Exhibit 10(aa)
NORFOLK SOUTHERN CORPORATION
LONG-TERM INCENTIVE PLAN
AS APPROVED BY SHAREHOLDERS MAY 14, 2015,
AS AMENDED JULY 29, 2016, NOVEMBER 29, 2016, NOVEMBER 28, 2017,
NOVEMBER 27, 2018 AND NOVEMBER 19, 2019
The terms of this amended plan, as set forth below, were approved by the separate vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation at which a quorum was present for the proposal on May 14, 2015. The Board of Directors of the Corporation subsequently amended the Plan: on July 29, 2016 to clarify that an Award may include conditions such as continued employment, passage of time, the provisions of a Retention Agreement, attainment of age and/or service requirements, and/or the achievement of Performance Goals; on November 29, 2016 to revise the definition of “Retirement” with respect to a Participant who is not eligible to participate in a retirement plan of the Corporation or a Subsidiary Company and to specifically include work as a director for purposes of the noncompete under Section 14; on November 28, 2017, to revise the definition of “Restriction Period” from three years to ratable restriction periods over three years and grant the Committee authority to award up to 25,000 shares per year with a one-year restriction period for officers and employees; on November 27, 2018, to revise the definition of “Award Date” regarding the effective date of an Award made during a blackout period; and on November 19, 2019, to clarify the Committee’s authority to specify in the Award Agreement the non-forfeiture of Performance Share Units or an Option for a Participant who terminates service for a reason other than Retirement, Disability or death.
Section 1. PURPOSE
The purpose of the Long-Term Incentive Plan (“Plan”), as amended, is to promote the success of Norfolk Southern Corporation (the “Corporation”) and to provide an opportunity for non-employee directors, officers and other employees of the Corporation and its Subsidiary Companies (as hereinafter defined) to acquire or increase a proprietary interest in the Corporation and thereby to provide an additional incentive to devote their maximum efforts and skills to the advancement, betterment, and prosperity of the Corporation and its stockholders. The Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, performance share units, performance shares, restricted shares, and restricted stock units, in accordance with the terms and conditions set forth below. The Corporation intends that the Plan comply with the requirements of Internal Revenue Code Section 162(m) and applicable treasury regulations thereunder and intends that compensation paid under the Plan qualify as performance-based compensation under Code Section 162(m). Notwithstanding the preceding sentence, the Corporation reserves the right to pay compensation under the Plan that does not qualify as performance-based compensation under Code Section 162(m), as circumstances may warrant. The Plan, as amended, is intended, and shall be construed, to comply with the requirements of Code Section 409A.
Section 2. DEFINITIONS
The terms used herein shall have the following meanings unless otherwise specified or unless a different meaning is clearly required by the context:
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Award
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Any one or more of the following: Incentive Stock Option; Non-qualified Stock Option; Stock Appreciation Right; Restricted Shares; Restricted Stock Units; Performance Share Units; and Performance Shares.
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Award Agreement
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A written agreement, made in a form approved by the Committee and consistent with the terms of the Plan, that specifies the terms, conditions and limitations of each Award.
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Award Date
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The date on which the Committee or the chief executive officer (to the extent as may be delegated by the Committee) grants an Award or, if granted during a blackout period that precedes the release of the Corporation’s financial information for the preceding calendar quarter, the first day on which the Corporation’s common stock is traded after a full trading day has elapsed following the release of the Corporation’s financial information for the preceding calendar quarter.
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Beneficiary
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The person or persons designated in writing by the Participant as his Beneficiary in respect of Awards or, in the absence of such a designation or if the designated person or persons predecease the Participant, the person or persons who shall acquire the Participant’s rights in respect of Awards by bequest or inheritance in accordance with the applicable laws of descent and distribution. In order to be effective, a Participant’s designation of a Beneficiary must be on file with the Corporation before the Participant’s death. Any such designation may be revoked and a new designation substituted for the revoked designation by the Participant at any time before his death without the consent of the previously designated Beneficiary.
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Board of
Directors
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The Board of Directors of the Corporation.
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Cash-Settled Stock Appreciation Rights
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Stock Appreciation Rights settled in cash.
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Code
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The Internal Revenue Code of 1986, as amended from time to time.
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Committee
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The Compensation Committee or any other committee of the Board of Directors which is authorized to grant Awards under this Plan. It is intended that each member of the Committee shall qualify as (a) a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, (b) an “outside director” under Code Section 162(m), and (c) an “independent director” under the rules of the New York Stock Exchange. If it is later determined that one or more members of the Committee do not qualify as a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, actions taken by the Committee prior to such determination shall be valid despite such failure to qualify.
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Common Stock
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The Common Stock of the Corporation.
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Disability
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A disability that has enabled the Participant to receive a disability benefit under the Long-Term Disability Plan of the Corporation or a long-term disability plan of a Subsidiary Company (whichever is applicable), as amended from time to time, for a period of at least three months.
For a Participant who is a non-employee director, “Disability” means any medically determinable physical or mental impairment that is expected to result in death or to last for a continuous period of not less than 12 months and which prevents a Participant from continuing to serve as a non-employee director.
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Dividend Equivalent
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An amount equal to the regular quarterly dividend paid in accordance with the Corporation’s normal dividend payment practice as may be determined by the Committee, in its sole discretion, and granted pursuant to Section 13 of the Plan.
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Executive Officers
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Officers designated by the Board of Directors as “Executive Officers” for purposes of Section 16 of the Securities Exchange Act of 1934.
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Exercise Gain Shares
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With respect to a Stock Appreciation Right, all of the shares of Common Stock received upon exercise of the Stock Appreciation Right. With respect to an Option, the portion of the shares of Common Stock received upon exercise of the Option equal to the excess of the Fair Market Value, as of the exercise date, over the Option price, multiplied by the number of shares purchased under the Option on the exercise date, divided by such Fair Market Value, and rounded down to the nearest whole number of shares.
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Fair Market Value
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The value of Common Stock on a particular date as measured by the mean of the high and low prices at which it is traded on such date as reported in the Composite Transactions for such date by Bloomberg L.P., or its successor, on its internet-based service, or, if Common Stock was not traded on such date, on the next preceding day on which Common Stock was traded.
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Incentive Stock Option
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An Option that complies with the terms and conditions set forth in Section 422(b) of the Code and is designated by the Committee as an Incentive Stock Option.
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Non-Qualified Stock Option
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An Option granted under the Plan other than an Incentive Stock Option.
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Option
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Any option to purchase Common Stock granted pursuant to the provisions of Section 6 or Section 7 of the Plan.
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Optionee
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A Participant who is the holder of an Option.
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Participant
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A person eligible to participate in the Plan who is granted and accepts an Award under the Plan.
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Performance Cycle
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The period of time, designated by the Committee but not less than one year, over which Performance Shares may be earned.
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Performance Criteria
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One or more, or any combination, of the following business criteria, selected by the Committee, which may be applied on a corporate, department or division level, and which may be measured on an absolute or relative basis, or established as a measure of growth: earnings measures (including net income, earnings per share, income from continuing operations, income before income taxes, income from railway operations); return measures (including net income divided by total assets, return on shareholder equity, return on average invested capital); cash flow measures (including operating cash flow and free cash flow); productivity measures (including total operating expense per thousand gross ton miles or revenue ton miles, total operating revenue per employee, total operating expense per employee, gross ton miles or revenue ton miles per employee, carloads per employee, revenue ton miles per mile of road operated, total operating expense per carload, revenue ton miles per carload, gross ton miles or revenue ton miles per train hour, percent of loaded-to-total car miles, network performance); fair market value of shares of the Corporation’s Common Stock; revenue measures; expense measures; operating ratio measures; customer satisfaction measures; working capital measures; cost control measures; total shareholder return measures; economic value added measures; and safety measures.
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Performance Criteria Weighting Percentage
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The percentage weighting accorded to each Performance Criterion (or each combination thereof) selected by the Committee. The total of the Performance Criteria Weighting Percentages for any type of Award shall equal one hundred percent (100%).
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Performance Goal
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The specific target set by the Committee for each selected Performance Criterion (or each combination thereof) the outcome of which must be substantially uncertain at the time it is established. A Performance Goal may be set solely with respect to the Corporation’s performance, or as compared to the performance of a published or special index deemed applicable by the Committee, including but not limited to the Standard & Poor’s 500 Stock Index or an index based on a group of comparative companies. If a Performance Goal is based on the Corporation’s common stock, then in the event of a recapitalization, stock split, stock dividend, exchange, combination, or reclassification of shares, merger, consolidation, reorganization, or other change in or affecting the capital structure or capital stock of the Corporation (other than a normal cash dividend), the Committee shall make or provide for such adjustments in performance goals as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of participants.
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Performance Shares
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Shares of Common Stock granted pursuant to Section 11 of the Plan, which may be made subject to the restrictions and other terms and conditions prescribed in Section 11 of the Plan.
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Performance Share Units
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Contingent rights to receive Performance Shares pursuant to Section 11 of the Plan.
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Restricted Shares
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Shares of Common Stock granted pursuant to Section 9 of the Plan and subject to the restrictions and other terms and conditions set forth therein.
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Restricted Stock Unit
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Contingent rights, granted pursuant to Section 10 of the Plan, to receive Restricted Stock Unit Shares or cash payment for the Fair Market Value of shares of Common Stock, subject to the restrictions and other conditions set forth herein. Each Restricted Stock Unit shall equal the Fair Market Value of one share of Common Stock.
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Restricted Stock Unit Shares
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Shares of Common Stock issued as payment for Restricted Stock Units pursuant to Section 10 of the Plan, which may be made subject to the restrictions and other terms and conditions prescribed in Section 10 of the Plan.
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Restriction Period
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A period of time during which the restrictions imposed by paragraphs (b) and (c) of Section 9 or paragraphs (b) and (c) of Section 10 of the Plan shall apply. At the time that the Restricted Shares or Restricted Stock Units are granted, the Committee shall impose a Restriction Period and determine the length of the Restriction Period.
For non-employee directors, the Restriction Period shall not be less than twelve (12) months.
For officers and employees, the Restriction Period for at least one-third of the total number of Restricted Shares or Restricted Stock Units for each Award shall be not less than thirty-six months, at least one-third not less than twenty-four months, and not more than one-third shall have a minimum Restriction Period of twelve months. Notwithstanding this provision, the Committee may grant up to 25,000 Restricted Shares or Restricted Stock Units, in aggregate, in any calendar year with a minimum Restriction Period of twelve (12) months.
Such Restriction Period, if any, shall be incorporated in the Award Agreement setting forth the grant. Under Sections 9 and 10 of this Plan, the Committee may, in its discretion, specify when the Award is granted that the Restriction Period shall expire upon the earlier achievement of Performance Goals.
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Retention Agreement
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An agreement entered into pursuant to Section 12 of the Plan.
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Retirement
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Retirement from the Corporation and all Subsidiary Companies pursuant to the provisions of the Retirement Plan of the Corporation or a defined benefit retirement plan of a Subsidiary Company (whichever is applicable), as amended from time to time.
For a Participant who is employed by the Corporation or a Subsidiary Company but who is not eligible to participate in the Corporation’s Retirement Plan or a defined benefit retirement plan of a Subsidiary Company, “Retirement” means the Participant’s voluntary termination of employment from the Corporation or a Subsidiary Company, or involuntary termination of employment if the Participant is offered severance under the Norfolk Southern Corporation Severance Pay Plan, in either case after the participant: (a) attains age 55 and has been employed with the Corporation and/or a Subsidiary Company for 10 years, or (b) attains age 60 and has been employed with the Corporation and/or a Subsidiary Company for 5 years, or (c) attains age 62.
For a Participant who is a non-employee director, “Retirement” means termination of service as a director of the Corporation.
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Stock Appreciation Right
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The right, granted pursuant to the provisions of Section 8 of the Plan, to receive Exercise Gain Shares or a cash payment equal to the excess, if any, of the Fair Market Value of Common Stock on the exercise date over the Fair Market Value of the Common Stock on the Award Date, as specified in Section 8 of the Plan.
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Stock-Settled Stock Appreciation Rights
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Stock Appreciation Rights paid out in Exercise Gain Shares.
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Subsidiary Company
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A corporation of which at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote is owned, directly or indirectly, by the Corporation.
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Section 3. ADMINISTRATION
The Plan shall be administered by the Committee, which, subject to the limitations set forth herein, shall have the full and complete authority and sole discretion, except as may be delegated to the Corporation’s chief executive officer as provided herein, to construe and interpret the Plan; to select the Participants who shall be granted Awards under the Plan; to determine the type, size, terms, and conditions of the Award or Awards to be granted to each such Participant; to authorize the grant of such Awards pursuant to the Plan; in connection with the merger or consolidation of the Corporation (and subject to any applicable requirements of Code Section 409A), to give a Participant an election to surrender an Award in exchange for the grant of a new Award; to adopt, amend and rescind rules and regulations relating to the Plan; and to make all other determinations and take all other actions it may deem necessary or advisable for the implementation and administration of the Plan.
If the Committee makes an Award to non-employee directors in a calendar year, and after such Award is made and in the same year an individual is elected by the Board to be a non-employee director of the Corporation, then the newly appointed director shall automatically be granted an Award under the same terms as was granted to the other non-employee directors earlier that year. The Award granted to the newly appointed director shall be prorated based on the number of days remaining in the calendar year of the individual’s appointment as a director, and effective as of the date the individual became a director or, if the individual became a director during a blackout period, effective on the first day of the subsequent trading window during which officers of the Corporation and Subsidiary Companies are permitted to trade in Norfolk Southern Corporation Common Stock under the Corporation’s insider trading policy.
The Committee in its sole discretion may delegate authority to the Corporation’s chief executive officer to select as Participants the officers and employees who shall be granted Awards under the Plan (provided, however, that only the Committee shall grant Awards to the chief executive officer and Executive Officers); to determine the type, size, terms, and conditions of the Award or Awards to be granted to each such Participant; and to authorize the grant of such Awards pursuant to the Plan.
The Committee, or the chief executive officer to the extent as may be delegated by the Committee (hereinafter, the term “Committee” shall include reference to the chief executive officer to the extent of any such delegation), may authorize the grant of more than one type of Award, and Awards subject to differing terms and conditions, to any eligible Participant. The Committee’s decision to authorize the grant of an Award to a Participant at any time shall not require the Committee to authorize the grant of an Award to that Participant at any other time or to any other Participant at any time; nor shall its determination with respect to the size, type, or terms and conditions of the Award to be granted to a Participant at any time require it to authorize the grant of an Award of the same type or size or with the same terms and conditions to that Participant at any other time or to any other Participant at any time. The Committee shall not be precluded from authorizing the grant of an Award to any eligible Participant solely because the Participant previously may have been granted an Award of any kind under the Plan.
The grant, retention, vesting and/or settlement of any Award shall be subject to such terms and conditions as determined by the Committee and specified in the Award Agreement, which may include conditions based on continued employment, passage of time, the provisions of a Retention Agreement, attainment of age and/or service requirements, and/or the achievement of Performance Goals.
All determinations of the Committee shall be by a majority of its members and shall be final, conclusive and binding. Each member of the Committee, while serving as such, shall be considered to be acting in his capacity as a director of the Corporation, and no member of the Committee shall be liable for any action taken or decision made in good faith with respect to the implementation or administration of the Plan.
Section 4. ELIGIBILITY
To be eligible to be a Participant in the Plan, an individual must on the date on which the Award is made be a full-time nonagreement officer or employee who is a participant in the Norfolk Southern Corporation Executive Management Incentive Plan or Management Incentive Plan, or a full-time nonagreement employee of the Corporation or of a Subsidiary Company who can make an appreciable contribution to the attainment of the Corporation’s overall business objectives as determined in the sole discretion of the Committee, and must reside in the United States or Canada. A non-employee director shall be eligible to participate in the Plan if he or she is a director of the Corporation and is not a full-time salaried employee of the Corporation or a Subsidiary Company.
Section 5. SHARES AVAILABLE
Since the Plan’s establishment in 1983, up to a maximum of 90,978,604 shares of Common Stock (104,125,000 shares as adjusted for October 10, 1997, 3-for-1 stock split) have been authorized for issuance under the Plan. Awards that are made in a form other than Options or Stock-Settled Stock Appreciation Rights and that are granted under the Plan after May 13, 2010, shall be counted against the share limit set forth in the previous sentence as 1.61 shares for every one share issued in connection with such Award. Such shares shall be provided from shares of Common Stock authorized but not issued. Stock-Settled Stock Appreciation Rights shall be counted in full against the number of shares available for award
under the Plan, regardless of the number of Exercise Gain Shares issued upon settlement of the Stock Appreciation Right.
If any shares of Common Stock subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant (including by reason of such Award being settled in cash), the shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan; provided, however, in the case of a stock-based Award that is not an Option or Stock Appreciation Right and that was made after May 13, 2010, 1.61 shares for each share underlying such Award shall again be available for Awards under the Plan. Notwithstanding the foregoing, the following shares of Common Stock may not again be made available for award under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding Stock Appreciation Right or Option; (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding award, or (iii) shares of Common Stock repurchased on the open market with proceeds of an Option exercise.
Notwithstanding any other provision to the contrary, no Participant may be awarded a grant in any one year, which, when added to any other grant of Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units and Performance Share Units in the same year, shall exceed 1,000,000 shares of Common Stock. A Stock Appreciation Right granted in connection with an option is treated as a single Award for purpose of the preceding sentence. If an Option is canceled, the canceled Option continues to count against the maximum number of shares for which Options may be granted to a Participant in any year. Notwithstanding the foregoing, the aggregate grant date fair value of shares of Common Stock that may be granted during any year to any non-employee director shall not exceed $500,000.
Section 6. INCENTIVE STOCK OPTIONS
(a) General – The Committee may authorize the grant of Incentive Stock Options subject to the terms and conditions set forth in this Section 6. The grant of an Incentive Stock Option shall be evidenced by a written Award Agreement between the Corporation and the Optionee, setting forth the number of shares of Common Stock subject to the Incentive Stock Option evidenced thereby and the terms, conditions, and restrictions applicable thereto. The issuance of shares of Common Stock pursuant to an Incentive Stock Option also shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan.
Except for adjustments pursuant to Section 15 of the Plan, the Option Price for any outstanding Option granted under the Plan may not be decreased after the date the Option is granted, nor may an outstanding Option be modified or replaced if the effect would be to reduce the Option Price, nor may an outstanding Option be cancelled in exchange for cash or another Award, unless such repricing, modification or replacement is approved by the vote of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation at which a quorum is present.
(b) Option Price - The Committee shall determine the Option price for each share of Common Stock purchased under an Option, but, subject to the provisions of Section 15 of the Plan, in no event shall the Option price be less than the greater of (i) one hundred percent
(100%) of the Fair Market Value of the Common Stock on the Award Date, or (ii) the price at which the Corporation’s Common Stock was last sold in the principal United States market for such Common Stock on the Award Date.
(c) Duration of Options - The Committee shall fix the term or duration of Options, provided that such term shall not exceed ten (10) years from the Award Date, and that such term shall be subject to earlier termination pursuant to the provisions of paragraph (g) of this Section 6.
(d) Non-Transferability of Options - Options may be exercised during the lifetime of the Optionee only by him, and following his death only by his Beneficiary. If a Beneficiary dies after the Optionee, but before the Option is exercised and before such rights expire, such rights shall become assets of such Beneficiary’s estate. Except as provided in this paragraph, Options may not be assigned or alienated, whether voluntarily or involuntarily.
(e) Exercise of Options - The Committee shall determine the time or times at which Options may be exercised; provided that such time or times shall not occur before the latest of:
(i) the first anniversary of the Award Date; and
(ii) the effectiveness of any registration statement required to be filed under the Securities Act of 1933 for the registration of the Common Stock to be issued upon exercise of the Option.
(f) Payment of Option Price - The purchase price of Common Stock upon exercise of an Option shall be paid in full to the Corporation at the time of the exercise of the Option in cash or, at the discretion of the Committee and subject to any limitations or requirements that the Committee may adopt, by the surrender to the Corporation of shares of previously acquired Common Stock, which have been held by the Optionee for at least six (6) months and which shall be valued at Fair Market Value on the date that the Option is exercised, or, at the discretion of the Committee, by a combination of cash and such Common Stock.
(g) Termination of Options - No Option shall be exercisable after it expires. Each Option shall expire upon the earliest of:
(i) the expiration of the term for which the Option was granted;
(ii) Except as otherwise provided by the Committee in the Award Agreement,
(A) in the case of an Optionee whose employment with the Corporation or a Subsidiary Company is terminated due to Retirement, Disability or death, the expiration of the term for which the Option was granted, or
(B) in the case of an Optionee whose employment with the Corporation or a Subsidiary Company is terminated for any reason other than Retirement, Disability, or death, at the close of business on the last day of active service by the Optionee with the Corporation or a Subsidiary Company, or
(C) in the case of an Optionee who is granted a leave of absence, if the Optionee’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence, at the close of business on the last day of employment with the Corporation or a Subsidiary Company, or
(iii) in connection with a merger or consolidation of the Corporation, with the Optionee’s consent, the grant of a new Award to replace the Option.
(h) Limitation on Exercisability - The aggregate Fair Market Value (determined as of the Award Date) of the Common Stock with respect to which Incentive Stock Options (granted on or after January 1, 1987) are exercisable for the first time by the Optionee during any calendar year shall not exceed $100,000, as adjusted under Code Section 422(d)(1) and corresponding Treasury Regulations.
Section 7. NON-QUALIFIED STOCK OPTIONS
The Committee may authorize the grant of Non-Qualified Stock Options subject to the terms and conditions specified in this Section 7. The grant of a Non-Qualified Stock Option shall be evidenced by a written Award Agreement between the Corporation and the Optionee, setting forth the number of shares of Common Stock subject to the Non-Qualified Stock Option evidenced thereby and the terms, conditions, and restrictions applicable thereto. Non-Qualified Stock Options granted pursuant to the provisions of this Section 7 shall be subject to the terms, conditions, and restrictions set forth in paragraphs (a) through (g) of Section 6 of the Plan. The limitations set forth in paragraph (h) of Section 6 of the Plan shall not apply to Non-Qualified Stock Options. The issuance of shares of Common Stock pursuant to a Non-Qualified Stock Option also shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan.
Section 8. STOCK APPRECIATION RIGHTS
(a) General - The Committee may grant a Stock Appreciation Right to a Participant in connection with an Option, or portion thereof, or on a stand alone basis, as determined by the Committee, subject to the terms and conditions set forth in this Section 8. If granted in connection with an Option, the Stock Appreciation Right may be granted at the time of grant of the related Option and shall be subject to the same terms and conditions as the related Option, except as this Section 8 may otherwise provide. If granted in connection with an Option, the Stock Appreciation Right shall be evidenced by provisions in the Award Agreement evidencing or identifying the related Option, specifying the number of shares of Common Stock subject thereto and setting forth the terms and conditions applicable to the Stock Appreciation Right. If granted on a stand alone basis, the Stock Appreciation Right shall be evidenced by provisions of a written Award Agreement between the Corporation and the Participant. The Committee may grant Cash-Settled Stock Appreciation Rights or Stock-Settled Stock Appreciation Rights as shall be set forth in an Award Agreement.
Except for adjustments pursuant to Section 15 of the Plan, the terms of an outstanding Stock Appreciation Right may not be amended to reduce the exercise price of the Stock Appreciation Right, nor may an outstanding Stock Appreciation Right be modified or replaced if the effect would be to reduce the exercise price, nor may an outstanding Stock Appreciation Right be cancelled in exchange for cash or another Award, unless such repricing, modification or replacement is approved by the vote of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation at which a quorum is present.
(b) Exercise Price and Duration - The Committee shall determine the exercise price for any Stock Appreciation Right granted on a stand alone basis but, subject to the provisions of Section 15 of the Plan, in no event shall the exercise price be less than the greater of (i) one hundred percent (100%) of the Fair Market Value of the Common Stock on the Award Date, or (ii) the price at which the Corporation’s Common Stock was last sold in the principal United States market for such Common Stock on the Award Date. The Committee shall fix the term or duration of Stock Appreciation Rights, provided that such term shall not exceed ten (10) years from the Award Date, and that such term shall be subject to earlier termination pursuant to the provisions of paragraph (e) of this Section 8.
(c) Exercise – If granted in connection with an Option, a Stock Appreciation Right shall be exercisable only at such time or times, to such extent, and by such persons, as the Option to which it relates shall be exercisable. If granted on a stand alone basis, a Stock Appreciation Right shall be exercisable only at such time or times, to such extent, and by such persons, as shall be set forth in the Award Agreement.
Stock Appreciation Rights shall be subject to the following restrictions:
(i) the Stock Appreciation Right may not be exercised before the expiration of one (1) year from the Award Date; provided, however, that this subparagraph (i) shall not apply if the death or Disability of the Optionee occurs within one (1) year after the Award Date; and,
(ii) a Stock Appreciation Right granted in connection with an Incentive Stock Option may not be exercised on any date on which the Fair Market Value of a share of Common Stock is less than or equal to the Option price per share under the related Incentive Stock Option.
A Stock Appreciation Right shall be exercised by providing the Corporation with a written notice in such form and containing such information (including the number of shares of Common Stock with respect to which the Stock Appreciation Right is being exercised) as the Committee may specify. If the Stock Appreciation Right was granted in connection with an Option, the Participant must surrender the related Option, or the portion thereof pertaining to the shares with respect to which the Stock Appreciation Right is exercised, and the date on which the Corporation receives such notice shall be the date on which the related Option, or portion thereof, shall be deemed surrendered and the Stock Appreciation Right shall be deemed exercised.
(d) Payment - Upon the proper exercise of a Stock-Settled Stock Appreciation Right granted on a stand alone basis, a Participant shall be entitled to receive Exercise Gain Shares equal to the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the exercise price for the Stock Appreciation Right established on the Award Date, multiplied by the number of Stock-Settled Stock Appreciation Rights surrendered in connection with the exercise of the Stock Appreciation Right.
Upon the proper exercise of a Stock-Settled Stock Appreciation Right granted in connection with an Option, an Optionee shall be entitled to receive Exercise Gain Shares equal to the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option price per share of the related Option, multiplied by the number of shares covered by the related Option, or portion thereof, surrendered in connection
with the exercise of the Stock Appreciation Right. The Exercise Gain Shares shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan.
Upon the proper exercise of a Cash-Settled Stock Appreciation Right granted on a stand alone basis, a Participant shall be entitled to receive cash equal to the value of the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the exercise price for the Stock Appreciation Right established on the Award Date, multiplied by the number of Cash-Settled Stock Appreciation Rights surrendered for settlement.
Upon the proper exercise of a Cash-Settled Stock Appreciation Right granted in connection with an Option, an Optionee shall be entitled to receive cash equal to the value of the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option price per share of the related Option, multiplied by the number of shares covered by the related Option, or portion thereof, surrendered in connection with the exercise of the Stock Appreciation Right.
(e) Termination of Right - A Stock Appreciation Right granted in connection with an Option shall expire, unless previously exercised or canceled, upon the expiration of an Option to which it relates, or upon such time as may be set forth in an Award Agreement. A Stock Appreciation Right granted on a stand alone basis shall be subject to the termination provisions set forth in paragraph (g) of Section 6 for Options and shall expire, unless previously exercised or cancelled, at such time as may be set forth in an Award Agreement.
(f) Effect of Exercise - A Stock Appreciation Right shall be canceled when, and to the extent that, it or a related Option is exercised, and an Option shall be canceled when, and to the extent that, the Option is surrendered to the Corporation upon the exercise of a related Stock Appreciation Right.
Section 9. RESTRICTED SHARES
(a) General - The Committee, in its sole discretion, may from time to time authorize the grant of Restricted Shares to a Participant pursuant to an Award Agreement. A certificate or certificates representing the number of Restricted Shares granted shall be registered in the name of the Participant or held in uncertificated form through a direct registration system or the number of Restricted Shares shall be delivered by electronic delivery to a brokerage account established for the Participant’s benefit at a financial/brokerage firm selected by the Corporation. Until the expiration of the Restriction Period or the lapse of restrictions in the manner provided in paragraph (g) of this Section 9, any certificate or certificates shall be held by the Corporation for the account of the Participant, and any Restricted Shares held through direct registration or in a brokerage account shall be blocked from sale or transfer. Restricted Shares shall be subject to such restrictions as the Committee may establish in the Award Agreement (including, without limitation, any limitation on the right to vote Restricted Shares or the right to receive any dividend or other right), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate; provided that dividends on Restricted Shares subject to a specified Performance Goal or Goals shall be
payable only to the extent the Performance Goal(s) are achieved with respect to such Restricted Shares.
(b) Performance Goal Requirement – The Committee may determine, in its sole discretion, that a Participant’s entitlement to Restricted Shares shall be subject to achievement of a specified Performance Goal or Goals during the Restriction Period. If so, the Committee shall select the Performance Criterion or each combination thereof, the Performance Goal for each Performance Criterion or each combination thereof, and the Performance Criteria Weighting Percentage for each Performance Criterion or each combination thereof within ninety (90) days of the commencement of the Restriction Period. The Committee may also determine that the Restriction Period shall expire upon achievement of established Performance Goals prior to the established end of the Restriction Period. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. At such time as the Committee certifies that the Performance Goals have been achieved, the Committee shall authorize delivery of Restricted Shares (or such percentage of the Restricted Shares as equal the Percentage of Performance Goals that have been achieved) for which the Restriction Period has expired. If the Restricted Shares are subject to the achievement of Performance Goals, such Restricted Shares shall be forfeited to the extent Performance Goals are not achieved before the established end of the Restriction Period.
(c) Restrictions – Until the expiration of the Restriction Period or the lapse of restrictions in the manner provided in paragraph (g) of this Section 9, Restricted Shares shall be subject to the following restrictions and any additional restrictions that the Committee, in its sole discretion, may from time to time deem desirable in furtherance of the objectives of the Plan:
(i) the Participant shall not be entitled to receive the certificate or certificates representing the Restricted Shares, or exercise any ownership over any Restricted Shares held through direct registration or in a brokerage account;
(ii) the Restricted Shares may not be sold, transferred, assigned, pledged, conveyed, hypothecated, or otherwise disposed of; and
(iii) the Restricted Shares may be forfeited as provided in paragraphs (b) or (e) of this Section 9, subject to the provisions of paragraph (f) and (g) of this Section 9.
(d) Distribution of Restricted Shares – If a Participant to whom Restricted Shares have been granted remains in the continuous employment of the Corporation or a Subsidiary Company during the entire Restriction Period, or, in the case of a Participant who is a non-employee director, who remains a non-employee director during the entire Restriction Period, upon the expiration of the Restriction Period all restrictions applicable to the Restricted Shares shall lapse. When the restrictions applicable to the Restricted Shares lapse, either:
(i) the certificate or certificates representing the shares of Common Stock that were earned pursuant to paragraph (b) of this Section 9 shall be delivered to the Participant or,
(ii) if the shares were delivered by electronic delivery to a brokerage account established for the Participant’s benefit or by direct registration and held in uncertificated form, the restrictions on the sale or transfer of any shares that were earned pursuant to paragraph (b) of this Section 9 shall lapse.
(e) Termination of Employment - If the employment of a Participant is terminated for any reason other than the Retirement, Disability, or death of the Participant in service before the expiration of the Restriction Period, the Restricted Shares shall be forfeited immediately and all rights of the Participant with respect to such shares shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company. If the Participant is granted a leave of absence before the expiration of the Restriction Period, the Participant shall not forfeit any rights with respect to any Restricted Shares subject to the Restriction Period, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence for any reason other than Retirement, Disability, or death, at which time the shares shall be forfeited immediately and all rights of the Participant with respect to such shares shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company.
(f) Retirement, Disability or Death - Except with respect to continued employment requirements or as otherwise specified in the Award Agreement, if the Participant’s employment is terminated by reason of the Retirement or Disability of the Participant before the expiration of the Restriction Period and no Performance Goals have been imposed, the restrictions on the Restricted Shares shall lapse upon the expiration of the Restriction Period and delivery of the Restricted Shares shall be made to the Participant, as described in paragraph (d) of this Section 9; provided, however, that if the Participant dies after Retirement or Disability and before the expiration of the Restriction Period, the restrictions on the Restricted Shares shall lapse and delivery shall be made to the Participant’s Beneficiary. If the Participant’s employment is terminated by reason of the Participant’s death in service before the expiration of the Restriction Period, the restrictions on the Restricted Shares shall lapse and delivery of the Restricted Shares shall be made to the Participant’s Beneficiary. Except with respect to continued employment requirements or as otherwise specified in the Award Agreement, if the Participant’s employment is terminated by reason of the Retirement, Disability, or death of the Participant before the expiration of the Restriction Period and Performance Goals have been imposed, the restrictions on the Restricted Shares shall lapse upon the expiration of the Restriction Period and to the extent that the Committee certifies that Performance Goals have been achieved and delivery of the Restricted Shares shall be made to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, in accordance with paragraphs (b) and (d) of this Section 9.
(g) Waiver of Restrictions - The Committee, in its sole discretion, may waive any or all restrictions with respect to Restricted Shares.
Section 10. RESTRICTED STOCK UNITS
(a) General - The Committee, in its sole discretion, may from time to time authorize the grant of Restricted Stock Units (“Units”) to a Participant pursuant to an Award Agreement. Such Units shall be recorded in individual memorandum accounts maintained by the Committee or its agent. The grant of Restricted Stock Units shall entitle the Participant to payment in
Restricted Stock Unit Shares or cash, as provided for in the Award Agreement. The Participant shall have no beneficial ownership interest in the Common Stock represented by the Units prior to expiration of the Restriction Period and achievement of any Performance Goals. The Participant shall have no right to vote the Common Stock represented by the Units or to receive dividends (except for any Dividend Equivalents which may be awarded by the Committee in connection with such Units) on the Common Stock represented by the Units. The grant of Units shall be evidenced by an Award Agreement between the Corporation or Subsidiary Company and the Participant, identifying the number of Units awarded, and setting forth the terms and conditions applicable to the Units.
(b) Performance Goal Requirement – The Committee may determine, in its sole discretion, that a Participant’s entitlement to payment in cash or Restricted Stock Unit Shares for Restricted Stock Units shall be subject to achievement of a specified Performance Goal or Goals over the duration of the Restriction Period. If so, the Award shall specify when it is granted that the Participant’s entitlement to payment is subject to the achievement of the Performance Goal or Goals, and the Committee shall select the Performance Criterion or each combination thereof, the Performance Goals for each Performance Criterion or each combination thereof, and the Performance Criteria Weighting Percentage for each Performance Criterion or each combination thereof within ninety (90) days after the commencement of the Restriction Period.
The Committee may specify, when the Award is granted, that the Restriction Period shall expire upon achievement of the established Performance Goals prior to the established end of the Restriction Period. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. For Restricted Stock Units subject to the achievement of Performance Goals, the Committee shall certify in writing the extent to which the Performance Goals have been achieved, and shall authorize settlement of Units in cash or Restricted Stock Unit Shares. The Units shall be settled within two and one half months after the end of the year in which the Performance Goals are achieved. Such settlement shall be based on the Fair Market Value on the date all applicable restrictions lapse (or such percentage of the value of the Restricted Stock Units as equal the percentage of Performance Goals that have been achieved) for which the Restriction Period has expired. If the settlement of Restricted Stock Units is subject to the achievement of Performance Goals, such Restricted Stock Units shall be forfeited to the extent Performance Goals are not achieved before the established end of the Restriction Period.
(c) Restrictions - Until the expiration of the Restriction Period and the lapse of any Retention Agreement provided in Section 12, Units shall be subject to the following restrictions and any additional restrictions that the Committee, in its sole discretion, may from time to time deem desirable in furtherance of the objectives of the Plan:
(i) the grant of Units to a Participant shall not entitle a Participant to receive cash payment or Restricted Stock Unit Shares;
(ii) the Units may not be sold, transferred, assigned, pledged, conveyed, hypothecated, or otherwise disposed of; and,
(iii) all or a portion of the Units may be forfeited immediately as provided in paragraph (b) or (e) of this Section 10, subject to the provisions of paragraphs (f) and (g) of this Section 10.
(d) Distribution of Restricted Stock Units - If a Participant to whom Units have been granted remains in the continuous employment of the Corporation or a Subsidiary Company during the entire Restriction Period or, in the case of a Participant who is a non-employee director, who remains a non-employee director during the entire Restriction Period, upon the expiration of the Restriction Period and the further expiration of any Retention Agreement applicable to such Units, all restrictions applicable to the Units shall lapse, and the Units shall be settled in cash or in Restricted Stock Unit Shares, based on Fair Market Value on the later of the date all applicable restrictions lapse or any Retention Agreement lapses. Settlement in cash in a single sum or issuance of Restricted Stock Unit Shares shall be made within thirty (30) days following the later of the expiration of the Restriction Period or any Retention Agreement applicable to such Units. The Participant may not, directly or indirectly, designate the taxable year of the settlement.
(e) Termination of Employment - If the employment of a Participant is terminated for any reason other than the Retirement, Disability, or death of the Participant in service before the expiration of the Restriction Period, the Units shall be forfeited immediately and all rights of the Participant with respect to such Units shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company. If the Participant is granted a leave of absence before the expiration of the Restriction Period, the Participant shall not forfeit all rights with respect to any Units subject to the Restriction Period, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence for any reason other than Retirement, Disability, or death, at which time all rights of the Participant with respect to such Units shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company.
(f) Retirement, Disability or Death – Except with respect to continued employment requirements or as otherwise specified in the Award Agreement, if the Participant’s employment is terminated by reason of the Retirement or Disability of the Participant before the expiration of the Restriction Period and no Performance Goals have been imposed, the restrictions on the Restricted Stock Units shall lapse upon the expiration of the Restriction Period and settlement of Restricted Stock Units shall be made at the end of the Restriction Period to the Participant as described in paragraph (d) of this Section 10; provided, however, if the Participant dies after Retirement or Disability and before the expiration of the Restriction Period, the restrictions on the Restricted Stock Units shall lapse and delivery shall be made to the Participant’s Beneficiary. If the Participant’s employment is terminated by reason of the Participant’s death in service before the expiration of the Restriction Period, the restrictions on the Restricted Stock Units shall lapse and delivery of the Restricted Stock Units shall be made to the Participant’s Beneficiary. Settlement of the Restricted Stock Units shall be made within thirty (30) days following the expiration of the Restriction Period. The Participant or Beneficiary may not, directly or indirectly, designate the taxable year of the settlement.
Except with respect to continued employment requirements or as otherwise specified in the Award Agreement, if the Participant’s employment is terminated by reason of the Retirement, Disability, or death of the Participant before the expiration of the Restriction Period and Performance Goals have been imposed, the restrictions on the Restricted Stock Units shall lapse if the Committee certifies that Performance Goals have been achieved, and settlement of the Restricted Stock Units shall be made to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, in accordance with paragraphs (b) and (d) of this Section 10.
(g) Waiver of Restrictions - The Committee, in its sole discretion, may waive any or all restrictions with respect to Units. If no Performance Goals have been imposed, settlement of the Units shall be made on the same settlement date that would have applied absent the waiver of restrictions. If Performance Goals have been imposed, settlement of the Units shall be made within two and one half months after the end of the year in which all restrictions are either waived or satisfied.
Section 11. PERFORMANCE SHARES
(a) General - The Committee, in its sole discretion, may from time to time authorize the grant of Performance Share Units to a Participant pursuant to an Award Agreement. Performance Share Units shall entitle the Participant to Performance Shares (or cash in lieu thereof) upon the achievement of Performance Goals. The Committee shall select the Performance Criteria, set the Performance Goals and assign Performance Criteria Weighting Percentages to each Performance Criterion or each combination thereof within ninety (90) days of the commencement of the Performance Cycle. Performance Share Units may not be sold, transferred, assigned, pledged, conveyed, or hypothecated.
After the end of the Performance Cycle, the Committee shall certify in writing to what extent the Performance Goals have been achieved. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. The Committee shall thereafter authorize the payment of such percentage of the value of the Performance Share Units as equal the percentage of Performance Goals that have been achieved to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death after the end of the Performance Cycle, of (i) cash in lieu of Performance Shares, or (ii) either (1) the issuance of Performance Shares registered in the name of the Participant or (2) the electronic delivery of Performance Shares to a brokerage account established for the Participant’s benefit at a financial/brokerage firm selected by the Corporation, subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan, or (iii) both. Settlement in cash or issuance of Performance Shares shall be made within two and one half months after the end of the year in which the Performance Goals are achieved.
(b) Distribution or Forfeiture of Performance Shares - Except as otherwise provided
by the Committee in the Award Agreement, if the Participant’s employment with the Corporation or a Subsidiary Company is terminated before the end of a Performance Cycle for any reason other than Retirement, Disability, or death, the Participant shall forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle. If the Participant is granted a leave of absence before the end of a Performance Cycle, the Participant shall not forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence, at which time the Participant shall forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle. Except with respect to continued employment requirements or as otherwise specified in the Award Agreement, if the Participant’s employment is terminated before the end of a Performance Cycle by reason of Retirement, Disability, or death, the Participant’s rights with respect to any Performance Shares being earned during the Performance Cycle shall, subject to the other provisions of this Section 11, continue as if the Participant’s employment had continued through the end of the Performance Cycle.
Section 12. RETENTION AGREEMENTS
(a) General - The Committee, in its sole discretion, may require as a condition of a grant, exercise, settlement or payment with respect to any Award under the Plan that the Participant and the Corporation enter into a Retention Agreement, which shall provide, (1) with respect to an Award of Restricted Stock Units, that the settlement of the Restricted Stock Units in Restricted Stock Unit Shares or cash shall not occur until the event specified in the Retention Agreement that is part of the Award, or (2) with respect to any portion of any Exercise Gain Shares, Restricted Shares, Restricted Stock Unit Shares, or Performance Shares, that (i) the certificate or certificates representing any such Awards, when issued, shall be held by the Secretary of the Corporation for the benefit of the Participant until such time as the retention period specified by the Retention Agreement has expired or has been waived by the Committee, whichever occurs first, or (ii) that any such Award, when delivered by electronic delivery to a brokerage account established for the Participant’s benefit at a financial/brokerage firm selected by the Corporation or by direct registration and held in uncertificated form, shall not be permitted to be transferred or sold until such time as the retention period specified by the Retention Agreement has expired or has been waived by the Committee, whichever occurs first.
Any dividends payable on shares subject to a Retention Agreement shall be paid to the Participant in cash on the date declared by the Board of Directors. Each Retention Agreement may include some or all of the terms, conditions and restrictions set forth in paragraphs (b) through (e) of this Section 12.
(b) Retention Period - Shares that are subject to the Retention Agreement may not be sold, transferred, assigned, pledged, conveyed, hypothecated or otherwise disposed of within such period of time of not less than twenty-four (24) months following the exercise date (in the case of Exercise Gain Shares) or the date of issuance (in the case of Restricted Shares, Restricted Stock Unit Shares, or Performance Shares), as shall be prescribed by the Committee.
(c) Termination of Employment - If a Participant’s employment with the Corporation or a Subsidiary Company is terminated for any reason other than Retirement, Disability, or death, shares subject to the Retention Agreement shall continue to be held, following the Participant’s termination of employment, until the expiration of the retention period specified by the Retention Agreement. If the Participant’s employment is terminated by reason of Retirement or Disability, shares then held subject to the Retention Agreement shall continue to be held until the expiration of the applicable retention period following termination of employment, but any such retention period shall cease upon the earlier of the Participant’s attainment of age 65 or the expiration of two (2) years after the Participant’s Retirement or Disability, if either of those events occurs before the expiration of the applicable retention period. If the Participant dies while shares are subject to a retention period under the Retention Agreement, such retention period shall expire immediately at the time of death.
(d) Leave of Absence - If a Participant is granted a leave of absence, shares subject to the Retention Agreement shall continue to be held during the leave of absence, until the expiration of the retention period specified by the Retention Agreement.
(e) Change in Control - Upon a Change in Control, the retention periods specified by all Retention Agreements shall immediately expire; provided, however, that any such waiver shall not accelerate the settlement of any Restricted Stock Units in a manner that would violate the requirements of Code Section 409A.
A Change in Control shall occur if:
(i) any person, other than the Corporation or a Subsidiary Company or any employee benefit plan sponsored by the Corporation or a Subsidiary Company, shall become the beneficial owner of, or obtain voting control over, 20% or more of the Corporation’s outstanding Common Stock;
(ii) (A) any consolidation or merger of the Corporation occurs in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities, or other property, other than a merger of the Corporation in which holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before, or (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Corporation occurs; or
(iii) there shall have been a change in the composition of the Board of Directors such that within any period of two (2) consecutive years or less individuals who at the beginning of such period constituted such Board, together with any new directors whose election, or nomination for election by the Corporation’s stockholders, was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period, shall for any reason no longer constitute a majority of the directors of the Corporation.
(g) Waiver of Requirements - The Committee, in its sole discretion, may waive any or all retention periods or other restrictions in the Share Retention Agreement, provided that the waiver of restrictions does not accelerate the payment of any Restricted Stock Units in a manner that would violate the requirements of Code Section 409A.
(f) Distribution of Shares and Restricted Stock Units - The Corporation shall cause the shares subject to a Retention Agreement to be distributed to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, upon expiration of the retention period or other termination or waiver of the restrictions under this Section 12. The Corporation shall cause the Restricted Stock Units subject to a Retention Agreement to be distributed to the Participant upon the expiration of the retention period or to the Participant’s Beneficiary in the event of the Participant’s death.
Section 13. DIVIDEND EQUIVALENT PAYMENTS
The Committee may authorize the immediate payment, in cash or in Common Stock, of Dividend Equivalents on some or all of the shares of Common Stock covered by Options or Stock Appreciation Rights, as specified in the Award Agreement required under Section 6(a), Section 7 or Section 8(a) of the Plan. Dividend Equivalents payable on options may be paid in cash or Common Stock, at the discretion of the Committee.
The Committee may authorize the immediate or deferred payment of Dividend Equivalents on some or all of the shares of Common Stock covered by Restricted Stock Units that are not subject to Performance Goals, as specified in the Award Agreement required under Section 10 of the Plan. Dividend Equivalents payable on Restricted Stock Units may be paid in cash or converted to additional Restricted Stock Units, at the discretion of the Committee and as specified in the Award Agreement.
The Committee may authorize the deferred payment of Dividend Equivalents on some or all of the shares of Common Stock covered by Restricted Stock Units that are subject to Performance Goals, or by Performance Share Units, as specified in the Award Agreement described in Sections 10 or 11 of the Plan. Deferred Dividend Equivalents shall be paid only to the extent Performance Goals are achieved with respect to such Performance Share Units or Restricted Stock Units, and shall be distributed at the same time as the underlying Performance Shares, Restricted Stock Unit Shares, or cash equivalents thereto. Deferred Dividend Equivalents payable on Performance Share Units or on Restricted Stock Units that are subject to a Performance Goal may be paid in cash, or converted to additional Performance Shares or Restricted Stock Unit Shares (as applicable), at the discretion of the Committee and as specified in the Award Agreement.
Notwithstanding the above, Dividend Equivalents shall not be made or accumulated during a Participant’s leave of absence. If Dividend Equivalents provided under this section are to be paid immediately, the Dividend Equivalents shall be paid in cash on the date declared by the Board of Directors for the payment of dividends on Common Stock. If Dividend Equivalents provided under this section are to be deferred, the deferred Dividend Equivalents shall be paid or forfeited when the underlying Award is paid or forfeited.
Section 14. NON-COMPETE COVENANT
The Committee, in its sole discretion, may require as a condition of a grant of any Award under the Plan that the Participant execute a non-compete, non-solicitation and confidentiality agreement, which agreement shall require that such individual (i) not Engage in Competing Employment (as defined in this Section 14 of the Plan) nor solicit any employee of the
Corporation or a Subsidiary Company to Engage in Competing Employment for a specified term following termination of employment (including Retirement), (ii) not solicit customers of the Corporation or a Subsidiary Company for a specified term following termination of employment (including Retirement), and (iii) maintain the Corporation’s and each Subsidiary Company’s confidential information in strict confidence, in accordance with the provisions of the agreement. The Committee, in its sole discretion, may further require as a condition of a grant, exercise, settlement or payment with respect to any Award under the Plan that the Award shall be subject to immediate forfeiture, and all rights of the Participant to such Award shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company, if the Participant Engages in Competing Employment for a specified period of time following termination of employment. The terms of such a non-compete covenant shall be as set forth in the agreement or grant providing the terms of an Award and are incorporated herein by reference. A non-compete covenant shall not apply to the settlement or payment of any Option (although it may apply to the grant or exercise of an Option). Settlement or payment of any other Award that is subject to a non-compete covenant shall occur upon the expiration of the Restriction Period, Performance Cycle, Retention Agreement, or other date upon which the Award would be settled and paid if the Participant had not terminated employment.
For purposes of the provision, “Engages in Competing Employment” shall mean to work for or provide services for any Competitor, on the Participant’s own behalf or in the service of or on behalf of others, including, but not limited to, as a consultant, independent contractor, director, owner, officer, partner, joint venturer, or employee, at any time during the specified period commencing on the date of his or her termination of employment (including Retirement). “Competitor” shall mean any entity in the same line of business as the Corporation in North American markets in which the Corporation competes, including, but not limited to, any North American Class I rail carrier, any other rail carrier competing with the Corporation (including without limitation a holding or other company that controls or operates or is otherwise affiliated with any rail carrier competing with the Corporation), and any other provider of transportation services competing with Corporation, including motor and water carriers.
Section 15. CAPITAL ADJUSTMENTS
In the event of a recapitalization, stock split, stock dividend, exchange, combination, or reclassification of shares, merger, consolidation, reorganization, or other change in or affecting the capital structure or capital stock of the Corporation, the Board of Directors, upon the recommendation of the Committee, may make appropriate adjustments in the number of shares of Common Stock authorized for the Plan and in the annual limitation imposed by Section 5 of this Plan; and the Committee may make appropriate adjustments in the number of shares subject to outstanding Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, or Performance Share Unit grants, and in the Option price of any then outstanding Options, as it deems equitable, in its absolute discretion, to prevent dilution or enlargement of the rights of Participants.
Section 16. REGULATORY APPROVALS
The exercise of each Option and Stock Appreciation Right, and the grant or distribution of Restricted Shares, Restricted Stock Units and Performance Shares, shall be subject to the condition that if at any time the Corporation shall determine in its discretion that the satisfaction
of withholding tax or other tax liabilities, or the listing, registration, or qualification of any shares of Common Stock upon any securities exchange or under any Federal or state law, or the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise, grant, or distribution, then in any such event such exercise, grant, or distribution shall not be effective unless such liabilities have been satisfied or such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Corporation.
Section 17. TERM OF THE PLAN
Awards may be granted from time to time under the terms and conditions of the Plan, but no Incentive Stock Option may be granted after the expiration of ten (10) years from the date of adoption of the Plan, as amended on May 14, 2015, by the Board of Directors; provided, that any future amendment to the Plan that is approved by the stockholders of the Corporation in the manner provided under Section 18 of this Plan shall be regarded as creating a new Plan, and an Incentive Stock Option may be granted under such new Plan until the expiration of ten (10) years from the earlier of the approval by the Board of Directors, or the approval by the stockholders of the Corporation, of such new Plan. Incentive Stock Options theretofore granted may extend beyond the expiration of that ten-year period, and the terms and conditions of the Plan shall continue to apply thereto and to shares of Common Stock acquired upon the subsequent exercise of an Incentive Stock Option or related Stock Appreciation Right.
Section 18. AMENDMENT OR TERMINATION OF THE PLAN
The Corporation may at any time and from time to time alter or amend, in whole or in part, any or all of the provisions of the Plan, or may at any time suspend or terminate the Plan, through resolution of its Board of Directors, provided that no change in any Awards theretofore granted to any Participant may be made which would impair or diminish the rights of the Participant without the Participant’s consent, and provided further, that no alteration or amendment may be made without the approval of the holders of a majority of the Common Stock then outstanding and entitled to vote if (a) such stockholder approval is necessary to comply with the requirements of any rules promulgated under Section 16 of the Securities Exchange Act of 1934 or such other Federal or state laws or regulations as may be applicable, (b) the amendment materially increases the benefits accruing to Participants under the Plan, (c) materially increases the number of securities that may be issued under the Plan, or (d) materially modifies the requirements for participation in the Plan.
Section 19. FORFEITURE AND RECOUPMENT EVENTS
The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.
Any Award to a Participant under this Plan is subject to reduction, forfeiture, or recoupment to the extent provided under Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as may be provided under any other applicable law.
Section 20. MISCELLANEOUS
(a) Fractional Shares - The Corporation shall not be required to issue or deliver any fractional share of Common Stock upon the exercise of an Option or Stock Appreciation Right, the award of Performance Shares, the payment of a dividend equivalent in Common Stock pursuant to Section 13 of the Plan or the withholding of shares of Common Stock for payment of taxes required to be withheld, but may pay, in lieu thereof, an amount in cash equal to the Fair Market Value of such fractional share.
(b) Withholding - The Corporation and its Subsidiary Companies shall have the right, to the extent permitted by law, to deduct from any payment of any kind otherwise due to a Participant any Federal, state or local taxes of any kind required by law to be withheld with respect to Awards under the Plan, and to the extent any such withholding requirements are not satisfied, each Participant shall pay to the Corporation any Federal, state or local taxes of any kind required by law to be withheld with respect to Awards under the Plan. The Corporation shall have the right to withhold shares of Common Stock, including fractional shares, from payment as necessary to satisfy any withholding obligations, but may only withhold the minimum number of shares necessary to do so. If fractional shares are withheld, any remaining fractional shares shall be paid in cash to the Participant as provided under paragraph (a) of this Section 20. The Participant or Beneficiary shall remain responsible at all times for paying any Federal, state or local taxes of any kind with respect to Awards under the Plan. In no event shall the Corporation or the Committee be liable for any interest or penalty that a Participant or Beneficiary incurs by failing to make timely payments of tax.
(c) Acceleration of Payments to Avoid Conflicts of Interest - To the extent permitted by Code Section 409A and not prohibited by Section 6(a) of the Plan, the Committee may, in its sole discretion and with the consent of a Participant or Beneficiary, accelerate the time or schedule of a payment under the Plan, or make a substitute cash payment upon cancellation of a Participant’s Award, in either case to the extent reasonably necessary for a Participant or Beneficiary to avoid the violation of an applicable Federal, state, local or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant or Beneficiary to participate in activities in the normal course of his or her position in which the Participant or Beneficiary would otherwise not be able to participate under an applicable rule). The Corporation’s chief executive officer may exercise the authority granted to the Committee in this paragraph with respect to any Participant or Beneficiary who is neither a current or former director of the Corporation nor a current Executive Officer of the Corporation.
(d) Stockholder Rights - No person shall have any rights of a stockholder by virtue of an Option, Stock Appreciation Right, or Performance Share Unit except with respect to shares of Common Stock actually issued to him, and the issuance of shares of Common Stock shall confer no retroactive right to dividends. A Participant’s right to receive Dividend Equivalents shall not, by itself, confer upon the Participant the rights or privileges of a stockholder.
(e) No Contract of Employment - This Plan shall not be deemed to be an employment contract between the Corporation or any Subsidiary Company and any Participant or other employee. Nothing contained herein, or in any agreement, certificate or other document evidencing, providing for, or setting forth the terms and conditions applicable to any Awards shall
be deemed to confer upon any Participant or other employee a right to continue in the employment of the Corporation or any Subsidiary Company, or to interfere with the right of the Corporation or any Subsidiary Company to terminate the employment of such Participant or employee at any time.
(f) Unfunded Plan - Except as may otherwise be provided in the Plan, the Plan shall be unfunded. Neither the Corporation nor any Subsidiary Company shall be required to segregate any assets that may be represented by Options, Stock Appreciation Rights, Performance Share Units, or Restricted Stock Units, and neither the Corporation nor any Subsidiary Company shall be deemed to be a trustee of any amounts to be paid under an Option, Stock Appreciation Right, Performance Share Unit, or Restricted Stock Unit. Any liability of the Corporation to pay any Participant or Beneficiary with respect to an Option, Stock Appreciation Right, Performance Share Unit, or Restricted Stock Unit shall be based solely upon any contractual obligations created pursuant to the provisions of the Plan; no such obligation shall be deemed to be secured by any pledge or encumbrance on any property of the Corporation or a Subsidiary Company.
(g) Applicable Law - The Plan, its validity, interpretation, and administration, and the rights and obligations of all persons having an interest therein, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, except to the extent that such laws may be preempted by Federal law.
(h) Gender and Number - Wherever used in the Plan, words in the masculine form shall be deemed to refer to females as well as to males, and words in the singular or plural shall be deemed to refer also to the plural or singular, respectively, as the context may require.
(i) Code Section 409A - The Plan is intended, and shall be construed, to comply with the requirements of Code Section 409A. The Corporation does not warrant that the Plan will comply with Code Section 409A with respect to any Participant or with respect to any payment, however. In no event shall the Corporation or the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Code Section 409A, or as a result of the Plan’s failure to satisfy any other applicable requirements for the deferral of tax.
Exhibit 10(ddd)
Norfolk Southern Corporation Long-Term Incentive Plan
Award Agreement for Outside Directors
This AGREEMENT dated as of <Award Date> (Award Date), between NORFOLK SOUTHERN CORPORATION (Corporation), a Virginia corporation, and <Full_Name> (Participant), a director of the Corporation who is not an officer or employee of the Corporation or any of its subsidiaries.
1.Award Contingent Upon Execution of this Agreement. This Award is contingent upon the Participant’s timely execution and return to the Corporate Secretary of this Agreement.
2.Terms of Plan Govern. The Award made hereunder is made pursuant to the Norfolk Southern Corporation Long-Term Incentive Plan (Plan), all the terms and conditions of which are incorporated in this Agreement and which form a part of this Agreement. The Participant agrees to be bound by all the terms and conditions of the Plan and in this Agreement, and by all determinations of the Committee thereunder. Capitalized terms used in this Agreement but not defined herein will have the same meanings as in the Plan.
3.Deferral Election. Each Participant may make an irrevocable election to defer distribution of Restricted Stock Unit Shares payable in respect of an Award until the Participant’s Separation from Service, in accordance with this Agreement and procedures established by the Corporate Secretary. To make a deferral election, a Participant must file an irrevocable deferral form with the Corporation before the beginning of the year in which such Award would be granted. Notwithstanding the foregoing, if, in accordance with Section 3 of the Plan, an individual is to be elected by the Board to be a non-employee director of the Corporation after the Committee has made an Award to non-employee directors for that calendar year, then that individual must make the deferral election prior to that individual’s election as a director in order to defer distribution of the initial grant of Restrict Stock Unit Shares. The deferral election must specify whether the Participant is to receive the Restricted Stock Unit Shares upon the Participant’s Separation From Service in either a single distribution or in ten annual installments.
4.Award of Restricted Stock Units. The Corporation hereby grants to the Participant on Award Date < # of RSUs> Restricted Stock Units. Each Restricted Stock Unit is a contingent right to receive a Restricted Stock Unit Share, subject to the restrictions and other terms and conditions set forth in the Plan and this Agreement. The Participant’s Award of Restricted Stock Units will be recorded in a memorandum account. The Participant will have no beneficial ownership interest in the Common Stock of the Corporation represented by the Restricted Stock Units awarded until the Participant receives a distribution of Restricted Stock Unit Shares.
(a)No Deferral Election – Restriction Period. Restricted Stock Units are subject to a Restriction Period which will terminate on <Date> or, if Corporation’s Common Stock is not traded on such date, on the next date on which the Corporation’s Common Stock is traded.
(a)Restrictions. Until the expiration of the Restriction Period or the lapse of restrictions in the manner provided in Section 5 of this Agreement, Restricted Stock Units will be subject to the following restrictions:
A.the Participant will not be entitled to (1) receive the Restricted Stock Unit Shares, (2) vote the Common Stock represented by the Restricted Stock Units, or (3) receive dividends thereon; and
B.the Restricted Stock Units may not be sold, transferred, assigned, pledged, conveyed, hypothecated, used to exercise options, or otherwise disposed of.
(i)Dividend Equivalent Payments. The Corporation will make to a Participant who holds Restricted Stock Units on the declared record date a cash payment on the number of shares of Common Stock represented by the Restricted Stock Units held by Participant on such record date. The dividend equivalent payment will be payable on the tenth (10th) day of March, June, September, and December. Each dividend equivalent will be equal to the regular quarterly dividend declared by the Board of Directors of the Corporation and paid on Common Stock and will be paid in accordance with the Corporation’s normal dividend payment practice as may be determined by the Committee, in its sole discretion.
(ii)Distribution of Restricted Stock Units. Restricted Stock Units will vest upon the expiration of the Restriction Period. Upon the vesting and expiration of the Restriction Period, a whole number of Restricted Stock Unit Shares equal to the number of Restricted Stock Units on the date the Restriction Period ended will be distributed to the Participant or the Participant’s beneficiary in the event of the Participant’s death.
(b)Deferral Election – Restriction and Retention Period. If the Participant makes a deferral election as described in Section 3 of this Agreement, then the Restricted Stock Units are subject to a Restriction Period which terminates on <Date> or, if Corporation’s Common Stock is not traded on such anniversary date, on the next date on which the Corporation’s Common Stock is traded. In addition, the Restricted Stock Units are subject to a Retention Period. The Retention Period will expire upon the Participant’s Separation from Service (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder) (a “Separation From Service”) or death. Restricted Stock Units will not be settled in Restricted Stock Unit Shares until the expiration of both the Restriction Period and the Retention Period.
(a)Restrictions. Until the expiration of the Restriction Period and the Retention Period, or the lapse of restrictions in the manner provided in Section 5 of this Agreement, Restricted Stock Units granted under this Award will be subject to the following restrictions:
A.the Participant will not be entitled to (1) receive the Restricted Stock Unit Shares, (2) vote the Common Stock represented by the Restricted Stock Units, or (3) receive dividends thereon; and
B.the Restricted Stock Units may not be sold, transferred, assigned, pledged, conveyed, hypothecated, used to exercise options, or otherwise disposed of.
(i)Crediting of Dividend Equivalents. On each dividend payment date for the Corporation, the Corporation will credit the memorandum account of each Participant who holds Restricted Stock Units as of the declared record date with additional Restricted Stock Units and fractions thereof equivalent to the dividend paid on the Corporation’s Common Stock based on the Fair Market Value of the Common Stock on the dividend payment date. Each credited dividend equivalent will be equal to the amount of the regular quarterly dividend paid in accordance with the Corporation’s normal dividend payment practice as may be determined by the Committee, in its sole discretion. The Participant’s memorandum account will be credited with additional Restricted Stock Units, including fractions thereof, pursuant to this paragraph until all Restricted Stock Units that were credited to the Participant are distributed.
(ii) Distribution of Restricted Stock Units. The Restricted Stock Units credited hereunder will be distributed in accordance with an irrevocable distribution election previously made by the Participant.
If the Participant elected to receive the Restricted Stock Units in a single distribution, upon the Participant’s Separation From Service: (a) whole shares of Common Stock equal to the number of Restricted Stock Units for which the Restriction Period has expired will be delivered to the Participant within 30 business days following the Participant’s Separation from Service; and (b) thereafter, when the Restriction Period expires for the most recent year’s Restricted Stock Unit Award, whole shares of Common Stock equal to the most recent year’s Award plus the number of additional Restricted Stock Units credited under Section 4(b)(ii) for that Award, will be delivered to the Participant. Any remaining fraction of a single Restricted Stock Unit that remains in the memorandum account upon the final distribution of any whole shares of Common Stock from the account will be distributed in cash concurrent with the final stock distribution.
If the Participant elected to receive the Restricted Stock Units in ten annual installments upon the Participant’s Separation From Service, following the expiration of the Retention Period, the first distribution will be made in January following the year of the Participant’s Separation From Service, and subsequent installments will be distributed on the anniversary of the first installment. Whole shares of Common Stock will be delivered to the Participant upon distribution of each annual installment. The first such installment will be equal to the number of whole Restricted Stock Unit Shares that equal one tenth of the total number of the Restricted Stock Units in the memorandum account for which the Restriction Period has expired at the time of the distribution; the second installment, one ninth of the remaining total number for which the Restriction Period has expired at the time of the distribution; and so forth, until all remaining Restricted Stock Units are distributed as whole Restricted Stock Unit Shares upon distribution of the tenth installment. Any remaining fraction of a single Restricted Stock Unit that was credited to the memorandum account upon the distribution of the tenth installment will be distributed in cash concurrent with the distribution of the tenth installment.
5.Death of the Participant. If the Participant dies before the entire Award has been distributed, upon the Participant’s death, all Restricted Stock Units held pursuant to this Agreement will vest, and the Restriction Period on the Restricted Stock Units will lapse immediately notwithstanding any deferral election made by a Participant. Restricted Stock Units credited to the Participant’s memorandum account will be distributed as whole Restricted Stock Unit Shares to the Participant’s beneficiary within 30 days following the Participant’s death. Any remaining fraction of a single Restricted Stock Unit that remains in the memorandum account upon the distribution of any whole shares of Common Stock from the account will be distributed to the Participant’s beneficiary in cash. The beneficiary may not, directly or indirectly, designate the taxable year of the distribution.
6.Nontransferability. This Agreement and the Restricted Stock Units granted to the Participant shall not be subject to any assignment, pledge, levy, garnishment, attachment, or other attempt to assign or alienate such shares prior to their delivery to Participant (or Participant’s beneficiary), including, without limitation, under any domestic relations order, and any such attempted assignment or alienation will be null, void, and of no effect.
7.Tax Withholding. To the extent required by law with respect to any Participant who is a Canadian tax resident, or as may be otherwise required to satisfy any federal or state tax withholding requirements, the Corporation will reduce the gross number of minimum number of Restricted Stock Unit Shares to be delivered under this Agreement hereof by withholding the minimum necessary number of shares necessary to satisfy the Corporation’s tax withholding obligations with respect to the Participant (or in the event of the Participant’s death, the beneficiary) based on the Fair Market Value of the Corporation’s Common Stock when shares are distributable to the Participant (or beneficiary). The Participant or beneficiary will be deemed to have been issued the gross number of Restricted Stock Unit Shares prior to such tax withholding, notwithstanding that a number of shares are held back solely for the purpose of satisfying such tax withholding obligation. The value of any fractional share amount created as a result of such withholding will be added to the tax withholding amount.
8.Governing Law. The Participant agrees that this Award will be governed by and interpreted in accordance with the laws of the Commonwealth of Virginia without regard to Virginia’s choice of law rules. The Participant consents to the personal jurisdiction of the federal and/or state courts serving the Commonwealth of Virginia and waives any defenses of forum non conveniens. The Participant agrees that any and all initial judicial actions related to this Award will only be brought in the United States District Court for the Eastern District of Virginia, Norfolk Division, or the appropriate state court in the City of Norfolk, Virginia regardless of the place of residence or work location of the Participant at the time of such action.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its duly authorized officer, and the Participant has executed this Agreement by his or her electronic acceptance hereof, in acceptance of the abovementioned Award, subject to the terms of the Plan and of this Agreement, all as of the day and year first above written.
By: _____________________________________________
<Full_Name>
By: _____________________________________________
NORFOLK SOUTHERN CORPORATION
Deferral Election for
Restricted Stock Units Awarded in 2020 and Subsequent Years
Under the Norfolk Southern Corporation Long-Term Incentive Plan
Must Be Completed Annually For Each Director Who Wants Deferral
I am, or will be, appointed as a director of Norfolk Southern Corporation (“Corporation”). I am not an officer or employee of the Corporation, or any of its subsidiaries.
I may become eligible for Awards of Restricted Stock Units made pursuant to the Norfolk Southern Corporation Long-Term Incentive Plan (Plan) in calendar year 2020 and future years. The Restricted Stock Units will be distributed as Restricted Stock Unit Shares one year after the Award Date unless I affirmatively elect to defer the distribution of each Award until my Separation from Service or death, as described herein.
I am making an election, as of the date listed below, to defer distribution of Restricted Stock Units awarded under the Norfolk Southern Corporation Long-Term Incentive Plan (Plan) pursuant to the Award granted next year (or, if I am a new director, pursuant to the Award granted upon my becoming a director) until my Separation from Service or death.
By completing and signing this form, I hereby acknowledge my understanding and acceptance of the following:
1.Irrevocable Election. This election is irrevocable for Restricted Stock Units to be awarded in the calendar year after the year in which I complete this election, unless I revoke it on or before December 31 of the calendar year in which I make it. If I am to be appointed as a new director of the Corporation, this election is irrevocable for Restricted Stock Units to be awarded upon my appointment. I may revoke this deferral election for Restricted Stock Units by providing written notice to the Corporate Secretary on or before December 31 before the year in which the Restricted Stock Units are to be awarded. If I properly revoke this election, no Restricted Stock Units awarded in the year after the year in which I revoke the election will be deferred unless I make a new, timely deferral election.
2.Terms of Plan Govern. This deferral election is made pursuant to the Plan and the Award Agreement. I agree to be bound by all the terms and conditions of the Plan and the Award Agreement, and by all determinations of the Committee thereunder. Capitalized terms not defined herein are defined in the Plan.
3.Award of Restricted Stock Units. The Committee may, from time to time, make Awards of Restricted Stock Units. Any such Restricted Stock Units will be recorded in a memorandum account, and I will have no beneficial ownership interest in the Common Stock of the Corporation represented by the Restricted Stock Units awarded.
4.Restriction and Retention Period. The Award of Restricted Stock Units will be subject to a one-year Restriction Period. In addition, pursuant to this election, this Award will be subject to a Retention Period that will expire upon my Separation from Service (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended) (a “Separation From Service”) or death. Restricted Stock Units will not be settled in Restricted Stock Unit Shares until the expiration of every applicable Restriction Period and Retention Period.
5.Distribution of Restricted Stock Units. I have elected a form of distribution, below, with respect to any Restricted Stock Units that are credited to the memorandum account maintained on my behalf under the Plan.
5
My election of the form of distribution is irrevocable for the Restricted Stock Units subject to this deferral election.
If I elect to receive the Restricted Stock Units in a single distribution upon my Separation from Service, upon my Separation from Service, whole shares of Common Stock equal to the number of Restricted Stock Units for which the Restriction Period has expired will be distributed to me within 30 business days following my Separation from Service or when the one-year Restriction Period expires. Any remaining fraction of a single Restricted Stock Unit that remains in the memorandum account upon the final distribution of any whole shares of Common Stock from the account will be distributed in cash concurrent with the final stock distribution.
If I elect to receive the Restricted Stock Units in ten annual installments upon my Separation From Service, the first distribution will be made in January following the year of my Separation From Service, and subsequent installments will be distributed on the anniversary of the first installment. Whole shares of Common Stock will be delivered upon distribution of each annual installment. The first such installment will be equal to the number of whole Restricted Stock Unit Shares that equal one tenth of the total number of the Restricted Stock Units in the memorandum account for which the Restriction Period has expired at the time of the distribution; the second installment, one ninth of the remaining total number for which the Restriction Period has expired at the time of the distribution; the third installment, one eighth of the remaining total number for which the Restriction Period has expired at the time of the distribution; and so forth, until all remaining Restricted Stock Units are distributed as whole Restricted Stock Unit Shares upon distribution of the whole shares in the tenth installment. Any remaining fraction of a single Restricted Stock Unit that was credited to the memorandum account upon the distribution of the tenth installment will be distributed in cash concurrent with the distribution of the tenth installment.
If I die before the entire Award has been distributed, then any Restricted Stock Units credited to the memorandum account will be distributed as whole Restricted Stock Unit Shares to my beneficiary within 30 days following my death. Any remaining fraction of a single Restricted Stock Unit that remains in the memorandum account upon the distribution of any whole shares of Common Stock from the account will be distributed to my beneficiary in cash. The beneficiary may not, directly or indirectly, designate the taxable year of the distribution.
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I elect to defer distribution of Restricted Stock Units awarded next year (or, if I am a new director, pursuant to the Award granted upon my becoming a director) until my Separation from Service or death.
I elect the following form of distribution for the Restricted Stock Units subject to this deferral election (check only one):
_______ A single distribution
_______ Ten annual installments, beginning in January following the year of my Separation From Service with the Corporation.
This deferral election applies only to Restricted Stock Units awarded next year or, if I am a new director, only for the Restricted Stock Units awarded upon my becoming a director. I understand that I may revoke this election in a writing received by the Corporate Secretary by December 31 of the year before the year in which the Restricted Stock Units are awarded. However, this election is irrevocable as to the time and form of distribution for all Restricted Stock Units that were subject to this election.
Date: ______________________ By: _________________________________________
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Exhibit 10(xx)
DIRECTORS' DEFERRED FEE PLAN
OF
NORFOLK SOUTHERN CORPORATION
(Effective June 1, 1982)
Last Amended December 1, 2019
PURPOSE
The Directors' Deferred Fee Plan (the "Plan") as adopted and approved by the Board of Directors (the "Board") of Norfolk Southern Corporation ("NS"), effective June 1, 1982, and as last amended effective December 1, 2019, makes available to NS directors a deferral election with respect to the directors' annual compensation and fees to provide for retirement and death benefits and thereby facilitate individual financial planning.
SECTION 1. ADMINISTRATION
The Plan Administrator shall be the Board. The Board shall from time to time adopt rules and regulations determined to be necessary to ensure the effective implementation of the Plan. The Board shall have the power to interpret the Plan, to supervise the maintenance of the deferred memorandum accounts of participants in the Plan and the method of distribution of those amounts credited to the deferred memorandum accounts pursuant to Section 4.
SECTION 2. ELIGIBILITY
Each NS director who is not an employee of NS (a “Non-Employee Director”) shall be eligible to be a participant in the Plan.
SECTION 3. DEFERRED COMPENSATION
A Non-Employee Director may elect to have all or a specified part of the annual compensation and fees earned for service on the Board credited to a deferred memorandum account established pursuant to Section 4. The Non-Employee Director making such an election (the "Participant") shall do so by filing with the Corporate Secretary on or before the date specified by the Plan Administrator (the “Election Deadline”) an election on a form prescribed by the Corporate Secretary for the purpose
of specifying the percentage of compensation and fees to be deferred and the distribution option under Section 6(b).
If the Participant was a Non-Employee Director on December 31 preceding the calendar year for which the compensation and fees to be deferred are earned, in no event shall the Election Deadline be later than such December 31. The election shall apply only to compensation and fees earned for services performed in the calendar year commencing after the Election Deadline.
If the Participant either is elected to fill a vacancy on the Board or is elected at the annual meeting of shareholders, and the Participant was not a Non-Employee Director on the last day of the year preceding that Participant’s election, in no event shall the Election Deadline be later than the end of the 30-day period following such Participant’s first day of eligibility to participate in the Plan. The election shall apply only for the calendar year of the election, and only to compensation and fees earned for services performed after the election.
The Participant’s deferral election and distribution election in effect on the Election Deadline shall be irrevocable for the calendar year following the Election Deadline (or for the portion of the calendar year following the election, in the case of an election made during the initial 30-day period of participation in the Plan). Until a Non-Employee Director makes a deferral election, the Non-Employee Director shall be deemed to have elected to receive the entire compensation and fees in cash.
SECTION 4. DEFERRED MEMORANDUM ACCOUNT
The amount of a Participant's annual compensation and fees which, pursuant to Section 3, the Participant has elected to receive on a deferred basis shall by appropriate bookkeeping entries be credited to that Participant's deferred memorandum fixed interest or variable earnings accounts (the "Accounts") in accordance with the Plan terms and the Participant’s investment election applicable to such deferral.
The Board shall have the right to delegate to NS' chief financial officer the responsibility for supervising the maintenance of the Participants' respective Accounts and, subject to Section 6, the method of distribution of the amounts credited to the Accounts. In addition, the Board shall have the right to delegate to NS’ chief financial officer the responsibility to select Hypothetical Investment Options, subject to subsection (b) of this Section, made available to Participants solely for the purpose of valuing deferrals in the Variable Earnings Accounts.
The Accounts shall be utilized solely as a device for the measurement of amounts to be paid to the Participant under the Plan. The Accounts shall not constitute or be treated as an escrow, trust fund, or any other type of funded account for ERISA or Internal Revenue Code (“Code”) purposes and, moreover, contingent amounts credited
thereto shall not be considered plan assets for ERISA purposes. The Accounts merely provide a record of the bookkeeping entries relating to the contingent benefits that NS intends to provide to the Participant and thus reflect a mere unsecured promise to pay such amounts in the future.
(a) Fixed Interest Account. Amounts deferred before January 1, 2001, shall be credited to a Participant’s Fixed Interest Account as provided in this subsection. Unless otherwise stated herein or determined by the Board, each Participant's Account shall also be credited at the end of each quarter by appropriate bookkeeping entries with an amount equivalent to interest ("Interest") on the amount credited to the Participant's Fixed Interest Account at the beginning of the quarter at a rate determined by the Participant's age at the time the deferral is made. For purposes of determining the appropriate rates, a deferral is deemed to occur when the compensation and fees would otherwise have been paid. Amounts deferred on or after January 1, 1994, shall accrue Interest based on the Participant's age at the time of deferral at the rates set forth below:
Age Rate
Under 45 7%
45-54 10%
55-60 11%
Over 60 12%
Amounts deferred on or after January 1, 1992, and prior to January 1, 1994, shall accrue Interest based on the Participant's age at the time of deferral at the rates set forth below:
Age Rate
Under 45 13%
45-54 14%
55-60 15%
Over 60 16%
Amounts deferred on or after January 1, 1987, and prior to January 1, 1992, shall accrue Interest based on the Participant's age at the time of deferral at the rates set forth below:
Age Rate
Under 45 15%
45-54 16%
55-60 17%
Over 60 18%
Amounts deferred under the Plan prior to January 1, 1987, shall accrue Interest at a rate determined by the Participant's age on January 1, 1987, as if such amounts had been deferred on January 1, 1987. Interest on each deferral shall continue to accrue at the rate determined by the Participant's age at the time the deferral is made until all benefits payable hereunder have been distributed to, or with respect to, the Participant.
(b) Variable Earnings Account. Amounts deferred on or after January 1, 2001, shall be credited to a Participant’s Variable Earnings Account as provided in this subsection. Investment funds or benchmarks shall be selected from time to time by the Plan Administrator or its designee (as provided in this Section) and made available to Participants solely for the purpose of valuing deferrals. Such funds or benchmarks shall be referred to as “Hypothetical Investment Options.”
Unless otherwise stated herein or determined by the Board of Directors, an amount equivalent to earnings or losses (“Earnings”) shall accrue on or be deducted from all deferrals, beginning when the compensation and fees would otherwise have been paid, in accordance with the Participant’s selection of Hypothetical Investment Options. Earnings shall be determined based upon the Hypothetical Investment Option(s) elected by the Participant. If a Participant does not elect Hypothetical Investment Options for the deferrals, then Earnings shall be determined based on such Hypothetical Investment Options as may be designated by the Plan Administrator to apply in the absence of an election. Participants will be required to elect a Hypothetical Investment Option(s) at the time a deferral election is made for amounts deferred on or after January 1, 2001, and such investment election will apply to all subsequent deferrals until the Participant changes such election. Participants will be permitted at any time prior to the complete pay out of their Variable Earnings Account balance to elect to change their Hypothetical Investment Option(s) with respect to all or part of their Variable Earnings Account balances effective as soon as practicable following such election. The procedure for electing to change a Hypothetical Investment Option(s) will be established by the Plan Administrator. An election to change a Hypothetical Investment Option for part of a Variable Earnings Account balance must be made in increments of 1% of the Variable Earnings Account balance or a specified dollar amount.
While a Participant’s Accounts do not represent the Participant’s ownership of, or any ownership interest in, any particular assets, the Participant’s Variable Earnings Account shall be adjusted in accordance with the performance of the Hypothetical Investment Options chosen by the Participant. Any cash earnings generated under a Hypothetical Investment Option (such as interest and cash dividends and distributions) shall be deemed to be reinvested in that Hypothetical Investment Option. All notional acquisitions and dispositions of Hypothetical Investment Options which occur within a Participant’s Variable Earnings Account, pursuant to the terms of the Plan, shall be deemed to occur at such times as the Plan Administrator shall determine to be
administratively feasible in its sole discretion and the Participant’s Variable Earnings Account shall be adjusted accordingly. In the event of a Change in Control, the practices and procedures for determining any Earnings credited to any Participants’ Variable Earnings Accounts following a Change in Control shall be made in a manner no less favorable to Participants than the practices and procedures employed under the Plan, or otherwise in effect, as of the date of the Change in Control.
SECTION 5. RESTRICTIONS
The Participants shall have only those rights in respect of the amounts credited to their Accounts specifically set forth herein.
No Participant may, prior to the distribution of funds pursuant to Section 6, sell, assign, transfer, distribute, pledge as collateral for a loan or as security for the performance of any obligation, exchange or otherwise dispose of any interest in the amounts credited to that Participant’s Accounts.
The amounts credited to the Accounts shall remain assets of NS until distributed to Participants pursuant to Section 6.
SECTION 6. DISTRIBUTION
(a) Fixed Interest Account. Except as otherwise provided in Section 7, distributions of the amounts credited to a Participant's Fixed Interest Account shall be made in ten annual cash installments beginning with the first day of the calendar year immediately following the year when a Participant ceases to be an NS director by retirement or otherwise.
(a)Variable Earnings Account. No later than the Election Deadline for each calendar year’s deferrals, a Participant may elect one of the two distribution options described in this Section 6(b) for amounts credited to the Variable Earnings Account. If a Participant fails to elect the time and form of distribution for a particular calendar year’s deferrals by the Election Deadline, the Participant shall be deemed to have made the same distribution election as he last made for a calendar year’s deferrals. If the Participant has never elected the time and form of distribution of his deferral, the Participant’s distribution will be made in one lump sum after the Participant experiences a “separation from service” within the meaning of section 409A of the Code and the regulations thereunder for a reason other than the Participant’s death (a “Separation From Service”).
The Participant must elect to have the benefit distributed either (i) beginning with the first day of the calendar year immediately following the year when the Participant experiences a Separation From Service, or (ii) upon the earlier of the Participant’s
Separation From Service or a specified date at least five (5) years but not more than fifteen (15) years after the calendar year in which the deferred amount is earned (“Specified Date”). If the Participant elects to receive the benefit upon Separation from Service, he may elect to have the benefit distributed to him in one lump sum or in annual installment payments that are distributed over a period of five (5), ten (10), or fifteen (15) years. The amount of each annual installment payment shall be determined by dividing the balance credited to the Participant’s Variable Earnings Account on each payment date by the number of installments remaining. For purposes of Section 409A of the Code, a series of installment payments will be considered a single payment. Any benefit which a Participant elects to receive on the earlier of Separation from Service or a Specified Date will be distributed in one lump sum.
For each calendar year’s deferrals for which the Participant elected to have the benefit distributed on a Specified Date, the Participant shall be paid the amount in the Account for that calendar year’s deferrals on the first day on or after the date selected or, if the Participant’s Separation From Service is earlier than the Specified Date, on the first day following the date of the Separation From Service.
For a Participant who did not elect distribution on a Specified Date, the Participant shall be paid on the first day of the calendar year following the date the Participant experiences a Separation From Service, the amount in the Variable Earnings Account which is attributable to deferrals for which the Participant elected a lump sum distribution.
For distributions other than lump sum distributions, payments shall commence on the first day of the calendar year following the date the Participant experiences a Separation From Service and shall be made in installments on the first day of each year thereafter for each applicable deferral based on the distribution elections made by the Participant. The annual installment payment for each applicable deferral shall be an amount equal to the remaining balance in the Participant’s Account for that deferral, valued at the end of the calendar year preceding the installment payment, divided by the remaining number of annual payments not yet distributed for that deferral.
(b)Death of the Participant. The Participant may designate a beneficiary or beneficiaries who shall receive a distribution of funds pursuant to this Section 6 in the event of the Participant’s death. In the absence of such designation, or if the beneficiary predeceases the Participant, the beneficiary shall be the Participant’s surviving spouse or, if the Participant does not have a surviving spouse, the Participant’s estate. In order to be effective, a Participant's designation of a beneficiary must be on file with NS before the Participant's death. Any such designation may be revoked and a new designation submitted by the Participant at any time before his death without the consent of the previously designated beneficiary.
Upon the death of a Participant prior to the expiration of the period during which the deferred amounts are payable, the balance of the deferred fees and Earnings
credited to the Fixed Interest Account and Variable Earnings Account shall be payable to the beneficiary or beneficiaries in full on the first day of the calendar year following the year in which the Participant dies.
(d) Administrative Adjustments in Payment Date. A payment under Section 6(b) or 6(c) is treated as being made on the date when it is due under the Plan if the payment is made on the due date specified by the Plan, or on a later date that is either (i) in the same calendar year (for a payment whose specified due date is on or before September 30), or (ii) by the 15th day of the third calendar month following the date specified by the Plan (for a payment whose specified due date is on or after October 1). A payment also is treated as being made on the date when it is due under the Plan if the payment is made not more than 30 days before the due date specified by the Plan. A Participant or beneficiary may not, directly or indirectly, designate the taxable year of a payment made in reliance on the administrative rules in this paragraph.
(e) Emergency Hardship Distribution. A Participant who ceased to be a Non-Employee Director before October 3, 2014, may request to withdraw all or any portion of the Participants’ Accounts for an Unforeseeable Emergency. The amounts distributed with respect to an Unforeseeable Emergency may not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). “Unforeseeable Emergency” means for this purpose a severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152 of the Internal Revenue Code, without regard to section 152(b)(1), (b)(2) or (d)(1)(B)), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The Corporation’s chief administrative officer will have the sole and absolute discretion and authority to determine the extent to which a distribution is permissible under this paragraph.
SECTION 7. CHANGE IN CONTROL
If, on the date of a Change in Control (as defined herein) or a 409A Change in Control (as defined herein), a Participant who was serving as a Non-Employee Director of NS on the day immediately preceding the date of the Change in Control or 409A Change in Control experiences a Separation From Service, then, notwithstanding the provisions of Section 6, such Participant shall receive the following:
(a) For the Fixed Interest Account, a lump-sum cash payment equal to the present value on the Participant’s last day of service as a Non-Employee Director, using
a discount rate of 4.5 percent, of any stream of installment payments that the Participant would have received had the Participant served as a Non-Employee Director until the latest date permitted under the Retirement Policy for Non-Employee Directors as in effect on the day before the Change in Control; and
(b)For the Variable Earnings Account, in the event of a 409A Change in Control, a lump-sum cash payment equal to the present value on the Participant’s last day of services as a Non-Employee Director, using a discount rate of 4.5 percent. The present value will be calculated assuming that the Participant would have served as a Non-Employee Director until the latest date permitted under the Retirement Policy for Non-Employee Directors as in effect on the day before the Change in Control, and the projected Earnings used to determine such present value will be calculated in accordance with the Interest rate specified in Section 4(a) based on the Participant’s age immediately preceding the date of a Change in Control and applied to the Participant’s Variable Earnings Account balance on such date. In the event of a Change in Control that is not a 409A Change in Control, the benefit shall be calculated as described above except that any portion of the Participant’s deferred compensation benefit that is not a Grandfathered Benefit under Section 15, exclusive of any projected Earnings as described in this section, shall be paid at the time and in the form the benefit would have been paid absent a Change in Control.
Any payment made pursuant to this Section 7 will be in full satisfaction of all amounts credited to the Participant’s Accounts.
A Change in Control shall occur upon any of the following circumstances or events:
(i) NS consummates a merger or other similar control-type transaction or transactions (however denominated or effectuated) with another corporation or other entity (Combination), and immediately thereafter less than eighty percent (80%) of the combined voting power of the then-outstanding securities of such corporation or entity is held in the aggregate by the holders of securities entitled, immediately prior to such Combination, to vote generally in the election of NS directors (Voting Stock);
(ii) NS consummates any stockholder-approved consolidation or dissolution (however denominated or effectuated) pursuant to a recommendation of the Board;
(iii) At any time, Continuing Directors (as herein defined) shall not constitute a majority of the members of the Board (“Continuing Director” means (i) each individual who has been a director of NS for at least twenty-four (24) consecutive months before such time and (ii) each individual who was
nominated or elected to be a director of NS by at least two-thirds (2/3) of the Continuing Directors at the time of such nomination or election); or
(iv) NS sells all or substantially all of its assets to any other corporation or other entity, and less than eighty percent (80%) of the combined voting power of the then-outstanding securities of such corporation or entity immediately after such transaction is held in the aggregate by the holders of Voting Stock immediately prior to such sale.
A Change in Control under Section 409A of the Code (a “409A Change in Control”) shall occur upon any of the following circumstances or events:
(i) A person, or more than one person acting as a group, acquires ownership of stock of NS that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of NS;
(ii) A person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of NS possessing thirty percent (30%) or more of the total voting power of NS;
(iii) Continuing Directors (as herein defined) no longer constitute a majority of the members of the Board (“Continuing Director” means (i) each individual who has been a director of NS for at least twelve (12) consecutive months before such time and (ii) each individual who was nominated or elected to be a director of NS by at least a majority of the directors at the time of such nomination or election); or
(iv) A person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from NS that have a total gross fair market value equal to forty percent (40%) or more of the total gross fair market value of all of the assets of NS immediately before such acquisition.
For purposes of a 409A Change in Control, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with NS. The definition of a 409A Change in Control shall be interpreted and applied in a manner consistent with section 409A of the Code.
SECTION 8. RECALCULATION EVENTS
NS' commitment to accrue and pay Interest and Earnings as provided in Section 4 is facilitated by the purchase of corporate-owned life insurance purchased on the lives of eligible Participants. If the Board, in its sole discretion, determines that any change whatsoever in Federal, State or local law, or in its application or interpretation, has materially affected, or will materially affect, the ability of NS to recover the cost of providing the benefits otherwise payable under the Plan, then, if the Board so elects, a Recalculation Event shall be deemed to have occurred. If a Recalculation Event occurs, then Interest and/or Earnings shall be recalculated and restated using a lower rate of Interest and/or Earnings determined by the Board, but which shall be not less than one-half (1/2) the rate of Earnings provided for in Section 4(b) or one-half (1/2) the rate of Interest provided in Section 4(a), as applicable.
SECTION 9. AMENDMENTS
The Board in its sole discretion may at any time modify or amend any provisions of the Plan, or suspend or terminate the Plan. However, except as otherwise provided in Section 8, no modification, amendment, suspension or termination of the Plan may, without the Participant’s consent, apply to or affect the rights of a Participant in respect of amounts credited to the Participant’s Account for any month ended prior to the effective date of that modification, amendment, suspension or termination. In no event shall a termination of the Plan accelerate the distribution of amounts deferred under the Plan in calendar year 2005 and succeeding years, except to the extent permitted in regulations or other guidance under section 409A of the Code and expressly provided in the resolution terminating the Plan.
SECTION 10. NATURE AND SOURCE OF PAYMENTS
The obligation to make payments hereunder with respect to each Participant shall constitute a liability of NS to the Participant and any beneficiaries in accordance with the terms of the Plan. NS may establish one or more grantor trusts within the United States to which NS may transfer such assets as NS determines in its sole discretion to assist NS to accumulate assets that can be used to pay benefits under the Plan. While NS generally reserves the right to establish or fund any such grantor trust at any time, it shall not fund such trust in connection with a change in NS’ financial health to the extent that such funding would not comply with the requirements of section 409A of the Code. The provisions of the Plan shall govern the rights of NS, Participants and the creditors of NS to the assets transferred to the trust. NS’ obligations under the Plan may be satisfied with trust assets distributed pursuant to the terms of the trust, and any such distribution shall reduce NS’ obligations under this Plan.
Participants and beneficiaries shall stand in the position of unsecured creditors of NS, and all rights hereunder and under any trust are subject to the claims of creditors of NS.
SECTION 11. EXPENSES OF ADMINISTERING PLAN
All expenses of administering the Plan shall be borne by NS, and no part thereof shall be charged against the benefit of any Participant, except the costs of the Hypothetical Investment Options in the Variable Earnings Account, which shall be charged against the value of deferrals measured against those funds.
SECTION 12. FACILITY OF PAYMENT
If the Board shall find that any individual to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident or is a minor or other person under legal disability, any payment due such individual (unless a prior claim for such payment shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister of such individual, or to any other person deemed by the Board to have incurred expenses of such individual, in such manner and proportions as the Board may determine. Any such payment shall be a complete discharge of the liabilities of NS with respect thereto under the Plan.
SECTION 13. CONTINUED SERVICE
Nothing contained herein or in a deferral agreement shall be construed as conferring upon any Participant the right nor imposing upon the Participant the obligation to continue in the service of NS in any capacity.
SECTION 14. DISPUTED QUESTIONS
Any disputed question arising under the Plan, including questions of construction and interpretation, shall be determined conclusively and finally by the Board.
SECTION 15. EFFECTIVE DATE
The Plan became effective on June 1, 1982, and was last amended effective December 1, 2019. The Plan, as hereby amended and restated, is effective with respect to amounts that were not earned and vested (within the meaning of section 409A of the Code) before January 1, 2005, and any earnings on such amounts.
Amounts earned and vested (within the meaning of section 409A of the Code) before January 1, 2005, and earnings on such amounts (collectively, “Grandfathered Amounts”), remain subject to the terms of the Plan as in effect on October 3, 2004; provided, however, that Participants who ceased to be Non-Employee Directors before October 3, 2014, shall not have Grandfathered Amounts after October 2, 2014. For recordkeeping purposes, the Company will account separately for Grandfathered Amounts.
SECTION 16. INTERNAL REVENUE CODE SECTION 409A
The Plan is intended, and shall be construed, to comply with the requirements of section 409A of the Code. NS does not warrant that the Plan will comply with section 409A of the Code with respect to any Participant or with respect to any payment, however. In no event shall NS, its officers, directors, employees, parents, subsidiaries, or affiliates be liable for any additional tax, interest, or penalty incurred by a Participant or beneficiary as a result of the Plan’s failure to satisfy the requirements of section 409A of the Code, or as a result of the Plan’s failure to satisfy any other applicable requirements for the deferral of tax.