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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CSX Corporation
(Name of Registrant as Specified In Its Charter)
Alan A. Rudnick,
Vice President - General Counsel
and Corporate Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exhange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
PROXY RULES
1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
_________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________________
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
3) Filing Party:
________________________________________________________________________
4) Date Filed:
________________________________________________________________________
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March 11, 1994
Dear CSX Shareholder:
You are cordially invited to attend our Annual Meeting of
Shareholders on Tuesday, May 3, 1994, at 10:00 a.m. (EDT), at The Greenbrier,
White Sulphur Springs, West Virginia.
If you plan to attend the meeting, please complete and mail the form
containing information about The Greenbrier as soon as possible. An admission
card will be sent to you about two weeks 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
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Notice of Annual Meeting of Shareholders
Richmond, Virginia
March 11, 1994
To Our Shareholders:
The Annual Meeting of Shareholders of CSX Corporation will be held at
The Greenbrier, White Sulphur Springs, West Virginia, on Tuesday, May 3, 1994,
at 10:00 a.m. (EDT), for the purpose of considering and acting upon the
following matters:
1. Election of fourteen directors;
2. Appointment of Ernst & Young as independent certified public
accountants for 1994;
3. Approval of amendments to the 1987 Long-Term Performance Stock Plan;
4. Approval of the 1994 Senior Management Incentive Compensation 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 March 4,
1994, 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
11, 1994.
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
CSX had outstanding as of March 4, 1994, 104,648,925 shares of common
stock entitled to one vote per share. A majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum for the
transaction of business. Only shareholders of record at the close of business
on March 4, 1994, will be entitled to vote.
CSX is not aware of any matters to come before the meeting other than
those set forth in the accompanying Notice and this Proxy Statement.
1. ELECTION OF DIRECTORS
Fourteen directors are to be elected to hold office until the next
Annual Meeting of Shareholders is held and their successors are elected,
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 below, except John R. Hall and Frank S.
Royal, 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 below 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 is set forth below. Each nominee
has consented to being named in the Proxy Statement and to serve if elected.
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Edward L. Addison, 64, is Chairman and Chief Executive Officer of The Southern
Company, an electric utility holding company. He is a director of Alabama
Power Company; Georgia Power Company; Phelps Dodge Corporation; Protective
Life Corporation; Wachovia Bank of Georgia, NA; and Wachovia Corporation of
Georgia. Mr. Addison has been a director of CSX since March 1987, and is
Chairman of the Board's Organization and Corporate Responsibility Committee
and a member of the Executive Committee.
Elizabeth E. Bailey, 55, is the John C. Hower Professor of Public Policy and
Management, The Wharton School of the University of Pennsylvania. Prior to
July 1991, she was Visiting Research Scholar, Yale School of Organization and
Management, and Professor, Graduate School of Industrial Administration,
Carnegie Mellon University; prior to 1991, she was Dean of the Graduate School
of Management at Carnegie Mellon University. She is a director of Honeywell,
Inc.; College Retirement Equities Fund; Philip Morris Companies, Inc.; and
National Westminster Bancorp, Inc. Dr. Bailey has been a director of CSX since
November 1989, and is a member of the Board's Audit Committee.
Robert L. Burrus, Jr., 59, is Chairman of McGuire, Woods, Battle & Boothe, a
law firm of which he has been a partner since prior to 1989. He was elected
Chairman of the firm in 1990. Mr. Burrus is a director of Heilig-Meyers
Company; S & K Famous Brands, Inc.; and Concepts Direct, Inc. Mr. Burrus has
been a director since April 1993, and is a member of the Board's Organization
and Corporate Responsibility Committee.
Bruce C. Gottwald, 60, is Chairman and Chief Executive Officer of Ethyl
Corporation, a worldwide producer of petroleum additives. He is a director of
Albemarle Corporation; Dominion Resources, Inc.; First Colony Corporation;
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.
John R. Hall, 61, is Chairman and Chief Executive Officer of Ashland Oil, 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.; and Reynolds Metals Company.
Robert D. Kunisch, 52, is Chairman, President and Chief Executive Officer of
PHH Corporation ("PHH"), a provider of integrated business services, including
vehicle management services, relocation and real estate services 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 a
member of the Board's Compensation and Pension Committee.
Hugh L. McColl, Jr., 58, is Chairman and Chief Executive Officer of
NationsBank Corporation, a bank holding company. Previously, Mr. McColl was
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; 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.
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James W. McGlothlin, 53, 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 a
member of the Board's Organization and Corporate Responsibility Committee.
Southwood J. Morcott, 55, is Chairman, President and Chief Executive Officer
of Dana Corporation, a manufacturer of automotive and truck parts and provider
of commercial credit. From August 1989 to February 1990, Mr. Morcott was Chief
Executive Officer, President and Chief Operating Officer and, prior to August
1989, he was President and Chief Operating 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 a member of the
Board's Compensation and Pension Committee.
Charles E. Rice, 58, 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 a member of the Board's
Audit Committee.
William C. Richardson, 53, is President of The Johns Hopkins University. Prior
to 1990, Dr. Richardson was Executive Vice President of The Pennsylvania State
University. He is a director of 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 and
Pension Committee.
Frank S. Royal, M.D., 54, is a physician in private practice in Richmond, Va.
and a health care expert. He is a director of Best Products Company, Inc.;
Columbia/HCA Healthcare Corporation; Crestar Financial Corporation; and
Chesapeake Corporation. Dr. Royal has been a director of CSX since January 1,
1994, and is a member of the Board's Compensation and Pension Committee.
John W. Snow, 54, became Chairman of the Board, President and Chief Executive
Officer of CSX on February 1, 1991. From April 1989 to February 1991, Mr. Snow
was President and Chief Executive Officer of CSX and from April 1988 to April
1989, he was President and Chief Operating Officer. Mr. Snow is a director of
NationsBank Corporation; Bassett Furniture Industries, Inc.; Dominion
Resources, Inc.; and Textron, Inc. Mr. Snow has been a director of CSX since
April 1988, and is a member of the Board's Executive Committee.
William B. Sturgill, 69, is President of East Kentucky Investment Co., an
investment holding company, and Chairman of the Board of Central Rock Mineral
Company, Inc., engaged in the production and sale of limestone. Mr. Sturgill
is President of Reading & Bates Coal Company and Golden Oak Mining Co., both
of which are engaged in the production and sale of coal. He is a director of
Bank One, Lexington, NA. Mr. Sturgill has been a director of CSX since
November 1980, and is Chairman of the Board's Compensation and Pension
Committee and a member of the Executive Committee.
During 1993, there were six meetings of the Board of Directors of
CSX. Mr. McColl attended eight of the 11 meetings of the Board of Directors
and the Audit Committee which were held during 1993. Each other director of
the Company 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.
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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 "Election of Directors" includes committee memberships currently held
by each nominee.
The Audit Committee's basic functions are to approve and 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 and 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 four members, none of
whom are Company employees. It held five meetings in 1993.
The primary functions of the Compensation and Pension Committee are
to establish the Company's compensation philosophy and to review and approve
compensation and compensation plans, including certain fringe benefits, for
employees at certain salary grade levels (as determined by this committee from
time to time), to recommend to the Board such compensation, plans and benefits
for certain senior officers of the Company and its subsidiaries, 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 Section 162(m) of the Internal Revenue
Code. The Compensation and Pension Committee also considers developments in
human resource and affirmative action matters. In addition, it monitors the
administration and funding of all retirement plans and is responsible for
administration of certain employee compensation programs. With Dr. Royal's
election to the committee on February 9, 1994, it has five members, none of
whom are Company employees. It held four meetings in 1993.
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 four members. It held one meeting in 1993.
The Organization and Corporate Responsibility Committee of the Board
recommends candidates for election to the Board and also reviews and
recommends changes in board composition, qualifications, compensation and
retirement. 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, P. O. Box 85629, Richmond, Virginia
23285-5629 or 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
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addition, this committee reviews CSX's relationship to the broader social
environment in which CSX 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 are Company
employees. It held five meetings during 1993.
Directors' Compensation
For services rendered during a year, directors, other than employees,
receive a retainer fee of $30,000 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 participate in the CSX Stock Plan for Directors (the
"Plan"). Pursuant to the Plan, directors are paid not less than 40 percent of
their annual retainer in CSX common stock (the "Designated Percentage"),
issued to them immediately following the Company's Annual Meeting of
Shareholders. In addition, directors can annually elect to increase the
Designated Percentage up to as much as 100 percent. Any election to increase
or to decrease the Designated Percentage cannot take effect until six months
plus one day following the last business day of the month in which the Annual
Meeting of Shareholders occurs. Payments made in stock pursuant to the Plan
can also be deferred for income tax purposes into a trust established for that
purpose.
Directors, other than employees, 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.
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 compensation paid by CSX until he or she ceases
to be a director or 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.
Amounts deferred to the Phantom Stock Account are treated as if they had been
used to purchase CSX stock at the closing price on the date the fees would
otherwise have been paid to the director. Participants in the Enhanced
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Interest Account are also covered by an additional $10,000 death benefit.
Messrs. Addison and Morcott have caused deferred compensation to be invested
in the Phantom Stock Account where they had, as of December 31, 1993,
accumulated the equivalent, respectively, of 1,323 and 780 shares.
The Directors' Retirement Plan and the Deferred Compensation Plan
provide that if the Board determines that a change of control of CSX has
occurred, plan participants will be entitled to 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.
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
totalling $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 is reimbursed for the charitable
contributions as beneficiary under policies of 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 Messrs. Addison, Gottwald, Snow and Sturgill.
Directors also can participate in a CSX Directors' Matching Gift
Program. Directors' contributions to colleges and universities and to certain
organizations providing support to such institutions are matched on a one to
one basis, up to $5,000 per year, per institution. The maximum amount which
can be matched in any year is $25,000 per director. Directors who
participated in the Matching Gift Program during 1993 and the amounts matched
by the Company for contributions made by these directors in 1993 are as
follows: Edward L. Addison - $2,500; Elizabeth E. Bailey - $500; Robert L.
Burrus, Jr. - $7,431; Clifford M. Kirtland, Jr. - $300; Hugh L. McColl, Jr. -
$25,000; Southwood J. Morcott - $2,000; Charles E. Rice - $8,900; William C.
Richardson - $2,500; John W. Snow - $15,500; and William B. Sturgill - $5,000.
Certain Relationships and Related Transactions
Hugh L. McColl, Jr., a director of the Company, is also Chairman and
Chief Executive Officer of NationsBank Corporation. The Company has a $100
million credit facility with NationsBank Corporation.
Charles E. Rice, a director of the Company, is also Chairman and
Chief Executive Officer of Barnett Banks, Inc. The Company has a $20 million
credit facility shared by two bank subsidiaries of Barnett Banks, Inc. 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 after its sale was renamed BTI Services,
Inc., is headquartered in Jacksonville, Fla., and is engaged in the business
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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 time of James W. McGlothlin's election as a
director of CSX, The United Company, of which Mr. McGlothlin is Chairman and
Chief Executive Officer, purchased from a wholly owned subsidiary of the
Company a used Gulfstream aircraft at a cost of $6 million, with down payment
in the amount of $1.2 million and an additional $800,000 which 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, Charlotte, North Carolina, was
payable in 10 consecutive annual installments beginning December 31, 1988. As
of December 31, 1993, the total outstanding indebtedness was $1.6 million.
McGuire, Woods, Battle & Boothe, the law firm in which Robert L.
Burrus, Jr. is a partner and of which he is Chairman, regularly provides legal
services to the Company and its subsidiaries.
Contractual Obligations
The Board of Directors has determined that it is in the best
interests of CSX and its shareholders to assure that the Company will have the
continued dedicated services of its executive officers, notwithstanding the
possibility, threat or occurrence of certain changes in control. Therefore,
agreements were entered into with Messrs. Snow, Carpenter, Clancey and Ermer
that relate to the officers' employment following certain changes of control.
For Messrs. Snow, Carpenter and Ermer, the agreements were entered into in
1988. For Mr. Clancey, the agreement was entered into in 1994, and it
supersedes an earlier agreement entered into in 1985. The term of each
agreement is extended for an additional one-year period on the anniversary
date of the agreement unless 60 days prior to any anniversary date CSX gives
notice that the term will not be extended.
Each agreement provides for the officer's continued employment until
the earlier of either three years following a change of control event or
normal retirement age as defined under CSX's retirement plans (the "Employment
Period"). During the Employment Period, the officer will be entitled to a
minimum annual salary and bonus in an amount equal to the annualized highest
monthly salary and average annualized bonus paid during the 12 months
immediately preceding the change of control event. The officer also will be
entitled to participate in incentive, savings and other benefit programs on
terms at least as favorable as those in effect during the 90 days preceding
the change of control event.
The agreements generally provide certain benefits if, following a
change in control event, an officer's employment is terminated by the Company
or its successor other than for cause, death or disability, or if the officer
resigns for "good reason" such as a reduction in responsibilities. In such
event, the Company will be obligated to pay to the executive through the date
of termination the executive's annual base salary, a pro rata portion of the
executive's annual bonus, an amount equal to three times the executive's
annual salary and highest annual bonus within the 12 months preceding the
change of control, all amounts of previously deferred compensation not yet
paid by the Company and a lump sum retirement benefit equal to the difference
between the present value of benefits receivable under CSX's retirement plans
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(assuming such officer had continued to be employed for the Employment Period)
and the actual present value of benefits to be received under such plans. CSX
also will pay any excise tax or any interest or penalties incurred with
respect to such an excise tax which may be imposed pursuant to Section 4999 of
the Internal Revenue Code with respect to these lump sum payments.
Pursuant to a June 1989 letter agreement with Mr. Davis, Executive
Vice President and Chief Operating Officer of CSXT, upon completion of 10
years of service with CSXT, the years of Mr. Davis' prior service with the
Union Pacific Corporation will be included in the calculation of his CSX
pension. Any benefits payable by CSX pension plans will be reduced by benefits
paid by Union Pacific Corporation.
In April 1990, pursuant to the 1987 Long-Term Performance Stock Plan
("1987 Plan"), the Company entered into Special Stock Award Agreements with
Messrs. Carpenter and Davis. Under the terms of the Agreements, 20,000 shares
of CSX common stock were awarded, conditioned on continued employment, to each
of Messrs. Carpenter and Davis, one-half of the shares to be issued on the
fifth anniversary, and the balance to be issued on the tenth anniversary of
each agreement. In February 1994, the Company entered into a similar agreement
with Mr. Clancey pursuant to which 10,000 shares of CSX common stock 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 tenth anniversary of the agreement. In the case of all three
agreements, 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. All three agreements will be accelerated in the event of a change of
control.
On February 9, 1994, the Company entered into an agreement with Mr.
Snow awarding him 500,000 non-qualified employee stock options with an
exercise price of $89.875 per share. The options were awarded pursuant to the
Company's 1987 Plan. The agreement will be accelerated in the event of a
change of control. The options were granted in three tranches, each of which
has restrictions which do not permit their exercise earlier than (a) passage
of a vesting period, and (b) the price of CSX common stock achieving certain
threshold levels for a period of 10 consecutive business days ("Price
Threshold"). The first tranche of 100,000 options has a vesting period of
three years and a Price Threshold of $100 per share; the second tranche of
150,000 options has a vesting period of four years and a Price Threshold of
$110 per share; and the third tranche of 250,000 options has a vesting period
of five years and a Price Threshold of $120 per share. As to each tranche, if
Mr. Snow terminates employment for any reason other than death or disability
prior to the satisfaction of the vesting periods and Price Thresholds, the
options granted as part of that tranche are forfeited. The agreement includes
restrictions on Mr. Snow's ability to sell any shares realized through
exercises of options granted pursuant to the agreement. Those restrictions
terminate in the event of Mr. Snow's death or disability or in the event of a
change of control.
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PAGE 13
<TABLE>
Security Ownership of Directors, Nominees and Executive Officers
<CAPTION>
Amount and Nature of Beneficial Ownership (Note 1)
Shares for
Which
Beneficial
Stock Ownership
Purchase Other can be Total Percent
and Shares Acquired within Beneficial of
Name of Loan Plan Beneficially 60 Days Ownership Class
Title of Class Beneficial Owner (Note 2) Owned (Note 3) (Note 4) (Note 4)
<S> <C> <C> <C> <C> <C> <C>
CSX Corp. Edward L. Addison N/A 1,904 N/A 1,904 *
Common Stock Elizabeth E. Bailey N/A 1,862 N/A 1,862 *
$1 Par Value Robert L. Burrus, Jr. N/A 651 N/A 651 *
Bruce C. Gottwald N/A 6,052 N/A 6,052 *
John R. Hall N/A 1,000 N/A 1,000 *
Clifford M. Kirtland, Jr. N/A 2,161 N/A 2,161 *
(Note 5)
Robert D. Kunisch N/A 1,366 N/A 1,366 *
Hugh L. McColl, Jr. N/A 1,362 N/A 1,362 *
James W. McGlothlin (Note 6) N/A 53,864 N/A 53,864 *
Southwood J. Morcott N/A 1,606 N/A 1,606 *
Charles E. Rice N/A 2,064 N/A 2,064 *
William C. Richardson N/A 264 N/A 264 *
Frank S. Royal N/A 500 N/A 500 *
William B. Sturgill N/A 2,455 N/A 2,455 *
John W. Snow 131,960 123,467 381,365 636,792 *
Alvin R. Carpenter 52,207 53,922 24,000 130,129 *
Jerry R. Davis 40,870 40,214 16,600 97,684 *
John P. Clancey 40,870 29,533 16,600 87,003 *
James Ermer 31,581 56,084 81,132 168,797 *
Executive officers as a
group (17 persons, including
those named above) and all
directors and nominees 548,030 611,849 977,146 2,137,025 1.97
FMR Corp. (Note 7)
82 Devonshire Street,
Boston, MA 02109 N/A 9,860,766 N/A 9,860,766 9.10
</TABLE>
Notes to Security Ownership of Directors, Nominees 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 4, 1994.
Note 2 This column reflects grants under the 1991 Stock Purchase and Loan
Plan ("SPLP"). There were separate offerings under the SPLP in 1991
and 1992. There were no awards or stock issuances under the SPLP
during 1993.
Pursuant to the SPLP, the Board's Compensation and Pension Committee,
as administrator, granted purchase awards to each participant. Each
participant could subscribe to all, a portion, or none of the
purchase award offered. Upon subscription to the purchase award, the
participant was required to tender to the Company 5 percent of the
purchase price of the shares, which could be borrowed from the
- 13 -
PAGE 14
Company (the "Downpayment Loan"). The participant was required to
borrow the remaining balance of 95 percent of the purchase price
through a loan from the Company (the "Purchase Loan"). The purchase
price for shares purchased pursuant to the SPLP in 1991 was $48.325
per share, and the purchase price for shares issued in 1992 was
$64.325 per share. These prices were, for each of the two offerings,
the average of the closing price on the New York Stock Exchange for
the five business days preceding commencement of the period during
which any employee's commitment to purchase had to be made.
In the case of the 1991 offering, each Purchase Loan has a term of
five years, but can be prepaid without penalty after three years. The
loans bear interest at the rate of 7.87 percent per annum, compounded
semiannually. Purchase Loans for shares offered in July 1992 have
terms of four years, but are prepayable without penalty after two
years. At the request of the borrower, the Purchase Loans can be
extended one additional year. These loans bear interest at the rate
of 6.74 percent per annum. Purchase Loans are non-recourse to the
borrower, and each is secured by all of the shares of stock
purchased. Dividends paid on shares held as security under the
Purchase Loans are applied against accrued and unpaid interest. The
terms of the Downpayment Loans parallel those of the Purchase Loans
except that the Downpayment Loans are recourse loans and are secured
by shares of CSX stock provided by the borrower.
Under the terms of the SPLP, as of August 1, 1993, the principal
balance and interest under each Purchase Loan was subject to various
adjustments as a result of the market price of the common stock
having equalled or exceeded certain threshold levels for a period of
10 consecutive business days. These adjustments on the Purchase Loans
consisted of forgiveness of the Interest Spread (the difference
between accrued interest on the Downpayment Loan and any dividends on
the shares purchased) and a reduction of 25 percent of the purchase
price. The table below reflects Purchase Loan balances both before
and after such adjustments. The benefits of the adjustments described
are not available to participants exiting the SPLP prior to August 1,
1994.
Dividends on the stock held as collateral under Downpayment Loans are
paid directly to the borrower. Interest on the down payment notes was
forgiven as a result of the market price of the CSX common stock
having equalled or exceeded certain threshold levels for a period of
10 consecutive business days after August 1, 1993. The table below
reflects Downpayment Loan balances both before and after adjustments
are made.
For Messrs. Snow, Carpenter, Davis, Clancey and Ermer, the number of
shares purchased pursuant to the SPLP, the purchase price for those
shares, and the aggregate loan balances as of December 31, 1993, both
with and without the adjustments described above, are indicated in
the following table. Messrs. Snow, Carpenter, Davis, Clancey and
Ermer all took Downpayment Loans for 5 percent of the purchase price
of shares.
- 14 -
PAGE 15
<TABLE>
<CAPTION>
Unadjusted Unadjusted Adjusted Adjusted
Number of Purchase Loan Down Payment Purchase Loan Downpayment
Shares Purchase Balances Loan Balances Balances Loan Balances
Name Purchased Price 12/31/93(i) 12/31/93(ii) 12/31/93(iii) 12/31/93(iv)
<S> <C> <C> <C> <C> <C> <C>
J.W. Snow 131,960 $ 6,376,967 $ 6,704,916 $ 379,491 $ 4,463,877 $ 318,848
A.R. Carpenter 52,207 2,704,295 2,809,025 157,478 1,893,007 135,215
J.R. Davis 40,870 1,975,043 2,076,613 117,534 1,382,530 98,752
J.P. Clancey 40,870 2,253,843 2,316,963 128,817 1,577,690 112,692
J. Ermer 31,581 1,526,152 1,604,637 90,821 1,068,306 76,308
All executive officers as a group
(17 persons, including those
named above) 548,030 $27,162,270 $28,430,637 $1,603,494 $19,013,589 $1,358,113
</TABLE>
(i) Unadjusted Purchase Loan balances include principal equal to
95 percent of the actual cost of the common stock and
accrued interest net of dividends applied.
(ii) Unadjusted Downpayment Loan balances include principal equal
to 5 percent of the actual cost of the common stock and
accrued interest.
(iii) Adjusted Purchase Loan Balances reflect reduction of the
Unadjusted Purchase Loan Balance by the Interest Spread and
25 percent of the Purchase Price, as a result of achievement
of the thresholds discussed above.
(iv) Adjusted Downpayment Loan Balances reflect reduction of the
Unadjusted Downpayment Loan Balance by the accrued interest
on the Downpayment Loan as a result of achievement of the
thresholds discussed 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 4, 1994.
Note 4 Based on number of shares outstanding of 108,365,812 on March 4,
1994, including 3,716,887 shares deemed outstanding for which
beneficial ownership can be acquired within 60 days. An asterisk (*)
indicates that ownership is less than one percent of class.
Note 5 Mr. Kirtland will retire as a director on May 3, 1994.
Note 6 Mr. McGlothlin's ownership includes 51,000 shares of common stock as
a result of stock holdings by affiliates of Mr. McGlothlin in which
he shares voting and investment power.
Note 7 Information reported is derived from a Schedule 13G of FMR
Corporation dated February 11, 1994, 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 773,887 shares, and has the sole power to dispose or to direct the
disposition of 9,860,766 shares. Shares outstanding as of March 4,
1994 have been used to determine percent of class.
- 15 -
PAGE 16
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 end of the fiscal year ending December 31, 1993. Information is
provided for the fiscal years ending on December 31 of the years shown.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long-Term
Compensation (Note 2)
Awards Payouts
Other Securities
Annual Underlying LTIP All Other
Compensation Options/ Payouts Compensation
Name and ($) SARs (#) ($) ($)
Principal Position Year Salary ($) Bonus ($) (Note 1) (Note 3) (Note 4) (Note 5)
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Snow 1993 $746,758 $850,894 $56,146 76,200 $1,585,395 $98,605
Chairman, President 1992 746,758 700,060 50,070 76,200 842,100 85,004
& CEO 1991 669,504 565,698 N/A 66,700 396,694 N/A
Alvin R. Carpenter 1993 432,475 417,094 N/A 24,000 647,280 18,986
President & CEO, 1992 380,988 367,140 N/A 24,000 312,554 16,367
CSXT 1991 321,360 197,590 N/A 15,898 217,905 N/A
Jerry R. Davis 1993 360,566 347,642 N/A 16,600 587,064 19,993
Executive Vice 1992 360,471 313,406 N/A 16,600 297,291 17,235
President & COO, 1991 321,360 197,590 N/A 15,898 175,555 N/A
CSXT
John P. Clancey 1993 382,450 254,142 N/A 16,600 614,296 0
President & CEO, 1992 369,004 244,546 N/A 16,600 256,089 0
Sea-Land 1991 253,959 158,933 N/A 8,096 157,086 N/A
James Ermer 1993 309,012 254,134 N/A 12,900 505,817 6,298
Senior Vice 1992 309,012 205,958 N/A 12,900 268,645 5,429
President - Finance 1991 283,254 169,870 N/A 11,714 194,460 N/A
</TABLE>
Notes to Summary Compensation Table
Note 1 In 1993, the only perquisites or other personal benefits exceeding 25
percent of the total perquisites and other personal benefits afforded
to a named officer were, in the case of Mr. Snow, premiums for life
insurance of $31,657. In 1992, the only such perquisites or other
personal benefits for Mr. Snow were premiums for life insurance of
$24,369.
Note 2 During 1993, no restricted stock was outstanding, therefore, no
"Restricted Stock Award" column has been included.
Note 3 Represents number of employee stock options granted. Stock
appreciation rights ("SARs") were not granted in 1991, 1992 or 1993.
Note 4 LTIP (Long-Term Incentive Plan) payouts for 1993 represent the fair
market value of $89.875 per share of performance shares awarded
pursuant to 1987 Long-Term Performance Stock Plan on February 9,
1994, the date of the award. Tax valuation may differ. (See also, the
- 16 -
PAGE 17
Long-Term Incentive Plans - Awards in Last Fiscal Year table on page
18 and Note 2 to the Security Ownership of Directors, Nominees and
Executive Officers table on page 13, regarding the Company's 1991
Stock Purchase and Loan Plan and awards made pursuant to it.)
Note 5 Amounts shown are comprised of the above-market portion of earnings
on a deferred compensation program available to executives only
during 1985, 1986, 1988 and 1989.
<TABLE>
Option/SAR Grants in Last Fiscal Year (Note 1)
<CAPTION>
Grant Date
Individual Grants Value
Number of Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Grant Date
Granted Employees in Exercise or Present
(#) Fiscal Year Base Price Expiration Value
Name (Note 2) (Note 3) ($/Share) Date (Note 4)
<S> <C> <C> <C> <C> <C>
John W. Snow 76,200 6.8% $73.375 4/27/03 $2,143,506
Alvin R. Carpenter 24,000 2.1 73.375 4/27/03 675,120
Jerry R. Davis 16,600 1.5 73.375 4/27/03 466,958
John P. Clancey 16,600 1.5 73.375 4/27/03 466,958
James Ermer 12,900 1.2 73.375 4/27/03 362,877
</TABLE>
Notes to Option/SAR Grants Table
Note 1 SARs were not granted during 1993.
Note 2 Stock options granted to employees on April 27, 1993, were granted at
the fair market value as of the date of the grant. In addition, the
options are subject to an exercisability restriction, becoming
exercisable in three tranches, each of which equals one-third of the
total grant, at such time as the mean daily price of CSX common stock
has remained for 10 consecutive business days at a price per share,
for each tranche respectively, of $78.375, $83.375 and $88.375.
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.
Note 3 A total of 1,116,900 employee stock options was granted on April 27,
1993.
Note 4 The present value of options granted has been reported using the
Black-Scholes option pricing model. These values assume: grant date -
April 27, 1993; exercise price - $73.375 (mean price on grant date);
closing price on grant date - $72.625; assumed exercise date - April
26, 2003; risk free rate of return - 6.0% (10-year U.S. Treasury note
yield on April 27, 1993); dividend at time of grant - $0.38 per share
per quarter; volatility assumption - 25%.
- 17 -
PAGE 18
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options/SARs at FY-End
Options/SARs at FY-End (Note 2)
Shares Value
Acquired on Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Name Exercise (#) (Note 1) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
John W. Snow 50,000 $2,246,875 327,480 76,200 $13,784,267 $714,375
Alvin R. Carpenter 24,000 420,000 0 24,000 0 225,000
Jerry R. Davis 15,898 523,640 16,600 16,600 335,113 155,625
John P. Clancey 26,407 1,067,488 16,600 16,600 335,113 155,625
James Ermer 0 0 74,094 12,900 3,309,792 120,937
</TABLE>
Notes to Aggregated Option/SAR Exercise Table
Note 1 Value realized represents the difference between the exercise price
of the option or SAR and the fair market value of CSX common stock on
the date of exercise.
Note 2 Value of unexercised options/SARs at fiscal year-end represents the
difference between the exercise price of any outstanding option/SAR
grants and $82.75, the mean value of CSX common stock on December 31,
1993.
<TABLE>
Long-Term Incentive Plans -- Awards in Last Fiscal Year
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number of Shares, Performance or
Units or Other Other Period Until Threshold Target Maximum
Name Rights (#)(Note 1) Maturation or Payout (#) (#) (#)
<S> <C> <C> <C> <C> <C>
John W. Snow 19,000 3 years 2,470 12,730 19,000
Alvin R. Carpenter 7,400 3 years 962 4,958 7,400
Jerry R. Davis 6,300 3 years 819 4,221 6,300
John P. Clancey 6,300 3 years 819 4,221 6,300
James Ermer 5,700 3 years 741 3,819 5,700
</TABLE>
Notes to Long-Term Incentive Plan Table
Note 1 Represents the number of performance shares granted on April 27,
1993, pursuant to the 1987 Long-Term Performance Stock Plan. The
final payouts in CSX stock are based on the financial performance of
the participant's business unit over a three-year period. Performance
is measured by the business unit's return on invested capital. The
estimated threshold payout was calculated at 13% of the performance
shares granted and represents the number of shares of CSX stock that
would be awarded if a specified minimum level of financial
performance is achieved by the participant's business unit. The
estimated target payout was calculated at 67% of the performance
shares granted and represents the number of shares of CSX stock that
would be awarded if a specified interim level of financial
- 18 -
PAGE 19
performance is achieved by the participant's business unit. The
maximum equals 100% of the performance shares granted on April 27,
1993. The levels of financial performance that must be achieved are
established at the beginning of each year of the three-year
performance cycle based on performance during the prior year. No
awards were made under the 1991 Stock Purchase and Loan Plan during
1993.
<TABLE>
Pension Plan Table
<CAPTION>
Average Compensation Gross Annual Pension Payable Before Offset
During Five Consecutive for Railroad Retirement of Social Security
Years of Highest Pay Annuity Based on Creditable Years of Service of:
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 44 Years
<C> <C> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
Retirement benefits under 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 16 covered by the Pension Plans are Base Salary and
Bonus.) The benefits are computed at the time of retirement under a defined
benefit formula based on years of service and average 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. As of December 31, 1993, the individuals
named in the Summary Compensation Table had the following credited years of
service: Mr. Snow, 26.0 years; Mr. Carpenter, 36.5 years; Mr. Davis, 4.5
years; Mr. Clancey, 26.8 years; and Mr. Ermer, 31.1 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.
- 19 -
PAGE 20
Report of the Compensation and Pension Committee
Concerning Executive Compensation
Administration of Compensation Programs
The Compensation and Pension Committee ("Committee") reviews and
approves compensation for senior executives of CSX, including the Chief
Executive Officer and the other executives whose compensation is described in
this Proxy Statement. The Committee is composed entirely of outside directors.
Compensation Philosophy
The Committee and the Board of Directors of CSX believe that
shareholder value depends upon closely aligning the financial interests of
shareholders with those of the Company's employees, including its senior
executives. The Company relies heavily on incentive compensation programs to
motivate employees. These programs are variable and tied to business unit and
individual performance. Paid in cash and in stock, these plans place "at risk"
a major portion of senior executives' compensation to encourage sharp and
continuing focus on building shareholder value. The Company expects executives
to acquire and hold significant amounts of stock and, in part, the Company's
compensation programs are designed to accomplish that objective.
Components of the Compensation Program
The Committee believes that competitive compensation packages help
the Company attract and retain highly motivated and effective executives. The
compensation package for senior executives is composed of base salary, annual
bonus and long-term incentives, including stock options and performance
shares.
The Committee compares the value of total compensation paid to senior
executives to that paid by companies of similar size. Specifically, the
Committee considers compensation paid at companies with revenues of $6 to $10
billion annually, in transportation and other industries. Those approximately
70 companies participate in surveys conducted by nationally recognized outside
consultants and are identified by such consultants as companies with which CSX
may compete for executive talent. The comparison companies are not identical
to those included in the Dow Jones Transportation Average described in the
Performance Graph. When analyzing the components of compensation, the
Committee generally seeks to provide overall compensation for senior
executives up to the 85th percentile of the comparison companies if business
unit financial and strategic objectives are fully met.
Base Salary. Base salaries are targeted around the 50th percentile of
salaries paid for similar positions at the comparison companies. When
determining salary adjustments, the Committee also considers the objective
measures of the Company's performance described elsewhere in this report, such
as return on invested capital and the subjective evaluation of the senior
executive's contribution to that performance.
Annual Bonus. Under the Management Incentive Compensation Plan
("MICP"), annual incentive bonuses are payable in cash based on business unit
performance. If the proposed Senior Management Incentive Compensation Plan
- 20 -
PAGE 21
described in this Proxy Statement (the "SMICP") is adopted, future bonuses
will be paid to the Chief Executive Officer and the other executives whose
compensation is described in this Proxy Statement under the SMICP. Under
either the MICP or SMICP, total annual cash compensation (salary plus bonus)
generally would be targeted at the 75th percentile of the comparison companies
if the business unit and individual objectives were met.
Each position has a bonus award formula which sets forth
opportunities (expressed as a percentage of base salary) that a senior
executive may receive. Awards depend upon the financial and strategic
performance of the business unit against measures established prior to the
beginning of each year. Under the MICP, two thirds of bonus awards are
determined by objective financial measures, specifically, a business unit's
return on invested capital earned for the year, compared to the Company's cost
of capital. The balance of the bonus award is determined by accomplishment of
strategic objectives, including increased free cash flow, shareholder value
created, capital market access, successful investor relations and safety
improvements. For any bonus paid under the proposed SMICP, all of the award
would be determined entirely by objective measures.
Long-term Incentives. Long-term incentives paid under the Long-Term
Performance Stock Plan generally take the form of stock option grants and
performance share awards. The ultimate value of these long-term incentives
depends entirely on the value of the Company's stock and, consequently, the
creation of shareholder value.
Stock option grants in 1993 were targeted, based on grant date value,
at the 75th percentile of the comparison companies. Those options vest within
one year but are only exercisable if the stock price reaches certain threshold
levels that are established at the time of the option grant.
Performance share grants are established at the beginning of three-
year cycles. When establishing grant levels, the Committee considers
historical grants, stock price and business unit financial objectives. The
actual award is made at the conclusion of the three-year cycle based on
financial performance of each business unit as determined by the average
return on invested capital earned during the period.
Tax Considerations
In 1993 Congress enacted legislation that eliminated federal income
tax deductions for certain compensation over $1 million paid to the Chief
Executive Officer and the other four most highly compensated executives
required to be named in the annual Proxy Statement. Beginning in 1994, the new
law generally eliminates such deductions unless compensation is awarded under
plans meeting a number of requirements based upon objective performance
standards and advance shareholder approval.
The Company's compensation program for senior executives has both
objective and discretionary elements. The Committee wishes to maximize
deductibility of compensation payments and, to that end, is seeking
shareholder approval of the SMICP and qualifying amendments to the 1987 Plan,
which is the plan under which long-term incentive payments are made. However,
the Committee does not believe the new tax law requirements are fully
- 21 -
PAGE 22
consistent with sound senior executive compensation policy. Specifically, to
achieve full tax deductibility, the tax law requirements do not afford
companies flexibility to respond to changing market conditions, to reflect
subjective performance factors or to reward extraordinary performance of an
unforeseen type. To ensure such flexibility, the Committee reserves the right
to make additional incentive payments that may not qualify for deduction if
the recipient's compensation exceeds the $1 million limit.
CEO Compensation
In 1993, the most highly compensated officer was Mr. Snow. His base
salary was slightly below the median of the comparison companies, which
reflects the Committee's focus on pay for performance and the desire to
motivate employees, particularly the Chief Executive Officer, through
variable, versus fixed, compensation. Mr. Snow's 1993 base salary was
unchanged from the year before.
Mr. Snow's 1993 annual bonus was based on a review of his and the
Company's financial and strategic accomplishments. The Committee was very
pleased with the progress of the Company during that period and granted Mr.
Snow an award equal to 117 percent of his base salary during 1993.
In awarding the bonus, the Committee considered financial and
strategic performance. Most notably, the Company achieved its key financial
objective of having each of its major operating units meet or exceed its cost
of capital. In addition, the Company's 1993 consolidated operating revenue was
higher than 1992, despite external difficulties such as declines in export
coal, a prolonged coal strike, major storms in the Southeast, and disruptive
Midwest flooding. The Company's 1993 consolidated operating expense was lower
than 1992, reflecting a sharp focus on cost controls and expense reductions to
offset revenue losses resulting from the extraordinary external events
mentioned. Furthermore, a major strategic accomplishment was successful
completion of reduced crew consist agreements with rail labor, which will
yield measurable cost savings in future years. The Committee believes these
1993 successes can largely be attributed to Mr. Snow's focus on customers,
core businesses and management accountability.
The largest portion of Mr. Snow's 1993 compensation was in the form
of long-term incentives (performance shares and stock options). His 1993
performance share and stock option grants were approximately at the 75th
percentile of the comparison companies based on grant date value. The actual
long-term value of these grants depends upon the creation of future
shareholder value.
During Mr. Snow's approximately three-year tenure as Chairman and
Chief Executive Officer, the Company's stock price has reached record highs,
increasing by more than 130 percent, from around $35.50 to $81.88 per share at
the end of 1993. During his three-year tenure, the Company's average annual
return to shareholders, including dividends, was 43 percent, while the average
annual return of the Company's peer group described in the Performance Graph
was 26 percent, and the S&P 500 index average annual return was 15 percent.
This performance added $6.1 billion to shareholder value during this three-
year period. Moreover, in 1993, the Company increased its dividend by about
16%, reflecting success in achieving another key financial objective, the
generation of free cash flow.
- 22 -
PAGE 23
In addition to meeting financial and strategic objectives, the
Committee believes Mr. Snow has strengthened the Company's relationships with
the investment community, has generated confidence and enthusiasm among the
Company's employees and has demonstrated leadership in the U.S. business
community through his activities in government projects and key business
groups.
Compensation and Pension Committee
William B. Sturgill, Chairman
Robert L. Kunisch
Southwood J. Morcott
William C. Richardson,
the entire Committee
Richmond, Virginia
February 8, 1994
- 23 -
PAGE 24
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 as independent auditors to audit and report on CSX's financial
statements for the year 1994. 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 the shareholders the final choice in the
designation of independent auditors.
Ernst & Young 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 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 is also expected that they will be available to respond to
appropriate questions.
The Board of Directors recommends a vote FOR this proposal.
3. APPROVAL OF AMENDMENTS TO AND RESTATEMENT OF THE 1987 LONG-TERM
PERFORMANCE STOCK PLAN
On February 9, 1994, the Board of Directors, acting on the
recommendation of the Compensation and Pension Committee, amended and restated
the 1987 Long-Term Performance Stock Plan (the "1987 Plan") effective as of
May 3, 1994, and directed that the restated 1987 Plan be submitted to the
shareholders for their approval.
As approved by the shareholders in 1987 and amended with their
approval in 1991, the 1987 Plan presently sets a maximum authorization of
11,000,000 shares of common stock that may be issued with respect to options
and awards. At present, there are approximately 874,000 of these shares
remaining available for future grants.
The Board of Directors believes that the 1987 Plan has been effective
in helping the Company to attract and retain outstanding individuals as
officers and key employees and to furnish motivation for the achievement of
long-term objectives through opportunities to acquire CSX common stock or
monetary payments based on the value of such stock or the financial
performance of CSX, or both. In addition, the Board also believes that certain
amendments to the Plan are advisable for administrative purposes and to permit
the Company to continue to take certain deductions for executive compensation
in excess of $1 million pursuant to the Omnibus Budget Reconciliation Act of
1993 (the "1993 Tax Act"). Accordingly, the Board of Directors on February 9,
1994, adopted amendments to the 1987 Plan, subject to shareholder approval, to
increase the number of shares available for issuance under the 1987 Plan by an
additional 5,000,000; to clarify the rights of participants in the 1987 Plan
upon termination or separation from employment; to eliminate Limited Stock
Appreciation Rights from the Plan; and to extend the termination date of the
Plan from December 10, 1996, to May 2, 1999.
- 24 -
PAGE 25
The principal features of the proposed amendment to the 1987 Plan are
summarized below. The summary is qualified by reference to the complete text
of the 1987 Plan, as amended and restated, which is attached as Appendix A.
Incentive Opportunities
The 1987 Plan provides for the grant to officers and key employees of
CSX and of its subsidiaries selected by the Committee of incentive
opportunities (Incentives) in any one or a combination of forms, consisting of
Incentive Stock Options (ISOs), Non-Qualified Stock Options (NQSOs), Stock
Appreciation Rights (SARs), Performance Share Awards, Performance Unit Awards,
or Restricted Stock Awards. It is intended that the Incentives provided under
the 1987 Plan will be treated as qualified performance-based compensation
under Section 162(m) of the Internal Revenue Code. As amended, the 1987 Plan
also specifies the maximum number of shares of CSX common stock with respect
to which Incentives can be granted during any plan year.
The number and type of awards that may be granted in the future under
the 1987 Plan, as well as the number of eligible employees who may be granted
such awards, are not determinable at this time. Currently, there are
approximately 340 active employees who are participants in the 1987 Plan. The
awards made under the 1987 Plan during the year 1993 are shown on the
"Option/SAR Grants in Last Fiscal Year" table on page 17, the "Long-Term
Incentive Plans - Awards in Last Fiscal Year" table on page 18 and the "New
Plan Benefits" table on page 28.
Additional Shares Authorization
Since the 1987 Plan's inception, approximately 5.3 million shares of
CSX common stock, par value $1.00 per share have been issued and approximately
4.8 million shares are presently reserved for issuance under authorized
grants. There are currently approximately 874,000 shares available for future
grants. The amendment would increase this number by 5,000,000 shares and would
allow shares surrendered in connection with the exercise of Incentives to be
available for future grant, with certain limitations relevant to executive
officers subject to the Securities Exchange Act of 1934.
Terms of Incentives
The 1987 Plan provides that the exercise price of any ISO or NQSO
shall be not less than the fair market value of the common shares on the date
that the option is granted. Payment of the purchase price for option stock can
be made in cash or by delivery of other common shares of CSX, or a combination
of both. Under the proposed amendments the Committee would be authorized to
adopt programs and procedures for loans to be made by CSX to any option holder
to acquire or carry options shares. The Committee is not presently
contemplating any such loan program.
The period of any option will be determined by the Committee, but no
options granted may be exercised earlier than one year after the date of grant
nor later than 10 years after the date of grant. The Committee may add
restrictions or conditions on the exercise of options in addition to the one-
year holding requirement. The proposed amendments to the 1987 Plan provide
special rules covering the time and exercise of options in cases of death,
- 25 -
PAGE 26
disability, retirement or other termination of employment. The 1987 Plan also
provides that, notwithstanding any other provision, upon the occurrence of a
Change in Control (as defined in the 1987 Plan), all Incentives, whether or
not then exercisable, will be accelerated.
Termination Provisions
The 1987 Plan currently provides that it will terminate, if not
sooner terminated, on December 10, 1996. In order to make the benefits of the
1987 Plan available to the Company for a longer period, the proposed
amendments will extend the automatic termination date to May 2, 1999.
Incentives granted under the 1987 Plan are exercisable only by a
participant during lifetime and are non-assignable and non-transferable,
except that upon a participant's death Incentives may be exercised by the
person to whom such right passes by will or by the laws of descent and
distribution. The proposed amendments would permit the Incentives to be
exercised by a beneficiary designated by a participant or by the executor of
the participant's estate.
Federal Income Tax Consequences
Under existing law and regulations, the grant of NQSOs and SARs will
not result in income taxable to the employee or provide a deduction to CSX.
However, the exercise of a NQSO or an SAR results in taxable income to the
employee and CSX is entitled to a corresponding deduction. At the time of the
exercise of a NQSO, the amount so taxable and so deductible will be the excess
of the fair market value of the shares purchased over their option price. Upon
the exercise of an SAR, the participant will be taxed at ordinary income tax
rates on the amount of the cash and the fair market value of the shares
received, and CSX will be entitled to a corresponding deduction.
If ISO shares are held two years from the date of grant and one year
from the date of exercise, then a sale will result in any increment in value
from the date of grant being treated as capital gains for federal income tax
purposes. If ISO shares are sold prior to expiration of the above period, then
any increment in value will be treated as ordinary income to the individual
and CSX will be entitled to a deduction for all amounts included in the
employee's federal taxable income as a consequence of such disqualifying
disposition. There is a $100,000 per employee limitation on the value of ISOs
exercisable in any one calendar year.
An employee who is granted a Restricted Stock Award will not be taxed
upon the acquisition of such shares so long as the interest in such shares is
subject to a "substantial risk of forfeiture" within the meaning of Section 83
of the Internal Revenue Code. Upon lapse or release of the restrictions, the
participant will be taxed at ordinary income tax rates on an amount equal to
either the current fair market value of the shares (in the case of lapse or
termination) or the sale price (in case of a sale). CSX will be entitled to a
corresponding tax deduction.
A participant will realize ordinary income as a result of Performance
Share Awards and Performance Unit Awards at the time common shares are
transferred or cash is paid in an amount equal to the value of the shares
- 26 -
PAGE 27
delivered plus the cash paid. CSX will be entitled to a corresponding tax
deduction.
Effect on Earnings
Currently, neither the grant nor the exercise of an ISO or a NQSO
under the 1987 Plan will result in any charge to pretax earnings. Grants of
restricted stock result in a charge to pretax earnings upon issuance of the
stock. All other incentive opportunities provided by the 1987 Plan will
require a pretax charge to earnings accrued over an appropriate period of
time, based on the difference between fair market value of the shares or award
and the grant price.
Vote Required
The affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereon will be required for adoption of the
Amendments to the 1987 Long-Term Performance Stock Plan. For this purpose,
abstentions will be treated as "no" votes, and broker "non-votes" will not be
counted.
The Board of Directors recommends a vote FOR the proposal to amend the
1987 Long-Term Performance Stock Plan.
4. APPROVAL OF 1994 SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
On February 9, 1994, the Board of Directors, acting on the
recommendation of the Compensation and Pension Committee, approved and adopted
the CSX Corporation Senior Management Incentive Compensation Plan (the
"SMICP") effective as of January 1, 1994, and directed that it be submitted to
the shareholders for their approval. The Board of Directors believes that the
SMICP is important to encourage the senior management of CSX Corporation to
achieve planned financial goals in order to increase shareholder value. It is
intended that awards under the SMICP based solely on the achievement of
financial objectives will be treated as performance-based compensation within
the meaning of Section 162(m) of the Internal Revenue Code that will qualify
for exclusion from the $1 million limitation on deductibility of executive
compensation under the Omnibus Budget Reconciliation Act of 1993. Awards under
the SMICP will constitute a portion of annual bonus for employees covered by
the plan.
The following summary description of the SMICP is qualified in its
entirety by reference to the full text of the SMICP, which is attached to this
Proxy Statement as Appendix B.
Administration of the SMICP
The SMICP will be administered by a Committee (the "Committee")
comprised of members of the Board of Directors who are "outside directors"
within the meaning of Section 162(m) of the Internal Revenue Code, and who are
not eligible to participate or to receive any benefits pursuant to the SMICP.
Awards under the SMICP will be paid in cash only. Only those employees whose
compensation is anticipated to be subject to the provisions of Section 162(m)
- 27 -
PAGE 28
of the Internal Revenue Code that relate to deductibility of executive
compensation and who are designated by the Committee prior to the beginning of
the plan year will be covered employees for purposes of the SMICP. At the end
of each plan year, the Committee will approve incentive awards based on the
achievement of the previously approved financial performance objectives.
Vote Required
The affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereon will be required for adoption of the
SMICP.
Other Information
Because the amount to be earned and paid to participants in the SMICP
for 1994 and future years is dependent on the financial performance of the
participant's business unit, it is impossible to calculate the future awards
to each participant. However, had the SMICP been in effect for calendar year
1993, the following amounts would have been paid under the SMICP, based on the
levels of financial performance measures and award opportunities that have
been established for 1994.
<TABLE>
New Plan Benefits
<CAPTION>
SMICP Awards During 1993 Under 1987 Plan
Stock Options Performance Shares
---------------------------- -------------------------
Dollar Value ($) Grant Date Value
Name (Note 1) (#) $(Note 2) #(Note 3) $(Note 4)
<S> <C> <C> <C> <C> <C>
John W. Snow $650,329 76,200 $2,143,506 19,000 $1,585,395
Alvin R. Carpenter 318,780 24,000 675,120 7,400 647,280
Jerry R. Davis 265,699 16,600 466,958 6,300 587,064
John P. Clancey 224,247 16,600 466,958 6,300 614,296
James Ermer 194,108 12,900 362,877 5,700 505,817
Executive officers as a group
(17 persons, including
those named above) $1,653,163 238,400 $6,706,192 82,400 $7,907,742
Non-executive officer
employee group N/A 878,500 $24,712,205 47,000 $33,468,820
</TABLE>
Notes to New Benefits Plans Table
Note 1 Represents value of awards that would have been paid had the SMICP
been in effect for calendar year 1993, based on the levels of
financial performance measures and award opportunities that have been
established for 1994.
Note 2 This is a hypothetical valuation using a modified Black-Scholes
valuation formula. See Note 4 to the Option Grant table on page 17
for an explanation of the assumptions used in determining this
valuation.
- 28 -
PAGE 29
Note 3 Represents the number of performance shares granted on April 27,
1993. See Note 1 to the Long-Term Incentive Plan table on page 18 for
a detailed description of these awards.
Note 4.Represents the fair market value of $89.875 per share of performance
shares awarded on February 9, 1994, for the 1991-92-93 performance
cycle.
The Board of Directors recommends a vote FOR the proposal to approve the
1994 Senior Management Incentive Compensation Plan.
ADDITIONAL INFORMATION
Voting Procedures
Votes are tabulated by three Inspectors of Election. Except as noted
with respect to the 1987 Plan, abstentions and broker "non-votes" are not
considered to be voting "for" or "against" any proposal or any person
nominated for director. 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, directors are elected by a plurality of votes cast by
the shares entitled to vote at a meeting at which a quorum is present.
Date for Receipt of Shareholder Proposals
Shareholder proposals for inclusion in the Proxy Statement for the
1995 Annual Meeting of Shareholders must be received at the principal
executive offices of CSX on or before November 10, 1994.
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, at no additional
compensation, may request the return of proxies by personal conversations or
by telephone, telecopy or telegraph. It is also expected that, for a fee of
$10,000 plus reimbursement of certain expenses, additional solicitation will
be made by personal interview, telephone, telecopy and telegraph under the
direction of the proxy solicitation firm of D. F. King & Co., 77 Water Street,
New York, New York 10005.
March 11, 1994
By Order of the Board of Directors
Alan A. Rudnick
Vice President-General Counsel and Corporate Secretary
- 29 -
PAGE 30
[LOGO] This proxy is Solicited on Behalf of the
Board of Directors for the Annual Meeting on May 3, 1994
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, proxies
to vote all stock of the undersigned on the following proposals and, in their
discretion, upon such other matters as may properly come before the Annual
Meeting of Shareholders to be held at The Greenbrier, White Sulphur Springs,
WV, on May 3, 1994, and at all adjournments thereof.
Please sign and date on the reverse and return promptly in the enclosed
postage paid envelope.(over)
(Continued from other side)
The Board of Directors of CSX Corporation recommends a vote FOR Items 1, 2, 3
and 4. Shares will be so voted unless you otherwise indicate.
1. Election of Directors.
[ ] FOR all nominees listed below, except as marked to the contrary
(see instruction):
E.L.Addison; E.E. Bailey; R.L. Burrus Jr.; B.C. Gottwald; C.M. Kirtland
Jr.; R.D. Kunisch; H.L. McColl Jr.; J.W. McGlothlin; S.J. Morcott; C.E.
Rice; W.C. Richardson; F.S. Royal, MD.; J.W. Snow; W.B. Sturgill.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through nominee's name in list above.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. Appointment of Ernst & Young as independent certified public
accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of amendments to 1987 Long-Term Performance Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of 1994 Senior Management Incentive Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Date: ____________________________________
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.,
- 30 -
PAGE 1 CSX CORPORATION
INDEX TO EXHIBITS
Description Value
- ----------- -----
1987 Long-Term Performance Stock Plan EX-10.1
Senior Management Incentive Compensation Plan EX-10.2
Appendix Describing Graphic Materials EX-99
- E-1 -
PAGE 1
Exhibit 10.1
Appendix A
CSX CORPORATION
1987 Long-Term Performance Stock Plan as Amended
and Restated May 3, 1994
1. Purpose
The purpose of the CSX Corporation Long-Term Performance Stock Plan
is to attract and retain outstanding individuals as officers and key employees
of CSX Corporation and its subsidiaries, to furnish motivation for the
achievement of long-term performance objectives by providing such persons
opportunities to acquire ownership of common shares of the Company, monetary
payments based on the value of such shares or the financial performance of the
Company, or both, on terms as herein provided. It is intended that the
Incentives provided under this Plan will be treated as qualified performance-
based compensation within the meaning of Section 162(m) of the Code.
2. Definitions
Whenever the following words are capitalized and used in the Plan,
they shall have the respective meanings set forth below, unless a different
meaning is expressly provided. Unless the context clearly indicates to the
contrary, in reading this document the singular shall include the plural and
the masculine shall include the feminine.
a. "Beneficiary": The term Beneficiary shall mean the person
designated by the Participant, on a form provided by the Company,
to exercise the Participant's rights in accordance with Section 14
of the Plan in the event of his death.
b. "Board of Directors": The term Board of Directors or Board means
the Board of Directors of CSX Corporation.
c. "Cause": The term Cause means (i) an act or acts of personal
dishonesty of a Participant intended to result in substantial
personal enrichment of the Participant at the expense of the
Company or any of its subsidiaries, (ii) violation of the
management responsibilities by the Participant which is
demonstrably willful and deliberate on the Participant's part and
which is not remedied in a reasonable period of time after receipt
of written notice from the Company or a subsidiary, or (iii) the
conviction of the Participant of a felony involving moral
turpitude.
d. "Change in Control": The term Change in Control is defined in
Section 19.
e. "Code": The term Code means the Internal Revenue Code of 1986, as
amended.
f. "Committee": The term Committee means a committee appointed from
time to time by the Board of Directors to administer the Plan.
- 1 -
PAGE 2
g. "Company": The term Company means CSX Corporation and/or its
subsidiary companies.
h. "Completed Month": The term Completed Month shall mean a period
beginning on the monthly anniversary date of a grant of an
Incentive and ending on the day before the next monthly
anniversary.
i. "Covered Employee": The term Covered Employee shall mean the chief
executive officer of the Company or any other individual who is
among the four (4) highest compensated officers or who is
otherwise a "covered employee" within the meaning of Section
162(m) of the Code, as determined by the Committee.
j. "Disability": The term Disability means long-term disability as
determined under the Company's Salary Continuance and Long-Term
Disability Plan.
k. "Exchange Act": The term Exchange Act means the Securities
Exchange Act of 1934, as amended.
l. "Exercisability Requirements": The term Exercisability
Requirements used with respect to any grant of options means such
restrictions or conditions on the exercise of such options that
the Committee may, in its discretion, add to the one-year holding
requirement contained in Sections 7 and 8.
m. "Fair Market Value": The term Fair Market Value shall be deemed to
be the mean between the highest and lowest quoted selling prices
of the stock per share as reported under New York Stock Exchange-
Composite Transactions on the day of reference to any event to
which the term is pertinent, or, if there is no sale that day, on
the last previous day on which any such sale occurred.
n. "Incentive": The term Incentive means any incentive under the Plan
described in Section 6.
o. "Objective Standard": The term Objective Standard means a formula
or standard by which a third party, having knowledge of the
relevant performance results, could calculate the amount to be
paid to a Participant. Such formula or standard shall specify the
individual employees or class of employees to which it applies,
and shall preclude discretion to increase the amount payable that
would otherwise be due upon attainment of the objective.
p. "Participant": The term Participant means an individual designated
by the Committee as a Participant pursuant to Section 5.
q. "Performance Objective": The term Performance Objective shall mean
a performance objective established in writing by the Committee
prior to the commencement of the Performance Period to which the
performance objective relates and at a time when the outcome of
such objective is substantially uncertain. Each Performance
Objective shall be established in such a way that a third party
- 2 -
PAGE 3
having knowledge of the relevant facts could determine whether the
objective is met. A Performance Objective may be based on one or
more business criteria that apply to the individual Participant, a
business unit or the Company as a whole, and shall state, in terms
of an Objective Standard, the method of computing the amount
payable to the Participant if the Performance Objective is
attained. With respect to Incentives granted to Covered Employees,
the material terms of the Performance Objective shall be disclosed
to, and must be subsequently approved by, a vote of the
shareholders of the Company, consistent with the requirements of
Section 162(m) of the Code and the regulations thereunder. The
Performance Objectives for any Performance Period shall be based
on one or more of the following measures, as determined by the
Committee in writing prior to the beginning of the Performance
Period:
1. The achievement by the Company or business unit of specific
levels of Return on Invested Capital ("ROIC"). ROIC for the
Company or business unit means its results of operations
divided by its capital.
2. The generation by the Company or business unit of free cash
flow.
3. The creation by the Company or business unit of specific
levels of Economic Value Added ("EVA"). EVA for the Company
or business unit means its ROIC less its cost of capital
multiplied by its capital.
r. "Performance Period": The term Performance Period means a fixed
period of time, established by the Committee, during which a
Participant performs service for the Company and during which
Performance Objectives may be achieved.
s. "Plan": The term Plan means this CSX Corporation 1987 Long-Term
Performance Stock Plan as amended or restated from time to time.
t. "Retirement": The term Retirement means termination of employment
with immediate commencement of retirement benefits under the
Company's defined benefit pension plan.
u. "Separation From Employment": The term Separation From Employment
means an employee's separation from employment with the Company as
a result of Retirement, death, Disability, or termination of
employment (voluntarily or involuntarily). A Participant in
receipt of periodic severance payments shall be considered
separated from employment on the day preceding the day such
severance payments commenced.
- 3 -
PAGE 4
3. Number of Shares
Subject to the provisions of Section 16 of this Plan, the maximum
number of shares which may be issued pursuant to the Incentives shall be
16,000,000 shares of the Company's common stock, par value $1.00 per share.
Such shares shall be authorized and unissued shares of the Company's common
stock. Subject to the provisions of Section 16, if any Incentive granted under
the Plan shall terminate or expire for any reason without having been
exercised in full, the unissued shares subject thereto shall again be
available for the purposes of the Plan. Similarly, shares which have been
issued, but which the Company retains or which the Participant tenders to the
Company in satisfaction of income and payroll tax withholding obligations or
in satisfaction of the exercise price of any option shall remain authorized
and shall again be available for the purposes of the Plan, provided, however,
that any such previously issued shares shall not be the subject of any grant
under the Plan to any officer of the Company who, at the time of such grant,
is subject to the short-swing trading provisions of Section 16 of the Exchange
Act.
4. Administration
The Plan shall be administered by the Committee. The Committee shall
consist of three or more members of the Board of Directors. No member of the
Committee shall be eligible to receive any Incentives under the Plan while a
member of the Committee. A majority of the Committee shall constitute a
quorum. The Committee shall recommend to the Board individuals to receive
Incentives, including the type and amount thereof, unless the Board shall have
delegated to the Committee the authority and power to select persons to whom
Incentives may be granted, to establish the type and amount thereof, and to
make such grants.
Subject to the express provisions of the Plan, the Committee shall
have authority to construe any agreements entered into with any person in
respect of any Incentive or Incentives, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
any such agreements and to make all other determinations necessary or
advisable for administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
agreement under the Plan in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expedience. Any determination of the Committee under the Plan may be made
without notice of meeting of the Committee by a writing signed by a majority
of the Committee members. The determinations of the Committee on the matters
referred to in this Section 4 shall be conclusive.
5. Eligibility and Participation
Incentives may be granted only to officers and key employees of the
Company and of its subsidiaries at the time of such grant as the Committee in
its sole discretion may designate from time to time to receive an Incentive or
Incentives. An officer or key employee who is so designated shall become a
Participant. A director of the Company or of a subsidiary who is not also an
officer or employee of the Company or of such subsidiary will not be eligible
to receive an Incentive.
- 4 -
PAGE 5
The Committee's designation of an individual to receive an Incentive
at any time shall not require the Committee to designate such person to
receive an Incentive at any other time. The Committee shall consider such
factors as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Incentives, including without limitation
(a) the financial condition of the Company, (b) anticipated financial results
for the current or future years, including return on invested capital, (c) the
contribution by the Participant to the profitability and development of the
Company through achievement of established strategic objectives, and (d) other
compensation provided to Participants.
6. Incentives
Incentives may be granted in any one or a combination of (a)
Incentive Stock Options; (b) Non-Qualified Stock Options; (c) Stock
Appreciation Rights; (d) Performance Shares; (e) Performance Units; and (f)
Restricted Stock, all as described below and pursuant to the terms set forth
in Sections 7-11 hereof. With respect to Items (a)-(c), the maximum number of
shares of common stock of the Company with respect to which these Incentives
may be granted any Plan Year to any Participant will be 750,000. With respect
to Items (d)-(f), the maximum number of shares of common stock of the Company
with respect to which these Incentives may be granted during any Plan Year to
any Participant will be 150,000.
7. Incentive Stock Options
Incentive Stock Options (ISOs) will consist of options to purchase
shares of the Company's common stock at purchase prices not less than 100
percent of the Fair Market Value of such common stock on the date of grant.
ISOs will be exercisable upon the date or dates specified in an option
agreement entered into with a Participant but not earlier than one year after
the date of grant of the options and not later than 10 years after the date of
grant of the options; provided, however, that whether or not the one-year
holding requirement is satisfied, any Exercisability Requirements must be
satisfied. For options granted after December 31, 1986, the aggregate Fair
Market Value, determined at the date of grant, of shares for which ISOs are
exercisable for the first time by a Participant during any calendar year shall
not exceed $100,000.
Notwithstanding the provisions of Section 5 of this Plan, no
individual will be eligible for or granted an ISO if that individual owns
stock of the Company possessing more than 10 percent of the total combined
voting power of all classes of the stock of the Company or its subsidiaries.
Any Participant who is an option holder may exercise his option to
purchase stock in whole or in part upon the date or dates specified in the
option agreement offered to him. In no case may an option be exercised for a
fraction of a share. Except as set forth in this Section 7 and in Sections 12
through 15, no option holder may exercise an option unless at the time of
exercise he has been in the continuous employ of the Company or one of its
subsidiaries since the grant of such option. An option holder under this Plan
shall have no rights as a shareholder with respect to any shares subject to
such option until such shares have been issued.
- 5 -
PAGE 6
For purposes of this Section 7, written notice of exercise must be
received by the Corporate Secretary of the Company not less than one year nor
more than 10 years after the option is granted. Such notice must state the
number of shares being exercised and must be accompanied by payment of the
full purchase price of such shares. Payment for the shares for which an option
is exercised may be made by (1) a personal check or money order payable to CSX
Corporation; (2) a tender by the employee (in accordance with procedures
established by the Company) of shares of the Company's common stock having a
Fair Market Value on the date of tender equaling the purchase price of the
shares for which the option is being exercised; or (3) any combination of (1)
and (2).
8. Non-Qualified Stock Options
Non-Qualified Stock Options (NQSOs) will consist of options to
purchase shares of the Company's common stock at purchase prices not less than
100 percent of the Fair Market Value of such common stock on the date of
grant. NQSOs will be exercisable upon the date or dates specified in an
option agreement entered into with a Participant but not earlier than one year
after the date of grant of the options and not later than 10 years after the
date of grant of the options; provided, however, that whether or not the one-
year holding requirement is satisfied, any Exercisability Requirements must be
satisfied.
Any Participant may exercise an option to purchase stock upon the
date or dates specified in the option agreement offered to him. In no case may
an option be exercised for a fraction of a share. Except as set forth in this
Section 8 and in Sections 12 through 15, no option holder may exercise an
option unless at the time of exercise he has been in the continuous employ of
the Company or one of its subsidiaries since the grant of his option. An
option holder under this Plan shall have no rights as a shareholder with
respect to any shares subject to such option until such shares have been
issued.
For purposes of this Section 8, written notice of exercise must be
received by the Corporate Secretary of the Company, not earlier than one year
nor later than 10 years after the option is granted. Such notice must state
the number of shares being exercised and must be accompanied by payment of the
full purchase price of such shares. Payment for the shares for which an option
is exercised may be made by (1) a personal check or money order payable to CSX
Corporation; (2) a tender by the employee (in accordance with procedures
established by the Company) of shares of the Company's common stock having a
Fair Market Value on the date of tender equaling the purchase price of the
shares for which the option is being exercised; (3) the delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker
to promptly deliver to the Company either sale proceeds of shares sold to pay
the purchase price or the amount loaned by the broker to pay the purchase
price; or (4) any combination of (1), (2) and (3).
- 6 -
PAGE 7
9. Stock Appreciation Rights
Any option granted under the Plan may include a stock appreciation
right (SAR) by which the participant may surrender to the Company all or a
portion of the option to the extent exercisable at the time of surrender and
receive in exchange a payment equal to the excess of the Fair Market Value of
the shares covered by the option portion surrendered over the aggregate option
price of such shares. Such payment shall be made in shares of Company common
stock, in cash, or partly in shares and partly in cash, as the Committee in
its sole discretion shall determine, but in no event shall the number of
shares of common stock delivered upon a surrender exceed the number the option
holder could then purchase upon exercise of the option. Such rights may be
granted by the Committee concurrently with the option or thereafter by
amendment upon such terms and conditions as the Committee may determine.
The Committee may also grant, in addition to, or in lieu of options
to purchase stock, SARs which will entitle the Participant to receive a
payment upon surrender of that right, or portion of that right in accordance
with the provisions of the Plan, equaling the difference between the Fair
Market Value of a stated number of shares of Company common stock on the date
of the grant and the Fair Market Value of a comparable number of shares of
Company common stock on the day of surrender, adjusted for stock dividends
declared between the time of the grant of the SAR and its surrender. The
Committee shall have the right to limit the amount of appreciation with
respect to any or all of the SARs granted. Payment made upon the exercise of
the SARs may be in cash or shares of Company common stock, or partly in shares
and partly in cash, as the Committee in its sole discretion shall determine.
For purposes of this Section 9, written notice must be received by
the Corporate Secretary of the Company not earlier than one year nor later
than 10 years after the SAR is granted. Such notice must state the number of
SARs being surrendered and the method of settlement desired within the
guidelines established from time to time by the Committee. The SAR holder will
receive settlement based on the Fair Market Value on the day the written
request is received by the Corporate Secretary of the Company.
In certain situations as determined by the Committee, for purposes of
this Section 9, written notice must be received by the Corporate Secretary of
the Company between the third and twelfth business days after the public
release of the Company's quarterly earnings report, or between such other,
different period as may hereinafter be established by the Securities and
Exchange Commission. For such settlements, a Participant subject to a
restricted exercise period shall receive settlement based on the highest Fair
Market Value during the period described in the foregoing sentence.
The Committee may not grant an SAR or other rights under this Section
9 in connection with an incentive stock option if such grant would cause the
option or the Plan not to qualify under Section 422A of the Code or if it is
prohibited by such section or Treasury regulations issued thereunder. Any
grant of an SAR or other rights which would disqualify either the option as an
ISO or the Plan, or which is prohibited by Section 422A of the Code or
Treasury regulations issued thereunder, is and will be considered as void and
vesting no rights in the grantee. It is a condition for eligibility for the
benefits of the option and of the Plan that the Participant agree that in the
event an SAR or other right granted should be determined to be void as
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PAGE 8
provided by the foregoing, the Participant has no right or cause of action
against the Company.
10. Performance Unit Awards and Performance Share Awards.
The Committee may grant Performance Unit Awards (PUAs) and
Performance Share Awards (PSAs) under which payment shall be made in shares of
the Company's common stock, in cash, or partly in shares and partly in cash,
as the Committee in its sole discretion shall determine. The Committee shall
establish in writing and communicate to Participants at the time of grant of
each PUA or PSA, Performance Objectives to be achieved during the Performance
Period. Awards of PUAs and PSAs may be determined by the average level of
attainment of Performance Objectives over multiple Performance periods.
Prior to the payment of PUAs and PSAs, the Committee shall determine
the extent to which Performance Objectives have been attained during the
Performance Period or Performance Periods in order to determine the level of
payment to be made, if any, and shall record such results in the minutes of
the meeting of the Committee. In no instance will payment be made if the
Performance Objectives are not attained.
Payment, if any, shall be made in a lump sum or in installments, in
cash or shares of Company common stock, as determined by the Committee,
commencing as promptly as feasible following the end of the Performance
Period, except that (a) payments to be made in cash may be deferred subject to
such terms and conditions as may be prescribed by the Committee, and (b)
payments to be made in Company common stock may be deferred pursuant to an
election filed on forms prescribed and provided by and filed with the
Committee. A Participant may elect annually to defer to a date certain, or the
occurrence of an event, as provided in the form, the receipt of all or any
part of shares of Company common stock he may subsequently become entitled to
receive. On forms provided by and filed with the Committee, the Participant
shall also specify whether, when the deferral period expires or the
restrictions specified below lapse, payment will be in a lump sum or
installments over a period not exceeding twenty years. The Committee shall
prescribe the time periods during which the election must be filed in order to
be effective. Elections to defer are irrevocable. Changes regarding the date
of payment, the period over which payments are to be made and the method of
payment are subject to substantial penalties. Shares of Company common stock
with respect to which a Participant has made an effective election shall be
transferred to a trust and shall remain subject to the claims of the Company's
creditors and restricted and may not be sold, hypothecated or transferred
(including, without limitation, transfer by gift or donation), except that
such shares shall be distributed to Participants and such restrictions shall
lapse upon:
a. the death of the Participant;
b. the Disability of the Participant
c. the Participant's termination of employment with the Company or a
subsidiary of the Company, subject to the Participant's deferral
election; or
d. a Change in Control.
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PAGE 9
11. Restricted Stock
A Restricted Stock Award (RSA) shall entitle the Participant, subject
to his continued employment during the restriction period determined by the
Committee and his complete satisfaction of any other conditions, restrictions
and limitations imposed in accordance with the Plan, to the unconditional
ownership of the shares of the Company's common stock covered by the grant
without payment therefor.
The Committee may grant RSAs at any time or from time to time to a
Participant selected by the Committee in its sole discretion. The Committee
shall establish at the time of grant of each RSA a Performance Period and
Performance Objectives to be achieved during the Performance Period.
At the time of grant, the Performance Period and Performance
Objectives shall be set forth either in agreements or in guidelines
communicated to the Participant in such form consistent with this Plan as the
Committee shall approve from time to time.
Following the conclusion of each Performance Period and prior to
payment, the Committee shall determine the extent to which Performance
Objectives have been attained or a degree of achievement between maximum and
minimum Performance Objectives during the Performance Period in order to
determine the level of payment to be made, if any, and shall record such
results in the minutes of the meeting of the Committee. In no instance will
payment be made if the Performance Objectives are not attained.
At the time that an RSA is granted, the Committee shall establish in
the written agreement a restriction period applicable to all shares covered by
such grant. Subject to the provisions of the next following paragraph, the
Participant shall have all of the rights of a stockholder of record with
respect to the shares covered by the grant to receive dividends or other
distributions in respect of such shares (provided, however, that any shares of
stock of the Company distributed with respect to such shares shall be subject
to all of the restrictions applicable to such shares) and to vote such shares
on all matters submitted to the stockholders of the Company, but such shares
shall not be sold, exchanged, pledged, hypothecated or otherwise disposed of
at any time prior to the expiration of the restriction period, including by
operation of law, and any purported disposition, including by operation of
law, shall result in automatic forfeiture of any such shares.
Except as hereinafter provided, if, during the restriction period
applicable to such grant, a Separation From Employment of a Participant occurs
for any reason other than death, Disability or Retirement, all shares covered
by such grant shall be forfeited to the Company automatically. If the
Participant's Separation From Employment is because of Retirement or death, or
in the event of Disability, the Participant or his successor in interest shall
be entitled to unconditional ownership of a fraction of the total number of
shares covered by such grant of which the numerator is the number of whole
calendar months in the period commencing with the first whole calendar month
following the date of grant and ending with the whole calendar month including
the date of death, Disability or Retirement, and of which the denominator is
the number of whole calendar months in the applicable restriction period. Any
fractional shares shall be disregarded.
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PAGE 10
The Committee may, at the time of granting any RSA, impose such other
conditions, restrictions or limitations upon the rights of the Participants
during the restriction period or upon the Participant's right to acquire
unconditional ownership of shares as the Committee may, in its discretion,
determine and set forth in the written agreement.
At the time of grant of an RSA, the Company shall cause to be issued
and registered in the name of the Participant a stock certificate representing
the full number of shares covered thereby, which certificate shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such grant, and the grantee shall execute and deliver to the
Company a stock power endorsed in blank covering such shares. Such stock
certificate and stock power shall be held by the Company or its designee until
the expiration of the restriction period, at which time the same shall be
delivered to the Participant or his designee if all of the conditions and
restrictions of the grant have been satisfied, or until the forfeiture of such
shares, at which time the same shall be cancelled and the shares shall be
returned to the status of unissued shares.
12. Separation From Employment
If the Participant's Separation From Employment is because of
Disability or death, the right of the Participant or his successor in interest
to exercise an ISO, NQSO or SAR shall terminate not later than five years
after the date of such Disability or death, but in no event later than 10
years from the date of grant; provided, however, that if such Participant is
eligible to retire with the ability to begin immediately receiving retirement
benefits under the Company's pension plan, his or his successor in interest's
right to exercise any ISOs, NQSOs or SARs shall be determined as if his
Separation From Employment was because of Retirement.
If the Participant's Separation From Employment is because of his
Retirement, the right of the Participant or his successor in interest to
exercise an ISO, NQSO or SAR shall terminate not later than 10 years from the
date of grant.
Unless the Committee deems it necessary in individual cases (except
with respect to Covered Employees) to extend a Participant's exercise period,
if a Participant's Separation From Employment is for any reason other than
Retirement, Disability or death, the right of the Participant to exercise an
ISO, NQSO or SAR shall terminate not later than one year from the date of
Separation From Employment, but in no event later than 10 years after the date
of grant.
At the time of his Separation From Employment for any reason other
than Cause, a Participant shall vest in a portion of any Incentives granted
under sections 7 (ISOs), 8 (NQSOs) or 9 (SARs) that he has held for less than
one year from the date of the grant. The portion of such Incentives in which
the Participants shall vest shall be determined by multiplying all shares
subject to such Incentives by a fraction, the numerator of which shall be the
number of Completed Months of employment following the date of grant and the
denominator of which shall be twelve.
A Participant who vests in any Incentives under the preceding
paragraph may not exercise such Incentives prior to the satisfaction of the
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PAGE 11
one-year holding requirement and the Exercisability Requirements pertaining to
such Incentives. Any Incentives vested under the preceding paragraph must be
exercised within one year from the date of the Participant's Separation From
Employment.
As to PUAs or PSAs, in the event of a Participant's Separation From
Employment by Retirement, Disability or death prior to the end of the
applicable Performance Period, payment, if any, to the extent earned under the
applicable Performance Objectives and awarded by the Committee, shall be
payable at the end of the Performance Period in proportion to the active
service of the Participant during the Performance Period, as determined by the
Committee. If the Separation From Employment is for any other reason, the
Participant's participation in Section 10 of the Plan shall immediately
terminate, his agreement shall become void and the PUA or PSA shall be
cancelled.
13. Incentives Non-assignable and Non-transferable
Any Incentive granted under this Plan shall be non-assignable and
non-transferable other than as provided in Section 14 and shall be exercisable
(including any action of surrender and exercise of rights under Section 9)
during the Participant's lifetime only by the Participant who is the holder of
the Incentive or by his guardian or legal representative.
14. Death of Option Holder
In the event of the death of a Participant who is an Incentive holder
under the Plan while employed by the Company or one of its subsidiaries or
prior to exercise of all rights under an Incentive, the Incentive theretofore
granted may be exercised (including any action of surrender and exercise of
rights under Section 9) by the Participant's Beneficiary or, if no Beneficiary
is designated, by the executor or executrix of the Participant's estate or by
the person or persons to whom rights under the Incentive shall pass by will or
the laws of descent and distribution in accordance with the provisions of the
Plan and of the option and to the same extent as though the Participant were
then living.
15. No Right to Continued Employment
Notwithstanding any other provisions of this Plan to the contrary, it
is a condition for eligibility for any benefit or right under this Plan that
each individual agrees that his or her designation as a Participant and any
grant made under the Plan may be rescinded and determined to be void and
forfeited entirely in the absolute and sole discretion of the Committee in the
event that such individual is discharged for Cause.
Incentives granted under the Plan shall not be affected by any change
of employment so long as the Incentive holder has not suffered a Separation
From Employment. A leave of absence granted by the Company or one of its
subsidiaries shall not constitute Separation From Employment unless so
determined by the Committee. Nothing in the Plan or in any Incentive granted
pursuant to the Plan shall confer on any individual any right to continue in
the employ of the Company or one of its subsidiaries or interfere in any way
with the right of the Company or such subsidiary to terminate employment at
any time.
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PAGE 12
16. Adjustment of Shares
In the event of any change (through recapitalization, merger,
consolidation, stock dividend, split-up, combination or exchanges of shares or
otherwise) in the character or amount of the Company's common stock prior to
exercise of any Incentive granted under this Plan, the Incentives, to the
extent not exercised, shall entitle the Participant who is the holder to such
number and kind of securities as he would have been entitled to had he
actually owned the stock subject to the Incentives at the time of the
occurrence of such change. If any such event should occur, prior to exercise
of an Incentive granted hereunder, which shall increase or decrease the amount
of common stock outstanding and which the Committee, in its sole discretion,
shall determine equitably requires an adjustment in the number of shares which
the Incentive holder should be permitted to acquire, such adjustment as the
Committee shall determine may be made, and when so made shall be effective and
binding for all purposes of the Plan.
Incentives may also be granted having terms and provisions which vary
from those specified in the Plan provided that any Incentives granted pursuant
to this paragraph are granted in substitution for, or in connection with the
assumption of, then existing Incentives granted by another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant to or
by reason of a transaction involving a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
which the Company or a subsidiary corporation is a party.
17. Loans to Option Holders
The Committee may adopt programs and procedures pursuant to which the
Company may lend money to any Participant who is an Incentive holder for the
purpose of assisting the Participant to acquire or carry shares of common
stock issued upon the exercise of Incentives granted under the Plan.
18. Termination and Amendment of Plan
Unless the Plan shall have been previously terminated as hereinafter
provided, the Plan shall terminate on May 2, 1999, and no Incentives under it
shall be granted thereafter. The Board of Directors, without further approval
of the Company's shareholders, may at any time prior to that date terminate
the Plan, and thereafter no further Incentives may be granted under the Plan.
However, Incentives previously granted thereunder may continue to be
exercised in accordance with the terms thereof.
The Board of Directors, without further approval of the shareholders,
may amend the Plan from time to time in such respects as the Board may deem
advisable; provided, however, that no amendment shall become effective without
prior approval of the shareholders which would: (i) increase (except in
accordance with Section 16) the maximum number of shares for which Incentives
may be granted under the Plan; (ii) reduce (except in accordance with Section
16) the Incentive price below the Fair Market Value of the Company's common
stock on the date of grant of the Incentive; (iii) extend the term of the Plan
beyond May 2, 1999; (iv) change the standards of eligibility prescribed by
Section 5; or (v) increase the maximum awards identified in Sections 7, 8, 9,
10 and 11.
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PAGE 13
No termination or amendment of the Plan may, without the consent of a
Participant who is a holder of an Incentive then existing, terminate his or
her Incentive or materially and adversely affect his or her rights under the
Incentive.
19. Change in Control
a. Notwithstanding any provision of this Plan to the contrary, upon
the occurrence of a Change in Control as set forth in subsection
b., below: (i) all stock options then outstanding under this Plan
shall become fully exercisable as of the date of the Change in
Control, whether or not then otherwise exercisable; (ii) all SARs
which have been outstanding for at least six months shall become
fully exercisable as of the date of the Change in Control, whether
or not then otherwise exercisable: (iii) all terms and conditions
of RSAs then outstanding shall be deemed satisfied as of the date
of the Change in Control; and (iv) all PUAs and PSAs then
outstanding shall be deemed to have been fully earned and to be
immediately payable in cash as of the date of the Change in
Control.
b. A "Change in Control" shall be deemed to have occurred on the
earliest of the following dates: (i) the acquisition, other than
from the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20 percent or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors,
but excluding, for this purpose, any such acquisition by the
Company or any of its subsidiaries, or any employee benefit plan
(or related trust) of the Company or its subsidiaries, or any
corporation with respect to which, following such acquisition,
more than 50 percent of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by the individuals and
entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately
prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the
then outstanding shares of common stock of the Company or the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors, as the case may be; or
(ii) Individuals who, as of this date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least a majority of the
Board, provided 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
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PAGE 14
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 is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange
Act); or
(iii)Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which the individuals and entities who were the
respective beneficial owners of the common stock and voting
securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, 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 reorganization, merger or consolidation, or a
complete liquidation or dissolution of the Company or of the
sale or other disposition of all or substantially all of the
assets of the Company.
20. Compliance with Regulatory Authorities
Any shares purchased or distributed pursuant to any Incentives
granted under this Plan must be held for investment and not with a view to the
distribution or resale thereof. Each person who shall exercise an Incentive
granted under this Plan may be required to give satisfactory assurances to
such effect to the Company as a condition to the issuance to him or to her of
shares pursuant to such exercise; provided, however, that the Company may
waive such condition if it shall determine that such resale or distribution
may be otherwise lawfully made without registration under the Securities Act
of 1933, or if satisfactory arrangements for such registration are made. Each
Incentive granted under this Plan is further subject to the condition that if
at any time the Board shall in its sole discretion determine that the listing,
registration or qualification of the shares covered by such Incentive upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the granting of such Incentives or the
purchase or transfer of shares thereunder, the delivery of any or all shares
of stock pursuant to exercise of the Incentive may be withheld unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
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PAGE 15
21. Withholding Tax
Whenever the Company proposes or is required to issue or transfer
shares of common stock under the Plan, a Participant shall remit to the
Company an amount sufficient to satisfy any federal, state or local income and
payroll tax withholding liability prior to the delivery of any certificate or
certificates for such shares. Alternatively, in the sole discretion of the
Company, to the extent permitted by applicable laws including regulations
promulgated under the Exchange Act, such federal, state or local income and
payroll tax withholding 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. Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any federal, state or
local income and payroll tax withholding liability.
22. Non-Uniform Determinations
Determinations by the Committee under the Plan, including, without
limitation, determinations of the persons to receive Incentives and the form,
amount and timing of such Incentives, and the terms and provisions of such
Incentives and the agreements evidencing the same need not be uniform, and may
be made by the Committee selectively among persons who receive, or are
eligible to receive, Incentives under the Plan, whether or not such persons
are similarly situated.
Without amending the Plan, Incentives may be granted to eligible
employees who are foreign nationals or who are employed outside the United
States or both, on such terms and conditions different from those specified in
the Plan as may, in the judgment of the Committee, be necessary or desirable
to further the purposes of the Plan. Such different terms and conditions may
be reflected in Addenda to the Plan.
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PAGE 1
Exhibit 10.2
Appendix B
CSX CORPORATION
Senior Management Incentive Compensation Plan
1. Purpose
The purpose of the Senior Management Incentive Compensation Plan
(SMICP) is to encourage senior management of CSX Corporation and its
subsidiary companies to achieve and exceed planned financial goals so as to
increase shareholder value.
The SMICP shall be effective as of January 1, 1994. It is intended
that awards under the SMICP generally will be treated as qualified
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code of 1986 related to the deductibility of executive
compensation.
2. Definitions
Whenever the following words are used in the SMICP, they shall have
the meaning set forth below:
"Base Salary": The term base salary means a Covered Employee's annual
base salary as of the beginning of the Plan Year, exclusive of any incentive
or stock-based compensation.
"Board of Directors": The term Board of Directors or Board means the
Board of Directors of CSX Corporation.
"Cause": The term Cause means (a) an act or acts of personal
dishonesty of a Covered Employee intended to result in substantial personal
enrichment of the Covered Employee at the expense of the Company or any of its
subsidiaries, (b) violation of the management responsibilities by the Covered
Employee which is demonstrably willful and deliberate on the Covered
Employee's part and which are not remedied in a reasonable period of time
after receipt of written notice from the Company or any of its subsidiaries,
or (c) the conviction of the Covered Employee of a felony involving moral
turpitude.
"Code": The term Code means the Internal Revenue Code of 1986, as
amended.
"Committee": The term Committee means a committee comprised solely of
outside directors within the meaning of Section 162(m) of the Code, appointed
from time to time by the Board of Directors to administer the Plan.
"Company": The term Company means CSX Corporation and/or its
subsidiary companies.
"Cost of Capital" (COC): The term Cost of Capital (COC) means the
cost to the Company of securing funds and shall be determined by the weighted
cost of debt and equity within the Company's capital structure.
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PAGE 2
"Covered Employee": The term Covered Employee means the chief
executive officer of the Company or any other individual who is among the four
(4) highest compensated officers or who is otherwise a "covered employee"
within the meaning of Section 162(m) of the Code, as determined by the
Committee.
"Disability": The term Disability means long-term disability as
determined under the Company's Salary Continuance and Long-Term Disability
Plan.
"Plan Year": The term Plan Year means the annual accounting period
for the Company.
"Retirement": The term Retirement means termination of employment
with immediate commencement of retirement benefits under the Company's pension
plan.
"Return On Invested Capital" (ROIC): The term Return On Invested
Capital (ROIC) means for the Company or any business unit its Results of
Operations divided by its Capital. These values are defined as follows:
a. "Results of Operations": The term Results of Operations means
operating income, adjusted for special charges and increased by
the interest portion of lease payments, plus other income
exclusive of interest income, less the related cash income taxes.
b. "Capital": The term Capital means short- and long-term debt, the
present value of all leases with a term exceeding one year, and
factored accounts receivable, plus shareholders' equity adjusted
for special charges and accounting changes, and any other debt or
equity instruments, less cash, cash equivalents, and short-term
investments.
The ROIC calculation excludes any non-routine one-of-a-kind gains or
losses, including gains or losses which result from a change in accounting.
3. Administration
The Committee shall be responsible for administering the SMICP and
shall have the power to construe and to interpret the SMICP. The Committee may
appoint such agents, who need not be members of the Committee, as it may deem
necessary for the effective performance of its duties, and may delegate to
such agents such powers and duties as the Committee may deem appropriate and
that are not inconsistent with the intent of the SMICP. A decision of the
Committee shall be final and conclusive on all persons, except to the extent
otherwise provided by law.
Prior to the beginning of each Plan Year, (or in the case of the 1994
Plan Year, prior to April 1, 1994), the Committee shall:
a. determine the Covered Employees for the Plan Year;
b. establish four specific ROIC Levels, each of which shall be
expressed as a percentage of the Company's Cost of Capital for the
Plan Year; and
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PAGE 3
c. establish the award opportunity at each specific ROIC Level,
expressed as a percentage of base salary at the beginning of the
Plan Year, for each Covered Employee. Award opportunities shall be
interpolated for performance which falls between the ROIC Levels.
Furthermore, if a business unit exceeds all performance objectives
established by the Committee, the calculated award payable to the
Covered Employee will be increased by the percentage that the
business unit exceeds the highest ROIC Level, however, such
increase shall not exceed 25 percent of the calculated award.
Notwithstanding the above, the maximum per person award opportunity
under the SMICP shall be 150 percent of Base Salary at the beginning of the
Plan Year.
At the conclusion of the Plan Year, in accordance with Section
162(m)(4)(C)(iii) of the Code, prior to the payment of any award under the
SMICP, the Committee shall certify in the Committee's internal meeting minutes
the attainment of the financial objectives for the Plan Year and the
calculation of the award. Awards generally shall be reviewed and approved by
the Committee during the first Board of Directors meeting held after the end
of the Plan Year. Once initial shareholder approval of the material terms of
the performance criteria is obtained, no shareholder action shall be required
for awards made under the SMICP unless such criteria are changed or such
action is required under Section 162(m) of the Code.
A Covered Employee's calculated award may be reduced or eliminated at
the discretion of the Committee. In the event the Committee reduces an award
otherwise payable to a Covered Employee for a Plan Year, the amount of such
reduction shall not be paid to other Covered Employees.
The existence of the SMICP does not constitute a contract for
continued employment between a Covered Employee and the Company. The Company
reserves the right to terminate a Covered Employee for any reason and at any
time notwithstanding the existence of the SMICP.
If the employment of a Covered Employee is terminated during the Plan
Year due to Retirement, Disability, or death, or is involuntarily terminated
for reasons other than Cause, any award payable under this SMICP will be
prorated for the number of full months during which the Covered Employee was
actively employed during the Plan Year. If employment terminates for any other
reason during the Plan Year, no award will be payable under the SMICP.
4. Shareholder Approval
Notwithstanding any of the foregoing, no awards will be paid under
the SMICP unless the material terms of the performance criteria have been
disclosed to the shareholders and subsequently approved by a vote of the
shareholders of the Company. Once the material terms of the performance
criteria are disclosed to and approved by shareholders, no additional
disclosure or approval is required until such time as the Committee changes
the material terms of the performance criteria, or until otherwise required by
Section 162(m) of the Code.
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PAGE 4
The SMICP may be amended or terminated by action of the Committee,
approved by the Company's Board of Directors, except insofar as approval by
the Company's shareholders may be required pursuant to Section 162(m)
(4)(C)(i) of the Code.
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PAGE 1
Exhibit 99
CSX CORPORATION
Appendix Describing Graphic
Materials Deleted From Electronic Transmission
of 1994 Proxy Statement
Page
Numbers Description
- ------- -----------
6-7 A photograph of each director nominee precedes his or
her biographical information.
23 The performance line graph required by Regulation S-K,
Section 229.402(1), immediately follows the Report of
the Compensation and Pension Committee Concerning
Executive Compensation. A copy of the graph has been
filed with the Commission with a Form SE dated March
8, 1994.
- 1 -
