EXHIBIT 10.17
EXHIBIT A
[INSERT NAME AND ADDRESS]
Dear ________:
Burlington Northern Santa Fe Corporation (the "Corporation") considers
it essential to the best interests of its stockholders to foster the
continuous employment of key management personnel. In this connection, the
Board of Directors of the Corporation (the "Board") recognizes that, as is the
case with many publicly held corporations, the possibility of a Change in
Control (as that term is defined in this letter) may exist, and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Corporation's management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control.
In order to induce you to remain in the employ of the Corporation or its
affiliates, the Corporation agrees that you shall receive the severance
benefits set forth in this letter agreement (the "Agreement") in the event
your employment with the Corporation is terminated under the circumstances
described below subsequent to a "Change in Control" (as defined in Section 2),
and that you shall be eligible for the parachute tax gross-up and certain
other benefits described in this Agreement.
1. TERM. The "Agreement Term" shall begin on January 16, 1997, (the
"Effective Date" of this Agreement), and shall end on December 31, 1999,
subject to the following:
(i) As of January 1, 2000, and each January 1 thereafter, the Agreement
Term shall automatically be extended to the next following December 31;
provided, however, that no such extension shall take place if, on or before
the September 30 next preceding the date on which the extension would
otherwise take place, the Corporation has given notice that it does not wish
to extend the Agreement Term; and further provided that no such extension
shall
take place if a Change in Control has occurred prior to the date on which the
extension would otherwise take place.
(ii) Subject to Subsection (iii) next below, if a Change in Control
occurs during the Agreement Term (as it may be extended from time to time),
the Agreement Term shall be extended for a period of twenty-four (24) months
beyond the last day of the calendar month in which the Change in Control
occurs, but in no event less than twelve (12) months beyond the date of the
consummation of the Change in Control.
(iii) If a Change in Control described in Subsection 2(i) or 2(iii)
occurs during the Agreement Term (as it may be extended from time to time),
but the Board thereafter determines that it will not consummate the
transaction or regulatory approval for the transaction is not obtained, then
the Board may reduce the 24-month extension period set forth in Subsection
(ii) next above; provided that the Agreement Term may not end earlier than six
(6) months after such notice of reduction is provided by the Board or, if
earlier, the date such Agreement Term would end in the absence of action under
this Subsection (iii).
(iv) In no event, however, shall the Agreement Term extend beyond the
end of the calendar month in which your 65 birthday occurs if you are subject
to mandatory retirement at such age or to the extent permitted by law.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred if:
(i) Any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Corporation, any trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, or any company owned, directly or
indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of
the combined voting power of the Corporation's then outstanding securities.
(ii) During any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Corporation
to effect a transaction described in subsections (i), (iii) or (iv) of this
definition) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in
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office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof.
(iii) The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other company other than (a) a
merger or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than 80% of the combined voting power of the
voting securities of the Corporation (or such surviving entity) outstanding
immediately after such merger or consolidation, or (b) a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no "person" (as hereinabove defined) acquires
more than 25% of the combined voting power of the Corporation's then
outstanding securities.
(iv) The stockholders of the Corporation adopt a plan of complete
liquidation of the Corporation or approve an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets. For purposes of this subsection (iv), the term "the
sale or disposition by the Corporation of all or substantially all of the
Corporation's assets" shall mean a sale or other disposition transaction or
series of related transactions involving assets of the Corporation or of any
direct or indirect subsidiary of the Corporation (including the stock of any
direct or indirect subsidiary of the Corporation) in which the value of the
assets or stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefor or by such other method as the Board of
Directors of the Corporation determines is appropriate in a case where there
is no readily ascertainable purchase price) constitutes more than two-thirds
of the fair market value of the Corporation (as hereinafter defined). For
purposes of the preceding sentence, the "fair market value of the Corporation"
shall be the aggregate market value of the outstanding shares of common stock
of the Corporation (on a fully diluted basis) plus the aggregate market value
of the Corporation's other outstanding equity securities. The aggregate
market value of the shares of common stock of the Corporation (on a fully
diluted basis) outstanding on the date of the execution and delivery of a
definitive agreement with respect to the transaction or series of related
transactions (the "Transaction Date") shall be determined by the average
closing price of the shares of common stock of the Corporation for the ten
trading days immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of the Corporation shall be determined in
a manner similar to that prescribed in the immediately preceding sentence
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for determining the aggregate market value of the shares of common stock of
the Corporation or by such other method as the Board of Directors of the
Corporation shall determine is appropriate.
A Change in Control that occurs prior to the beginning of the Agreement Term
shall be disregarded for purposes of this Agreement.
3. BASIS OF EMPLOYMENT TERMINATION. If your Date of Termination occurs
during the Agreement Term, on a date that is coincident with or follows the
occurrence of a Change in Control, or if you have a disability during the
Agreement Term after the occurrence of a Change in Control, you shall be
eligible for payments and benefits in accordance with, and to the extent
provided by, Section 4, with such eligibility determined on the basis for your
termination of employment. For purposes of this Agreement, the basis for your
termination of employment shall be determined in accordance with this Section
3.
(i) Disability. If, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive months, and within
thirty (30) days after written Notice of Termination is given by the
Corporation, you shall not have returned to the full-time performance of your
duties, your employment may be terminated by the Corporation for "Disability."
Notwithstanding any other provision of this Agreement, a termination of
employment under this Subsection (i) shall not cause you to be considered a
terminated employee within the meaning of the Corporation's long term
disability plan and your rights thereunder shall not be affected by this
Agreement.
(ii) Cause. Your Date of Termination shall be deemed to have occurred
for "Cause," if your Date of Termination occurs because of circumstances
described in paragraph (a) or paragraph (b) next below, as determined in
accordance with the procedures set forth in paragraphs (A), (B) and (C) next
below:
(a) the willful and continued failure by you to substantially
perform your duties with the Corporation (other than any such failure
resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of
Termination by you for Good Reason); or
(b) the willful engaging by you in conduct which is demonstrably
and materially injurious to the Corporation, monetarily or otherwise.
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For purposes of this Subsection (ii), no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without a reasonable belief that your action or omission was in
the best interest of the Corporation. Your Date of Termination shall not be
deemed to have occurred for "Cause" unless the procedures described in
paragraphs (A), (B) and (C), next below, have been satisfied:
(A) A written notice of alleged Cause is delivered to you by the
Board or a member of the Board. In the case of "Cause" described in
paragraph 3(iii)(a), the written notice shall consist of specific
identification of the manner in which the Board or such Board member
believes that you have not substantially performed your duties, and
shall include a demand for such performance. In the case of "Cause"
described in paragraph 3(iii)(b), the written notice shall consist of
specific identification of the manner in which the Board or such Board
member believes that you have engaged in conduct which is demonstrably
and materially injurious to the Corporation.
(B) You have received an opportunity to be heard by the Board or a
member of the Board, which will consist of delivery to you of reasonable
advance written notice of a Board meeting (to be delivered at or after
the time you receive the notice of alleged Cause, described in paragraph
(A) next above), at which you, together with your counsel, may be heard
by the Board, concerning the contents of the notice of alleged Cause
and, in the case of "Cause" described in paragraph 3(iii)(a), the manner
in which you intend to achieve substantial performance.
(C) You have received a copy of your Notice of Termination, which
will include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board, which occurs after your opportunity to
be heard by the Board (at that meeting or a subsequent meeting), and
which finds that in the good faith opinion of the Board you were guilty
of conduct set forth in the notice of alleged Cause and which specifies
the particulars thereof in detail. The Date of Termination set forth in
the Notice of Termination shall be not earlier than thirty (30) days
after the notice of alleged Cause has been delivered to you in
accordance with paragraph 3(ii)(A).
(iii) Good Reason. Subject to the procedures set forth in paragraphs
(A), (B), and (C) next below, you shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence, after a
Change in Control, of any of the
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circumstances described in paragraphs (a) through (h) next below. However,
"Good Reason" shall not exist under paragraphs (a), (e), (f), (g) or (h), next
below, if such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:
(a) The assignment to you of any duties with a level of
responsibility inconsistent with the position in the Corporation that
you held immediately prior to the Change in Control, or a significant
adverse alteration in the status of your responsibilities from those in
effect immediately prior to such Change in Control.
(b) A reduction by the Corporation in your annual base salary as
in effect on the Effective Date, and adjusted to reflect such increases
as may be made after the Effective Date and prior to the occurrence of a
Change in Control, and also adjusted to reflect such decreases as may be
made after the Effective Date, but taking decreases into account only to
the extent that they are part of across-the-board salary reductions
similarly affecting all management personnel of the Corporation and all
management personnel of any person in control of the Corporation.
(c) The Corporation's requiring you to be based anywhere other
than fifty (50) miles from your work location on the date of the Change
in Control except for required travel on the Corporation's business to
an extent substantially consistent with your business travel obligations
during the one-year period prior to the Change in Control.
(d) The failure by the Corporation to pay to you any portion of
your current compensation or to pay to you any portion of an installment
of deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due.
(e) The failure by the Corporation to continue in effect any
compensation plan in which you participate immediately prior to the
Change in Control that is material to your total compensation, including
but not limited to the Corporation's Retirement Plan, Supplemental
Retirement Plan, Investment and Retirement Plan, Supplemental Investment
and Retirement Plan, Incentive Compensation Plan, Stock Incentive Plan,
Incentive Bonus Stock Program, Salary Exchange Option Program, or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Corporation to continue your
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participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to other
participants, as existed at the time of the Change in Control.
(f) The failure by the Corporation to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Corporation's life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the
Change in Control, the taking of any action by the Corporation which
would directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time of
the Change in Control, or the failure by the Corporation to provide you
with the number of paid vacation days to which you are entitled on the
basis of years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the time of the Change
in Control.
(g) The failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 8.
(h) Any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements
of Subsection 3(vi) (and, if applicable, the requirements of Subsection
3(iii)), which purported termination shall not be effective for purposes
of this Agreement.
You shall not be deemed to have terminated employment for Good Reason unless
you have delivered a written Notice of Termination, which:
(A) identifies the circumstances, and the provisions of this
Subsection 3(iii), which form the basis for your termination for Good
Reason;
(B) in the case of circumstances described in paragraphs (a), (e),
(f), (g) or (h) next above, demands correction; and
(C) specifies a Date of Termination which is not less than fifteen
(15) days nor more than sixty (60) days after the Notice of Termination
has been provided to the Corporation.
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Your continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason hereunder.
(iv) Discharge Absent Cause or Disability. You shall be deemed to have
been discharged by the Corporation absent Cause or Disability if your
employment is terminated by the Corporation other than in accordance with
Subsection 3(i) (relating to Disability) or Subsection 3(ii) (relating to
Cause). Your Date of Termination under this Subsection 3(iv) may not be
earlier than sixty (60) days after the written Notice of Termination is
delivered to you. However, the sixty (60) day notice requirement shall not
apply to a termination which occurs prior to the date of a Change in Control;
provided, however, that if your employment is terminated in accordance with
this Subsection 3(iv) within sixty (60) days prior to the occurrence of a
Change in Control, your employment shall be deemed to have been terminated on
the date specified in the Notice of Termination, but not earlier than sixty
(60) days after such notice is provided to you.
(v) Payment in Lieu of Notice. The Corporation shall be deemed to have
complied with the requirement of this Section 3 relating to advance Notice of
Termination if it places you on a fully-paid leave of absence during such
notice period; provided, however, that to the extent that such leave of
absence prevents you from returning to work following a disability, as
described in Subsection 3(i), or prevents you from substantially performing
your duties, as described in Subsection 3(ii)(a), the establishment of such
leave of absence shall be deemed inconsistent with the provisions of
Subsection 3(i) or Subsection 3(ii), and except to the extent that another
provision of Subsection 3(i) or Subsection 3(ii) applies, your employment will
be deemed to have been terminated in accordance with Subsection 3(iv)
(relating to discharge absent Cause or Disability). For purposes of this
Subsection (v), during such fully-paid leave of absence, you shall be entitled
to base salary, and to continue as a participant in all compensation, benefit
and insurance plans in which you were participating at the time the leave of
absence began.
(vi) Notice of Termination. "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(vii) Date of Termination. "Date of Termination" shall mean the date
on which your employment with the Corporation and any affiliates terminates
for any reason.
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(viii) Extension of Date of Termination. If, within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to extensions under this Subsection
(viii), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally 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); provided,
however, that the Date of Termination 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.
Notwithstanding the pendency of any such dispute if the dispute relates to a
termination under Section 3(iv) of this Agreement and the Corporation's
failure to provide benefits under this Agreement, the Corporation will
continue to pay you your full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and insurance plans
in which you were participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this
Subsection (viii). Amounts paid under this Subsection (viii) are in addition
to all other amounts due under this Agreement, and shall not be offset against
or reduce any other amounts due under this Agreement and shall not be reduced
by any compensation earned by you as the result of employment by another
employer. Notwithstanding the foregoing provisions of this Subsection (viii),
the determination of whether your Date of Termination has occurred within the
Agreement Term shall be determined without regard to any extensions under this
Subsection (viii).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. If your Date of
Termination occurs during the Agreement Term, on a date that is coincident
with or follows the occurrence of a Change in Control, or if you have a
disability during the Agreement Term and after the occurrence of a Change in
Control, you shall be entitled to payments and benefits in accordance with,
and to the extent provided by, this Section 4.
(i) Discharge for Cause and Voluntary Resignation. If your employment
is terminated by the Corporation for Cause, or is terminated by you other than
for Good Reason, the Corporation shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled under
any compensation plan of the Corporation or any
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affiliate at the time such payments are due, and the Corporation shall have no
further obligations to you under this Agreement.
(ii) Disability. During any period that you fail to perform your
full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
compensation payable to you under the long term disability plan or other
similar plan during such period, until your employment is terminated pursuant
to Section 3(ii). Thereafter, or in the event your employment shall be
terminated by reason of your death, your benefits shall be determined under
the Corporation's retirement, insurance and other compensation programs then
in effect in accordance with the terms of such program; however, your receipt
of benefits under the long term disability plan will not be affected by your
termination under this Agreement.
(iii) Termination for Good Reason and Discharge Absent Cause or
Disability. If your employment is terminated by you for Good Reason, or by
the Corporation absent Cause or Disability (as described in Subsection 3(iv)),
then you shall be entitled to the payments and benefits described below:
(a) Prior Salary and Deferrals. The Corporation shall pay to you
(1) your full base salary through your Date of Termination at the rate
in effect at the time the Notice of Termination is given, with payment
to be made no later than the fifth day following your Date of
Termination; (2) your Bonus Rate (defined below) for the year in which
your Date of Termination occurs, subject to a pro-rata reduction for the
portion of the year after your Date of Termination; and (3) all other
amounts to which you are entitled under any compensation plan of the
Corporation, at the time such payments are due under the terms of such
plans.
(b) Additional Salary and Severance. In lieu of any further
salary or bonus payments to you for periods subsequent to your Date of
Termination, you shall be entitled to the benefits described in
paragraph (I) next below; provided that, in lieu of such benefits, you
may elect to receive the benefits described in paragraph (II) next
below, subject to the limitations set forth in such paragraph (II) and
except as provided in Subsection 4(iv):
(I) The Corporation shall pay to you, at the time specified
in Subsection 4(iv), a lump sum severance payment equal to: (A)
the sum of three (3) times your Salary Rate and (B) three times
your Bonus Rate.
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(II) You may elect to receive, in lieu of the lump-sum
severance under Subsection 4(iii)(b)(I)(A) provided for in
paragraph (I) next above, the benefits provided for under The
Burlington Northern and Santa Fe Railway Company Severance Program
(the "Severance Program"), the terms and provisions of which are
incorporated herein by this reference, but only if you are then
eligible for receipt of those benefits under the terms of the
Severance Program.
For purposes of this Subsection (iii):
(A) Your "Salary Rate" shall be equal to the greatest of:
(1) your annual salary as in effect as of the Date of Termination
plus any amounts deferred under the Burlington Northern Santa Fe
Supplemental Investment and Retirement Plan or foregone under the
Salary Exchange Option Program, (2) your highest consecutive
twelve (12) months' salary over the twenty-four (24) month period
preceding the Date of Termination, or (3) your annual salary as in
effect immediately prior to the Change in Control.
(B) Your "Bonus Rate" shall be the amount which you would
have received under the Corporation's Incentive Compensation Plan
for the calendar year in which your Date of Termination occurs, if
you had remained employed by the Corporation for that entire year,
with the level of performance based on the performance through
your Date of Termination and extrapolated through the end of the
year. For purposes of Subsection 4(iii)(b)(I) "Bonus Rate" shall
mean the amount that would be payable if the target level of
performance is achieved for the year.
(c) Restricted Stock Awards. Notwithstanding any provision of the
Corporation's 1996 Stock Incentive Plan or successor plan, the
Restricted Period with respect to any Restricted Stock other than
Performance-based Restricted Stock (including, without limitation,
Restricted Stock granted under the Corporation's Incentive Bonus Stock
Plan) granted to you thereunder prior to the date of the Change in
Control shall lapse on your Date of Termination, and such shares shall
be distributed to you at the time specified in Subsection 4(iv).
(d) Stock Options. Pursuant to the Corporation's 1996 Stock
Incentive Plan or successor plan, the restrictions shall lapse on a
proportion of any outstanding option award. A proportion of the option
award upon which the restrictions shall lapse shall be a fraction, the
denominator of which is
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the total number of months of any Restricted Period applicable to the
option award and the numerator of which is the number of months of such
Restricted Period which elapsed prior to the Date of Termination.
However, any Options that are not affected by this Subsection shall
continue to be available pursuant to the terms of the aforementioned
plans.
(e) Legal Fees. The Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or disputing
any such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of section
4999 of the Code, to any payment or benefit provided hereunder);
provided, however, that payment with respect to any legal action other
than in connection with a tax dispute shall be made only if you are
successful in the action.
(f) Group Health Coverage. You and your eligible family members
shall be entitled to group health coverage to the extent that such
coverage is required to be provided in accordance with the provisions of
section 4980B of the Code and section 601 of the Employee Retirement
Income Security Act (sometimes referred to as "COBRA coverage");
provided that your eligibility for such coverage shall be determined as
though such coverage was required for the greater of thirty-six (36)
months after your Date of Termination or the period otherwise required
under the applicable COBRA coverage provisions. For the thirty-six (36)
month period during which you are entitled to such medical benefit
coverage under this paragraph (f), the premiums for such coverage shall
be paid by the Corporation (either by direct payment of such premiums,
or by reimbursing you for the premiums, at the election of the
Corporation), and the period of such coverage provided under this
paragraph (f) shall be counted toward the Corporation's obligation to
provide COBRA coverage.
(g) Welfare Benefits. For the thirty-six (36) month period after
your Date of Termination, the Corporation shall arrange to provide you
with life, disability, and accident insurance benefits substantially
similar to those which you were receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to
this paragraph (g) shall be reduced to the extent comparable benefits
are actually received by you during the thirty-six (36) month period
following your termination, and
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any such benefits actually received by you shall be reported to the
Corporation.
(h) Outplacement and Financial Assistance. For a period of twelve
(12) months following such termination, the Corporation shall pay the
expenses of such outplacement services as you may require, and/or for
financial planning services with such services to be performed by an
agency approved by the Corporation; provided, however, that
reimbursement for all fees under this paragraph (h) shall not exceed
$20,000.
(i) Tax Benefits. The Corporation shall pay you an additional
amount necessary to provide the benefits under Subsection 4(iii)(b)(I)
on an after-tax basis, except that this benefit shall be limited to the
extent set forth in Section 6 and shall be reduced to the extent
necessary so that no such payments would result in an excise tax imposed
by Section 4999 of the Code.
(iv) Form of Payment. The payments provided for in paragraphs
4(iii)(b), (c) and (d) (the "Severance Payments") shall be paid in accordance
with the following:
(a) Unless you are eligible and elect an option based upon the
Severance Program as described in Section 4(iii)(b)(II) or elect to
participate in a deferred compensation program, the Severance Payments
shall be made not later than the fifth day following your Date of
Termination. However, if the amounts of such payments cannot be finally
determined on or before such day, the Corporation shall pay to you on
such day an estimate, as determined in good faith by the Corporation, of
the minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date
of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth
day after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code.
(b) Notwithstanding the foregoing provisions of this Subsection
(iv) or the provisions of paragraph 4(iii)(b)(I), if you are treated as
terminating your employment for Good Reason, by reason of relocation
under circumstances described in Section 3(iii)(c) and not for any other
reason under Subsection 3(iii), and you retain or are offered a
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position in another location that, in status and responsibilities, is
equal to or better than the position you held at the time of the Change
in Control, and you are entitled to benefits under paragraph
4(iii)(b)(I), those benefits shall not be paid in a lump sum, but
instead 1/12 of the lump sum benefit amount otherwise payable shall be
distributed to you during each of the 12 calendar months next following
the month which includes your Date of Termination, provided however that
such payments shall cease as of the date you are in "Competition" (as
described below) and shall not recommence thereafter.
For purposes of this Subsection, you shall be considered to be in
"Competition" during any period in which you are employed by, perform
any material services for, or own any interest in (except for an
interest of not more than 1% in any publicly traded business) any Class
I railroad, or any company or other enterprise that offers shipping
services to the public (including, without limitation, trucking
services, rail services, air-freight services, and water- going freight
services).
(v) Mitigation and Set-Off. Except as provided in paragraph 4(iii)(f)
and paragraph 4(iii)(g), you shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise.
5. STOCK PLANS.
(i) STOCK OPTIONS AND RESTRICTED STOCK. If (I) a Change in Control
occurs during the Agreement Term, (II) you are employed by the Corporation on
the date of the consummation of the Change in Control, and (III) the Change in
Control occurs prior to the end of the Restricted Period for Options or
Restricted Stock relating to shares of common stock of the Corporation granted
to you under the Corporation's 1996 Stock Incentive Plan, then upon the
consummation of the Change in Control, you shall vest in any such unvested
Options and Restricted Stock other than Performance-based Restricted Stock.
(ii) PERFORMANCE SHARE PLAN. If (I) a Change in Control occurs during
the Agreement Term, (II) you are employed by the Corporation on the date of
the Change in Control and your employment thereafter is not terminated for
Cause or by voluntary resignation, and (III) the Change in Control occurs
prior to the end of the Performance Period for shares of common stock of the
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Corporation granted to you under the Corporation's Performance Share Plan,
then upon the consummation of the Change in Control, you shall vest in any
such unvested shares, based on the applicable price goals under the terms of
the plan, and the per-share price which has been achieved for shares of common
stock of the Corporation at any time during the Performance Period and on or
before the consummation of the Change in Control date, determined without
regard to the plan requirement that a specified number of years during the
Performance Period must have elapsed prior to the vesting of shares. If you
are terminated for Cause or by voluntary resignation, you will receive no
benefits under the Performance Share Plan. After the consummation of the
Change in Control, the terms of the Performance Share Plan will govern without
regard to the foregoing provisions for persons who remain in the employ of the
Corporation. If you have terminated employment under Subsection 3(iii) or
3(iv) after the consummation of the Change in Control, you shall have no
further rights under the Performance Share Plan.
6. PARACHUTE TAX.
(i) In the event it shall be determined that any payment, benefit or
distribution (or combination thereof) by the Corporation, any affiliate or
associated company, trusts established by the Corporation, any affiliate or
associated company, for the benefit of its employees, to or for your benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement, or otherwise) (a "Payment") would be subject to the excise
tax imposed by section 4999 of the Code, or any interest or penalties are
incurred by you with respect to such excise tax (such excise tax, together
with any such interest and penalties, hereinafter collectively referred to as
the "Excise Tax"), you shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and the Excise Tax imposed upon the
Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. For purposes of this Section 6,
"Payments" will include any payments, benefits or distributions to other
persons with respect to awards granted to you and transferred by you to such
other person in accordance with the terms of the awards, to the extent that
such awards result in taxable income being attributable to you.
(ii) Subject to the provisions of Subsection 6(iii), all determinations
required to be made under this Section 6, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions
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to be utilized in arriving at such determination, shall be made by such
nationally recognized certified public accounting firm as may be designated by
the Corporation (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Corporation and you within fifteen (15)
business days of the receipt of notice from you that there has been a Payment,
or such earlier time as is requested by the Corporation. All fees and
expenses of the Accounting Firm shall be borne solely by the Corporation. Any
Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by
the Corporation to you within five (5) days after the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by you, it shall so indicate to you in writing. Any
determination by the Accounting Firm shall be binding upon the Corporation and
you. As a result of the uncertainty in the application of section 4999 of the
Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Corporation should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Corporation
exhausts its remedies pursuant to Subsection 6(iii) and you thereafter are
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to you or for your
benefit.
(iii) You shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Corporation of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days after you are informed
in writing of such claim and shall apprise the Corporation of the nature of
such claim and the date on which such claim is requested to be paid. You
shall not pay such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Corporation (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies you in writing prior to the
expiration of such period that it desires to contest such claim, you shall:
(a) give the Corporation any information requested by the Corporation
relating to such claim;
(b) take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Corporation;
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(c) cooperate with the Corporation in good faith in order to effectively
contest such claim; and
(d) permit the Corporation to participate in any proceedings relating to
such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 6(iii), the Corporation shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct you to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and you agree to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Corporation shall
determine; provided, however, that if the Corporation directs you to pay such
claim and sue for a refund, the Corporation shall advance the amount of such
payment to you, on an interest-free basis, and shall indemnify and hold you
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to such advance;
and provided, further, that if you are required to extend the statute of
limitations to enable the Corporation to contest such claim, you may limit
this extension solely to such contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(iv) If, after the receipt by you of an amount advanced by the
Corporation pursuant to Subsection 6(iii), you become entitled to receive any
refund with respect to such claim, you shall (subject to the Corporation's
complying with the requirements of Subsection 6(iii)) promptly pay to the
Corporation the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by you
of an amount advanced by the Corporation pursuant to Subsection 6(iii), a
determination is made that you shall not be entitled to any refund with
respect to such claim and the Corporation does not notify you in writing of
its intent to contest such denial of refund prior to the expiration of
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thirty (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.
(v) Notwithstanding any other provision of this Agreement to the
contrary, in the event that it shall be determined that (a) the Payments to
you would, if made, be subject to an Excise Tax (or would result in the loss
of a deduction to the Corporation or its affiliates under section 280G of the
Code), but that, (b) if the amount of the Payments were reduced by an amount
that is not greater than 20% of the value of all Payments otherwise due to you
(determined without regard to the limitations of this Section (v)); then the
amount of the Payments otherwise due to you (regardless of whether payable
pursuant to the terms of this Agreement or otherwise) shall be reduced to an
amount which is determined to be $1 less than the maximum amount of the
Payments which could be made to you without resulting in the imposition of
Excise Taxes (and without the loss of a deduction under section 280G of the
Code). You shall be entitled to select the order in which payments are to be
reduced in accordance with this Section (v). If, by reason of the limitations
of this Section (v), the maximum amount payable to you under this Agreement or
otherwise cannot be determined prior to the due date for such payment, the
Corporation shall pay on the due date the minimum amount which it in good
faith determines to be payable and shall pay the remaining amount, with
interest at a rate, compounded semi-annually, equal to 120% of the applicable
Federal rate determined under section 1274(d) of the Code, as soon as such
remaining amount is determined in accordance with this Section (v).
Application of this Section (v) shall be made by an Accounting Firm selected
in the manner set forth in Section 6(ii).
(vi) You shall be eligible for benefits under this Section 6, and shall
be subject to the terms of this Section 6, regardless of whether the Change in
Control occurs or the payments are made during the Agreement Term, regardless
of whether you are employed by the Corporation on or after the occurrence of a
Change in Control and, if your Date of Termination shall have occurred,
regardless of the reason for such termination.
7. RIGHTS OF EMPLOYMENT. Except as otherwise expressly provided in
this Agreement:
(i) nothing in this Agreement shall be construed as limiting your right
to resign prior to the beginning or after the end of the Agreement Term; and
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(ii) nothing in this Agreement shall be construed as limiting the
Corporation's right to discharge you at any time prior to the beginning or
after the end of the Agreement Term, or to renegotiate the terms of your
employment for any period prior to the beginning or after the end of the
Agreement Term.
(iii) Termination Not Covered by Agreement. Except as otherwise
provided in subsection 3(iv) (relating to discharge absent Cause or
Disability), or as otherwise expressly provided in this Agreement, this
Agreement shall be inapplicable to the determination of your rights to
payments and benefits, if your Date of Termination occurs prior to the
occurrence of a Change in Control, or if your Date of Termination occurs after
the end of the Agreement Term and you are not subject to a disability after a
Change in Control.
8. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation 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
Corporation to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the Corporation
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Corporation in the same amount and on the same terms to
which you would be entitled hereunder if you terminate your employment for
Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Corporation" shall mean the Corporation 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.
(ii) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If you should die
while any amount would still be payable to you hereunder had you continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.
9. NOTICE. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the
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respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Illinois without regard to its
conflicts of law principles. All references to sections of the Exchange Act
or the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the parties to this Agreement shall survive the expiration of
the Agreement Term. Capitalized terms used in this Agreement shall be defined
as set forth in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Chicago, Illinois, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of
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Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
14. AMENDMENT. This Agreement may be amended or cancelled only by
mutual agreement of the parties in writing without the consent of any other
person. So long as you shall live, no person, other than the parties hereto,
shall have any rights under or interest in this Agreement or the subject
matter hereof.
15. GENERAL RELEASE AND COVENANT NOT TO SUE. You agree that as a
condition of receiving benefits under this Agreement in connection with your
termination of employment, you shall execute the attached General Release and
Covenant Not to Sue within thirty (30) days following your Date of
Termination. Notwithstanding any other provision herein, no benefits or
payments in connection with your termination of employment shall be provided
until the executed General Release and Covenant Not to Sue has been received
by the Corporation and a seven (7) day revocation period from the date of
execution has expired.
16. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled. Notwithstanding the foregoing
provisions of this paragraph 16, if you have entered into a letter agreement
with Santa Fe Pacific Corporation or Burlington Northern Inc. relating to
certain separation benefits to be provided if your employment terminates after
the occurrence of a Change in Control, and such agreement provided that, as a
result of stockholder approval of the merger between Burlington Northern Inc.
and Santa Fe Pacific Corporation, you will be entitled to such benefits if
your employment terminates for reasons as specified in such agreement prior to
the expiration of such Change in Control event which is September 22, 1997 for
the agreement with Burlington Northern Inc. and February 7, 1998, for the
agreement with Santa Fe Pacific Corporation (each agreement, as it has been
amended from time to time, is referred to as the "Prior Agreement"), then you
may irrevocably elect, by writing filed not later than 30 days after such
termination of employment, to receive benefits under the Prior Agreement in
lieu of benefits under this Agreement. Upon the filing of such election, your
rights shall be determined in accordance with (and you shall become subject
to) the Prior Agreement, and this Agreement shall be void; provided, however,
that your rights to benefits under the Prior Agreement shall be reduced by the
actuarial equivalent of any amounts you may have received under this
Agreement; and further provided that an election in
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accordance with this sentence shall not affect the limitation on your benefits
set forth in Section 6(v) (relating to restrictions on benefits subject to
parachute taxes) and shall not affect the Corporation's ability to impose such
limit.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
Burlington Northern
Santa Fe Corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Agreed to this day
---
of , 1997.
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GENERAL RELEASE AND COVENANT NOT TO SUE
For and in consideration of the terms of the Agreement between Burlington
Northern Santa Fe Corporation and its affiliates and [NAME] dated [DATE],
("Agreement"), the undersigned does hereby fully waive, release, remit and
forever discharge Burlington Northern Santa Fe Corporation and any and all of
its affiliates, divisions, subsidiaries, officers, directors, stockholders,
agents advisors and employees from any and all claims, demands or causes of
action, including any claims for merger protection benefits pursuant to the
Interstate Commerce Commission decision in the Northern Lines or Frisco
merger proceedings, claims arising under Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. Section 2000(e), et seq., the Civil Rights Act of
1866, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act of
1967, as amended, 29 U.S.C. Section 621, et seq., the Federal Employers'
Liability Act, and any other federal, state or local law, order, regulation,
common law, contract or collective bargaining agreement, which relates to my
employment or cessation of employment by Burlington Northern Santa Fe
Corporation and its affiliates; provided however that the undersigned does not
waive enforcement of rights to any benefits provided or extended pursuant to
the terms of the Agreement or to assert any counterclaims in response to any
litigation initiated by BNSF Corporation against me. The undersigned
specifically waives all claims, whether past or present, known or unknown, and
whether or not in litigation, which I, or acting on my behalf, my heirs,
successors, executors, administrators or assigns, may have based on any
action, omission or event occurring prior to this date. Included in this
Release are any and all claims for future damages allegedly arising from the
alleged continuation of the effects of any past action, omission or event.
This General Release and Covenant Not to Sue is executed willingly and
voluntarily, for adequate consideration, and after having the opportunity to
consult with counsel. This General Release and Covenant Not to Sue is
irrevocable and binding upon the undersigned.
- ----------------------- ----------------------------------
Date Name
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Signature
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