Document:

ex10-1.htm

    Exhibit
10.1

     

    
      UNITED
STATES DISTRICT COURT

      SOUTHERN
DISTRICT OF NEW YORK

      

      

      
        	
                 

                DEBORAH
      DONOGHUE,

                 

                Plaintiff,

                 

                - against -

                 

                CSX
      CORPORATION, et al.

                 

                Defendants,

              	
                    Civil
      Action No.

                 

                    08
      Civil 9252  (MGC)

                 

                    STIPULATION
      OF

                   SETTLEMENT      
      

                 

                 

              

      

      

      

      WHEREAS, plaintiff, Deborah Donoghue
(“Plaintiff”), a shareholder of CSX Corporation (“CSX”), brought this action
(the “Action”) pursuant to Section 16(b) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), to recover so-called “short-swing” profits
alleged to have been realized by defendants The Children’s Investment Master
Fund (“TCI”), The Children’s Investment Fund Management (UK) LLP, The Children’s
Investment Fund Management (Cayman) Ltd., Christopher Hohn, Timothy O’Toole, 3G
Fund LP (“3G”), 3G Capital Partners Ltd., 3G Capital Partners LP, Alexandre
Behring and Gilbert H. Lamphere or some of them (collectively, the “Settling
Defendants”) in connection with their putative purchases and sales of CSX
securities;

      WHEREAS, the Settling Defendants deny
any wrongdoing whatsoever and this Stipulation of Settlement (“Stipulation”)
shall in no event be construed or deemed to be evidence of or an admission or
concession on the part of the Settling Defendants with respect to any claim, or
any fault or liability or wrongdoing or damages whatsoever, or any deficiency in
the defenses that the Settling Defendants have or may assert.  The
Plaintiff, CSX and the Settling Defendants (collectively, the “Parties”)
recognize, however, that the Action has been filed by Plaintiff and defended by
the Settling Defendants in good faith and with adequate basis in fact under Rule
11 of the Federal Rules of Civil Procedure, and that the Action is being
voluntarily settled after advice of counsel and negotiation between counsel for
the Parties;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, CSX and the Settling
Defendants are parties to an action entitled CSX Corporation v.
The Children’s
Investment Fund Management (UK) LLP, 08 Civil 2764 (LAK) (the “13D
Action”) in which the court issued a 115-page Opinion and Final Judgment (the
“Opinion”) after trial; the Opinion is currently on appeal to the United States
Court of Appeals for the Second Circuit;

      WHEREAS, Plaintiff’s theory of
liability in this Action is based on the June 11, 2008 Opinion in the 13D
Action, wherein the court found that:  (i) TCI’s transactions in total
return cash-settled equity swaps (the “equity swaps”) resulted in it being
deemed to be the beneficial owner, within the meaning of Rule 13d-3(b) of the
Exchange Act, of CSX common stock held by its swap counterparties as hedges to
the swaps; and (ii) TCI and 3G purchased and sold CSX common stock and/or
equity swaps and were members of a group under Section 13(d)(3) of the Exchange
Act along with other Settling Defendants;

      WHEREAS, Plaintiff asserts that by
reason of such beneficial ownership TCI may be deemed to beneficially own over
10 percent of CSX’s common stock;

      WHEREAS, Plaintiff asserts that 3G, by
virtue of its membership in a group, may be deemed to beneficially own over 10
percent of CSX’s common stock;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, the Settling Defendants
vigorously contest the findings in the 13D Action and have appealed the
Opinion;

      WHEREAS, Timothy O’Toole and Gilbert
Lamphere had no involvement in any of the trading activity alleged to give rise
to Section 16(b) liability and were incorrectly named as defendants in this
Action;

      WHEREAS, the United States Court of
Appeals for the Second Circuit heard argument in the 13D Action on August 25,
2008; the Parties recognize that, if the Second Circuit reverses the findings in
the 13D Action that the Settling Defendants beneficially owned CSX’s common
stock through their transactions in equity swaps, there will be no basis for
liability in this Action.  The Parties further recognize that CSX’s
theory of beneficial ownership in the 13D Action is novel, that a number of
amici have submitted
briefs in support and opposition to CSX’s position, and that the Securities and
Exchange Commission (the “SEC”), Division of Corporation Finance (the
“Division”), sent a letter to the trial court stating that “[t]he Division
believes that interpreting an investor’s beneficial ownership under Rule 13d-3
to include shares used in a counter-party’s hedge, absent unusual circumstances,
would be novel and would create significant uncertainties for investors who have
used equity swaps in accordance with accepted market practices understood to be
based on reasonably well-settled law”;

      WHEREAS, given the risks and
uncertainties of the outcome of the appeal in the 13D Action, CSX and Plaintiff
have concluded that it is in the interest of CSX to settle this Action on the
terms set forth herein (the “Settlement”);

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, CSX obtained significant
discovery from the defendants in the 13D Action, including records reflecting
all of the Settling Defendants’ transactions in CSX equity securities and equity
swaps related to CSX stock; thereafter, CSX engaged an expert consultant to
prepare an analysis of potential damages under Section 16(b) arising from the
Settling Defendants’ transactions in equity swaps and common stock, which
reflects that the maximum recoverable damages under the Rules which govern the
calculation of recoverable profits under Section 16(b) of the Exchange Act, may
be as much as $128,000,000 for TCI and $9.6 million for 3G; and in connection
with the Parties’ settlement negotiations, CSX has shared its discovery and
analysis with Plaintiff’s counsel in this Action;

      WHEREAS, the Settling Defendants
believe that, even if the Second Circuit affirms the Opinion, they have several
meritorious defenses to Plaintiff’s Section 16(b) claims and that the potential
liability for the Section 16(b) claims is substantially lower than the $137.6
million calculated by Plaintiff and CSX;

      WHEREAS, the Parties engaged in
settlement negotiations among themselves which culminated in an agreement
whereby TCI will pay CSX the sum of $10,000,000 and 3G will pay CSX the sum of
$1,000,000;

      WHEREAS, CSX and its disinterested
directors (i.e., directors who have no financial interest in this litigation and
are not affiliated with or nominated by the Settling Defendants), who are
represented by their own independent counsel, realize that a settlement of this
litigation on the terms described herein is in the best interests of CSX and its
shareholders; and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, in evaluating the proposed
settlement provided for herein, Plaintiff and her counsel have
considered:  the substantial benefit being provided by the proposed
Settlement; the uncertainties of the outcome of this Action, which Plaintiff
recognizes turns on the outcome of the appeal in the 13D Action and TCI’s
separate defenses to Section 16(b) liability in this Action; CSX’s theory of
liability in the 13D Action is hotly contested and there is no precedent
directly on point; and that resolution of the claims in this Action, wherever
and however determined, likely would be submitted for appellate review, there
would be yet additional time until there would be a final adjudication of the
claims and defenses asserted, and additional legal fees, which could reduce the
amount of any ultimate recovery (whether on a litigated judgment, if Plaintiff
were to prevail, or by settlement).

      IT IS HEREBY STIPULATED AND AGREED, for
good and valuable consideration, the sufficiency of which is hereby
acknowledged, as follows:

      1.           As
soon as practicable after this Stipulation has been executed, the Parties
jointly shall move the Court for preliminary approval of this Settlement and the
form of notice to shareholders, and for entry of a Preliminary Order,
substantially in the form attached hereto as Exhibit A.

      2.           Following
entry of the Preliminary Order, (a) CSX shall file a Form 8-K with the SEC,
issue a press release, place a notice of settlement on its website, and send
notice of the proposed Stipulation substantially in the form attached hereto as
Exhibit B (the “Notice”) by U.S. First Class Mail, to its shareholders who filed
current Schedules 13D or 13G, or Form 13F, with the SEC, and (b) CSX and the
Settling Defendants (other than Timothy O’Toole and Gilbert Lamphere) shall send
a joint request to the Second Circuit Court of Appeals advising it of the
settlement of this Action and requesting that it defer further ruling on the
appeal of the 13D Action until the Settling Defendants have sent notice that
this Action has become Final or, in the event that it does not become Final,
that litigation of this Action has resumed.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.           If
the Settlement contemplated by this Stipulation is approved by the Court after
Notice and a hearing on the fairness of the Settlement, counsel for the Parties
shall request that the Court enter an Order and Final Judgment (the “Order and
Final Judgment”) substantially in the form annexed hereto as Exhibit
C.  The Order and Final Judgment shall become final (“Final”)
following entry, either by expiration of the time for appeal or review of such
Order or, if any appeal is filed and not dismissed, after the Order is affirmed
on appeal and is no longer subject to review upon appeal or by writ of
certiorari or motion for reconsideration.

      4.           (a)           On
or before the tenth business day after the Order approving the Settlement
becomes Final (i) TCI shall wire transfer to CSX the amount of ten million
dollars ($10,000,000) less the amount of attorney’s fees and reimbursement of
expenses, if any, awarded by the Court to Plaintiff’s counsel, which amount
shall be paid directly to Plaintiff’s counsel and (ii) 3G shall wire transfer to
CSX the amount of one million dollars ($1,000,000) (the “Settlement
Payments”).  The total Settlement Payments, including any award of
attorney’s fee and reimbursement of expenses, shall not exceed
$11,000,000.

      (b)           Entry
and Finality of the Order and Final Judgment is a condition precedent to TCI’s
and 3G’s obligation to make the Settlement Payment.

      (c)           In
the event the Court does not enter the Order approving the Settlement, or such
Order does not become Final, this Stipulation shall be null and void except as
to paragraphs 4(c), 6 and 13(a), and the Parties shall be returned to their
positions nunc pro tunc
as they existed on the date before the Settlement and without prejudice in any
way.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.           In
consideration of the Settlement Payment, CSX and Plaintiff on behalf of herself
and any and all owners of any security (as defined in Section 3(a)(10) of the
Exchange Act) of CSX or any other security or instrument, the value of which is
derived from the value of any CSX equity security, each release and discharge
the Settling Defendants, their present, future or former officers, directors,
members, employees, agents, attorneys, representatives, advisors and affiliates
or associates (as the latter two terms are defined in Rule 12b-2 of the Exchange
Act), trustees, parents, principals, subsidiaries, general or limited partners
or partnerships, investment advisory clients and brokers, and each of their
heirs, executors, administrators, successors and assigns (the “Related Parties”)
from any and all liability and damages under or based upon any and all claims,
rights, causes of action, suits, matters, demands, transactions and issues,
known or unknown, arising out of or relating to the assertions contained in the
Amended Complaint in this Action or that could have been asserted in this Action
(i) by Plaintiff on behalf of herself or any other person or entity, (ii) by CSX
and/or (iii) by any and all owners of any security (as defined in Section
3(a)(10) of the Exchange Act) of CSX or any other security or instrument the
value of which is derived from the value of any CSX equity security, or any of
them, whether individually, directly, representatively, derivatively or in any
other capacity for all claims arising out of or relating to any violation of
Section 16(b) of the Exchange Act and the rules and regulations promulgated
under Section 16 relating to trading in CSX securities, equity swaps and/or
other securities or instruments the value of which is derived from the value of
any CSX equity security, from the beginning of time up through the date that
this Settlement becomes Final under paragraph 3.  This release does
not extend to CSX’s claims and the defendants’ defenses in the 13D
Action.  Plaintiff’s counsel, David Lopez, covenants not to bring any
additional claims against the Settling Defendants and their Related Parties for
trading in CSX securities, including, without limitation equity swaps or any
other derivative security or instrument tied to the value of any CSX equity
security arising from or relating to transactions in such securities or
instruments up through the date that this Settlement becomes Final under
paragraph 3, regardless of the theory of liability.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.           This
Stipulation and all negotiations and papers related to it, and any proceedings
in connection with the Settlement, whether or not the Settlement becomes Final
or is consummated, are not and shall not be construed to be evidence of, or an
admission by, any of the Parties respecting the validity or invalidity of any of
the claims or defenses asserted by the Parties or of the Settling Defendants’
liability or lack thereof with respect to any such claim or defense or for any
damages sought in the Action, or of any wrongdoing or lack of wrongdoing by any
or all of them whatsoever, and shall not be offered for admission or received as
evidence of any such liability or wrongdoing or damages, or lack
thereof.  This covenant expressly applies to but is not limited to the
13D Action: CSX and the Settling Defendants agree that neither this Stipulation,
nor the proceedings or orders in this Action, shall be offered into evidence in
the 13D Action or any other action or proceeding, nor may they cite to this
Settlement as grounds for arguing the strength or infirmity of their claims or
defenses in the 13D Action.

      7.           Plaintiff’s
counsel will apply to the Court, on notice to counsel for the Settling
Defendants and CSX and to the shareholders of CSX, for attorney’s fees and
expenses in an amount of five hundred fifty thousand dollars ($550,000.00),
which application CSX has agreed to support.  Such attorney’s fees and
expenses as may be awarded by the Court are to be paid by TCI after the Order
becomes Final in accordance with paragraph 4(a) and shall reduce the amount of
the Settlement Payment to CSX as provided therein, so that, as described in
paragraph 4(a), the total payment by TCI will equal $10 million and the total
payment by 3G will equal $1 million.  The Settlement is in no way
contingent upon any attorney’s fees or expenses being awarded in any
amount.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.           This
Stipulation contains the entire agreement between the Parties concerning the
subject matter hereof and neither party is relying upon any representation,
promise or assertion not contained herein.

      9.           This
Stipulation may be executed in one or more counterparts, each of which shall be
deemed an original of this Stipulation and all of which, when taken together,
shall be deemed to constitute one and the same agreement provided that no party shall
be bound hereby unless and until all parties shall have executed and delivered
this Stipulation.

      10.           The
individuals signing this Stipulation represent that they have the authority to
execute this Stipulation, to grant the releases in this Stipulation and to
compromise and settle all their claims and their defenses relating to the
Action.

      11.           This
Stipulation may not be modified or amended, nor may any of its provisions be
waived, except by a writing signed by all Parties hereto.

      12.           The
Parties shall use their best efforts to execute such documents and shall take
such other reasonable action as is necessary to effectuate this Stipulation as
provided for herein.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      13.           The
Parties submit to the jurisdiction of this Court (a) for all purposes relating
to this Action; and (b) for resolving any disputes over this Stipulation and its
enforcement.

      

      Dated:      
New York, New York

         December 16, 2008

      

      
        	/s/ David
    Lopez	 
      	/s/ Michael
      Swartz
	
                David
      Lopez (DL-6779)

                LAW
      OFFICE OF DAVID LOPEZ

                171
      Edge of Woods Road, P.O. 323

                Southampton,
      New York 11968

                631.287.5520

              	 
      	
                Michael
      Swartz (MS-7069)

                SCHULTE
      ROTH & ZABEL LLP

                919
      Third Avenue

                New
      York, New York 10022

                212.756.2000

              
	 
      	 
      	 
      
	
                Attorney
      for Plaintiff

              	 
      	
                Attorneys
      For The Children’s 

                Investment
      Master Fund, The 

                Children’s
      Investment Fund 

                Management
      (UK) LLP, The 

                Children’s
      Investment Fund 

                Management
      (Cayman) Ltd., 

                Christopher
      Hohn and Timothy O’Toole

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                /s/
      Miranda Schiller

              	 
      	/s/
      David Marriott
	
                Miranda
      Schiller (MS-9456)

                WEIL,
      GOTSHAL & MANGES, LLP

                767
      Fifth Avenue

                New
      York, New York 10153

                212.310.8000

              	 
      	
                David
      Marriott (DM-7708)

                CRAVATH,
      SWAINE & MOORE

                Worldwide
      Plaza

                825
      Eighth Avenue

                New
      York, New York 10019

              
	 
      	 
      	 
      
	
                Attorneys
      for CSX Disinterested Directors

              	 
      	
                Attorneys
      for CSX Corporation

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	/s/
      Peter Doyle
	 
      	 
      	
                Peter
      Doyle (PD-1735)

                Kirkland
      & Ellis LLP

                Citigroup
      Center

                153
      East 53rd Street

                New
      York, New York  10022-4611

                 

                Attorneys
      for 3G Fund LP, 3G 

                Capital
      Partners Ltd., 3G Capital 

                Partners
      LP, Alexandre Behring, and 

                Gilbert
      H. Lamphere

              

      

      

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    EXHIBIT
A

     

    
       

      
        UNITED
STATES DISTRICT COURT

        SOUTHERN
DISTRICT OF NEW YORK

      

    

    
      

      
        	
                 

                DEBORAH
      DONOGHUE,

                 

                Plaintiff,

                 

                - against -

                 

                CSX
      CORPORATION, et al.

                 

                Defendants,

              	
                 

                    Civil
      Action No.

                    08
      Civil 9252  (MGC)

                 

                    

                 

              

      

       

      
        PRELIMINARY
ORDER IN CONNECTION

        WITH SETTLEMENT
PROCEEDINGS

        

        WHEREAS,
on December 16, 2008, the parties to the above-captioned action (the “Action”)
entered into a Stipulation of Settlement (the “Stipulation” or the “Settlement”)
which has been submitted for review and which, together with the exhibits
thereto, sets forth the terms and conditions for the proposed settlement of the
Action and all claims in the Amended Complaint and dismissal of the Amended
Complaint on the merits and with prejudice, upon the terms and conditions set
forth in the Stipulation; and the Court having read and considered the
Stipulation and the accompanying documents and brief in support of the
Settlement; and the parties to the Stipulation having consented to the entry of
this Order; and all capitalized terms used herein having the meanings defined in
the Stipulation,

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        NOW
THEREFORE, IT IS HEREBY ORDERED this ______ day of December, 2008,
that:

        1.           A
hearing (the “Settlement Fairness Hearing”) is hereby scheduled to be held
before the Court on ____________________, 2009 at ___________ __.m. in Courtroom
____ at the United States Courthouse, 500 Pearl Street, New York, New York for
the following purposes:

        a)           to
determine whether the proposed Settlement is fair, reasonable and adequate and
should be approved by the Court;

        b)           to
determine whether the Order and Final Judgment, as provided for in the
Stipulation, should be entered, dismissing the Amended Complaint herein, on the
merits and with prejudice, and to determine whether the release by the Plaintiff
and by CSX, as set forth in the Stipulation, should be provided to the Settling
Defendants;

        c)           to
rule on Plaintiff’s application for an attorney’s fee and reimbursement of costs
and expenses; and

        d)           to
rule upon such other matters as the Court may deem appropriate.

        2.           The
Court reserves the right to approve the Settlement without further notice of any
kind and to adjourn the Settlement Fairness Hearing without further notice,
other than announcement thereof in open Court at the above time and
place.  The Court further reserves the right to enter its Order and
Final Judgment approving the Stipulation and dismissing the Complaint as to the
Settling Defendants on the merits and with prejudice, regardless of whether it
has awarded Plaintiff’s attorney’s fees and reimbursement of costs and
expenses.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        3.           The
Court approves the form, substance and requirements of the “Notice of Pendency
of Derivative Action and Hearing on Proposed Settlement and Attorney’s Fee
Petition” (the “Notice”), as set forth in and attached as Exhibit B to the
Stipulation.

        4.           CSX
shall cause the Notice, substantially in the form annexed as Exhibit B to the
Stipulation, to be mailed by first class mail, postage prepaid, on or before
_______________, 2009, to all shareholders of CSX who filed a current Form 13F,
Schedule 13D or Schedule 13G with the Securities and Exchange Commission (the
“SEC”) and place a copy of the Notice on its website.  In addition,
the Notice shall be filed with the SEC on a Form 8-K within ___ days of entry of
this Order and CSX shall issue a press release on the same date in the form
attached as Exhibit ___ to the Stipulation.

        5.           The
form and method set forth herein of notifying CSX shareholders and owners of any
securities (as defined in Section 3(a)(10) of the Exchange Act) of CSX or of any
other security or instrument, the value of which is derived from the value of
any CSX equity security, of the Settlement and of its terms and conditions meet
the requirements of due process, constitute the best notice practicable under
the circumstances, and shall constitute due and sufficient notice to all persons
and entities entitled thereto.

        6.           CSX
shareholders and owners of any CSX securities (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or of any other security or instrument, the value of
which is derived from the value of any CSX equity security, shall be bound by
all determinations and judgments in this Action, whether favorable or
unfavorable.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        7.           The
Court will consider comments and/or objections to the Stipulation of Settlement,
and to the application for an award of an attorney’s fee and reimbursement of
costs and expenses to plaintiff’s counsel only if, on or before
_________________, 2009, such comments or objections and any supporting
papers:  (i) are filed in writing with the Clerk of the Court, United
States District Court, 500 Pearl Street, New York, New York 10007, and (ii)
copies of all such papers are served upon each of the following:

         

        
          
            	 
      	 
      	 
      
	
                    David
      Lopez

                    171
      Edge of Woods Road, P.O. 323

                    Southampton,
      New York 11968

                     

                  	 
      	
                    Michael
      Swartz 

                    Schulte,
      Roth & Zabel, LLP

                    919
      Third Avenue

                    New
      York, New York 10022

                  
	 
      	 
      	 
      
	
                    Attorney
      for Plaintiff

                         Deborah Donoghue

                  	 
      	
                    Attorneys
      For The Children’s 

                    Investment
      Master Fund, 

                    The
      Children’s Investment Fund 

                    Management
      (UK) LLP, The 

                    Children’s
      Investment Fund 

                    Management
      (Cayman) Ltd., 

                    Christopher
      Hohn and Timothy O’Toole

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    Miranda
      Schiller 

                    Weil,
      Gotshcal & Manges, LLP

                    767
      Fifth Avenue

                    New
      York, New York 10153

                     

                  	 
      	
                    David
      Marriott 

                    Cravath,
      Swaine & Moore LLP

                    Worldwide
      Plaza

                    825
      Eighth Avenue

                    New
      York, New York 10019

                  
	Attorneys
      for CSX Independent Directors	 
      	 
      
	
                     

                  	 
      	
                    Attorneys
      for CSX Corporation

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    Peter
      Doyle

                    Kirkland & Ellis LLP

                    Citigroup Center

                    153 East 53rd Street

                    New York, New York 10022-4611

                     

                    Attorneys for 3G Capital Partners Ltd.,

                      3G Capital Partners LP, 3G Fund LP,

                      Alexandre Behring, and Gilbert H. Lamphere

                  	 
      	
                     

                  

          

        

         

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        
           

           

          
            Attendance
at the hearing is not necessary; however, persons wishing to be heard orally in
opposition to the approval of the Stipulation and/or the request for attorney’s
fees are required to indicate, in their written objection, their intention to
appear at the hearing.  Persons who intend to object to the
Stipulation and/or counsel’s application for an award of an attorney’s fee and
reimbursement of costs and expenses and who desire to present evidence at the
Settlement Fairness Hearing, must include in their written objections the
identity of any witness they may call to testify and a list of any exhibits they
intend to introduce into evidence at the Settlement Fairness
Hearing.

            8.           If:  (a)
any specified condition to the Settlement set forth in the Stipulation is not
satisfied and the satisfaction of such condition is not waived in writing by
counsel for the Plaintiff, CSX and the Settling Defendants; (b) the Court
rejects, in any respect, the Order and Final Judgment in substantially the form
and content annexed to the Stipulation as Exhibit C, and/or counsel for
Plaintiff, CSX and the Settling Defendants all fail to consent to entry of
another form of order in lieu thereof; (c) the Court rejects the Stipulation,
including any amendment thereto approved by each of counsel for Plaintiff, CSX
and the Settling Defendants; or (d) the Court approves the Stipulation,
including any amendment thereto approved by each of counsel for Plaintiff, CSX
and the Settling Defendants, but such approval or Order and Final Judgment is
reversed, vacated or modified on appeal and such reversal, vacatur or
modification becomes final by lapse of time or otherwise, then, in any such
event, the Stipulation (except as to paragraphs 4(c), 6 and 13(a), which shall
survive, including any amendment(s) thereto), shall be null and void, of no
further force or effect, and without prejudice to any party, and may not be
introduced as an admission or other evidence against any party, or referred to
in this Action or other actions or proceedings by any person or entity, and each
party shall be restored, nunc
pro tunc to his, her or its respective position as it existed prior to
the execution of the Stipulation.

             

            
              
                
                

              

              
                5

                
                  

                

              

              
                
                

              

            

             

            9.           The
Court retains exclusive jurisdiction over the action to consider all further
matters arising out of or connected with the Stipulation or the enforcement
thereof, or proceedings in connection therewith.

          

           

          
            

            Dated:      
New York, New York

               December ____, 2008

             

            
              
                	 	 	 	 	 
	
                         

                      	 	 	
                         

                      	 
	
                         

                      	 	 	
                        Miriam
      Goldman Cedarbaum, U.S.D.J.

                      	 
	
                         

                      	 	 	
                         

                      	 

              

            

          

        

      

    

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B

     

     

    
      
         

        
          UNITED
STATES DISTRICT COURT

          SOUTHERN
DISTRICT OF NEW YORK

        

      

      
        

        
          	
                   

                  DEBORAH
      DONOGHUE,

                   

                  Plaintiff,

                   

                  - against -

                   

                  CSX
      CORPORATION, et al.

                   

                  Defendants,

                	
                      

                      Civil
      Action No.

                      08
      Civil 9252  (MGC)

                   

                      

                   

                

        

        

          

          

          NOTICE
OF PENDENCY OF DERIVATIVE ACTION,

          AND
HEARING ON PROPOSED SETTLEMENT AND OF

          APPLICATION FOR AWARD OF
ATTORNEY’S FEES

          

          TO:           ALL
PERSONS OR ENTITIES WHO OWN DIRECTLY OR

          DERIVATIVELY
ANY SECURITY OF CSX CORPORATION

          

          PLEASE
READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY.

          YOUR
RIGHTS WILL BE AFFECTED BY PROCEEDINGS IN THIS ACTION.

          

          This
Notice is given pursuant to an Order of the United States District Court for the
Southern District of New York (the “Court”).  The purpose of this
Notice is to advise of a proposed Settlement (the “Settlement”) involving
defendants, The Children’s Investment Master Fund (“TCI”), The Children’s
Investment Fund Management (UK) LLP, The Children’s Investment Fund Management
(Cayman) Ltd., Christopher Hohn, Timothy O’Toole, 3G Fund LP (“3G”), 3G Capital
Partners Ltd., 3G Capital Partners LP, Alexandre Behring, and Gilbert Lamphere
(the “Settling Defendants”) in the above-captioned action (the
“Action”).  The terms of the Settlement are set forth in a Stipulation
of Settlement dated December 16, 2008, on file with the Court.  A
hearing will be held before Judge Miriam Goldman Cedarbaum in Courtroom _______
of the United States Courthouse, 500 Pearl Street, New York, New York on
________________, 2009 at ______ _.m. (the “Settlement Fairness Hearing”) to
determine whether the Settlement is fair, reasonable and adequate, and to
consider the application of Plaintiff for attorney’s fees.  The
Settlement provides for an aggregate payment by the Settling Defendants of
$11,000,000 (the “Settlement Payment”) to CSX Corporation
(“CSX”).  Counsel for the Plaintiff who brought this Action intends to
request that the Court award $550,000 for attorney’s fees and
expenses.  CSX has agreed to support this application.  Any
award of fees and expenses will be paid from the Settlement Payment and such
award will reduce the amount of the Settlement Payment to CSX.

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

           

          THE
ACTION

          Nature
of the Claims and Defenses

          The
Action affected by this Settlement is based on an amended complaint which was
filed by the Plaintiff as a shareholder of CSX and derivatively for its benefit
against the Settling Defendants and which asserted claims under Section 16(b) of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  Section 16(b) permits an issuer of registered equity
securities to recover certain trading profits, as defined by the rules of the
Securities and Exchange Commission (“SEC”), resulting from the purchase and sale
of securities within a period of less than six months by, among others,
investors who beneficially owned in excess of 10 percent of the issuer’s
stock.  Recovery under the statute does not turn in any way on the
wrongdoing of the defendant; rather, it is based solely on the existence and
timing of “purchases” and “sales” under the definition of these terms set forth
by the SEC rules and judicial decisions.

           

          
            
              
              

            

            
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          Plaintiff’s
theory of liability in this action is based on a June 11, 2008 Opinion and Final
Judgment (“Opinion”) issued in an action entitled CSX Corp. v. The Children’s
Investment Fund Management (UK) LLP, et al., 08 Civ. 2764 (LAK) (the “13D
Action”), which was brought by CSX against defendants for alleged violations of
Section 13(d) and 14(a) of the Exchange Act.  CSX brought the 13D
Action in order to restrain the Settling Defendants
(other than Timothy O’Toole and Gilbert Lamphere) from voting or soliciting
proxies at CSX’s annual meeting on the grounds that they allegedly failed to
timely file a Schedule 13D disclosing, among other things, their acquisition of
5 percent of CSX’s common stock, and that they had formed a group with the
objective of waging a proxy fight to support their nominees to CSX’s Board of
Directors.  Although the court denied CSX’s motion to enjoin
defendants from voting or soliciting proxies, it made certain findings in the
13D Action that provide the basis of plaintiff’s theory of liability in this
Action.  First, the court found that TCI and 3G formed a group and
attained beneficial ownership surpassing the 5 percent threshold of stock
ownership and failed to timely disclose their ownership
plans.  Second, the court found that, under Rule 13d-3 of the Exchange
Act, TCI may be deemed to be the beneficial owner of CSX common stock owned by
several banks that had purchased CSX stock (the “Hedged Shares”) in order to
hedge transactions in cash-settled equity swaps (the “equity swaps”) that had
been initiated by TCI.  Based on the Opinion in the 13D Action,
plaintiff in this action alleges that each time TCI entered into an equity swap
contract with a bank, the purchase of the Hedged Shares by the bank constituted
a purchase by TCI under Section 16(b) of the Exchange Act because TCI was the
beneficial owner of those shares under Rule 13d-3.  Plaintiff further
alleges that each of those purchases is matchable against sales of the Hedged
Shares by the banks.  CSX established in the 13D Action that,
with minor exceptions, whenever TCI terminated a swap agreement or the swap
agreement expired, the counterparty bank sold about the same number of Hedged Shares and it
did so on or about
the same day that the swap
was terminated.  CSX and plaintiff contend that if TCI’s
transactions in equity swaps during 2007 are deemed to give rise to the
beneficial ownership of the Hedged Shares, the maximum disgorgable profits that
are recoverable from TCI are as high as $128 million.

           

          
            
              
              

            

            
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          Plaintiff’s
theory of liability against 3G hinges on another finding in the 13D Action that
3G was a member of a group along with TCI and the other Settling Defendants
within the meaning of Section 13(d)(3) of the Exchange Act so that its
beneficial ownership reached the 10 percent threshold that must be established
for Section 16(b) “insider” liability to attach.  While 3G purchased
and sold CSX common stock, its own beneficial ownership standing alone never
exceeded 10 percent of CSX outstanding stock.  Thus, Section 16(b)
liability may only be imputed to 3G if (i) it is deemed to be a member of a
group with TCI under Section 13(d)(3) of the Exchange Act so that its ownership
combined with that of other members of the group exceeds the 10 percent
threshold and (ii) TCI’s equity swaps give rise to beneficial ownership of
the Hedged Shares.  CSX and plaintiff contend that if those two
conditions are established, 3G’s trading in CSX common stock within six-month
periods during 2007 is matchable to yield disgorgable profits of approximately
$9.6 million.

          Thus,
assuming plaintiff could prove the merits of her claims, the maximum recovery on
her claims against both 3G and TCI under the current SEC rules governing
determination of recoverable profits is alleged to be approximately $137.6
million.

          The
Settling Defendants deny all allegations of any liability under Section 16(b)
and any other assertions of wrongdoing or violations of law.  The
Settling Defendants have appealed from the Opinion in the 13D Action and have
asked the Second Circuit to reverse and vacate the Opinion and, in particular,
the findings that form the bases of plaintiff’s theories of liability in this
Action -- i.e., that
TCI’s transactions in equity swaps gave rise to its beneficial ownership of the
Hedged Shares and that defendants were members of a Section 13(d)(3)
group.

           

          
            
              
              

            

            
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          The
parties recognize that CSX and plaintiff’s theory of liability (that TCI’s
transactions in cash-settled equity swaps give rise to beneficial ownership of
the Hedged Shares) is novel and that there is no prior case or rule directly on
point.  If the Second Circuit reverses this finding in the 13D Action,
there is no basis for liability in this Action against any of the
defendants.  Moreover, if the Second Circuit reverses the finding that
3G was a member of a group along with TCI, there is no basis for liability
against 3G because it did not beneficially own 10 percent of CSX common stock at
any time.

          The
significant risks and uncertainties arising from the appeal in the 13D Action,
and the possibility that a decision in that action is imminent, has prompted the
parties to engage in settlement discussions in this Action on an expedited basis
before defendants respond to the Complaint in this Action.  Following
entry of an order preliminarily approving the proposed settlement of this
Action, counsel for the Settling Defendants and CSX will request that the Second
Circuit withhold issuing its decision in the 13D Action until the date that the
proposed settlement becomes final, within the meaning of ¶ 3 of the
Settlement, or if the Settlement is not approved, upon entry of an order denying
final approval of the Settlement.

           

          
            
              
              

            

            
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          Discovery
And Settlement Negotiations

          CSX
obtained substantial discovery in the 13D Action, which proceeded through a full
trial on the merits.  Defendants’ transactions in CSX securities and
in equity swaps are described in detail in the 115-page Opinion in the 13D
Action.  In addition, counsel for CSX’s disinterested directors (i.e.,
directors who have no financial interest in this litigation and are not
affiliated with or nominated by the Settling Defendants) and counsel for CSX
engaged a financial expert to analyze and match all of the Settling Defendants’
transactions in equity swaps and common stock in order to derive the maximum
potential recoverable damages under the rules applicable to Section 16(b)
claims.  This assumes both that CSX ultimately prevails in the 13D
Action on its claims about defendants’ beneficial ownership and group status and
that the Settling Defendants do not prevail on any of their defenses in this
Action to plaintiff’s Section 16(b) claims, discussed below.

          On
December 2, 2008, CSX, its disinterested directors and plaintiff, entered into a
cooperation agreement which provided for CSX to share its work product and
damage analysis with plaintiff’s counsel and which provided that plaintiff’s
counsel may seek an award of fees and expenses up to 5 percent of any settlement
amount with a cap of $750,000.  Thereafter, counsel to CSX and its
disinterested directors shared with plaintiff’s counsel in this Action their
damage analysis, the trading records of the Settling Defendants, and the
contracts governing TCI’s equity swaps so that he could perform his own analysis
of the potential damages.  In December 2008, settlement negotiations
were conducted by counsel for plaintiff, the Settling Defendants, CSX and CSX’s
disinterested directors, who are separately represented.

           

          
            
              
              

            

            
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          In
agreeing to the Settlement, counsel for plaintiff, CSX and the CSX disinterested
directors, weighed the risk of an unfavorable outcome if prosecution of this
Action is continued; the fact that the claims involve novel legal issues of
first impression and ones that are the subject of a hotly-contested appeal in
the 13D Action in which numerous amici have filed briefs in
support of and opposition to CSX’s position; the fact that the SEC Division of
Corporation Finance (the “Division”) sent a letter to the trial court in the 13D
Action stating that “[t]he Division believes that interpreting an investor’s
beneficial ownership under Rule 13d-3 to include shares used in a
counter-party’s hedge, absent unusual circumstances, would be novel and would
create significant uncertainties for investors who have used equity swaps in
accordance with accepted market practices understood to be based on reasonably
well-settled law”; the fact that any ruling in this Action is likely to be
appealed and that yet additional time would elapse before the final resolution
of any such appeal; and counsel further weighed the risk of uncertainty inherent
in the outcome of the appeal in the 13D Action, and the attendant costs, against
the benefits and certainty of an immediate $11,000,000 cash
settlement.  CSX, its disinterested directors, and plaintiff each has
determined that the Settlement on the terms described herein is in the best
interests of CSX and its shareholders.

           

          
            
              
              

            

            
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          Counsel
for plaintiff, CSX and its disinterested directors also weighed defenses that
counsel for TCI stated it will raise to the claims in this Action, but which are
unrelated to the arguments TCI has raised in its appeal in the 13D
Action.  Among other things, TCI asserts that the alleged purchases
and sales at issue are exempt from Section 16(b) liability pursuant to (1) Rule
16b-6(b)’s exemption for converting derivative securities to direct ownership of
the underlying security, (2) Section 16(e)’s arbitrage exemption, (3) Rule
16a-13’s exemption for changes in the form of beneficial ownership, and (4) the
Kern County unorthodox
transaction doctrine.  Those defenses are based on TCI’s contention
that the alleged purchases and sales at issue arose from transactions in which
(a) TCI closed swap positions and acquired equivalent positions in CSX stock,
and (b) TCI closed swap positions with certain counterparties and opened the
same number of swap positions with other counterparties in order to reduce
credit risk.  Because the offsetting purchases and sales took place on
or about the same day, and because of CSX’s adversity to TCI during the period
in question, TCI could not have utilized inside information to speculate on any
movement in the price of CSX stock.  In addition, TCI claims that the
transactions at issue are exempt from Section 16(b) liability pursuant to
Section 23(a) of the Exchange Act because TCI entered into those transactions
based on its good faith reliance on, among other things, prior SEC guidance that
cash-settled equity swaps did not confer beneficial ownership over the Hedge
Shares.  Those defenses are discussed more fully in the brief in
support of CSX and plaintiff’s joint motion for preliminary approval of the
Settlement.  TCI further disputes the correctness of CSX’s method of
computing damages.  TCI contends that its defenses, if successful,
could substantially reduce or eliminate the amount recoverable by
CSX.

          The
Settlement is not and shall not be construed or deemed to be evidence or an
admission or concession on the part of the Settling Defendants of any fault or
liability whatsoever, and the Settling Defendants do not concede any merit to
plaintiff’s theories or any infirmity in the defenses that they have raised in
the 13D Action, or that they would assert in this Action if it was litigated to
judgment.

           

          
            
              
              

            

            
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          The
Terms of Settlement

          Pursuant
to the Settlement, the Settling Defendants have agreed to pay to CSX the sum of
$11,000,000.  In return this Action will be dismissed as against the
Settling Defendants on the merits and with prejudice.  In addition, if
the Settlement is approved, the Court will enter a final Order and Judgment
which provides for a dismissal of the Complaint and a release and bar order in
the following form:

          The
Amended Complaint, each claim for relief therein against the Settling Defendants
and their Related Parties and all claims for violations of Section 16(b) that
were asserted in this Action or could have been asserted in any amended
complaint against the Settling Defendants or their Related Parties, are hereby
dismissed on the merits, with prejudice and without costs, except as otherwise
provided in the award of an attorney’s fee, costs and disbursements provided for
herein; and the Settling Defendants and their Related Parties are hereby
discharged and released, except as noted in the final sentence hereof, from any
and all liability and damages under or based upon any and all claims, rights,
causes of action, suits, matters, demands, transactions and issues, known or
unknown, arising out of or relating to the assertions contained in the Amended
Complaint in this Action or that could have been asserted in this Action (i) by
Plaintiff on behalf of herself or any other person or entity, (ii) by CSX and/or
(iii) by any and all owners of any security (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or any other security or instrument, the value of which
is derived from the value of any CSX equity security, or any of them, whether
individually, directly, representatively, derivatively or in any other capacity
for all claims arising out of or relating to any violation of Section 16(b) of
the Exchange Act and the rules and regulations promulgated under Section 16(b)
relating to trading in CSX securities, equity swaps and/or other equity
securities or instruments the value of which is derived from the value of any
CSX equity security, from the beginning of time up through the date that this
Settlement becomes Final under paragraph 3 of the
Settlement.  Plaintiff and her counsel in this Action are enjoined
from bringing any claims against the Settling Defendants and their Related
Parties for trading in CSX securities, including, without limitation, equity
swaps or any other derivative security or instrument tied to the value of any
CSX equity security arising from or relating to transactions in such securities
or instruments, up through the date that this Settlement becomes Final under
paragraph 3 of the Settlement, regardless of the theory of
liability.  Nothing herein extends to or releases CSX’s claims and the
defendants’ defenses in the 13D Action.

           

           

          
            
              
              

            

            
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          Because
the Action was brought derivatively on behalf of CSX, the Settlement Payments
will be paid to CSX, net of any award by the Court of an attorney’s fee and
reimbursement of expenses to plaintiff’s counsel.  There will be no
distribution to shareholders.

          If the
Settlement is approved by the Court, all claims that were asserted or could have
been asserted against the Settling Defendants in the Action will be dismissed on
the merits and with prejudice as to CSX and all of its shareholders and CSX and
its shareholders and plaintiff and her counsel will be forever barred from
prosecuting this Action or any other action raising any of the claims in this
Action against the Settling Defendants.

          If the
District Court does not approve the Settlement, or if the Order approving the
Settlement is reversed on appeal, then the rights and duties of the respective
parties to the terminated Settlement will revert to their respective statuses as
of the date immediately prior to the execution of the Settlement.

          NOTICE
OF SETTLEMENT HEARING

          The Court
has ordered that a hearing be held before the Hon. Miriam Goldman Cedarbaum,
United States District Judge for the Southern District of New York, at the
United States Courthouse, 500 Pearl Street, New York, New York, at _______ .m.,
on _____________, 2009 (or at such other time and place as the Court hereafter
may set, without further notice other than announcement thereof in open court at
the above time and place) concerning: (i) the fairness, reasonableness and
adequacy to CSX of the Settlement described above; and (ii) if the
Settlement is approved, the application of plaintiff’s counsel for an award of
an attorney’s fee and reimbursement of costs and expenses.

           

           

          
            
              
              

            

            
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      If you are the owner of a CSX security
or any other security or instrument, the value of which is derived from the
value of any CSX equity security, you may appear personally or by counsel and be
heard at the Settlement Hearing;  and you may support, object to or
express your views regarding the Settlement and/or plaintiff’s application for
an award of an attorney’s fee and reimbursement of costs and
expenses.  However, you will not be heard or entitled to contest the
approval of the Settlement or plaintiff’s application for an award of attorney’s
fees and reimbursement of costs and expenses unless, on or before
________________, 2009, you file a notice of intention to appear:
(i) setting forth the dates you purchased and the number of shares of CSX
common stock or security instrument, the value of which is derived from the
value of CSX common stock, that you own as of the date hereof; and
(ii) stating your objections, support or comments, in writing, with the
Clerk of the United States District Court for the Southern District of New York,
500 Pearl Street, New York, New York 10007, together with a list of any
witnesses you intend to call, a list of any exhibits you intend to present and
all briefs or other papers that support your objections or comments that you
will submit to this Court at the Settlement Hearing.  On or before
________________, 2009, you must also serve, in person or by mail, the notice of
intention to appear and attendant papers described in (i) and (ii) of this
paragraph on the following:

    

     

    
      
        
          	 
      	 
      	 
      
	
                  David
      Lopez (DL-6779)

                  171
      Edge of Woods Road, P.O. 323

                  Southampton,
      New York 11968

                	 
      	
                  Michael
      Swartz 

                  Schulte
      Roth & Zabel LLP

                  919
      Third Avenue

                  New
      York, New York 10022

                
	 
      	 
      	 
      
	
                  Attorney
      for Plaintiff

                     Deborah Donoghue

                	 
      	
                  Attorneys
      For The Children’s 

                  Investment
      Master Fund, 

                  The
      Children’s Investment Fund 

                  Management
      (UK) LLP, The 

                  Children’s
      Investment Fund 

                  Management
      (Cayman) Ltd., 

                  Christopher
      Hohn and Timothy O’Toole

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  Miranda
      Schiller 

                  Weil,
      Gotshal & Manges, LLP

                  767
      Fifth Avenue

                  New
      York, New York 10153

                   

                	 
      	
                  David
      Marriott

                  Cravath,
      Swaine & Moore LLP

                  Worldwide
      Plaza

                  825
      Eighth Avenue

                  New
      York, New York 10019

                
	Attorneys
      for CSX Disinterested Directors	 
      	 
      
	
                   

                	 
      	
                  Attorneys
      for CSX Corporation

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  Peter
      Doyle

                  Kirkland & Ellis LLP

                  Citigroup Center

                  153 East 53rd Street

                  New York, New York 1022-4611

                   

                  Attorneys for 3G Fund LP,

                  3G
      Capital Partners Ltd.,

                  3G
      Capital Partners LP,

                  Alexandre Behring, and Gilbert H. Lamphere

                	 
      	
                

        

      

       

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

     

    
      ATTORNEY’S
FEE AND DISBURSEMENTS

       

      At the Settlement Fairness Hearing, or
at such other time as the Court may direct, Plaintiff’s counsel intends to apply
to the Court for an award of attorney’s fee and expenses in the amount of
$550,000.  CSX, prior to the negotiation of the Settlement with the
Settling Defendants, agreed with Plaintiff’s counsel to a formula for computing
a fair and reasonable attorney’s fee based on 5 percent of the recovery and will
support such application.  This agreement is not binding on the
Court.  Any amounts awarded would be paid from the Settlement Payment,
after the Order approving the Settlement becomes final.

      FURTHER
INFORMATION

      This Notice is not
all-inclusive.  For the full details of the matters disclosed in the
Notice, including the Stipulation of Settlement described above, and for further
information concerning this Action, you may wish to refer to the pleadings or
other papers filed with the Court in this Action, all of which may be inspected
at the office of the Clerk of the United States District Court for the Southern
District of New York, 500 Pearl Street, New York, New York during normal
business hours.

      For further information regarding this
Notice, the Action or the proposed Settlement, CSX shareholders can contact, in
writing, Plaintiff’s counsel:

      David Lopez, Esq.

      171 Edge of Woods
Road,  P.O. Box 323

      Southampton, New York
11968

      

      PLEASE
DO NOT CALL OR WRITE THE COURT OR THE CLERK’S OFFICE 

      OTHER
THAN TO FILE NOTICES OF YOUR INTENTION TO SUPPORT OR 

      OPPOSE
THE SETTLEMENT WITH ACCOMPANYING DOCUMENTS

       

       

    

    
      

      Dated:      
New York, New York

         December ____, 2008

       

       

      
         

        
          
            	 	 	 	 	 
	
                     

                  	 	 	
                     

                  	 
	
                     

                  	 	 	
                    Clerk
      of the Court

                    United States District Court

                    Southern District of New York

                  	 
	
                     

                  	 	 	
                     

                  	 

          

        

         

         

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        
           

          EXHIBIT
C

           

          
            
               

              
                UNITED
STATES DISTRICT COURT

                SOUTHERN
DISTRICT OF NEW YORK

              

            

            
              

              
                	
                         

                        DEBORAH
      DONOGHUE,

                         

                        Plaintiff,

                         

                        - against -

                         

                        CSX
      CORPORATION, et al.

                         

                        Defendants,

                      	
                            

                            Civil
      Action No.

                            08
      Civil 9252  (MGC)

                         

                            

                         

                      

              

               

              

                
                  ORDER AND FINAL
JUDGMENT

                  On the
______ day of ________________, 2009, a hearing was held before this Court to
determine (1) whether the terms and conditions of the Stipulation of Settlement,
dated December 16, 2008, (the “Stipulation”) are fair, reasonable and adequate
for the settlement of all claims asserted by Deborah Donoghue (the “Plaintiff”),
derivatively on behalf of CSX Corporation (“CSX”), in the action now pending in
this Court under the above caption, including the release of the defendants The
Children’s Investment Master Fund, The Children’s Investment Fund Management
(UK) LLP, The Children’s Investment Fund Management (Cayman) Ltd., Christopher
Hohn, Timothy T. O’Toole, 3G Capital Partners Ltd., 3G Capital Partners LP, 3G
Fund LP, Alexandre Behring, and Gilbert Lamphere (collectively, the “Settling
Defendants”) and should be approved; (2) whether judgment should be entered
dismissing the Amended Complaint with prejudice; (3) whether and what to award
the Plaintiff’s counsel as a reasonable attorney’s fee and reimbursement of
costs and expenses.  All capitalized terms shall have the meaning set
forth in the Stipulation of Settlement.

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  This
action (the “Action”) was brought by Plaintiff on behalf of CSX to recover
alleged “short-swing profits” under Section 16(b) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  The Court, having
considered all matters submitted to it at the hearing and otherwise during the
course of proceedings in this Action; and it appearing that a Notice of Hearing
substantially in the form approved by the Court was mailed to all persons or
entities (the “CSX Shareholders”) who filed a current Form 13F, Schedule 13G or
Schedule 13D with the Securities and Exchange Commission (the “SEC”); CSX filed
a Form 8-K with the SEC on ____________ attaching the Notice, placed a Notice of
Settlement on its website and issued a press release on ___________ describing
the settlement; and after a review of the record herein, the Stipulation and
other papers submitted to the Court, and having concluded that the settlement
should be approved:

                  NOW,
THEREFORE, IT IS HEREBY ORDERED THAT:

                  
                    1.           The
Court has jurisdiction over the subject matter of this action, over the
Plaintiff, over CSX and over the Settling Defendants.

                    2.           Notice
of the pendency of this Action and the proposed settlement hereof was given as
set forth above.  The method of notifying the CSX shareholders and
holders of any securities (as defined in Section 3(a)(10) of the Exchange Act)
of CSX or of any other security or instrument, the value of which is derived
from any CSX equity security, of the pendency of this Action and of the
settlement and of the terms and conditions meet the requirements of Fed. R. Civ.
P. 23.1, Local Civil Rule 23.1 and due process, and constituted the best notice
practicable under the circumstances, and constituted due and sufficient notice
to all persons and entities thereto.

                     

                    
                      
                        
                        

                      

                      
                        2

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    3.           The
Stipulation of Settlement (a copy of which is annexed hereto as Exhibit A) is
hereby approved as fair, reasonable and adequate and in the best interests of
CSX and its shareholders.  The parties are directed to consummate the
settlement in accordance with the terms and provisions of the
Stipulation.

                    4.           This
Order and Final Judgment shall not constitute evidence or an admission by the
Settling Defendants or any other person that any transaction giving rise to
liability or damages under Section 16(b) occurred, or that any violations of law
or acts of other wrongdoing have been committed, and shall not be deemed to
create any inference that there is or was liability of any person
therefor.  The Settling Defendants do not admit, either expressly or
implicitly, that they or any one of them is subject to any liability whatsoever
by reason of any of the matters alleged in the Complaint or referenced in the
Stipulation of Settlement, or that there is any merit to any of the claims for
damages sought therein.  The Settling Defendants, on the contrary,
expressly deny and dispute the existence of any such liability or
damages.

                     

                    
                      
                        
                        

                      

                      
                        3

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    5.           The
Amended Complaint, each claim for relief therein against the Settling Defendants
and all claims for violations of Section 16(b) that were asserted in this Action
or could have been asserted in any amended complaint against the Settling
Defendants and their Related Parties, are hereby dismissed on the merits, with
prejudice and without costs, except as otherwise provided in the award of an
attorney’s fee, costs and disbursements provided for herein; and the Settling
Defendants and their Related Parties are hereby discharged and released, except
as noted in the final sentence hereof, from any and all liability and damages
under or based upon any and all claims, rights, causes of action, suits,
matters, demands, transactions and issues, known or unknown, arising out of or
relating to the assertions contained in the Amended Complaint in this Action or
that could have been asserted in this Action (i) by Plaintiff on behalf of
herself or any other person or entity, (ii) by CSX and/or (iii) by any and all
owners of any security (as defined in Section 3(a)(10) of the Exchange Act) of
CSX or of any other security or instrument, the value of which is derived from
the value of any CSX equity security, or any of them, whether individually,
directly, representatively, derivatively or in any other capacity for all claims
arising out of or relating to any violation of Section 16(b) of the Exchange Act
and the rules and regulations promulgated under Section 16 relating to trading
in CSX securities, equity swaps and/or other securities or instruments the value
of which is derived from the value of any CSX equity security, from the
beginning of time up through the date that this Settlement becomes Final under
paragraph 3 of the Stipulation of Settlement.  Plaintiff and her
counsel in this Action are enjoined from bringing any claims under Section 16(b)
against the Settling Defendants and their Related Parties for trading in CSX
securities, including, without limitation equity swaps or any other derivative
security or instrument tied to the value of any CSX equity security arising from
or relating to transactions in such securities, up through the date that this
Settlement becomes Final under paragraph 3 of the Stipulation, regardless of the
theory of liability.  Nothing herein extends to or releases CSX’s
claims and the defendants’ defenses in the 13D Action.

                     

                    
                      
                        
                        

                      

                      
                        4

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    6.           This
Order and Final Judgment is not intended to in any way affect the subject matter
of pending litigation between CSX and the Settling Defendants, captioned CSX Corporation vs. The Children’s
Investment Fund Management (UK) LLP, 08 Civil 2764 (LAK) now on appeal
before the United States Court of Appeals for the Second Circuit.

                    7.           The
Plaintiff, CSX and all owners of any security (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or of any other security or instrument, the value of
which is derived from the value of any CSX equity security or any of them,
either individually, directly, derivatively, representatively or in any other
capacity, except as noted in the final sentence hereof, are permanently barred
and enjoined from instituting or prosecuting this or any other action, in this
or any other court or tribunal of this or any other jurisdiction, any and all
claims, rights, causes of action, suits, matters, demands, transactions and
issues, known or unknown, arising out of or relating to the assertions contained
in the Amended Complaint in this Action or that could have been asserted in this
Action (i) by Plaintiff on behalf of herself or any other person or entity, (ii)
by CSX and/or (iii) by any and all owners of any security (as defined in Section
3(a)(10) of the Exchange Act) of CSX or of any other security or instrument, the
value of which is derived from the value of any CSX equity security, or any of
them, whether individually, directly, representatively, derivatively or in any
other capacity, for all claims arising out of or relating to any violation of
Section 16(b) of the Exchange Act and the rules and regulations promulgated
under Section 16 relating to trading in CSX securities, equity swaps and/or
other securities or instruments the value of which is derived from the value of
any CSX equity security, from the beginning of time up through the date that the
Settlement becomes Final under paragraph 3 of the Stipulation, except for the
claims and defenses asserted in the 13D Action.

                     

                    
                      
                        
                        

                      

                      
                        5

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    8.           Plaintiff’s
counsel is hereby awarded an attorney’s fee (inclusive of reimbursement of costs
and disbursements) in the sum of $_____________, which sum the Court finds to be
fair and reasonable and which shall be paid to Plaintiff’s counsel by the
Settling Defendants and deducted from the Settlement Payment to CSX after this
Order has become final as set forth in the Stipulation at Paragraph
4(a).

                    9.           Jurisdiction
is hereby reserved over all matters relating to the enforcement, administration
and performance of the Stipulation of Settlement.

                    
                      10.         The
Clerk of the Court is directed to enter and docket this Order and Final Judgment
in this Action.

                    

                     

                  

                  Dated:    New
York, New York

                  ________________, 2009

                  

                  

                  

                  SO
ORDERED:

                  

                  ____________________________________

                     Miriam
Goldman Cedarbaum, U.S.D.J.

              

            

          

        

         

         

         

         6Unassociated Document

    Exhibit
10.1

     

    EMPLOYMENT
AGREEMENT

     

    PENNSYLVANIA
COMMERCE BANCORP, INC.

     

    

    

    

    HARRY
D. MADONNA

    

    

    

    EFFECTIVE
DATE _____________________

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    
 

    
      
        
          
            	 	
                    PAGE

                  
	 	 
	
                    1.
      Employment and Term of Employment.

                  	
                    1

                  
	
                    2.
      Services and Duties.

                  	
                    2

                  
	
                    3.
      Compensation.

                  	
                    2

                  
	
                    4.
      Fringe and Other Benefits.

                  	
                    3

                  
	
                    5.
      Disability and Death Compensation.

                  	
                    4

                  
	
                    6.
      Termination by Commerce for Cause.

                  	
                    5

                  
	
                    7.
      Termination by Commerce Without Cause.

                  	
                    6

                  
	
                    8.
      Termination “For Good Reason” by Executive.

                  	
                    7

                  
	
                    9.
      “Change in Control” and “Good Reason.”

                  	
                    7

                  
	
                    10.
      Additional Payments/Excise Taxes.

                  	
                    9

                  
	
                    11.
      Other Rights for Termination “Without Cause” or “For Good
      Reason”.

                  	
                    12

                  
	
                    12.
      Source of Payment and Timing.

                  	
                    13

                  
	
                    13.
      Interest..

                  	
                    14

                  
	
                    14.
      Reimbursement of Enforcement Expenses.

                  	
                    14

                  
	
                    15.
      Confidential Information and Non-Competition.

                  	
                    14

                  
	
                    16.
      Successions.

                  	
                    16

                  
	
                    17.
      Notices.

                  	
                    18

                  
	
                    18.
      General Provisions.

                  	
                    18

                  

          

        

      

    

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EMPLOYMENT
AGREEMENT

     

    

    This
Agreement dated _______________________, by and between PENNSYLVANIA COMMERCE
BANCORP, INC., a Pennsylvania corporation (“Commerce”) and Harry D. Madonna
(“Executive”) is conditioned upon and is to be effective upon consummation of
the Merger (defined below).

    

    BACKGROUND

    A. Commerce
and Republic First Bancorp, Inc. (“Republic First”) parent company of Republic
First Bank, a Pennsylvania bank (“RFB”), have entered into an Agreement and Plan
of Merger, dated as of November 7, 2008, pursuant to which Republic First will
be merged with and into Commerce and RFB will become a wholly-owned subsidiary
of Commerce (the “Merger”).

    

    B. Executive
and Republic First and RFB are parties to an employment agreement dated January
1, 2007 (the “Republic First Employment Agreement”) pursuant to which Executive
serves as Chairman, President and Chief Executive Officer of Republic First and
RFB.

    

    C. Upon  consummation
of the Merger, Executive and Commerce desire for this Agreement  to
supersede and replace the Republic First Employment Agreement and for Executive
to serve as the President and Chief Executive Officer of RFB and Vice Chairman
of the Board of Directors of Commerce.

    

    D. The Board
of Directors of Commerce (the "Board") has determined that the services of
Executive in these capacities are valuable to Commerce and RFB.

    

    E. Accordingly,
the Board wishes to have Executive’s services available to Commerce for at least
five (5) years and to provide supplemental benefits to Executive should his
employment with Commerce terminate under certain circumstances or should he die
or become disabled before the termination of this Agreement.

    

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
here, and intending to be legally bound, the parties agree as
follows:

    

    
      	
               
      

            	
              1.
      Employment and Term of
      Employment.

            

    

     

    1.1 Five Year
Term.  Commerce offers Executive employment, and Executive
accepts such employment, subject to all the terms and conditions of this
Agreement, for a term of five (5) years beginning on the effective date of the
Merger.

     

    1.2 Conditions to
Term.  This five year term is subject to:

     

    (a) Automatic Renewal
and Extension.  Unless either party has provided the other with
written notice pursuant to Section 1.2 (b) below, this Agreement and Executive’s
employment shall automatically be renewed and extended (upon the same terms and

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    conditions)
for a one (1) year term on the fifth (5th)
Anniversary Date and on each Anniversary Date thereafter.

     

    (b) Termination Upon
Notice.  With written notice of termination to the other party
given not less than six (6) months prior to the expiration of the five-year term
or any annual extension term, either Commerce or Executive may terminate this
Agreement.  If such notice is given, termination shall be effective at
the applicable Anniversary Date.

     

    (c) Termination for
Other Reasons. This Agreement may be
terminated on Death, “For Cause”, “Without Cause”, or for “Good Reason” as
described in Sections 5, 6, 7 and 8 below.

     

    1.3 “Term”
Definition.  "Term"
means the original five (5) year employment period, as well as any
renewed or extended periods as provided for in this Agreement.

     

    1.4 “Anniversary Date “
Definition.  “Anniversary
Date” means ______________________20__, as well as each annual
____________ thereafter if this Agreement is automatically renewed or
extended.

     

    
      	
               
      

            	
              2.
      Services and
      Duties.

            

    

     

    2.1 Offices.  During the
Term, Executive shall be employed as Vice Chairman of Commerce and until
such time as RFB merges into Commerce Bank/Harrisburg (“CBH”), he shall also
serve as President and Chief Executive Officer of RFB.  Upon the
merger of RFB into CBH, Executive shall continue to serve as the Vice Chairman
and an employee of Commerce.

     

    2.2 Duties.  As the Vice
Chairman of Commerce and as President and Chief Executive Officer of RFB,
Executive shall have such powers and duties as are commensurate with such
positions and as may from time to time be prescribed by the Boards of Directors
of Commerce and RFB.

     

    (a) Full Time and
Best Efforts.  Executive accepts such duties and agrees to his
employment by Commerce and to devote his full time and efforts to the business
and affairs of Commerce, RFB and their subsidiaries, if any, and to use his best
efforts to promote the interests of Commerce, RFB and their
subsidiaries.  It is provided, however, that Executive may continue as
chairman of the board of directors of First Bank of Delaware.

     

    (b) Outside
Activities. Executive also has participated in and shall have discretion
to participate in other outside activities. Such outside activities are
expressly permitted, and shall be in addition to and notwithstanding Executive’s
obligation of full time and best efforts as described in Section
2.2(a)

     

    
      	
               
      

            	
              3.
      Compensation.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    3.1 Compensation Definition.
“Compensation”
means the sum of the highest annual rate of base salary (described in Section
3.2) and highest cash bonus (described in Section 3.3) paid to Executive during
the most recent twenty-four (24) months of employment by RFB and/or
Commerce.

     

    3.2 Base Salary.  For
all positions held by him during the Term and for all services to be rendered by
him under this Agreement, Commerce shall pay Executive “base salary” at the rate of
$400,000 per year.

     

    (a) Payment.  Base
salary is payable at regular intervals in accordance with Commerce's normal
payroll practices now or subsequently in effect.

     

    (b) Adjustment.  Executive’s
base salary shall be subject to an annual review and subject to such upward
adjustments as may be deemed appropriate by the Board or a Board-designated
Committee.  The Board or Board-designated Committee may approve an
increase in salary for Executive, but shall have no obligation to do so. Base
salary may not be decreased without Executive’s written consent.

     

    3.3 Plans and
Programs.  During the Term, Executive shall be entitled to
participate in any cash or other bonus programs, incentive compensation plans,
stock option plans or similar benefit or compensation programs now or later in
effect that are generally made available to executive officers of
Commerce.

     

    (a) Annual
Bonus.   Any annual bonus (or prorated portion of an
annual bonus) earned and payable to Executive hereunder shall be paid on or
after January 1 but not later than March 15 of the calendar year following the
calendar year for which the annual bonus (or prorated portion of an annual
bonus) is earned.  It is understood by the parties that a bonus
payment is not guaranteed.

     

    (b) Pro-Ration.  For
any period less than a full year during the Term, Executive shall receive an
amount equal to the pro-rated portion of any payment pursuant to such plan or
program.

     

    3.4 Year. A “year” shall be deemed
to commence on the date of this Agreement and on January 1 of each subsequent
calendar year.

     

    3.5 Compensation
Pro-Ration. Compensation for a portion of a year shall be
pro-rated. 

     

    
      	
               
      

            	
              4.
      Fringe and Other
      Benefits.  During
      the Term, Executive shall also be entitled
to:

            

    

     

    4.1 Generally Available Benefits.
Participate in all fringe benefits as then in effect that are generally
available to Commerce’s executive officers including, without limitation,
medical and hospitalization coverage, long-term care insurance, life insurance
coverage and disability coverage.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4.2 Other Benefits. Such other
fringe benefits as the Board, or a Board-designated Committee, shall deem
appropriate; provided that such benefits are consistent with those that he
currently enjoys including, without limitation, use of an automobile, paid
holidays,  four (4) weeks’ vacation each calendar year and club
memberships.

     

    4.3 Expenses. Reimbursement by
Commerce for all expenses incurred by Executive which Commerce determines to be
reasonable and necessary (in accord with its normal reimbursement practices now
or later in effect) for Executive to carry out his duties under this
Agreement.

     

    4.4 Indemnity. Indemnification by
Commerce to the fullest extent permitted by governing law and in accordance with
Commerce’s bylaws and policies, against all claims concerning Executive’s status
as an officer, director, employee, or agent of Commerce.

     

    
      	
               
      

            	
              5.
      Disability and Death
      Compensation.

            

    

     

    5.1 Permanent
Disability.  Executive shall be deemed to have become
permanently disabled if he is unable to engage in any substantial gainful
activity by reason of a medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months.  In the event Executive
becomes permanently disabled during the Term of this Agreement, he shall be
compensated for the balance of the Term as provided in Section 5.3.

     

    5.2 Disability Leave. Executive
shall qualify for disability leave under this Agreement if he becomes unable to
perform the duties and services of the character contemplated by this Agreement
because of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than six (6) months. If Executive
qualifies for disability leave while employed during the Term, this Agreement
will not terminate at such time but Executive shall be placed on disability
leave until the first to occur of: (i) Executive’s qualification for permanent
disability as provided in Section 5.1; (ii) the expiration of this Agreement; or
(iii) Executive’s recovery from disability.  It is provided, however,
that disability leave shall in no event be longer than twenty-nine (29)
months.

     

    5.3 Disability
Compensation.  Commerce shall compensate Executive during the
time he is on disability leave at a rate equal to 70% of his Compensation at the
time he is placed on disability leave.  If Executive becomes
permanently disabled during the time he is on disability leave and the Term of
this Agreement has not expired, Commerce shall continue the payments described
in this Section for the balance of the Term.

     

    (a) Monthly
Payments.  Commerce agrees that it will make the payments due
under this Section 5.3 on the first day of each month, commencing with the first
day of the month following the month in which Executive is placed on disability
leave, in an amount equal to 1/12 of 70% of his Compensation at the time he is
placed on disability leave.

     

    Insurance
Reductions.  Such payments shall be reduced each month by the
amount of any disability payments made to Executive under any Commerce-sponsored
disability 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    insurance
plan.  The amount of the reduction under the preceding sentence shall
be computed as if Executive had elected to receive monthly payments of
disability benefits (regardless of the actual payment frequency).

     

    (b) Disability
Benefits.  If Executive is placed on disability leave or
becomes permanently disabled as provided in this Section 5, then he shall
nonetheless continue, after becoming so disabled and until the end of the
Term, to be entitled to receive at Commerce's expense such group hospitalization
coverage, life insurance coverage and disability coverage as is generally made
available from time to time to executive officers of Commerce, if and to the
extent permitted by the respective insurers of such coverage. Until such time as
Executive is placed on disability leave, he shall continue to receive his full
compensation and fringe benefits due him under Sections 3 and 4
above.

     

    5.4 Payment upon Executive’s
Death.  If Executive dies during the Term while employed
hereunder, then:

     

    (a) Termination of
Employment and Regular Compensation.  Executive’s employment
and his rights to compensation hereunder shall automatically terminate at the
close of the calendar week in which death occurs; and

     

    (b) Death
Benefit.   Commerce shall pay the person designated by
Executive in a notice filed with Commerce or to the personal representative of
Executive’s estate (if no person is designated by Executive) an amount equal to
the product of three (3) times Executive’s Compensation at the time of his death
in addition to any amount of compensation then accrued and owed to Executive
upon his death.

     

    (c) Life
Insurance.  The “death benefit” provided pursuant to Section
5.4(b) shall be in addition to any amount payable under any group life insurance
program maintained by Commerce or RFB.

     

    
      	
               
      

            	
              6.
      Termination by Commerce
      For Cause.

            

    

     

    6.1 “For Cause” Termination.
Commerce shall have the right at any time to terminate Executive’s employment
“For
Cause” only if:

     

    (a) Prior Written
Notice. Commerce shall give Executive not less than thirty (30) days
prior written notice of its intention to terminate his employment specifying in
detail the reason(s) for such termination and the date of termination;
and 

     

    (b) Failure to
Cure. After receipt of such notice, Executive fails to cure, cease or
remedy the reason(s) for such termination before the date of termination stated
in such notice. 

     

    6.2 “For Cause” Definition. “For Cause”
means only the following at any time during the Term:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (a) Conviction or
Plea.  If Executive is indicted for, convicted of or enters a
plea of guilty or nolo contendere to, a felony, a crime of falsehood or a crime
involving fraud, moral turpitude or dishonesty; or

     

    (b) Willful
Violation.  If Executive willfully violates any of the terms or
provisions of this Agreement, including, without limitation: 

    

    (i) the
willful failure of Executive to perform his duties hereunder or the instructions
of the Board after written notice of such instructions (other than any such
failure resulting from Executive’s incapacity due to illness or disability);
or

     

    (ii)
Executive engages in any conduct materially harmful to Commerce's business, and
in either case fails to cease such conduct or correct such conduct, as the case
may be, within thirty (30) days subsequent to receiving written notice from the
Board advising Executive of same (which conduct shall be specifically set forth
in such notice).

     

    6.3 Compensation on Termination “For
Cause.”  If Executive’s employment shall terminate For Cause,
then Commerce shall pay Executive in accordance with the regular payroll
practices of Commerce, his full base salary through the date of termination at
the rate currently in effect and pay such other compensation as may have accrued
and be due Executive pursuant to Sections 3 and 4.  Commerce shall
have no further obligations to Executive under this Agreement.

     

    
      	
               
      

            	
              7.
      Termination by Commerce
      Without Cause.

            

    

     

    7.1 “Without Cause” Termination.
Commerce shall have the right to terminate Executive’s employment “Without
Cause” by giving not less than thirty (30) days prior written notice of
its intention to terminate Executive’s employment “Without Cause” pursuant to
this Section 7. 

     

    7.2 “Without Cause” Definition.
Termination “Without
Cause” means any reason other than by either Termination “For Cause”
(Section 6 above), Termination at the Anniversary Date (Section 1.2(b) above),
or termination due to death or disability (Section 5 above).

     

    7.3 Compensation for Termination “Without
Cause.” Commerce shall pay Executive the following if Commerce terminates
Executive’s employment “Without Cause”:

     

    (a) Compensation
through Termination Date.  A pro-rated portion of Executive’s
full compensation through the date of termination in accordance with the regular
payroll practices of Commerce, and any compensation due him as provided in
Section 4 above; and

     

    (b) “Without Cause
Severance Payment.”  In lieu of any further Compensation
payments to Executive after the date of termination, a lump sum severance
payment equal to the greater of (i) three (3) times
Executive’s Compensation at the time of his 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    termination
or (ii) Executive’s Compensation at the time of his termination multiplied by
the number of years (including any fractional year) then remaining in the
Term.

     

    
      	
               
      

            	
              8.
      Termination “For Good
      Reason” by Executive.

            

    

     

    8.1 “Good Reason” Termination.
Executive shall have the right to terminate his employment “For Good
Reason” (as defined in Section 9.2 below) if: 

     

    (a) Prior Written
Notice. Executive has given notice to Commerce of the existence of the
condition(s) described in Section 9.2 within ninety (90) days of the initial
existence of the condition(s);  

     

    (b) Failure to
Cure. If within a period of thirty (30) days after receipt of such notice
(the “Cure Period”),
Commerce fails to cure, cease or remedy the reason(s) for such termination;
and

     

    (c) Separation from
Service.  Executive’s separation from service occurs within a
period of ninety (90) days following the expiration of the Cure
Period.

     

    8.2 Compensation for “Good Reason”
Termination. Commerce shall pay Executive the following if Executive
terminates his employment “For Good
Reason” (as defined in Section 9.2):

    

    (a) Compensation
through Termination Date.  A pro-rated portion of Executive’s
full compensation through the date of termination in accordance with the regular
payroll practices of Commerce, and any compensation due him as provided in
Section 4 above; and

     

    (b) “Good Reason
Severance Payment.”  In lieu of any further Compensation
payments to Executive after the date of termination,  a lump sum
severance payment equal to the greater of (i) three (3) times
Executive’s Compensation at the time of his termination or (ii) Executive’s
Compensation at the time of his termination multiplied by the number of years
(including any fractional year) then remaining in the Term..

     

    
      	
               
      

            	
              9.
      “Change in Control” and
      “Good Reason.”

            

    

     

    9.1 Change in Control Definition.
“Change in
Control” or “Change of
Control” means a change in control of Commerce of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or any
successor provisions under the Exchange Act, whether or not
Commerce  is subject to such reporting requirement; provided that, without
limitation, such a change in control shall have been deemed to occur
conclusively when any of the following events shall have occurred without
Executive’s prior written consent:

     

    (a) Board
Change. Within any period of two (2) consecutive years during the Term,
there is a change in at least a majority of the members of the Board or the
addition of 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    five or
more new members to the Board, unless such change or
addition occurs with the affirmative vote in writing of Executive in his
capacity as a director or a shareholder; or

     

    (b) Beneficial
Ownership Change. A Person or group acting in concert as described in
Section 13(d)(2) of the Exchange Act holds or acquires beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of a number
of common shares of Commerce which constitutes either:

     

    (i)
       more than fifty (50%) percent of the
shares which voted in the election of directors of Commerce at the shareholders’
meeting immediately preceding such determination; or

     

    (ii)
 more than thirty (30%) percent of Commerce’s outstanding common shares.
For this Section 9.1(b)(ii), unexercised warrants or options or unconverted
nonvoting securities shall count as constituting beneficial ownership of
Commerce’s common shares into which the warrants or options are exercisable or
the nonvoting convertible securities are convertible, notwithstanding anything
to the contrary contained in Rule 13d-3 of the Exchange Act.

     

     9.2
Good Reason Definition.
“Good
Reason” means: 

     

    (a) Both a Change in
Control and Other Reductions. Both a “change in
control” of Commerce (as defined in Section 9.1 above); and if any of the following
“Other
Reductions” occur within three (3) years after such
change in control without Executive’s prior written
consent: 

     

    (i) Reduction of Authority. The
nature and scope of Executive’s authority with Commerce or a surviving or
acquiring Person are materially reduced to a level below that which he enjoys
when the change in control occurs;

     

    (ii)
Materially Inconsistent
Duties. The duties and responsibilities assigned to Executive are
materially inconsistent with those which he enjoys when the change in control
occurs, resulting in a diminution of Executive’s authority, duties or
responsibilities;  

     

    (iii)
Materially Reduced
Benefits. The fringe benefits which Commerce provides Executive are
materially reduced to a level below that which he enjoys when the change in
control occurs;  

     

    (iv)
Reduction of Position or
Title. Executive’s position or title with Commerce or the surviving or
acquiring Person is reduced from his current position or title with Commerce
when the change in control occurs, resulting in a diminution of Executive’s
authority, duties or responsibilities; or

     

    (v) Transfer or Offices and
Relocation. Any relocation or transfer of Commerce’s principal executive
offices to a location more than fifty (50) miles from Executive’s principal
residence on the date when the change in control occurs; or, if Executive is

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    required,
without his prior written consent, to relocate more than fifty (50) miles from
his principal residence when the change in control occurs.

     

    (b) Material
Breaches. Commerce materially breaches this Agreement; or

     

    (c) Non-Assumption.
There is a failure or refusal of any successor to Commerce to assume all duties
and obligations of Commerce under this Agreement.

    

    
      	
               
      

            	
              10. Additional Payments/Excise
      Taxes.

            

    

     

    10.1
Gross-Up Payment.
Notwithstanding anything in this Agreement to the contrary or any termination of
this Agreement, Executive
shall be entitled to receive an additional payment (a “Gross-Up
Payment”) if: 

     

    (a) Tax is Determined
Due. It shall be determined that any payment or distribution or benefit
made or provided by Commerce or its affiliates to or for the benefit of
Executive, whether pursuant to this Agreement or some other plan or otherwise
and determined without regard to any additional payments required under this
Section 10 (a “Payment”),
would be an excess Parachute Payment that is not deductible by Commerce for
federal income tax purposes and subject to an excise tax; or 

     

    (b) Interest or
Penalties are Incurred. Any interest or penalties are incurred by
Executive concerning such excise tax. 

     

    (i) Excise Tax Definition.  “Excise
Tax” means both: any excise tax imposed on any compensation payments or
rights due to Executive because of Section 280G and Section 4999 of the Internal
Revenue Code of 1986 as amended (the “Code”) or
any successor Code provision, or any state or local law; and interest or
penalties incurred concerning such excise tax.

    

    (ii)
Gross-Up Payment
Definition. “Gross-Up
Payment” means any amount of additional payments to Executive that are
needed so that Executive incurs no out-of-pocket expense for Excise Taxes, and
to place Executive in the same position after all federal and state taxes -
including all income tax, Excise Tax, employment or other tax or any penalties
and interest - that Executive would have been in if: (a) Executive did not have
to pay the Excise Tax; (b) the Excise Tax did not apply for reasons other than
Sections 280G and 4999 of the Code; and (c) Executive did not have to pay any
interest or penalty charge for the imposition of any portion of the Excise
Tax.

    

    10.2
Gross-Up Payment
Determination. All determinations required to be made under this Section
10, including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment, the calculations under Section 280G and 4999 of the Code,
and the assumptions to be used in arriving at such determination, shall be made
by Commerce’s independent auditor or another nationally recognized accounting
firm chosen by the auditor with the consent of Commerce and Executive (the
“Accounting
Firm”). 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (a) Cooperation.
Commerce and Executive shall cooperate with Accounting Firm and provide
information needed for the determination. 

     

    (b) Calculations.
Accounting Firm shall provide detailed supporting calculations both to Commerce
and Executive within fifteen
(15) business days of the receipt of notice from Executive that there has
been a Payment or receipt of Notice of IRS claim under Section 10.3, or such
earlier time as is requested by Commerce. 

     

    (c) Fees and
Expenses. Commerce shall pay all fees and expenses of the Accounting Firm
for services for this determination. 

     

    (d) Payment
Timing. Commerce shall pay any Gross-Up Payment, as determined pursuant
to this Section 10, to Executive within five (5) days of the
receipt of the Accounting Firm’s determination, but in no event later than the
date specified in Treasury Regulation Section 1.409A-3(i)(v). 

     

    (e) Binding
Effect. Any determination by the Accounting Firm shall be binding upon
Commerce and Executive. 

     

    (f) Possible
Underpayment. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm, it is possible that Commerce may not make Gross-Up Payments
that should be made (“Underpayment”).

     

    (i) Determination. If Commerce
exhausts its remedies pursuant to Section 10.3 and Executive is later required,
directly or indirectly, to make a payment of any Excise Tax, then the Accounting
Firm shall determine the amount of the Underpayment that has occurred. Such
amount shall be sufficient to put Executive in the same position after all
federal and state taxes - including all income tax, Excise Taxes, employment, or
other taxes, and all penalties and interest on such taxes - as Executive would
have been in if there had been no Underpayment and Commerce had made the
appropriate Gross-Up Payment in the first instance.

     

    (ii)
Payment. Commerce shall
promptly pay to Executive or for the benefit of Executive any amounts determined
by Accounting Firm to be needed to satisfy any Underpayment.

     

    10.3
Notice of IRS Claim.
Executive shall notify Commerce in writing of any claim by the Internal Revenue
Service (“IRS”)
that, if successful, would require the payment by Commerce of the Gross-Up
Payment. 

     

    (a) Time and Content
of Notice. Such notification shall be given as soon as practicable but
not later than ten (10)
business days after Executive is informed in writing of such claim and
shall apprise Commerce of the nature of such claim and the date on which such
claim is requested to be paid. 

     

    
      
        
        

      

      
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    (b) Payment
Timing. Executive shall not pay such IRS claim until thirty (30) days
after the date on which he gives such notice to Commerce (or such shorter period
ending on the date that any payment of taxes on such claim is
due). 

     

    (c) Contest
Notice. If Commerce notifies Executive in writing before the expiration
of such thirty (30) day period that it desires to contest such IRS claim, then
Executive shall:  

     

    (i) Give
Commerce any information reasonably requested by Commerce relating to such IRS
claim;

     

    (ii) Take
such action in connection with contesting such IRS claim as Commerce shall
reasonably request in writing, including, without limitation, accepting legal
representation for such IRS claim by an attorney reasonably selected by
Commerce;

     

    (iii)
Cooperate with Commerce in good faith in order to effectively contest such IRS
claim; and

     

    (iv)
Permit Commerce to participate in any proceedings on such IRS claim.
 

     

    (d) Other Contest
Terms. Without limitation on the foregoing provisions of this Section
10.3: 

     

    (i)
Commerce shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses.

     

    (ii)
Commerce shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearing and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to pay the tax
claimed and sue for a refund or contest the IRS claim in any permissible
manner;

     

    (iii)
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Commerce shall determine;

     

    (iv) If
Commerce directs Executive to pay such IRS claim and sue for a refund, then
Commerce shall advance the amount of such payment to Executive on an
interest-free basis and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest
penalties) imposed regarding such advance or regarding any imputed income with
respect to such advance;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (v) Any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.

     

    (vi)
Commerce’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable under this Section 10 and Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.

     

    10.4
Refund. Executive shall,
subject to Commerce’s complying with the requirements of Section 10.3, promptly
pay to Commerce the amount of any refund actually received, including any
interest paid or credited after applicable taxes if, after the receipt by
Executive of an amount advanced by Commerce pursuant to Section 10.3, Executive
becomes entitled to receive any refund for such IRS claim. 

     

    (a) Denial of
Refund. If, after the receipt by Executive of an amount advanced by
Commerce pursuant to Section 10.3, a determination is made that Executive shall
not be entitled to any refund for such IRS claim and Commerce does not notify
Executive in writing of its intent to contest such denial of refund before the
expiration of thirty (30) days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset the amount of Gross-Up Payment required to be
paid.

     

    
      	
               
      

            	
              11.
      Other Rights for
      Termination “Without Cause” or “For Good
  Reason”.

            

    

     

    11.1
Other Benefits.
Executive shall be entitled to the following from Commerce, in addition to the
other Compensation stated in either Section 7.3 or 8.2 above, if Executive’s
employment is terminated either “Without
Cause” or “For Good
Reason” as set forth in either Section 7.1 or 8.1 above:

     

    (a) Insurance.
Following the date of termination, Executive shall be entitled to participate in
all Commerce medical, disability, hospitalization and life insurance benefits
for a period of three (3) years: 

     

    (i) Exception. If Executive
accepts subsequent employment during the three-year period following the date of
termination, then continuation of any medical, disability, hospitalization and
life insurance benefits will be offset by coverages provided through Executive’s
subsequent employer.

     

    (b) Vesting of
Incentive Compensation Awards. Any outstanding incentive compensation
awards held by Executive, including deferred compensation and equity awards
related to Commerce stock (e.g., options, stock appreciation rights, restricted
stock or restricted stock units) shall vest as of the date of termination of
Executive’s employment.

     

    11.2
Plans and Program
Rights. Nothing in this Agreement shall affect or have any bearing on
Executive’s entitlement to other benefits under any plan or program providing
benefits by reason of termination of employment.

    

    
      
        
        

      

      
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    11.3
Reimbursements and In-Kind
Benefits.  All reimbursements and in-kind benefits provided
under this Agreement shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, where applicable, the
requirement that:

    

    (a) Any
reimbursement shall be for expenses incurred during Executive’s lifetime (or
during a shorter period of time specified in this Agreement);

     

    (b) 
The amount of expenses eligible for reimbursement, or in-kind benefits provided,
during a calendar year may not affect the expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other calendar year;

     

    (c) The
reimbursement of an eligible expense will be made on or before the last day of
the calendar year following the year in which the expense is
incurred;

     

    (d) The
right to in-kind benefits shall not extend beyond the last day of Executive’s
second taxable year following his termination of employment; and

     

    (e) The
right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit.

     

    11.4
No Mitigation by
Executive. Executive shall not be required, under any circumstance
including provision in this Agreement, to mitigate the amount of any
compensation or payment provided for in this Agreement by seeking other
employment.

     

    
      	
               
      

            	
              12.
      Source of Payment and
      Timing.

            

    

     

    12.1
Source.  All
payments provided under this Agreement shall be paid in cash from the general
funds of Commerce.

     

    (a) No
special or separate fund shall be required to be established and Executive shall
have no right, title or interest whatsoever in or to any investment which
Commerce may make to aid Commerce in meeting its obligations hereunder except to
the extent that Commerce shall, in its sole and absolute discretion, choose to
designate any of its rights it may have under one or more life insurance
policies it may obtain to cover any of its obligations under this
Agreement.

     

    (b) Nothing
contained in this Agreement, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind or fiduciary
relationship between Commerce and Executive or any other Person.

     

    12.2
Time.  All
payments due under Sections 5.2, 6.3, 7.3 or 8.2 above shall be made not later
than the thirtieth (30th) day
following the date of termination of employment.

     

    12.3
Effect of Section
409A.    If the termination of employment giving rise
to the severance benefits described in Sections 7.3, 8.2 or 11.1 is not a
"separation from 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    service"
within the meaning of Treasury Regulation § 1.409A-1(h)(1), then to the extent
necessary to avoid the imposition of any accelerated or additional tax under
Section 409A of the Code, such benefits will be deferred without interest until
Executive experiences a separation from service.  In addition, if
necessary to prevent any accelerated or additional tax under Section 409A of the
Code on amounts payable to Executive upon his separation from service, Commerce
will postpone such payments (without any reduction in such payments or benefits
ultimately paid or provided to Executive) until the first payroll date that
occurs after the date that is six months following Executive's "separation of
service" with Commerce or RFB.  The accumulated postponed amount will
be paid in a lump sum payment within ten days after the end of the six-month
period.  If Executive dies during the postponement period and prior to
the payment of postponed amount, the amounts postponed on account of Section
409A shall be paid to the personal representative of Executive's estate within
60 days after the date of his death.

     

    13. Interest.  In the
event any benefits due to Executive are not paid when due hereunder, Executive
shall be entitled (in addition to his other rights and remedies) to interest on
the past due amounts at a rate equal to two percentage points above the prime
rate charged from time to time by RFB, such interest to commence on the date a
benefit was due hereunder.

     

    14. Reimbursement of Enforcement
Expenses.  Executive shall be entitled to full reimbursement
from Commerce for all costs and expenses (including reasonable attorneys’ fees,
costs, and interest as stated in Section 13) incurred by Executive in enforcing
his rights under this Agreement if the following exist: 

     

    14.1
Failure to Pay. Commerce
fails to pay or provide Executive any of the amounts due him under this
Agreement; or 

     

    14.2
Failure to Provide.
Commerce fails to provide Executive with any of the other benefits due him under
this Agreement; and 

     

    14.3
Further Conditions for
Reimbursement. Provided
that:

     

    (a) Commerce
does not cure any such failure within thirty (30) days after having received
written notice from Executive of such failure; and 

     

    (b) There
is an adjudication that Executive’s action in enforcing his rights are not
frivolous.

     

    
      15. Confidential Information and
Non-Competition.

    

     

    15.1
Confidentiality. 

    

    (a) Company
Information Definition. “Company
Information” means all data relating to Commerce’s business that is not
generally published or available to the public, including writings, equipment,
processes, drawings, strategic plans, reports, manuals, inventions, records,
financial information, business plans, customer lists, the identity of and other
facts concerning prospective customers, inventory lists, arrangements with
suppliers and customers, 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    computer
programs, or other materials embodying trade secrets, customer product
information, or technical or business information of Commerce.

     

    (b) Non-Disclosure
and Non-Use.
During the Term or any later time, except with the prior written consent
of Commerce’s Board, Executive shall not, directly or
indirectly: 

     

    (i) Non-Disclosure. Disclose,
communicate or divulge Company Information to any Person other than authorized
Commerce personnel;  

     

    (ii) Non-Use. Use Company
Information for the benefit of himself or any other Person, other than
authorized Commerce personnel.  

     

    15.2
Commerce’s Interests.
Executive will not, during the Term, except with the express prior written
consent of Commerce’s Board, directly or indirectly, in any capacity (including
but not limited to employee, owner, partner, consultant, agent, director,
officer, shareholder or in any other capacity) engage in or assist any Person to
engage in any act or action which he, acting reasonably, believes or should
believe would be harmful or inimical to the interests of Commerce.

     

    15.3
Non-Competition and Time of
Restrictions.

     

    (a) Non-Competition.
During his employment pursuant to this Agreement and following termination of
Executive’s employment for any reason , Executive will not, except with the
express prior written consent of Commerce’s Board, in any capacity (including,
but not limited to, owner, partner, shareholder, consultant, agent, employee,
officer, director or otherwise), directly or indirectly, for his own account or
for the benefit of any Person:

     

    (i) Business and Geographic
Restriction. Establish, engage or participate in or otherwise be
connected with any business which is in competition with Commerce or any of its
subsidiaries, including being engaged in commercial banking, mortgage banking,
leasing, or the taking of deposits and which conducts business in any geographic
area in which Commerce and its subsidiaries is then conducting such business.
 

    

    (ii)
Exception. The
foregoing shall not prohibit Executive from continuing to serve as chairman of
the board of directors of First Bank of Delaware and owning as a shareholder
less than 5% of the outstanding voting stock of an issuer engaged in the
commercial banking business.

     

    (b) Time of
Restrictions. The non-competition restrictions in Section 15.3 shall
start on the effective date of this Agreement and end eighteen (18) months
  following the
effective date of termination of Executive’s employment under this
Agreement.

    

    15.4
Remedies. Any breach by
Executive of any of the terms in this Section 15 will result in irreparable
injury to Commerce for which money damages could not adequately compensate
Commerce; and, thus, in the event of any such breach, Commerce shall be entitled
(in addition to any other rights and remedies which it may have at law or in
equity) to 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    have an
injunction issued by any competent court enjoining and restraining Executive
and/or any other Person involved from continuing such breach. 

     

    (a) No Defense or
Bar. The existence of any claim or cause of action which Executive may
have against Commerce or any other Person (other than a claim for Commerce’s
breach of this Agreement for failure to make payments) shall not constitute a
defense or bar to the enforcement of the terms in this Section 15.

     

    (b) Payments After
Breach. In the event of any alleged breach by Executive of any of the
terms in this Section 15, Commerce shall continue any and all of the payments
due Executive under this Agreement until such time as a Court shall enter a
final and unappealable order finding such a breach. 

     

    (i) Exception. The foregoing
shall not preclude a Court from ordering Executive to repay such payments made
to him for the period after the breach is determined to have occurred or from
ordering that payments under this Agreement be permanently terminated in the
event of a material and willful breach.

     

    15.5
Enforceability. If any
portion of the terms in this Section 15, or their application, is construed to
be invalid or unenforceable, then the other portions of such terms or their
application shall not be affected and shall be given full force and effect
without regard to the invalid or unenforceable portions to the fullest extent
possible. 

     

    (a) If
any term in this Section 15 is held to be unenforceable because of the area
covered, duration, or scope, then Executive and Commerce expressly and
intentionally authorize the court making such determination to reduce the area
and/or duration and/or limit the scope to an enforceable term, so that the term
shall then be enforceable in its reduced form.

     

    15.6
Commerce Definition. For
this Section 15, the term “Commerce”
means Commerce, any successor of Commerce under Section 16 below, and all
present and future direct and indirect subsidiaries and affiliates of Commerce
including, but not limited to, RFB.

    

    16. Successions.

     

    16.1
Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon:

    

    (a) The
parties hereto and their respective heirs, executors, administrators, successors
and assigns; and

    

    (b) Any
corporate or other successor of Commerce which will acquire, directly or
indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of Commerce.

     

    
      
        
        

      

      
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    16.2
Death.  Upon
the death of Executive, except as Executive may have designated pursuant to
Section 5.4, any payments or benefits otherwise due Executive hereunder shall be
paid to or be for the benefit of Executive’s legal representatives.

     

    16.3
Combination.  Nothing
in the Agreement shall preclude Commerce from consolidating or merging into or
with or transferring all or substantially all of its assets to another Person (a
“Combination”).

     

    (a) In
the event of a Combination, such other Person shall assume this Agreement and
all obligations of Commerce in this Agreement.

     

    (b) Upon
a Combination, the term "Commerce," as used in this Agreement, shall mean such
other Person and this Agreement shall continue in full force and
effect.

     

    
      
         

      

      
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    17. Notices.

     

    17.1
Form of
Notice.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid.

     

    17.2
Place of
Notice.  Any notice shall be delivered to the following
addresses or to such other address as either party may designate by like
notice:

     

    If to
Commerce, to:

     

    Commerce
Bank/Harrisburg

    3801
Paxton Street

    Harrisburg,
PA 17111

    Attn:
Chairman, Compensation Committee of the Board of Directors

    

    If to
Executive:

     

    Harry D.
Madonna

    1320
North Avignon Drive

    Gladwyne,
PA 19035

     

    and to
such other or additional person or persons as either party shall have designated
to the other party in writing by like notice.

    

    
      	
               
      

            	
              18.
      General
      Provisions.

            

    

     

    18.1
Entire
Agreement.  This Agreement constitutes the entire agreement
between the parties concerning its subject matter, and supersedes and replaces
all prior agreements between the parties and expressly supersedes and replaces
the Republic First Employment Agreement.

     

    18.2
Amendment, Waiver and
Termination.

     

    (a) General.  No
amendment, waiver or termination of any of the provisions of this Agreement
shall be effective unless in writing and signed by the party against whom it is
sought to be enforced. Any written amendment, waiver or termination hereof
executed by Commerce and Executive (or his legal representatives) shall be
binding upon them and upon all other Persons, without the necessity of securing
the consent of any other Person including, but not limited to, Executive’s
spouse, and no Person shall be deemed to be a third party beneficiary under this
Agreement except to the extent provided under Section 16 above.

     

    (b) Compliance with
Requirements of Troubled Assets Relief Program
(TARP).  Notwithstanding Section 18.2 (a), in the event
Commerce is a participant in TARP, during such time as the U. S. Treasury
Department (“Treasury”) holds an equity or debt position 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    in
Commerce, Executive agrees to modify the terms of this Agreement to comply with
any executive compensation requirements of such Program, including (i) an
agreement to relinquish to Commerce any bonus or incentive compensation
paid that is based on statements of earnings, gains, or other criteria that are
later proven to be materially inaccurate; and (ii) a reduction, if necessary, in
any compensation so as not to receive any “golden parachute” payments (based on
the applicable Code provision).  Executive also agrees to waive any
claims he may have against Commerce or Treasury as a result of any amendments to
this Agreement required by TARP.

     

    18.3
Alternate
Payments.  RFB or any other subsidiary of Commerce may make
payments to Executive thereunder in lieu of payments to be made by Commerce, and
to the extent such payments are so made, Commerce shall be released of its
obligations to make such payments.

     

    18.4
Benefits and
Insurance.  The benefits provided under this Agreement shall be
in addition to and shall not affect the proceeds payable to Executive’s
beneficiaries under group life insurance policies which Commerce may be carrying
on Executive’s Life.

     

    18.5
Release.  Notwithstanding
any other provision of this Agreement, any severance payments or benefits due
Executive under Sections 7 and 8 are conditioned on the Executive’s execution
and delivery to Commerce of an effective general release and non-disparagement
agreement in a form reasonably prescribed by Commerce and in a manner consistent
with the requirements of the Older Workers Benefit Protection Act and any
applicable state law.

     

    18.6
Definition of
Person.  "Person" as used in this Agreement means a natural
person, joint venture, corporation, sale proprietorship, trust, estate,
partnership, cooperative, association, non-profit organization or any other
legal entity.

     

    18.7
Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same Agreement.

     

    l8.8
No
Waiver.  Except as otherwise expressly stated in this
Agreement, no failure on the part of any party to this Agreement to exercise and
no delay in exercising any right, power or remedy under this Agreement shall
operate as a waiver; nor shall any single or partial exercise of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.

     

    18.9
Assignment.  Without
Commerce's prior written consent and approval, neither this Agreement nor any
rights to receive payments hereunder shall be voluntarily or
involuntarily:

     

    (a) Assigned,
transferred, alienated, encumbered or disposed of, in whole or in part;
or

     

    
      
        
        

      

      
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    (b) Subject
to anticipation, levy, execution, garnishment, attachment by, or interference or
control of, any creditor.

     

    
      
         

      

      
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    18.10
Jurisdiction.  Commerce
and Executive irrevocably consent to:

     

    (a) Commonwealth of Pennsylvania Courts.  The
exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and the
United States District Court for the Middle District of Pennsylvania in any and
all actions arising hereunder; and

     

    (b) Service of
Process.  Service of process as set forth in Section 17
above.

     

    18.11 Headings.  The
headings of the sections of this Agreement have been inserted for convenience of
reference only and shall in no way restrict or modify any of the terms or
provisions of this Agreement.

     

    18.12
Notice of Dispute and
Cure.  If Commerce or Executive has a dispute or claim under
this Agreement, then that dispute or claim shall be described with specificity
in writing; and, the party receiving such written notice shall have thirty (30)
business days to cure the dispute or claim

     

    18.13
Pennsylvania Law.  This
Agreement shall be governed and construed and the legal relationships of the
parties determined in accordance with the laws of the Commonwealth of
Pennsylvania applicable to contracts executed and to be performed solely in the
Commonwealth of Pennsylvania.

     

    18.14
Any Required
Approval.  This Agreement is contingent upon any required
approval of the Federal Deposit Insurance Corporation.

     

    18.15
Intent to Comply with Section
409A.  This Agreement is intended to comply with the
requirements of Section 409A of the Code or an exemption from Section 409A, and
shall in all respects be administered in accordance with Section 409A.
Executive’s termination of employment under this Agreement shall be interpreted
in a manner consistent with the separation from service rules under Section
409A.  For purposes of Section 409A of the Code, each payment made
under this Agreement shall be treated as a separate payment and the right to a
series of payments under this Agreement shall be treated as a right to a series
of separate payments.  In no event shall Executive, directly or
indirectly, designate the calendar year of a payment.

     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, Commerce has caused this agreement to be executed by its duly
authorized officer and the Executive has hereunto set his hand and seal as of
the date first above written.

     

    

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	 
      	
                                    PENNSYLVANIA
      COMMERCE BANCORP, INC.

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                    By:

                                  	 
      
	
                                    Attest

                                  	 
      	
                                     

                                  	

                                    Name:

                                  
	 
      	 
      	
                                     

                                  	

                                    Title:

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                    EXECUTIVE:

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                    Witness

                                  	 
      	
                                    Harry
      D.
Madonna

                                  

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

     

     

     22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]