Exhibit 10.16
DRAFT: 10/30/00
EMPLOYMENT AGREEMENT
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AGREEMENT by and between CSX CORPORATION, a Virginia corporation (the
"Company"), and ____________________ (the "Executive"), dated as of the first
day of November, 2000.
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.
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a. The "Effective Date" shall mean the first date during the Term
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(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
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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
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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
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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
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of Control" shall mean:
a. Stock Acquisition. The acquisition by any individual, entity or
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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
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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,
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constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
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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
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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
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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
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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
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Combination that is subject, as a matter of law or contract, to approval by
the Agency (a "Regulated Business Combination") unless such Business
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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
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Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
If any Change of Control is a Regulated Business Combination, but its
implementation involves another "Change of Control" that is not a Regulated
Business Combination within the meaning of this Section 2, then for all purposes
of this Agreement, such Change of Control shall not be deemed to be a Regulated
Business Combination, the provisions governing a Regulated Business Combination
shall not apply, and the provisions governing such other Change in Control shall
apply.
3. Employment Period.
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a. Generally. Subject to Section 3(b), the Company hereby agrees
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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,
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in the case of a Change of Control that is a Regulated Business
Combination, then for all
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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
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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.
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a. Position and Duties. (i) During the Employment Period: (A)
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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,
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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.
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5. Termination of Employment.
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a. Death or Disability. The Executive's employment shall terminate
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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
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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
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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
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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).
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d. Regulated Business Combination. Notwithstanding the foregoing,
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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
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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
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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
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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
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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.
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a. Good Reason or Constructive Termination: Other Than for Cause,
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Death or Disability. If, during the Employment Period, the Company shall
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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
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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
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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
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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
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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.
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(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
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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
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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
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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
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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
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forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and xxx
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
-------- -------
that if the Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
d. If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall 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,
-16-
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; provided, that the Company may unilaterally amend
--------
Exhibit A hereto from time to time, but only to the extent it determines,
upon the advice of counsel, to be necessary to comply with the legal
requirements to obtain a valid release.
-17-
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:
-------------------
If to the Company:
-----------------
CSX Corporation
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
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. Waiver and Release with Respect to Prior Agreements. In
----------------------------------------------------
exchange for the compensation and benefits promised herein, the Executive hereby
waives and releases the Company and its affiliates from any and all claims he
ever had or may have arising from or in
-18-
connection with the letter agreement dated November 14, 1988, as the same may be
amended to the date hereof, between the Company and the Executive and the
Employment Agreement dated _____________, 19__, between the Company and the
Executive (together, the "Prior Agreements"), and the Executive acknowledges
that this Agreement supersedes and renders null and void in all respects the
Prior Agreements.
15. Other Agreements Unaffected. Except for the Prior Agreement,
----------------------------
or 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.
__________________________________
CSX CORPORATION
By________________________________
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