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Employment & Consulting Agreement

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Sectors: Transportation
Governing Law: Virginia , View Virginia State Laws
Effective Date: July 11, 2001
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EXHIBIT 10.3


EMPLOYMENT AND CONSULTING AGREEMENT
-----------------------------------


AGREEMENT by and between CSX CORPORATION, a Virginia corporation (the "Company"), and John W. Snow (the "Executive"), dated as of the eleventh day of July, 2001 (this "Agreement").


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, both before and after his retirement from active employment, and the Executive is willing to commit to render services to the Company, all on the terms and conditions set forth below in this Agreement.


NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:


1. Periods of this Agreement. This Agreement provides for the
------------------------- continued relationship of the Company and the Executive for three successive periods and thereafter. These three periods are: (a) the Employment Period, which shall extend from the date hereof until such time, not later than the conclusion of the 2004 Annual Meeting, as the Board shall determine; (b) the Chairmanship Period, which shall extend from the end of the Employment Period through the conclusion of the 2004 Annual Meeting (unless those events occur at the same time, in which event there shall be no Chairmanship Period); and (c) the Consulting Period, which shall extend from the conclusion of the 2004 Annual Meeting through the conclusion of the 2006 Annual Meeting. The Employment Period, the Chairmanship Period, if any, and the Consulting Period are sometimes referred to collectively as the "Term of this Agreement." It is anticipated that the Employment Period will end at the time of the 2003 Annual Meeting, but the Board may determine, in its sole discretion, that the Employment Period should end before that time, or at any time thereafter (but not later than the conclusion of the 2004 Annual Meeting). For all purposes of this Agreement, unless and until the Board notifies the Executive otherwise, it shall be assumed that the Employment Period will end at the conclusion of the 2003 Annual Meeting.


2. Duties and Positions. (a) Employment Period. (i) During the
-------------------- ----------------- Employment Period, the Executive shall serve as the Chairman of the Board and the Chief Executive Officer of the Company, with the duties and responsibilities normally associated with those positions. At the end of the Employment Period, the Executive shall resign his position as Chief Executive Officer of the Company, and any other officer or director position with any Affiliated Company, and shall retire from employment with the Company and the Affiliated Companies. If the Employment Period ends before the conclusion of the 2004 Annual Meeting, the Executive shall remain as a member of the Board and Chairman of the Board through the conclusion of the 2004 Annual Meeting, as more fully set forth in Section 2(b).


(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.


(b) Chairmanship Period. During the Chairmanship Period, if any, the
------------------- Executive shall serve as non-executive Chairman of the Board, with the duties and responsibilities normally associated with that position.


(c) Consulting Period. At the conclusion of the 2004 Annual Meeting,
----------------- the Executive shall resign from the Board and shall cease to serve as Chairman of the Board. Thereafter, during the Consulting Period, the Executive shall serve as a consultant to the Company as and when requested by the Successor CEO or the Board, providing assistance to the Successor CEO in the areas of government initiatives, investor events and client events and services to the Company in connection with industry initiatives and consolidation. The Executive shall provide such services for up to 60 days during the first year of the Consulting Period and for up to 30 days during the second year of the Consulting Period. The Executive's services during the Consulting Period shall be provided at mutually convenient times and places, taking into account the Company's needs and the Executive's other professional and personal commitments.


3. Compensation and Benefits. (a) Base Salary and Retainers. During
------------------------- ------------------------- the Employment Period, the Executive shall receive a base salary (the "Base Salary"), payable in accordance with the Company's normal payroll practices for senior executives, at an annual rate of not less than $1,250,000. Any increase in the Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Chairmanship Period, if any, the Executive shall receive a cash retainer at an annual rate equal to the annual rate of Base Salary in effect immediately before the end of the Employment Period, which shall be in lieu of any other compensation to which he may be entitled as a non-employee member of the Board. The Executive shall receive a cash retainer at an annual rate of $500,000 during the first year of the Consulting Period and $250,000 during the second year of the Consulting Period. Such retainers shall be paid monthly in arrears during the Chairmanship Period, if any, and the Consulting Period.


(b) Annual Bonus. In addition to the Base Salary, the Executive shall
------------ have the opportunity to earn, for fiscal year 2001 and each subsequent fiscal year (if any) that begins during the Employment Period, an annual bonus under the Company's Senior Executive Incentive Plan or any successor thereto, with a target amount equal to 120% of the annualized amount of his Base Salary; provided, that the Annual Bonus for the fiscal year in which the end of the Employment Period occurs shall equal the Annual Bonus that he otherwise would have received, times a fraction, the numerator of which is the number of days in such fiscal through and including the last day of the Employment Period, and the denominator of which is the total number of days in such fiscal year. Any annual bonuses so earned (each, an "Annual Bonus") shall be paid to the Executive at the same times as the Company's senior executives receive


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their bonuses under such plan, notwithstanding his retirement at the end of the Employment Period.


(c) Long-Term Incentive Compensation. On or as soon as practicable
-------------------------------- after the date hereof, the Company shall grant to the Executive options to acquire 800,000 shares of common stock of the Company (the "Options") and 200,000 shares of restricted stock of the Company (the "Restricted Stock").


(d) Split-Dollar Arrangement. On or as soon as practicable after the
------------------------ date hereof, the Company and the Executive shall enter into a split-dollar life insurance arrangement (the "Split-Dollar Arrangement") under which the Executive shall be insured by a policy having a face value of $25 million, with the Company being obligated to pay all premiums required to cause such policy to be fully paid-up within seven years.


(e) Other Benefits. During the Employment Period: (i) the Executive
-------------- shall be entitled to participate in all savings and retirement plans, practices, policies and programs of the Company to the same extent as the Company's senior executives; (ii) 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, all welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life insurance, group life insurance, accidental death and travel accident insurance plans and programs) to the same extent as the Company's senior executives; and (iii) the Executive shall be entitled to fringe benefits to the same extent and on the same basis as the Company's senior executives. It is expressly acknowledged and agreed that the Executive shall not be entitled to any additional grants of stock options or other long-term incentive compensation awards except as specifically provided above. From and after the end of the Employment Period, the Executive shall be entitled to receive retiree medical, dental, and term life insurance coverage, and any other retirement benefits to which he may be entitled under the plans, practices, policies and programs provided by the Company. In addition, during the Chairmanship Period, if any, and the Consulting Period, the Executive shall continue to be covered by the Company's business travel accident insurance program, as if he were an active employee, on the same terms and conditions as the Company's senior executives.


(f) Business Expenses. Throughout the Term of this Agreement, the
----------------- Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable expenses that he incurs in the course of carrying out his duties under this Agreement, in accordance with the Company's policies as in effect from time to time.


(g) Offices. During the Employment Period and the Chairmanship
------- Period, if any, the Company shall provide the Executive with an office, a secretary, and other support and services, at a location of his choosing within the continental United States, as he deems appropriate. During the Consulting Period and thereafter, the Company shall provide the Executive with a personal office and secretarial support at a location of his choosing within the continental United States.


(h) Vacation. During the Employment Period, the Executive shall be
-------- entitled to not less than five weeks of vacation annually.


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(i) Perquisites. The Executive shall be entitled to continued
----------- perquisites as set forth in this Section 3(i). The following perquisites shall be available to the Executive, in a form comparable to that provided as of the date of this Agreement, for the remainder of his lifetime: country clubs; Greenbrier; executive physicals; financial and estate planning services; tax return preparation; and home security. Further, during the Term of this Agreement, the Executive shall continue to participate in the Company's executive car allowance and charitable gift programs. Finally, the Executive shall be entitled (i) to unlimited use of Company aircraft or other comparable flight services during the Employment Period and the Chairmanship Period, if any, and (ii) thereafter, to reasonable and occasional use of Company aircraft or other comparable flight services for the remainder of his lifetime; provided,
-------- however, that the Executive shall be permitted such use for at least 50 hours ------- per year during the Consulting Period and thereafter; and provided, further,
-------- ------- that during the Consulting Period only, the Company shall make cash payments to the Executive sufficient to make him whole, on an after-tax basis, for any income tax imposed on him as a result of such usage.


4. Termination of Services. (a) Effect of Early Termination.
----------------------- --------------------------- Notwithstanding the foregoing provisions of this Agreement, the Executive's service under this Agreement may terminate early under the provisions of this Section 4 (an "Early Termination"), in which event the Company and the Executive shall have no further obligations under Sections 1, 2 and 3.


(b) Death or Disability. An Early Termination shall occur upon the
------------------- Executive's death during the Term of this Agreement. If the Company determines in good faith that the Disability of the Executive has occurred during the Term of this Agreement (pursuant to the definition of Disability set forth below), it may give to the Executive written notice of its intention to terminate the Executive's services under this Agreement. In such event, an Early Termination shall occur 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.


(c) By the Company. An Early Termination shall occur if the Company
-------------- terminates the Executive's services during the Term of this Agreement for Cause or without 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 hereunder (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 Successor CEO (if
applicable) which specifically identifies the manner in which the
Board or Successor CEO (if applicable) believes that the Executive has
not substantially performed the Executive's duties, or


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(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 Successor CEO (if applicable) or based upon the advice of counsel for the Company shall be 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 the Executive's services 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 (other than the Executive) 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) of this Section 4(c), and specifying the particulars thereof in detail.


(d) By the Executive. An Early Termination shall occur if the
---------------- Executive terminates his employment during the Employment Period for Good Reason or without Good Reason. For purposes of this Section 4(d), 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 2(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 3 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) resignation of the Executive upon a determination by the
Board of Directors, in its sole discretion, that the best interests of
the shareholders are served by the executive's resignation at such
time, to allow appropriate Company succession or so that the executive
may fulfill an appointment to public office or a similar quasi-
governmental role benefiting the Company and its mission;


(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or


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(v) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement.


(e) Notice of Termination. Any Early 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 the Early Termination 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 Date of Termination (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 the date on
------------------- which an Early Termination is effective, which shall be as follows: (i) if the Early Termination is 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 Early Termination is by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination and (iii) if the Early Termination occurs by reason of the Executive's death or Disability, the date of death or the Disability Effective Date, as the case may be.


5. Obligations of the Company upon Termination.
-------------------------------------------


(a) During the Employment Period; Good Reason or Constructive
--------------------------------------------------------- Termination; Other Than for Cause, Death or Disability. If an Early Termination ------------------------------------------------------ occurs during the Employment Period, either by action of the Company other than for Cause or Disability or by action of the Executive for Good Reason, 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) any Base Salary through the Date of
Termination, to the extent not theretofore paid, (2) the amount
of any Annual Bonus for any fiscal year ended before the Date of
Termination that has been earned but not yet paid, 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


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(1), (2), and (3) shall be hereinafter referred to as the
"Accrued Obligations); and


B. the sum of (1) the aggregate amount of the Base Salary
payable to the Executive for the portion of the Employment Period
(as in effect immediately before the Date of Termination) that
follows the Date of Termination, to the extent not theretofore
paid, (2) the amount of the Annual Bonuses, if any, that the
Executive would have been entitled to receive for periods ending
after the Date of Termination under Section 3(b), assuming that
any such Annual Bonuses were all earned at the target level of
120% of Base Salary and assuming that the Employment Period would
have ended at the conclusion of the 2003 Annual Meeting or such
later date, if any, as the Board had established pursuant to the
penultimate sentence of Section 1, (3) the cash retainer that
would have been payable to the Executive for the actual scheduled
period of the Chairmanship Period, if any, and (4) the cash
retainer that would have been payable to the Executive during the
Consulting Period; and


C. an amount equal to the excess of (1) 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 Date of Termination), 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 through the end of the Employment Period (as
in effect immediately before the Date of Termination), assuming
for this purpose that the Executive's compensation had equaled
the Base Salary and Annual Bonuses payable during that period
under Sections 3(a) and (b) (assuming that such Annual Bonuses
were all earned at the target level of 120% of Base Salary), over
(2) 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) Until the end of the Employment Period, 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 3(e)(ii) 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 senior
executives of the Company and the Affiliated Companies and their


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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 the end
of the Employment Period (as in effect immediately before the Date of
Termination) and to have retired on the last day of the Employment
Period.


(iii) The Company shall provide the Executive with the office
and secretarial support provided for in Section 3(g) and the
perquisites provided for in Section 3(i), in each case as if the
Consulting Period had begun on the Date of Termination and ended at
the conclusion of the 2006 Annual Meeting.


(iv) 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 the Affiliated Companies,
including without limitation under the agreements governing the
Options, the Restricted Stock and the Split-dollar Arrangement (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").


(b) Death. If an Early Termination occurs b
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