________dated _____________, _____,
(“Agreement”), the undersigned (i) does hereby agree to comply with the
restrictions applicable to me under the change in control agreement dated
________ between Burlington Northern Santa Fe Corporation and me (as well
as any
other restrictions applicable to me) after my termination of employment,
and
(ii) does hereby fully waive, release, acquit, and forever discharge Burlington
Northern Santa Fe Corporation and any and all of its Affiliates, divisions,
subsidiaries, benefit plans, officers, directors, stockholders, agents,
advisors, fiduciaries, administrators, and employees, or any of their successors
or assigns, from any and all claims, demands or causes of action, including
but
not limited to any claims for merger protection benefits pursuant to the
Interstate Commerce Commission decision in the Northern Lines,
BNSF, or Frisco merger proceedings, claims arising under Title VII
of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000(e), et
seq., the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Age Discrimination
in Employment Act of 1967, as amended, 29 U.S.C. § 621, et seq., the
Federal Employers’ Liability Act, and any other federal, state or local law,
order, regulation, common law, contract or collective bargaining agreement,
which relates to my employment or cessation of employment by Burlington Northern
Santa Fe Corporation and its Affiliates; provided however that the undersigned
does not waive enforcement of rights to any benefits provided or extended
pursuant to the terms of the Agreement or to assert any counterclaims in
response to any litigation initiated by Burlington Northern Santa Fe Corporation
against me. The undersigned specifically waives all claims, whether
past or present, known or unknown, and whether or not in litigation, which
I, or
acting on my behalf, my heirs, successors, executors, administrators or assigns,
may have based on any action, omission or event occurring prior to this
date. Included in this Release are any and all claims for future
damages allegedly arising from the alleged continuation of the effects of
any
past action, omission or event.
I
acknowledge that (i) I have read the Agreement including this General Release
and Covenant Not to Xxx (“Release”); (ii) I am advised by the Corporation to
consult, and have had the opportunity to consult, an attorney about the meaning
and effect of this Agreement and Release; (iii) I have had sufficient time,
and
at least 45 days, to consider and fully understand the meaning and effect
of
signing this Agreement and Release; (iv) I have 7 days after signing to change
my mind and revoke my acceptance by so notifying __________________________;
(v)
this Agreement and Release will not become effective and enforceable until
that
7-day period has passed; (vi) I am not otherwise entitled to the benefits
of the
Agreement; (vii) I am not relying on any written or oral statement or promise
other than as set out in the Agreement and Release; and (viii) this Agreement
and Release shall be governed by and construed in accordance with the laws
of
the State of Texas.
This
General Release and Covenant Not to Xxx is executed knowingly and voluntarily,
for adequate consideration, and is irrevocable and binding upon the
undersigned.
ACCEPTED
AND AGREED TO this _____ day of _______, 20___:
Person’s
Name: _________________________
Signature:_______________________________
24
