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Exhibit 10.2
Appendix B
CSX CORPORATION
Senior Management Incentive Compensation Plan
1. Purpose
The purpose of the Senior Management Incentive Compensation Plan
(SMICP) is to encourage senior management of CSX Corporation and its
subsidiary companies to achieve and exceed planned financial goals so as to
increase shareholder value.
The SMICP shall be effective as of January 1, 1994. It is intended
that awards under the SMICP generally will be treated as qualified
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code of 1986 related to the deductibility of executive
compensation.
2. Definitions
Whenever the following words are used in the SMICP, they shall have
the meaning set forth below:
"Base Salary": The term base salary means a Covered Employee's annual
base salary as of the beginning of the Plan Year, exclusive of any incentive
or stock-based compensation.
"Board of Directors": The term Board of Directors or Board means the
Board of Directors of CSX Corporation.
"Cause": The term Cause means (a) an act or acts of personal
dishonesty of a Covered Employee intended to result in substantial personal
enrichment of the Covered Employee at the expense of the Company or any of its
subsidiaries, (b) violation of the management responsibilities by the Covered
Employee which is demonstrably willful and deliberate on the Covered
Employee's part and which are not remedied in a reasonable period of time
after receipt of written notice from the Company or any of its subsidiaries,
or (c) the conviction of the Covered Employee of a felony involving moral
turpitude.
"Code": The term Code means the Internal Revenue Code of 1986, as
amended.
"Committee": The term Committee means a committee comprised solely of
outside directors within the meaning of Section 162(m) of the Code, appointed
from time to time by the Board of Directors to administer the Plan.
"Company": The term Company means CSX Corporation and/or its
subsidiary companies.
"Cost of Capital" (COC): The term Cost of Capital (COC) means the
cost to the Company of securing funds and shall be determined by the weighted
cost of debt and equity within the Company's capital structure.
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"Covered Employee": The term Covered Employee means the chief
executive officer of the Company or any other individual who is among the four
(4) highest compensated officers or who is otherwise a "covered employee"
within the meaning of Section 162(m) of the Code, as determined by the
Committee.
"Disability": The term Disability means long-term disability as
determined under the Company's Salary Continuance and Long-Term Disability
Plan.
"Plan Year": The term Plan Year means the annual accounting period
for the Company.
"Retirement": The term Retirement means termination of employment
with immediate commencement of retirement benefits under the Company's pension
plan.
"Return On Invested Capital" (ROIC): The term Return On Invested
Capital (ROIC) means for the Company or any business unit its Results of
Operations divided by its Capital. These values are defined as follows:
a. "Results of Operations": The term Results of Operations means
operating income, adjusted for special charges and increased by
the interest portion of lease payments, plus other income
exclusive of interest income, less the related cash income taxes.
b. "Capital": The term Capital means short- and long-term debt, the
present value of all leases with a term exceeding one year, and
factored accounts receivable, plus shareholders' equity adjusted
for special charges and accounting changes, and any other debt or
equity instruments, less cash, cash equivalents, and short-term
investments.
The ROIC calculation excludes any non-routine one-of-a-kind gains or
losses, including gains or losses which result from a change in accounting.
3. Administration
The Committee shall be responsible for administering the SMICP and
shall have the power to construe and to interpret the SMICP. The Committee may
appoint such agents, who need not be members of the Committee, as it may deem
necessary for the effective performance of its duties, and may delegate to
such agents such powers and duties as the Committee may deem appropriate and
that are not inconsistent with the intent of the SMICP. A decision of the
Committee shall be final and conclusive on all persons, except to the extent
otherwise provided by law.
Prior to the beginning of each Plan Year, (or in the case of the 1994
Plan Year, prior to April 1, 1994), the Committee shall:
a. determine the Covered Employees for the Plan Year;
b. establish four specific ROIC Levels, each of which shall be
expressed as a percentage of the Company's Cost of Capital for the
Plan Year; and
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c. establish the award opportunity at each specific ROIC Level,
expressed as a percentage of base salary at the beginning of the
Plan Year, for each Covered Employee. Award opportunities shall be
interpolated for performance which falls between the ROIC Levels.
Furthermore, if a business unit exceeds all performance objectives
established by the Committee, the calculated award payable to the
Covered Employee will be increased by the percentage that the
business unit exceeds the highest ROIC Level, however, such
increase shall not exceed 25 percent of the calculated award.
Notwithstanding the above, the maximum per person award opportunity
under the SMICP shall be 150 percent of Base Salary at the beginning of the
Plan Year.
At the conclusion of the Plan Year, in accordance with Section
162(m)(4)(C)(iii) of the Code, prior to the payment of any award under the
SMICP, the Committee shall certify in the Committee's internal meeting minutes
the attainment of the financial objectives for the Plan Year and the
calculation of the award. Awards generally shall be reviewed and approved by
the Committee during the first Board of Directors meeting held after the end
of the Plan Year. Once initial shareholder approval of the material terms of
the performance criteria is obtained, no shareholder action shall be required
for awards made under the SMICP unless such criteria are changed or such
action is required under Section 162(m) of the Code.
A Covered Employee's calculated award may be reduced or eliminated at
the discretion of the Committee. In the event the Committee reduces an award
otherwise payable to a Covered Employee for a Plan Year, the amount of such
reduction shall not be paid to other Covered Employees.
The existence of the SMICP does not constitute a contract for
continued employment between a Covered Employee and the Company. The Company
reserves the right to terminate a Covered Employee for any reason and at any
time notwithstanding the existence of the SMICP.
If the employment of a Covered Employee is terminated during the Plan
Year due to Retirement, Disability, or death, or is involuntarily terminated
for reasons other than Cause, any award payable under this SMICP will be
prorated for the number of full months during which the Covered Employee was
actively employed during the Plan Year. If employment terminates for any other
reason during the Plan Year, no award will be payable under the SMICP.
4. Shareholder Approval
Notwithstanding any of the foregoing, no awards will be paid under
the SMICP unless the material terms of the performance criteria have been
disclosed to the shareholders and subsequently approved by a vote of the
shareholders of the Company. Once the material terms of the performance
criteria are disclosed to and approved by shareholders, no additional
disclosure or approval is required until such time as the Committee changes
the material terms of the performance criteria, or until otherwise required by
Section 162(m) of the Code.
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The SMICP may be amended or terminated by action of the Committee,
approved by the Company's Board of Directors, except insofar as approval by
the Company's shareholders may be required pursuant to Section 162(m)
(4)(C)(i) of the Code.
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