FORM OF BURLINGTON NORTHERN SANTA FE CHANGE-IN-CONTROL AGREEMENTChange of Control Agreement |
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Exhibit 10.4
Amended and Restated Agreement as of September 21, 2006
Mr.XXXXXXXXXXXXXX:
Burlington Northern Santa Fe Corporation (the "Corporation") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Corporation (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as that term is defined in this letter) may exist, and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporations management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control.
In order to induce you to remain in the employ of the Corporation or its affiliates, the Corporation agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Corporation is terminated under the circumstances described below subsequent to a "Change in Control" (as defined in Section 2), and that you shall be eligible for the parachute tax gross-up and certain other benefits described in this Agreement.
1. TERM. The "Agreement Term" shall begin on _______________ (the "Effective Date" of this Agreement), and shall end on December 31, ____, subject to the following:
(i) As of January 1, ____, and each January 1 thereafter, the Agreement Term shall automatically be extended to the next following December 31; provided, however, that no such extension shall take place if, on or before the September 30 next preceding the date on which the extension would otherwise take place, the Corporation has given notice that it does not wish to extend the Agreement Term.1 For the avoidance of doubt, it is recited here that if a Change in Control described in paragraph 2(i) or 2(iii) occurs, and your Date of Termination occurs after the 24-month anniversary of the date of the Change in Control but before consummation of the transaction approved by the shareholders and before the Agreement Term expires by reason of paragraph (iii) below (relating to a Board determination that consummation will not occur), the Agreement Term shall be extended to your Date of Termination.
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Insert the next clause in agreements entered into after September 21, 2006 : "; and further provided, that no such extension shall take place if the effect of the extension would be to extend the Agreement Term beyond the December 31 coincident with or next following the two-year anniversary of the date on which you cease to be in a position that is at or above salary band 36 (unless, as of such December 31, you are again in a position that is at or above salary band 36); and further provided that no such extension shall take place if a Change in Control has occurred prior to the date on which the extension would otherwise take place)" |
(ii) Subject to paragraph (iii) next below, if a Change in Control occurs during the Agreement Term (as it may be extended from time to time), the Agreement Term shall be extended for a period of twenty-four (24) months beyond the last day of the calendar month in which the Change in Control occurs, but in no event less than twelve (12) months beyond the date of the consummation of the Change in Control.
(iii) If a Change in Control described in paragraph 2(i) or 2(iii) occurs during the Agreement Term (as it may be extended from time to time), but the Board thereafter determines that it will not consummate the transaction or regulatory approval for the transaction is not obtained, then the Board may reduce the 24-month extension period set forth in paragraph (ii) next above; provided that the Agreement Term may not end earlier than six (6) months after such notice of reduction is provided by the Board or, if earlier, the date such Agreement Term would end in the absence of action under this paragraph (iii).
(iv) In no event, however, shall the Agreement Term extend beyond the end of the calendar month in which your 65th birthday occurs if you are subject to mandatory retirement at such age or to the extent permitted by law.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred if:
(i) Any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any company owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporations then outstanding securities.
(ii) During any period of two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in paragraphs (i), (iii) or (iv) of this definition) whose election by the Board or nomination for election by the Corporations stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof.
(iii) The stockholders of the Corporation approve a merger or consolidation of the Corporation with any other company other than (a) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Corporation (or such surviving entity) outstanding immediately after such merger or consolidation, or (b) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 25% of the combined voting power of the Corporations then outstanding securities.
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(iv) The stockholders of the Corporation adopt a plan of complete liquidation of the Corporation or approve an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporations assets. For purposes of this paragraph (iv), the term "the sale or disposition by the Corporation of all or substantially all of the Corporations assets" shall mean a sale or other disposition transaction or series of related transactions involving assets of the Corporation or of any direct or indirect subsidiary of the Corporation (including the stock of any direct or indirect subsidiary of the Corporation) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by another objective method in a case where there is no readily ascertainable purchase price) constitutes more than two-thirds of the fair market value of the Corporation (as hereinafter defined). For purposes of the preceding sentence, the "fair market value of the Corporation" shall be the aggregate market value of the outstanding shares of common stock of the Corporation (on a fully diluted basis) plus the aggregate market value of the Corporations other outstanding equity securities (excluding employee stock options). The aggregate market value of the shares of common stock of the Corporation (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the "Transaction Date") shall be determined by the average closing price of the shares of common stock of the Corporation for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Corporation shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of common stock of the Corporation.
A Change in Control that occurs prior to the beginning of the Agreement Term shall be disregarded for purposes of this Agreement.
3. BASIS OF EMPLOYMENT TERMINATION. If your Date of Termination occurs during the Agreement Term, on a date that is coincident with or follows the occurrence of a Change in Control, or if you have a disability during the Agreement Term after the occurrence of a Change in Control, you shall be eligible for payments and benefits in accordance with, and to the extent provided by, Section 4, with such eligibility determined on the basis for your termination of employment. For purposes of this Agreement, the basis for your termination of employment shall be determined in accordance with this Section 3.
(i) Disability. If, as a result of your incapacity due to physical or mental illness or injury, you shall have been absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written Notice of Termination is given by the Corporation, you shall not have returned to the full-time performance of your duties, your employment may be terminated by the Corporation for unavailability due to "Disability." Notwithstanding any other provision of this Agreement, a termination of employment under this paragraph (i) shall not cause you to be considered a terminated employee within the meaning of the Corporations long term disability plan and your rights thereunder shall not be affected by this Agreement.
(ii) Cause. Your Date of Termination shall be deemed to have occurred for "Cause," if your Date of Termination occurs because of circumstances described in paragraph (a) or paragraph (b) next below, as determined in accordance with the procedures set forth in paragraphs (A), (B) and (C) next below:
(a) the willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or injury, or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason); or
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(b) the willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise.
For purposes of this paragraph (ii), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without a reasonable belief that your action or omission was in the best interest of the Corporation. Your Date of Termination shall not be deemed to have occurred for "Cause" unless the procedures described in paragraphs (A), (B) and (C), next below, have been satisfied:
(A) A written notice of alleged Cause is delivered to you by the Board or a member of the Board. In the case of "Cause" described in paragraph 3(ii)(a) (relating to a failure to perform your duties), the written notice shall consist of specific identification of the manner in which the Board or such Board member believes that you have not substantially performed your duties, and shall include a demand for such performance. In the case of "Cause" described in paragraph 3(ii)(b) (relating to conduct injurious to the Company), the written notice shall consist of specific identification of the manner in which the Board or such Board member believes that you have engaged in conduct which is demonstrably and materially injurious to the Corporation.
(B) You have received an opportunity to be heard by the Board or a member of the Board, which will consist of delivery to you of reasonable advance written notice of a Board meeting (to be delivered at or after the time you receive the notice of alleged Cause, described in paragraph (A) next above), at which you, together with your counsel, may be heard by the Board, concerning the contents of the notice of alleged Cause and, in the case of "Cause" described in paragraph 3(ii)(a), the manner in which you intend to achieve substantial performance.
(C) You have received a copy of your Notice of Termination, which will include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board, which occurs after your opportunity to be heard by the Board (at that meeting or a subsequent meeting), and which finds that in the good faith opinion of the Board you were guilty of conduct set forth in the notice of alleged Cause and which specifies the particulars thereof in detail. The Date of Termination set forth in the Notice of Termination shall be not earlier than thirty (30) days after the notice of alleged Cause has been delivered to you in accordance with paragraph 3(ii)(A).
(iii) Good Reason. Subject to the procedures set forth in paragraphs (A), (B), and (C) next below, you shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence, after a Change in Control, of any of the circumstances described in paragraphs (a) through (h) next below. However, "Good Reason" shall not exist under paragraphs (a), (e), (f), (g) or (h), next below, if such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof.
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(a) The assignment to you of any duties with a level of responsibility materially inconsistent with the position in the Corporation that you held immediately prior to the Change in Control, or a significant adverse alteration in the status of your responsibilities from those in effect immediately prior to such Change in Control.
(b) A reduction by the Corporation in your annual base salary as in effect on the Effective Date, and adjusted to reflect such increases as may be made after the Effective Date and prior to the occurrence of a Change in Control, and also adjusted to reflect such decreases as may be made after the Effective Date, but taking decreases into account only to the extent that they are part of across-the-board salary reductions similarly affecting all management personnel of the Corporation and all management personnel of any person in control of the Corporation.
(c) The relocation of your base of operations for the Corporation or affiliate to a place that is fifty (50) miles farther from your residence immediately prior to the Change in Control than the distance from such residence to your former base of operations for the Corporation or affiliate. The determination of whether the distance exceeds 50 miles shall be performed in a manner that is consistent with Internal Revenue Service rules applicable to the determination of deductibility of moving expenses.
(d) The failure by the Corporation to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due.
(e) The failure by the Corporation to continue in effect any compensation plan in which you participate immediately prior to the Change in Control that is material to your total compensation, including but not limited to the Corporations Retirement Plan, Supplemental Retirement Plan, Investment and Retirement Plan, Supplemental Investment and Retirement Plan, Incentive Compensation Plan, Stock Incentive Plan, or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control.
(f) The failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporations life insurance, medical, health and accident, or disability plans in which you were participating at the time of the Change in Control, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporations normal vacation policy in effect at the time of the Change in Control.
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(g) The failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 7.
(h) Any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph 3(vi) (and, if applicable, the requirements of this paragraph 3(iii)), which purported termination shall not be effective for purposes of this Agreement.
You shall not be deemed to have terminated employment for Good Reason unless you have delivered a written Notice of Termination, which:
(A) identifies the circumstances, and the provisions of this paragraph 3(iii), which form the basis for your termination for Good Reason;
(B) in the case of circumstances described in paragraphs (a), (e), (f), (g) or (h) next above, demands correction; and
(C) specifies a Date of Termination which is not less than fifteen (15) days nor more than sixty (60) days after the Notice of Termination has been provided to the Corporation.
Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.
(iv) Discharge Absent Cause or Disability. You shall be deemed to have been discharged by the Corporation absent Cause or Disability if your employment is terminated by the Corporation other than in accordance with paragraph 3(i) (relating to Disability) or paragraph 3(ii) (relating to Cause). Your Date of Termination under this paragraph 3(iv) may not be earlier than sixty (60) days after the written Notice of Termination is delivered to you. However, the sixty (60) day notice requirement shall not apply to a termination which occurs prior to the date of a Change in Control; provided, however, that if your employment is terminated in accordance with this paragraph 3(iv) within sixty (60) days prior to the occurrence of a Change in Control, your employment shall be deemed to have been terminated on the date specified in the Notice of Termination, but not earlier than sixty (60) days after such notice is provided to you.
(v) Payment in Lieu of Notice. The Corporation shall be deemed to have complied with the requirement of this Section 3 relating to advance Notice of Termination if it places you on a fully-paid leave of absence during such notice period; provided, however, that to the extent that such leave of absence prevents you from returning to work following a disability, as described in paragraph 3(i), or prevents you from substantially performing your duties, as described in paragraph 3(ii), the establishment of such leave of absence shall be deemed inconsistent with the provisions of paragraph 3(i) or paragraph 3(ii), and except to the extent that another provision of paragraph 3(i) or paragraph 3(ii) applies, your employment will be deemed to have been terminated in accordance with paragraph 3(iv) (relating to discharge absent Cause or Disability). For purposes of this paragraph (v), during such fully-paid leave of absence, you shall be entitled to base salary, and to continue as a participant in all compensation, benefit and insurance plans in which you were participating at the time the leave of absence began.
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(vi) Notice of Termination. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.
(vii) Date of Termination. "Date of Termination" shall mean the date on which your employment with the Corporation and any affiliates terminates for any reason.
(viii) Extension of Date of Termination. If, within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to extensions under this paragraph (viii)), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute if the dispute relates to a termination under paragraph 3(iv) and the Corporations failure to provide benefits under this Agreement, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this paragraph (viii). Amounts paid under this paragraph (viii) are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. Notwithstanding the foregoing provisions of this paragraph (viii), the determination of whether your Date of Termination has occurred within the Agreement Term shall be determined without regard to any extensions under this paragraph (viii).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. If your Date of Termination occurs during the Agreement Term, on a date that is coincident with or follows the occurrence of a Change in Control, or if you have a disability during the Agreement Term and after the occurrence of a Change in Control, you shall be entitled to payments and benefits in accordance with, and to the extent provided by, this Section 4.
(i) Discharge for Cause and Voluntary Resignation. If your employment is terminated by the Corporation for Cause, or is terminated by you other than for Good Reason, the Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Corporation or any affiliate at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.
(ii) Disability. During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness or injury, you shall continue to receive your base salary at the rate in effect at the commencement of any such
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period, together with all compensation payable to you under the long term disability plan or other similar plan during such period, until your employment is terminated pursuant to paragraph 3(i). Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Corporations retirement, insurance and other compensation programs then in effect in accordance with the terms of such program; however, your receipt of benefits under the long term disability plan will not be affected by your termination under this Agreement.
(iii) Termination for Good Reason and Discharge Absent Cause or Disability. If your employment is terminated by you for Good Reason, or by the Corporation absent Cause or Disability (as described in paragraph 3(iv)), then you shall be entitled to the payments and benefits described below:
(a) Prior Salary and Deferrals. The Corporation shall pay to you (1) your full base salary through your Date of Termination at the rate in effect at the time the Notice of Termination is given, with payment to be made no later than the fifth day following your Date of Termination; (2) your Bonus Rate (defined below) for the year in which your Date of Termination occurs, subject to a pro-rata reduction for the portion of the year after your Date of Termination; and (3) all other amounts to which you are entitled under any compensation plan of the Corporation, at the time such payments are due under the terms of such plans.
(b) Additional Salary and Severance. In lieu of any further salary or bonus payments to you for periods subsequent to your Date of Termination, and except as provided in paragraph 4(iv), the Corporation shall pay to you, at the time specified in paragraph 4(iv), a lump sum severance payment equal to: [for CEO, EVPs, and individuals covered by the Corporations Change in Control Agreement as of September 21, 2006: the sum of (A) 2.99 times your Salary Rate and (B) 2.99 times your Bonus Rate; or for all other executives in salary bands 36 and above who become covered by the Corporations Change in Control Agreements after September 21, 2006: the sum of (A) two (2) times your Salary Rate and (B) two (2) times your Bonus Rate.]
For purposes of this paragraph (iii):
(A) Your "Salary Rate" shall be equal to the greatest of: (1) your annual salary as in effect as of the Date of Termination plus any amounts deferred under the Burlington Northern Santa Fe Supplemental Investment and Retirement Plan or foregone under the Salary Exchange Option Program or any other arrangement of the Corporation or its affiliates providing for the elective deferral of salary], (2) your highest consecutive twelve (12) months salary over the twenty-four (24) month period preceding the Date of Termination, or (3) your annual salary as in effect immediately prior to the Change in Control.
(B) Your "Bonus Rate" shall be the amount which you would have received under the Corporations Incentive Compensation Plan (or other successor
