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EXHIBIT (C)(6)
CHANGE OF CONTROL AGREEMENT
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AGREEMENT by and between 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 the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
a. The "EFFECTIVE DATE" shall mean the first date during the Term (as
defined in Section 1(b)) on which a Change of Control (as defined in
Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is
terminated by the Company without Cause prior to the date on which the
Change of Control occurs or the Executive ceases to be an officer of the
Company, and if it is reasonably demonstrated by the Executive that such
termination of employment or cessation of status as an officer (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then, in each such case, for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or
cessation of status as an officer.
b. The "TERM" shall mean the period commencing on the date of the
consummation of the merger (the "Merger Date") between the Company and
Conrail Inc., a Pennsylvania corporation, pursuant to the Agreement and
Plan of Merger dated as of October 14, 1996, and ending on the earlier to
occur of (i) the third anniversary of such date or (ii) the first day of
the month next following the Employee's normal retirement date ("Normal
Retirement Date") under the principal pension plan in which the Executive
participates (the "Retirement Plan"); PROVIDED, HOWEVER, that commencing on
the date one year after the Merger Date, and on each annual
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anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date", unless previously
terminated, the Term shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior to the
Renewal Date the Company shall give notice to the Executive that the Term
shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "CHANGE OF
CONTROL" shall mean:
a. STOCK ACQUISITION. The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
b. BOARD COMPOSITION. Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs a result of an actual
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
c. BUSINESS COMBINATION. Approval by the shareholders of the Company
of a reorganization, merger, or consolidation or sale or other disposition
of all or substantially all of the assets of the Company or its principal
subsidiary (a "Business Combination") that is not subject, as a matter of
law or contract, to approval by the Interstate Commerce Commission or any
successor agency or regulatory body having jurisdiction over such
transactions (the "Agency"), in each case, UNLESS, following such Business
Combination:
(i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
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Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or its principal subsidiary or all or substantially all of
the assets of the Company or its principal subsidiary either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for
such Business Combination; or
d. REGULATED BUSINESS COMBINATION. Approval by the shareholders of the
Company of a Business Combination that is subject, as a matter of law or
contract, to approval by the Agency (a "Regulated Business Combination")
unless such Business Combination complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 2; or
e. LIQUIDATION OR DISSOLUTION. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
If any Change of Control is a Regulated Business Combination, but its
implementation involves another "Change of Control" that is not a Regulated
Business Combination within the meaning of this Section 2, then for all purposes
of this Agreement, such Change of Control shall not be deemed to be a Regulated
Business Combination, the provisions governing a Regulated Business Combination
shall not apply, and the provisions governing such other Change in Control shall
apply.
3. EMPLOYMENT PERIOD.
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a. GENERALLY. Subject to Section 3(b) and Section 5, the Company
hereby agrees to continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms
and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the
"Employment Period").
b. REGULATED BUSINESS COMBINATION. Notwithstanding the foregoing, in
the case of a Change of Control that is a Regulated Business Combination,
then for all purposes of this Agreement, the "Employment Period" shall mean
the longer of (i) the period commencing on the Effective Date and ending on
the third anniversary of such date or (ii) the period commencing on the
Effective Date and ending thirteen months from the effective date of a
final decision by the Agency on the proposed Regulated Business Combination
("Final Regulatory Action"), PROVIDED, HOWEVER, that (x) if the Final
Regulatory Action is a denial of the Regulated Business Combination then
for all purposes of this Agreement the "Employment Period" shall end upon
the sixtieth (60th) day following such Final Regulatory Action and (y) if
the Final Regulatory Action is an approval of the Regulated Business
Combination, but the Regulated Business Combination is not consummated by
the first anniversary of the Final Regulatory Action, then for all purposes
of this Agreement the "Employment Period" shall end upon such first
anniversary of the Final Regulatory Action.
4. TERMS OF EMPLOYMENT.
a. POSITION AND DUTIES. (i) During the Employment Period: (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with those set forth in any
applicable employment agreement then in effect between the Executive and
the Company (an "Existing Agreement"), or if there shall be no Existing
Agreement, with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the Effective
Date, and (B) the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the Effective Date
or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable 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
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institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
b. COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to the GREATER OF, the
Annual Base Salary provided for in any Existing Agreement and twelve times
the highest monthly base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase, and the term Annual Base Salary as utilized in
this Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall include any
company controlled by, controlling or under common control with the
Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the GREATER OF, the bonus provided for in any Existing
Agreement and the Executive's highest cash bonus under the Company's
annual incentive plans, or any comparable bonus under any predecessor
or successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not
employed by the Company for the whole of such fiscal year) (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive
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shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs, applicable to
other senior executives of the Company and its affiliated companies on
a basis no less favorable than provided for in any Existing Agreement,
but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided
by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or
if more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable to other senior executives of the
Company and its affiliated companies on a basis no less favorable than
provided for in any Existing Agreement, but in no event shall such
plans, practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive on a basis no less favorable than
provided for in any Existing Agreement and in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation,
tax and fi-
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nancial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, on a basis no
less favorable than provided for in any Existing Agreement and in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal
secretarial and other assistance, on a basis no less favorable than
provided for in any Existing Agreement and at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation on a basis no less favorable than
provided for in any Existing Agreement and in accordance with the most
favorable plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
5. TERMINATION OF EMPLOYMENT.
a. DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If
the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to
the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate
effective on the 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
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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 willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or 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.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests
of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail
and that in the case of the conduct specified in subparagraph
(i), Executive shall have 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
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be terminated by the Executive during the Employment Period for Good
Reason. For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive. For purposes of this Agreement, "Good Reason" shall mean
any event constituting "Good Reason" under any Existing Agreement and:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at
any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to
travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason shall be deemed to be a
termination for Good Reason for all purposes of this Agreement if such
termination occurs (i) in the case of a Change of Control that is not
a Regulated Business Combination, during the 30-day period immediately
following the first anniversary of the Effective Date, (ii) in the
case of a Change of Control that is a Regulated Business Combination
consummated pursuant to Final Regulatory Action, during the 30-day
period immediately following the first anniversary of the Final
Regulatory Action (it being understood that the Executive will have no
rights under this paragraph in the case of a Change of Control that is
a Regulated Business Combination (x) denied by the Agency or (y) for
any other reason not consummated within one year of Final Regulatory
Action).
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d. REGULATED BUSINESS COMBINATION. Notwithstanding the foregoing,
in the case of a Change of Control that is a Regulated Business
Combination, then for all purposes of this Agreement, during that
portion of the Employment Period prior to Final Regulatory Action, the
Executive may not exercise his rights to terminate his employment
under this Agreement for "Good Reason." The Executive may only
terminate his employment under this Agreement if he is "Constructively
Terminated" by the Company. Moreover, except to the extent expressly
set forth in the definition of "Constructive Termination," the
Executive shall have no remedy for any breach by the Company of the
provisions of Section 4; PROVIDED, HOWEVER, that any failure of the
Company to comply in any material respect with the provisions of
Section 4 shall create a rebuttable presumption that a Constructive
Termination has occurred.
For purposes of this Agreement, a "Constructive Termination shall
mean:
(i) substantial diminution of the Executive's duties or
responsibilities as contemplated by Section 4(a) of this
Agreement, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) either (x) a reduction in the Executive's cash
compensation (which shall mean his Annual Base Salary or Annual
Bonus) or (y) a discriminatory reduction in the Executive's other
incentive opportunities, benefits or perquisites described in
Section 4(b);
(iii) the Company's requiring the Executive to be based at
any office or location other than as provided in Section
4(a)(i)(B) hereof; or
(iv) any purported termination by the Company of the
Executive's employment otherwise than for Cause.
During that portion of the Employment Period after Final
Regulatory Action, the Executive may terminate his
Employment under this Agreement for "Good Reason."
e. NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason or Constructive
Termination, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(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,
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specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason, Cause or Constructive
Termination shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
f. DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason or Constructive Termination, the date of receipt
of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination
and (iii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
a. GOOD REASON OR CONSTRUCTIVE TERMINATION; 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 or Constructive
Termination:
(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 higher of (I)
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 (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has
been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which
the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during
the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a
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fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (3) any compensation
previously deferred 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
B. the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; 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 assuming for this purpose that all accrued benefits
are fully vested, and, assuming that the Executive's compensation
in each of the three years is that required by Section 4(b)(i)
and Section 4(b)(ii), 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;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue 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
4(b)(iv) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated
companies and their families, PROVIDED, HOWEVER, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer
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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 and to have retired on the last day of such
period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole
discretion; and
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy
or practice or contract or agreement of the Company and its
affiliated companies, including earned but unpaid stock and
similar compensation (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
b. DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further Obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be
entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to
death benefits, if any, as in effect with respect to other peer executives
and their beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive's
estate and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of the Company
and its affiliated companies and their beneficiaries.
c. DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
shall terminate
14
without further obligations to the Executive, other than for payment of
Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to
the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time
thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
d. CAUSE; OTHER THAN FOR GOOD REASON OR CONSTRUCTIVE TERMINATION. If
the Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y)
the amount of any compensation previously deferred by the Executive, and
(z) other Benefits, in each case to the extent theretofore unpaid. If the
Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason or Constructive Termination, this
Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of
Other Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(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.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the
15
provisions of this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. 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 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 9) (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 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. Notwithstanding
the foregoing provisions of this Section 9(a), if it shall be determined
that the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $50,000 (taking into
account both income taxes and any Excise Tax) as compared to the net
after-tax proceeds to the Executive resulting from an Elimination of the
Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
b. Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, 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 & Young or such other certified public accounting firm as may
be designated by the
16
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. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). 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 9, shall be paid by the Company to
the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding
upon the Company 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 9(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;
17
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 9(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; PROVIDED, HOWEVER, that if the Company directs the Executive to
pay such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
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 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section
9(c), a determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall
18
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,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it, except (x) otherwise publicly
available information, or (y) as may be necessary to enforce his rights under
this Agreement or necessary to defend himself against a claim asserted directly
or indirectly by the Company or its affiliates. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
11. SUCCESSORS.
a. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
c. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law, or otherwise.
12. 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:
19
If to the Executive:
--------------------
Xxxxx X. XxXxx
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to the Company:
------------------
One Xxxxx Center
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Executive Vice President -
Law and 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 or Constructive Termination pursuant to Section 5 of this
Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
f. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company specifically including without limitation any
Existing Agreement, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a) hereof and the terms of any Existing
Agreement or other written agreement, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either
the Executive or the Company at any time prior to the Effective Date, in
which case the Executive shall have no further rights under this Agreement.
In the event any compensation or benefits become due to the Executive
hereunder as a result of the Executive's termination of employment, the amount
of compensation and/or benefits to be paid or provided to the Executive
hereunder shall be reduced to the extent, and only to the extent (e.g., dollar
for dollar and benefit for benefit), the Executive is paid compensation or
provided such benefits under any Existing Agreement or other agreement with the
Company as a result of such termination of employment. Subject to the previous
sentence, it
20
is expressly agreed that the execution and performance of the parties'
respective obligations under this Agreement shall be without prejudice to any of
the Executive's rights or entitlement to compensation or benefits under any
Existing Agreements or other agreement with the Company or its affiliates.
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
CSX CORPORATION
By /s/ Xxxx X. Xxxx
-----------------------------
