Exhibit 10.1
[LOGO]
CSX 500 Water St.
CORPORATION C900
Jacksonville, FL 32202
(904) 366-5603
Fax (904) 359-1859
Robert J. Haulter
Senior Vice President-Human Resources
April 8, 2003
Mr. Oscar Munoz
2 Kensington Court
Morristown, NJ 07960
Dear Oscar:
To confirm our discussion, I am pleased to offer you the position of
Executive Vice President and Chief Financial Officer of CSX Corporation
reporting to Michael J. Ward. All of us involved in discussions with you believe
you will be a valuable addition to the CSX management team. This offer is
contingent on successful interviews with several members of the Board of
Directors, and the approval of this package by our Compensation Committee.
The following is a summary of the principal elements of our offer to you:
Annual Base Salary $500,000
Annual Bonus Opportunity (90%) $450,000
Initial Stock Option Grant 125,000 shares
Signing Bonus $250,000
Signing Restricted Stock Grant 25,000 shares
The sign-on bonus will be payable one-half at time of employment, the other
half after one year. The Restricted Stock Grant will vest in four years.
Additional details are:
1. The stock option grant will be proposed for approval at the next meeting
of the Company's Compensation Committee which is currently scheduled for
May 7. We are currently reviewing our Long-Term Incentive Program and
hope to have Board approval by the 3/rd/ quarter, 2003.
2. To assist you in your move to Jacksonville, Florida, CSX will provide
you with a full relocation program including movement of household goods
and a home purchase program as well as the additional relocation benefit
described in paragraph 5 below. A copy of our standard program is
included as Attachment A. Please contact Steve Frey, AVP Workforce
Operations, to assist you in the relocation process. His phone number is
904/359-2479. Attachment B will cover our agreement on loss of home
sale.
Mr. Oscar Munoz
Page 2
April 8, 2003
3. You will be eligible to participate in the CSX Perquisite Program,
included in Attachment C.
4. You will be offered an employment agreement that would provide you with
certain benefits in the event of a change of control of CSX. Your
agreement would mirror that of your peer CSX executives. A copy of this
agreement is Attachment D.
5. You will be offered a separate employment agreement that would provide
you with certain benefits if you were terminated by CSX without cause
before the second anniversary of your hire date. Specifically, you would
be paid two times the sum of your then-current base salary and bonus.
For this purpose, the bonus would be the higher of target or actual for
the year during which the termination occurred. In addition, in
connection with your relocation from New Jersey to Florida, the
agreement will provide that the Company will reimburse you for any loss
you incur in the sale of your New Jersey home, up to $200,000. A draft
of the agreement is included in Attachment B.
Oscar, I am pleased to offer you this position and look forward to your
affirmative response. Please call me with any issues or questions.
Sincerely,
/s/ Robert J. Haulter
cc: Michael J. Ward
Enclosures
/s/ Oscar Munoz
- -------------------------------------
Accept
Robert J. Haulter
Senior Vice President-Human Resources
April 17, 2003
Mr. Oscar Munoz
2 Kensington Court
Morristown, New Jersey 07960
Dear Oscar:
I am writing to confirm our understanding regarding five matters relating
to your employment with CSX Corporation and its successors ("CSX"). Please
confirm your agreement by returning a signed and dated copy of this letter to
me.
First, under CSX's Relocation Policy you are entitled to be protected by
CSX against certain losses on the sale of your New Jersey residence as a result
of your relocation to Florida to join CSX. Notwithstanding any other provision
of the policy, in your case (a) the cap on reimbursable losses will be raised to
an amount such that after payment by you of all taxes imposed with respect to
the payment, you will retain an amount that reimburses your loss up to $200,000;
and (b) the policy will apply to your current residence in New Jersey regardless
of when you sell the house, so long as the house is put on the market for sale
within the next six months and remains for sale. Your entitlement to this
protection is otherwise subject to the terms and conditions of CSX's policy.
Second, this is to confirm that for acts on behalf of CSX and its
affiliates during your tenure, you will be entitled to indemnity and advances
for expenses afforded officers under the Company's organizational documents and
applicable state law. As background, today those protections are provided in the
CSX Articles of Incorporation to the extent permitted by the Virginia Stock
Corporation Act.
Third, this is to confirm that you will be entitled to four weeks annual
paid vacation.
Fourth, this is to confirm that the Company will enter into a Restricted
Stock Award Agreement with you, under which a restricted stock award of 25,000
shares will be made. On each of the first three anniversaries of the agreement,
5,000 of the shares will vest. On the fourth anniversary of the agreement, the
balance of 10,000 shares will vest.
Fifth, except as provided below, if CSX terminates your employment
(including a "Constructive Termination" as defined below), other than as a
result of Cause or Disability (as those terms are defined below), the following
provisions will apply.
Mr. Oscar Munoz
April 17, 2003
Page 2
May 5, 2003-May 5, 2006. If such termination occurs on or before May 5,
2006, CSX will [pay you a lump sum severance benefit, within 30 days after the
date of termination, equal to two times the sum of (1) your Annual Base Salary
(as defined in the Employment Agreement between CSX and you dated as of May 5,
2003 (the "Employment Agreement") and (2) your target Annual Bonus (as defined
in your Employment Agreement). Furthermore, following the end of the year of the
termination, CSX will determine the amount of the Annual Bonus to which you
would actually have been entitled, had your employment not terminated, and if
that amount exceeds your target Annual Bonus for that year, CSX will pay you an
additional amount equal to two times such excess. In addition, to the extent
that any of the 125,000 options granted to you in May 2003 have not vested, such
options will vest immediately as of the date of such termination.
May 6, 2006-May 6, 2008. If such termination occurs between May 6 2005 and
May 6, 2007, CSX will pay you a lump sum severance benefit, within 30 days after
the date of termination, equal to two times your Annual Base Salary. In
addition, to the extent that nay of the 125,000 options granted to you in May
2003 have not vested, such options will vest immediately as of the date of such
termination.
After May 6, 2008. If such termination occurs after May 6, 2008, CSX will
pay you a lump sum severance benefit, within 30 days after the date of
termination, equal to your Annual Base Salary.
The preceding paragraphs will not apply in the event of any termination of
your employment that occurs during the Employment Period (as defined in the
Employment Agreement), which will be governed exclusively by that agreement.
With respect to the bonus calculations described in the preceding two
paragraphs, no reduction or enhancement will be made for individual performance.
The payments described in the preceding two paragraphs will be in lieu of any
severance or other benefit to which you might otherwise be entitled under any
severance plan, program or policy of CSX and its affiliates, and you will be
required to sign a waiver and release in order to receive them.
For these purposes: (i) "Cause" means (a) your willful and continued
failure substantially to perform your duties as an employee of CSX (other than
as a result of physical or mental illness or injury); (b) your illegal conduct;
(c) your gross misconduct; or (d) your violation of the CSX Code of Ethics; (ii)
"Disability" means your permanent disability within the meaning of CSX's
long-term disability plan applicable to you; and (iii) "Constructive
Termination" means (a) a material diminution of your duties or responsibilities
as Executive Vice President and Chief Financial Officer, including your
reporting to the Chief Executive Officer of CSX, but excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by CSX promptly after receipt of written notice thereof given
by you; (b) a reduction in
Mr. Oscar Munoz
April 17, 2003
Page 3
your Annual Base Salary unless your peer executives suffer a comparable
reduction; (c) a reduction in your target Annual Bonus unless your peer
executives suffer a comparable reduction; (d) a reduction in your other
incentive opportunities, benefits or perquisites unless your peer executives
suffer a comparable reduction; or (e) CSX requiring you to be based at any
office or location other than its corporate headquarters.
Very truly yours,
/s/ Robert J. Haulter
Acknowledged and Agreed,
this 18th day of April, 2003
/s/ Oscar Munoz
- ---------------
Oscar Munoz
Attachment A
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Summary of Relocation Assistance
Management Relocation Policy
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Provision Coverage
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Eligibility . CSX employee who has been asked to relocate by
the company and whose distance from previous
residence to new work location is at least 50
miles greater than previous residence to old
work location.
. In the 12-month period following the move, you
must be a full-time employee for at least 39
weeks.
. Relocation shall be completed within one year
from effective date of transfer.
. One set of benefits per CSX family.
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Home Sale . Primary residence only - must be single
Assistance family, titled in employee's name and with
a lot not larger than 5 acres.
. Marketing Assistance - Mandatory marketing
periods
. 90 days if home valued under $500,000
. 180 days if home valued $500,000+
. CSX to recommend realtors & handle listing
referral
. Must list within 105% of Broker's Market
Analysis (BMA) to be eligible for homesale
buyout program and amended value incentive.
. Offer - Average of 2 appraisals within 5%
spread.
. Three options on your existing home:
. CSX will purchase your home
. You may keep your home and CSX will pay you
an incentive
. You may present a qualified buyer to CSX.
When closing occurs, CSX will pay you an
incentive.
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Retaining Employee may elect to retain primary residence
Residence and receive 3% of appraised value of home
(based on the average of 2 appraisals obtained
by CSX).
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Amended Value Sale . Potential incentive of 3% if homeowner sells
Incentive Program home through Amended Value program.
. 3% based on sales price or appraised value,
whichever is higher.
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Loss On Sale of . Maximum reimbursement is 20% of the original
Home purchase price up to $50,000, provided home
has been marketed and sold at a price
approved by CSX.
. Home must have been purchased within 2 years
prior to effective date of transfer to be
eligible for this benefit.
- --------------------------------------------------------------------------------
House Hunting Trips . Lump Sum Allowance of $1,000 to cover
expenses such as lodging, meals, car rental
and incidentals.
. Airfare reimbursed separately or personal
auto mileage (distance between old and new
location must be greater than 150 miles to
qualify for air transportation).
. Up to two (2) trips each, employee & spouse;
dependent children are entitled to one (1)
round trip.
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Provision Coverage
- --------------------------------------------------------------------------------
Temporary Living . Lump Sum Allowance to cover lodging, meals,
Allowance car rental & incidentals:
Homeowners - $6,000
Renters - $4,000
. Airfare or personal auto mileage for a
maximum of three (3) return visits home
prior to the movement of household goods.
- --------------------------------------------------------------------------------
New Home Purchase . CSX approved national lenders for direct
bill of closing costs
. Reimbursement of closing costs, including 1
point - see policy for specific items
covered/not covered.
- --------------------------------------------------------------------------------
Bridge Loan . Interest-free loan for up to 60 days when
required for purchase of new home.
. Based on 90% of available equity.
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. Lease termination penalty
reimbursement
Renters' Assistance . Maximum of up to two (2)
months' rent, plus security
deposit.
. Proof of charges required for
reimbursement.
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Household Goods Move . Packing, insuring, transporting,
unpacking of goods (if requested).
. Disconnecting and connecting of
appliances.
. Temporary storage of goods as required,
up to 60 days.
- --------------------------------------------------------------------------------
Final Destination Trip . One-way airfare for family, or mileage
at standard company rate.
. Reasonable hotel & meals for last day
old location and first day new
location.
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Cost-of-Living Allowance If cost-of-living adjustment (COLA)
exceeds 3%, CSX will provide a
differential.
- --------------------------------------------------------------------------------
Miscellaneous Allowance CSX will pay $3,000 miscellaneous
allowance per household.
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Spousal Assistance . Job search assistance
. Resume writing
- --------------------------------------------------------------------------------
This is only a summary of the assistance that will be provided. Please refer to
the policy for eligibility requirements, details and guidelines.
[LOGO]
CSX
CORPORATION
Attachment B
500 Water St.
C900
Jacksonville, FL 32202
(904)366-5603
Fax (904) 359-1859
Robert J. Haulter
Senior Vice President-Human Resources
April 8, 2003
Mr. Oscar Munoz
2 Kensington Court
Morristown, New Jersey 07960
Dear Oscar:
I am writing to confirm our understanding regarding two matters relating
to your employment with CSX Corporation ("CSX").
First, under CSX's Relocation Policy you are entitled to be protected by
CSX against certain losses on the sale of your New Jersey residence as a result
of your relocation to Florida in connection with joining CSX. The policy caps
this protection at $50,000; however, in your case, the cap will be raised to
$200,000. Your entitlement to this protection is otherwise subject to the terms
and conditions of CSX's policy.
Second, except as provided below, if CSX terminates your employment,
other than as a result of Cause or Disability (as those terms are defined
below), on or before May 5, 2005, CSX will pay you a lump sum severance benefit,
within 30 days after the date of termination, equal to two times the sum of (1)
your annual base salary at the rate in effect immediately before the termination
and (2) your target annual bonus for the year of the termination. Furthermore,
following the end of the year of the termination, CSX will determine the amount
of the annual bonus to which you would actually have been entitled, had your
employment not terminated, and if that amount exceeds your target annual bonus
for that year, CSX will pay you an additional amount equal to two times such
excess. With respect to such bonus calculation, no reduction or enhancement will
be made for individual performance. These payments will be in lieu of any
severance or other benefit to which you might otherwise be entitled under any
severance plan, program or policy of CSX and its affiliates, and you will be
required to be required to sign a waiver and release in order to receive such
payments.
The preceding paragraph will not apply in the event of any termination
of your employment that occurs during the Employment Period, as defined in the
Employment Agreement between you and CSX dated as of May 5, 2003, which will be
governed exclusively by that agreement.
For these purposes: (i) "Cause" means your willful and continued failure
substantially to perform your duties as an employee of CSX (other than as a
result of physical or mental illness or injury), or your illegal conduct or
gross misconduct; and (ii) "Disability" means your permanent disability within
the meaning of CSX's long-term disability plan applicable to you.
Very truly yours,
/s/ Robert J. Haulter
Attachment C
Executive Perquisites
.. Greenbrier Discount of up to 80% off room & facility charges at the CSX-owned
West Virginia resort
.. Mayo Executive Physical
.. Financial Services - Ayco financial counseling service plus $2,000 financial
service reimbursement account
.. Executive Car Allowance - $600 Monthly Car Allowance, Business Mileage
Reimbursement and Insurance Coverage for One Vehicle
.. Country Club - Up to $20,000 Initiation Fee and $3,500 Annual Dues
Reimbursement
.. Luncheon Club - Up to $1,000 Initiation Fee and $1,000 Annual Dues
Reimbursement
Attachment D
EMPLOYMENT AGREEMENT
AGREEMENT by and between CSX CORPORATION, a Virginia corporation (the
"Company"), and Oscar Munoz (the "Executive"), dated as of the fifth day of May,
2003.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
a. The "Effective Date" shall mean the first date during the Term
(as defined in Section l(b)) on which a Change of Control (as defined in
Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs, and the Executive's
employment with the Company is terminated by the Company without Cause
prior to the date on which the Change of Control occurs or the Executive
ceases to be an officer of the Company, and if it is reasonably
demonstrated by the Executive that such termination of employment or
cessation of status as an officer (i) was at the request of a third party
who has taken steps reasonably calculated to effect such Change of Control
or (ii) otherwise arose in connection with or anticipation of such Change
of Control, then, in each such case, for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
b. The "Term" shall mean the period commencing on the date hereof
and ending on the earlier to occur of (i) the third anniversary of such
date or (ii) the first day of the month next following the Employee's
normal retirement date ("Normal Retirement Date") under the principal
pension plan in which the Executive participates (the "Retirement Plan");
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the
Term shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Term shall not be so
extended; and provided, further, that the Term shall end on an earlier date
if the Company gives the Executive at least one year's advance written
notice thereof.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean:
a. Stock Acquisition. The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
b. Board Composition. Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
c. Business Combination. Approval by the shareholders of the
Company of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company or its
principal subsidiary (a "Business Combination") that is not subject, as a
matter of law or contract, to approval by the Surface Transportation Board
or any successor agency or regulatory body having jurisdiction over such
transactions (the "Agency"), in each case, unless, following such Business
Combination:
(i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common
Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or its principal
subsidiary or all or substantially all of the assets of the Company or
its principal subsidiary either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for
such Business Combination; or
d. Regulated Business Combination. Consummation of a Business
Combination that is subject, as a matter of law or contract, to approval by
the Agency (a "Regulated Business Combination") unless such Business
Combination complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
e. Liquidation or Dissolution. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
If any Change of Control is a Regulated Business Combination, but its
implementation involves another "Change of Control" that is not a Regulated
Business Combination within the meaning of this Section 2, then for all purposes
of this Agreement, such Change of Control shall not be deemed to be a Regulated
Business Combination, the provisions governing a Regulated Business Combination
shall not apply, and the provisions governing such other Change in Control shall
apply.
3. Employment Period.
a. Generally. Subject to Section 3(b), the Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
b. Regulated Business Combination. Notwithstanding the foregoing,
in the case of a Change of Control that is a Regulated Business
Combination, then for all purposes of this Agreement, the "Employment
Period" shall mean the longer of (i) the period commencing on the Effective
Date and ending on the third anniversary of such date or (ii) the period
commencing on the Effective Date and ending thirteen months from the
effective date of a final decision by the Agency on the proposed Regulated
Business Combination ("Final Regulatory Action"), provided, however, that
(x) if the Final Regulatory Action is a denial of the Regulated Business
Combination then for all purposes of this Agreement the "Employment Period"
shall end upon the sixtieth (60th) day following such Final Regulatory
Action and (y) if the Final Regulatory Action is an approval of the
Regulated Business Combination, but the Regulated Business Combination is
not consummated by the first anniversary of the Final Regulatory Action,
then for all purposes of this Agreement the "Employment Period" shall end
upon such first anniversary, of the Final Regulatory Action.
4. Terms of Employment.
a. Position and Duties. (i) During the Employment Period: (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date, and (B) the Executive's services
shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less
than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
b. Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has
been earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase, and the term Annual Base Salary as utilized in
this Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall include any
company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be eligible to earn, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual Bonus") in
cash, at a minimum, target and maximum level not less favorable (in
terms both of dollar amounts and difficulty of achievement) to the
Executive than the Executive's opportunity to earn such annual cash
bonuses under the Company's annual incentive plans, or any comparable
bonus under any predecessor or successor plan, for each of the last
three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed by the Company for the whole
of such fiscal year). (The highest of the actual amounts of such
bonuses, as so annualized, for each of such three full fiscal years is
hereafter referred to as the "Recent Annual Bonus".) Each such Annual
Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus
is awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company
and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives
of the Company and its affiliated companies, but in no event shall
such plans practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs its effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues,
and, if applicable, use of an automobile and payment of related
expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company
and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or,
it more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
5. Termination of Employment.
a. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
b. Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one
of its affiliates (other than any such failure resulting from
incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive officer believes that the
Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the
Chief Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company shall he conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
c. Good Reason. The Executive's employment may be terminated by the
Executive during the Employment Period for Good Reason. For purposes of
this Section 5(c), any good faith determination of "Good Reason" made by
the Executive shall be conclusive. For purposes of this Agreement, "Good
Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which
is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to
the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement.
Anything in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason shall be deemed to be a termination for
Good Reason for all purposes of this Agreement if such termination occurs
(i) in the case of a Change of Control that is a Business Combination but
not a Regulated Business Combination, during the 30-day period beginning on
the 180/th/ day following the day on which the Business Combination is
consummated, (ii) in the case of any other Change of Control that is not a
Regulated Business Combination, during the 30-day period beginning on the
180/th/ day following the Effective Date, and (iii) in the case of a Change
of Control that is a Regulated Business Combination consummated pursuant to
Final Regulatory Action, during the 30-day period immediately following the
first anniversary of the Final Regulatory Action (it being understood that
the Executive will have no rights under this paragraph in the case of a
Change of Control that is a Regulated Business Combination denied by the
Agency).
d. Regulated Business Combination. Notwithstanding the foregoing,
in the case of a Change of Control that is a Regulated Business
Combination, then for all purposes of this Agreement, during that portion
of the Employment Period prior to Final Regulatory Action, the Executive
may not exercise his rights to terminate his employment under this
Agreement for "Good Reason." The Executive may only terminate his
employment under this Agreement if he is "Constructively Terminated" by the
Company. Moreover, except to the extent expressly set forth in the
definition of "Constructive Termination," the Executive shall have no
remedy for any breach by the Company of the provisions of Section 4;
provided, however, that any failure of the Company to comply in any
material respect with the provisions of Section 4 shall create a rebuttable
presumption that a Constructive Termination has occurred.
For purposes of this Agreement, a "Constructive Termination" shall mean:
(i) substantial diminution of the Executive's duties or
responsibilities as contemplated by Section 4(a) of this Agreement,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(ii) a reduction in the Executive's Annual Base Salary;
(iii) a failure by the Company to comply with Section 4(b)(ii)
regarding the Annual Bonus;
(iv) a reduction in the Executive's other incentive
opportunities, benefits or perquisites described in Section 4(b)
unless the Executive's peer executives suffer a comparable reduction;
(v) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B)
hereof; or
(vi) any purported termination by the Company of the Executive's
employment otherwise than for Cause.
During that portion of the Employment Period after Final Regulatory Action,
the Executive may terminate his Employment under this Agreement for "Good
Reason."
e. Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason or Constructive Termination, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 13(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more
than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason, Cause or
Constructive Termination shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
f. Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason or Constructive Termination, the date of receipt
of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause
or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
a. Good Reason or Constructive Termination: Other Than for Cause,
Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment for Good Reason or Constructive
Termination, then the Company shall provide the following payments and
benefits:
(i) The Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the higher of (I) the Recent Annual
Bonus and (II) the Executive's most recently established target
Annual Bonus (annualized for any fiscal year consisting of less
than twelve full months or during which the Executive was
employed for less than twelve full months) (such higher amount
being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2)
the sum of (x) the Executive's Annual Base Salary and (y) the
Highest Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan immediately
prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together,
the "SERP") which the Executive would receive if the Executive's
employment continued
for three years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of the three years is
that required by Section 4(b)(i) and Section 4(b)(ii), over (b)
the actuarial equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and the SERP as of
the Date of Termination;
provided, that if the Executive shall have previously so elected in
accordance with any nonqualified deferred compensation plan of the
Company in which the Executive is eligible to participate, some or all
of such cash payments may be deferred under such plan.
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 4(b)(iv) of this Agreement if the Executive's employment
had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families; provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility; and provided, further, that the period during which the
Executive and his family are eligible for health continuation coverage
under Section 4980B of the Code by reason of the Executive's
termination of employment shall be determined in accordance with the
same principles as are applicable under the Company's general
severance plan or policy. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until three
years after the Date of Termination and to have retired on the last
day of such period.
(iii) The Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of
which shall be selected by the Executive in his sole discretion, but
at a cost not in excess of $20,000.
(iv) The provisions of this Section 6.a.(iv) shall apply with
respect to each option to acquire stock of the Company and/or its
affiliated companies, whether vested or unvested, that has been
granted to the Executive before the Effective Date, remains
outstanding immediately
before the Date of Termination, and terminates, expires, or is
forfeited without having been exercised (an "Unexercised Option");
provided, that this Section 6.a.(iv) shall not be applicable if the
Change of Control transaction referred to in Section 1.a. hereof is
intended to be eligible for pooling-of-interests accounting under APB
No. 16, and would, but for this Section 6.a.(iv), be eligible for such
accounting treatment. The Company shall pay to the Executive, upon the
termination, expiration or forfeiture of an Unexercised Option, a cash
lump sum equal to the value of such Unexercised Option, determined as
of the day before the Date of Termination, using the Black-Scholes
method of valuation, determined based upon the terms and conditions
that would have governed such Unexercised Option if the Executive's
employment had not terminated.
(v) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies,
including earned but unpaid stock and similar compensation (such other
amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
b. Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be
entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to
death benefits, if any, as in effect with respect to other peer executives
and their beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive's
estate and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of the Company
and its affiliated companies and their beneficiaries.
c. Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than
for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in
this Section 6(c) shall include, and
the Executive shall be entitled after the Disability Effective Date to
receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating
to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable
to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
d. Cause; Other than for Good Reason or Constructive
Termination. If the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for Good Reason
or Constructive Termination, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to Section 13(f),
shall anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its affiliated
companies; provided, that any amounts payable to the Executive pursuant to
Section 6(a) hereof shall not be eligible for deferral by the Executive. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Executive may reasonably incur as
a result of any contest regardless of the outcome thereof by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment, at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"); provided, that the
Executive shall repay to the Company all such amounts paid by the Company, and
shall not be entitled to any further payments hereunder, in connection with a
contest originated by the Executive if the trier of fact in such contest
determines that the Executive's claim was not brought in good faith or was
frivolous.
9. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section
9(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account
the Payments and the Gross-Up Payment, would not receive a net
after-tax benefit of at least $50,000 (taking into account both income
taxes and any Excise Tax) as compared to the net after-tax proceeds to
the Executive resulting from an elimination of the Gross-Up Payment
and a reduction of the Payments, in the aggregate, to an amount (the
"Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
b. Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to
the Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten business days after the Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
d. If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section
9(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Arbitration. The Company and the Executive agree that all
disputes, controversies and claims arising between them concerning the subject
matter of this Agreement, other than Sections 9 and 10 hereof, shall be settled
by arbitration in accordance with the rules and procedures of the American
Arbitration Association of Virginia in Richmond, Virginia in accordance with the
laws of the Commonwealth of Virginia. If the parties to any such dispute,
controversy or claim are unable to agree upon an arbitrator or arbitrators, then
three arbitrators or two arbitrators and one umpire shall be appointed by the
American Arbitration Association of Virginia, as it may determine, in accordance
with the rules and practices, then obtaining, of such association. If the
parties to any such dispute, controversy or claim shall agree upon two
arbitrators, but such parties or such arbitrators shall be unable to agree upon
a third arbitrator or upon an umpire, then such third arbitrator or umpire shall
be appointed as aforesaid by the said American Arbitration Association. Any
arbitration pursuant to this Section shall be final and binding on the parties,
and judgment upon the award rendered in any such arbitration may be entered in
any court, state or federal, having jurisdiction. The parties expressly
acknowledge that they are waiving their rights to seek remedies in court,
including without limitation the right (if any) to a jury trial.
12. Successors.
a. This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
c. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
13. Miscellaneous.
a. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Oscar Munoz
2 Kensington Court
Morristown, New Jersey 07960
If to the Company:
CSX Corporation
500 Water Street
Jacksonville, FL 32202
Attention: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
c. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
d. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason or Constructive Termination pursuant to
Section 5 of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section 1(a) hereof, prior to the
Effective Date, the Executive's employment may be terminated by either
the Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under this
Agreement. From and after the Effective Date this Agreement shall
supersede any other agreement between the parties with respect to the
subject matter hereof.
14. Other Agreements Unaffected. Except as otherwise expressly
provided herein, this Agreement shall have no effect on any other agreement
between the Executive and the Company or any of its affiliates, and any such
agreement is ratified and confirmed in all respects and shall remain in full
force and effect in accordance with its terms.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.