SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Commission Only (as permitted
by Rule 14a-6(e)(2))
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( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CSX CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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4) Date Filed:
March 18, 1997
Dear CSX Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Thursday, April 17, 1997, 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 twelve
directors, appointment of independent auditors, and the approval of the Amended
and Restated CSX Stock Plan for Directors. The Board of Directors believes that
these proposals are in the best interests of the Company and its shareholders
and recommend a vote for each of these proposals.
Also to be acted upon at the Meeting is a shareholder proposal regarding the
Company's Shareholder Rights Plan. The Board of Directors believes that 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 and The
Greenbrier. An admission card will be sent to you about one week prior to the
Meeting date.
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 mark, sign, date and mail your proxy promptly in the envelope provided.
John W. Snow
Chairman of the Board,
President and Chief Executive Officer
Notice of Annual Meeting of Shareholders
Richmond, Virginia
March 18, 1997
To Our Shareholders:
The Annual Meeting of Shareholders of CSX Corporation will be held at The
Greenbrier, White Sulphur Springs, West Virginia, on Thursday, April 17, 1997,
at 10:00 a.m. (EDT), for the purpose of considering and acting upon the
following matters:
1. Election of twelve directors;
2. Appointment of Ernst & Young LLP as independent certified public
accountants for 1997;
3. Approval of Amended and Restated CSX Corporation Stock Plan for
Directors;
4. Shareholder proposal regarding Shareholder Rights Plan; 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 mark, sign, date and return the Proxy to assure
that your shares are represented at the Meeting.
Only shareholders of record at the close of business on February 17, 1997,
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 18,
1997.
By Order of the Board of Directors
Alan A. Rudnick
Vice President - General Counsel
and Corporate Secretary
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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 Corporate Secretary, by
submission of another proxy bearing a later date, or by voting in person at the
Annual Meeting.
CSX is the parent of CSX Transportation, Inc. ("CSXT"); Sea-Land Service,
Inc. ("Sea-Land"); American Commercial Lines, Inc.; CSX Intermodal, Inc.;
Customized Transportation, 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 February 17, 1997, CSX had outstanding 217,525,493 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 February
17, 1997, 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
Twelve directors are to be elected to hold office until the next Annual
Meeting of Shareholders is held and their successors are elected, except that
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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[Picture] Elizabeth E. Bailey, 58, is the John C. Hower Professor of
Public Policy and Management, The Wharton School of the
University of Pennsylvania. She is a director of Honeywell, Inc.
and Philip Morris Companies, Inc. Dr. Bailey has been a director of
CSX since November 1989 and is a member of the Board's Audit
Committee and Pension Committee.
[Picture] Robert L. Burrus, Jr., 62, is a partner in and Chairman of McGuire,
Woods, Battle & Boothe, a law firm. Mr. Burrus is a director of
Concepts Direct, Inc.; Heilig-Meyers Company; O'Sullivan
Corporation; 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 Organization and Corporate Responsibility
Committee and Pension Committee.
[Picture] Bruce C. Gottwald, 63, is Chairman and Chief Executive Officer of
Ethyl Corporation, a worldwide producer of petroleum additives. He
is a director of James River Corporation and Tredegar Industries,
Inc. Mr. Gottwald has been a director of CSX since April 1988 and is
a member of the Board's Organization and Corporate Responsibility
Committee and Pension Committee.
[Picture] John R. Hall, 64, retired at the end of January 1997 as 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 Banc One Corporation; The Canada Life Assurance
Company; Humana Inc.; Reynolds Metals Company; and UCAR
International Inc. He is also President of the Board of Trust of
Vanderbilt University. Mr. Hall has been a director of CSX since May
1994 and is a member of the Board's Audit Committee and Compensation
Committee.
[Picture] Robert D. Kunisch, 55, is 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. He is a director of Mercantile Bankshares
Corporation and GenCorp. Mr. Kunisch has been a director of CSX
since October 1990 and is Chairman of the Board's Compensation
Committee and a member of the Executive Committee.
[Picture] Hugh L. McColl, Jr., 61, is Chief Executive Officer of NationsBank
Corporation, a bank holding company. Previously, Mr. McColl was
Chairman and Chief Executive Officer of NationsBank Corporation, and
prior thereto, he served as Chairman and Chief Executive Officer of
NCNB Corporation, a bank holding company and a predecessor of
NationsBank Corporation. He is a director of Jefferson-Pilot
Corporation; Jefferson-Pilot Life Insurance Company; Ruddick
Corporation; and Sonoco Products Co. Mr. McColl has been a director
of CSX since February 1992 and is a member of the Board's Audit
Committee and Pension Committee.
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[Picture] James W. McGlothlin, 56, is Chairman and Chief Executive Officer of
The United Company, a diversified energy company. He is a director
of Bassett Furniture Industries, Inc. He has been a director of CSX
since November 1989 and is Chairman of the Board's Organization and
Corporate Responsibility Committee and a member of the Executive
Committee.
[Picture] Southwood J. Morcott, 58, is Chairman and Chief Executive Officer of
Dana Corporation, a manufacturer of automotive and truck parts and
provider of commercial credit. Previously, Mr. Morcott was
Chairman, President and Chief Executive Officer of Dana
Corporation. He is a director of Johnson Controls, Inc., and Phelps
Dodge Corporation. Mr. Morcott has been a director of CSX since
July 1990 and is Chairman of the Board's Pension Committee and
a member of the Audit Committee and the Executive Committee.
[Picture] Charles E. Rice, 61, is Chairman and Chief Executive Officer of
Barnett Banks, Inc., a bank holding company. He is a director of
Sprint Corporation. Mr. Rice has been a director of CSX since April
1990 and is Chairman of the Board's Audit Committee and a member of
the Compensation Committee and the Executive Committee.
[Picture] William C. Richardson, 56, has been President and Chief Executive
Officer of the W.K. Kellogg Foundation, a major philanthropic
institution, since 1995. Previously, he was President of The Johns
Hopkins University. He is a director of The Kellogg Company;
Mercantile Bankshares Corporation; and Mercantile Safe Deposit &
Trust Company. Dr. Richardson has been a director of CSX since
December 1992 and is a member of the Board's Compensation Committee
and Organization and Corporate Responsibility Committee.
[Picture] Frank S. Royal, M.D., 57, is a physician in private practice in
Richmond, Va., and a health care expert. He is a director of
Columbia/HCA Healthcare Corporation; Crestar Financial Corporation;
Chesapeake Corporation; and Dominion Resources, Inc. Dr. Royal has
been a director of CSX since January 1994 and is a member of the
Board's Compensation Committee.
[Picture] John W. Snow, 57, is Chairman of the Board, President and Chief
Executive Officer of CSX. Mr. Snow is a director of Bassett
Furniture Industries, Inc.; Circuit City Stores, Inc.;
NationsBankCorporation; Textron, Inc.; and USX Corporation. Mr.
Snow has been a director of CSX since April 1988 and is Chairman of
the Board's Executive Committee.
During 1996, there were eleven meetings of the CSX Board of Directors. Each
director of the Company, other than those identified below, attended more than
75 percent 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. Mr. McColl attended 10
of the 16 meetings of the Board, Audit Committee and Pension Committee held
during 1996. Mr. Morcott attended 12 of the 17 meetings of the Board, Audit
Committee, Executive Committee and Pension Committee held during 1996.
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Corporate Governance
The CSX Board of Directors is committed to governance principles and
practices which permit the Board to fulfill 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 carefully
articulated, 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 and 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 the section
entitled "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 one meeting in 1996.
The Audit Committee's primary functions are to approve and to recommend to
the shareholders management's selection of independent auditors and to satisfy
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 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; 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 Audit Committee has five members, none of whom is a Company
employee. It held three meetings in 1996.
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 fringe
benefits, for employees at certain organizational levels (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, it 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 six meetings in 1996.
The Pension Committee monitors funding and administration of certain
tax-qualified benefit plans of the Company. The Committee recommends amendments
to certain tax-qualified plans to the Board. The Pension Committee has five
members and held two meetings in 1996.
The Organization and Corporate Responsibility 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 compensation and retirement. This Committee also conducts regular
evaluations of director performance and of the effectiveness of the Board as a
working group. In fulfilling this responsibility, the 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 Organization and Corporate Responsibility 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. This Committee also reviews changes in corporate structure,
succession in top management and other internal matters of broad corporate
significance. In addition, this Committee reviews CSX's relationship to the
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broader social environment in which the Company operates and legal aspects of
CSX's operations, including litigation, legislation and other governmental
actions that could affect CSX. The Committee has four members, none of whom is a
Company employee. It held four meetings in 1996.
Directors' Compensation
For services rendered during a year, non-employee directors receive a
retainer fee of $35,000 per year, a portion of which is paid in CSX stock as
described below. Chairmen of Board committees receive an additional annual
retainer fee 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 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. In addition, directors can
make an annual election 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 a trust
established for that purpose.
Non-employee directors who have served on the Board of CSX or a predecessor
company for 10 years or more, or whose years of service plus their age total at
least 75, will receive for life, upon retirement, an annual payment equal to
one-half of the total compensation received during the last year of service on
the Board pursuant to the Special Retirement Plan for CSX Directors (the
"Retirement Plan"). If a director has served less than 10 years, or if his or
her years of service plus age do not total at least 75, payments computed in the
same manner will be paid upon retirement for a period equal to the number of
years of service on the Board. Upon shareholder approval of the proposed Amended
and Restated CSX Corporation Stock Plan for Directors, one of the proposals to
be acted upon at the Annual Meeting of Shareholders, the Retirement Plan will be
eliminated for current and future directors.
A director may elect to participate in a 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, or ceases to be a director and has attained age 65, after
which he or she will be paid in installments over a period not to exceed 15
years. The Deferred Compensation Plan also provides for payment to a designated
beneficiary in the event of death prior to receipt of the full amount due.
Amounts so deferred may be designated by the director to be credited to an
Interest Account, a CSX Phantom Stock Account, or a combination of both. 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 1986, 1987, 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. Morcott and Dr. Royal
have directed deferred compensation to be invested in the Phantom Stock Account
where the cash balances accumulated as of December 27, 1996, represent the
equivalent, respectively, of 1,669 shares and 344 shares of CSX stock.
The Retirement Plan and the Deferred Compensation Plan provide that if the
Board determines that a change of control of CSX has occurred, as defined in the
plans, plan participants will receive, within seven days of such determination,
a lump sum cash payment equal to the present value of accrued benefits in the
case of the Retirement Plan or a lump sum cash payment equal to the balance
credited to directors' accounts in the case of the Deferred Compensation Plan.
The Stock Plan provides that upon a change of control, shares whose receipt was
deferred and held in trust will be distributed unless the Participant has
elected to remain in the Plan.
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Upon a change of control of CSX, amounts sufficient to pay any undistributed
payments pursuant to the Retirement Plan, the Deferred Compensation Plan, and
the Stock Plan will be put into a trust until distribution under the terms of
the plans and the distribution elections which participants have made. 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
of control event, to continue participation in the Deferred Compensation Plan,
the Stock Plan, and the Retirement Plan as if a change of control had not
occurred. Once such an election has been made and a change of control occurs,
the election can be revoked, subject to a five percent penalty on distribution.
In 1996, in recognition that the Retirement Plan and the Deferred
Compensation Plan are non-qualified benefit plans and are unfunded obligations
of CSX, CSX reimbursed directors for the premium cost of an individual insurance
policy. The policy, named "Executive Edge Deferred Income Insurance" ("EDII"),
provides security against repudiation of benefit payments. The policy would not,
however, make payments in the event that CSX fails to meet its obligations due
to bankruptcy. The insurance policy is owned by the director and has a five-year
term, renewable each year for an additional year of coverage. CSX also has paid
the directors for the federal, state and Medicare taxes incurred as a result of
the premium reimbursement. Total amounts reimbursed to each director for EDII as
described were as follows: Dr. Bailey - $2,801; Mr. Burrus - $1,750; Mr.
Gottwald - $6,471; Mr. Hall - $1,216; Mr. Kunisch - $3,554; Mr. McColl - $2,090;
Mr. McGlothlin - $5,257; Mr. Morcott - $3,672; Mr. Rice - $4,663; Dr. Richardson
- - $2,979; and Dr. Royal - $1,866. In addition, in 1996 the Company provided
personal excess liability insurance, an "umbrella" policy, to directors who
elected to participate.
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, as of the date of this Proxy Statement, have
completed five years of consecutive service and thus are eligible to participate
in the Gift Plan are Dr. Bailey and Messrs. Gottwald, Kunisch, McColl,
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 that can be matched in any year is $25,000
per director. Directors who participated in the Matching Gift Program during
1996 and the amounts paid by the Company for contributions made by these
directors in 1996 are as follows: Dr. Bailey - $4,000; Mr. Burrus - $25,000; Mr.
Hall - $17,763; Mr. Kunisch - $21,500; Mr. McColl - $50,000; Mr. Morcott -
$6,200; Mr. Rice - $50,000; Dr. Richardson - $21,100; Dr. Royal - $50,000; and
Mr. Snow - $50,000.
Certain Relationships and Related Transactions
Hugh L. McColl, Jr., a director of the Company, is Chief Executive Officer
of NationsBank Corporation. Through an affiliate, NationsBank, N.A. was a
co-syndication agent for a $4.8 billion Revolving Credit Facility and
Competitive Advance entered into by CSX Corporation. NationsBank's portion of
this facility is $250 million. During 1996, the Company had a $100 million
credit facility with an affiliate of NationsBank Corporation. NationsBank also
participated in a syndicated credit facility to a joint venture in which a
subsidiary of the Company is a party. NationsBank's portion of this facility is
$40 million. An affiliate of NationsBank acted as a co-agent to place the
Company's commercial paper to assist the Company in raising funds in conjunction
with the proposed acquisition by the Company of Conrail Inc. and related
transactions (the "Conrail Transaction.")
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Charles E. Rice, a director of the Company, is Chairman and Chief Executive
Officer of Barnett Banks, Inc. During 1996, the Company had a $20 million credit
facility with an affiliate of Barnett Banks, Inc. An affiliate of Barnett Banks,
Inc. also participated to the extent of $100 million in the $4.8 billion
Revolving Credit Facility and Competitive Advance entered into by CSX
Corporation. In addition, in January 1992 an affiliate of Barnett Banks, Inc.,
purchased the stock of CSX Commercial Services, Inc., from the Company for
approximately $7.5 million in cash, subject to subsequent balance sheet
adjustments. CSX Commercial Services, Inc., which is no longer owned by a
Barnett affiliate and has changed its name to InTuition, Inc., is headquartered
in Jacksonville, Fla., and is engaged in the business of servicing student
loans. The Company agreed, as part of the sale, to indemnify the Barnett
affiliate against certain contingent liabilities.
In 1987, prior to the election of James W. McGlothlin as a director of CSX,
The United Company, of which Mr. McGlothlin is Chairman and Chief Executive
Officer, purchased a used Gulfstream aircraft from a wholly owned subsidiary of
the Company at a cost of $6 million, with a down payment in the amount of $1.2
million and an additional $800,000 that was paid upon delivery. The balance of
$4 million, in the form of a promissory note bearing interest at the prime rate
set by NationsBank of North Carolina, N.A., was payable in 10 consecutive annual
installments beginning December 31, 1988. As of December 27, 1996, the total
outstanding indebtedness was $800,000.
Robert L. Burrus, Jr., a director of the Company, is a partner in and
Chairman of McGuire, Woods, Battle & Boothe, a law firm which regularly provides
legal services to the Company and its subsidiaries.
Compensation Committee Interlocks and Insider Participation
Mr. Snow is a member of the Compensation Committee of NationsBank
Corporation of which Mr. McColl is Chief Executive Officer.
Alvin R. Carpenter, President and Chief Executive Officer of CSXT, is an
executive officer of CSX for proxy reporting purposes. Mr. Carpenter is a
director of Barnett Banks, Inc. Charles E. Rice, a director of the Company and a
member of the Compensation Committee, is the Chairman and Chief Executive
Officer of Barnett Banks, Inc.
Contractual Obligations
To ensure that the Company will have the continued dedicated service of
certain executives notwithstanding the possibility, threat or occurrence of
changes in control, the Company in 1995 entered into change of control
employment agreements ("Employment Agreements") with certain executives,
including those named in the Summary Compensation Table. The Employment
Agreements generally provide that if the executive is terminated other than for
cause within three years after a change of control of the Company, or if the
executive terminates his employment for good reason within such three-year
period or voluntarily during the 30-day period following the first anniversary
of the change of control, the executive is entitled to receive "severance
benefits." Severance benefits include a lump sum severance payment equal to
three times the sum of his base salary and highest annual bonus, together with
certain other payments and benefits, including continuation of employee welfare
benefits and an additional payment to compensate the executive for certain
excise taxes imposed on certain change of control payments.
In change of control transactions subject to regulatory review by the
Surface Transportation Board, or any successor regulatory body, the Employment
Agreements generally provide somewhat different treatment. During the period of
regulatory review, the executive would only be entitled to severance benefits if
he is constructively terminated by the Company. If a transaction were to receive
regulatory approval, then the executive generally would be entitled to severance
benefits if he is terminated other than for cause within one year after the
regulatory approval or if the executive terminates his employment for good
reason within such one-year period or voluntarily during the 30-day period
following the first anniversary of the regulatory approval.
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In January 1997, the Employment Agreements for Messrs. Carpenter, Nichols,
Clancey, and Goodwin, as well as certain other executive officers, were amended.
Pursuant to the amendments, consummation of the proposed Conrail Transaction
would also trigger benefits of the Employment Agreements following issuance of a
final order by the Surface Transportation Board approving the Conrail
Transaction.
In April 1990, the Company entered into a Special Stock Award Agreement with
Mr. Carpenter. Under the terms of the Agreement, 40,000 shares of CSX common
stock (as adjusted following the December 1995 stock split) were awarded to Mr.
Carpenter, conditioned on continued employment, one-half of the shares issued on
the fifth anniversary, and the balance to be issued on the 10th anniversary of
the Agreement. In April 1995, 20,000 shares were issued to Mr. Carpenter
pursuant to that Agreement. To assist Mr. Carpenter in paying the income tax
obligations associated with the award in April 1995, CSX made an interest-free
loan to Mr. Carpenter of $377,200 which has been repaid. Mr. Carpenter has been
compensated for taxes associated with the interest free character of the loan.
In February 1994, the Company entered into an incentive agreement with Mr.
Snow awarding him 1,000,000 non-qualified employee stock options (as adjusted
for the December 1995 stock split) with an exercise price of $44.9375 per share,
the fair market value as of the date of the grant. The options are subject to
vesting and sale restrictions and are conditioned upon the Company's common
stock achieving certain threshold levels ranging from $50 to $60 per share. The
options may be forfeited in whole or in part at the time of termination of
employment. In October 1996, the incentive agreement was amended to provide that
the vesting and sale restrictions shall terminate upon a change of control.
In February 1994, the Company entered into a Special Stock Award Agreement
with Mr. John P. Clancey pursuant to which 20,000 shares of CSX common stock (as
adjusted following the December 1995 stock split) were awarded, conditioned on
continued employment, with one-half of the shares to be issued on the fifth
anniversary of the Agreement, and the balance to be issued on the 10th
anniversary of the Agreement.
In the case of the Special Stock Award Agreements with both Messrs.
Carpenter and Clancey, the value of all dividends declared and payable during
the period between award and issuance will be paid at the time the share awards
are payable. In the event of certain changes of control, the awards under the
agreements with Messrs. Snow, Carpenter and Clancey will be accelerated and the
recipients will be entitled to compensation for certain excise taxes imposed on
certain change of control payments.
In December 1996, the Company provided an interest free loan for Donald D.
Davis, an executive officer of the Company, for $300,000 to assist him in
fulfilling certain contractual commitments for which he had relied on his
ability to exercise Company stock appreciation rights and stock options and
which he was precluded from doing as a result of Company-imposed restrictions
following announcement of the Conrail Transaction. The loan has been repaid. CSX
compensated Mr. Davis for taxes associated with the interest-free character of
the loan.
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 received by it,
the Company believes that with one exception the Company's executive officers
and directors complied with the SEC's requirements with respect to transactions
during the last fiscal year. The only exception relates to one gift transaction
of CSX stock by Mr. Robert J. Grassi, Senior Vice President Atlantic-AME, during
1996 that was reported on a late filed amendment to the Form 5 for 1996.
9
Security Ownership of Certain Beneficial Owners, Directors,
and Executive Officers
Amount and Nature of Beneficial Ownership
------------------------------------------
Shares for which
Stock Beneficial
Purchase Ownership can Percent
and Other Shares be Acquired Total of
Name of Loan Plan Beneficially within 60 Days Beneficial Class
Title of Class Beneficial Owner (Note 1) (Note 2) Owned (Note 3) Ownership (Note 4)
- ---------------------------------------------------------------------------------------------------------------------------
CSX Corp. Elizabeth E. Bailey N/A 4,737 N/A 4,737 *
Common Stock Robert L. Burrus, Jr. N/A 4,432 N/A 4,432 *
$1 Par Value Bruce C. Gottwald N/A 15,426 N/A 15,426 *
John R. Hall N/A 4,776 N/A 4,776 *
Robert D. Kunisch N/A 6,690 N/A 6,690 *
Hugh L. McColl, Jr. N/A 3,737 N/A 3,737 *
James W. McGlothlin (Note 5) N/A 221,532 N/A 221,532 *
Southwood J. Morcott N/A 5,769 N/A 5,769 *
Charles E. Rice N/A 8,145 N/A 8,145 *
William C. Richardson N/A 1,511 N/A 1,511 *
Frank S. Royal N/A 3,246 N/A 3,246 *
John W. Snow 679,775 441,689 1,392,365 2,513,829 1.1%
Alvin R. Carpenter 308,245 198,368 194,000 700,613 *
John P. Clancey 219,102 92,231 141,200 452,533 *
Gerald L. Nichols 120,774 100,903 110,000 331,677 *
Paul R. Goodwin 162,685 114,071 177,198 453,997 *
Executive officers as a
group (20 persons, including
those named above) and
all directors 2,768,795 1,894,394 3,276,948 7,940,137 3.5%
FMR Corp. (Note 6)
82 Devonshire Street
Boston, MA 02109 N/A 28,515,175 N/A 28,515,175 12.4%
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 7, 1997.
Note 2 This column reflects grants made and stock purchased under the Stock
Purchase and Loan Plan ("SPLP") as of August 1, 1996. All Executive
Officers were participants in this offering. Pursuant to the SPLP,
the Board's Compensation Committee as administrator granted Purchase
Awards or Exchange Awards as defined in the SPLP to each participant.
Each participant could subscribe to all, a portion, or none of the
Purchase Award or Exchange Award offered. The purchase price for shares
offered on August 1, 1996 was $47.50 per share, the Market Price on
that date as defined under the SPLP.
Under the terms of the SPLP, each participant must provide a down
payment for the shares purchased, with the balance of the purchase price
paid with loans provided by the Company ("Purchase Loans"). The down
payment remains at risk until the Purchase Loans have been paid. For
Purchase Awards, down payment obligations may be satisfied with a full
recourse loan provided by the Company ("Down Payment Loan"). For
Exchange Awards, the down payment obligation must be satisfied by using
equity from earlier offerings as explained below. Dividend equivalents
are paid by the Company on the number of shares represented by the
equity used as a down payment for an Exchange Award.
10
Exchange Awards offered on August 1, 1996, permitted officers who
participated in offerings under the SPLP in 1991 and/or 1992 to use the
equity which they had earned under those offerings ("Equity") as the
down payment for shares offered pursuant to the Exchange Award. The
Equity used for down payments represented the value as of August 1,
1996, of shares acquired pursuant to 1991 and/or 1992 offerings under
the SPLP, less outstanding balances on the Purchase Loans made pursuant
to the same offerings. Participants could then elect to make a down
payment representing 25%, 20%, 15%, or 10% of the value of shares
purchased as of August 1, 1996. Any down payment of less than 25% would
have resulted in a participant's purchase of proportionately fewer
shares than the maximum number offered in the Exchange Award. Eighteen
of the current Executive Officers were participants in the 1991 and/or
1992 SPLP offerings, each was offered an Exchange Award, and each
elected to use equity earned through the 1991 and/or 1992 offerings as a
25% down payment.
Upon exercise of Exchange Awards, each participant executed new Down
Payment Loans and new Purchase Loans covering purchase of the shares
acquired in the 1991 and/or 1992 offerings, as well as additional shares
offered on August 1, 1996. The new Down Payment Loans extend the term of
the original Down Payment Loans to be coextensive with that of the new
Purchase Loans. The principal balance of the new Down Payment Loans
remains unchanged from that of the original Down Payment Loans and
reflects amounts which are 5% of the purchase price of shares purchased
in 1991 and/or 1992. In the case of Exchange Awards the new Purchase
Loans are for the balance of the purchase price of shares purchased upon
exercise of the Exchange Award. In the case of each Executive Officer,
the new Purchase Loans for Exchange Awards are for 75% of the purchase
price. As a result of the exchange feature, the number of shares
purchased as indicated in the table below includes shares purchased in
1991 and/or 1992. The Purchase Loan is collateralized by all such shares
purchased pursuant to the Exchange Award. Interest accrues on the
Purchase Loans at the Applicable Federal Rate.
Purchase Awards were offered to Executive Officers who did not
participate in the 1991 and/or 1992 offerings. In addition, Purchase
Awards were offered to seven Executive Officers for shares in addition
to those which these participants could purchase using Exchange Awards.
For this group of seven Executive Officers, the Purchase Awards
reflected enhanced responsibilities over those which the same
participants had at the time of the 1991 and/or 1992 offerings. Except
in the cases of Messrs. Carpenter and Clancey, Executive Officers
receiving Purchase Awards were required to make down payments of 5% of
the value of the award. In the cases of Messrs. Carpenter and Clancey,
the down payment was agreed to be 10% of the value of the Purchase
Award.
Each new Purchase Loan has a term of five years. The participant can
extend the Purchase Loan to six years. The Compensation Committee can
require extension of Purchase Loans for up to two years. In no event can
Purchase Loans be for a period greater than seven years.
The principal balance and interest under the Purchase Loans are subject
to various adjustments after the first anniversary of the Purchase
Loans. These adjustments occur only when the price of CSX stock has
reached levels specified in the following table in excess of the
purchase price and have remained at such levels for at least 10
consecutive business days. The Purchase Loans cannot be prepaid except
pursuant to conditions specified by the SPLP involving termination of
employment from CSX or change in control of CSX
Interest on the Down Payment Loans of Executive Officers participating
in the 1991 and/or 1992 offerings under the SPLP was forgiven as a
result of CSX stock having equaled or exceeded certain threshold levels
for a period of 10 consecutive business days following August 1, 1993.
Dividends paid on shares purchased upon exercise of Purchase Awards and
Exchange Awards are applied against interest accrued on the Purchase
Loans. Interest accrued on a Purchase Loan in excess of dividends
applied is defined in the SPLP and loan documents as "Interest Spread."
The Interest Spread on the new Purchase Loans will be forgiven, and the
Purchase Price reduced according to the following schedule, if and when,
at any time after the first anniversary of the Purchase Loan the price
of CSX common stock achieves the levels indicated in the schedule and
holds them for ten consecutive business days.
11
Stock Price Interest & Purchase Price Reductions
-------------------------------------------------------------------------------------
Purchase Price + 10% Interest Spread + Interest on down payment loan
Purchase Price + 20% Interest Spread + 5% + Interest on down payment loan
Purchase Price + 30% Interest Spread + 10% + Interest on down payment loan
Purchase Price + 40% Interest Spread + 15% + Interest on down payment loan
Purchase Price + 50% Interest Spread + 20% + Interest on down payment loan
Purchase Price + 60% Interest Spread + 25% + Interest on down payment loan
Purchase Price + 70% Interest Spread + 30% + Interest on down payment loan
Purchase Price + 80% Interest Spread + 35% + Interest on down payment loan
Purchase Price + 90% Interest Spread + 40% + Interest on down payment loan
Purchase Price + 100% Interest Spread + 50% + Interest on down payment loan
For the executives named below, the number of shares purchased pursuant
to the SPLP and the aggregate loan balances as of December 27, 1996, are
indicated in the following table:
1996
1996 Unadjusted 1991 & 1992
Unadjusted Down Down
1996 1996 1996 Purchase Payment Payment
Exchange Purchase Total Loan Loan Loan
Award Award Purchase Balances Balances Balances
Name (#Shares)(i) (#Shares) Price 12/27/96 (ii) 12/27/96 (iii) 12/27/96 (iv)
- --------------------------------------------------------------------------------------------------------------------------
John W. Snow 679,775 $32,289,313 $24,522,730 $318,848
Alvin R. Carpenter 258,245 50,000 (v) 14,641,638 11,485,891 $244,015 135,215
John P. Clancey 194,102 25,000 (v) 10,407,345 8,087,066 122,007 112,692
Gerald L. Nichols 120,774 5,736,765 4,356,895 56,649
Paul R. Goodwin 162,685 7,727,538 5,868,825 76,308
All executive 2,508,795 260,000 (vi) $131,517,763 $102,421,407 $817,449 $1,250,471
officers as a group
(20 persons,
including those
named above)
(i) All shares purchased with Exchange Awards, using a 25% down payment.
(ii) 1996 Unadjusted Purchase Loan Balances include principal and accrued
interest net of dividends.
(iii) 1996 Unadjusted Down Payment Loan Balances include principal and accrued
interest and are for shares purchased August 1, 1996.
(iv) 1991 and 1992 Down Payment Loan Balances represent loans extended from the
initial offerings in 1991 and 1992 pursuant to the Note.
(v) Shares purchased in addition to those available using Exchange Awards and
purchased as indicated by Messrs. Carpenter and Clancey with a 10% down
payment pursuant to agreement.
(vi) Shares purchased in addition to those available using Exchange Awards and
purchased with a 5% down payment, including shares purchased by Messrs.
Carpenter and Clancey as explained in (v) above.
Note 3 Represents shares under options or stock appreciation rights
exercisable within 60 days, based on the market price of CSX common
stock on March 7, 1997, expressed as the average of the high and low
prices reported on the New York Stock Exchange, which was $50.875.
Note 4 Based on number of shares outstanding of 229,942,357 on March 7, 1997,
including 12,355,421shares deemed outstanding for which beneficial
ownership can be acquired within 60 days. An asterisk (*) indicates that
ownership is less than 1 percent of class.
Note 5 Mr. McGlothlin's ownership includes 202,000 shares of common stock as
a result of stock holdings by affiliates of Mr. McGlothlin in which he
shares voting and investment power.
Note 6 Information reported is derived from a Schedule 13G of FMR Corporation
dated February 14, 1997, and filed with the Securities and Exchange
Commission. As reported in the Schedule 13G, the person filing the
statement has the sole power to vote or to direct the vote of 2,160,799
shares, and has the sole power to dispose or to direct the disposition
of 28,515,175 shares.
12
Executive Compensation
The individuals named below (the "Named Executives") include the Company's
Chief Executive Officer and the other four executive officers of the Company who
were the most highly compensated executive officers of the Company as of the
last day of the fiscal year ending December 27, 1996. Information is provided
for the fiscal years ending on December 27, 1996, December 29, 1995, and
December 30, 1994.
Summary Compensation Table
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying LTIP All Other
Compensation Stock Options/ Payouts Compensation
Name and Bonus ($) ($) Award(s)($) SARs (#) ($) ($)
Principal Position Year Salary (Note 1) (Note 2) (Note 1) (Note 3) (Note 4) (Note 5)
- --------------------------------------------------------------------------------------------------------------------------
John W. Snow 1996 $961,336 $ 0 $359,840 $1,526,625 152,400 $1,570,375 $153,911
Chairman, President 1995 895,698 0 488,577 1,687,500 152,400 1,786,000 132,682
& CEO 1994 814,590 1,070,304 68,033 0 1,152,400 1,415,000 114,381
Alvin R. Carpenter 1996 606,866 0 214,155 811,250 50,000 600,438 29,636
President & CEO, 1995 521,872 55,504 242,215 885,008 48,000 1,515,600 25,548
CSXT 1994 432,600 464,498 N/A 0 48,000 580,150 22,024
John P. Clancey 1996 456,138 410,000 139,879 0 36,000 554,250 0
President & CEO, 1995 409,884 211,600 101,410 264,500 36,000 592,200 0
Sea-Land 1994 359,019 276,675 N/A 0 36,000 480,393 0
Gerald L. Nichols 1996 342,809 375,000 87,938 0 28,000 531,156 6,445
Executive Vice 1995 320,824 390,578 94,612 0 28,000 535,800 5,556
President and COO 1994 252,354 218,127 N/A 0 18,000 293,613 4,790
CSXT
Paul R. Goodwin 1996 321,018 0 84,638 470,000 28,000 461,875 9,820
Executive Vice
President- 1995 289,980 36,751 85,956 376,250 28,000 535,800 8,465
Finance and CFO 1994 252,354 218,127 N/A 0 25,800 445,725 7,298
Notes to Summary Compensation Table
- -----------------------------------
Note 1 For service during 1995 and 1996, management employees whose annual
cash bonuses were paid pursuant to CSX's Management Incentive
Compensation Plan or the Senior Management Incentive Compensation
Plan were permitted to elect to receive all or a portion of their
bonuses in CSX stock. Employees who received their bonuses in stock and
deferred them for tax purposes received a 25 percent premium to be
paid in stock. Such stock is restricted from sale until CSX employment
is terminated, but not before a minimum of three years has passed
following the stock issuance except in cases of death, disability, or
change of control. The amounts shown in the Restricted Stock Award(s)
column reflect the cash value of such bonuses paid in stock for Messrs.
Snow, Carpenter, Clancey and Goodwin. Cash bonuses shown for Messrs.
Carpenter, Nichols, and Goodwin in 1995 include payment of a special
bonus to management employees of CSXT for achievement and maintenance
of an operating ratio of 80 percent or less for an entire year. These
special bonuses, although paid in 1995, reflected achievement over a
period of years until the target operating ratio was reached and
sustained. The amounts of such bonuses for Messrs. Carpenter, Nichols,
and Goodwin were $55,504, $32,400 and $36,751, respectively.
13
Note 2 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 1996, for Mr. Snow, $98,934 for Executive Edge
Deferred Income Insurance; for Mr. Clancey, $31,264 for Executive Edge
Deferred Income Insurance; for Mr. Nichols, $15,877 for life insurance
premiums; for Mr. Goodwin, $19,768 for club dues and $14,889 for
Executive Edge Deferred Income Insurance (Because of increased
limitations on the extent to which benefits may be paid from qualified
plans, CSX arranged Executive Edge Deferred Income Insurance for
payment of unfunded benefit obligations. Executives paid the
insurance premiums and were then reimbursed by the Company for premiums
and compensation taxes incurred. The amounts so paid are indicated); (b)
during 1995, for Mr. Snow, $421,145 for Executive Edge Deferred Income
Insurance; for Mr. Carpenter, $110,514 for Executive Edge Deferred
Income Insurance and $77,800 for dividend equivalent payments
pursuant to his Special Stock Award Agreement (see page 9); for Mr.
Clancey, $38,599 for club dues; for Mr. Nichols, $43,126 for
Executive Edge Deferred Income Insurance; for Mr. Goodwin, $58,599 for
Executive Edge Deferred Income Insurance; (c) during 1994, for Mr. Snow,
$34,107 for life insurance premiums.
Note 3 This column represents the number of employee stock options granted.
Stock appreciation rights ("SARs") were not granted in 1996, 1995, or
1994.
Note 4 LTIP ("Long-Term Incentive Plan") payouts for 1996 represent the
fair market value of $46.1875 per share of performance shares awarded
for the 1994-1995-1996 performance cycle on February 12, 1997,
pursuant to the 1987 Long-Term Performance Stock Plan ("1987 Plan").
(See the Long-Term Incentive Plans--Awards in Last Fiscal Year table
on page 16 and Note 2 to the Security Ownership of Certain Beneficial
Owners, Directors, and Executive Officers table on page 10,
regarding the SPLP and awards made pursuant to it.) Mr. Carpenter's
LTIP payouts for 1995 included $820,000 representing payment of stock
pursuant to his Special Stock Award Agreement with CSX. (See description
of agreement and distribution on page 9.)
Note 5 Amounts shown include the above-market portion of earnings on a
deferred compensation program available to executives only during
1985, 1986, 1988, and 1989.
14
Option/SAR Grants in Last Fiscal Year (Note 1)
Grant Date
Individual Grants Value
---------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted Grant Date
Options/SARs to Employees in Exercise or Present
Granted (#) Fiscal Year Base Price Expiration Value ($)
Name (Note 2) (Note 3) ($/Share) Date (Note 4)
- -------------------------------------------------------------------------------------------------------------------------
John W. Snow 152,400 7.71% 51.4375 4/25/06 $2,816,352
Alvin R. Carpenter 50,000 2.53% 51.4375 4/25/06 924,000
John P. Clancey 36,000 1.82% 51.4375 4/25/06 665,280
Gerald L. Nichols 28,000 1.42% 51.4375 4/25/06 517,440
Paul R. Goodwin 28,000 1.42% 51.4375 4/25/06 517,440
Notes to Option/SAR Grants Table
- --------------------------------
Note 1 SARs were not granted during 1996.
Note 2 Stock options granted to employees on April 25, 1996, were granted at an
exercise price of $51.4375, which was the fair market value as of the
date of the grant. The options are subject to an exercisability
restriction, becoming exercisable in three equal tranches, at such
time as the mean daily price of CSX common stock remains at a price per
share at or above, for each tranche respectively, $56.4375, $61.4375
and $66.4375 for 10 consecutive business days. However, regardless of
whether the stock price-related exercisability restrictions are
satisfied, the options may not be exercised until one year after the
date of the grant. The exercisability restrictions lapse after nine
years regardless of whether the stock price thresholds have been
satisfied.
Note 3 A total of 1,977,520 employee stock options were granted during 1996.
Note 4 The present value of options granted on April 25, 1996, has been
reported using the Black-Scholes option pricing model. The values
presented are based on the following assumptions: exercise price -
$51.4375 (mean price on grant date); market price on grant date -
$18.48; assumed exercise date - April 25, 2006; risk free rate of return
- 6.53 percent (10-year U.S. Treasury bond rate); dividend yield - 2.4
percent (5-year quarterly average); volatility assumption - 26.19
percent.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Value of Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options/SARs at FY-End
Options/SARs at FY-End (#) ($) (Note 1)
- ----------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------
John W. Snow 37,400 $1,238,878 1,074,760 1,152,400 $15,871,605 $0
Alvin R. Carpenter 0 0 144,000 50,000 669,000 0
John P. Clancey 0 0 105,200 36,000 484,425 0
Gerald L. Nichols 6,734 198,442 82,000 28,000 485,812 0
Paul R. Goodwin 21,410 779,633 149,198 28,000 1,732,846 0
Notes to Aggregated Option/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 $42.8750 the mean value of CSX common stock on
December 27, 1996.
15
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future Payouts
Under Non-Stock Price-Based Plans
---------------------------------
Number of Performance or
Shares, Units Other Period Until
or Other Maturation or Threshold Target Maximum
Name Rights (#) Payout (#) (#) (#)
- -----------------------------------------------------------------------------------------------------------------------
John W. Snow 34,000 (Note 1) 3 years 4,420 22,780 34,000
679,775 (Note 2) (Note 2) N/A N/A 679,775
Alvin R. Carpenter 18,000 (Note 1) 3 years 2,340 12,060 18,000
258,245 (Note 2) (Note 2) N/A N/A 258,245
50,000 (Note 2) (Note 2) N/A N/A 50,000
John P. Clancey 12,000 (Note 1) 3 years 1,560 8,040 12,000
194,102 (Note 2) (Note 2) N/A N/A 194,102
25,000 (Note 2) (Note 2) N/A N/A 25,000
Gerald L. Nichols 10,000 (Note 1) 3 years 1,300 6,700 10,000
120,774 (Note 2) (Note 2) N/A N/A 120,774
Paul R. Goodwin 10,000 (Note 1) 3 years 1,300 6,700 10,000
162,685 (Note 2) (Note 2) N/A N/A 162,685
Notes to Long-Term Incentive Plan Table
- ---------------------------------------
Note 1 Represents the number of performance shares granted on December
10, 1996, pursuant to the 1987 Long-Term Performance Stock Plan
for the 1997-1998-1999 cycle. The final payouts in CSX stock
will be based on the participant's business unit's Return on Invested
Capital as a percentage of the Company's Cost of Capital over the
three-year period. The estimated threshold payout was calculated at
13 percent of the performance shares granted on December 10, 1996, and
assumes a specified minimum level of financial performance by the
participant's business unit. The estimated target payout was
calculated at 67 percent of the performance shares granted and
represents the number of shares that would be awarded if a specified
intermediate level of financial performance is achieved by the
participant's business unit. The maximum equals 100 percent of the
performance shares granted on December 10, 1996. The levels of
financial performance required to achieve these payouts were
established within the first 90 days of the three-year cycle.
Note 2 Represents shares purchased in August 1996 pursuant to awards made
under the Stock Purchase and Loan Plan ("SPLP"). See Note 2 to the
Security Ownership of Certain Beneficial Owners, Directors, and
Executive Officers on page 10 for a more detailed explanation of the
SPLP.
16
Pension Plan Table
Gross Annual Pension Payable Before Offset for Railroad Retirement or Social Security
Average Compensation Annuity Based on Creditable Years of Service of:
During Five Consecutive
Years of Highest Pay 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 44 Years
- ----------------------------------------------------------------------------------------------------------------------
$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
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, including 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 on page
13 covered by the Pension Plans are Base Salary and Bonus. (In the case of
employees who took their Bonus in Company Stock, as explained in Note 1 to the
Summary Compensation Table on page 13, 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 Bonus in stock.) The benefits are computed at the time of retirement
under a defined benefit formula based on years of service and average salary and
bonus; computed without regard to additional payments in stock as described in
Note 1 to the Summary Compensation Table, compensation for the highest 60
consecutive months of service. The formula also takes into account retirement
benefits under the Social Security Act or Railroad Retirement Act attributable
to service by the participant for the employer. The Pension Plans provide for
normal retirement at age 65, and, subject to certain eligibility requirements,
early retirement 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 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 on total service.
The above table sets forth the estimated annual benefits payable, before
offset for the Social Security or Railroad Retirement annuity, by CSX and
certain of its subsidiaries to any officer or salaried employee upon retirement
at the normal retirement age after selected periods of service and in specified
compensation groups. In October 1996, as part of a number of retention
incentives related to the Conrail Transaction, the Board of Directors awarded to
Mr. Snow maximum benefits under the Pension Plans so that Mr. Snow now has 44.0
years of credited service. As of December 27, 1996, the other individuals named
in the Summary Compensation Table had the following credited years of service:
Mr. Carpenter, 42.5 years; Mr. Clancey, 32.83 years; Mr. Nichols, 44.0 years;
and Mr. Goodwin, 39.42 years.
The Internal Revenue Code imposes certain limitations on compensation and
benefits payable from tax-qualified pension plans. Pension amounts in excess of
such limitations are payable from the non-qualified Special and Supplemental
Plans, which are not funded.
17
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Administration of Compensation Programs
The Compensation Committee (the "Committee") of the CSX Corporation Board of
Directors, composed entirely of non-employee directors, is responsible for the
review and approval of compensation for senior executives of CSX. The Committee
determines the compensation of the Chief Executive Officer and reviews and
approves compensation for the other four most highly compensated executives
named in the 1997 Proxy Statement.
Compensation Philosophy
The Committee and the Board of Directors of CSX believe that the creation of
long-term shareholder value depends upon the alignment of the financial
interests of the Company's employees, including its senior executives, with
those of the Company's shareholders. CSX has established variable incentive
compensation programs, tied to business unit and individual performance, to
motivate its employees. These programs place a significant part of each senior
executive's annual and long-term compensation at risk to encourage a dedicated
focus on building value for the shareholder. Compensation under these programs
is paid as both cash and stock.
The Company expects executives to acquire and hold significant amounts of
stock and it has designed its compensation programs to accomplish that
objective. In keeping with its belief that tying the interests of CSX executives
to those of the shareholder will result in enhanced shareholder value over the
long term, CSX has communicated to each executive target levels of stock
ownership which must be achieved and maintained. These guidelines, which require
ownership as a multiple of base salary ranging between 1.5 and, in the case of
the Chief Executive Officer, 15 times an executive's salary, are substantially
greater than those of comparable U.S. companies.
Components of Compensation
The Committee considers it essential that the total compensation opportunity
for senior executives remain competitive with similar companies in order to
attract and retain highly motivated and effective executives. In establishing
the Company's executive compensation program, the Committee takes into account
current market data and compensation trends for comparable companies, gauges
achievement of corporate, business unit, and individual objectives and ensures
the overall effectiveness of the program in measuring and rewarding attainment
of desired performance levels.
In making 1996 compensation decisions, the Committee utilized information
from a general industry survey of 60 companies with revenues ranging from $6
billion to $10 billion. The 60 companies in this comparator group participate in
surveys conducted by nationally recognized independent consultants. The
comparator group includes two companies which also form part of the Dow Jones
Transportation Average (described in the Performance Graph on page 25 of the
Proxy Statement), a group with which CSX can expect to compete for investors.
The compensation comparator group is more broadly based and reflects a group of
corporations with which CSX can expect to compete to attract and retain
executive talent.
When establishing compensation levels, the Committee generally seeks to
provide a total compensation package for its senior executives ranging up to the
85th percentile of the comparator companies if financial, strategic and
individual objectives are met. The compensation package for senior executives is
composed of base salary, annual bonus, and long-term incentives, including stock
options and performance shares.
Base Salary. Base salaries are targeted around the 50th percentile of
salaries paid for similar positions at the comparator companies. In determining
salary adjustments, the Committee considers market data for comparable positions
at those companies as well as each individual's performance and contribution to
the objective measures of the Company's performance described elsewhere in this
report, such as Return on Invested Capital.
18
Annual Bonus. Under the Senior Management Incentive Compensation Plan
("SMICP"), annual incentive bonuses are payable in cash to certain senior
executives as designated by the Committee. A participant's award opportunity for
specific levels of performance is expressed as a percentage of the individual's
base salary at the beginning of the performance period. These opportunities are
established to provide total annual cash compensation (base salary plus annual
bonus) at approximately the 75th percentile of the comparator companies if
corporate and business unit objectives are met.
Financial performance objectives under the SMICP are set each year by the
Compensation Committee. For the corporate staff, financial goals are based on
the Company's overall Return on Invested Capital (ROIC) compared to its Cost of
Capital. Similarly, financial goals are established for each business unit based
on its ROIC compared to the Company's Cost of Capital. Bonuses paid under the
SMICP are based entirely on these objective measures. During 1996, the Company
and its major business units successfully met or exceeded their respective
financial objectives, resulting in awards under the SMICP for senior executives
of those units.
In addition to an annual bonus award under the SMICP, senior executives may
receive an additional cash bonus for exceptional contributions. When making
these awards for 1996, the Committee considered such factors as increased free
cash flow, improved operating ratios, and service reliability.
Long-term Incentives. Long-term incentives are paid under the 1987 Long-Term
Performance Stock Plan. For 1996, the Committee approved grants of stock options
and performance shares. These grants are made with the objective of bringing
total direct compensation (base salary, annual bonus, and long-term incentives)
to approximately the 85th percentile of the comparator companies. The ultimate
value of these grants depends upon the value of CSX stock and, consequently, the
creation of shareholder value.
Stock option grants for 1996 were made considering historic grant levels and
the Company's stock price. Options vest within one year but may only be
exercised prior to the ninth anniversary of the grant if the stock price reaches
certain threshold levels established at the time of the option grant.
Performance share grants are established at the beginning of each three-year
cycle. When establishing these grants, the Committee considered historic grant
levels, competitive practice, stock price and corporate and business unit
financial objectives. The actual award made at the conclusion of each three-year
cycle is based upon corporate and business unit financial performance determined
by the average Return on Invested Capital earned during the cycle. For the
1994-1996 performance cycle, the Company and its major business units achieved
the targeted levels of Return on Invested Capital which translated to payment of
100% of the performance shares granted for the cycle.
Tax Considerations
Present tax law limits to $1 million the Company's deduction for
compensation paid to each of the Chief Executive Officer and the other four most
highly compensated executives unless compensation is awarded under plans meeting
certain requirements to qualify as performance based. The Company's compensation
program for senior executives has both objective and discretionary elements.
Generally, the Committee wishes to maximize deductibility of compensation
elements and has structured the major compensation elements to achieve
deductibility. The Committee does, however, believe in retaining flexibility to
recognize an executive officer's contribution beyond the deductibility limits if
this serves the best interests of the Company and its shareholders. In 1996, all
of the compensation paid to the Chief Executive Officer and the other four most
highly compensated executives qualified for deduction pursuant to Section 162(m)
of the Internal Revenue Code.
19
1996 Compensation for the Chief Executive Officer
For 1996, the Company's most highly compensated executive was Mr. Snow, the
Chairman, President, and Chief Executive Officer. Consistent with the
Committee's objective to pay base salaries at the 50th percentile of the
comparator companies, Mr. Snow's base salary was increased by 11 percent to
$1,000,000 in September, 1996. When establishing Mr. Snow's base salary, the
Committee reviewed reported base salary information for the chief executive
officers of the comparator companies.
For 1996, the portion of Mr. Snow's annual bonus representing financial
performance, which was paid under the shareholder approved SMICP, was calculated
according to a formula which compares the Company's financial performance
against pre-established targets for Return on Invested Capital (ROIC) as a
percentage of its Cost of Capital (COC). During 1996, CSX achieved a ROIC of
12%, substantially in excess of the Company's COC and representing an increase
over prior years' accomplishments. The Committee can establish an award under
the SMICP, the amount of which cannot exceed the award determined using the
formula.
In determining the amount of Mr. Snow's bonus, the Committee further
considered Mr. Snow's efforts in pursuing a strategic expansion of CSX's rail
system, as well as an enhancement to his pension upon retirement. During 1996,
Mr. Snow took a significant step toward positioning the Company for long term
strategic success with the announcement of a proposed transaction with Conrail
Inc. The Board of Directors believes the Company's and shareholders' best
interests will be served over a long-term period by expanding the market reach
and scope of the Company's rail services, thereby increasing its access to
additional customers and revenues and positioning CSX to remain a key player in
the changing national railroad map. In connection with CSX's acquisition of
Conrail Inc., Mr. Snow has been given an enhancement to his pension upon
retirement as described on page 17.
Having reviewed the maximum award to be paid utilizing the formula under the
SMICP in combination with Mr. Snow's strategic leadership initiatives, and the
long-term value to be realized from the retention arrangement and pension
enhancement, the Committee established an award of $1,221,300 to be paid under
the SMICP for 1996.
Under a deferral program available to executives of the Company, Mr. Snow
elected to receive 100 percent of this bonus in stock and deferred receipt of
this income for the period he remains employed by the Company. By deferring his
bonus into stock, Mr. Snow received additional stock valued at 25 percent of the
deferred amount. This deferral program is available to the other four most
highly compensated executives participating in the Senior Management Incentive
Compensation Plan.
The largest portion of Mr. Snow's 1996 compensation was in the form of
long-term incentives, including performance shares and stock options. Granted
pursuant to the shareholder-approved 1987 Long-Term Performance Stock Plan,
these performance shares and stock options are granted with the objective of
positioning total compensation at approximately the 85th percentile of the
comparison companies. The actual long-term value of these grants depends upon
the creation of shareholder value through stock price appreciation. The
Committee approved payment of an award to Mr. Snow of 34,000 performance shares,
for performance during the 1994-1996 performance cycle, in recognition of the
Company's achievement of the average of its Return on Invested Capital targets
during that cycle. This represents 100% of the performance shares originally
granted.
Mr. Snow was also granted 152,400 stock options during 1996 and 34,000
performance shares for the 1996-1998 performance cycle were granted prior to the
beginning of the cycle. With increased pressures to conserve cash and capital as
a result of the proposed transaction with Conrail Inc., the Committee has
established Return on Invested Capital as compared to the Company's Cost of
Capital as the measurement to determine the subsequent award of these
performance shares.
20
The Committee concluded that Mr. Snow's outstanding strategic leadership and
contributions to the long-term value of the Company and to its shareholders
through initiatives designed to shape the evolution of America's railroads
support the compensation paid to him for 1996. The Committee believes the
current decline in the value of the Company's stock is a temporary one, pending
resolution of the proposed acquisition and its approval by the Surface
Transportation Board. The Committee feels the Chief Executive Officer has taken
the critical steps necessary to secure a strong foothold for the Company in a
highly competitive marketplace, has balanced the short-term impact of these
decisions with the long-term benefits to be gained, and that his efforts in
doing so should be recognized. In addition, the Committee recognizes and
appreciates Mr. Snow's service as Chairman of the Association of American
Railroads.
Compensation Committee
Robert D. Kunisch, Chairman
John R. Hall
Charles E. Rice
William C. Richardson
Frank S. Royal,
the entire Committee
Richmond, Virginia
February 11, 1997
21
Comparison of Five-Year Cumulative Total Return*
CSX Corporation, S&P 500, Dow Jones Transportation Average
[GRAPH]
1991 1992 1993 1994 1995 1996
CSX 100 122 148 129 173 203
S&P 100 108 133 120 165 179
Dow Jones Transportation 100 108 118 112 156 166
* $100 Invested on 12/31/91 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31, for the years 1991 through 1993, and
December 30, 1994, December 29, 1995, and December 27, 1996.
Source: Research Holdings Ltd.
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 1997. 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 AMENDED AND RESTATED CSX CORPORATION STOCK PLAN FOR DIRECTORS
The Board of Directors feels that it is in the Company's best interests to
align further the personal financial interests of directors with those of
shareholders. To that end, the Corporation requires additional flexibility to be
able to compensate directors with Company stock. Under the existing CSX Stock
Plan for Directors ("Stock Plan"), approved by shareholders in May 1992,
directors are required to be paid in stock for a minimum of 40 percent of their
annual retainer. Each director may elect to have up to 100 percent of retainer
and fees paid in stock.
The proposed amendments would permit the Company to pay directors in stock
or equity-based securities without any prior election to do so by each director.
The amendments would also permit directors to be awarded stock options whose
value would depend on the price of CSX stock. In addition, amendments are
proposed to simplify administrative aspects of the payment for directors'
services using stock. If the Amended and Restated CSX Corporation Stock Plan for
Directors is approved by shareholders, the Company would terminate its
Retirement Plan for Directors described on page 6 insofar as it applies to
current and prospective directors.
22
There remain 956,728 shares available for issuance of those reserved under
the Stock Plan since its inception in 1992. No additional shares are requested
for approval.
A copy of the Amended and Restated CSXCorporation Stock Plan for Directors
is attached as Appendix A.
The Board of Directors recommends a vote FOR this proposal.
4. SHAREHOLDER PROPOSAL REGARDING SHAREHOLDER APPROVAL OF SHAREHOLDER RIGHTS
PLAN.
Mr. Dewey B. Garland, 1834 Thompson Station Road West, Thompson Station, TN
37179, owner of 633 shares of common stock has informed the Company that he
intends to present the following proposal at the Annual Meeting of Shareholders.
"BE IT RESOLVED: That the shareholders of the CSX Corporation urge the Board
of Directors to redeem the stockholder rights issued pursuant to the
"Shareholder Rights Plan" unless the Shareholder Rights Plan is approved by a
majority of the voting shares at the next meeting of shareholders.
SUPPORTING STATEMENT
"We strongly believe that the Company's financial performance is closely
linked to its corporate governance procedures and practices, and the level of
management accountability they impose. The Company has a variety of measures in
place that protect the incumbency of sitting directors and senior executives,
thus reducing their accountability to shareholders. Those measures include a
Shareholder Rights Plan, commonly referred to as a `poison pill,' which is an
anti-takeover device frequently adopted by corporate boards of directors to
prevent shareholders from acting directly on offers of their shares. Poison
pills are designed to severely dilute the ownership interests of shareholders
whom management deems to be `unfriendly.' This threat of dilution forces
investors to negotiate potential acquisitions with management, instead of making
their offer directly to shareholders.
"A triggering of the poison pill could dilute the shareholdings of the
so-called `unfriendly' shareholder by 50 percent. A poison pill thus discourages
potential acquirers from making offers to purchase a controlling interest of the
Company, thereby denying shareholders the opportunity to evaluate the merits of
a bid for their shares independent of management.
"Poison pills can pose such an obstacle to a takeover that management
becomes entrenched. We believe that the entrenchment of management, and the lack
of accountability that results, can adversely affect shareholder value.
Therefore, as shareholders concerned about the value of our investment, we are
very disturbed by the Company's adoption of a Shareholder Rights Plan without
the approval of a majority of the shareholders.
"The argument that a board of directors needs a poison pill in order to
negotiate a better offer from potential acquirers or prevent so-called `abusive
takeover practices' is deceptive. In 1986, the U.S. Securities and Exchange
Commission issued a study entitled The Effects of Poison Pills on the Wealth of
Target Shareholders which concluded `Poison pills are not in the best interest
of shareholders.'
"We strongly believe that it is the shareholders (who are the owners of the
Company), not the directors and managers, who should have the right to decide
what is or is not a fair price for their shareholdings. The Company's Board of
Directors unilaterally adopted a poison pill which transferred this decision
from the owners of the Company to the agents of the owners. In order to restore
management accountability to the shareholders, the Company's Shareholder Rights
Plan should be submitted to a shareholder vote as soon as possible.
"We urge you to VOTE FOR this proposal."
24
MANAGEMENT RESPONSE
The Company adopted a Shareholder Rights Plan ("Rights Plan") in 1988 and
amended the Rights Plan in 1990. Rights plans are specifically authorized under
Virginia law. In adopting the Rights Plan, the Board gave careful consideration
to the effect of the Rights Plan on the Company's shareholders and, after
consultation with outside financial and legal advisors, concluded that the
Rights Plan would benefit the Company's shareholders. The Company continues to
hold this view.
Rights plans give corporations and their shareholders more time in which to
make decisions respecting a sale of control, a question of fundamental
importance. Thus, a rights plan strengthens the ability of the Company's
directors to fulfill their duties under Virginia law to act in the best
interests of the company. Further, a rights plan deters coercive takeover
tactics and self-dealing transactions that may not be in the best interests of a
company and its shareholders. A rights plan should not interfere with negotiated
transactions, nor preclude unsolicited takeovers.
Since the introduction of rights plans in 1984, economists and market
analysts have debated the economic impact of rights plans on the market price of
a company's stock as well as on takeovers and takeover premiums. Although a 1986
study by the SEC comparing market prices of companies' stock prior to and
immediately after announcement of a rights plan found a "statistically
significant" reduction in market price of 0.66% in some circumstances, more
recent studies have called this conclusion into question. Every major investment
banking firm that has studied the subject has concluded that adoption of a
rights plan has no effect on the stock prices of companies that are not the
subject of takeover speculation.
Furthermore, a 1994 study by University of Rochester economists Robert
Comment and G. William Schwert replicated the analysis of the earlier SEC study
using a database that was four times the size of the database of the 1986 SEC
study. Professors Comment and Schwert concluded that adoptions of rights plans
have no meaningful price effect. Significantly, they found that rights plans
"are reliably associated with higher premiums for selling shareholders, both
unconditionally and conditional on a successful takeover...Antitakeover measures
increase the bargaining position of target firms..." Thus, the evidence suggests
that rights plans clearly serve their principal objectives - protection against
inadequate offers and abusive tactics and increased bargaining power resulting
in higher value for shareholders. A rights plan gives the Board the ability, in
response to an inadequate offer, to protect the best interests of the
corporation, including by seeking alternative means of maximizing shareholder
value or by negotiating a transaction on terms more favorable to the corporation
and its shareholders.
For the foregoing reasons the Board recommends that shareholders vote
AGAINST Proposal No. 4.
The Board of Directors recommends a vote AGAINST this proposal.
24
ADDITIONAL INFORMATION
New Plan Benefits
CSX Corporation Stock Plan for Directors
Because the Board of Directors may not yet make grants of stock or stock
options under the CSX Stock Plan for Directors, it is impossible to calculate
with certainty the future awards under the Amended and Restated CSX Stock Plan
for Directors. Accordingly, the following table sets forth the payments of
retainers and fees made to current directors in the form of stock under the
Stock Plan for Directors for fiscal year 1996.
Fiscal Year 1996
Payments of Retainers and Fees in Form of Stock
Total Shares (#) Total Payment Date Value ($)
(Note 1) (Note 2)
-----------------------------------------------------
9,487 $456,178
Notes to New Plan Benefits Table
- --------------------------------
Note 1 Represents total number of shares distributed to current non-employee
directors in payment of retainers and fees during fiscal year 1996.
Note 2 Represents total value of shares distributed during fiscal year 1996
based on the fair market value of shares on the respective distribution
dates.
Voting Procedures
Votes are tabulated by three Inspectors of Election. The affirmative vote of
the majority of shares represented at the meeting and entitled to vote therein
will be required for adoption of the amendment and restatement of the Stock Plan
for Directors. For these purposes, abstentions will be treated as "no" votes,
and broker "non-votes" will not be counted.
The Company's by-laws 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 by-laws, 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.
Date for Receipt of Shareholder Proposals
Shareholder proposals for inclusion in the Proxy Statement for the 1998
Annual Meeting of Shareholders must be received at the principal executive
offices of CSX on or before November 18, 1997.
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 $15,000 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 18, 1997
By Order of the Board of Directors
Alan A. Rudnick
Vice President-General Counsel and Corporate Secretary
25
AMENDED AND RESTATED CSX CORPORATION
STOCK PLAN FOR DIRECTORS
1. Name of Plan. This plan shall be known as the "Amended and Restated
CSX Corporation Stock Plan for Directors" (the "Plan".)
2. Purpose of Plan. The purpose of the Plan is to enable CSX Corporation, a
Virginia corporation (the "Company"), to attract and retain persons of
exceptional ability to serve as directors and to solidify the common
interests of its directors and shareholders in enhancing the value of the
Company's Stock. The Plan provides for grants of Stock, grants of options to
acquire Stock, and payment of directors' retainers and fees in Stock.
3. Effective Date and Term and Shares Subject to Plan. The Plan shall be
effective as of the date it is adopted by the Board of Directors of the
Company, subject, however, to approval by at least a majority of the
outstanding shares of Stock present or represented and entitled to vote at a
meeting of shareholders of the Company not later than April 17, 1997, and
shall remain in effect until amended or terminated by action of the Board.
Of the 1,000,000 shares subject to the Plan as of May 1, 1992, the date of
original approval by shareholders of the Company, 956,728 shares remain
unissued and subject to the Plan as of March 18, 1997.
4. Eligible Participants. Each member of the Board from time to time who is
not a full-time employee of the Company or any of its subsidiaries shall
be a participant ("Participant") in the Plan.
5. Definitions.
(a) "Annual Meeting" means the Company's Annual Meeting of Shareholders.
(b) "Board of Directors" or "Board" means the Board of Directors of CSX
Corporation.
(c) "Business Day" means, if relevant to a determination of the value of
Stock, a day on which shares of Stock are or could be traded on the New
York Stock Exchange (or other national stock exchange, or if not so
listed, could be traded over-the-counter). In all other cases, the term
means a day on which the offices of the Company are open for the conduct
of business in the normal course.
(d) A "Payment Date" means the fifteenth day of the last month of each
quarter of the Corporation's fiscal year or, if the fifteenth day of
such month is not a Business Day, on the next Business Day following the
fifteenth day of such month.
(e) "Fair Market Value" means, as of any given date, the mean between the
high and low selling prices of the Stock per share on the New York Stock
Exchange on such date (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred).
(f) "Stock" means the Common Stock of the Company and rights, options or
warrants for the purchase of securities of the Company which may be
issued with shares of Stock pursuant, and subject, to plans or
agreements adopted or entered into from time to time by the Company. If
the par value of Stock is changed, or in the event of a change in the
capital structure of the Company, the shares resulting from such a
change shall be deemed to be Stock within the meaning the Plan.
A-1
6. Shares and Stock Options.
(a) Commencing May 1, 1992, the annual retainer payable to each Participant
for service on the Board shall be payable in part in shares of Stock
subject to any applicable deferrals and restrictions set forth in
Section 8 hereof. Subject to paragraphs (b) and (c) below, each
Participant shall be paid 40 percent of the annual retainer payable to
each Participant for service on the Board (the "Designated Percentage")
in shares of Stock. The shares shall be deducted at their Fair Market
Value, determined as of the Business Day immediately preceding the date
of the Company's Annual Meeting of Shareholders ("Annual Meeting"), from
the Participant's annual retainer.
(b) Any person who becomes a non-employee director following the Company's
Annual Meeting, whether by appointment or election as a director or by
change in status from a full-time employee, shall receive shares of
Stock as a portion of the compensation to be paid to such Participant
until the next Annual Meeting. The number of shares of Stock issued to
such Participant shall be determined by dividing the product of the pro
rata portion of the annual retainer to be paid to such director and the
Designated Percentage by the Fair Market Value on the day such person
becomes a Participant. A Participant who becomes a non-employee director
following the Company's Annual Meeting may, at the beginning of such
term, make his or her Annual Election as set forth in paragraph (c)
below regardless of the number of months remaining until the next Annual
Meeting.
(c) Each Participant may also make one election during the period from
Annual Meeting to the next Annual Meeting (the "Annual Election") to
receive up to 100 percent of his or her retainers and/or fees in shares
of Stock, subject to any applicable deferrals and restrictions set forth
in Section 8 hereof. The Annual Election must be in writing and shall be
delivered to the Corporate Secretary of the Company no later than six
months prior to the next Annual Meeting. The Annual Election shall be
irrevocable in respect of the year to which it pertains and shall
specify the applicable percentage of the annual retainers and/or fees
above the Designated Percentage that such Participant wishes to receive
in shares of Stock. The Annual Election shall not be effective until at
least six months and one day following its execution and receipt by the
Company.
(d) In addition to the awards described in the previous provisions of this
Section 6, the Board may make additional awards of Stock or options to
acquire Stock to Participants upon such terms as it deems fit; provided,
however, that options to acquire Stock ("Stock Options") shall be
subject to the restrictions in Section 10.
7. Payment of Shares. Payments to directors of Stock or Stock Options pursuant
to this Plan shall be made as follows, subject to any applicable deferrals
and restrictions pursuant to Section 8 of this Plan:
(a) Shares payable as the Designated Percentage pursuant to Section 6 of the
Plan shall be payable immediately following the Company's Annual
Meeting.
(b) Following payment of the Designated Percentage, the balance of each
director's retainers to be paid in Stock, if any, shall be prorated and
paid on the Payment Dates remaining until the next Annual Meeting.
(c) Unless otherwise specified by resolution of the Board of Directors, any
compensation to be paid in Stock and any grant of Stock shall be made on
or as of the Payment Date next succeeding the date on which such
payments have been earned or are otherwise payable or issuable.
(d) The number of shares to be issued in payment of retainers and fees
denominated in dollars shall be calculated on the basis of the Fair
Market Value on the Payment Date as of which such shares are issued.
A-2
8. Deferrals and Restrictions on Payment. Payment of shares issuable under
Section 6 shall, at the Participant's election (which election must be in
writing and shall be delivered to the Corporate Secretary of the Company no
later than six months prior to the next Annual Meeting), be deferred in
accordance with a deferral election made by the Participant and filed
with the Company. The Company shall transfer shares of Stock or other
assets equal in value to a number of shares as to which payment is deferred
to a trust to secure the Company's obligation to pay shares of Stock to
the Participant in the future, but any assets transferred shall remain
subject to the claims of the Company's creditors and any interest the
Participant may be deemed to have in the trust may not be sold,
hypothecated or transferred (including, without limitation, transfer by
gift or donation). The Company shall distribute Stock deferred pursuant to
this Section 8 in accordance with elections made by each participant
on forms approved by the Board; provided, however, that upon a Change of
Control, as hereinafter defined, all Stock previously deferred shall be
issued immediately, except that a Participant may elect that shares which
would be distributed to him or to her upon a Change of Control may continue
to be held in trust for distribution in accordance with this Section 8.
Such election with respect to Change of Control described in the preceding
sentence shall be effective no earlier than the Annual Meeting following
such election.
The Participant's right to receive the shares issued under Section 6
shall not be affected by a termination of the trust described herein.
9. Share Certificates, Voting and Other Rights. The certificates for shares
issued hereunder shall be issued in the name of the Participant or the
trustee of the trust described in Section 8, as the case may be, and shall
be held by such Participant or such trustee; provided, however, that each
Participant shall be entitled to all rights of a shareholder with respect to
Stock for all such shares issued in his name, including the right to vote
the shares, and the Participant or the trustee, as the case may be, shall
receive all dividends and other distributions paid or made with respect
thereto.
10. Procedures with Respect to Stock Options.
(a) Each Stock Option granted pursuant to the Plan:
(i) will consist of an option to purchase shares of Stock at a purchase
price not less than 100 percent of the Fair Market Value of the
Stock on the date of grant;
(ii) will be exercisable during the time period specified in the terms of
the grant and reflected in an agreement entered into with a
Participant, but such exercise shall not be earlier than one year
after the date of grant of the Stock Option and not later than 15
years after the date of grant of the Stock Option, with the
determination of the final date of exercise of the Stock Option to
be made at the time of grant.
(b) In the event of the death of a Participant who holds unexercised Stock
Options awarded under the Plan, the Stock Option may be exercised by a
beneficiary designated by the Participant prior to his death, or if no
beneficiary is designated, by the executor or executrix of the
Participant's estate or by the person or persons to whom the
Participant's rights have passed by will or the laws of descent and
distribution, such exercise to be in accordance with the provisions of
the Plan and to the same extent as though the Participant were then
living.
11. Fractions of Shares. The Company shall not issue fractions of shares.
Whenever under the terms of the Plan a fractional share would otherwise be
required to be issued, the Participant or the trustee of the trust described
in Section 8, as the case may be, shall be paid in cash for such fractional
share based upon the same Fair Market Value which was utilized to determine
the number of shares to be issued on the relevant Payment Date.
A-3
12. Change of Control. "Change of Control" shall mean any of the following:
(a) 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 Stock of the Company, 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 of 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 (c) of this Section 12; or
(b) Board Composition. Individuals who, as of the date hereof, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; 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 of Directors; or
(c) Business Combination. Approval by the shareholders of the Company of a
reorganization, merger, consolidation or sale or other disposition of
all or substantially all of the assets of the Company or its principal
subsidiary that is not subject, as a matter of law or contract, to
approval by the Surface Transportation Board or any successor agency or
regulatory body having jurisdiction over such transactions (the
"Agency") (a "Business Combination"), 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 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 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% 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 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 of Directors, providing for such Business
Combination; or
A-4
(d) Regulated Business Combination. Approval by the shareholders of the
Company 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 (c) of this Section 12; or
(e) Liquidation or Dissolution. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
13. Withholding Taxes. Whenever the Company proposes or is required to
issue or to transfer shares of Stock under the Plan, or whenever the
Company is required to withhold taxes upon exercise of Stock Options under
the Plan, a Participant:
(a) Shall remit to the Company an amount sufficient to satisfy any federal,
state or local withholding tax liability prior to the delivery of any
certificate or certificates for such shares; or
(b) To the extent permitted by applicable laws, including regulations
promulgated under the Securities Exchange Act of 1934, such federal,
state or local withholding tax liability may be satisfied prior to the
delivery of any certificate or certificates for the shares by an
adjustment, equal in value to such liability, in the number of shares
to be transferred to the Participant.
14. Amendment. This Plan may be amended by action of a majority of the Board
of Directors, and approval by shareholders shall not be required for any
amendment which does not authorize additional shares to be subject to the
Plan.
15. Administration. The Plan will be administered by the Board. Except as
otherwise specifically provided in the Plan, the Board will have the
entire authority to interpret and administer the Plan, including the
power and complete discretion with respect to any award of Stock or Stock
Options to determine the terms and conditions of the award, the number of
shares of Stock to be covered by the award, the time or times when an award
will be granted, when Stock Options may be exercised, and the manner in
which payment may be made upon the exercise of Stock Options. If the
Board determines that a spin-off, stock dividend or other
distribution not in the form of cash or Stock, consolidation, merger,
dissolution, liquidation or other similar corporate transaction or
event affects a Stock Option such that an adjustment is appropriate to
preserve the intended benefits of a Stock Option, the Board may make such
equitable changes or adjustments in the Stock Option as it deems necessary
or appropriate. The Board may adopt rules and regulations for carrying
out the Plan. The interpretation and construction of any provision of the
Plan by the Board will be final and conclusive.
A-5
PROXY
[CSX CORPORATION LOGO] CSX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON APRIL 17, 1997.
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 April
17, 1997, and at all adjournments thereof.
PLEASE SIGN AND DATE ON THE REVERSE AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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.
For All For Against Abstain
1. Election of Directors For Withheld Except 2. Appointment of Ernst & Young LLP as | | | | | |
Nominees: E.E. Bailey; R.L. Burrus, Jr.; | | | | | | independent certified public
B.C. Gottwald; J.R. Hall; R.D. Kunisch; H.L. accountants;
McColl, Jr.; J. W. McGlothlin; S.J. Morcott; 3. Approval of Amended and Restated CSX
C.E. Rice; W.C. Richardson; F.S. Royal, M.D.; Corporation Stock Plan for Directors; For Against Abstain
J.W. Snow. 4. Shareholder proposal concerning | | | | | |
To withhold authority to vote for any individual Shareholder Rights Plan.
nominee(s), write the name(s) on the line below. For Against Abstain
| | | | | |
- ------------------------------
Nominee Exception
Date:----------------------------
Please Sign:---------------------
Please Sign:---------------------
NOTE: Please sign exactly as your
name appears on this Card. Joint
owners should each sign personally.
Corporation. Proxies should be signed
by an authorized officer. Executors,
administrators, trustees, etc.,
should so indicate.
DETACH PROXY CARD HERE
To Our Shareholders:
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. Accordingly, please
complete and sign the proxy printed above, tear at the
perforation, and mail the above proxy in the enclosed postage
paid envelope addressed to CSX in Rockford, Illinois.
If you are planning to attend the Annual Meeting and Luncheon,
please fill out and return the reservation form addressed to
Office of Corporate Secretary at CSX Corporation. When folded
and sealed as directed, no separate mailing envelope is
required. Your ticket(s) to the Annual Meeting and Luncheon
will be mailed directly to you.
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 brochure enclosed herein.
Please note that in order to reduce the number of duplicative
mailings of proxy materials, CSX has consolidated on a single
proxy or voting instruction card all of your holdings in CSX
common stock registered in the identically registered name and
tax identification number, including ownership that may be
attributed to you through various employee benefit plans.