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EXHIBIT (C)(5)
EMPLOYMENT AGREEMENT
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AGREEMENT by and between Conrail Inc., a Pennsylvania corporation
("Conrail"), CSX Corporation, a Virginia corporation (the "Company"), and Xxxxx
X. XxXxx (the "Executive"), dated as of the 14th day of October, 1996.
The Board of Directors of Conrail (the "Conrail Board") and the Board of
Directors of the Company, has determined that it is in the best interests of
Conrail and its shareholders to assure that Conrail will have the continued
dedication of the Executive pending the merger of Conrail and the Company (the
"Merger") pursuant to the Agreement and Plan of Merger dated as of October 14,
1996 and to provide the surviving corporation after the Merger with continuity
of management. Therefore, in order to accomplish these objectives, the Company's
Board and the Conrail Board have caused the Company and Conrail, respectively to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE DATE. The "Effective Date" shall mean the date on which the
Effective Time of the Merger (as defined in the Merger Agreement) occurs.
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to accept employment with and 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 fifth anniversary
of the Effective Date (the "Employment Period"). Notwithstanding the previous
sentence, commencing on the fifth anniversary of the Effective Date, and on each
anniversary date thereafter, this Agreement and the Executive's employment
hereunder will be automatically renewed and the term extended for successive
one-year periods upon the terms and conditions set forth herein unless either
party to this Agreement gives the other party written notice (in accordance with
Section 11(b)) of such party's intention to terminate this Agreement at least
three months prior to the end of such initial or extended term. For purposes of
this Agreement, any reference to the "Employment Period" will include the
original term and any extension thereof.
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The Employment Period shall, for the purposes of this agreement, be divided into
a period beginning on the Effective Date and ending on the second anniversary
thereof, or if earlier, upon the termination of employment of the Chairman and
Chief Executive Officer of the Company as of the date hereof or of his status as
Chief Executive Officer (the "First Employment Segment"); a period beginning
immediately after the First Employment Segment and ending on the fourth
anniversary of the Effective Date or if earlier, upon the termination of
employment of the Chairman and Chief Executive Officer of the Company as of the
date hereof or of his status as Chairman of the Board of the Company (the
"Second Employment Segment"); and a third period commencing immediately after
the Second Employment Segment or, if earlier upon the termination of the current
Chairman's status as Chairman of the Board of the Company (the "Third Employment
Segment").
3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) (A) During the First
Employment Segment, the Executive shall serve as Chief Operating Officer and
President of the Company and as Chief Executive Officer and President of
railroad businesses of Conrail and the Company (the "Railroad Companies"), with
such authority, duties and responsibilities as are commensurate with such
position and as may be consistent with such position as may be assigned to him
by the Board of Directors of the Company (the "Board"); (B) during the Second
Employment Segment, the Executive shall in addition to the titles listed in (A)
above, serve as Chief Executive Officer of the Company, with such authority,
duties and responsibilities as are commensurate with such position and as may be
consistent with such position as may be assigned to him by the Board; (C) during
the Third Employment Segment, the Executive Officer shall serve additionally as
Chairman of the Board of the Company, with such authority, duties and
responsibilities as are commensurate with such position; (D) the Executive's
services shall be performed at Philadelphia, Pennsylvania or such other location
the Executive shall select; provided, however, the location of the Executive's
employment shall not be determinative of the location of the Railroad Companies.
Notwithstanding the foregoing, the Company will use its best efforts to cause
the Executive to be elected as a director of the Company and to remain as such
throughout the Employment Period and shall appoint the Executive as (i) Chief
Executive Officer of the Company and (ii) Chairman of the Board immediately upon
vacancy of such position by the individual
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previously serving as such, but in no event later than the applicable dates
specified above.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote substantially all of his attention and time during normal business
hours to 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 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. (A) During the First Employment Segment,
the Executive shall receive an annual base salary ("Annual Base Salary") which
shall be paid at a monthly rate at least equal to 90% of the monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Chief Executive Officer of the Company but not less than $810,000 per
annum; (B) during the Second and Third Employment Segments, the Executive shall
receive an 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, by the Company to the Chief
Executive Officer of the Company during the First Employment Segment in respect
of such period but not less than $900,000 per annum. 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
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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. As used in
this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(ii) Incentive Compensation. During the Employment Period, the
Executive shall participate in all annual and long-term incentive plans,
practices, policies and programs applicable to any other senior executives of
the Company and its affiliated companies, provided that the Executive shall have
an annual bonus opportunity of no less than 100% of his Annual Base Salary for
achieving targeted performance or if greater, during the First Employment
Segment, 90% of the annual bonus opportunity of the Chief Executive Officer of
the Company. During the Employment Period the Executive shall receive, as a
percentage of Annual Base Salary, annual bonus and long-term incentive
opportunities (including stock based awards) of no less than that provided to
any other senior executives of the Company and its affiliated companies, and
during the First Employment Segment, such opportunities shall be no less than
90% of that provided to the Chief Executive Officer of the Company.
(iii) Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs on a basis no less favorable than that
applicable to any other senior 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) on a basis no less favorable than that applicable
to any other senior executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for
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all reasonable expenses incurred by the Executive in accordance with the
Company's policies.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, payment of
club dues, and, if applicable, use of an automobile and payment of related
expenses, on a basis no less favorable than that applicable to any other senior
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 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 plans, policies, programs and
practices of the Company and its affiliated companies on a basis no less
favorable than that applicable to any other senior executives of the Company and
its affiliated companies but in any event no less than four weeks vacation per
annum during the Employment Period.
(ix) Service Credit. Executive shall be provided full service credit
for his years of service at Conrail for purposes of eligibility, vesting and
benefit accrual under each employee benefit plan, program or arrangement of the
Company and its affiliates in which Executive participates during the Employment
Period (with an offset for benefit accrual purposes for any benefit accrued
under a defined benefit pension plan of Conrail prior to becoming a participant
in a Company defined benefit pension plan).
4. 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 Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set forth below),
the Company may give to the Executive written notice in accordance with Section
11(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
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terminate effective on the 60th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 60 days
after such receipt, the Executive shall not have returned to substantially
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 incapacity due to mental or physical illness which is determined to be
total and permanent by an independent physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(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 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 Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company, or
(iii) conviction of a felony (which through lapse of time or otherwise
is not subject to appeal) or guilty or nolo contendere plea by the Executive
with respect thereto, or
(iv) a material willful breach of the covenants contained in Section
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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
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adopted by the Board or, during the First Employment Segment, upon the
instructions of the Chief Executive 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)
through (iv) above, and specifying the particulars thereof in detail and that in
the case of the conduct described in subparagraphs (i) and (iv) above, Executive
failed to cure such conduct within 30 days of his receipt of written notice from
the Company detailing such conduct.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for or without Good Reason. For purposes of this Agreement, "Good
Reason" shall mean in the absence of a written consent of the Executive:
(i) the failure of the Company to appoint the Executive as Chief
Executive Officer of the Company as provided in Section 3(a);
(ii) the failure of the Company to appoint the Executive as a director
on the Effective Date and as Chairman of the Board of the Company as provided in
Section 3(a);
(iii) the removal of the Executive during the Employment Period as a
director or from any of the positions described in Section 3(a) or the
assignment to the Executive of any duties inconsistent in any material respect
with the Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
3(a) of this Agreement, or any other action by the Company which results in a
material diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
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action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iv) any material failure by the Company to comply with any of the
provisions 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;
(v) the Company's requiring the Executive without his consent to be
based at any office or location more than 35 miles from that provided in Section
3(a)(i)(D) hereof or the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required immediately prior to
the Effective Date;
(vi) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(vii) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
For purposes of this Section 3(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b) 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 or Cause shall not waive any right of the Executive or
the Company, respectively,
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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.
(e) 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, the date of receipt of the Notice of Termination or any later date
specified therein within 30 days of such notice, 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.
5. Obligations of the Company Upon Termination. (a) Good Reason; Other Than
For Cause, Death or Disability. 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:
(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 the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of (x)
the highest annual bonus paid to the Executive for any of the three years
prior to the Date of Termination (the "Recent Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the fiscal year
in which the Date of Termination occurs through the Date of Termination,
and the denominator of which is 365 and (3) any compensation previously
deferred (other than pursuant to a qualified plan) by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
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B. the greater of (1) the amount equal to the product of (i) the
number of months remaining in the Employment Period on the Date of
Termination (the "Continuation Period"), divided by twelve and (ii) the sum
of (x) the Executive's Annual Base Salary and (y) the Recent Annual Bonus,
and (2) the amount equal to the product of (i) three and (ii) the sum of
(x) the Executive's Annual Base Salary and (y) the Recent Annual Bonus;
provided, however, if the Date of Termination occurs during the First
Employment Segment, then for purposes of the preceding clauses of this
paragraph in determining the weighted average of the Executive's Annual
Base Salary and Recent Annual Bonus, (i) the Executive's "Annual Base
Salary" payable in respect of the 36 months representing the Second
Employment Segment and the Third Employment Segment shall be the higher of
his Annual Base Salary or the annual base salary of the current Chief
Executive Officer of the Company and (ii) the Executive's "Recent Annual
Bonus" payable in respect of the 36 months representing the Second
Employment Segment and the Third Employment Segment shall be the higher of
his Recent Annual Bonus and the most recent annual bonus paid or awarded to
the Chief Executive Officer of the Company; and
C. an amount equal to the excess of (a) the actuarial equivalent of
the benefit under the Company's qualified defined benefit retirement plan
(the "Retirement Plan") (utilizing actuarial assumptions no less favorable
to the Executive than those in effect under the Company's Retirement Plan
immediately prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together, the "SERP")
which the Executive would receive if the Executive's employment continued
for three years after the Date of Termination or, if longer, for the
Continuation Period, assuming for this purpose that all accrued benefits
are fully vested, and, assuming that the Executive's compensation in each
such year is that required by Section 3(b)(i) and assuming an annual bonus
equal to the Recent Annual Bonus, over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the Retirement
Plan and the SERP as of the Date of Termination;
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(ii) for three years after the Executive's Date of Termination or, if
longer, for the Continuation Period, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 3(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 if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until three years after
the Date of Termination, or if longer, for the Continuation Period, and to have
retired on the last day of such period; and
(iii) 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 any amount which (i) is earned
by, but has not been paid to, the Executive and (ii) would have been paid or
vested in the calendar year in which the Executive's termination of employment
occurs (such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(iv) all stock-based awards shall become immediately vested and, in
the case of stock options or other exercisable awards, shall remain exercisable
for at least 90 days following the Date of Termination or such longer period as
may be provided in any applicable plan or award agreement.
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(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 5(b) shall include
death benefits 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. In addition, all stock based awards that would have vested by the
end of the fiscal year in which such termination occurs shall become immediately
vested and, in the case of stock options and other exercisable awards, shall
remain exercisable for at least 90 days following the date of such termination
or such longer period as may be provided in any applicable plan or award
agreement.
(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 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families. In addition, all stock based awards
that would have vested by the end of the fiscal year in which such termination
occurs shall become immediately vested and, in the case of stock options and
other exercisable awards, shall remain exercisable for at least 90 days
following the date of such termination or such longer period as may be provided
in any applicable plan or award agreement.
(d) Cause; Other Than For Good Reason. If the Executive's employment shall
be terminated for Cause or the Executive terminates his employment without Good
Reason during
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the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
(x) his Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Executive (other than pursuant to a
qualified plan), and (z) Other Benefits, in each case to the extent theretofore
unpaid.
6. 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
and for which the Executive may qualify, nor, subject to Section 11(f), 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.
7. 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, except as provided
in Section 5(a)(ii), 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
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the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution by Conrail, in
connection with the Merger, or 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 otherwise, but determined without regard to any
additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income and employment taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 8(c), all determinations required
to be made under this Section 8, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Ernst and Young LLP
or such other certified public accounting firm reasonably acceptable to the
Company as may be designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Executive within five days of (i) the later
of the due date for the payment of any Excise Tax, and (ii) the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company
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and the Executive. 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 Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is
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 Company to or for the benefit of the
Executive.
(c) 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
Company of the Gross-Up Payment. 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 effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
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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 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 Section 8(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 Excise Tax or income tax
(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 a Gross-Up Payment would be payable hereunder 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 8(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 8(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 8(c), a determination is made that
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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 and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. (a) The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential 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 or in order to enforce his
rights under this Agreement or as necessary to defend himself against a claim
asserted directly or indirectly by the Company or its affiliates, communicate or
divulge any such information, knowledge or data that is not otherwise publicly
available to anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(b) In the event of a breach or threatened breach of this Section 9, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledges that damages would be inadequate and
insufficient.
(c) Any termination of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9.
10. 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
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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.
11. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, 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) 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:
--------------------
Xxxxx X. XxXxx
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to Green:
------------
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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Attention: General Counsel
If to the Company:
------------------
One Xxxxx Center
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Executive Vice President -
Law & Public Affairs
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.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) 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.
(e) 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
pursuant to Section 4(c)(i)-(ix) 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.
(f) The Executive and Conrail acknowledge that effective on the Effective
Date the agreement between the Executive and Conrail dated as of August 1, 1995
will be superseded by this Agreement, and that the terms and conditions of this
Agreement shall be controlling during the Employment Period. The Change of
Control Agreement between the Executive and the Company dated as of October 14,
1996 (the "Severance Agreement") shall become effective in the event of any
Change of Control (as defined in
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the Severance Agreement) subsequent to the consummation of the Merger.
(g) The Company shall indemnify and hold the Executive and his legal
representatives harmless to the fullest extent permitted by applicable law, from
and against all judgements, fines, penalties, excise taxes, amounts paid in
settlement, losses, expenses, costs, liabilities and legal fees if the Executive
is made, or threatened to be made a party to any threatened or pending or
completed action, suit, proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Company or its
affiliates to procure a judgement in its favor, by reason of the fact that the
Executive is or was serving as a director or officer of the Company or its
affiliates or in any capacity at the request of the Company or its affiliates
for any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The right to indemnification provide in this paragraph
(g) shall not be deemed exclusive of any other rights to which Executive may
have or hereafter be entitled under any law or the charter or by-laws of the
Company or its affiliates or otherwise, both as to action in Executive's
official capacity and as to action in another capacity while holding such
office, and shall continue after Executive has ceased to be a director or
officer and shall inure to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder shall be
satisfied on an as incurred basis. In addition, the Company agrees to continue
to maintain customary and appropriate directors and liability insurance during
the Employment Period and the Executive shall be entitled to the protection of
any such insurance policies on no less favorable a basis than is provided to any
other officer or director of the Company or its affiliates.
(h) To the extent the provisions of this Agreement operate to amend the
terms of or awards outstanding under certain benefit or incentive award plans,
and the terms of such plans or awards require approval of such amendment by the
Company or its affiliated companies, or an authorized representative thereof,
and/or the Executives consent thereto (including the Executive's consent to
amend the terms of outstanding awards, if any), (i) the offering of this
Agreement pursuant to the direction of the Board shall constitute the express
authorization of the Company
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and its affiliated companies and their approval of the amendment of such plan or
award in the manner set forth herein, and (ii) the Executive's consent to the
terms hereof shall signify his consent to the amendment of such plan or award,
as required, as of the date hereof.
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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.
/s/ Xxxxx X. XxXxx
-----------------------------------
Xxxxx X. XxXxx
CONRAIL INC.
By /s/ Xxxxxxx X. X'Xxxxx
---------------------------------
CSX CORPORATION
By /s/ Xxxx X. Xxxx
---------------------------------
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