[LOGO OF CSX CORPORATION]
March 26, 2001
Dear CSX Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, May 1, 2001, at 10:00 a.m. (EDT), at The Greenbrier, White Sulphur
Springs, West Virginia. Your Board of Directors and management look forward to
greeting those shareholders able to attend.
The proposals to be acted upon at the Meeting include the election of 14
directors, the appointment of independent auditors, and approval of an employee
stock purchase plan. The Board of Directors believes that these proposals are in
the best interests of the Company and its shareholders and recommends a vote for
each of these proposals.
Also to be acted upon at the meeting is a shareholder proposal regarding
change in control employment agreements. The Board of Directors believes this
proposal is not in the best interests of the Company and its shareholders and
recommends a vote against this proposal.
If you plan to attend the Meeting, please complete and mail the form
included in the brochure containing information about the Meeting, The
Greenbrier, and ticketing procedures.
Whether or not you are able to attend the Meeting, it is important that
your shares be represented, no matter how many shares you own. Therefore, you
are urged to vote promptly.
/s/ John W. Snow
John W. Snow
Chairman of the Board,
President and Chief Executive Officer
Notice of Annual Meeting of Shareholders
Richmond, Virginia
March 26, 2001
To Our Shareholders:
The Annual Meeting of Shareholders of CSX Corporation will be held at The
Greenbrier, White Sulphur Springs, West Virginia, on Tuesday, May 1, 2001, at
10:00 a.m. (EDT), for the purpose of considering and acting upon the following
matters:
1. Election of 14 directors;
2. Appointment of Ernst & Young LLP as independent certified public
accountants for 2001;
3. Approval of the CSX 2001 Employee Stock Purchase Plan;
4. Shareholder proposal regarding Change in Control Employment
Agreements; and
5. Such other matters as may properly come before the Meeting.
The above matters are described in the Proxy Statement. You are urged,
after reading the Proxy Statement, to vote your shares by proxy using one of the
following methods: (a) over the Internet, (b) by telephone using the
instructions on the enclosed proxy card, or (c) mark, sign, date, and return the
enclosed Proxy by mail to assure that your shares are represented at the
Meeting.
Only shareholders of record at the close of business on March 2, 2001, will
be entitled to vote at the Meeting, either in person or by proxy. This Proxy
Statement is being mailed to those shareholders on or about March 26, 2001.
By Order of the Board of Directors
/s/ Alan A. Rudnick
Alan A. Rudnick
Vice President - General Counsel
and Corporate Secretary
1
PROXY STATEMENT
General Information
The enclosed Proxy is solicited by the Board of Directors of CSX
Corporation ("CSX" or the "Company"). A Proxy may be revoked by a shareholder at
any time before it is voted by notice in writing delivered to the CSX Corporate
Secretary, by timely receipt of another proxy (including an Internet or
telephone vote), or by voting in person at the Annual Meeting.
CSX is the parent of CSX Transportation, Inc. ("CSXT"); CSX Lines LLC; CSX
World Terminals LLC; CSX Intermodal, Inc.; and The Greenbrier Resort Management
Company. The address of CSX's principal executive offices is One James Center,
901 East Cary Street, Richmond, Virginia 23219-4031.
Shares Outstanding and Voting Rights
As of March 2, 2001, CSX had outstanding 213,322,075 shares of common stock
entitled to one vote per share. A majority of the shares entitled to vote,
represented in person or by proxy, will constitute a quorum for the transaction
of business. Only shareholders of record at the close of business on March 2,
2001, will be entitled to vote. CSX is not aware of any matters to come before
the meeting other than those set forth in the accompanying Notice and this Proxy
Statement.
1. ELECTION OF DIRECTORS
Fourteen directors are to be elected to hold office until the next Annual
Meeting of Shareholders is held and their successors are elected. However, the
term of any director who is also a CSX officer ends if he or she ceases to be an
employee of the Company. Votes will be cast, unless otherwise specified, for
the election of those named below. If, at the time of the meeting, any nominee
should be unable to serve as a director, such votes will be cast for such
substitute nominee as may be nominated by the Board of Directors. All of the
nominees listed were previously elected directors by the shareholders.
As of the date of this Proxy Statement, the Board of Directors has no
reason to believe that any of the nominees named will be unable or unwilling to
serve. There are no family relationships among any of these nominees or among
any of these nominees and any officer, nor any arrangement or understanding
between any nominee and any other person pursuant to which the nominee was
selected.
In the election of directors, those receiving the greatest number of votes
shall be elected, even if such votes do not constitute a majority. Certain
information regarding each nominee follows. Each nominee has consented to being
named in the Proxy Statement and to serve if elected.
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[PHOTO OF ELIZABETH E. BAILEY]
Elizabeth E. Bailey, 62, is the John C. Hower Professor of Public Policy and
Management, The Wharton School of the University of Pennsylvania. She is a
director of Philip Morris Companies, Inc., and Teachers Insurance and Annuity
Association-College Retirement Equities Fund. Dr. Bailey has been a director of
CSX since November 1989. She is Chair of the Board's Audit Committee and a
member of the Nominating and Organization Committee and the Executive Committee.
[PHOTO OF H. FURLONG BALDWIN]
H. Furlong Baldwin, 69, has been Chairman of Mercantile Bankshares Corporation,
a bank holding company since March 2001. Previously, he was Chairman, President,
and Chief Executive Officer of Mercantile Bankshares Corporation. He is also a
director of CEG, Inc.; NASD, Inc.; and The Saint Paul Companies. Mr. Baldwin has
been a director of CSX since October 1998 and is a member of the Board's Audit
Committee.
[PHOTO OF CLAUDE S. BRINEGAR]
Claude S. Brinegar, 74, is retired from Unocal Corp., a high technology earth
resources company, where he served as Vice Chairman from 1990 to 1995. Until
1997, he was a visiting scholar at Stanford University. He has been a director
of CSX since October 1998 and is a member of the Board's Nominating and
Organization Committee.
[PHOTO OF ROBERT L. BURRUS, JR.]
Robert L. Burrus, Jr., 66, is a partner in and Chairman of McGuireWoods LLP, a
law firm. Mr. Burrus is a director of Concepts Direct, Inc.; S&K Famous
Brands, Inc.; and Smithfield Foods, Inc. Mr. Burrus has been a director of CSX
since April 1993 and is a member of the Board's Nominating and Organization
Committee and the Pension Committee.
[PHOTO OF BRUCE C. GOTTWALD]
Bruce C. Gottwald, 67, is Chairman and Chief Executive Officer of Ethyl
Corporation, a worldwide producer of petroleum additives. Mr. Gottwald has been
a director of CSX since April 1988 and is Chair of the Board's Pension Committee
and a member of the Compensation Committee and the Executive Committee.
[PHOTO OF JOHN R. HALL]
John R. Hall, 68, is the former Chairman of the Board of Directors of Bank One
Corporation, a bank holding company, a position he held from December 1999 to
March 2000. Previously, Mr. Hall was Chairman of Arch Coal, Inc., a coal mining
company, from July 1997 to December 1998; and, prior to February 1997, he was
Chairman and Chief Executive Officer of Ashland Inc., a diversified energy
company with operations in petroleum refining and marketing, chemicals, highway
construction, oil and gas exploration and coal. He is a director of Bank One
Corporation; The Canada Life Assurance Company; Humana Inc.; UCAR International
Inc.; and United States Enrichment Corp. Mr. Hall has been a director of CSX
since May 1994 and is a member of the Board's Compensation Committee and the
Nominating and Organization Committee.
[PHOTO OF E. BRADLEY JONES]
E. Bradley Jones, 73, is a private consultant and former Chairman and Chief
Executive Officer of LTV Steel Company. He is a director of RPM Inc. He has been
a director of CSX since October 1998 and is a member of the Board's Pension
Committee.
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[PHOTO OF ROBERT D. KUNISCH]
Robert D. Kunisch, 59, has been Special Partner in ABS Capital Partners, Inc., a
private equity investment firm, since January 2001, and Senior Adviser to the
Chief Executive Officer of Cendant Corporation, a global provider of consumer
and business services primarily in the membership, travel and real estate
services segments, since January 2000. He is also engaged in various other
business activities. From December 1997 to January 2000, Mr. Kunisch was Vice
Chairman of Cendant Corporation. Prior to December 1997, he was Chairman,
President and Chief Executive Officer of PHH Corporation, a provider of
value-added business services, including vehicle management, real estate, and
mortgage banking services. Mr. Kunisch has been a director of CSX since October
1990 and is a member of the Board's Compensation Committee and the Nominating
and Organization Committee.
[PHOTO OF JAMES W. MCGLOTHLIN]
James W. McGlothlin, 60, is Chairman and Chief Executive Officer of The United
Company, a diversified energy company. He is a director of Birmingham Steel
Corporation. He has been a director of CSX since November 1989 and is a member
of the Board's Audit Committee and Pension Committee.
[PHOTO OF SOUTHWOOD J. MORCOTT]
Southwood J. Morcott, 62, is the retired Chairman of the Board of Dana
Corporation, a manufacturer of automotive and truck parts and provider of
commercial credit, a position he had held since February 1999 through April
2000. Prior to February 1999, he was Chairman and Chief Executive Officer of
Dana Corporation. He is a director of Johnson Controls, Inc.; Navistar
International Corporation; and Phelps Dodge Corporation. Mr. Morcott has been a
director of CSX since July 1990 and is a member of the Board's Audit Committee
and the Pension Committee.
[PHOTO OF CHARLES E. RICE]
Charles E. Rice, 65, has been Chairman of Mayport Venture Partners LLC, a
venture capital firm, since January 2001. From December 1998 to January 2001, he
was Vice Chairman, Corporate Development, of Bank of America Corp., a bank hold-
ing company. From April 1998 through October 1998, he was Chairman of
NationsBank, Inc., a bank holding company. Previously, he was Chairman and Chief
Executive Officer of Barnett Banks, Inc., a bank holding company. He is a
director of Post Properties, Inc. and Sprint Corporation. Mr. Rice has been a
director of CSX since April 1990 and is Chair of the Board's Compensation
Committee and a member of the Executive Committee.
[PHOTO OF WILLIAM C. RICHARDSON]
William C. Richardson, 60, is President and Chief Executive Officer of the W. K.
Kellogg Foundation, a major philanthropic institution. He is a director of The
Bank of New York Company, Inc., and The Kellogg Company. Dr. Richardson has been
a director of CSX since December 1992 and is Chair of the Board's Nominating and
Organization Committee and a member of the Executive Committee.
[PHOTO OF FRANK S. ROYAL]
Frank S. Royal, M.D., 61, is a physician in private practice in Richmond, Va.,
and a health care expert. He is a director of Chesapeake Corporation; Dominion
Resources, Inc.; HCA, The Healthcare Corporation; and SunTrust Banks, Inc. Dr.
Royal has been a director of CSX since January 1994 and is a member of the
Board's Audit Committee and Compensation Committee.
[PHOTO OF JOHN W. SNOW]
John W. Snow, 61, is Chairman of the Board, President and Chief Executive
Officer of CSX. Mr. Snow is a director of Circuit City Stores, Inc.; Johnson &
Johnson; USX Corporation; and Verizon Communications. Mr. Snow has been a
director of CSX since April 1988 and is Chair of the Board's Executive
Committee.
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Meetings of the Board
During 2000, there were seven meetings of the CSX Board of Directors. With
the exception of Mr. McGlothlin, each director attended 75 percent or more of
the meetings of the Board of Directors and committees on which he or she served
during the period he or she was a director.
Corporate Governance
The CSX Board of Directors is committed to governance principles and
practices that facilitate the Board in fulfilling its fiduciary duties to
shareholders and to the Company. Much of the Board's work is conducted through
committees as described below. The role and jurisdiction of each committee is
set forth in written charters, and the appropriateness of the committee
structure is reviewed regularly. The Board has established and maintains
qualification guidelines for candidates for director. Reviews of each
director's performance and continuing qualification for Board membership, as
well as the Board's performance as a working group, are conducted on a regular
basis.
Committees of the Board
CSX's Board of Directors has the following committees to assist it in the
discharge of its responsibilities. The biographical information in "Election
of Directors" includes committee memberships currently held by each nominee.
The Executive Committee meets only on call and has authority to act for the
Board on most matters during the intervals between Board meetings. The
Executive Committee has five members. It held no meetings in 2000.
The Audit Committee approves and recommends independent auditors to the
Board and to the shareholders. Its primary functions include satisfying itself
on behalf of the Board that the Company's internal control structure, policies,
procedures and external and internal auditing activities assure reliable and
informative accounting and financial reporting. Specifically, the Committee,
through meetings with and reports from management, the auditors, or both,
reviews the scope of the auditors' examination, audit reports and CSX's internal
auditing procedures; reviews and monitors policies established to prohibit
unethical, questionable or illegal activities by those associated with CSX;
receives reports from management and outside auditors regarding matters that
can have an adverse economic impact on the Company; receives reports from
internal and outside auditors on matters that could impact the Company's
internal control and financial reporting and integrity; and reviews the
compensation paid to the auditors for annual audit and non-audit services and
the effect of such compensation and services on the independence of the
auditors. The Charter of the Audit Committee is attached as Appendix A to this
Proxy Statement. The Audit Committee has five members, none of whom is a Company
employee and each of whom the Board of Directors has determined to be
independent. It held five meetings in 2000.
The primary functions of the Compensation Committee are to establish the
Company's compensation philosophy and to review and approve, or recommend
approval of, compensation and compensation plans, including certain benefits,
for key employees (as determined by this Committee from time to time), to
establish performance objectives for certain executives, and to certify the
attainment of those objectives in connection with the payment of
performance-based compensation within the meaning of Internal Revenue Code
Section 162(m). In addition, the Committee monitors the administration of
certain executive compensation and benefit programs. The Compensation Committee
has five members, none of whom is a Company employee and all of whom are
"outside directors" within the meaning of regulations promulgated pursuant to
Internal Revenue Code Section 162(m). It held five meetings in 2000.
The Pension Committee monitors funding and administration of certain
tax-qualified benefit plans of the Company. The Committee has authority to amend
certain tax-qualified plans. The Pension Committee has five members and held two
meetings in 2000.
The Nominating and Organization Committee of the Board recommends
candidates for election to the Board and reviews and recommends changes in Board
composition, committee structure, director qualification, and director com-
pensation and retirement. This Committee recommends and monitors corporate
governance practices and also conducts regular evaluations of director
performance and of the effectiveness of the Board as a working group. The
Nominating and Organization Committee also reviews significant changes in
corporate structure, succession in senior management, and other internal matters
of broad corporate importance. In addition, this Committee reviews CSX's
relationship to the broader social environment in which the Company operates,
including certain major litigation, legislation, and other governmental and
legal actions that could affect CSX. The Committee has six members, none of whom
is a Company employee. It held four meetings in 2000.
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In fulfilling its responsibility for making nominations to the Board of
Directors, the Nominating and Organization Committee will review recommendations
as to possible nominees received from shareholders and other qualified sources.
Shareholder recommendations must be in writing addressed to the Chairman of the
Nominating and Organization Committee, c/o Corporate Secretary, CSX Corporation,
One James Center, 901 East Cary Street, Richmond, Virginia 23219-4031, and
should include a statement setting forth the qualifications and experience of
the proposed candidate and basis for nomination.
Directors' Compensation
For services rendered during a year, non-employee directors receive a
retainer of $35,000 per year, at least 40 percent of which is paid in CSX stock
as described below. The Chair of each Board committee receives an additional
annual retainer of $5,000. Retainers are prorated for service of less than a
full year. Each non-employee director also receives $1,000 for each Board and
committee meeting attended and is reimbursed for expenses incurred in connection
with services as a director.
CSX directors must participate in the CSX Corporation Stock Plan for
Directors (the "Stock Plan"). Pursuant to the Stock Plan, directors are paid not
less than 40 percent of their annual retainer in CSX common stock. Directors can
annually elect to receive up to 100 percent of the remaining portion of their
retainers and meeting fees in stock. Payments made in stock pursuant to the
Stock Plan also can be deferred for income tax purposes into the CSX Directors'
Stock Trust ("Directors' Trust"), established for that purpose. The Directors'
Trust is subject to the claims of creditors of CSX Corporation. In 2000, each
director received a stock grant of 500 shares of CSX common stock with a market
value on date of grant of $26.41 per share, the average between the high and low
prices reported on the New York Stock Exchange on December 13, 2000. Receipt of
these shares and the income tax thereon were deferred for all directors, and the
stock was issued to the Directors' Trust. Each non-employee director also
received 4,000 stock options, with an exercise price of $26.41 and a term of 10
years.
For all deferred stock compensation, each director elects, in accordance
with Internal Revenue Service requirements, a distribution schedule for such
deferred stock compensation. Distributions of deferred stock compensation cannot
occur before the later of the director's retirement from the Board or reaching
age 65, and distribution periods cannot exceed 20 years.
A director may elect to participate in the Corporate Director Deferred
Compensation Plan (the "Deferred Compensation Plan"), under which he or she can
defer all or a portion of cash compensation paid by CSX until he or she ceases
to be a director and has reached age 65, after which he or she will be paid in
installments over a period not to exceed 15 years. Amounts so deferred may be
designated by the director to be credited to an Interest Account, a CSX Phantom
Stock Account, or a combination. The Interest Account accrues interest,
compounded quarterly, at rates that are reviewed and adjusted from time to time.
An Enhanced Interest Account, to which deferrals could be directed in 1989 and
1990, accrues interest at a higher than market rate compounded annually. The
rate may be adjusted from time to time. Participants in the Enhanced Interest
Account also are covered by an additional $10,000 death benefit. The balances in
the Phantom Stock Accounts represent cash balances equal to the value of such
CSX stock, including reinvested dividends, which would have been in the account
had the deferred cash compensation actually been used to purchase CSX stock. Mr.
Jones, Mr. Morcott and Dr. Royal have directed deferred cash compensation to be
invested in the Phantom Stock Account where the cash balances accumulated as of
December 29, 2000, represent the equivalent of 2,068 shares, 1,895 shares, and
391 shares of CSX stock, respectively.
The Deferred Compensation Plan provides that if the Board determines that a
change in control of CSX has occurred, as defined in the Plan, Plan participants
will receive, within seven days of such determination, a lump sum cash payment
equal to the balance credited to directors' accounts. The Stock Plan provides
that upon a change in control, shares, the receipt of which was deferred and
held in trust, will be distributed unless the Participant has elected to remain
in the Plan. Upon a change in control of CSX, amounts sufficient to pay any
undistributed payments pursuant to the Deferred Compensation Plan and the Stock
Plan will be put into a trust until distribution under the terms of the plans
and participants' distribution elections. The trust will be subject to claims
of creditors of CSX Corporation. Directors may elect, within a specified
period of time prior to any change in control event, to continue participation
in the Deferred Compensation Plan and the Stock Plan as if a change in control
had not occurred. Once such an election has been made and a change in control
occurs, the election can be revoked, subject to a five percent penalty on
distribution.
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CSX directors participate in the CSX Directors' Charitable Gift Plan ("Gift
Plan"). Participation in the Gift Plan begins when an individual has completed
five consecutive years of service as a CSX director. Under the Gift Plan, the
Company will make, on behalf of each participant, contributions totaling $1
million to charitable institutions designated by that participant. Contributions
to designated charities are made in installments, with $100,000 payable upon the
director's retirement and the balance payable in installments of $100,000 per
year, commencing at the time of the participant's death. The Company funds the
charitable contributions through company-owned life insurance on the lives of
certain participants. Premiums on the life insurance policies are paid by the
Company. The directors who participate in the Gift Plan are: Dr. Bailey, Dr.
Richardson, Dr. Royal, and Messrs. Burrus, Gottwald, Hall, Kunisch, McGlothlin,
Morcott, Rice, and Snow.
Directors also can participate in a CSX Directors' Matching Gift Program.
Directors' contributions to organizations exempt from taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code, and which qualify for support
under internal guidelines for CSX charitable contributions, are matched on a
two-for-one basis. The maximum amount of contributions that can be matched in
any year is $25,000 per director. Directors who participated in the Matching
Gift Program during 2000 and the amounts paid by the Company for contributions
made by these directors in 2000 are: Dr. Bailey - $10,000; Mr. Brinegar -
$33,880; Mr. Burrus - $50,000; Mr. Gottwald - $50,000; Mr. Hall - $50,000; Mr.
Jones - $50,000; Mr. Kunisch - $50,000; Mr. McGlothlin - $50,000; Mr. Morcott -
$20,000; Mr. Rice - $50,000; Dr. Richardson - $50,000; Dr. Royal - $50,000; and
Mr. Snow - $40,000.
Certain Relationships and Related Transactions
Robert L. Burrus, Jr., a director of the Company, is a partner in and
Chairman of McGuireWoods LLP, a law firm that regularly provides legal services
to the Company and its subsidiaries.
Contractual Obligations
To ensure that the Company will have the continued dedicated service of
certain executives notwithstanding the threat or occurrence of changes in
control, the Company has entered into change in control employment agreements
(the "Employment Agreements") with certain executives, including Messrs. Snow,
Grassi, Goodwin, and Aron. The Employment Agreements generally provide that if
the executive is terminated other than for cause within three years after a
change in control of the Company (as defined in the Employment Agreements), or
if the executive terminates employment for good reason (as defined in the
Employment Agreements) within such three-year period or voluntarily during the
30-day period following the six-month anniversary of the change in control, the
executive is entitled to receive severance benefits. Severance benefits include
a lump sum severance payment equal to three times the sum of the executive's
base salary and highest annual bonus for the three years preceeding the change
in control (or, if higher, the most recently established target bonus),
together with certain other payments and benefits, including a prorated bonus
for the year of termination, continuation of employee welfare benefits, an
additional payment to compensate the executive for certain excise taxes imposed
on certain change in control payments, the right to receive the Black-Scholes
value of options that terminate unexercised, and the right to up to $20,000 of
outplacement services. The agreements generally provide somewhat different,
but generally analogous, treatment in certain change in control transactions
subject to regulatory review by the Surface Transportation Board, or any
successor regulatory body.
In June 1999, the Company entered into separate employment agreements
(each, a "Stock Agreement") with Messrs. Snow, Alvin R. Carpenter, then Vice
Chairman of the Company, and Ronald J. Conway, who, at the time, was President
of CSXT. The Stock Agreement with Mr. Snow will expire in June 2002 or, if
later, with the appointment of his successor as Chief Executive Officer of the
Company. The Company and Mr. Carpenter have agreed to amend the Stock Agreement
with Mr. Carpenter, which originally was for a three-year term, as of January
15, 2001, the date of his retirement from the Company. The Agreement with Mr.
Conway, which originally was for a four-year term, was terminated effective
April 10, 2000, and replaced by an Employment Separation and Consulting
Agreement, dated June 21, 2000 (described below as the "Conway Agreement"), at
the time of Mr. Conway's resignation as President of CSXT.
Mr. Snow's Stock Agreement provides for an annual base salary at least
equal to the base salary paid to him immediately prior to the effective date of
the Stock Agreement or as subsequently adjusted. Mr. Snow also is entitled to
participate in bonus plans and to receive the other benefits to which he was
entitled prior to the effective date of the Stock
7
Agreement. Under the Stock Agreement, Mr. Snow personally was required to
purchase 250,000 shares on the open market for which he received a matching
grant of 250,000 shares of restricted stock from the Company. Mr. Snow receives
credit toward his pension benefits ratably over the restricted period for the
restricted stock, to the extent performance goals have been met, as if the
shares were paid as cash bonuses based on the stock price when the restricted
shares were issued.
Mr. Snow's employment may be terminated for "Cause" by the Company or for
"Good Reason" by Mr. Snow, each as defined in his Agreement. Upon termination of
employment for Cause by the Company or other than Good Reason by Mr. Snow, the
Company will have no further obligations to Mr. Snow after the date of
termination.
If Mr. Snow's employment is terminated other than for Cause or if his
employment is terminated due to Death, Disability, or by Mr. Snow for Good
Reason (each as defined in the Stock Agreement), the Company is required to pay
him (or to his legal representative), to the extent not previously paid, a lump
sum cash payment equal to (i) his base salary through the date of termination,
plus (ii) a bonus based on the highest annual bonus paid to him for any of the
three years preceding the effective date of the Stock Agreement prorated to the
termination date. In addition, all shares of restricted stock subject to the
Stock Agreement will vest immediately. The Company also will provide continued
medical and dental benefits to Mr. Snow until the originally scheduled
termination date of the Stock Agreement. In addition, Mr. Snow will receive any
unpaid amounts or benefits required to be paid or provided under Company plans,
programs, or policies through the date of termination. If Mr. Snow's employment
is terminated before the end of the employment period for any reason other than
Death, Disability or Good Reason, he forfeits the restricted shares.
Mr. Conway's and Mr. Carpenter's Stock Agreements were substantially
similar to Mr. Snow's, although for 100,000 and 150,000 shares of stock,
respectively, which they were required to purchase personally as matching shares
for the restricted stock granted. Mr. Carpenter has received credit toward his
pension benefits for the full value of the restricted shares issued to him,
valued as of June 30, 1999, the date of issuance.
In 2000, the Company guaranteed the personal bank loans used by Mr. Snow
and Mr. Carpenter to fund the purchase of stock required under the Stock
Agreements. Also in 2000, Messrs. Snow's and Carpenter's Stock Agreements were
amended to provide that upon a change in control, each would be indemnified (on
an after-tax basis) against any loss to them resulting from the difference
between outstanding loan balances (including interest paid on the loan) and the
combined value of restricted stock issued and the matching stock they were
required to purchase pursuant to the Stock Agreements (including dividends paid
on such stock) (the "Loan Indemnification"). The Company agreed in the Conway
Agreement and with Mr. Carpenter in connection with his retirement, that the
Loan Indemnification would apply to each of them unconditionally.
In connection with his retirement, Mr. Carpenter agreed to remain available
to the Company as needed and not to compete with the Company for the term of his
Stock Agreement. The Company can, in its discretion, waive the performance
goals with respect to the restricted stock and accelerate vesting of the
restricted shares, and can require Mr. Carpenter to sell the restricted and
purchased shares to minimize the Company's obligations under the Loan
Indemnification.
Under the Conway Agreement, Mr. Conway remained as a consultant to the
Company for the balance of the year. Additionally, the restricted shares issued
under Mr. Conway's Stock Agreement were fully vested (although not for
purposes of pension benefit enhancement). Mr. Conway did receive enhanced
pension benefit, described in the discussion accompanying the Pension Plan
Table. Since the date of the Conway Agreement, Mr. Conway's loan was repaid in
full through the sale of shares, thereby eliminating any liability of the
Company to Mr. Conway under the Loan Indemnification. The Conway Agreement
included a covenant of perpetual confidentiality as to certain Company
information and contained a restriction against employment with any competitor
of the Company or its subsidiaries prior to January 1, 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and any persons owning more than 10 percent of a class
of the Company's stock, to file certain reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Based solely on
its review of the copies of Forms 3, 4 and 5
8
received by it, the Company believes that, with two exceptions, the Company's
executive officers and directors complied with the SEC's requirements with
respect to transactions during the last fiscal year. Mr. Dale Hawk sold 60
shares of stock that were reported on a late filed Form 4. Mr. P. Michael Giftos
received an award of performance shares from the Company shortly before becoming
an executive officer of the Company. His ownership of these shares was reported
in a late filed amendment to his otherwise timely Form 3.
Report of the Audit Committee
The Audit Committee has reviewed and discussed the Company's audited
financial information with management, and it has discussed with the independent
auditors the matters required to be discussed by SAS 61. In addition, the Audit
Committee has received the written disclosures and letter from Ernst & Young LLP
("E&Y"), the Company's independent accountants, as required by Independence
Standards Board Standard No. 1. The Committee has discussed with its independent
auditor, E&Y, the independance of E&Y. Based on its review and on the
discussions described above, the Audit Committee has recommended to the full
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 29,
2000.
Audit Committee
Elizabeth E. Bailey, Chair
H. Furlong Baldwin
James W. McGlothlin
Southwood J. Morcott
Frank S. Royal, M.D.,
the entire Committee
Richmond, Virginia
February 13, 2001
Audit Committee Charter
The charter of the Audit Committee is included as Appendix A to this Proxy
Statement.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's consolidated financial statements for the fiscal year ending
December 29, 2000 were $2,345,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed for the professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR 210.2-01(c)(4)(ii))
rendered by E&Y for the fiscal year ended December 29, 2000.
All Other Fees
All other fees paid to E&Y, for the fiscal year ending December 29, 2000,
aggregated $3,207,000, and included audit related services of $2,285,000 and
other services of $922,000.
The Audit Committee has concluded that the provision of services covered in
the sections captioned "Financial Information Systems Design and Implementation
Fees" and "All Other Fees" are compatible with maintaining E&Y's independence.
9
Security Ownership of Certain Beneficial Owners, Directors, and Executive
Officers
Amount and Nature of Beneficial Ownership
--------------------------------------------------------------
Shares for which
Beneficial Ownership Percent
Shares can be Acquired Total of
Title Name of Beneficially within 60 Days Beneficial Class
of Class Beneficial Owner (Note 1) Owned (Note 2) Ownership (Note 3)
- ---------------------------------------------------------------------------------------------------------------------------
CSX Corp. Elizabeth E. Bailey 9,762 2,000 11,762 *
Common H. Furlong Baldwin 8,601 2,000 10,601 *
Stock Claude S. Brinegar 5,362 2,000 7,362 *
$1 Par Robert L. Burrus, Jr. 13,469 2,000 15,439 *
Value Bruce C. Gottwald 25,367 2,000 27,367 *
John R. Hall 18,910 2,000 20,910 *
E. Bradley Jones 3,964 2,000 5,964 *
Robert D. Kunisch (Note 4) 16,320 2,000 18,320 *
James W. McGlothlin (Note 5) 228,532 2,000 230,532 *
Southwood J. Morcott 15,017 2,000 17,017 *
Charles E. Rice 17,932 2,000 19,932 *
William C. Richardson 6,328 2,000 8,328 *
Frank S. Royal 10,575 2,000 12,575 *
John W. Snow 1,485,424 (Note 6) 1,914,400 3,399,824 1.6%
Alvin R. Carpenter 318,626 (Note 6) 198,000 516,626 *
Robert J. Grassi 67,923 (Note 6) 118,600 186,523 *
Paul R. Goodwin 141,465 161,400 302,865 *
Mark G. Aron 233,631 161,400 395,031 *
Ronald J. Conway 67,959 0 67,959 *
Executive officers as a group 3,243,474 (Notes 6 & 7) 3,154,300 6,397,774 3.0%
(14 including those named above)
and all directors and nominees
Capital Research and Management 23,895,000 -- 23,895,000 11.2%
Company (Note 8)
333 South Hope Street
Los Angeles, CA 90071
AXA Financial, Inc. (Note 9) 27,391,545 -- 27,391,545 12.8%
1290 Avenue of the Americas
New York, NY 10104
- ---------------------------------------------------------------------------------------------------------------------------
Notes to Security Ownership of Certain Beneficial Owners, Directors, and
- ------------------------------------------------------------------------
Executive Officers
- ------------------
Note 1 Except as otherwise noted, the persons listed have sole voting power as
to all shares listed, including shares held in trust under certain
deferred compensation plans, and have investment power, except with
respect to all shares held in trust under deferred compensation plans,
investment of which is governed by the terms of the trust. Ownership
information is as of March 9, 2001.
Note 2 Represents shares under options exercisable within 60 days.
Note 3 Based on 213,343,467 shares outstanding on March 9, 2001, plus shares
deemed outstanding for which beneficial ownership can be acquired within
60 days by that individual or group. An asterisk (*) indicates that
ownership is less than one percent of class.
Note 4 Mr. Kunisch's ownership includes 1,000 shares of common stock held in a
limited partnership in which Mr. Kunisch holds an ownership interest.
Note 5 Mr. McGlothlin's ownership includes 200,000 shares of common stock as a
result of stock holdings by affiliates of Mr. McGlothlin in which he
shares voting and investment power.
10
Note 6 The ownership of Messrs. Snow and Carpenter includes restricted shares of
common stock in the amount of 250,000 shares and 150,000 shares,
respectively. Mr. Snow's ownership includes 194,811 shares of common
stock owned jointly with his wife. Mr. Grassi's ownership includes 3,070
shares of common stock held in a family trust over which the executive
officer has voting and investment power.
Note 7 This column includes ownership by executive officers other than those
named above as follows: 27,489 shares of common stock owned by executive
officers' spouses and 165,000 shares of restricted stock.
Note 8 Information reported is derived from a Schedule 13G of Capital Research
and Management Company dated February 9, 2001, and filed with the
Securities and Exchange Commission. As reported in the Schedule 13G, the
person filing the statement has the sole power to dispose of or to direct
the disposition of 23,895,000 shares.
Note 9 Information reported is derived from a Schedule 13G filed jointly by AXA
Financial, Inc., as a parent company of Alliance Capital Management,
L.P., and The Equitable Life Insurance Society of the United States and
an affiliate of AXA Rosenberg (U.S.), dated February 12, 2001, and filed
with the Securities and Exchange Commission. As reported in the Schedule
13G, the person filing the statement has the sole power to vote or to
direct the vote of 15,523,846 shares, shared power to vote or direct the
vote of 2,902,911 shares, and the sole power to dispose of or to direct
the disposition of 27,385,945 shares.
Executive Compensation
The individuals named below include the Company's Chief Executive Officer
and the other four executive officers of the Company who were the most highly
compensated executive officers of the Company as of the last day of the fiscal
year ending December 29, 2000. Information is also provided for Mr. Ronald J.
Conway, who was an executive officer until his resignation as President of CSXT
as of April 10, 2000. Information is provided for the fiscal years ending on
December 29, 2000; December 31, 1999; and December 25, 1998.
Summary Compensation Table
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying LTIP All Other
Compen- Stock Options/ Payouts Compen-
Name and sation ($) Award(s)($) SARs (#) ($) sation ($)
Principal Position Year Salary ($) Bonus ($) (Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
- ----------------------------------------------------------------------------------------------------------------------------------
John W. Snow 2000 $1,100,008 $ 0 $705,665 $ 0 301,480 $ 0 $6,057,360
Chairman, President 1999 1,100,008 0 424,356 0 290,000 696,247 273,239
& CEO 1998 1,000,008 Note 1 284,939 1,303,500 0 654,681 240,132
Alvin R. Carpenter 2000 775,008 0 714,103 0 111,200 423,750 2,391,449
Vice Chairman 1999 775,008 0 420,951 0 145,000 359,500 70,310
1998 775,008 Note 1 265,373 775,008 0 368,719 61,003
Robert J. Grassi 2000 290,000 270,000 154,627 0 68,110 0 696,952
CSX World Terminals 1999 275,000 131,875 106,787 0 31,000 0 8,250
President & CEO 1998 245,000 0 104,470 0 20,000 0 7,350
Paul R. Goodwin 2000 491,667 0 269,237 0 82,960 0 1,520,055
Vice Chairman- 1999 475,000 0 121,337 0 100,000 204,779 29,577
Finance and CFO 1998 425,008 298,350 73,876 0 0 192,553 25,963
Mark G. Aron 2000 425,000 0 348,680 0 60,660 0 1,579,397
Executive Vice 1999 425,000 0 214,291 0 80,000 204,779 112,094
President-Law
and Public Affairs 1998 425,000 149,175 161,224 186,469 0 192,553 98,266
Ronald J. Conway 2000 550,000 0 625,307 0 0 2,181,250 688,612
President 1999 483,333 0 139,104 0 40,000 259,638 534,500
CSXT (Note 6) 1998 150,000 Note 1 14,099 125,000 0 383,058 795,450
- ----------------------------------------------------------------------------------------------------------------------------------
11
Notes to Summary Compensation Table
- -----------------------------------
Note 1 The perquisites or other personal benefits exceeding 25 percent of the
total perquisites and other personal benefits afforded to named officers
were for the years and in the cases of individuals as follows: (a) during
2000, for Mr. Snow, $207,237 for life insurance premiums for 2000 and
part of 1999; for Mr. Carpenter, $93,783 for life insurance premiums for
2000 and part of 1999; for Mr. Goodwin, $44,640 for life insurance
premiums for 2000 and part of 1999; for Mr. Aron, $39,509 for life
insurance premiums for 2000 and part of 1999, and $52,783 for club dues;
(b) during 1999, for Mr. Snow, $35,565 for life insurance premiums; for
Mr. Aron, $51,684 for club dues; (c) during 1998, for Mr. Snow, $35,162
for life insurance premiums and $23,050 for aircraft usage; for Mr.
Carpenter, $14,985 for life insurance premiums and $15,191 for aircraft
usage.
Note 2 In 1998 and 1999, management employees could elect to receive all or a
portion of their bonuses in CSX stock. Employees who elected to receive
cash bonuses in stock and deferred them for tax purposes received a
premium paid in stock. That premium was 25 percent for 1998, and 15
percent for 1999. These stock premiums were discontinued in 2000. For
1998 and 1999, stock paid as bonuses and premiums was issued to the CSX
Executives' Stock Trust ("Executives' Trust") and is restricted from sale
until employment with CSX is terminated, but not before a minimum of
three years has passed following the stock issuance except in cases of
death, disability, or change in control. The amounts shown in the
Restricted Stock Award(s) column reflect the cash value of such bonuses
and premiums paid in stock as of the date bonuses were granted for
Messrs. Snow, Carpenter, Aron, and Conway. The amounts shown in the
Restricted Stock Award(s) column do not reflect amounts withheld to
satisfy employment tax withholding liabilities. Employees who defer their
bonuses in the form of stock into the Executives' Trust receive cash
dividend equivalent payments or may elect to have dividends reinvested by
the Executives' Trust in CSX stock. As of December 29, 2000, restricted
stock balances and their corresponding values, based on the closing price
of CSX stock on the New York Stock Exchange on that date were: Mr. Snow -
147,086 shares ($3,815,411); Mr. Carpenter - 71,801 shares ($1,862,518);
Mr. Grassi - 2,496 shares ($64,746); Mr. Goodwin - 18,808 shares
($487,880); Mr. Aron - 11,739 shares ($304,510); Mr. Conway - 3,752
shares ($ 97,327).
Note 3 This column represents the number of employee stock options granted.
Employee stock options were not granted to the named executive officers,
except Mr. Grassi during 1998. Stock appreciation rights ("SARs") were
not granted in 2000, 1999, or 1998.
Note 4 In 2000, Mr. Carpenter received a payout of restricted shares pursuant to
a special stock award made in 1990. This column also reflects the value
of the restricted stock that was distributed to Mr. Conway under the
Conway Agreement described in "Contractual Obligations."
Note 5 Amounts shown include: (a) the above-market portion of earnings on a
deferred compensation program available to executives only during 1985,
1986, 1988, and 1989. For 2000, these amounts are: for Mr. Snow,
$278,678; for Mr. Carpenter, $53,659; for Mr. Goodwin, $17,780; for Mr.
Aron, $115,239; (b) the Company's matching contributions made in
conjunction with deferrals of salary or bonuses to the CSX Tax Savings
Thrift Plan and the CSX Supplementary Savings and Incentive Award
Deferral Plan. The amounts contributed for 2000 are: for Mr. Snow,
$33,000; for Mr. Carpenter, $23,250; for Mr. Grassi, $8,700; for Mr.
Goodwin, $14,750; for Mr. Aron, $11,688; for Mr. Conway, $9,750; (c) the
value of stock paid to or deferred by each named executive in
consideration of termination of the Company's obligations for performance
share grants previously made pursuant to the 1987 Plan. These amounts
are: for Mr. Snow, $1,568,250; for Mr. Carpenter, $696,488; for Mr.
Grassi, $75,276; for Mr. Goodwin, $487,772; for Mr. Aron, $452,717; for
Mr. Conway, $437,726; and (d) the value of payments made pursuant to the
2001 CSX Stock Reacquisition Plan to terminate participation in the
Company's Stock Purchase and Loan Plan ("SPLP" ). For each named
executive officer, such value includes: (i) return of the down payment
for share purchases made in 1996 using taxable value achieved under the
SPLP from 1991-1996. This value was paid to each named executive in
shares. The number of shares was calculated by dividing the value of the
1996 gain under the SPLP by $47.50, the purchase price calculated
pursuant to the terms of the SPLP on July 31, 1996, the date of the
offering of new shares under the SPLP; (ii) full or partial forgiveness
of down payment loans executed pursuant to the SPLP; and (iii) gross-up
for taxes resulting from the forgiveness of such loans. Reimbursement
was also made for income taxes incurred as a result of this distribution
and termination of the SPLP. The value of such compensation, calculated
at $25.53 per share, the average between the high and low price of CSX
stock on the New York Stock Exchange on November 13, 2000, to the named
executives is:
Shares Value of Shares Down Payment Tax
Name Distributed (#) Distributed ($) Loan Forgiveness ($) Reimbursements ($)
- ----------------------------------------------------------------------------------------------------------------------------
John W. Snow 158,395 $4,043,816 $147,476 $124,369
Alvin R. Carpenter 60,389 1,541,722 103,899 70,973
Robert J. Grassi 11,936 304,738 23,014 19,604
Paul R. Goodwin 28,690 732,449 35,294 29,769
Mark G. Aron 34,168 872,316 35,294 31,299
- -----------------------------------------------------------------------------------------------------------------------------
The value, if any, to Messrs. Snow and Carpenter of the Company's loan guaranty
made in connection with their Stock Agreements cannot be determined at this time
and is not included.
12
Note 6 Mr. Conway resigned as President of CSXT as of April 10, 2000. He
continued as a consultant to the Company through December 30, 2000. (See
"Contractual Obligations")
Stock Option Grants
The following table reflects stock options granted to the named executives
in 2000.
Option/SAR Grants in Last Fiscal Year (Note 1)
Individual Grants Grant Date Value
------------------------------------------------------------------------------------
Percent of Total
Options/SARs Granted
Number of Securities to Employees in Exercise or
Underlying Options/SARs Fiscal Year Base Price Expiration Grant Date
Name Granted (#) (Note 1) (Note 3) ($/Share) Date Present Value ($) (Note 2)
- -----------------------------------------------------------------------------------------------------------------------------------
John W. Snow 301,480 (Note 2) 10.99% $21.25 April 26, 2010 $1,721,451
Alvin R. Carpenter 111,200 (Note 2) 4.05% 21.25 April 26, 2010 634,952
Robert J. Grassi 68,110 (Note 2) 2.41% 21.25 April 26, 2010 388,908
Paul R. Goodwin 82,960 (Note 2) 3.02% 21.25 April 26, 2010 473,702
Mark G. Aron 60,660 (Note 2) 2.21% 21.25 April 26, 2010 364,369
Ronald J. Conway 0 0% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Notes to Option/SAR Grant Table
- -------------------------------
Note 1 SARs were not granted during 2000.
Note 2 Stock options granted to the named executive officer and certain other
executives on April 27, 2000, pursuant to the CSX Omnibus Incentive Plan
("COIP"), at an exercise price of $21.25, which was the fair market value
as of the date of the grant. The options vest and become exercisable in
three equal tranches on the third, fourth and fifth anniversaries of the
grant date. The present value of stock options granted on April 27, 2000,
has been reported using the Black-Scholes option pricing model. The
values presented are based on the following assumptions: exercise price -
$21.25 (mean price on grant date); market price on grant date - $21.25;
assumed exercise date - April 26, 2006; risk-free rate of return - 6.51
percent (10-year U.S. Treasury bond rate as of April 27, 2000); dividend
yield -3.2 percent (5-year quarterly average); volatility assumption -
0.266 percent.
Note 3 A total of 2,743,706 employee stock options were granted during 2000.
13
Stock Options and Stock Appreciation Rights
The following table reflects the number of stock options exercised by the
named executives in 2000, the total gain realized upon exercise, the number of
stock options held at the end of the year,and the realizable gain of the stock
options that are "in-the-money."
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at FY-End (#) Options/SARs at FY-End ($) (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
John W. Snow 133,400 $796,225 1,914,400 1,291,480 $0 $1,471,222
Alvin R. Carpenter 0 0 198,000 606,200 0 542,656
Robert J. Grassi 0 0 118,600 99,110 0 332,377
Paul R. Goodwin 0 0 161,400 332,960 0 404,845
Mark G. Aron 0 0 161,400 340,660 0 296,021
Ronald J. Conway 0 0 0 40,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Notes to Aggregated Options/SAR Exercise Table
- ----------------------------------------------
Note 1 Value of unexercised options/SARs at fiscal year-end represents the
difference between the exercise price of any outstanding in-the-money
option/SAR grants and $26.1399, the mean value of CSX common stock on
December 29, 2000.
Long-Term Incentive Awards
The following table sets forth information regarding long-term incentive
awards under the CSX Long-Term Incentive Cash Program.
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future Payouts
Number of Shares, Units Performance or Other Period Under Non-Stock Price-Based Plans
Name or Other Rights (#) Until Maturation or Payout Threshold ($) Target ($) Maximum ($)
- -------------------------------------------------------------------------------------------------------------------------------
John W. Snow 3,135,900 3 years $1,567,950 $3,135,900 $6,271,800
Alvin R. Carpenter 1,156,700 3 years 578,350 1,156,700 2,313,400
Paul R. Goodwin 863,000 3 years 431,500 863,000 1,726,000
Mark G. Aron 631,000 3 years 315,500 631,000 1,262,000
- -------------------------------------------------------------------------------------------------------------------------------
Notes to Long-Term Incentive Plan Table
Note 1 Represents awards of cash units made to the named executive officers as
part of the CSX Long-Term Incentive Cash Program pursuant to the terms of
the CSX Omnibus Incentive Plan. The cash units, each valued at $1.00,
were granted on February 12, 2000, for the 2000- 2002 performance period.
One-half of the final payout of these awards will be calculated based on
total shareholder return for the 2000- 2002 performance period measured
against a peer group of five other railroads, and one-half of the final
payout will be calculated on the basis of earnings per share growth
measured against an internally set three-year target.
14
Pension Plans
The following table sets forth the estimated annual benefits payable,before
offsets for Social Security and Railroad Retirement annuities, by CSX and
certain of its subsidiaries to any officer or salaried employee upon retirement
from active employment at age 60 after selected periods of service and in
specified compensation groups.
Pension Plan Table
Average Compensation
During Five Consecutive
Years of Highest Pay 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 44 Years
- ------------------------------------------------------------------------------------------------------------------------------
$ 200,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000 $ 120,000 $ 132,000
400,000 90,000 120,000 150,000 180,000 210,000 240,000 264,000
600,000 135,000 180,000 225,000 270,000 315,000 360,000 396,000
800,000 180,000 240,000 300,000 360,000 420,000 480,000 528,000
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000 660,000
1,200,000 270,000 360,000 450,000 540,000 630,000 720,000 792,000
1,400,000 315,000 420,000 525,000 630,000 735,000 840,000 924,000
1,600,000 360,000 480,000 600,000 720,000 840,000 960,000 1,056,000
1,800,000 405,000 540,000 675,000 810,000 945,000 1,080,000 1,188,000
2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,320,000
2,200,000 495,000 660,000 825,000 990,000 1,155,000 1,320,000 1,452,000
2,400,000 540,000 720,000 900,000 1,080,000 1,260,000 1,440,000 1,584,000
2,600,000 585,000 780,000 975,000 1,170,000 1,365,000 1,560,000 1,716,000
2,800,000 630,000 840,000 1,050,000 1,260,000 1,470,000 1,680,000 1,848,000
3,000,000 675,000 900,000 1,125,000 1,350,000 1,575,000 1,800,000 1,980,000
3,200,000 720,000 960,000 1,200,000 1,440,000 1,680,000 1,920,000 2,112,000
3,400,000 765,000 1,020,000 1,275,000 1,530,000 1,785,000 2,040,000 2,244,000
3,600,000 810,000 1,080,000 1,350,000 1,620,000 1,890,000 2,160,000 2,376,000
3,800,000 855,000 1,140,000 1,425,000 1,710,000 1,995,000 2,280,000 2,508,000
4,000,000 900,000 1,200,000 1,500,000 1,800,000 2,100,000 2,400,000 2,640,000
4,200,000 945,000 1,260,000 1,575,000 1,890,000 2,205,000 2,520,000 2,772,000
- ------------------------------------------------------------------------------------------------------------------------------
Retirement benefits from funded and unfunded non-contributory pension plans
("Pension Plans") of CSX and certain of its subsidiaries are based on both
length of service and compensation. The compensation covered by the Pension
Plans is compensation paid by CSX or its subsidiaries to a participant on a
regular monthly or annual salary basis, and bonuses or similar awards for
personal services rendered in a position that is not under the scope of a labor
agreement. Compensation items listed in the Summary Compensation Table covered
by the Pension Plans are base salary and bonus as well as, in the case of
Messsrs. Snow and Carpenter, the value of the restricted shares issued under the
Stock Agreements described under "Contractual Obligations." In the case of
employees who took their bonus in Company stock, as explained in Note 2 to the
Summary Compensation Table, the amount of the bonus for Pension Plan
computations is the cash value of the bonus prior to addition of the premium for
receipt of the bonus in stock.
The average compensation during the five consecutive years of highest pay
covered by the Pension Plans for Messrs. Snow, Carpenter and Conway (which
include amounts creditable under the Stock Agreements and the Conway Agreement)
currently is $4,043,767, $2,493,490 and $613,114, respectively. The Conway
Agreement provides Mr. Conway a 15 percent pension enhancement over his benefits
under the Pension Plan.
The benefits are computed at the time of retirement under a defined benefit
formula based on years of service and average salary and bonus for the highest
60 consecutive months of service. The formula also takes into account retirement
benefits under the Social Security Act and Railroad Retirement Act attributable
to service by the participant for the employer. The Pension Plans provide for
retirement from active employment commencing at age 60 without diminution of
benefits. Retirement from active employment beginning at age 55 is permitted
with reduced pension payments. Certain participants in the Pension Plans may be
eligible to receive an additional year of unfunded credit for each year of
actual
15
service beginning at age 45 and, in certain instances, such credit for periods
prior to employment by CSX or its subsidiaries, with a 44-year maximum of total
service.
The Pension Plans permit the Chief Executive Officer and other key
executives named by him to take the unfunded portion of their pensions in a lump
sum payment. The amount of the payment is calculated on an actuarial present
value, using an interest rate set periodically by the Pension Committee, which
currently is five percent. Mr. Carpenter, who was for acturarial purposes 59
years old as of the date of his retirement, has elected to take his unfunded
pension benefit in a lump sum.
As of December 29, 2000, the individuals named in the Summary Compensation
Table had the following credited years of service: Mr. Snow, 44 years; Mr.
Carpenter, 44 years; Mr. Goodwin, 44 years; Mr. Grassi, 24 years; Mr. Conway,
38.5 years; and Mr. Aron, 44 years.
The amounts in the table have not been restricted to those within the
maximum annual retirement benefit that is currently permissible under the
Internal Revenue Code, which is $135,000 for 2001. Also, in calculating a
participant's benefit, annual compensation in excess of a limit set annually by
the Secretary of the Treasury may not be considered. That limit is $170,000 for
2001. Pension amounts in excess of such limitations are payable from the
non-qualified Special and Supplemental Plans, which are not funded.
* * * * * * * * * * * * * * * *
Comparison of Five-Year Cumulative Total Return*
CSX Corporation, S&P 500, Dow Jones Transportation Average
Cumulative Total Return
---------------------------------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
CSX CORPORATION 100.00 94.58 123.39 97.26 75.59 65.75
S & P 500 100.00 122.96 163.98 210.84 255.22 231.98
DOW JONES TRANSPORTATION AVERAGE 100.00 114.84 170.05 165.88 158.39 159.02
* CSX Corporation, S&P 500, Dow Jones Transportation Average
$100 Invested on December 31, 1995, in stock or index - including
reinvestment of dividends.The graph depicts prices for years ending
December 31 for CSX Corporation, rather than the Company's fiscal
year-end, in order to be consistent with the S&P 500 and Dow Jones
Transportation Average year-end valuations.
Source: Research Data Group, Inc.
16
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
This report describes the philosophy, objectives and components of the
Company's executive officer compensation program and the manner in which
compensation determinations for 2000 were made for the Company's Chief Executive
Officer, Mr. John W. Snow, and other executive officers, including the executive
officers whose compensation is reported in the Summary Compensation Table of
this Proxy Statement (the "Named Executive Officers").
The Compensation Committee (the "Committee") of the Company's Board of
Directors is composed of the directors named below, none of whom is an officer
or employee of the Company, and all of whom are "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code. The Committee is
responsible for setting and administering the Company's compensation philosophy,
objectives and policies, and for establishing and administering compensation
plans and programs for executive officers of the Company. Based on
recommendations of the Committee, the Board is responsible for approving the
compensation for the Chief Executive Officer.
Overall Compensation Philosophy and Objectives
The Company's executive compensation programs are designed to provide
competitive annual and long-term compensation and to encourage executive
officers to focus on maximizing shareholder value through superior performance.
The programs are based on the philosophy that the financial interests of the
Company's executive officers should be aligned closely with those of its
shareholders and that overall compensation should be linked to the sustained
short-term and long-term performance of the Company, of individual business
units of the Company, and of the individual executive officer.
Accordingly, the Company's executive compensation programs are structured
and administered applying the following principles:
. Competitiveness. Consistent with the Company's performance, total
compensation for executive officers is targeted to produce pay
competitive with the total compensation paid by a comparison group of
companies that compete for executives of similar talent, including
several direct competitors. The Committee believes that providing
competitive total compensation opportunities for executive officers is
an important element in the Company's ability to attract and retain
motivated and effective executives.
In determining executive officer compensation for 2000, the Committee
used market data regarding the compensation paid for similar positions by
44 other companies with annual revenues ranging from $6 billion to $10
billion, as provided through a survey conducted by a nationally recognized
independent compensation consulting firm. These comparison companies
included five companies which, like the Company, form part of the Dow Jones
Transportation Average (described in the Performance Graph included in this
Proxy Statement), and which can be expected to compete directly with the
Company for employees, investors and business. Since the job market for the
Company's executives is not limited to the Company's industry, and since
the Company's most direct competitors for executive talent are not
necessarily all of the companies that would be included in a peer group
established to compare shareholder returns, the "comparison group" is not
the same as the peer group index in the Comparison of Five Year Cumulative
Total Return graph included in this Proxy Statement.
. Performance Based. A substantial portion of the total compensation
package for executive officers is at risk and consists of
performance-based cash and equity incentives that link executive
compensation to Company, business unit and individual performance.
Performance incentives provide rewards for achieving strong operating
and financial performance, motivate executive officers and encourage a
dedicated focus on building value for shareholders.
. Aligned with Interests of Shareholders. A significant portion of each
executive officer's total compensation is linked directly to the
achievement of specific, measurable performance results which are
intended to create both short-term and long-term value for the
shareholders. In addition, executive officers are expected to acquire
and hold significant amounts of the Company's stock. At year-end, CSX
executives and employees owned directly or beneficially approximately
22 million shares, which is approximately ten percent of all shares
outstanding.
17
Components of Compensation
The total compensation package for executive officers during 2000 was
composed of three key elements:
. Base Salary
. Short-Term Incentives
. Long-Term Incentives
In establishing and administering each of these components, the Committee
considers: (1) current market data regarding the compensation paid for similar
positions by the comparison companies, and (2) achievement against Company,
business unit and individual performance objectives that are established for
each performance period by the Committee. The Committee's intent is to provide
total compensation packages for executive officers approximating the 55th to
65th percentile of the total compensation paid for similar positions by the
comparison companies, when competitive performance results are achieved.
In 1999 and 2000, the Committee reviewed its compensation programs and
determined that a number of Company programs were no longer serving their
intended purpose. As a result, a number of programs were terminated or amended
as described below.
Base Salary
The Committee determines a salary for each Named Executive Officer and
certain other executive officers based upon the Committee's assessment of the
individual's performance and contribution to the Company's objective performance
goals. Base salaries for 2000 generally were targeted to be at approximately the
50th percentile of salaries paid for similar positions by the comparison
companies. Historically, base salaries of executive officers have been reviewed
throughout the year, with adjustments typically occurring every 15 to 24
months, as appropriate in light of then-current market data for the comparison
companies. Individual executive performance and the executive's contributions to
the Company are also considerations. Prospectively, the Committee will review
all executive officer salaries in February of each year based upon the same
criteria, although the review may not necessarily result in salary adjustments.
Except for Mr. Goodwin, who received an increase in base salary upon his
promotion to Vice Chairman of the Company, none of the Named Executive Officers
received an increase in base salary during 2000.
Short-Term Incentives
The short-term compensation incentives available for executive officers of
the Company are composed of annual cash incentive bonuses and, in certain
circumstances, additional discretionary cash bonuses in recognition of
exceptional contributions and performance. These short-term incentives are
established and awarded with the objective of bringing total annual cash
compensation (base salary plus bonus) to approximately the 75th percentile of
the comparison companies, assuming achievement of target performance levels.
Named Executive Officers are awarded annual cash incentive bonuses under
the Company's shareholder-approved Senior Executive Incentive Plan ("SEIP")
based on Company operating income results. The Committee has the authority, in
its sole discretion, to make downward adjustments to bonus awards under the SEIP
to reflect (1) the impact of unplanned events, (2) performance below other
financial or strategic objectives (including earnings per share, the Company's
operating ratio, operating income and cash available to the Company, and the
performance of the Company's subsidiaries), and (3) an executive's individual
performance based on such factors as the Committee deems appropriate.
For 2000, the formula for annual cash incentive payout based upon operating
income would have resulted in an award of an annual cash incentive bonus to each
of the Named Executive Officers. However, after considering other performance
factors, Mr. Snow and senior management recommended that the Committee eliminate
such awards for all executive officers except Mr. Grassi. Based upon the
performance of CSX World Terminals LLC, where the business unit achieved $71.0
million in operating income, exceeding its performance target, the Committee
approved an incentive payment of $270,000 for Mr. Grassi and exercised its
discretion under the SEIP to make downward adjustments, declining to pay any
annual cash incentive bonuses except to Mr. Grassi.
18
Other executive officers are awarded annual cash incentive bonuses under
the Company's Management Incentive Compensation Plan ("MICP"), based on the
Committee's evaluation of the executive's performance and such other objective
measures and subjective factors as the Committee deems appropriate. No executive
officer received a cash incentive bonus under the MICP in 2000.
Long-Term Incentives
The long-term compensation incentives available for executive officers of
the Company are composed primarily of equity-based incentive awards. In 2000,
those could be awarded under the 1987 Long-Term Performance Stock Plan (the
"1987 Plan") or the CSX Omnibus Incentive Plan (the "COIP"), including stock
options, cash unit awards, restricted stock, and other equity-based awards.
The primary form of long-term incentive compensation provided to the Named
Executive Officers is non-qualified stock options, where the executive only
gains from the award when shareholders gain. In addition, Named Executive
Officers participate in a long-term cash plan. Compensation from the long-term
cash plan is based on Company total return to shareholders (equity appreciation
plus the value of reinvested dividends) compared to an external rail peer group
over a three-year period and Company improvement in earnings per share over a
three-year period compared to internal performance targets. In 2000, awards
under the long-term cash plan were made to all Named Executive Officers, except
Mr. Grassi, for the 2000-2002 performance period.
The long-term incentive compensation opportunity granted to each executive
officer, including Named Executive Officers, is based upon individual executive
performance and impact on the Company and competitive market grant levels for
similar positions made by the comparison companies. The stock option and cash
unit awards help link the long-term interests of executive officers with those
of shareholders.
In 2000, the Committee approved the grant of stock options, based on the
criteria described above, to the Named Executive Officers, except Mr. Conway.
These grants are set forth in the table entitled "Option/SAR Grants in Last
Fiscal Year." The Committee also recommended, and the Board approved, grants of
stock options to executive officers other than Named Executive Officers and
approximating 380 other key employees in 2000. In 2000, the Committee also
approved the award of cash units based on the criteria described above to all
Named Executive Officers, except Mr. Grassi and Mr. Conway. These grants are set
forth in the table entitled "Long-Term Incentive Awards." The Compensation
Committee concluded that the stock option and cash unit grants were appropriate
for the purpose of insuring executive officer retention and providing incentives
during the integration resulting from the Conrail acquisition.
In 1998, the Company established the Market Value Cash Plan (the "Cash
Plan") to allow participants to receive current cash payments based on sustained
increases in the market price for the Company's Common Stock. The Named
Executive Officers and most of the executive officer group elected to waive
their rights to certain benefits available to them under the Company's Stock
Purchase and Loan Plan ("SPLP") in order to participate in the Cash Plan. Under
the Cash Plan, participants were awarded units that are used to determine the
cash amount to be paid when each of a series of predetermined Company stock
price targets are met and sustained for a period of at least 15 business days.
During 2000, the performance targets were not met. Accordingly, no payments were
made under the Cash Plan during 2000. No further awards under the Cash Plan are
expected. Outstanding awards under the plan expire in 2003.
Other 2000 Committee Actions
From the period 1988 through 1999, the Company awarded executives and a
broad group of key executives and managers participation in the Company's
Performance Share Plan. Based upon an extensive review of Company pay practices
conducted in 1999 by two nationally recognized external consulting firms, the
Committee determined the plan was not serving its intended purpose, and no
further awards were granted under the plan. In 2000, the Committee determined
that the best interests of the Company, its employees and its shareholders would
be served by allowing recipients of outstanding awards which were for the
periods 1998-2000 and 1999-2001 to surrender their awards voluntarily in
exchange for a cash amount approximating the expected future value of the
awards. The amounts received by each of the Named Executive Officers as a result
of this surrender of awards and cancellation of the plan are included in the
Summary Compensation Table.
19
Under the SPLP, as established in 1991, certain officers could purchase
shares of CSX common stock at fair market value on offering dates in 1991, 1992,
1996 and 1997. Each provided a down payment that remained at risk. A portion of
the value used for down payment was provided through a full recourse loan from
CSX. The balance of the purchase price was satisfied through non-recourse loans
provided by CSX and secured by the shares purchased. Loan interest was set at
the Applicable Federal Rate in effect at the time the loans were issued.
Participants were to pay the balance due on the loans between July 31, 2001, and
August 1, 2003.
Upon review of the plan, the Committee determined that the arrangement was
no longer providing an incentive for executives. Consequently, executives were
allowed, on a voluntary basis, to surrender their interests in the SPLP in
exchange for forgiveness of the outstanding loans. For executives leaving the
SPLP, any down payment was returned, and the tax consequences of the loan
forgiveness were addressed through a tax offset payment. The taxable income to
each of the Named Executive Officers as a result of this surrender of shares and
loan forgiveness is also included in the Summary Compensation Table.
Stock Ownership Guidelines for 2000
In addition to long-term incentive awards, the Committee believes that, to
link the interests of executive officers to those of the Company's shareholders,
it is also necessary to require that executive officers own a significant amount
of the Company's stock. As a result, the Committee has adopted the following
formal stock ownership guidelines:
Position Equivalent Minimum Aggregate Value
-------------------------------------------------------------
Chief Executive Officer 6 times base salary
Vice Chairmen, Business 4 times base salary
Unit Presidents and
Executive Vice Presidents
Senior Vice Presidents 3 times base salary
Vice Presidents 2 times base salary
Assistant Vice Presidents/ 1 times base salary
General Managers and Equivalent
These guidelines are generally at or above the stock ownership guidelines
of the comparison companies. As of December 29, 2000, each Named Executive
Officer owned more than the required amount of the Company's stock, as did all
the executive officers who have more than four years of Company service.
2000 Compensation for the Chief Executive Officer
For 2000, the Company's most highly compensated executive was John W. Snow,
Chairman, President, and Chief Executive Officer. Mr. Snow's 2000 performance
was reviewed by the Committee and discussed with the non-employee directors of
the Company and Mr. Snow. The Committee's recommendations to the Board
concerning the annual and long-term components of Mr. Snow's compensation were
based on the considerations discussed below, all of which were accepted without
modification by the Board. The performance and other factors on which Mr. Snow's
2000 compensation were based are the same as described for all executive
officers pursuant to the executive compensation strategy described earlier in
this report and Proxy Statement. Mr. Snow is eligible to participate in the same
compensation plans available to other Named Executive Officers of the Company.
The Committee considered financial and strategic results of the Company in
2000. While the financial performance of CSX was disappointing, the Committee
believes that Mr. Snow was successful at completing the difficult and complex
integration of Conrail and initiating a turnaround in the operational
performance of the consolidated organization. Further, Mr. Snow enhanced the
Company's financial position by arranging the sale of CTI Logistx, Inc. ("CTI"),
a logistics subsidiary. That transaction continued the effort initiated in 1999
of refocusing the Company in its primary freight transportation business.
Mr. Snow also is a leader in the U.S. transportation industry. The Committee
believes Mr. Snow plays a critical role in ensuring that regulatory and
legislative initiatives take into account the Company's business and policy
objectives. Mr. Snow was Chairman of the Board of Directors of the Association
of American Railroads for the year 2000.
20
Based upon the Committee's review of external pay practices and its
assessment of individual and Company performance, Mr. Snow did not receive an
increase in base salary in 2000.
Under the SEIP, operating income performance of the Company would have
resulted in the award of an annual cash incentive bonus for 2000 for Mr. Snow.
However, after considering the overall performance of the Company, Mr. Snow
recommended that the Committee eliminate such an award. The Committee concurred
in the recommendation, exercised its discretion to make downward adjustments
under the SEIP, and declined to pay Mr. Snow an annual cash incentive bonus.
Based upon Mr. Snow's contribution to the Company described above, the
Committee approved a long-term incentive award for the Chairman and Chief
Executive Officer comprised of non-qualified stock options and cash units issued
under the CSX Omnibus Incentive Plan. The combined present value of the award is
intended to provide an opportunity for future gain that is competitive and
reflective of Mr. Snow's contribution to the organization. The combination of
salary, annual incentives and the present value of long-term incentives is
intended to provide Mr. Snow with total direct compensation approximating the
55th to 65th percentile of total direct compensation paid to the chief executive
officers by the comparison companies.
The Stock Agreements of Messrs. Snow and Carpenter required them to
purchase, at their own expense, an amount of stock equivalent to restricted
shares granted to them pursuant to those agreements. To ensure continued
availability of commercial financing for those share purchases, the Board
determined it advisable to guaranty Messrs. Snow's and Carpenter's loan
obligations to Bank of America.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on
the amount that the Company may deduct for compensation paid to the Chief
Executive Officer or any Named Executive Officer who is employed on the last day
of the year. However, "performance-based compensation," paid pursuant to a plan
that has been approved by shareholders, is excluded from the $1 million limit
if, among other requirements, the compensation is payable only upon attainment
of pre-established objective performance goals and the Board committee that
establishes such goals consists only of "outside directors" (as defined for
purposes of Section 162(m)). The SEIP and the COIP have been approved by the
shareholders of the Company.
The Committee and the Board have considered these requirements. While the
tax impact of any compensation arrangement is one factor to be considered, such
impact is evaluated by the Committee and the Board in light of the Company's
overall compensation philosophy and objectives. The Company's compensation
program for Named Executive Officers has both objective and discretionary
elements. Generally, the Committee wishes to maximize the Company's federal
income tax deductions for compensation expense and has therefore structured the
short-term and long-term incentive elements of executive compensation to meet
the requirements for deductibility under Section 162(m). However, the Committee
and the Board believe that there are circumstances where the provision of
compensation that is not fully deductible may be more consistent with the
compensation philosophy and objectives of the Company and/or may be in the
Company's and its shareholders' best interests. The Committee's ability to
exercise discretion and to retain flexibility in this regard may in certain
circumstances outweigh the advantages of qualifying compensation as deductible
under Section 162(m).
21
The Committee believes that the compensation of executive officers has
been appropriately structured and administered so that a substantial component
of total compensation is dependent upon, and directly related to, the Company's
performance and total returns to its shareholders.
Compensation Committee
Charles E. Rice, Chairman
Bruce C. Gottwald
John R. Hall
Robert D. Kunisch
Frank S. Royal, M.D.,
the entire Committee
Richmond, Virginia
February 13, 2001
2. APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As recommended by the Audit Committee, the Board of Directors designated,
subject to ratification by the shareholders, the firm of Ernst & Young LLP as
independent auditors to audit and report on CSX's financial statements for the
fiscal year 2001. Action by shareholders is not required by law in the
appointment of independent auditors, but their appointment is submitted by the
Board in order to give shareholders the final choice in the designation of
independent auditors.
Ernst & Young LLP has no direct or indirect financial interest in CSX or in
any of its subsidiaries, nor has it had any connection with CSX or any of its
subsidiaries in the capacity of promoter, underwriter, voting trustee, director,
officer or employee. Representatives of Ernst & Young LLP will be present at the
meeting of shareholders and will be afforded an opportunity to make a statement
if they desire to do so. It also is expected they will be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR this proposal.
3. APPROVAL OF THE CSX 2001 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted the 2001 Employee Stock Purchase Plan
(the "Plan"), subject to approval by CSX shareholders. The Plan provides a means
for CSX employees to authorize payroll deductions on a voluntary basis to be
used for the periodic purchase of CSX stock. All employees participating in the
Plan will have equal rights and privileges. Under the Plan, eligible
participants will be able to purchase shares at a price equal to 85 percent of
the fair market value of CSX stock at either the beginning of an offering
period or at the end of the offering period, whichever is less. The Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors believes that the Plan will encourage broader stock
ownership by employees of CSX and thereby provide an incentive for employees to
contribute to the continued profitability and success of CSX. In particular, the
Board intends that the Plan offer a convenient means for employees who might not
otherwise purchase and hold CSX common stock to do so and that the discounted
sale feature of the Plan provide a meaningful inducement to participate.
The Board believes that employees' continuing economic interest, as
shareholders, in the performance and success of CSX will enhance the
entrepreneurial spirit of CSX, which can greatly contribute to long-term
profitability.
Summary of Plan
The following is a description merely of the material features of the Plan.
The full Plan is set forth as Appendix B to this Proxy Statement, and the
following is qualified in its entirety by reference to Appendix B.
22
The maximum number of shares that may be purchased under the Plan is 1.6
million shares, subject to appropriate adjustment in the case of any stock
split, stock dividend, reclassification, or similar extraordinary corporate
event affecting CSX stock. Shares delivered under the Plan can be either
previously unissued shares or shares acquired by CSX in the open market.
The Plan will be administered by a committee of directors appointed by the
Board of Directors (the "Committee"). The Committee will have authority to
interpret the Plan, construe its terms, adopt rules and regulations, prescribe
forms, and make all determinations under the Plan.
Effectively, any full-time employee of CSX or any designated subsidiary
will be eligible to participate in the Plan. Full-time employees are employees
whose customary employment with CSX or any designated subsidiary is more than 20
hours per week and more than five months per year. Approximately 44,000 CSX
employees currently could be eligible to participate.
An eligible employee may enroll for an offering period by filing an
enrollment form with CSX at least 45 days before the period commences. After
initial enrollment in the Plan, the employee will be automatically re-enrolled
in the Plan for subsequent offering periods unless he or she files a notice of
withdrawal before a new offering period begins, terminates employment, or
otherwise becomes ineligible to participate.
Upon enrollment in the Plan, the employee must elect the rate at which he
or she will make payroll contributions for the purchase of CSX stock. Elections
can be in an amount not less than $25 per month, although an employee's
contributions will be adjusted downward to the extent necessary to ensure that
he or she will not purchase CSX stock having a fair market value, as of the
beginning of the offering period, in excess of $25,000 in any single calendar
year. The maximum number of shares that can be purchased each year is 2,500.
All employee contributions will be made by means of direct payroll deduction.
The contribution rate elected by a participant will continue in effect until
modified by the participant, except that an employee may not increase his or
her previously elected contribution rate during an offering period and, unless
otherwise authorized by the Committee, may elect to decrease his or her
previously elected contribution rate no more than once during a given offering
period. No additional contributions are permitted by a participant during a
given offering period if his or her contribution rate is reduced to zero.
An employee's contributions will be credited to an account maintained on
behalf of such employee. The Plan provides that the initial "offering period"
means the approximately one-year period commencing on the first trading day
after December 1 and terminating on the last trading day in the following
November, except that the initial offering period under the Plan will commence
December 1, 2001 (or as soon as practicable thereafter) and terminate on
November 30, 2002. The Committee may change the beginning date, ending date, and
duration of offering periods on a prospective basis, provided that offering
periods will in all cases comply with applicable limitations under Section 423
of the Code.
As described above, CSX will sell shares directly to the custodian for
employees' accounts at a price equal to the lesser of 85 percent of the fair
market value of CSX stock at the beginning of the offering period or 85 percent
of the fair market value of CSX stock at the end of the offering period. Shares
purchased under the Plan will be credited to the accounts maintained by the
custodian for each participant based upon the average cost of all shares
purchased. No interest will be credited on payroll contributions pending
investment in CSX stock. Dividends paid on CSX stock credited to participants'
accounts will be automatically reinvested in additional shares by the custodian,
either through purchases in the market or directly from CSX (no discounts will
apply to such dividend reinvestment purchases).
Participants will have the exclusive right to vote or direct the voting of
shares credited to their accounts, and will be permitted to withdraw, transfer,
or sell their shares without restriction. Participants' rights under the Plan
are nontransferable except pursuant to the laws of descent and distribution.
A participant may terminate enrollment in the Plan at any time, effective
for payroll periods or offering periods beginning after the filing of a notice
of termination of enrollment. Enrollment will also terminate upon termination of
a participant's employment by CSX or one of its subsidiaries. The custodian
will continue to hold CSX common stock for the account of such a participant
until the participant sells or withdraws the common stock, but in no event more
than one year after the participant ceases to be employed. No refunds from a
participant's cash account are permitted except upon termination of enrollment
due to termination of employment.
23
In the event of a change in control of CSX, the Committee administering the
Plan must set a new date to exercise the option. The New Exercise Date must be
at least 10 days prior to the date that will constitute the change in control as
defined in the Plan.
CSX will pay costs and expenses incurred in the administration of the Plan
and maintenance of accounts, and will pay brokerage fees and commissions for
purchases. CSX will not pay brokerage fees and expenses relating to sales of
stock acquired under the Plan by participants, and participants may be charged
reasonable fees by the custodian for withdrawals of share certificates and
other specified services. The custodian will be responsible for furnishing
account statements to participants.
The Board of Directors may amend, alter, suspend, discontinue, or terminate
the Plan without further shareholder approval, except that shareholder approval
must be obtained within one year after the effectiveness of such action if
required by law or regulation or under the rules of any automated quotation
system or securities exchange on which CSX common stock is then quoted or
listed, or if such shareholder approval is necessary in order for the Plan to
continue to meet the requirements of Section 423 of the Code. Shareholder
approval will not necessarily be required for amendments that might increase the
cost of the Plan or broaden eligibility. The Plan will continue until terminated
by action of the Board, although as noted above the number of shares authorized
under the Plan is limited.
On March 9, 2001, the last reported sale price of CSX common stock on the
New York Stock Exchange was $33.33 per share.
Federal Income Tax Consequences
Rights to purchase shares under the Plan are intended to constitute
"options" issued pursuant to an "employee stock purchase plan" within the
meaning of Section 423 of the Code. CSX believes that under present law the
following Federal income tax consequences would generally result under the Plan:
(1) No taxable income results to the participant upon the grant of a right
to purchase or upon the purchase of shares for his or her account
under the Plan (although the amount of a participant's payroll
contributions under the Plan will be taxable as ordinary income as if
received by the participant).
(2) If the participant disposes of shares within two years after the first
day of an offering period with respect to which he or she purchased
the shares or within one year after the purchase date, then at that
time the participant will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date
of purchase over the amount of the participant's payroll deductions
used to purchase the shares. The participant will be considered to
have disposed of a share if the participant sells, exchanges, makes a
gift or transfers (except by death) legal title to the share.
(3) If the participant (i) disposes of shares more than two years after
the first day of an offering period with respect to which he or she
purchased the shares and more than one year after the purchase date,
or (ii) dies at any time while holding shares acquired under the Plan,
then at the time the participant disposes of the shares he or she will
recognize ordinary income in an amount equal to the lesser of (x) the
fair market value of the shares on the first day of the offering
period, and (y) the excess of the fair market value of the shares on
the date of disposition or death over the amount of the participant's
payroll deductions used to purchase the shares.
(4) In addition, the participant will recognize a long-term or short-term
capital gain or loss, as the case may be, in an amount equal to the
difference between the amount realized upon any sale of CSX common
stock and the participant's basis in the common stock (i.e., the
purchase price plus the amount, if any, taxed to the participant as
ordinary income, as described in (2) and (3) above).
(5) If the holding periods described in (2) and (3) above are satisfied,
CSX will not receive any deduction for Federal income tax purposes
with respect to any discount in the sale price of shares purchased
under the Plan. If either of the holding periods is not satisfied, CSX
generally should be entitled to a tax deduction in an amount equal to
the amount taxed to the participant as ordinary income.
(6) Dividends, if any, on shares purchased pursuant to the Plan will be
taxable as ordinary income in the year paid.
24
The foregoing provides only a general description of the application of
Federal income tax laws to the Plan and does not purport to be complete. The
summary does not address the effects of other Federal taxes or taxes imposed
under state, local, or foreign tax laws. Because of the complexities of the tax
laws, participants are urged to consult a tax advisor as to their individual
circumstances.
The Board of Directors recommends a vote FOR this proposal.
4. SHAREHOLDER PROPOSAL REGARDING CHANGE IN CONTROL EMPLOYMENT AGREEMENTS
The Amalgamated Bank of New York Long View Collective Investment Fund has
submitted the following proposal and statement in support.
"RESOLVED: The shareholders of CSX Corporation ("CSX" or the "Company")
urge the Board of Directors to obtain prior shareholder approval for all future
agreements that provide compensation for senior executives if there is a change
in control of the Company."
SUPPORTING STATEMENT
"CSX has entered into employment agreements with Chief Executive Officer
John W. Snow and several other senior officers, which agreements provide these
officers with special severance compensation in certain situations where there
is a change in control of the Company.
These severance agreements, commonly known as "golden parachutes," provide
that if the affected officers resign or are terminated under circumstances
covered by the employment agreement, these officers are entitled to receive--
-- three times the sum of their base salary;
-- three times the sum of their highest annual bonus;
-- the continuation of employee welfare benefits; and
-- an additional payment to compensate them for certain excise taxes
imposed on certain change in control payments.
CSX's golden parachute agreements were adopted without the approval of
shareholders, and we believe that shareholders should be able to vote on such
agreements in the future, as a means of assessing potential conflicts of
interest between executives and shareholders.
In our view, golden parachutes have the potential to create the wrong
incentives, reduce shareholder value and reward mismanagement. A change in
control scenario is more likely to occur if executives have managed the company
in ways that do not maximize shareholder value, and the existence of golden
parachutes can allow covered executives to walk away with millions of dollars
even if shareholder value has suffered during their tenure.
And shareholder value has suffered at CSX in recent years. During the
five-year period ending in mid-November 2000, the Company's stock price has
declined by 40% while the S&P 500 index has risen 140%.
We believe that shareholders should have the opportunity to review golden
parachute arrangements in the future.
We urge you to vote FOR this resolution."
MANAGEMENT RESPONSE
CSX has employment agreements that provide compensation for certain
officers in the event of a change in control and subsequent loss of their jobs.
Should there be an actual or potential change in control of the Company,
protecting and enhancing shareholder value is paramount. The employment
agreements have important incentive retention features to ensure that key
managers do not leave the Company's employment during a sensitive and important
time.
25
The retention features of the agreements operate in two important ways.
First, they free key officers and managers from concern about immediate loss of
employment and income. In order to complete a merger successfully or to thwart
an offer that does not appropriately benefit shareholders, it is important to
retain these key employees and keep them focused on their jobs at such a crucial
juncture.
Furthermore, CSX's agreements are tailored for the circumstances of a
regulated company. The agreements provide no benefits until regulatory approval
is granted and the change in control is complete. CSX's principal business unit
is its railroad company, CSX Transportation, Inc. Railroads are regulated
businesses, and, unlike many other businesses, any merger or change in control
process has two crucial steps. First, a corporate approval, including any
shareholder approvals, if required, must occur. Second, approval by the federal
Surface Transportation Board must be obtained, a process which takes
approximately 16 months. Failure to ensure that key managers remain with the
Company during this period to keep all functions and operations going would
expose shareholders to business risks which could diminish shareholder value.
The Board of Directors recommends a vote AGAINST this proposal.
ADDITIONAL INFORMATION
Voting Procedures
Votes are tabulated by three Inspectors of Election. The Company's bylaws
provide that a majority of the outstanding shares of stock entitled to vote
constitute a quorum at any meeting of shareholders. In accordance with the law
of Virginia, the Company's state of incorporation, and the Company's bylaws,
directors are elected by a plurality of votes cast by the shares entitled to
vote at a meeting at which a quorum is present. For all other proposals,
abstentions and broker "non-votes" are not considered to be voting "for" or
"against" any proposal or any person nominated for director. The affirmative
vote of the majority of shares represented at the meeting and entitled to vote
will be required for approval of all other items.
Date for Receipt of Shareholder Proposals
Shareholder proposals for inclusion in the Proxy Statement for the 2002
Annual Meeting of Shareholders must be received at the principal executive
offices of CSX on or before November 26, 2001. If CSX Corporation does not
receive notice at its principal executive offices on or before January 25, 2002,
of a shareholder proposal for consideration at the 2002 Annual Meeting of
Shareholders, the proxies named by the CSX Board of Directors with respect to
that meeting shall have discretionary voting authority with respect to that
proposal.
Solicitation of Proxies
The cost of soliciting proxies is being paid by CSX. In addition to
solicitation by mail, officers and regular employees of CSX, for no additional
compensation, may request the return of proxies by personal conversations or by
telephone or telecopy. It also is expected that, for a fee of $12,500 plus
reimbursement of certain out-of-pocket expenses, additional solicitation will be
made by personal interview, telephone or telecopy under the direction of the
proxy solicitation firm of MacKenzie Partners, Inc., 156 Fifth Avenue, New York,
New York 10010.
March 26, 2001
By Order of the Board of Directors
Alan A. Rudnick
Vice President-General Counsel and Corporate Secretary
26
Appendix A
CSX Corporation
Charter of the Audit Committee
The Audit Committee's ("Committee") primary functions are to monitor and to
review, on behalf of the Board of Directors: the Corporation's financial reports
and financial reporting structure; its internal control structure regarding
finance, accounting, and financial reporting; and compliance with law and
ethical policies. The Audit Committee reports to the full Board of Directors on
all matters within the Committee's purview.
The Committee shall be composed of no fewer than three directors, each of
whom is independent of the management of the Corporation and is free of any
relationship that would interfere with or otherwise impair his or her exercise
of independent judgment as a Committee member. Each member of the Committee
shall have a working understanding of corporate financial statements. The
Board of Directors shall determine the qualification of each Committee member.
The independent auditors shall be responsible to the Board of Directors and
shall report directly to the Committee, as the Board's representative, on all
matters pertaining to its engagement. The Committee shall encourage open
communication among the Committee, independent auditors, internal auditors, and
Corporation management regarding matters within the Committee's purview. The
Committee shall establish a calendar incorporating regular reporting items which
it requires from independent auditors, internal auditors, and management during
the year.
In carrying out its responsibilities:
1. The Committee annually will review the independent auditors and shall
recommend to the Board the firm of independent auditors to be employed
to conduct the annual financial audit. The Committee will review all
compensation and fees paid to the independent auditors for audit and
non-audit work. The Committee will require the independent auditors to
review with the Committee any non-audit assignments and fees incurred,
and will assess any impact on the independence of such auditors as a
result of non-audit assignments. Neither the Corporation nor its
subsidiaries shall employ the independent auditors' firm to perform
non-audit work which itself may be subject to audit by the same firm.
2. In advance of each fiscal year, the Committee will meet with the
independent auditors, internal auditors and the Corporation's senior
management to review the scope and methodology of the proposed audits
for such fiscal year. Independent auditors and internal auditors shall
provide regular reports to the Committee during the year on the
underlying process and status of their audits and any findings or
preliminary conclusions that have been reached.
3. Management and the independent auditors shall review with the
Committee the Corporation's annual financial statements. Throughout
the year, the independent auditors shall review with the Committee
their assessment as to the adequacy of the Corporation's structure of
internal controls over financial accounting and reporting, and their
qualitative judgments as to accounting principles employed by the
Corporation and the conclusions expressed in the Corporation's
financial reports. The independent auditors shall review with the
Committee significant judgments made by management in the preparation
of the financial statements.
4. The independent auditors, internal auditors, and legal affairs
management shall identify to the Committee significant business,
financial, or legal issues which may significantly impact the
Corporation's financial statements and internal control systems. At
least annually, management shall report to the Committee as to all
significant litigation in which the Corporation and its subsidiaries
are engaged, as well as the anticipated impact of such litigation on
the Corporation.
5. The independent auditors shall identify to the Committee any areas of
disagreement with management in the preparation of financial
statements.
6. As needed, the Committee will receive reports as to material
violations of the Corporation's Code of Ethics and other compliance
responsibilities. At least annually, management shall review with the
Committee the Corporation's monitoring of the Code of Ethics and
procedures to ensure compliance with laws and governmental
regulations.
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7. Both the independent auditors and internal auditors shall report as
soon as possible to the Committee any material weaknesses in internal
control systems.
8. At all meetings of the Audit Committee, the independent auditors shall
have the opportunity to meet with the members of the Committee without
members of management present.
9. The Committee shall also be responsible for approving, as may be
required by the New York Stock Exchange ("NYSE"), any related party
transactions.
10. The Audit Committee shall have available to it such support personnel,
including management staff, outside auditors, attorneys, and
consultants, as it deems necessary to discharge its responsibilities.
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Appendix B
CSX Corporation
2001 Employee Stock Purchase Plan
1. Purpose.
The purpose of this 2001 Employee Stock Purchase Plan (the "Plan") is
to provide employees of CSX Corporation (the "Company") and its Designated
Subsidiaries with an opportunity to purchase Stock of the Company through
accumulated payroll deductions, enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's shareholders,
and to provide a benefit that will assist the Company in competing to
attract and retain employees of high quality. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. Accordingly, the provisions of the Plan shall be
construed in a manner consistent with the requirements of that Section of
the Code.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below, in addition to such terms as defined in Section 1 hereof:
(a) "Account" means the account maintained on behalf of the participant by
the Custodian for the purpose of investing in Stock and engaging in
other transactions permitted under the Plan.
(b) "Administrator" means the person or persons designated to administer
the Plan under Section 13(a).
(c) "Board" means the Company's Board of Directors.
(d) "Change in Control" means:
(1) Stock Acquisition. The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more
of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of
this Section 2(d); or
(2) Board Composition. Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Business Combination. Approval by the shareholders of the Company
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or its principal subsidiary (a "Business Combination")
that is not subject, as a matter of law or contract, to
B-1
approval by the Surface Transportation Board or any successor
agency or regulatory body having jurisdiction over such
transactions (the "Agency"), in each case, unless, following such
Business Combination:
(i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be,
of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Company or its
principal subsidiary or all or substantially all of the
assets of the Company or its principal subsidiary either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly
or indirectly, 20 percent or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the Board of
Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(4) Regulated Business Combination. Consummation of a Business
Combination that is subject, as a matter of law or contract, to
approval by the Agency (a "Regulated Business Combination")
unless such Business Combination complies with clauses (i), (ii)
------
and (iii) of subsection (3) of this Section 2(d); or
(5) Liquidation or Dissolution. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company
or its principal subsidiary.
If any Change in Control is a Regulated Business Combination, but its
implementation involves another "Change in Control" that is not a
Regulated Business Combination within the meaning of this Section
2(d), then for all purposes of the Plan, such Change in Control shall
not be deemed to be a Regulated Business Combination, the provisions
governing a Regulated Business Combination shall not apply, and the
provisions governing such other Change in Control shall apply.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, including regulations thereunder and successor provisions and
regulations thereto.
(f) "Committee" means a committee of two or more directors designated by
the Board to administer the Plan.
(g) "Custodian" means a custodian or any successor thereto as appointed by
the Board from time to time.
(h) "Designated Subsidiaries" means the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as
eligible to have their Employees participate in the Plan.
(i) "Employee" means any individual employed by the Company or a
Designated Subsidiary as a Full Time Employee.
(j) "Enrollment Date" means the first day of the next Offering Period.
(k) "Exercise Date" means the last day of each Offering Period.
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(l) "Fair Market Value" means the fair market value of a share of Stock as
determined by the Committee or under procedures established by the
Committee. Unless otherwise determined by the Committee, the Fair
Market Value of Stock as of any given date shall be the average of the
highest and lowest sales price of a share of Stock reported on a
consolidated basis for securities listed on the New York Stock
Exchange for trades on the date as of which such value is being
determined or, if that day is not a Trading Day, then on the latest
previous Trading Day.
(m) "Full Time Employee" means an employee whose customary employment with
the Company or a Designated Subsidiary is more than 20 hours per week
and more than five months per year.
(n) "Offering Period" means the approximately one-year period commencing
on the first Trading Day of December and terminating on the last
Trading Day of the following November. The beginning and ending dates
and duration of Offering Periods may be changed pursuant to Section 4
of the Plan.
(o) "Purchase Price" means an amount equal to 85 percent of the Fair
Market Value of a share of Stock on the Enrollment Date or 85 percent
of the Fair Market Value of a share of Stock on the Exercise Date,
whichever is lower.
(p) "Reserves" means the number of shares of Stock covered by all options
under the Plan which have not yet been exercised and the number of
shares of Stock which have been authorized for issuance under the Plan
but which have not yet become subject to options.
(q) "Stock" means the Company's Common Stock, and such other securities as
may be substituted (or resubstituted) for Stock pursuant to Section
18 hereof.
(r) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations
in the chain.
(s) "Trading Day" means a day on which the New York Stock Exchange is open
for trading.
3. Eligibility.
(a) All Employees (as determined in accordance with Section 2(i) hereof)
of the Company or a Designated Subsidiary on a given Enrollment Date
shall be eligible to participate in the Plan, subject to Section 5(a).
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Employee (or any other person
whose Stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock and/or hold outstanding
options to purchase such stock possessing five percent or more of the
total combined voting power or value of all classes of the capital
stock of the Company or of any Subsidiary, (ii) to the extent that his
or her rights to purchase stock under all employee stock purchase
plans of the Company and its Subsidiaries accrue at a rate which
exceeds $25,000 worth of stock (determined at the fair market value of
the shares at the time such option is granted) for each calendar year
in which such option is outstanding at any time, or (iii) in excess of
2,500 shares of stock for each calendar year in which such option is
outstanding at any time.
(c) All participants in the Plan shall have equal rights and privileges
(subject to the terms of the Plan) with respect to options outstanding
during any given Offering Period.
B-3
4. Offering Periods.
The Plan shall have consecutive Offering Periods with an initial Offering
Period commencing on the first Trading Day in December, 2001 and terminating in
the last Trading Day of November, 2002. The Committee shall have the power to
change the beginning date, ending date and duration of Offering Periods with
respect to future offerings without shareholder approval if such change is
announced at least five days prior to the scheduled beginning of the first
Offering Period to be affected thereafter, provided that Offering Periods will
in all cases comply with applicable limitations under Section 423(b)(7) of the
Code.
5. Participation.
(a) Any person who will be an eligible Employee on a given Enrollment Date
may become a participant in the Plan by completing a subscription
agreement authorizing payroll deductions and filing it with the
Administrator at least 45 days prior to such Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in
Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not less than twenty-five
dollars ($25).
(b) All payroll deductions made for a participant shall be credited to his
or her Account under the Plan. Payroll deductions shall be withheld in
whole dollar increments only, unless otherwise determined by the
Committee. A participant may not make any additional payments into
such Account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions during the Offering Period, by completing and
filing with the Administrator a new subscription agreement authorizing
a change in payroll deduction rate. Unless otherwise authorized by
the Committee, a participant may not change his or her payroll
deduction rate more than once during any Offering Period. The change
in rate shall be effective with the first payroll period following 30
business days after the Administrator's receipt of the new
subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription
agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) The foregoing notwithstanding, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be terminated at such time during any Offering
Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll
deductions accumulated with respect to the Current Offering Period
equals $21,250 (or such other limit as may apply under Code Section
423(b)(8)). Payroll deductions shall recommence at the rate provided
in such participant's subscription agreement (as previously on file or
as changed prior to the re-commencement date in accordance with
Section 6(c)) at the beginning of the next Offering Period which is
scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10 hereof.
(e) The Company or any Designated Subsidiary is authorized to withhold
from any payment to be made to a participant, including any payroll
and other payments not related to the Plan, amounts of withholding and
other taxes due in connection with any transaction under the Plan,
including any disposition of shares acquired under the Plan, and a
participant's enrollment in the Plan will be deemed to constitute his
or her consent to such withholding. At the time of a participant's
exercise of an option or disposition of shares acquired under the
Plan, the Company may require the participant to make other
arrangements to meet tax withholding obligations as a condition to
exercise of rights or distribution of shares or cash from the
participant's Account. In addition, a Participant may be required to
advise the Company of sales and other dispositions of
B-4
Stock acquired under the Plan in order to permit the Company to comply
with tax laws and to claim any tax deductions to which the Company may
be entitled with respect to the Plan.
7. Grant of Option.
On the Enrollment Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Exercise Date of such Offering Period, at the applicable Purchase Price, up
to a number of shares of Stock determined by dividing such Employee's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's Account as of the Exercise Date by the applicable Purchase Price;
provided that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. To the extent not exercised, the option shall expire on the last day of
the Offering Period.
8. Exercise of Option.
Participant's option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of shares subject to
option shall be purchased for such participant at the applicable Purchase Price
with the accumulated payroll deductions in his or her Account. Shares purchased
shall include fractional shares calculated to at least three decimal places,
unless otherwise determined by the Committee. If fractional shares are not to be
purchased for a participant's Account, any payroll deductions accumulated in a
participant's Account not sufficient to purchase a full share shall be
retained in the participant's Account for the subsequent Offering Period,
subject to earlier withdrawal by the participant as provided in Section 10
hereof. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery of Shares; Participant Accounts.
(a) At or as promptly as practicable after the Exercise Date for an
Offering Period, the Company will deliver the shares of Stock
purchased to the Custodian for deposit into the participant's Account.
(b) Cash dividends on any Stock credited to a participant's Account will
be automatically reinvested in additional shares of Stock; such
amounts will not be available in the form of cash to participants. All
cash dividends paid on Stock credited to participants' Accounts will
be paid over by the Company to the Custodian at the dividend payment
date. The Custodian will aggregate all purchases of Stock in
connection with the Plan for a given dividend payment date. Purchases
of Stock for purposes of dividend reinvestment will be made as
promptly as practicable (but not more than 30 days) after a dividend
payment date. The Custodian will make such purchases, as directed by
the Committee, either (i) in transactions on any securities exchange
upon which Stock is traded, otherwise in the over-the-counter market,
or in negotiated transactions, or (ii) directly from the Company at
100 percent of the Fair Market Value of a share of Stock on the
dividend payment date. Any shares of Stock distributed as a dividend
or distribution in respect of shares of Stock or in connection with a
split of the Stock credited to a participant's Account will be
credited to such Account. In the event of any other non-cash dividend
or distribution in respect of Stock credited to a participant's
Account, the Custodian will, if reasonably practicable and at the
direction of the Committee, sell any property received in such
dividend or distribution as promptly as practicable and use the
proceeds to purchase additional shares of Common Stock in the same
manner as cash paid over to the Custodian for purposes of dividend
reinvestment.
(c) Each participant will be entitled to vote the number of shares of
Stock credited to his or her Account (including any fractional
shares credited to such Account) on any matter as to which the
approval of the Company's shareholders is sought. If a participant
does not vote or grant a valid proxy with respect to shares credited
to his or her Account, such shares will be voted by the Custodian in
accordance with any stock exchange or other rules governing the
Custodian in the voting of shares held for customer accounts. Similar
procedures will apply in the case of any consent solicitation of
Company shareholders.
B-5
10. Withdrawal of Payroll Deductions or Shares; Termination of Employment.
(a) If a participant decreases his or her payroll deduction rate to zero
during an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant
delivers to the Administrator a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee for any reason
(including upon the participant's death), he or she shall be deemed to
have elected to withdraw from the Plan and the payroll deductions
credited to such participant's Account during the Offering Period but
not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or
persons entitled thereto under Section 14 hereof, and such
participant's option shall be automatically terminated.
(c) If a participant elects to withdraw shares, one or more certificates
for whole shares shall be issued in the name of, and delivered to, the
participant, with such participant receiving cash in lieu of
fractional shares based on the Fair Market Value of a share of Stock
on the date of withdrawal. If shares of Stock are transferred from a
participant's Account to a broker-dealer or financial institution that
maintains an account for the participant, only whole shares shall be
transferred and cash in lieu of any fractional share shall be paid to
such participant based on the Fair Market Value of a share of Stock on
the date of transfer. A Participant seeking to withdraw or transfer
shares of Stock must give instructions to the Custodian in such manner
and form as may be prescribed by the Committee and the Custodian,
which instructions will be acted upon as promptly as practicable.
Withdrawals and transfers will be subject to any fees imposed in
accordance with Section 10(e) hereof.
(d) Upon a participant's ceasing to be an Employee for any reason, the
Custodian will continue to maintain the participant's Account until
the earlier of such time as the participant withdraws or transfers all
Stock in the Account or one year after the participant ceases to be
employed by the Company and its Subsidiaries. At the expiration of
such one-year period, the assets in participant's Account shall be
withdrawn or transferred as elected by the participant or, in the
absence of such election, as determined by the Committee.
(e) Costs and expenses incurred in the administration of the Plan and
maintenance of Accounts will be paid by the Company, including annual
fees of the Custodian and any brokerage fees and commissions for the
purchase of Stock upon reinvestment of dividends and distributions.
The foregoing notwithstanding, the Custodian may impose or pass
through a reasonable fee for the withdrawal of Stock in the form of
stock certificates (as permitted under Section 10(c)), and reasonable
fees for other services unrelated to the purchase of Stock under the
Plan, to the extent approved in writing by the Company and
communicated to participants. In no circumstance shall the Company pay
any brokerage fees and commissions for the sale of Stock acquired
under the Plan by a participant.
11. Interest.
No interest shall accrue on the payroll deductions of a participant in the
Plan.
12. Stock.
(a) The maximum number of shares of Stock which shall be made available
for sale under the Plan shall be 1.6 million shares, subject to
adjustment as provided in Section 18 hereof. If, on a given Exercise
Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable. Any shares of Stock
delivered by the Company under the Plan may consist, in whole or in
part, of authorized and unissued shares or shares acquired by the
Company in the open market.
B-6
(b) The participant shall have no interest or voting right in shares
purchasable upon exercise of his or her option until such option has
been exercised.
(c) Shares acquired through dividend reinvestment shall be purchased on
the open market unless otherwise determined by the Committee.
13. Administration.
(a) The Plan shall be administered by the Committee. The Committee shall
have full and final authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan. The Committee may, in its
discretion, delegate authority to the Administrator. Every finding,
decision and determination made by the Committee or Administrator
shall, to the full extent permitted by law, be final and binding
upon all parties (except for any reserved right of the Committee to
review a finding, decision or determination of the Administrator). The
Committee, Administrator, and each member thereof shall be entitled
to, in good faith, rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or
employee of the Company or any Designated Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee or Administrator
and any officer or employee of the Company or any Designated
Subsidiary acting at the direction or on behalf of the Committee shall
not be personally liable for any action or determination taken or made
in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company
with respect to any such action or determination.
(b) The Custodian will act as custodian under the Plan, and will perform
such duties as are set forth in the Plan and in any agreement between
the Company and the Custodian. The Custodian will establish and
maintain, as agent for each Participant, an Account and any
subaccounts as may be necessary or desirable for the administration of
the Plan.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's Account
under the Plan in the event of (i) such participant's death subsequent
to an Exercise Date on which the option is exercised but prior to a
distribution to such participant of shares or cash then held in the
participant's Account or (ii) such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, any shares or
cash otherwise deliverable under Section 14(a) shall be delivered to
the participant's estate.
15. Transferability.
Neither payroll deductions credited to a participant's Account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in
Section 14 hereof) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect.
16. Use of Funds.
All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
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17. Reports.
An individual Account shall be maintained by the Custodian for each
participant in the Plan. Statements of Account shall be given to each
participant at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased, any
remaining cash balance, and other information deemed relevant by the Committee.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, or
Change in Control.
(a) Changes in Capitalization. The Committee shall proportionately adjust
the Reserves and the price per share and the number of shares of Stock
covered by each option under the Plan which has not yet been exercised
for any increase or decrease in the number of issued shares of Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Stock, or other extraordinary
corporate event which affects the Stock in order to prevent dilution
or enlargement of the rights of participants. The determination of
the Committee with respect to any such adjustment shall be final,
binding and conclusive.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Committee.
(c) Change in Control. In the event of a Change in Control the Committee
shall shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). The New Exercise Date shall
be before the date that will constitute the Change in Control. The
Committee shall notify each participant in writing, at least ten
business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date
and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant
has withdrawn from the Offering Period as provided in Section 10
hereof.
19. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination can
affect options previously granted, provided that an Offering Period
may be terminated by the Board of Directors by shortening the Offering
Period and accelerating the Exercise Date to a date not prior to the
date of such Board action if the Board determines that termination of
the Plan is in the best interests of the Company and its shareholders.
Except as provided in Section 18 and this Section 19, no amendment may
make any change in any option theretofore granted which materially
adversely affects the rights of any participant, and any amendment
will be subject to the approval of the Company's shareholders not
later than one year after Board approval of such amendment if such
shareholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, or if such
shareholder approval is necessary in order for the Plan to continue to
meet the requirements of Section 423 of the Code, and the Board may
otherwise, in its discretion, determine to submit any amendment to
shareholders for approval.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Committee shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and
crediting procedures to ensure that amounts applied toward the
purchase of Stock for each participant properly correspond with
amounts withheld from the participant's compensation, and establish
such other limitations or procedures as the Committee determines in
its sole discretion are advisable and consistent with the Plan.
B-8
20. Notices.
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares.
The Company shall not be obligated to issue shares with respect to an
option unless the exercise of such option and the issuance and delivery of
such shares pursuant thereto shall comply with all applicable provisions of
law, domestic or foreign, including, without limitation, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, and the requirements of any
stock exchange or automated quotation system upon which the shares may then
be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
22. Plan Effective Date and Shareholder Approval.
The Plan has been adopted by the Board on February 14, 2001, but shall
become effective upon approval by the Company's shareholders by a vote
sufficient to meet the requirements of Section 423(b)(2) of the Code within
12 months after the date the Plan was adopted and prior to the first
Exercise Date. In the event shareholders fail to so approve the Plan, all
options granted under the Plan shall be canceled, all payroll deductions
shall be refunded, and the Plan shall be terminated.
B-9
PROXY
[CSX Logo
appears here]
CSX Corporation
This Proxy is Solicited on Behalf of The Board of Directors
For The Annual Meeting on May 1, 2001.
The undersigned hereby appoints John W. Snow, Mark G. Aron, and Alan A.
Rudnick, or any one of them, with the power of substitution in each, or the
designated Trustee of any applicable employee benefit plan, proxies to vote all
stock of the undersigned on the following proposals and, in their discretion,
upon such other matters as may properly come before the Annual Meeting of
Shareholders to be held at The Greenbrier, White Sulphur Springs, WV, on May 1,
2001, and at all adjournments thereof.
(Continued and to be signed on reverse side.)
To Our Shareholders:
TO VOTE: Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented, no matter how
many shares you own. On the reverse side of this card are instructions on how to
vote for the election of directors and all other proposals. You may vote by
telephone, over the Internet, or by mail.
TO RECEIVE FUTURE ANNUAL REPORTS AND PROXY STATEMENTS BY INTERNET: To take
advantage of this offer, please go to the web address on the reverse side of
this proxy card or follow the instructions provided as you vote by phone or
Internet. You must have access to a computer with Internet access to be
eligible. Selecting this option means that you will no longer receive a printed
copy of the CSX Annual Report and Proxy Statement unless you request one. Next
year you will receive a printed proxy card that will direct you to the Internet
web site where the annual report and proxy statement will be posted. By
consenting to electronic delivery you will help CSX reduce printing and postage
costs, supporting a company-wide effort to reduce overhead.
You may cancel your enrollment in this process at any time by written
notification to Computershare Investor Services, 2 North LaSalle Street,
Chicago, IL, 60602.
TO ATTEND THE ANNUAL MEETING: If you are planning to attend the Annual Meeting
and Luncheon, please complete the enclosed reservation form and return it in the
envelope provided, addressed to Office of Corporate Secretary at CSX
Corporation. Your ticket(s) to the Annual Meeting and Luncheon will be available
for pickup at the CSX registration desk on Monday afternoon and Tuesday morning
at The Greenbrier. TICKETS WILL NOT BE MAILED IN ADVANCE OF THE ANNUAL MEETING.
TO STAY AT THE GREENBRIER: If you are planning to stay at The Greenbrier, you
will need to make your reservations directly with The Greenbrier. Shareholder
House Party information and rates are included on the enclosed brochure.
CSX CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
The Board of Directors of CSX Corporation recommends a vote FOR items 1, 2 and
3, and AGAINST item 4. Shares will be so voted unless you otherwise indicate.
1. Election of Directors For All
Nominees: 01-E.E. Bailey; 02-H.F. Baldwin; 03-C.S. Brinegar; For W/H Except
04-R.L. Burrus, Jr.; 05-B.C. Gottwald; 06-J.R. Hall; 07-E.B. Jones; |_| |_| |_|
08-R.D. Kunisch; 09-J.W. McGlothlin; 10-S.J. Morcott;
11-C.E. Rice; 12-W.C. Richardson; 13-F.S. Royal, M.D.;
14-J.W. Snow.
To withhold authority to vote for any individual nominee(s), write the name(s)
on the line below.
- -------------------
Nominee Exception
2. Appointment of Ernst & Young LLP as For Against Abstain
independent certified public accountants; |_| |_| |_|
3. Approval of the CSX 2001 Employee Stock
Purchase Plan; |_| |_| |_|
4. Shareholder proposal regarding Change of
Control Employment Agreements. |_| |_| |_|
Sign exactly as your name appears above. Joint owners sign individually; Date: ------------------
corporation proxies sign by authorized officer. Indicate if signor is executor, Please Sign: --------------------------
administrator, trustee, etc. Please Sign: --------------------------
CONTROL NUMBER - DETACH PROXY CARD HERE -
[CSX Logo
appears here]
TO VOTE BY PHONE o Call toll free 1-877-587-0759 in the United States
[GRAPHIC] or Canada prior to 12:00 midnight, Sunday, April
29, 2001, on a touch tone telephone.
o Option #1: To vote as the Board of Directors
recommends on ALL proposals: Press 1. When asked,
please confirm your vote by pressing 1.
o Option #2: If you choose to vote on each proposal
separately, press 0 and follow the simple recorded
instructions.
TO VOTE BY INTERNET
[GRAPHIC] o Go to the following website prior to 12:00
midnight, Sunday, April 29, 2001:
www.computershare.com/us/proxy
o Enter the information requested on your computer
screen, including your six-digit Control Number
located on this form, above left.
o Follow the simple instructions on the screen.
- -The above methods are quick, easy, and available 24 hours a day, 7 days a week
through Sunday, April 29, 2001.
TO VOTE BY PROXY CARD o Complete and sign the proxy printed above.
[GRAPHIC]
o Tear at the perforation, and mail the proxy card
in the enclosed, postage paid envelope addressed
to CSX, P.O. Box 7050, Rockford, Illinois
61125-9944.
-Mailed proxies must be received no later than Monday, April 30, 2001.
PLEASE DO NOT VOTE BY MORE THAN ONE METHOD; THE LAST VOTE RECEIVED WILL BE THE
OFFICIAL VOTE.
TO VIEW ANNUAL REPORT o Please go to the following website:
& PROXY STATEMENT
ON-LINE www.csx.com/aboutus/financial
TO CONSENT TO ELECTRONIC o Please go to the following website and follow the
DISSEMINATION OF ANNUAL prompts to receive your annual report and proxy
REPORT & PROXY STATEMENT statement electronically, saving CSX shareholders
IN 2002 the expense of printing and mailing the materials:
www.csxconsent.com
TO ATTEND THE ANNUAL o Place your unique Control Number (found on this
MEETING AND LUNCHEON form, above left immediately under the
[GRAPHIC] perforation) in the Control Number space on the
invitation, along with other requested
information. Mail in the return envelope addressed
to CSX CORPORATION, Attn: Office of the Corporate
Secretary, P.O. Box 85629, Richmond, VA
23285-5629.