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Exhibit 10.1
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Form Of Severance Agreement
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This agreement, dated as of August 1, 1995, between Conrail Inc.
("Company") and ("Agreement") (1) memorializes your entitlement to
certain rights and benefits hereinafter detailed that mature upon, and
only upon, your Termination (this and other terms not defined in the
text are defined in Attachment A hereto) following a Change in Control;
(2) absent such Termination, is not intended to affect, and shall not
be construed as affecting, the compensation and benefits you are
entitled to receive; and (3) is not under any circumstances a contract
or guarantee of employment with the Company. Except as herein expressly
provided, your rights under any and all employee retirement income or
welfare benefit policies, plans, programs or arrangements of the
Company in which you participate shall be governed by the terms thereof
and shall not be enlarged hereunder or otherwise affected hereby.
You are intended to rely on this Agreement. Its terms and protections
reflect the Company's beliefs that, in the event of a potential Change
in Control, (a) the best interests of its stockholders require
management focus and continuity; and (b) such focus and continuity will
be enhanced by providing economic protection to officers and other key
employees whose employment is most likely to be affected adversely by
such a change. At the recommendation of its Compensation Committee
("Committee"), which is composed entirely of non-employee directors,
the Board of Directors of the Company ("Board") has directed the
Company to offer this Agreement to you.
For purposes of the Agreement, references to the Company shall include,
as appropriate, its principal subsidiary, Consolidated Rail
Corporation.
I. Effective Date and Term
The Agreement is effective and its term ("Term") begins on the date
hereof. The Term ends on the earliest of (a) the date, prior to a
Change in Control, you cease to be an employee of the Company, (b) the
date, prior to a Change in Control, you cease to be employed by the
Company at Salary Grade Level [ ] or above, or any comparable successor
Salary Grade Level, and (c) the date, prior to a Change in Control,
that is twenty-four (24) months after you or the Company gives notice
to the other of the termination of this Agreement, provided, however,
that if a Change in Control occurs during the Term hereof, this
Agreement shall terminate on the later of (x) after a period of thirty-
six (36) months, beginning on the day next following a Change in
Control, or (y) after a period of twenty-four (24) months from a Final
Regulatory Decision, beginning on the day next following a Change in
Control, if such Change in Control is subject to approval prior to
consummation by the Interstate Commerce Commission or some successor
agency performing the same review and approval function (such period
being, the "Change in Control Period"). For purposes hereof, a "Final
Regulatory Decision" shall be the effective date of a final decision by
such regulatory agency.
II. Binding on Successors
The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization, share exchange or
otherwise) to all or substantially all of the business and/or assets of
the Company ("Successor"; and such result, "Succession") by agreement,
in form and substance satisfactory to the Company's chief legal
officer, or his designee(s), serving immediately prior to the Change in
Control, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required
to perform it had no such Succession occurred. This Agreement shall be
binding upon and inure to the benefit of the Company and any Successor
(and, from and after any such Succession, that Successor shall be
deemed the "Company" for purposes of this Agreement), but otherwise the
Company shall not assign or transfer any of its rights, or delegate any
of its duties or obligations, hereunder.
III. Protection Afforded by the Agreement During the Change in Control
Period
Except as limited by subparagraph (vii) concerning retirement, in the
event of your Termination during the Change in Control Period, the
Company shall (1) pay you within ten (10) business days after your
Termination Date the amounts indicated in subparagraphs (i) (A) and
(B), (iii) and (iv); (2) continue to provide the Additional Benefits
detailed in subparagraph (v); (3) pay or afford the other amounts or
credits provided in subparagraphs (i) (C) and (D), (ii) and (vi); and
(4) pay and provide the Tax Assistance Payments and other benefits
defined and called for herein:
(i) ACCRUED OBLIGATIONS. In full satisfaction of any and all claims
you have or may have for compensation earned through prior service
performed by you for the Company prior to your Termination Date:
(A) a lump-sum payment in an amount equal to your Base Pay to the
extent not theretofore paid; and
(B) a lump-sum payment in an amount equal to any cash compensation
previously deferred (together with any accrued interest and earnings
thereon, including any matching amounts earned as a result of the
deferral) and any accrued vacation pay, in each case to the extent not
theretofore paid.
(C) Any previously deferred compensation held in the form of Company
or successor securities (together with matching amounts of such
securities earned as a result of the deferral or as the result of
dividend reinvestment, if any) shall be delivered to you within ten
(10) business days of the Termination Date, with all remaining
restrictions thereon, if any, being treated as having lapsed as of the
day prior to the Termination Date; provided however, in the event you
are subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), delivery of such securities may be
delayed for some period of time to the extent required to comply with
applicable provisions of Section 16, during which period such
securities shall not be forfeited notwithstanding your Termination and
after which period such securities shall be delivered to you at the
earliest possible date.
Notwithstanding the foregoing, your entitlement to cash amounts
deferred and Company securities allocated to you in connection with
your participation, if any, in the Company's 401(k) Matched Savings
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Plan and Employee Stock Ownership Plan, or any successor plan, shall be
governed exclusively by the terms of such plan and not by this
subsection (C).
(D) In addition, for that portion of the calendar year prior to your
Termination Date, you shall be entitled to receive, on the date such
pay is paid to other employees of the Company, as bonus or incentive
pay, an amount equal to the product of (i) the amount you would have
received had you been employed on December 31 of the year that includes
your Termination Date, under the Company's Annual Performance
Achievement Reward Plan, Annual Performance Achievement Reward Plus
Plan or Senior Executive Performance Plan, as applicable, (or any
successor(s)) in effect for that year, multiplied by (ii) the
percentage (carried to three decimal places) derived by dividing (a)
the number of calendar days in that year which immediately precedes
your Termination Date by (b) 365.
(ii) STOCK OPTIONS. Any stock options granted to you by the Company
that have not vested prior to your Termination Date shall be vested as
of the day prior to your Termination Date and shall be exerciseable in
accordance with the terms of the applicable granting agreement,
provided however, in the event you are subject to Section 16 of the
Exchange Act, your right to exercise the options vesting pursuant to
this Agreement or to dispose of shares acquired through the exercise of
such options may be delayed to the extent required to comply with
applicable provisions of Section 16, during which period of delay such
securities shall not be forfeited notwithstanding your Termination.
For purposes of applying the terms of any granting agreement to options
vesting pursuant to this Agreement, your Termination shall be
characterized and shall have the effect as set forth in Item (L) of
Attachment A.
(iii) PERFORMANCE SHARE EQUIVALENT. In lieu of your having any
entitlement to unearned Performance Shares that you have been awarded
and as to which a performance period has not been completed on or
before your Termination Date, you shall receive a cash payment equal to
the Performance Share Equivalent (determined in accordance with Item
(H) of Attachment A).
(iv) SEVERANCE PAY. In lieu of, and in full satisfaction of any and
all claims you have or may have thereafter to receive cash compensation
or awards under or otherwise to participate in or under any feature of
any compensation policy, plan, program or arrangement of the Company
subsequent to your Termination, a lump-sum payment ("Severance Pay") in
an amount that is three (3) times the sum of:
(A) an amount equal to your Base Pay (determined in accordance with
Item (B)(ii) of Attachment A); and
(B) an amount equal to your Highest Recent Incentive Award
(determined in accordance with Item (G) of Attachment A).
(v) ADDITIONAL BENEFITS. For the thirty-six (36) months next
following your Termination Date, the Company shall arrange to provide
you with Additional Benefits substantially similar to those you were
entitled to receive immediately prior to your Termination Date (and if
and to the extent that such benefits shall not or cannot be paid or
provided under any policy, plan, program or arrangements of the Company
for whatever reason, the Company shall itself pay or provide for the
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payment of such Additional Benefits to you, your dependents and your
beneficiaries). Without otherwise limiting the purposes or effects of
the provisions under the caption "No Mitigation Obligation," infra,
Additional Benefits to which you are entitled pursuant to the first
sentence of this subparagraph (v) shall be reduced to the extent you
actually receive comparable Additional Benefits from another employer
during such period following your Termination Date, and you shall
report to the Company any such benefits actually received.
(vi) CREDITABLE SERVICE FOR RETIREMENT. For purposes of determining
your creditable service under the Company's various plans providing
retirement income, including without limitation any supplemental
retirement plans and any agreement(s) with you, you shall receive an
additional thirty-six (36) months of creditable service under each of
such plans or agreements. However, the additional service shall not be
credited to you under any plan where the effect of crediting such
additional service would violate Section 401(a) of the Internal Revenue
Code of 1986, as amended ("Code"), but shall instead be credited under
any retirement plan supplemental to a retirement plan to which Section
401(a) of the Code relates. Notwithstanding the foregoing, in the case
of a Board-appointed officer, such creditable service shall not be
greater than the number that is equal to the number of months
(calculated in accordance with the terms of the applicable plan)
between (a) that officer's Termination Date and (b) the date on which
such officer attains the mandatory retirement date for that officer, if
any, in effect at the time of the Change in Control. Your rights under
such programs and plans shall be governed by the terms thereof and,
except as herein expressly provided, shall not be enlarged hereunder or
otherwise affected hereby.
(vii) SPECIAL PROVISO FOR THOSE ELIGIBLE TO RETIRE. If on your
Termination Date you are eligible to retire under the provisions of any
of the Company's retirement plans, as in effect either immediately
preceding the Change in Control or on your Termination Date, you may
elect to retire on your Termination Date by giving the Company written
notice, postmarked or accepted for next-day delivery by a private
delivery service no later than noon on the business day next succeeding
your Termination Date. If and only if you make this election, your
retirement will be deemed to have occurred simultaneously with your
Termination Date (provided, however, that the "effective date" of such
retirement for purposes of such retirement plans shall be as provided
under such plans), and your rights concerning Performance Shares,
options, Additional Benefits, compensation deferred in the form of
securities and pro rata incentive pay shall be governed by the retiree
(or any specific change in control) provisions of the applicable plans,
as in effect either immediately preceding the Change in Control or on
your Termination Date, and not by subparagraphs (i)(C), (i)(D), (ii),
(iii) and (v) hereof.
There shall be no right of setoff or counterclaim in respect of any
claim, debt or obligation against any payment to, or benefit for, you
provided for in this Agreement, except as expressly provided in
subsection (v).
Without limiting your rights to arbitration, at law or in equity, if
the Company fails on a timely basis to make any payment required to be
made pursuant to provisions under this caption, the Company shall pay
interest on the amount thereof at an annualized rate of interest equal
to three percent (3%) above the then-applicable Prime Rate ("Prime
Rate" means the rate of interest publicly announced as its prime rate
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by Morgan Guaranty Trust Company of New York, or such other nationally
recognized banking institution as the Company may, from time to time,
select).
IV. Certain Tax Payments by the Company
Notwithstanding anything in the Agreement to the contrary, in the event
of (a) your Termination and (b) the determination (as hereinafter
provided) that any required payment by the Company to or for your
benefit, whether paid or payable pursuant to the terms of the Agreement
or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, stock appreciation right, or similar right, or the lapse or
termination of any restriction on the vesting or exercisability of any
of the foregoing including without limitation the acceleration of the
vesting or lapse of deferral periods under the Company's Long-Term
Incentive Plans (individually and collectively, "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code or any
successor provision thereto by reason of the Payment's being considered
"contingent on a change in ownership or control" of the Company within
the meaning of Section 280G of the Code (or any successor provision
thereto), or any interest or penalties with respect to such excise tax
(collectively, "Excise Tax"), then you shall be entitled to receive an
additional payment or payments (individually or collectively, "Tax
Assistance Payment"), which shall include an amount such that, after
you pay (1) all taxes (including any interest or penalties imposed with
respect to such taxes) and (2) any Excise Tax imposed upon the Tax
Assistance Payment, you retain so much of the Tax Assistance Payment as
is equal to the Excise Tax imposed on the Payment.
Subject to the provisions hereinafter concerning your providing notice
of a claim by the Internal Revenue Service, all determinations required
to be made under these provisions, including whether an Excise Tax is
payable by you, the amount of such Excise Tax and whether the Company
is required to pay you a Tax Assistance Payment and the amount of such
Tax Assistance Payment, if any, shall be made by Price Waterhouse LLP,
or such other nationally recognized accounting firm retained by the
Company and reasonably acceptable to you ("Accounting Firm"). The
Company shall direct the Accounting Firm to submit its determination
and detailed supporting calculations to both you and the Company within
thirty (30) days after the Termination Date, if applicable, and any
such other time or times as you or the Company may request. If the
Accounting Firm determines that any Excise Tax is payable by you, the
Company shall pay the required Tax Assistance Payment to you within ten
(10) business days after the Company receives such determination and
calculations with respect to any Payment to you.
Any federal tax returns you file shall be prepared and filed on a basis
consistent with the determination of the Accounting Firm with respect
to the Excise Tax payable by you. If the Accounting Firm determines
that you are required to pay no Excise Tax, it shall (at the same time
it makes such determination) furnish you and the Company an opinion
that you have substantial authority not to report any Excise Tax on
your federal income tax return. However, in view of the uncertainty
concerning application of Section 4999 of the Code (or any successor
provision thereto) at the time of any determination made hereunder by
the Accounting Firm, it is possible that a Tax Assistance Payment that
should have been made by the Company will not have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts or fails to pursue its
remedies pursuant to the provisions concerning notice of a claim by the
Internal Revenue Service, and you thereafter are required to make a
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payment of any Excise Tax, you shall direct the Accounting Firm to
determine the amount of the Underpayment and to submit its
determination and detailed supporting calculations as promptly as
possible both to you and to the Company, which shall pay the amount of
such Underpayment to you or for your benefit within ten (10) business
days following the Company's receipt of such determination and
calculations.
Each of you and the Company shall provide the Accounting Firm access to
and copies of any books, records and documents in your or its
possession, as the case may be, reasonably requested by the Accounting
Firm, and shall otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination and
calculations required or contemplated hereunder.
The Company shall bear the fees and expenses of the Accounting Firm for
services hereunder. If, for any reason, you initially pay such fees
and expenses, the Company shall reimburse you the full amount of the
same within ten (10) business days following receipt from you of a
statement and reasonable evidence of your payment thereof.
You shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the Company to pay a
Tax Assistance Payment. You shall give such notification as promptly
as practicable, but in no event later than the tenth (10th) business
day next following your receipt of such claim, and you further shall
apprise the Company of the nature of such claim and the date on which
it is required to be paid (in each case, to the extent known to you).
You shall not pay or otherwise satisfy such claim prior to the earlier
of (a) the expiration of the thirty (30)-calendar-day period next
following the date on which you give notice to the Company or (b) the
date any payment of the amount with respect to such claim is due. If
the Company notifies you in writing prior to the expiration of such
period that it desires to contest such claim, you shall:
(1) provide the Company any written records or documents in your
possession relating to such claim and reasonably requested by the
Company;
(2) take such action in connection with contesting such claim as the
Company reasonably shall request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(3) cooperate with the Company in good faith in order effectively to
contest such claim; and
(4) permit the Company to participate in any proceedings relating to
such claim, provided, however, that the Company directly shall bear and
pay all costs and expenses (including without limitation, interest and
penalties) incurred in connection with such contest and shall indemnify
you and hold you harmless, on an after-tax basis, from and against any
and all Excise Tax or income tax (including without limitation,
interest and penalties with respect thereto), imposed as a result of
such representation and payment of costs and expenses. Without
limiting the foregoing, the Company shall control all proceedings taken
in connection with the contest of any claim contemplated by these
provisions and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that you
may participate therein at your own cost and expense) and may, at its
option, either direct you to pay the tax claimed and sue for a refund
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or contest the claim in any permissible manner, and you agree to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs you to pay the tax claimed and to sue for a
refund, the Company shall advance the amount of such payment to you,
and pay on a current basis all costs of litigation, including without
limitation attorneys' fees, on an interest-free basis and shall agree
to and shall indemnify you and hold you harmless, on an after-tax
basis, from any Excise Tax or income tax, including without limitation,
interest and penalties with respect thereto, imposed with respect to
such advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for your taxable
year with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim shall be limited to issues with
respect to which a Tax Assistance Payment would be payable hereunder,
and you shall be entitled to settle or to contest, as the case may be,
any other issue(s) raised by the Internal Revenue Service or any other
taxing authority.
If, after you receive an amount advanced by the Company pursuant to
provisions of the last full paragraph, you receive any refund with
respect to such claim, you shall (subject to the Company's complying
with any applicable provisions of the same paragraph) promptly pay to
the Company the amount of such refund (together with any interest paid
or credited thereon after any taxes applicable thereto). If, after you
receive such an amount advanced by the Company, a determination is made
that you shall not be entitled to any refund with respect to such claim
and the Company does not notify you in writing of its intent to contest
such denial or refund prior to expiration of thirty (30) calendar 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 the Tax Assistance Payment
the Company is required to pay you hereunder.
V. No Mitigation Obligation
You and the Company acknowledge that it will be difficult, and that it
may be time-consuming or impossible, for you to find reasonably
comparable employment following the Termination Date. Accordingly, you
and the Company agree that payments made by the Company pursuant to
this Agreement will be liquidated damages (and in lieu of any claim for
any breach whatsoever of this Agreement by the Company) and that you
will not be required to mitigate the amount of any such payment by
seeking other employment or otherwise, nor shall any profits, income,
earnings or other benefits from any source whatsoever create any
mitigation, offset reduction or other obligation on your part hereunder
or otherwise, except as expressly provided in the materials, supra,
concerning Additional Benefits.
VI. Arbitration
Except as otherwise expressly provided under the caption "Certain Tax
Payments by the Company," any controversy or claim between you and the
Company arising out of or relating to the existence, enforceability,
terms or application of this Agreement or any breach or alleged breach
thereof, shall be settled by three (3) arbitrators, one of whom shall
be appointed-by the Company, one by you and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators
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cannot agree on the third arbitrator required to be appointed
hereunder, then such arbitrator shall be appointed by the Chief Judge
of the United States District Court for the district having
jurisdiction of the city or other municipality in which the arbitration
is to be held. The arbitration shall be conducted in accordance with
the rules of the American Arbitration Association, except with respect
to the selection of arbitrators, which shall be as hereinbefore
provided. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators
shall have no authority to award punitive, incidental or consequential
damages, and they shall apply the substantive law of the Commonwealth
of Pennsylvania in reaching a decision.
If you determine in good faith to retain legal counsel and/or to incur
other reasonable costs or expenses in connection with any such
arbitration or to enforce any or all of your rights under this
Agreement or under any arbitration award, the Company shall pay all
such attorneys' fees, costs and expenses you incur in connection with
non-frivolous applications to interpret or enforce your rights,
including enforcement of any arbitration award in court, regardless of
the final outcome. In addition, during the pendency of such
arbitration, the Company will continue to pay you, with the customary
frequency, the greater of your Base Pay as in effect immediately prior
to the Change in Control or immediately prior to your Termination and
to provide Benefits until the controversy or claim finally is resolved
in accordance herewith. These payments and the provision of Benefits
hereunder shall be in addition to, and not in derogation or mitigation
of any other payment or benefit due you under this Agreement.
Notwithstanding any other provision hereof, the parties' respective
rights and obligations under this Caption will survive a termination or
expiration of this Agreement or the Termination of your employment for
any reason whatsoever.
VII. Employment Rights
Nothing expressed or implied in this Agreement shall create any right
or duty on your part or that of the Company to have you remain in the
employment of the Company prior to or following any Change in Control.
VIII. Withholding of Taxes
The Company may withhold from any amounts payable under this Agreement
all federal, state, city, local or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
IX. Personal Nature of Agreement
This Agreement is personal in nature, and neither you nor the Company
(except as provided under the caption "Binding on Successors"), without
the prior written consent of the other, shall assign or transfer any of
its rights, or delegate any of its duties or obligations, except as
expressly provided under this caption. Without limiting the generality
and effect of the foregoing, your right to receive payments hereunder
shall not be assignable or transferable, whether by pledge, creation of
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a security interest or otherwise, other than by a transfer by will or
by the laws of descent and distribution; in no event shall the Company
have any obligation or liability to recognize or honor any attempted
assignment or transfer that is contrary hereto.
X. Consent to Amendment of Benefit Plans and Awards.
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 an authorized representative thereof,
and/or your consent thereto (including your 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 and its approval of the amendment of such
plan or award in the manner set forth herein, and (ii) your consent to
the terms hereof shall signify your consent to the amendment of such
plan or award, as required, as of the date hereof.
XI. Notice
For all purposes of this Agreement, all communications, including
without limitation, notices, consents, requests and approvals, provided
for herein shall be in writing and shall be deemed to have been duly
given when (1) actually delivered or (2) if mailed, five (5) business
days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid,
(i) if to the Company, to the attention of its Corporate Secretary at
its principal executive office at the time, and
(ii) if to you, at the address at the time on file with the Company as
your principal residence address, or
(iii) in either case, to such other address as either the Company or
you shall have furnished the other in writing and in accordance
herewith, provided, however, that notices of change of address
hereunder shall be effective only upon actual receipt.
XI. Governing Law
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania, without giving effect to the Commonwealth's principles of
conflict of law, save those permitting the parties to an agreement to
stipulate the substantive law applicable to the agreement and the
procedural law applicable to suits, actions or proceedings relating to
it. For purposes of interpreting this agreement, time is of the
essence.
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XII. Validity/Severability
If any provision of this Agreement or the application of any provision
hereof to any person (including a Person) or circumstance is held
invalid, illegal or unenforceable, the remainder of this Agreement and
the application of such provision to any other person (including a
Person) shall not be affected, and the provision(s) so held to be
invalid, illegal or unenforceable shall be reformed or excised in good
faith by the Company, without the necessity of your agreeing thereto,
to the extent (and only to the extent) necessary to make it or them
valid, legal or enforceable.
XIII. Miscellaneous
No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, modification, waiver or discharge is
agreed to in a writing signed by you and the Company. No waiver by
either party hereto at any time of any breach or of compliance with any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
XIV. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Board of Directors of the Company has directed
that this Agreement be executed and delivered on its behalf by one or
more officers of the Company thereunto duly authorized, as of the day
and year first above written, and you have indicated your acceptance of
and intent to be bound by this Agreement in the space provided below.
CONRAIL INC.
By:
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Frank H. Nichols
Senior Vice President - Organizational Performance
Accepted:
By:
--------------------------------
Name:
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Title:
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ATTACHMENT A
CERTAIN DEFINITIONS
For purposes of this Agreement:
(A) Additional Benefits refers to, as to each listed plan, the greater
of all those benefits associated with or accruing as a result of your
continued participation in the following plans, or portions of plans,
of the Company in which you are participating or are eligible to
participate (whether funded by actual insurance or self-insured by the
Company) immediately prior to (a) the Change in Control or (b) your
Termination:
1. Non-Agreement Employee Medical and Dental Plan
2. Non-Agreement Employee Life, Dismemberment and Disability Benefits
Plan
3. Long Term Disability Plan
The term "Additional Benefits" shall not include benefits of any type
under any other plans, policies or programs.
(B) Base Pay means
(i) in determining whether a Termination has occurred, the gross
amount of your annual salary in effect on the date of a Change in
Control (the gross amount you actually were paid in the pay period
coinciding with or immediately preceding the date of the Change in
Control, multiplied by the number of pay periods in the year or
otherwise determined and expressed as an annual amount).
(ii) in calculating the amount of Severance Pay, the greater of
(a) the amount calculated under Item (B)(i);
(b) the amount calculated as provided in Item (B)(i), but
substituting "Termination Date" for "Change in Control" wherever the
latter term appears.
(C) Beneficial Owner means any Person who, under Rule 13d-3 (or
successor rules or regulations thereto) promulgated under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act")
would be deemed beneficially to own Voting Stock.
(D) Benefits means any of the perquisites, benefits and service credit
for benefits provided under any and all employee retirement income or
welfare benefit policies, plans, programs or arrangements in which you
participate immediately prior to the Change in Control, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group and/or executive life, health, medical/
hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement or other employee benefit policies, plans, programs or
arrangements that now exist, or any equivalent successor policies,
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plans, programs or arrangements that may be adopted hereafter by the
Company providing perquisites, benefits and service credit for benefits
at least as great as are payable thereunder prior to a Change in
Control, provided, however, that your rights under such policies,
plans, programs or arrangements shall be governed by the terms thereof
and shall not be enlarged hereunder or otherwise affected hereby.
(E) Cause refers to your having engaged in any of the following if the
result of the same is materially harmful to the Company:
(i) an intentional act of fraud, embezzlement or theft in connection
with your duties or in the course of your employment with the Company;
(ii) intentional wrongful damage to property of the Company;
(iii) intentional wrongful disclosure of secret processes or of
confidential information of the Company;
(iv) intentional violation of the Company's policy or policies
regarding ethical conduct as in effect immediately prior to a Change in
Control; or
(v) intentional and continued gross failure to substantially perform
your duties with the Company (other than resulting from injury or
disease or for reasons that would constitute a Termination under Item
(K)(i) hereof) as determined in good faith by a majority of the Board
and after such failure continues for thirty (30) days following written
demand for substantial performance from the Board detailing the manner
in which the Board believes you have failed to perform.
For these purposes, an act or failure to act on your part shall be
deemed "intentional" only if you acted or omitted to act otherwise than
in accordance with your good faith business judgment of the best
interests of the Company; in determining whether this standard has been
satisfied, you shall be afforded all the presumptions and be entitled
to all the protections available to directors or officers under Section
1712 of the Pennsylvania Business Corporation Law.
(F) A Change in Control occurs upon any one of the following
circumstances or events:
(i) The stockholders of the Company approve a transaction or
transactions (however denominated or effectuated) with another
corporation or other Person ("Combination"), and immediately after such
transaction(s) less than eighty percent (80%) of the combined voting
power of the then-outstanding securities of such corporation or Person
will be held in the aggregate by the holders of securities entitled,
immediately prior to such Combination, to vote generally in the
election of directors of the Company ("Voting Stock");
(ii) The stockholders of the Company approve a consolidation (however
denominated or effectuated) pursuant to a recommendation of the Board;
(iii) At any time, Continuing Directors (as herein defined) shall not
constitute a majority of the members of the Board ("Continuing
Director" means (i) each individual who has been a director of the
Company for at least twenty-four (24) consecutive months before such
time and (ii) each individual who was nominated or elected to be a
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director of the Company by at least two thirds of the Continuing
Directors at the time of such nomination or election);
(iv) The stockholders of the Company approve the sale of all or
substantially all of its assets to any other corporation or other
Person, and less than eighty percent (80%) of the combined voting power
of the then-outstanding securities of such corporation or Person
immediately after such transaction will be held in the aggregate by the
holders of Voting Stock immediately prior to such sale;
(v) A report is filed on Schedule 13D or Schedule 14D-l (or any
successor schedule, form or report), pursuant to the Exchange Act,
disclosing that any Person has become the Beneficial Owner of 20 or
more percent of the voting power of Voting Stock;
(vi) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company; or
(vii) The Board determines by a majority vote that, because of the
occurrence, or the threat or imminence of the occurrence, of another
event or situation with import or effects similar to the foregoing,
those who have accepted an agreement of this type are entitled to its
protections.
Notwithstanding the provisions of the foregoing subparagraph (v),
unless otherwise determined in a specific case by majority vote of the
Board, a Change in Control for purposes of this Agreement shall not be
deemed to have occurred solely because (a) the Company, (b) an entity
of which the Company is the direct or indirect Beneficial Owner (as
herein defined) of 50 or more percent of the voting securities or (c)
any Company-sponsored employee stock ownership plan or any other
employee benefit plan of the Company either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-l, Form 8-K, or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares of Voting Stock,
whether in excess of 20 percent or otherwise, or because the Company
reports that a change in control of the Company has or may have
occurred or will or may occur in the future by reason of such
beneficial ownership.
(G) Highest Recent Incentive Award for purposes of calculating
Severance Pay shall be an amount equal to the highest incentive payment
earned by you under the Company's Annual Performance Achievement Reward
and Reward Plus Plans or Senior Executive Performance Plan, as
applicable, or such comparable successor incentive compensation plans,
during any one of the last three full fiscal years prior either to the
Change in Control or your Termination Date (annualized in the event
that you were not employed by the Company for the whole of such fiscal
year.) The determination of the Highest Recent Incentive Award shall
be made without regard to whether you elected to defer receipt of all
or any portion of such award in any given year, but shall be considered
in the year in which such award was earned.
Note that your Highest Recent Incentive Award is to be computed as of a
date that is immediately prior to the Change in Control and immediately
prior to your Termination Date, and you are to use the date that
entitles you to the larger of the two Highest Recent Incentive Award
calculations, to the extent they differ. Thus, if following a Change
in Control you remain employed by the Company or its successor and
thereby earn an incentive award that is greater than that earned during
any one of the three full fiscal years prior to the Change in Control,
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this computation is intended to give you the benefit of such corporate
results in calculating your Severance Pay.
(H) Performance Share Equivalent means the product of the (a) Fair
Market Value (as hereinafter defined) of the type of Conrail Inc.
security or successor security ("Security") which could be earned as a
result of the settlement of the Performance Shares, multiplied by (b)
the number of Equivalent Shares (as hereinafter defined) to which you
are deemed to be entitled on your Termination Date, calculated as
follows:
(i) If on your Termination Date the Security is listed on the New York
Stock Exchange ("Exchange"),
(a) The Fair Market Value of each such unearned Performance Share
shall be the value of a share of such Security (i) on your Termination
Date or (ii) if fewer than 100,000 shares of such Security were traded
on the Exchange on your Termination Date, then on the next succeeding
day on which at least 100,000 shares trade on the Exchange. Value, on
any date, is the mean of the high and low prices at which shares of the
Security trade on such date as reported in the Composite Transactions
for such date by The Wall Street Journal.
(b) Equivalent Shares is the whole number (any fraction/decimal to be
rounded to the next whole number) that is equal to the number of shares
of the Security you would have been entitled to receive as Performance
Shares, assuming satisfaction of all performance criteria associated
with such Performance Shares.
(ii) If, at the time of the Change in Control or during the Change in
Control Period, the Security ceases to be listed on the Exchange
("Cessation Date"),
(a) Fair Market Value shall be computed as provided under (i)(a)
hereof, but substituting Cessation Date for Termination Date; and
(b) Equivalent Shares shall be computed as provided under (i)(b)
hereof.
(J) Person means any
(i) "person" as that term is used and defined in the attached copy of
Section 14(d)(2) of the Exchange Act as in effect on the effective date
of this Agreement, and
(ii) "affiliate" or "associate" of any person (as defined in Item
(J)(i)) as those terms are used and defined in the attached copy of
Rule 12b-2 of the General Rules and Regulations under the Exchange Act
as in effect on the effective date of this Agreement.
(K) Termination means:
(i) Your decision to leave the employ of the Company if, following a
Change in Control and during the Change in Control Period, any of the
following occurs, provided, however, that your continued employment
14
after the occurrence of one or more of the following shall not
constitute consent to, or a waiver of rights with respect to,
circumstances that-empower you to leave the employ of the Company:
(a) You are not elected or reelected to the office of the Company you
held immediately prior to the Change in Control or, if you were serving
as a director of the Company immediately prior to the Change in
Control, you are removed as a director;
(b) Your Base Pay is, or when annualized will be, less than the amount
determined in accordance with Item (B)(i) herein, and any such
diminution is more than de minimus and was not effected in connection
with a similar proportionate reduction affecting generally all
management employees of the Company and of any corporation or Person
controlling the Company;
(c) Without your prior written consent, the Company, except to meet
the requirements of applicable federal or state law, (i) terminates or
reduces the value or scope of your rights to any Benefits, (ii) such
action results in more than a de minimus reduction in the value of such
Benefits and was not effected in connection with a similar termination
or proportionate reduction affecting generally all management employees
of the Company and of any corporation or Person controlling the
Company, and (iii) the Company does not remedy any such termination or
reduction, as the case may be, within ten (10) calendar days after its
receipt of written notice from you;
(d) You determine in good faith that, following a Change in Control,
you have been rendered substantially unable to carry out or have
suffered a substantial reduction in any of the substantial authorities,
powers, functions, responsibilities or duties attached to the position
you held immediately prior to the Change in Control, which situation is
not remedied within ten (10) calendar days after receipt by the Company
of written notice from you that you have made such a determination;
(e) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or the transfer of all or a significant
portion of its business and/or assets, unless the successor or
successors (by liquidation, merger, consolidation, reorganization or
otherwise) to which all or a significant portion of its business and/or
assets have been transferred (directly or by operation of law) shall
have assumed all the duties and obligations of the Company under this
Agreement pursuant to the provisions under the Agreement caption
"Binding on Successors;"
(f) The Company requires you to relocate your principal location of
work outside a circle having (i) as its center your principal location
of work immediately prior to the Change in Control and (ii) a radius of
forty (40) miles, or requires you to travel away from your office in
the course of discharging your responsibilities or duties hereunder
significantly more (in terms either of consecutive days or of aggregate
days in any calendar year) than was required of you immediately prior
to the Change in Control, without (in either case) your prior written
consent; or
(g) Without limiting the generality or the effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
OR
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(ii) The termination of your employment by the Company during the
Change in Control Period, for any reason except:
(a) Your death;
(b) Your Total Disability, as defined in the Company's Long Term
Disability Plan (or any plan that is successor or in addition thereto),
as then in effect;
(c) Your retirement (i) pursuant to any Board-approved policy or plan,
if any, on the terms in effect immediately prior to the Change in
Control providing for mandatory retirement of certain personnel, or
(ii) pursuant to the terms of any Board-approved early retirement or
similar program providing enhanced benefits upon retirement, other than
as provided pursuant to this Agreement.
(d) Cause.
(iii) For purposes of determining your status and rights under any plan
pursuant to which you receive Benefits, including any incentive
compensation and stock option plans, your Termination, other than
pursuant to (ii)(a) through (d), shall be treated as involuntary. In
the event your termination is covered by any one of (ii)(a) through
(d), your rights and status will be determined in accordance with the
applicable terms of such plans, except to the extent otherwise
expressly set forth herein.
(L) Termination Date means the date specified in the Notice of
Termination (hereinafter defined), provided, however, that if, prior to
the Termination Date, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
Termination, then the Termination Date shall be the date on which the
dispute finally is determined, either by mutual written agreement of
the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); and provided, further, that
the Termination Date shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
For these purposes, any purported termination of your employment by the
Company or by you during the Change in Control Period shall be
communicated by written Notice of Termination to the other party
hereto, delivered in accordance with the caption concerning "Notice" in
the Agreement. The Notice of Termination shall
(i) indicate the specific Termination provision relied upon hereunder;
(ii) to the extent applicable, set forth in reasonable detail the facts
and circumstances claimed to provide a basis for Termination under the
provision(s) so indicated; and
(iii) shall specify the Termination Date, which:
(a) if the Termination is for Cause, shall be a date not less than
thirty (30) days from the date the Notice of Termination is given; and
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(b) if the Termination is not for Cause, shall be a date not less
than fifteen (15) nor more than sixty (60) days after such Notice of
Termination is given.
- -----------------------------------------------------------------------
Securities Laws References
- -Section 14(d)(2) of the Securities Exchange Act of 1934
When two or more persons act as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding, or
disposing of securities of any issuer, such syndicate or group shall be
deemed a "person" for purposes of this subsection.
- -Section 12b-2 of the General Rules and Regulations, Securities
Exchange Act of 1934
An "affiliate" of, or a person "affiliated" with, a specified person,
is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
The term "associate" used to indicate a relationship with any person,
means (1) any corporation or organization (other than the registrant or
a majority-owned subsidiary of the registrant) of which such person is
an officer or partner or is, directly or indirectly, the beneficial
owner of 10 percent or more of any class of equity securities, (2) any
trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity, and (3) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or
who is a director or officer of the registrant or any of its parents or
subsidiaries.
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